Jharkhand High Court
Manoj Jayaswal And Ors vs The State Of Jharkhand And Anr on 6 February, 2015
Author: H. C. Mishra
Bench: H. C. Mishra
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P (Cr.) No. 202 of 2014
1. Manoj Jayaswal
2. Abhishek Jayaswal
3. Ravindra Jayaswal
4. Pradip Jayaswal ...... Petitioners
Versus
1. The State of Jharkhand
2. Ayesh Coal Trading Company, through its
Proprietor, Anil Kumar Agarwal ...... Respondents
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CORAM : HON'BLE MR. JUSTICE H. C. MISHRA
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For the Petitioners : Mr. Nitin Kr. Pasari, Advocate.
Mr. Ranjana Mukherjee, Advocate
Mr. Vishal Kumar Singh, Advocate
For the Respondents : Mr. Ram Nivas Roy, Advocate
Mr. Indrajit Sinha, Advocate
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CAV On :- 06/02/2015 Pronounced On :- 10/03/2015
H.C. Mishra, J. Heard learned counsel for the petitioners and learned counsel for the
State as also learned counsel for the informant respondent No.2.
2. The petitioners have filed this writ application with a prayer for
quashing the F.I.R., being Dhanbad Dhansar P.S Case No.436 of 2014
corresponding to G.R No.1794 of 2014, instituted for the alleged offences under
Sections 406, 420 and 120-B of the Indian Penal Code and Section 138 of the
Negotiable Instruments Act.
3. The F.I.R was lodged by the informant, who is the proprietor of the
respondent No.2, Ayesh Coal Trading Company, Dhanbad. It is alleged in the
F.I.R that in the month of March 2013, the petitioners, who are the Chairman,
Managing Director, C.E.O., and Director, of M/s Corporate Ispat Alloys Ltd.,
which is a unit of Abhijeet Group of companies, approached the informant, and as
per the order placed by them, the coal worth Rs.4,69,34,659/- was supplied by the
informant's company to the petitioners' company between 28.4.2013 to 1.8.2013. It
is stated in the F.I.R that against the said supply, the payment was made only to the
tune of Rs.3,93,57,233/-, and Rs.75,77,426/- remained outstanding. Upon several
demands, a cheque of Rs.59,36,057/- was issued, drawn upon Axis Bank Ltd,
Durgapur Branch, with a request that the cheque be produced after the period of
one month. The cheque was produced accordingly, in the Bank, but the same was
dishonored on 13.2.2014, whereupon notice was given to the petitioners, who again
requested for a further period of one month, for the clearance of the cheque.
Subsequently, the cheque was again produced in the Bank, which was again
dishonored on 12.3.2014. Upon assurance of the petitioners, the cheque was again
produced in the Bank, but it was again dishonored on 18.3.2014, due to the stop
payment request made to the Bank by the petitioners. Thereafter, legal notice was
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sent to the petitioners, but the payment was not made and the F.I.R was lodged. It
is also alleged in the F.I.R., that in the meantime, the petitioners were requesting
for supply of more coal to the petitioners' company, but no further supply was
made.
4. The petitioners have preferred this writ application with a prayer for
quashing the F.I.R., on the grounds inter-alia, that there was business transaction
between the petitioners' company and the informant's company and in the facts and
circumstances of the case, no offence is made out under Sections 406, 420 and
120-B of the Indian Penal Code. Petitioners have also challenged the F.I.R., on the
ground that for the offence under Section 138 of the Negotiable Instruments Act,
police case is not at all maintainable.
5. It appears from the record that the informant appeared through
Advocate and taking into consideration the fact that there was monetary dispute
between the parties, the matter was referred for conciliation between the parties
before the Conciliator at Jharkhand State Legal Services Authority (in short
JHALSA), Ranchi. The settlement could not be arrived at between the parties and
lastly, by order dated 16.1.2015, at the request of the learned counsels for both the
parties, the case was adjourned again by way of last indulgence to them to resolve
their dispute amicably, and it was made clear that if by 6th of February 2015, the
parties failed to resolve their dispute amicably, the matter would be decided on its
own merits. On 6th February 2015, when the matter was taken up, it was an
admitted position amongst both the parties that they could not settle their dispute
amicably and accordingly, both the parties were heard on merits of the case.
6. A counter affidavit has been filed by the informant respondent No.2,
in which, it is stated inter-alia, that the petitioners were having the fraudulent
intention at the very inception of entering into the contract between the parties and
accordingly, the criminal offence is also made out against the petitioners. It is also
stated in the counter affidavit that in course of talks of settlement between the
parties at JHALSA, the petitioners came out with a debit note, in which, they
claimed that the coal supply was not of the standard quality and accordingly, they
claimed for refund which is to be made by the informant, and according to the said
debit note, the claim of the petitioners' company against the respondent's company
is for the refund of the total amount of Rs. 24,13,156/-.
7. Learned counsel for the petitioners has submitted that in the F.I.R
itself, the petitioners have been described as the Chairman, Managing Director,
C.E.O., and Director, of M/s Corporate Ispat Alloys Ltd., a unit of Abhijeet Group
of companies, and the F.I.R clearly shows that the petitioners had entered into the
business transaction with the informant on behalf of the company. Accordingly, it
is submitted that the offence, if any, is made out only against the company and not
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against the petitioners, as in the Indian Penal Code, there is no provision for
vicarious liability. It has also been submitted by the learned counsel for the
petitioners that for the settlement of the dispute between the parties, the matter was
referred for conciliation before the Conciliator at JHALSA, Ranchi, where
according to the counter affidavit filed by the informant, the petitioners made out a
claim on the basis of the debit note, according to which, there were dues against the
informant's company. It is submitted by the learned counsel that this clearly shows
that there is a monetary dispute between the parties, which primarily is of a civil
nature, and accordingly, the offence under Sections 420 or 406 of the Indian Penal
Code is not at all made out in the facts and circumstances of the case. It is further
submitted that Section 142 of the Negotiable Instruments Act, clearly prescribes
that the cognizance for the offence under Section 138 of the Negotiable
Instruments Act, can be taken only upon a complaint made in writing and
accordingly, the F.I.R lodged for the said offence is absolutely misconceived and
cannot be sustained in the eyes of law.
8. In support of his contention, learned counsel for the petitioners has
placed reliance upon the decision of the Hon'ble Supreme Court of India in Anil
Mahajan Vs. Bhor Industries Ltd. & Anr., reported in (2005) 10 SCC 228,
wherein it has been held that for making out of the offence of cheating, fraudulent
and dishonest intention must be shown to be existing from the very beginning of
the transaction and from mere failure to keep the promise at a subsequent stage,
offence of cheating cannot be made out. Placing reliance on this decision, learned
counsel has submitted that from the bare perusal of the F.I.R itself, it is apparent
that against the supplies of coal made to the value of Rs.4,69,34,659/-, the
petitioners' company had already paid to the informant Rs.3,93,57,233/- and as
such, it cannot be said that the petitioners' company was having any fraudulent
intention at the very beginning of the transaction. In fact, about 80% of the dues
were paid by the company. It is submitted that remaining dues are disputed, for
which, the matter was sent for settlement between the parties before the
Conciliator, but the settlement could not be arrived at due to the rival contentions
of the parties.
9. Learned counsel for the petitioners has also placed reliance upon the
decision of the Hon'ble Supreme Court of India in GHCL Employees Stock
Option Trust Vs. Kranti Sinha, reported in (2013) 4 SCC 505, wherein the law
has been laid down as follows :-
"13. There is no dispute with regard to the legal proposition
that the case of breach of trust or cheating are both a civil
wrong and a criminal offence, but under certain situations
where the act alleged would predominantly be a civil wrong,
such an act does not constitute a criminal offence."
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10. In support of his contention that the petitioners being the officials of
the company cannot be made liable vicariously for the offence, if any, committed
by the company, learned counsel for the petitioners has placed reliance upon the
decision of the Hon'ble Supreme Court of India in Maksud Saiyed Vs. State of
Gujarat & Ors, reported in (2008) 5 SCC 668, wherein the law has been laid
down as follows :-
"13. Where a jurisdiction is exercised on a complaint petition
filed in terms of Section 156(3) or Section 200 of the Code of
Criminal Procedure, the Magistrate is required to apply his
mind. The penal code does not contain any provision for
attaching vicarious liability on the part of the Managing
Director or the Directors of the Company when the accused is
the Company. The learned Magistrate failed to pose unto
himself the correct question viz. as to whether the complaint
petition, even if given face value and taken to be correct in its
entirety, would lead to the conclusion that the respondents
herein were personally liable for any offence. The Bank is a
body corporate. Vicarious liability of the Managing Director
and Director would arise provided any provision exists in that
behalf in the statute. Statutes indisputably must contain
provision fixing such vicarious liabilities. Even for the said
purpose, it is obligatory on the part of the complainant to make
requisite allegations which would attract the provisions
constituting vicarious liability." (Emphasis supplied).
11. In support of this contention, learned counsel has also placed reliance
upon the decision of the Hon'ble Supreme Court of India in S.K. Alagh Vs.
State of Uttar Pradesh and Ors., reported in (2008) 5 SCC 662. Placing reliance
on these decisions, learned counsel has submitted that the petitioners cannot be
held vicariously liable for the offence, if any, which might have been committed by
the company, as there is no provision for any such liability in the Indian Penal
Code. Further, in view of the fact that the present case has been instituted
predominantly with an intention to realise the money from the company, criminal
offence cannot be said to be made out. Learned counsel accordingly, submitted that
it is a fit case, in which, the F.I.R., in Dhanbad Dhansar P.S Case No.436 of 2014
corresponding to G.R No.1794 of 2014, be quashed.
12. Per contra, learned counsel for the State as also learned counsel for
the informant respondent No.2 have submitted that on the basis of the allegations
made out in the F.I.R., the offence is clearly made out against the petitioners also,
as according to the F.I.R., the petitioners had approached the informant for supply
of coal on the basis of which, the coal was supplied, but the remaining dues of the
informant's company is not being cleared. It is submitted that the facts of this case
would show that the petitioners were having the fraudulent intention to cheat the
informant at the very inception of the transaction.
13. Learned counsel for the respondent No.2 has drawn the attention of
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this Court towards paragraph 25 of the writ application, which reads as follows:-
"25. That the present case is clearly to the contrary since it is
an admitted fact that M/s CIAL has already paid more than
80% of the dues and it is only some amount of money which is
left unpaid due to financial constraints of the company. The
company, therefore, had been requesting the accused time and
again to grant some more time to pay the dues. The company is
neither denying its dues nor is running away from its
obligations but due to its tight financial position, is unable to
clear its debts at present. In such a situation, there is no
question of alleging the offence of cheating against the
petitioners."
14. It is submitted by the learned counsel for the respondent No.2 that at
the one hand in the writ application, the case of the petitioners is that they had
already paid more than 80% of the dues and it is only some amount of money
which had been left unpaid due to the financial constraints of the company and the
company was seeking some more time to pay the dues to the informant, but at the
other hand, during the conciliation between the parties before the Conciliator, they
came out with the debit note making out a false counter claim for Rs.24,13,156/-,
payable by the informant's company to the petitioners' company, alleging below
standard supply of coal. Learned counsel accordingly, submitted that this
subsequent action of the petitioners clearly shows that they were having the
fraudulent intention to cheat the informant from the very beginning of the
transaction and accordingly, the offence under Sections 406 and 420 of the Indian
Penal Code is clearly made out against these petitioners and there can be no
interference with the F.I.R at this stage.
15. In support of his contention, learned counsel for the informant has
placed reliance upon the decision of the Hon'ble Supreme Court of India in Indian
Oil Corporation Vs. NECP India Ltd. & Ors., reported in (2006) 6 SCC 736,
wherein it has been held as follows :-
"36. In this case, the complaints clearly allege that the
accused with fraudulent intention to cheat and defraud IOC,
had induced IOC to resume supply of aircraft fuel on cash-
and-carry basis, by entering into a further agreement dated
20-9-1997and undertaking to clear the outstanding amount of Rs 18 crores approximately within the time stipulated in the hypothecation agreements. The sum and substance of the said allegation read with other averments extracted above, is that NEPC India, having committed default in paying the sum of Rs 18 crores, entered into a fresh agreement dated 20-9-1997 agreeing to clear the outstanding amount as per a fresh schedule, with the dishonest and fraudulent intention of pre-empting and avoiding any action by IOC in terms of the hypothecation deeds to take possession of the aircrafts. Though the supplies after 20-9-1997 were on cash-and-carry basis, the fraudulent intention is alleged to emanate from the 6 promise under the said agreement to make payment, thereby preventing immediate seizure (taking possession) of the aircrafts by IOC. This allegation made in addition to the allegation relating to removal of engines, has been lost sight of by the High Court. All that is to be seen is whether the necessary allegations exist in the complaint to bring the case within Section 415. We are clearly of the view that the allegations in the complaint constitute such an offence. We are not concerned with the proof of such allegations or ultimate outcome of trial at this stage."
(Emphasis supplied).
16. Learned counsel has also submitted that in the F.I.R., it is clearly stated that the petitioners themselves had approached the informant for making the supply and accordingly, the petitioners herein were involved in each and every act done by the company, which shows that the petitioners were individually and jointly liable for the commission of offence, as alleged in the F.I.R. Learned counsel further, submitted that simply because the civil relief is also available to the respondent No.2, it cannot be said at this stage that the petitioners are not liable for the criminal offence committed by them, and in the similar circumstance, in Lee Kun Hee, President, Samsung Corpn., South Korea & Ors. Vs. State of U. P. & Ors., reported in (2012) 3 SCC 132, it has been held as follows:-
"73. We have given our thoughtful consideration to the last contention advanced at the hands of the learned counsel for the appellants. We are of the considered view that in offences of the nature contemplated under the summoning order there can be civil liability coupled with criminal culpability. What a party has been deprived of by an act of cheating can be claimed through a civil action. The same deprivation based on denial by way of deception, emerging from an act of cheating, would also attract criminal liability. In the course of criminal prosecution, a complainant cannot seek a reciprocal relief for the actions of the accused. As in the instant case, the monetary consideration under the bill of exchange dated 1-2- 2001cannot be claimed in the criminal proceedings for that relief the remedy would be only through a civil suit. It is therefore not possible for us to accept that since a civil claim has been raised by the complainant JCE Consultancy, based on the alleged breach of the agreement dated 1-12-2001, it can be prevented from initiating proceedings for penal consequences for the alleged offences committed by the accused under the Penal Code."
(Emphasis supplied).
17. Learned counsel further placed reliance upon the decision of the Hon'ble Supreme Court of India in Sahara India Real State Corpn. Ltd. & Ors. Vs. SEBI & Anr., reported in (2013) 1 SCC 1, wherein it has been observed that it is the conduct and action that matters, and in the present case, the subsequent conduct of the petitioners shows that from the very beginning of the transaction, they had no intention to make the payment of remaining dues of the informant's 7 company. Placing reliance on these decisions, learned counsel submitted that the criminal offence is clearly made out against the petitioners and in that view of the matter, the F.I.R. cannot be quashed at this stage.
18. Having heard the learned counsels for both the sides and upon going through the record, I find from the F.I.R., that the petitioners have been made accused showing them to be the Chairman, Managing Director, C.E.O., and Director, of M/s Corporate Ispat Alloys Ltd, a unit of Abhijeet Group of Companies. Though in the F.I.R., there is allegation against these petitioners of placing the orders for supply of coal worth Rs.4,69,34,659/-, but it is apparent from the F.I.R., that the order was placed on behalf of the company and not in the personal capacity of these petitioners and the payment was also made by the company. In this connection, some statements made in the counter affidavit filed on behalf of the respondent No.2 also need to be referred, which clearly show that even according to the stand of the respondent No.2, whatever was done, it was done on behalf of the company and not in the personal capacity of the petitioners. In this connection, following statements made in the counter affidavit are specifically relied upon :-
"8. That it is stated that the answering respondent has been supplying coal to M/s Corporate Ispat Alloys Limited (CIAL), upon issuance of various purchase order by CIAL and receipt thereof has been duly acknowledged by it.
9. That it is stated that in course of business, total amount of Rs.4,69,34,659/- was billed to CIAL against supply of coal as per specification mentioned in the purchase order issued by it.
11. That it is stated that upon being requested for payment of the due amount, the petitioners did not pay attention however much later, a cheque for an amount of Rs.59,36,057/- bearing Cheque No.016543 dated 18.12.2013 was issued on behalf of M/s Corporate Ispat Alloys Limited against the due accrued on account of supply of coal."
19. The aforesaid paragraphs in the counter affidavit, clearly show that the purchase orders were issued by the company and even the cheque for Rs.59,36,057/- was issued on behalf of the company. Though it is stated in paragraph 25 of the writ application that the petitioners company owned the dues of the informant and some amount of money was left unpaid due to the financial constraints of the company, but the debit note has been brought on record by the respondent No.2, in the counter affidavit, clearly showing that there was monetary dispute between the parties. Apart from the aforesaid facts, it is also apparent that there could not be any fraudulent intention to cheat from the very inception of the transaction, and inasmuch as, the F.I.R itself shows that more than 80% of the dues had already been cleared by the petitioners' company, as they had already made the payment of Rs.3,93,57,233/-, as against the supply of coal worth Rs.4,69,34,659/-.
820. In Indian Oil Corporation's case (supra), the fact was that NECP India, having committed default in paying the sum of Rs.18 crores, entered into a fresh agreement, and agreed to clear the outstanding amount with a dishonest and fraudulent intention of pre-empting and avoiding any action by IOC in terms of the hypothecation deeds to take possession of the aircrafts. The fraudulent intention in the said case is alleged to emanate from the promise under the said agreement to make payment thereby preventing immediate seizure of the aircrafts by IOC. There was also allegation relating to removal of engines and in view of those facts, the Apex Court held that complaint constituted criminal offence also. In the present case, it is a plain case of the informant that as against the supply of coal worth Rs.4,69,34,659/-, the petitioners' company had already made the payment of Rs.3,93,57,233/- and there is dispute regarding the remaining amount only, which, according to the petitioners stand in the writ application, they have not been able to pay due to the financial constraints of the company, whereas according to the respondent No.2, the company has also made out a counter claim over the informant for a sum of Rs. 24,13,156/-, by way of debit note.
21. In my considered view, the decision of the Apex Court in Indian Oil Corporation's case (supra), is not at all applicable to the facts of this case, rather the facts of this case is fully covered by the decisions of the Apex Court in GHCL's case (supra), as also in Maksud Saiyed's case (supra). The decisions of the Apex Court in Anil Mahajan's case (supra) and S.K. Alag's case (supra) also fully apply to the facts of this case. Sahara India's case (supra), relied upon by learned counsel for the respondent No.2, related to the violation of the Companies Act and SEBI Act and in that background, there is only an observation, in nature of obiter, by the Apex Court that it is the conduct and action that matters. In Lee Kun Hee's case (supra), in the facts of that case, the Apex Court did not enter into the culpability of the appellants, holding that it would emerge only after evidence is adduced by the rival parties before the Trial Court, which is apparent from paragraph 74 of the Judgment, which reads as follows :-
"74. It would not be appropriate for us to delve into the culpability of the appellants at the present juncture on the basis of the factual position projected by the rival parties before us. The culpability (if at all) would emerge only after evidence is adduced by the rival parties before the trial court. The only conclusion that needs to be drawn at the present juncture is that even on the basis of the last submission canvassed on behalf of the appellants it is not possible to quash the summoning order at this stage. In the aforesaid view of the matter, it is left open to the appellants to raise their objections, if they are so advised, before the trial court. The trial court shall, as it ought to, adjudicate upon the same in consonance with law after allowing the rival parties to lead evidence to substantiate their respective positions."9
22. Thus, it is apparent that neither Sahara India's case (supra), nor Lee Kun Hee's case (supra), are applicable to the facts of this case.
23. As regards the offence under Section 138 of the Negotiable Instruments Act, it is well settled in view of Section 142 of the Negotiable Instruments Act, that no cognizance can be taken on the basis of the F.I.R., as the Act clearly prescribes that the cognizance can be taken only on the basis of the complaint in writing. This question of law is no more res integra. In that view of the matter, the present F.I.R is not at all maintainable for the offence under Section 138 of the Negotiable Instruments Act, if any, made out against the petitioners.
24. For the foregoing reasons, I find and hold that the order for supply of coal was placed to the informant on behalf of the petitioners' company and not in the personal capacity of the petitioners, and accordingly, there being no provision for vicarious liability in the Indian Penal Code, the petitioners cannot be held criminally liable for the actions done on behalf of the company. Even otherwise, it is apparent from the F.I.R. itself, that there is nothing therein to show that the petitioners were having the fraudulent intention to cheat the informant from the very inception of the transaction. I am also of the considered view that in the present case, the act alleged is predominantly a civil wrong, which does not constitute a criminal offence. As such, this is a fit case for exercise of the extraordinary jurisdiction under Article 226 of the Constitution of India, for quashing the F.I.R., at this stage.
25. Consequently, the F.I.R., being Dhanbad Dhansar P.S Case No. 436 of 2014 corresponding to G.R No.1794 of 2014, is hereby, quashed. This application is accordingly, allowed.
( H. C. Mishra, J.) BS/