Karnataka High Court
M/S Jakkur Promoters Pvt Ltd vs State Of Karnataka on 3 February, 2020
Equivalent citations: AIRONLINE 2020 KAR 345
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
R
DATED THIS THE 3RD DAY OF FEBRUARY, 2020
BEFORE
THE HON'BLE MR.JUSTICE B.A.PATIL
CRIMINAL PETITION NO.824/2019
BETWEEN :
1. M/s. Jakkur Promoters Pvt. Ltd.,
(Earlier known as M/s. Mantri Promoters)
Having its registered address at
Mantri House No.41,
Vittal Mallya Road,
Bengaluru-560 001
Represented by its Authorised Signatory
Mr. Ravishankar B.S.,
2. M/s. Hamara Shelters Private Limited
No.41, Vittal Mallya Road
Bengalore-560 001
Represented by its Authorised Signatory
Mr.Ravishankar B.S.
3. Sri Venkat Surya Kumar
S/o Rama Rao Challa
Aged about 50 years
Director,
M/s. Hamara Shelters Pvt. Ltd.,
No.25/21, 1st "B" Main Road
Hebbal Mills, Ganganagar Extension
Bengaluru-560 032.
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4. Methuku Srinivas
S/o Janardhanam Setty Methuku
Aged about 46 years
Director,
M/s. Hamara Shelters Pvt. Ltd.,
No.55 Sri Sai Khuteers
4th Cross, 1st Main,
Meenakshi Residency
Kodipalya, Kengeri Hobli
Bengaluru-560 050.
5. Mantri Developers Private Limited
Partner M/s. Mantri Promoters
Having its registered address at
Mantra House, No.41,
Vittal Mallya Road,
Bengaluru-560 001
Represented by its Authorised Signatory
Mr.Ravishankar B.S.
6. Mrs. Snehal Sushil Mantri
W/o Sushil Mantri
Aged about 55 years
Available at M/s. Mantri Developers Pvt. Ltd.,
Having her office at Mantri House
No.41, Vittal Mallya Road
Bengaluru-560 001.
7. Mr.Sushil Mantri
S/o Pandurang Mantri
Aged about 55 years
Chairman and Managing Director
M/s. Mantri Developers Pvt. Ltd.,
Having his Office at Mantri House
No.41, Vittal Mallya Road
Bengaluru-560 001.
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8. Mr. Pratik Sushil Mantri
S/o Sushil Mantri
Aged about 28 years
Director,
M/s. Mantri Developers Pvt. Ltd.,
Having his Office at Mantri House
No.41, Vittal Mallya Road
Bengaluru-560 001.
... Petitioners
(By Sri C.V.Nagesh, Senior Counsel for
Sri Raghavendra K., Advocate)
AND :
1. State of Karnataka
By the Station House Officer
High Grounds Police Station
Bengaluru-560 052
Represented by the State public Prosecutor
High Court of Karnataka
Bengaluru-560 001.
2. M/s. Township Promoters
A Partnership Firm having its
Registered office at No.9,
8th Main, R.M.V. Extension
Bengaluru-560 008.
And also available at:
No.10/1, Lakshminarayan Complex
Palace Road, Bengaluru-560 052
Represented by its Managing Partner
Mr. Ashwin Pai
... Respondents
(By Sri H.R.Showri, HCGP for R1;
Sri Hashmath Pasha, Senior Counsel for
Sri Vamshi Chandrashekar, Advocate for R2)
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This Criminal Petition is filed under Section 482 of
Cr.P.C praying to quash the FIR in Crime No.168/2018
registered by the High Grounds Police Station, Bengaluru,
for the offences punishable under Sections 406, 417,
418, 420, 465 and 34 of IPC, pending on the file of the
Hon'ble 4th ACMM, Bengaluru as against the petitioners.
This Criminal Petition having been heard and
reserved on 17.01.2020 coming on for pronouncement of
orders this day, the Court made the following:-
ORDER
This petition is filed by accused Nos.1 to 8 under Section 482 of Cr.P.C. praying to quash the FIR in Crime No.168/2018 registered by High Grounds Police Station, Bengaluru, for the offences punishable under Sections 406, 417, 418, 420, 465 r/w. Section 34 of IPC.
2. Though this case is listed for admission, with the consent of the learned counsel appearing for the parties, the same is taken up for final disposal.
3. I have heard Sri C.V.Nagesh, learned Senior Counsel appearing on behalf of the petitioners-accused Nos.1 to 8 and Sri Hashmath Pasha learned Senior -5- Counsel for respondent No.2, so also the learned HCGP for respondent No.1-State.
4. The brief facts of the case as averred in the petition are that accused No.1-M/s.Mantri Promoters are into the business of acquisition and development of lands. They had entered into agreements to build high raised buildings. It is a partnership firm formed through a partnership deed dated 25.3.2009. They entered into a Joint Development Agreement with Township Promoters for the development of lands at Jakkur and executed a deed on 1.6.2017. Subsequently, five more partners were added to the said firm and thereafter it has been converted into a Private Limited Company under the name and style "Jakkur Promoters Private Limited" and the said Company was incorporated on 23.8.2017. During the year 2009, 2nd respondent approached the first petitioner-Company by stating that they have landed property and are desirous of developing it and they intended to do the same jointly with petitioner No.1- -6- Company. After negotiation, they entered into a Joint Development Agreement ('JDA' for short) on 30.3.2009. In pursuance of the said JDA, the first petitioner- Company by spending huge amounts initiated the development activities on the said land belonging to the second respondent. They also procured required sanction and other permission from the statutory authorities. It is further averred that one of the land owners created certain hurdles and initiated the litigations and as such petitioner No.1 was not able to proceed with the developmental activities. The said facts were within the knowledge of the second respondent. Because of various litigations both on civil and revenue sides there was a delay in development of the property. It is further averred that as per the terms and conditions of JDA petitioner No.1 is entitled to raise loans on such property in so far as its share is concerned, to meet the expenses and with an intention to commence the development activities. Subsequently respondent No.2 started making -7- certain illegal demands with petitioner No.1 and also started harassing, so also caused a notice making certain allegations. Subsequently on 22.9.2017 respondent No.2 has filed a complaint in PCR No.11908/2017. The learned Magistrate without considering the material, referred the complaint to the police for investigation under Section 156(3) of Cr.P.C. and on the basis of the same, a case was registered. Challenging the same, petitioners approached this Court by filing Criminal Petition No.8203/2017. This Court by the order dated 29.11.2017 quashed the order of reference and subsequent action taken thereon. Being aggrieved by such order respondent No.2 preferred Special Leave Petition (Crl.) No.5707/2018 before the Hon'ble Apex Court and the said petition also came to be dismissed with the seal of the Supreme Court, with an observation that the complainant is permitted to file a fresh complaint in accordance with the provisions of Code of Criminal Procedure. Subsequently, on 1.12.2018, respondent -8- No.2 submitted the very complaint before the learned Magistrate. The said complaint was referred to High Grounds Police Station and a case has been registered in Crime No.168/2018 for the offences punishable under Sections 406, 417, 418, 420, 465 r/w. Section 34 of IPC. Challenging the same, the petitioners-accused Nos.1 to 8 are before this Court.
5. It is contended by the learned Senior Counsel Sri C.V.Nagesh that in terms of JDA, petitioner No.1 borrowed money for being used and utilized for development activities. It is his further submission that the rights which have been exercised by petitioner No.1 are on the basis of JDA and borrowing and repayment thereof made do not even remotely constitute any offence which is punishable under Indian Penal Code. The reference made, registration of a crime and conducting of investigation is bad in the eye of law. It is his further submission that earlier a complaint has been registered in Crime No.180/2017, which was challenged -9- before this Court in Criminal Petition No.8697/2017 c/w. Criminal Petition Nos.8320 and 8203/2017 and the same has been quashed by this Court on 29.11.2017. However, a liberty was given to the complainant to proceed with the complaint regarding the second relief sought in the complaint or the complainant is at liberty to seek permission to withdraw the complaint, if it is permissible in law and file the complaint after compliance of the guidelines issued by the Hon'ble Apex Court. It is his further submission that against the said order, respondent No.2 preferred Special Leave to Petition (Crl.)No.5707/2018, which came to be dismissed by the Hon'ble Apex Court on 7.9.2018 with the seal of the Supreme Court with a direction to follow the directions issued by this Court. It is his further submission that without taking shelter as observed, filing of fresh complaint, taking of cognizance and referring the matter is nothing but abuse of process of law. When already the complaint has been quashed, then under such
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circumstances, the police are not permitted to register the case on the same set of facts so as to harass the petitioners-accused Nos.1 to 8.
6. It is his further submission that the word 'complaint' has been defined under Section 2(d) and filing of a fresh complaint refers to under Chapter-XV of Cr.P.C. If anything is given to the police under Section 154(1) of Cr.P.C., it amounts to nothing but an information instead of filing a complaint. The respondent has given an information and the said act of the respondent is not in accordance with the directions issued by this Court. Under such circumstances, fresh complaint given by the respondent before the police is nothing, but what was not permitted to the respondent- complainant.
7. It is his further submission that the JDA clearly mentions that if any dispute arises in the matter, then under such circumstances, the same has to be referred
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to Arbitration. Instead of doing so, the proceedings are initiated only with an intention to convert the civil dispute or the commercial dispute into a criminal case and hence it amounts to registration of false and frivolous complaint. It is his further submission that because of the legal hurdles, there was some delay for developing the property and it is not intentional. It is his further submission that the amount which was borrowed from the bank has been utilized for the development of said project. To obtain the permission and other incidental works the amount was borrowed with the knowledge of the complainant-respondent. If at all there is any dispute, it is only a civil liability and not a criminal liability. It is his further submission that JDA authorized the petitioner-accused to obtain the loan by exercising the power as contemplated in JDA. The said loan has been raised and utilized for the said purpose. It is his further submission that the amount used is by the same firm and they are not two entities. JDA clearly indicates
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that M/s.Mantri Promoters and M/.s.Mantri Developers are one and the same. The contention of the complainant that M/s.Mantri Developers raised the loan and misused for the project of M/s.Mantri Promoters is patently incorrect. In the JDA itself it has been clearly mentioned that M/s.Mantri Promoters is represented by its partner M/s.Mantri Developers Private Limited, which is represented by its Managing Director Mr.Sushil Mantri. In that light, it is his submission that there is no misutilization of the funds raised by M/s.Mantri Developers. It is his further submission that the credit sanction given by Indian Overseas Bank and the details of the credit facilities sanction make it clear that they are not two different entities. Even in the notice issued, the said contentions have been accepted by the complainant. Looking from any angle, the respondent-complainant has not made out any case so as to continue the proceedings.
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8. It is his further submission that in order to constitute an offence under Section 420 of IPC, there must be breach of contract which would amount to cheating and there must be existence of an intention to cheat at the very inception and if such an intention developed later, it would not amount to cheating. In the absence of any allegation in the complaint that at the very inception there was any intention on behalf of the accused to cheat, then under such circumstances, a case is not made out under Section 420 of IPC. In order to substantiate his contention he relied upon the decision in the case of Umashankar Gopalika Vs. State of Bihar & Another, reported in (2005)10 SCC 336. It is his further submission that when a civil remedy is available and civil proceedings are pending, it amounts to nothing but a breach of contract. Under such circumstances, the Court cannot proceed with the matter. It is his further submission that the complaint gives a clear impression that it was a breach of contract and not a cheating.
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Under such circumstances, the complaint has to be quashed. In order to substantiate the said argument, he relied upon the decisions in the case of Medmeme, LLC and others Vs. Ihorse BPO Solutions Private Limited, reported in (2018)13 SCC 374; in the case of Commissioner of Police and others Vs. Devender Anand and others, reported in 2019 SCC online SC
996. It is his further submission that this Court can exercise its power under Section 482 of Cr.P.C. to prevent abuse of process of any Court and to secure the ends of justice by quashing the proceedings. In that light, he relied upon the decision in the case of M.Srikanth Vs. State of Telangana and another, reported in (2019)10 SCC 373. On these grounds, he prayed to allow the petition and to quash the proceedings.
9. Per contra, Sri Hashmath Pasha, learned Senior Counsel for the respondent-complainant has vehemently argued and submitted that the main condition as per the
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JDA is that the original property has to be given to the custody of the accused for the development and it is with a specific purpose, the property has been entrusted to the accused. But by violating the said conditions the amount has been raised and the same has been utilized for two different entities and thereby there is a breach of condition and misappropriation under Sections 405, 409 and 420 of IPC. It is his further submission that if the accused fails to produce any material to show that the said fund has not been utilized for other purpose, then under such circumstances, it amounts to nothing but misappropriation. Once the entrustment is proved, it is for the accused to prove as to how the property has been entrusted and dealt with. In order to substantiate the said contention, he relied upon a decision in the case of Sate of Himachal Pradesh Vs. Karanvir, reported in AIR 2006 SC 2211. It is his further submission that if the conduct and other behaviour of the accused is taken into consideration, the intention is very clear from the
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inception and if certain circumstances contain the ingredients of the criminal offence, then under such circumstances, the dispute has to be entertained notwithstanding the fact that there was a civil dispute. In order to substantiate his contention, he relied upon a decision in the case of Arun Bhandari Vs. State of Uttar Pradesh and others, reported in (2013)2 SCC
801. It is his further submission that as per the JDA there is a specific agreement arrived at between the parties, which is mentioned in one of the clauses that in case of dispute, the transaction has to be resolved through arbitration. But merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. In this regard, he relied upon a decision in the case of Trisuns Chemical Industry Vs. Rajesh Agarwal and others, reported in AIR 1999 SC 3499.
10. It is his further submission that the respondent- complainant has followed the order of the Coordinate Bench of this Court in Criminal Petition No.8697/2017 &
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connected matters, disposed of on 29.11.2017, which came to be affirmed by the Hon'ble Apex Court. In pursuance of the said order, the complainant has filed a memo for withdrawal of PCR on 9.10.2018 and thereafter in compliance with the order of this Court as observed, the complainant has to follow the provisions of Sections 154(1), 154(3) of Cr.P.C. and a liberty was given to the complainant to seek permission to withdraw the complaint if it is in accordance with law and with permission of the Court after complying the guidelines of the Hon'ble Apex Court. Keeping in view the aforesaid observations and stipulation, the second complaint is filed and as such though the contents of the complaint are similar to one which was already filed it is not a bar under the Code of Criminal Procedure to accept the complaint and investigate the case and hence there is no infirmity. On these grounds, he submits that the petitioners have not made out any good grounds to allow
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the petition so as to quash the proceedings and hence, he prays to dismiss the petition.
11. The learned HCGP appearing for the first respondent-State by supporting the contentions of the learned Senior Counsel for the second respondent- complainant, also prays to dismiss the petition.
12. I have carefully and cautiously gone through the submissions made by the learned Senior Counsel and the learned HCGP on either sides, and perused the records.
13. It is not in dispute that a Joint Development Agreement has been entered into between the petitioners-accused and the respondent-complainant. It is also not in dispute that the said agreement has been entered into between M/s.Township Promoters, M/s.Abhishek Developers and M/s.Mantri promoters. It is also not in dispute that an amount of Rs.40 Crores has been deposited as security deposit by the developer.
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Even as per the JDA, the borrowing power has been given to the developer and in the event if any dispute arises between the parties, then the matter has to be resolved through arbitration. It is also not in dispute that certain litigations were started both on civil and writ side and both the parties have approached the various Courts including the revenue authorities as well as the Lokayuktha. It is also not in dispute that earlier a complaint was filed under Section 200 Cr.P.C. and the learned Magistrate referred the said complaint by exercising his power under Section 156(3) of Cr.P.C. and the same had been challenged before this Court in Criminal Petition No.8697/2017 and connected cases. This Court by the order dated 29.11.2017 allowed the said petitions and the complaint came to be restored on to the file of the jurisdictional Magistrate. However, reference order under Section 156 of Cr.P.C. has been quashed and a liberty has been given to the complainant to proceed with the complaint with regard to the second
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relief sought therein by seeking permission to withdraw the complaint if permissible in law and if it is permitted then to file a complaint after complying with the guidelines of the Hon'ble Apex Court. Being aggrieved by the said order, the complainant approached the Hon'ble Apex Court in Special Leave to Petition (Crl.) No.5707/2018. The Hon'ble Apex Court by the order dated 7.9.2018. put the seal of confirmation of the order passed by the co-ordinate Bench of this Court and the complainant is permitted to file a fresh complaint.
14. With the above admitted facts, let me consider the contentions raised by the learned counsel for both the parties. It is the first contention of the learned Senior Counsel for the petitioners that filing of a fresh complaint by the respondent-complainant and subsequently acting upon the same by the learned Magistrate is not in accordance with law and even not in consonance of the order of this Court as well as the Hon'ble Apex Court. The complainant has tried to push
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the complaint with a mala fide intention by wrongly interpreting the order, which is not permissible. In other words, the complainant is intending to do what is not permitted under law and the orders of the Court.
15. But it is the contention of the learned Senior Counsel for the respondent-complainant that this Court as well as the Hon'ble Apex Court have permitted the complainant to file a fresh complaint. It is his further submission that the said fresh complaint has been filed in compliance of the guidelines of the Hon'ble Apex Court in the case of Priyanka Srivastava and another Vs. State of Uttar Pradesh and others, reported in (2015)6 SCC 287. On perusal of the order of this Court in Criminal Petition No.8697/2017 and connected cases, disposed of on 29.11.2017, this Court on considering the ratio laid down in the case of Priyanka Srivastava and another Vs. State of Uttar Pradesh and others (cited supra) has come to the conclusion that it is incumbent upon the complainant to comply with the guidelines of
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the Hon'ble Apex Court and to follow the procedure as contemplated under Sections 154(1), 154(3) and 156(3) of Cr.P.C. and thereafter has quashed the subsequent actions in pursuance of the order of reference under Section 156(3) of Cr.P.C. This Court has also given the liberty to the complainant to withdraw the complaint if it is permissible in law and file a complaint after compliance of the guidelines of the Hon'ble Apex Court. Even the Hon'ble Apex Court has also permitted the complainant to file a fresh complaint and to proceed in accordance with the provisions of Code of Criminal Procedure. On going through both the orders conjointly, it is clear that the complainant has been permitted to file the complaint afresh as observed therein and in pursuance of the same, the complainant has also filed a memo dated 9.10.2018 for withdrawal of the earlier complaint and subsequently the complaint in question has been filed. Under such circumstances, the second complaint filed on 1.12.2018 is not considered to be an illegal or mala fide one and
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even the principle of constructive res judicata is not applicable. In that light, the first contention of the learned Senior Counsel for the petitioner is not acceptable.
16. The next contention of respondent No.2- complainant is that the accused created an equitable mortgage without the knowledge of the complainant and they have also utilized such money to execute another development i.e., Mantri Hennur Project and thereby the accused have committed breach of trust as contemplated under Section 405 of IPC. In order to substantiate the said contention, he relied upon a decision in the case of State of Himachal Pradesh Vs. Karanvir (cited supra), wherein at paragraphs-9 and 11, it has been observed as under:-
"9. The High Court opined that the entrustment was proved. The fact that till 29- 11-1989, the amount of Rs.8,000/- deposited by the complainant with the respondent, had
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not been utilised for the purpose for which the same had been handed over to him also is admitted. When an enquiry came to be made by Shri Brijpal Thakur (PW-4), the respondent deposited the said amount in two installments along with a sum of Rs.200/- by way of interest. The respondent, therefore, being a public officer had the requisite knowledge that the amount carried interest. On 16-7-1989, the postal savings certificates came to be issued. The respondent therefore thought himself liable to pay the said amount with interest, so as to reimburse to the complainant the amount to which was entitled by way of interest for depositing the said amount. Even on 30-11-1989, he did not deposit the entire amount. The entire amount came to be deposited by him on 11-12-1989. We, therefore, fail to understand as to on what basis the learned Judge opined that the second ingredient of Section 405 IPC i.e. misappropriation of the amount by the respondent-accused had not been proved. The High Court, in our considered view, completely misdirected itself in opining that it
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was obligatory on the part of Rajbir Singh (PW
3) or Brijpal Thakur (PW-4) to state in their complaint that the accused committed criminal misappropriation with the intention to utilise the amount for his personal use. The very fact that the respondent retained with him the entrusted amount is not disputed. If he did not utilise the amount for the purpose for which the same had been deposited, an offence must be held to have been committed.
10. xxx xxx xxx
11. The actual manner of misappropriation, it is well settled, is not required to be proved by the prosecution. Once entrustment is proved, it was for the accused to prove as to how the property entrusted to him was dealt with in view of Section 405 of the IPC. If the respondent had failed to produce any material for this purpose, the prosecution should not suffer therefor."
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17. It is his further submission that sometimes a case may apparently look to be of civil nature or may involve a commercial transaction, but such civil disputes or commercial disputes in certain circumstances may also contain the ingredients of criminal offences and such disputes have to be entertained notwithstanding they are also civil disputes. Under such circumstances, the accused cannot be said to have committed an offence and it shows the guilty intention to induce the complainant with property and money. In that light, he relied upon the decision in the case of Arun Bhandari Vs. State of Uttar Pradesh and others (cited supra), wherein at paragraphs-26 and 29, it has been observed as under:-
"26. At this stage, we may usefully note that sometimes a case may apparently look to be of civil nature or may involve a commercial transaction but such civil disputes or commercial disputes in certain circumstances may also contain ingredients of criminal offences and such
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disputes have to be entertained notwithstanding they are also civil disputes. In this context, we may
reproduce a passage from Mohd. Ibrahim v. State of Bihar : (SCC p. 754, para 8) "8. This Court has time and again drawn attention to the growing tendency of the complainants attempting to give the cloak of a criminal offence to matters which are essentially and purely civil in nature, obviously either to apply pressure on the accused, or out of enmity towards the accused, or to subject the accused to harassment. Criminal courts should ensure that proceedings before it are not used for settling scores or to pressurise parties to settle civil disputes. But at the same time, it should be noted that several disputes of a civil nature may also contain the ingredients of criminal offences and if so, will have to be tried as criminal offences, even if they also amount to civil disputes. (See G. Sagar Suri v. State of U.P. and Indian Oil Corpn. v. NEPC India Ltd."
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27. xxx xxx xxx
28. xxx xxx xxx
29. We have referred to the aforesaid decisions in the field to highlight about the role of the court while dealing with such issues. In our considered opinion the present case falls in the category which cannot be stated at this stage to be purely civil in nature on the basis of the admitted documents or the allegations made in the FIR or what has come out in the investigation or for that matter what has been stated in the protest petition. We are disposed to think that prima facie there is an allegation that there was a guilty intention to induce the complainant to part with money. We may hasten to clarify that it is not a case where a promise initially made could not be lived up to subsequently. It is not a case where it could be said that even if the allegations in entirety are accepted, no case is made out. Needless to emphasise, the High
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Court, while exercising power under Article 226 of the Constitution or Section 482 CrPC, has to adopt a very cautious approach."
18. He has also relied upon the decision in the case of Trisuns Chemical Industry Vs. Rajesh Agarwal and others (cited supra), wherein at paragraphs-6, 8 and 9 it has been observed as under:-
"6. Time and again this Court has been pointing out that quashment of FIR or a complaint in exercise of inherent powers of the High Court should be limited to very extreme exceptions (vide State of Haryana vs. Bhajan Lal, 1992 suppl(1) SCC 335 :
(1992 AIR SCW 237 : AIR 1992 SC 604 : 1992 Cri LJ 527) and Rajesh Bajaj vs. State NCT of Delhi (1999)3 SCC 259 : (1999 AIR SCW 881: AIR 1999 SC 1216 : 1999 Cri LJ 1833)).
In the last referred case this court also pointed out that merely because an act has a civil profile is not sufficient to
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denude it of its criminal outfit. We quote the following observations (para 10 of AIR, Cri LJ):
"It may be that the facts narrated in the present complaint would as well reveal a commercial transaction or money transaction. But that is hardly a reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the course of commercial and also money transactions."
7. XXX XXX XXX
8. Learned single Judge has accepted the alternative contention advanced by the respondent pertaining to want of jurisdiction for the Judicial Magistrate of First Class, Gandhidham in respect of the offence alleged in the complaint. This is what the High Court has said on that aspect:
"Further, there is nothing in the complaint which shows that any part of the
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transaction took place within the territories of the State of Gujarat. It appears that even the supply of processed soyabean was delivered to the complainant-company at the factory itself. In my view, therefore, Mr. Shah is right in contending that the court of the learned Judicial Magistrate, First Class, Gandhidham ought not to have taken cognizance of the matter and ought not to have directed to issue the process".
9. It is an erroneous view that the Magistrate taking cognizance of an offence must necessarily have territorial jurisdiction to try the case as well. Chapter XIII of the Code relates to jurisdiction of the criminal courts "in enquiries and trials." That chapter contains provisions regarding the place where the enquiry and trial are to take place. Section 177 says that "every offence shall ordinarily be inquired into and tried by a Court within whose local jurisdiction it was committed." But S. 179 says that when an act is an offence by reason of anything which has been done
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and of a consequence which has ensued, the place of enquiry and trial can as well be in a court "within whose local jurisdiction such thing has been done or such consequence has ensued". It cannot be overlooked that the said provisions do not trammel the powers of any court to take cognizance of the offence. Power of the court to take cognizance of the offence is laid in S.190 of the Code. Sub-sections (1)& (2) read thus:
"(i) Subject to the provisions of this Chapter, any Magistrate of the first class, and any Magistrate of the second class specially empowered in this behalf under sub-sec. (2), may take cognizance of any offence-
(a) Upon receiving a complaint of facts which constitute such offence;
(b) Upon a police report of such facts;
(c) Upon information received from any person other than a police officer, or upon his own knowledge, that such offence has been committed.
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(ii) The Chief Judicial Magistrate may empower any Magistrate of the second class to take cognizance under sub-sec. (1) of such offences as are within his competence to inquire into or try".
19. However, it is the specific contention of the petitioners-accused that the JDA is very clear and the agreement entered into clearly goes to show that M/s.Mantri Promoters and M/s.Mantri Developers are one and same and even the JDA also specifically mentions that M/s.Mantri Promoters, represented by its partner M/s.Mantri Developers Private Limited is represented by its Managing Directors. It is his further contention that the JDA has authorized the accused-developer to create encumbrance or charge against the developer's entitlement of the residential development subject to the condition that the developer shall utilize the proceeds of such loan exclusively for the purpose of development of the said project on the schedule property. It is his further submission that the document executed in favour
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of the bank also clearly states that it is used for the purpose of development of the agreed property and not used for any other purpose. It is his further submission that deed of release also clearly goes to show that the loan was secured by equitable mortgage of immovable properties standing in the name of the mortgagor M/s.Mantri Promoters and the amount has been used for the development. It is his further contention that even in the notice issued by the respondent-complainant no such allegations have been made to show that the said fund has been utilized for some other purpose. He further contended that in order to constitute a breach of contract, the intention must be therefrom the beginning of the entering into JDA and if the intention to cheat was not existing from the inception, then under such circumstances, subsequent development of the intention would not amount to cheating. In the absence of any allegations in the complaint, if at the very inception of the agreement there was any intention on behalf of the
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accused to cheat is not made out, then the petitioner- accused is entitled for quashing of the proceedings. In order to substantiate the said contention, he relied upon the decision in the case of Umashankar Gopalika Vs. State of Bihar & Another (cited supra) wherein at paragraph-6, it has been observed as under:-
"6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of complaint any criminal offence whatsoever is made out much less offences under Sections 420/120-B IPC. The only allegation in the complaint petition against the accused persons is that they assured the complainant that when they receive the insurance claim amounting to Rs 4,20,000, they would pay a sum of Rs 2,60,000 to the complainant out of that but the same has never been paid. Apart from that there is no other allegation in the petition of complaint.
It was pointed out on behalf of the complainant that the accused fraudulently persuaded the complainant to agree so that the accused persons may take steps for
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moving the Consumer Forum in relation to the claim of Rs 4,20,000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case it has nowhere been stated that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC."
20. He has also contended that if the proceedings are civil in nature and the act is a breach of contract, then the proceedings pending deserve to be quashed. In order to substantiate his contention, he relied upon the decision in the case of Medmeme, LLC and others Vs. Ihorse BPO Solutions Private Limited (cited supra), wherein at paragraphs-11 to 15 it has been observed as under:-
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"11. The moot question before us revolves around Question 1 which was formulated by the High Court and it is to be seen as to whether dispute between the parties is essentially of a civil nature or any case is made out against the appellants for launching criminal prosecution under the aforesaid sections.
12. After going through the allegations contained in the complaint and the material on record, we are of firm conclusion that the matter entirely pertains to civil jurisdiction and not even a prima facie case is made out for the offences under Sections 420, 406 and 409 read with Section 120-B IPC even if the allegations contained in the complaint are to be taken on their face value. The complaint gives a clear impression that it was primarily a case where the respondent had alleged breach of contract on the part of the appellants in not making the entire payments for the services rendered to the appellants. On the other hand, it is not in dispute that substantial amounts have been
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paid by the appellants to the respondent company for the services rendered.
13. Reason for non-payment of the balance amount as given by the appellants is that the services rendered by the respondent company were not in terms of the agreement entered into between the parties and were deficient in nature. For this reason, even the appellants have filed claims against the respondent company alleging that the appellant suffered losses because of the defective services provided by the respondent.
14. On the basis of it, we find that it cannot be said that at the time of entering into the agreement, either the first agreement or even the second agreement, there was any intention on the part of the appellants to cheat the respondent. No suspicion of any nature was shown or even alleged. It is also not the allegation of the respondent in the complaint that the agreement was entered into with fraudulent
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or dishonest intention on the part of the appellants in inducing the respondent to enter into such a contract. At best, the dispute between the parties is of a civil nature, proceedings in respect of which are pending before the learned arbitrator.
15. We, thus, allow this appeal, set aside the judgment of the High Court and thereby allow the petition filed by the appellants in the High Court under Section 482 of Code of Criminal Procedure. The result whereof would be quashing of the proceedings arising out of Complaint No. 142 of 2012 pending in the Court of Judicial Magistrate-II, Puducherry."
21. It is his further contention that only to twist the civil proceedings into criminal proceedings if such a complaint has been filed, then the Court has to exercise its power under Section 482 of Cr.P.C. as it amounts to abuse of process of law. In that regard, he relied upon the decision in the case of Commissioner of Police and others Vs. Devender Anand and others (cited supra),
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wherein at paragraphs-7, 8, and 10 it has been observed as under:-
"7. Having heard the learned counsel appearing on behalf of the parties at length and considering the material on record, we are of the opinion that the criminal proceedings initiated by respondent No. 1 - original complainant is nothing but an abuse of the process of law for settling a civil dispute.
8. Even considering the nature of allegations in the complaint, we are of the firm opinion that no case is made out for taking cognizance of the offence under Section 420/34 IPC. The case involves a civil dispute and for settling a civil dispute, the criminal complaint has been filed, which is nothing but an abuse of the process of law.
9. XXX XXX XXX
10. In view of the above and for the reasons stated above and as observed hereinabove, the initiation of the criminal
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proceedings by the original complainant is nothing but an abuse of the process of law, we not only quash and set aside the impugned judgment and order, but also quash the criminal proceedings pending before the learned Magistrate in respect of the transaction in question. Consequently, the present appeal is allowed, the impugned judgment and order dated 13.01.2017 passed by the High Court is hereby quashed and set aside. Even the criminal proceedings initiated by the original complainant pending before the learned Magistrate in respect of the transaction in question are hereby quashed and set aside."
22. He has also relied upon the decision in the case of M.Srikanth Vs. State of Telangana (cited supra), wherein at paragraphs-16, 17 and 28 it has been observed as under:-
"16. This Court, in State of Haryana v. Bhajan Lal after considering all its earlier judgments, has laid down principles which are required to be taken into consideration
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by the High Court while exercising its jurisdiction under Section 482 CrPC for quashing the proceedings. It will be relevant to refer to the following observations of this Court in Bhajan Lal: (SCC pp. 378-79, para
102) "102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of
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cases wherein such power should be exercised:
(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer
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without an order of a Magistrate as contemplated under Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the Act concerned (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the Act concerned, providing efficacious redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended with mala fides and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."
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17. It could thus be seen, that this Court has held, that where the allegations made in the FIR or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute a case against the accused, the High Court would be justified in quashing the proceedings. Further, it has been held that where the uncontroverted allegations in the FIR and the evidence collected in support of the same do not disclose any offence and make out a case against the accused, the Court would be justified in quashing the proceedings.
18. xxx xxx xxx
19. xxx xxx xxx
20. xxx xxx xxx
21. xxx xxx xxx
22. xxx xxx xxx
23. xxx xxx xxx
24. xxx xxx xxx
25. xxx xxx xxx
26. xxx xxx xxx
27. xxx xxx xxx
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28. Insofar as original Accused 4 is concerned, we have no hesitation to hold, that his case is covered by categories (1) and (3) carved out by this Court in Bhajan Lal. As already discussed hereinabove, even if the allegations in the complaint are taken on its face value, there is no material to proceed further against Accused 4. We are of the considered view, that continuation of criminal proceedings against Accused 4, M. Srikanth, would amount to nothing else but an abuse of process of law. As such, his appeal deserves to be allowed."
23. On going through the submissions made by the learned Senior Counsel on both sides and on perusal of the records, it is not in dispute that arbitration proceedings are also pending in AC.No.130/2018 and even it is also mentioned in the JDA that in case any dispute arises between the parties, the proceedings have to be held in terms of arbitration.
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24. I have carefully and cautiously gone through the contents of the complaint and other material. In the said complaint it has been alleged that the development of the schedule property has to be completed and completion certificate has to be obtained within three years from 26.12.2008. It is further alleged that accused No.1 has not commenced construction work by 2012. A letter dated 19.5.2017 has also been issued to petitioner No.1-accused about failing to fulfill its obligation under 2009 JDA and petitioner No.1-accused has been called upon to complete the development within 12 months from the date of receipt of such letter. Even petitioner No.1-accused has replied to the said letter dated 19.5.2017.
25. It is not in dispute the litigations were pending between the parties and as per the JDA, the property has been mortgaged and the amount has been raised. The Court has to keep in mind as to what are the criteria which the Court has to keep in mind while exercising the
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power under Section 482 of Cr.P.C. which have been elaborately discussed in the case of Inder Mohan Goswami and another Vs. State of Uttaranchal and others, reported in (2007)12 SCC 1. In the said decision, it has been observed that the Court must ensure that criminal prosecution is not used as an instrument of harassment or for seeking private vendetta or with an ulterior motive to pressurize the accused. The said power should not be exercised to stifle a legitimate prosecution. At paragraph-27, the Hon'ble Apex Court has observed as under:-
"27. The powers possessed by the High Court under Section 482 of the Code are very wide and the very plenitude of the power requires great caution in its exercise. The Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power should not be exercised to stifle a legitimate prosecution. The High Court should normally refrain from giving a prima facie decision in
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a case where all the facts are incomplete and hazy, more so, when the evidence has not been collected and produced before the Court and the issues involved, whether factual or legal, are of such magnitude that they cannot be seen in their true perspective without sufficient material. Of course, no hard-and-fast rule can be laid down in regard to cases in which the High Court will exercise its extraordinary jurisdiction of quashing the proceedings at any stage."
26. On reading the aforesaid paragraph, it indicates that if a dispute is purely of a civil nature and in the absence of ingredients of offence, then the Court has to exercise its power under Section 482 of Cr.P.C. and to quash the proceedings.
27. It is also well settled proposition of law by catena of decisions that if the intention to cheat was existing at the very inception, then under such circumstances, it amounts to nothing, but a breach of contract or a breach of trust and if such intention
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developed later on, then the same would not amount to cheating. If there is no allegation in the complaint that from the inception there was an intention on behalf of the accused to cheat then an offence punishable under Section 420 of IPC is not made out. This proposition of law has also been laid down in the case of Umashankar Gopalika Vs. State of Bihar & Another (cited supra).
28. What are the factors which the Court has to keep in mind at the time looking into the material are that it has to scrutinize all the records and if there is any firm conclusion that the matter pertains to entire jurisdiction and even a prima facie case is not made out, then under such circumstances, it has to quash the proceedings. This proposition of law has also been held in the case of Medmeme, LLC and others Vs. Ihorse BPO Solutions Private Limited (cited supra).
29. Keeping in view the above said facts and circumstances of the case and on perusal of the records and the JDA, it indicates that if any dispute arises
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between the parties, the same shall be resolved through arbitration. It is not in dispute that JDA also provides for an arbitration clause and in pursuance of the said arbitration clause, arbitration proceedings are initiated in AC.No.130/2018. JDA also clearly goes to show that M/s.Mantri Promoters is a registered partnership firm, which is represented by its partners M/s.Mantri Developers Private Limited and as per clause No.16 it also authorized that the developer is entitled to create an encumbrance or charge of any manner against the developer's entitlement of the residential development. The records would also indicate that already the amount which has been obtained as a loan from the bank has been discharged. Even in the notice and the reply it has been clearly mentioned with regard to transactions and it is the specific contention of the complainant that the work has not been commenced in 2012. No material has been produced to substantiate the fact that petitioner No.1 represented by accused Nos.2 and 5 has utilized the
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money to execute another development currently undertaken by accused No.5 and its sister concern. Under the said facts and circumstances, I am of the considered opinion that there is no breach of trust as held in the decisions of the Hon'ble Apex Court and even there is no specific allegation to show that since from inception there was intention on behalf of the accused to cheat and thereby accused have committed any offence. In that light, I am of the considered opinion that initiation of criminal proceedings is nothing but an abuse of process of law, which requires to be quashed. Hence, I pass the following order:-
Petition is allowed. The FIR in Crime No.168/2018 registered by High Grounds Police Station, Bengaluru, for the offences punishable under Sections 406, 417, 418, 420, 465 r/w. Section 34 of IPC is hereby quashed.
Consequently, I.A.No.3/2010 is disposed of.
Sd/-
JUDGE *ck/-