Allahabad High Court
Sharad Arora And Another vs State Of U.P. And 3 Others on 12 April, 2022
Bench: Ashwani Kumar Mishra, Rajnish Kumar
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 44 Case :- CRIMINAL MISC. WRIT PETITION No. - 2672 of 2022 Petitioner :- Sharad Arora And Another Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Sudhanshu Kumar,Rajrshi Gupta,Sr. Advocate Counsel for Respondent :- G.A,Katyayini,Krishnarjun Connected with Case :- CRIMINAL MISC. WRIT PETITION No. - 3000 of 2022 Petitioner :- Jawahar Lal Arora Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Sudhanshu Kumar,Rajrshi Gupta,Sr. Advocate Counsel for Respondent :- G.A,Katyayini And Case :- CRIMINAL MISC. WRIT PETITION No. - 3001 of 2022 Petitioner :- Avantika Arora Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Sudhanshu Kumar,Rajrshi Gupta,Sr. Advocate Counsel for Respondent :- G.A,Katyayini And Case :- CRIMINAL MISC. WRIT PETITION No. - 3051 of 2022 Petitioner :- Hina Raghunandan Giri Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Ajay Yadav,Ramesh Chandra Yadav Counsel for Respondent :- G.A.,Katyayini Hon'ble Ashwani Kumar Mishra,J.
Hon'ble Rajnish Kumar,J.
(Delivered by Ashwani Kumar Mishra, J.)
1. Jurisdiction of this Court under Article 226 of the Constitution of India is invoked in the present bunch of writ petitions, filed with the prayer to quash the First Information Report in Case Crime No.47 of 2022, under Sections 406, 409, 420, 467, 468, 471, 477-A and 120-B IPC, Police Station Phase-I, District Commissionerate Gautam Buddh Nagar, as also the order dated 18.2.2022 passed by the Chief Judicial Magistrate, Gautam Buddh Nagar directing lodging of aforesaid FIR, primarily on the ground that offences alleged therein are essentially in the nature of commercial dispute, which ought to have been resolved by way of arbitration and lodgement of first information report is an abuse of the process of law.
2. The informant company and its authorized signatory i.e. respondent no. 3 & 4 have appeared on a caveat and have objected to the maintainability of the writ petition, at this stage, urging that prima facie commissioning of cognizable offence is disclosed in the F.I.R. and the investigating agencies be allowed to proceed with the investigation and the rights and contentions advanced, on behalf of the petitioners, be left open for its examination upon conclusion of investigation. It is stressed that extent of offence since is yet to be determined, therefore, investigation into allegations are necessary before embarking upon adjudication of questions raised in these writ petitions. Arguments accordingly have been concluded by the respective counsel for the parties on the aspect relating to entertainability of the present writ petition, at this stage, and the need to interfere with the impugned First Information Report, as of now. The writ petitions, accordingly, are being disposed off by this common judgment with Writ Petition No.2672 of 2022 (Sharad Arora and another Vs. State of U.P. through Principal Secretary, Home, Lucknow and others) treated as the leading case.
3. We have heard Sri Dileep Kumar, learned Senior Counsel assisted by Sri Sudhanshu Kumar, Sri Manish Singh, Mr. Rajrshi Gupta & Sri Ramesh Chandra Yadav for the petitioners, Sri Arunendra Singh, learned AGA for the State and Sri Aman Lekhi learned Senior Counsel assisted by Sri Krishnarjun, Ms. Katyayini, Ms. Ranjana Roy Gaurai, Sri Ujjwal Jain, Ms. Niharika Behl and Smt. Diksha Mishra for the respondents.
4. Brief facts giving rise to the filing of instant writ petitions are that the petitioners in leading writ petition are the founder promoters and directors of a company named ''Sensorise Digital Services Private Limited (hereinafter referred to as ''SDSPL'), which is engaged in the business of providing ''mission critical connectivity services' for Machine-to-Machine (M2M)/Internet of Things (IoT) by utilizing a technology, which is claimed to be open and fully standardized as per available global standards and registered as trademark ''QoSim'. This technology is claimed to have existed since late 1990s and was commonly used for ''plastic roaming'. SDSPL QoSim is stated to be a product based on the said solution concept and according to petitioners the product being standard based product has no confidential technology attached to it. SDSPL's Intellectual Property (IP) is restricted to ''QoSim' trademark. When used in the AIS140 compliance use cases, the SDSPL QoSim is certified alongwith the device that it is embedded in and the certification belongs to the Device partner. SDSPL buys SIM cards from IIIrd Party manufacturers who own the IP and all the software on the card apart from the pre-requisite certifications for the manufacturing process are purchased from outside. SDSPL's customers allegedly are governmental or non-governmental agencies and the services are provided under well defined service level agreements.
5. SDSPL is otherwise a start-up company. It appears that the company needed infusion of funds to grow further and came in contact with the informant, which also is a company in the name of ''KKH Finvest Private Limited' (hereinafter referred to as the ''investor company'). It is claimed that after due diligence the officials of informant company entered into a memorandum of understanding (MoU) with the petitioner company in April, 2016, which was followed with execution of Shareholding and Share Subscription Agreement (hereinafter referred to as ''SSSHA') between the SDSPL and the informant company.
6. The informant company agreed to infuse funds to the extent of Rs. 9 crore in return for 50% share in SDSPL and 49% voting rights. It is admitted that the amount of Rs. 9 crore has been invested by the informant company, although it is alleged that the deposit was somewhat delayed. It is also alleged that the petitioners were forced to sign a revenue sharing agreement with M/s Rosmerta Technologies Limited and by now approximately Rs. 8 crores have been paid to the company for and on behalf of informant company.
7. The management and control of SDSPL apparently was split between two factions i.e. the petitioners, who are the promoter directors, and the informant company and their relationship was being regulated by the terms of SSSHA. SDSPL continued to function in such manner for the last 5-6 years and various decisions came to be taken in respect of its affairs. It emerges that growth and projections disclosed to informant company, on the basis of which it infused funds in SDSPL, fell well short and differences have arisen between the two groups leading to the lodging of the impugned FIR.
8. SSSHA is on record of the writ petition as Annexure 7. Clause 20.2 of it provides for arbitration and Clause 20.2.1 contains an agreement between the parties that all disputes or differences between them in respect of or concerning or connected with the interpretation or implementation of SSSHA including its breach and termination shall at first instance be resolved through negotiation failing which the dispute be referred to arbitration in accordance with the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996). The investor company instituted a petition under Section 9 of the Act of 1996 before the Delhi High Court on 13.8.2021 levelling various allegations against the SDSPL and sought various reliefs including deferment of meetings till the disputes are resolved by the arbitral tribunal; restraining the respondents (petitioners herein) from deciding any of the agenda items outlined in the notice of adjournment dated 10.8.2021 etc. The prayer clause is exhaustive and included a direction to conduct an immediate audit of intellectual property of SDSPL; a direction that records of SDSPL including minutes of meetings of the Board of Directors and general meetings be corrected to reflect the true and correct proceedings; a direction for investigation for breach of Clause 15 of SSSHA and not to take any managerial decision in respect of the subsidiary of SDSPL i.e. Sensorise Smart Solutions Private Limited (hereinafter referred to as the ''Subsidiary Company').
9. Aforesaid application filed under Section 9 of the Act of 1996 was registered as OMP (I)(COMM) 276 of 2021 before the Delhi High Court and the proceedings were deferred on 6.9.2021 on the statement of the parties that they are in conciliation proceedings and in all likelihood the matter would be settled. On 27th September, 2021 the Court was informed by the investor company that a communication is received from Managing Director of SDSPL about proposed Board meeting having been cancelled. The informant company got the petition under Section 9 of the Act of 1996 withdrawn and all pending applications stood disposed off, accordingly.
10. It is on record that no steps were taken thereafter by the informant company to invoke the arbitration clause and no application was otherwise filed for appointment of arbitrator under Section 11 of the Act of 1996.
11. Instead, an application came to be filed on 24.1.2022 under Section 156(3) Cr.P.C. before the Chief Judicial Magistrate, Gautam Buddh Nagar by the informant company against the promoter directors of SDSPL and its Chief Strategic Officer and other members of its Key Managerial Team and M/s Sim. Things Private Limited and its founders/directors and another company named M/s Iotivity Communications Private Limited and its directors Debdip Saha and Shirsanka Saha, who was earlier a member of Key Managerial Team of SDSPL and had opened a new venture, alleging that the opposite parties in the application have committed cognizable offences in the manner disclosed in the application and the concerned police officials be directed to register FIR against the opposite parties under various sections of IPC.
12. Chief Judicial Magistrate after hearing the applicant called for comments from the concerned Police Station on the question as to whether any FIR has been lodged in the matter, and upon being informed in the negative, proceeded to direct lodging of the FIR vide his order dated 18.2.2022. This order of Chief Judicial Magistrate is also challenged in the present writ petition.
13. Before proceeding to record the submissions advanced in the matter and dealing with it, on merits, it would be appropriate to note the FIR allegations, for proper appreciation of issues raised in this bunch of writ petitions.
14. Informant has alleged in the FIR that founders, promoters and other officers and persons associated with the SDSPL have committed corporate fraud in a well calculated and pre meditated manner against the informant company. The informant company was invited to join as strategic partner with the clear assurance that the SDSPL and its key management team would continue to operate for the benefit of SDSPL and shall ensure confidentiality and would not engage in any competing business for a reasonable period after their termination with the business activity of SDSPL and based upon such representation succeeded in ensuring investment of Rs.9 crores from the informant company. It has later transpired that false representations were made to induce the informant company into investing funds inasmuch as from the very beginning the intention of petitioners was to cheat and not to act for the benefit of SDSPL. Having succeeded in their efforts to cheat the informant company by such inducement, the accused persons have conspired and connived to cheat the informant company by breaching the fiduciary duties owed as per SSSHA and misappropriated the know how and assets of SDSPL to make wrongful gain for themselves, jointly and severally. The IP (Intellectual Property) and its exclusive technology were diverted to another company formed with the active assistance and collaboration of accused and denied access to it, including its source code to the informant company. It is asserted that accused were never interested in developing the business of SDSPL and from the very beginning acted in a planned way to conspire for undue gain for themselves while causing losses for the informant company. For such purposes the minutes of meetings of SDSPL were also forged and fabricated and the business transacted in such meetings were misreported. The wife of first petitioner and father of second petitioner in the leading petition have set up a rival business in the name of M/s SIM Things Private Limited to engage in identical business activities. Business of SDSPL has been allegedly diverted to ''SIM Things' thereby duping the informant company. It is further alleged that the extent of conspiracy and entirety of wrongful gains by accused persons is beyond the means of informant company to ascertain and can be determined only in a thorough police investigation. Dishonest inducement, cheating, falsification of company records to make wrongful gains etc. is thus sought to be inquired into in the FIR so as to punish the accused persons.
15. It is also mentioned in the FIR that despite such facts having been highlighted in the company meetings nothing was done and rather forged minutes were prepared showing presence of representative of informant company while he was hospitalized. It is further alleged that instead of rectifying the mistake the accused misled the informant company to enter into conciliation and utilized this time to perpetrate such fraud. The complaint further alleges that scale of fraud can be determined only during course of investigation and as the corporate office of SDSPL situates in NOIDA, as such the FIR needs to be registered at the concerned police station at NOIDA, Gautam Buddh Nagar and investigations be made to punish the accused for offences under Sections 406, 409, 420, 467, 468, 471, 477-A, 34 and 120-B IPC.
16. Learned Senior Counsel for the petitioner contends that allegations made in the FIR at best discloses existence of a commercial dispute between two factions of the company i.e. SDSPL and criminal investigation is not warranted for its resolution. It is urged that a preliminary enquiry ought to have been conducted in the matter by the magistrate before ordering registration of FIR in this case. Submission is that the order of magistrate under Section 156(3) Cr.P.C. is a judicial order and preliminary enquiry warranted in a commercial dispute having not been conducted in view of the law laid down by the Supreme Court in Lalita Kumari Vs. Government of U.P. and others, (2014) 2 SCC 1, and Priyanka Srivastava and another Vs. State of U.P. and another, (2015) 6 SCC 287, as such the order of the magistrate directing lodgement of FIR is liable to be quashed. It is further urged that none of the ingredients of various sections of IPC, referred to in the FIR, are disclosed from its bare perusal, inasmuch as there is no entrustment of any property so as to attract sections 406 and 409 IPC; no specific allegation of making false account to attract section 477A; ingredients of ''dishonestly' and ''fraudulently' defined in section 24 and 25 are not made out as neither any specific allegation of wrongful gain nor making of any forged signature is substantiated; ingredients of section 467 regarding making of false document also is not substantiated. Learned Senior Counsel lastly submitted that the informant is attempting to give a colour of criminal offence to civil dispute and allegations since at best makes out a case of breach of contract and non-maintenance of correct records of company for which adequate adjudicatory process is provided under Chapter XIV of the Companies Act, 2013 from sections 206 to 224 as such the FIR deserves to be quashed.
17. Sri Aman Lekhi, learned Senior Counsel for the respondents, per contra, submits that holding of preliminary enquiry is not mandatory where allegations are specific with regard to commissioning of cognizable offence and the argument to the contrary proceeds on misreading of the referred judgments; same set of facts may give rise to a civil dispute and also criminal offence, both of which can be tried simultaneously, provided ingredients of an offence are disclosed. It is further submitted that specific allegations with regard to commissioning of cognizable offence are made in the FIR and defence of petitioners need not be examined at the threshold, in petition under Article 226 of the Constitution of India, and the investigation be allowed to be held as per Criminal Procedure Code. Argument also is that petitioners have indulged in forum shopping, inasmuch as, after having served notices for grant of anticipatory bail, they have chosen not to file such application and have instead filed the present petition.
18. Sri Arunendra Singh, learned A.G.A. has adopted the arguments of Sri Lekhi and submits that investigation is progressing in the matter and no occasion arises for this Court to interfere in the matter.
19. Learned Senior Counsels for the parties have elaborately addressed the Court on the aspect relating to maintainability of the present petition for challenging the order of Magistrate, passed under section 156(3) Cr.P.C. It has been urged that order of Magistrate is a judicial order and a writ petition would lie against it on the ground that a preliminary enquiry was not conducted in the matter and the offence alleged falls beyond the territorial jurisdiction of the Magistrate concerned.
20. In reply, it is urged that even if the order of Magistrate is a judicial order yet the petitioners get no right to challenge it, at this stage, particularly after FIR is registered and the challenge would be limited to the FIR on the grounds permissible in law. Submission also is that corporate office of SDSPL is at Gautam Buddh Nagar and major part of the offences are committed there and thus, the territorial jurisdiction of Magistrate to pass an order under Section 156(3) Cr.P.C. cannot be questioned.
21. Nature of an order passed by Magistrate under section 156(3) Cr.P.C. and the remedies available against it are no longer res-integra and fell for consideration earlier before a Full Bench of this Court in Father Thomas vs. State of U.P. and others, 2011 Criminal Law Journal 2278. The issue that arose before the Full Bench was whether the order of Magistrate under section 156(3) Cr.P.C. to direct the police to register FIR and conduct investigation is open to challenge in a revision? Nature of such order i.e. whether it is interlocutory in nature or final also fell for adjudication before the Full Bench. Correctness of the Division Bench judgement in Ajay Malviya vs. State of U.P. and others, 2000 (41) ACC 435 insofar as the revision was held maintainable and, therefore, a writ directed against consequential registration of FIR would not lie, was also questioned.
22. The Full Bench elaborately examined the scheme contained in the Code of Criminal Procedure and the applicable judgments on the issue to hold that right of hearing to a prospective accused at pre-cognizance stage is not conceived and, therefore, no revision would lie against such order which is purely interlocutory in nature, and involves no substantial rights of the parties. After referring to the judgement in Ajay Malviya (supra) the Full Bench observed as under in paragraph 64:-
"64. However it is made clear that the initial order for investigation under section 156(3) is also not open to challenge in a writ petition, as it is now beyond the pale of controversy that the province of investigation by the police and the judiciary are not overlapping but complementary. As observed by the Privy Council in paragraph 37 in Emperor v. Khwaja Nazir Ahmad, [AIR 1945 PC 18.] when considering the scope of the statutory powers of the police to investigate a cognizable case under sections 154 and 156 of the Code, that it would be an unfortunate result if the Courts in exercise of their inherent powers could interfere in this function of the police. The roles of the Court and police are "complementary not overlapping and the combination of individual liberty with a due observance of law and order is only to be obtained by leaving each to exercise its own function."
The Full Bench, therefore, clearly held that the view taken by the Division Bench in Ajay Malviya (supra) that Magistrate's order is revisable is not correct and that the direction to register FIR is interlocutory in nature. The judgment in Father Thomas (supra) holds the field even as of now.
23. The above position in law has been reiterated by the Supreme Court in HDFC Securities Limited and others vs. State of Maharashtra and another, (2017) 1 SCC 640. In para 27 the Court has observed as under:-
"27. It appears to us that the appellants approached the High Court even before the stage of issuance of process. In particular, the appellants challenged the order dated 4-1-2011 passed by the learned Magistrate under Section 156(3) CrPC. The learned counsel appearing on behalf of the appellants after summarising their arguments in the matter have emphasised also in the context of the fundamental rights of the appellants under the Constitution, that the order impugned has caused grave inequities to the appellants. In the circumstances, it was submitted that the order is illegal and is an abuse of the process of law. However, it appears to us that this order under Section 156(3) CrPC requiring investigation by the police, cannot be said to have caused an injury of irreparable nature which, at this stage, requires quashing of the investigation. We must keep in our mind that the stage of cognizance would arise only after the investigation report is filed before the Magistrate. Therefore, in our opinion, at this stage the High Court has correctly assessed the facts and the law in this situation and held that filing of the petitions under Article 227 of the Constitution of India or under Section 482 CrPC, at this stage are nothing but premature. Further, in our opinion, the High Court correctly came to the conclusion that the inherent powers of the Court under Section 482 CrPC should be sparingly used."
(emphasis supplied)
24. We are, therefore, not inclined to entertain the present bunch of writ petitions in so far as the order of Magistrate directing the registration of FIR is challenged. Even otherwise, the order of Magistrate has been given effect to and the consequential FIR has been registered. Challenge to the FIR is permissible on the limited grounds enumerated in State of Haryana Vs. Bhajan Lal, [1992 Suppl (1) SCC 335], and such remedy having been availed the challenge to the order of Magistrate under Section 156(3) Cr.P.C. is declined.
25. So far as the plea of non holding of preliminary enquiry in the matter is concerned, the argument on behalf of the petitioners proceeds on the judgement of the Supreme Court in Lalita Kumari and Priyanka Srivastava (supra). The Constitution Bench in Lalita Kumar (supra) observed as under in para 120.6 of the report:-
"120.6. As to what type and in which cases preliminary inquiry is to be conducted will depend on the facts and circumstances of each case. The category of cases in which preliminary inquiry may be made are as under:
(a) Matrimonial disputes/family disputes
(b) Commercial offences
(c) Medical negligence cases
(d) Corruption cases
(e) Cases where there is abnormal delay/laches in initiating criminal prosecution, for example, over 3 months' delay in reporting the matter without satisfactorily explaining the reasons for delay.
The aforesaid are only illustrations and not exhaustive of all conditions which may warrant preliminary inquiry."
It is urged with reference to the above judgment that the present case falls in second category, at best, and a preliminary inquiry was mandatory.
26. The conclusions expressed in para 120 of the judgment in Lalita Kumari (supra) can be better understood if it is examined in light of observations made in para 119 of the report, which is reproduced hereinafter:-
"119. Therefore, in view of various counterclaims regarding registration or non-registration, what is necessary is only that the information given to the police must disclose the commission of a cognizable offence. In such a situation, registration of an FIR is mandatory. However, if no cognizable offence is made out in the information given, then the FIR need not be registered immediately and perhaps the police can conduct a sort of preliminary verification or inquiry for the limited purpose of ascertaining as to whether a cognizable offence has been committed. But, if the information given clearly mentions the commission of a cognizable offence, there is no other option but to register an FIR forthwith. Other considerations are not relevant at the stage of registration of FIR, such as, whether the information is falsely given, whether the information is genuine, whether the information is credible, etc. These are the issues that have to be verified during the investigation of the FIR. At the stage of registration of FIR, what is to be seen is merely whether the information given ex facie discloses the commission of a cognizable offence. If, after investigation, the information given is found to be false, there is always an option to prosecute the complainant for filing a false FIR."
(emphasis supplied) The above principle has been reiterated in Priyanka Srivastava (supra) and subsequent judgments on the point.
27. The ratio culled out from paragraph 119 and 120 of the judgment in Lalita Kumari (supra) is that where information given to police ex-facie discloses commissioning of cognizable offence, its registration is mandatory. It is only where information given does not disclose cognizable offence that the FIR may not be registered immediately and some sort of a preliminary verification or enquiry could be held. The use of word 'may' in the judgment is suggestive that such preliminary inquiry is not mandatory in all cases of alleged commercial offences and that such inquiry would be desirable only in a case where information furnished ipso facto does not disclose commissioning of a cognizable offence so as to ascertain whether a cognizable offence has been committed or not?
28. Discretion is, therefore, left with the Magistrate in the matter of holding or otherwise of preliminary inquiry in cases of alleged commercial offence depending upon the facts of a case and it cannot be said that in every case of alleged commercial offence holding of preliminary inquiry would be mandatory. An order of Magistrate, therefore, cannot be challenged on the ground of non-holding of preliminary inquiry if the information given to Magistrate ex-facie discloses commissioning of cognizable offence.
29. In the facts of the present case we find that the FIR contains ex-facie disclosure of cognizable offence in the matter and whether such information is falsely given or is credible or genuine would have to be verified only during the investigation pursuant to FIR. The challenge to the FIR on the ground of non-holding of preliminary enquiry thus fails.
30. Sri Dileep Kumar, learned Senior Counsel for the petitioners then took us through the contents of application filed before the Delhi High Court by the informant company in application under section 9 of the Act of 1996, in order to submit that same set of facts form the basis of relief therein, as are mentioned in the impugned FIR and, therefore, lodgement of FIR is bad in law.
31. Though the argument of Sri Kumar appears attractive at the first blush, but a deeper examination of the matter persuades us not to accept it for the reasons enumerated hereinafter.
32. Same set of facts may constitute an offence under the Indian Penal Code while constituting breach of agreement on part of one of the parties and parallel proceedings can always proceed on both counts. What is of importance is to ascertain whether ingredients of an offence are made out in the facts of the case or not? In Priti Saraf and another vs. State of NCT of Delhi and another, (2021) SCC Online SC 206 the Court has observed as under in paragraph 32 to 34 of the judgment:-
"32. In the instant case, on a careful reading of the complaint/FIR/charge-sheet, in our view, it cannot be said that the complaint does not disclose the commission of an offence. The ingredients of the offences under Sections 406 and 420 IPC cannot be said to be absent on the basis of the allegations in the complaint/FIR/charge-sheet. We would like to add that whether the allegations in the complaint are otherwise correct or not, has to be decided on the basis of the evidence to be led during the course of trial. Simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of the process of the court for exercising inherent powers of the High Court under Section 482 CrPC for quashing such proceedings.
33. We have perused the pleadings of the parties, the complaint/FIR/charge-sheet and orders of the Courts below and have taken into consideration the material on record. After hearing learned counsel for the parties, we are satisfied that the issue involved in the matter under consideration is not a case in which the criminal trial should have been short-circuited. The High Court was not justified in quashing the criminal proceedings in exercise of its inherent jurisdiction. The High Court has primarily adverted on two circumstances, (i) that it was a case of termination of agreement to sell on account of an alleged breach of the contract and (ii) the fact that the arbitral proceedings have been initiated at the instance of the appellants. Both the alleged circumstances noticed by the High Court, in our view, are unsustainable in law. The facts narrated in the present complaint/FIR/charge-sheet indeed reveal the commercial transaction but that is hardly a reason for holding that the offence of cheating would elude from such transaction. In fact, many a times, offence of cheating is committed in the course of commercial transactions and the illustrations have been set out under Sections 415, 418 and 420 IPC. Similar observations have been made by this Court in Trisuns Chemical Industry v. Rajesh Agarwal (supra):--
"9. We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335]"
34. So far as initiation of arbitral proceedings is concerned, there is no correlation with the criminal proceedings. That apart, the High Court has not even looked into the charge-sheet filed against 2nd respondent which was on record to reach at the conclusion that any criminal offence as stated is prima facie being made out and veracity of it indeed be examined in the course of criminal trial."
33. Merely because on similar facts an application under section 9 of the Act of 1996 is instituted or arbitration for resolution of contractual dispute can be availed of, in terms of the agreement, it would not mean that criminal action cannot be set in motion even though prima facie ingredients of offence are disclosed in the FIR. The fact that even after filing application under section 9 of the Act of 1996 the dispute has not yet been referred to the arbitrator, or the court approached under section 11 of the Act of 1996, also cannot be a ground to challenge the FIR if it otherwise discloses cognizable offence.
34. Whether allegations made in the FIR are correct or not is not required to be examined by this Court, under Article 226 of the Constitution of India, at this stage, since the facts are to be ascertained by the concerned investigating agency at the first instance.
35. Law is otherwise well settled that same set of acts or omissions may constitute offences under different enactments and where there are two distinct offences disclosed, made up of different ingredients, the punishment in both would be permissible even if the offences have some overlapping features. In State vs. Navjot Sandhu, (2005) 11 SCC 600 the Court has observed as under in paragraph 255:-
"255. The learned counsel, apart from placing reliance on Section 56 of POTA, has also drawn our attention to Section 26 of the General Clauses Act and Section 71 IPC. His contention, though plausible it is, has no legal basis. We do not think that there is anything in Section 56 of POTA which supports his contention. That provision only ensures that the conspiracy to commit the terrorist act shall be punishable under POTA. As the appellant is being punished under that section, irrespective of the liability to be punished under the other laws, Section 56 ceases to play its role. Then, we shall turn to Section 26 of the General Clauses Act, which lays down:
"26. Where an act or omission constitutes an offence under two or more enactments, then the offender shall be liable to be prosecuted and punished under either or any of those enactments, but shall not be liable to be punished twice for the same offence."
It becomes at once clear that the emphasis is on the words "same offence". It is now well settled that where there are two distinct offences made up of different ingredients, the bar under Section 26 of the General Clauses Act or for that matter, the embargo under Article 20 of the Constitution, has no application, though the offences may have some overlapping features. The crucial requirement of either Article 20 of the Constitution or Section 26 of the General Clauses Act is that the offences are the same or identical in all respects. It was clarified in State of Bihar v. Murad Ali Khan [(1988) 4 SCC 655 : 1989 SCC (Cri) 27] : (SCC p. 668, paras 30-31) "''Though Section 26 in its opening words refers to "the act or omission constituting an offence under two or more enactments", the emphasis is not on the facts alleged in the two complaints but rather on the ingredients which constitute the two offences with which a person is charged. This is made clear by the concluding portion of the section which refers to "shall not be liable to be punished twice for the same offence". If the offences are not the same but are distinct, the ban imposed by this provision also cannot be invoked.' The same set of facts, in conceivable cases, can constitute offences under two different laws. An act or an omission can amount to and constitute an offence under IPC and at the same time constitute an offence under any other law." (emphasis in original) We accept the argument of the learned counsel for the State Mr Gopal Subramanium that offences under Section 302 IPC, Sections 3(2) and 3(3) of POTA are all distinct offences and a person can be charged, tried, convicted and punished for each of them severally. The analysis of these provisions show that the ingredients of these offences are substantially different and that an offence falling within the ambit of Section 3(1) may not be squarely covered by the offence under Section 300 IPC. The same set of facts may constitute different offences. The case of State of M.P. v. Veereshwar Rao Agnihotry [1957 SCR 868 : 1957 Cri LJ 892] is illustrative of this principle. In that case, it was held that the offence of criminal misconduct punishable under Section 5(2) of the Prevention of Corruption Act is not identical in essence, import and content with an offence under Section 409 IPC. The bar to the punishment of the offender twice over for the same offence would arise only where the ingredients of both the offences are the same."
36. In Sangeetaben Mahendrabhai Patel vs. State of Gujarat, (2012) 7 SCC 621 the Court observed as under in paragraph 31 to 33:-
"31. Similar view has been reiterated by this Court in State of Haryana v. Balwant Singh [(2003) 3 SCC 362 : 2003 SCC (L&S) 279 : AIR 2003 SC 1253] , observing that there may be cases of misappropriation, cheating, defamation, etc. which may give rise to prosecution on criminal side and also for action in civil court/other forum for recovery of money by way of damages, etc. Therefore, it is not always necessary that in every such case the provisions of Article 20(2) of the Constitution may be attracted.
32. In Hira Lal Hari Lal Bhagwati v. CBI [(2003) 5 SCC 257 : 2003 SCC (Cri) 1121 : AIR 2003 SC 2545] this Court while considering the case for quashing the criminal prosecution for evading the customs duty, where the matter stood settled under the Kar Vivad Samadhan Scheme, 1998, observed that once the tax matter was settled under the said Scheme, the offence stood compounded, and prosecution for evasion of duty, in such a circumstance, would amount to double jeopardy.
33. In view of the above, the law is well settled that in order to attract the provisions of Article 20(2) of the Constitution i.e. doctrine of autrefois acquit or Section 300 CrPC or Section 71 IPC or Section 26 of the General Clauses Act, the ingredients of the offences in the earlier case as well as in the latter case must be the same and not different. The test to ascertain whether the two offences are the same is not the identity of the allegations but the identity of the ingredients of the offence. Motive for committing the offence cannot be termed as the ingredients of offences to determine the issue. The plea of autrefois acquit is not proved unless it is shown that the judgment of acquittal in the previous charge necessarily involves an acquittal of the latter charge."
37. On behalf of the petitioners it has been emphasized that information disclosed in the FIR would fall short of the ingredients required to constitute offences in the disclosed section(s), and the disclosure otherwise is wrong on facts.
38. Admittedly, the facts in its entirety are not before the Court and the investigation is yet to conclude. At this stage, it would not be safe for this Court to adjudicate facts so as to hold that necessary ingredients of offences alleged are not made out against the writ petitioners. A word of caution has been sounded by the Supreme Court for exercise of power under Article 226 of the Constitution of India in Monika Kumar (Dr.) vs. State of U.P., (2008) 8 SCC 781 and reiterated in R. Kalyani vs. Janak C. Mehta, (2009) 1 SCC 516. In R. Kalyani (supra) the Court observed as under in paragraph 14 & 15 of the judgment:-
"14. However, Monica Kumar (Dr.) v. State of U.P. [(2008) 8 SCC 781 : (2008) 9 Scale 166] held: (SCC p. 798, para 36) "36. ... The inherent power should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire 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 magnitude and 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 jurisdiction of quashing the proceeding at any stage."
15. Propositions of law which emerge from the said decisions are:
(1) The High Court ordinarily would not exercise its inherent jurisdiction to quash a criminal proceeding and, in particular, a first information report unless the allegations contained therein, even if given face value and taken to be correct in their entirety, disclosed no cognizable offence.
(2) For the said purpose the Court, save and except in very exceptional circumstances, would not look to any document relied upon by the defence.
(3) Such a power should be exercised very sparingly. If the allegations made in the FIR disclose commission of an offence, the Court shall not go beyond the same and pass an order in favour of the accused to hold absence of any mens rea or actus reus.
(4) If the allegation discloses a civil dispute, the same by itself may not be a ground to hold that the criminal proceedings should not be allowed to continue."
39. We further find force in the argument that petitioners in the facts of the present case have remedy available to them of seeking appropriate protection under Section 438/439 of the code of criminal procedure and in the event such remedy is availed, it shall be dealt with in accordance with law without being influenced by any observation made in the present judgment. We clarify that examination of facts and legal questions in the present judgment were confined to the question posed at the outset i.e. whether interference in the impugned FIR is required in the present petitions or not? All legal and factual issues are thus left open for determination at appropriate stage of the proceedings in accordance with law. Specific role of each petitioner is also not required to be examined by us, at this stage, for the above reasons.
40. In view of our above deliberations we decline to interfere in the present writ petitions which are accordingly dismissed. No order is passed as to costs.
Order Date :- 12.4.2022 Anil