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2016 DIGILAW 2228 (BOM)

Urvi A. Piramal v. State of Maharashtra

2016-12-16

S.B.SHUKRE

body2016
JUDGMENT : S.B. Shukre, J. This is an application filed under section 482 of the Code of Criminal Procedure seeking quashing and setting aside of the order of issuance of process dated 9-3-2016 passed against the applicants by the Judicial Magistrate First Class, Nagpur in Criminal Complaint Case No. 2181/2011 filed against them and one more person by respondent No. 2. 2. In criminal complaint filed against the applicants and one more person, the applicants are made accused Nos. 1 to 9 and the other person, who is not a party to these proceedings, Mr. Dilip Bhatnagar, has been made accused No. 10. These applicants are hereinafter referred to as the accused Nos. 1 to 9 and respondent No. 2 as the complainant for the sake of convenience. 3. The complainant, Director of D.C. Weaving Mills Private Limited entered into an agreement dated 22nd May, 2006 with the company of accused Nos. 1 to 9 Morarjee Textiles Limited, previously known as "Morarjee Brembana Limited" (in short, "the Company") for setting up an industrial unit at Plot No. G-16-1, MIDC, Industrial area Hingna, Butibori, Nagpur with the assistance of the Company, which was to serve as an ancillary unit of the Company for fortifying the production capacity of the Company, which was into the business of production and sale of cloth and clothing material, as the Company was facing short fall in its production capacity. 4. As per the agreement, the Company was not only to assist the complainant in setting up and commissioning the ancillary unit, but also its running in a smooth manner by supplying the raw material consisting of yam of certain specifications and numbers for the purpose of weaving it into a cloth and returning the woven material to the company. Accordingly, second hand machinery including looms were made available on payment basis to the complainant and assistance was rendered in setting up and commissioning of the ancillary unit. The yam was also supplied to the complainant. However, the complainant could not weave the yam into the cloth within the time stipulated and as per the quality expected in terms of the agreement. The yam was also supplied to the complainant. However, the complainant could not weave the yam into the cloth within the time stipulated and as per the quality expected in terms of the agreement. This resulted in delayed payments and rise in production cost of the cloth suffered by the ancillary unit which had a further cascading effect on the overall health of the ancillary unit resulting in defaults being committed by the complainant in repayment of instalments of loan, which was of about Rs. 129.5 lakh, availed of by the complainant from Allahabad Bank. The account of the complainant was declared by the Bank as nonperforming assets (NPA) and proceedings for recovery of the loan under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 were initiated. 5. According to the complainant, all these calamities visited him because of the dishonest intention on the part of the accused Nos. 1 to 9 and another person. The complainant alleged that cloth of the desired quality and in the time stipulated in the agreement could not be manufactured by him because of intentional breach of the terms of the agreement laying down supplying yam of certain specifications and numbers. According to him, had it not been for supplying "bad beams" of the yam (beams of yam of poor quality and shorter lengths), the speed of the looms of the ancillary unit would not have been reduced and quality would not have been badly affected. The complainant further alleged that the "bad beams" were given to him in a deceptive manner for initial six months and even by black mailing him by the accused persons. He also alleged that these accused persons made a false representation to him knowing it to be false and made him invest huge amount in setting up the ancillary unit, which was designed not to function properly and also committed breach of the trust. Seeing no other recourse left open to him, the complainant filed a criminal complaint against accused Nos. 1 to 9 and also another person for commission of offences punishable under sections 418, 420, 406 and 409 read with Section 34 of the Indian Penal Code (in short, "IPC"). 6. Seeing no other recourse left open to him, the complainant filed a criminal complaint against accused Nos. 1 to 9 and also another person for commission of offences punishable under sections 418, 420, 406 and 409 read with Section 34 of the Indian Penal Code (in short, "IPC"). 6. Upon examining the complaint and the material available before him, the learned Magistrate felt that there was sufficient material to proceed in this case and, therefore, he issued a process under Section 204 of the Criminal Procedure Code against the accused Nos. 1 and 9 and another person for the offences punishable under sections 418, 420, 406 and 409 read with Section 34 of the Indian Penal Code. Being aggrieved by the same, the accused Nos. 1 to 9 are before this Court challenging the order of issuance of process and also seeking relief of quashing of the proceedings of the complaint case against them. 7. I have heard Shri Subodh Dharmadhikari, learned senior counsel for the applicants, Shri Neeraj Patil, learned A.P.P. for the respondent No. 1/State and Shri S.P. Dhole, learned counsel for respondent No. 2/complainant. I have carefully gone through the paper book of the case including the criminal complaint with the assistance of learned A.P.P. and learned counsel for the complainant. 8. Shri Subodh Dharmadhikari, learned senior counsel has submitted that the accused Nos. 1 to 9 are the Chairperson, Vice-chairperson, Managing Director, Director, Executive Director and Deputy Company Secretary against whom general allegations of cheating and criminal breach of trust have been made by the complainant. He submits that these allegations are based upon the grievance that as "bad beams" of yam were supplied intentionally, in breach of the terms of the agreement, the complainant suffered losses on various counts and if the machinery including the looms and raw-material that were supplied to the complainant were to be of good quality, there would not have occurred any delay in production of the woven cloth of good quality. But, he submits that these allegations, so far as the accused Nos. But, he submits that these allegations, so far as the accused Nos. 1 to 9 are concerned, are of extremely general nature and unless and until, the role played by each of these accused persons in making false representations and also committing a breach of trust is specified, which in fact is not specified, it cannot be said that any prima facie case has been made out against these accused persons. 9. He further submits that the allegations made against the accused Nos. 1 to 9 are based upon the premise that the false promises were made to the complainant by the company and relying upon those promises, the complainant altered his position and suffered losses. He submits that such being the nature of the allegations, it was necessary for the complainant to pinpoint the role played by each of the accused Nos. 1 to 9 in knowingly making false representations with dishonest intention since beginning of the transaction. But, no such allegations are made and no material has been placed before the Court to point out what exactly has been done by these accused persons. He further submits that it is well settled law that there is no such thing as vicarious liability of the directors only because the offence is alleged against the company, unless there is a specific provision fastening vicarious liability upon the Directors. According to him, so far as Indian Penal Code offences are concerned, which are alleged against the accused Nos. 1 to 9 in the present case, there is no such provision which would extend the principle of vicarious liability to the Directors of the company by virtue of their holding certain positions in the company in a case where the primary offence is alleged against the company and in such a case, direct allegations constituting prima facie the offences are necessary, which are absent here. 10. Learned senior counsel for the accused Nos. 10. Learned senior counsel for the accused Nos. 1 to 9 further submits that the agreement dated 22-5-2006 itself is false as the information collected by the company under the provisions of Right to Information Act has disclosed that the stamp paper used for this agreement of the year 2006 was issued to the stamp vendor on 5-11-2009 and for this forgery, on the basis of the complaint lodged by the company, a charge-sheet has been filed against the complainant, his father and another person in the Court of Metropolitan Magistrate, Mumbai. Learned senior counsel further submits that for issuing process under Section 204 of the Criminal Procedure Code for proceeding against the accused for the offences alleged against them, it is necessary that essential ingredients of the offences alleged must be disclosed by the complaint and if there is a flavour of civil nature, same cannot be agitated in the form of a criminal proceeding. 11. In support of his submissions, learned senior counsel has placed his reliance upon the cases of : (a) Sunil Bharti Mittal v. Cental Bureau of Investigation, reported in (2015) 4 SCC 609 , Civil Application No. 1287/16 in Public Interest Litigation No. 56/2016 decided on 28th July, 2016 by the Division Bench of this Court, (b) Thermax Limited and others v. K. M. Johny and others, reported in (2011) 13 SCC 412 , S.K. Alagh v. State of Uttar Pradesh and others, reported in 2008(4) Mh.L.J. (Cri.) (S.C.) 249 = (2008) 5 SCC 662 , (c) Indian Oil Corporation v. NEPC India Ltd. and others, reported in (2006) 6 SCC 736 , (d) Binod Kumar and others v. State of Bihar and another, reported in 2015(2) Mh.L.J. (Cri.) (S.C.) 460 = (2014) 10 SCC 663 and (e) International Advanced Research Centre for Power Metallurgy and New Materials (ARCI) and others v. Nirma Cerglass Technics Private Limited and another, reported in 2016(4) Mh.L.J. (Cri.) (S.C.) 525 = (2016) 1 SCC 348 . 12. Shri Neeraj Patil, learned A.P.P. for the respondent/State has submitted that an appropriate order be passed in this case. 13. 12. Shri Neeraj Patil, learned A.P.P. for the respondent/State has submitted that an appropriate order be passed in this case. 13. Shri S. P. Dhole, learned counsel for the respondent No. 2, the complainant, has submitted that there is no substance in the present application as the process has been issued after considering the allegations and the material available on record, which have disclosed prima facie, commission of the offences alleged against the accused Nos. 1 and 9 as well as another person. He submits that there were false representations knowingly made by these accused persons to the complainant, who believing in them to be true, took certain action without knowing that those representations will not be acted upon by these accused persons and this is how, prima facie, dishonest intention on the part of these accused persons since beginning of the agreement between the parties is visible on record. He further submits that there has also been an occasion when the trust reposed by the complainant in the accused persons was breached by them. He further submits that it is well settled law that if the allegations levelled in the complaint on their face value disclose offences alleged, which is the case here, the complaint cannot be quashed merely on the ground that civil remedy is available. He further submits that civil remedy for recovery of the loss and damages arising from the breach of terms and conditions may be available to the complainant but that is a different matter considering the fact that the allegations made in this case also independently make out offences alleged against these accused persons in a prima facie manner. For these submissions he places his reliance upon the case of M/s Medchl Chemicals and Pharma Pvt. Ltd. v. M/s Biological E. Ltd. and others, reported in 2000 Cri.L.J. 1487(1) SC. 14. Upon going through the complaint and the paper book of this application, I am of the view that there is a great substance in the argument of learned senior counsel for the applicants/accused Nos. 1 to 9 and no merit in the argument of learned counsel for the respondent No. 2/complainant. The reasons are stated in forgoing paragraphs. 15. In the instant case, offences alleged against the accused Nos. 1 to 9 and no merit in the argument of learned counsel for the respondent No. 2/complainant. The reasons are stated in forgoing paragraphs. 15. In the instant case, offences alleged against the accused Nos. 1 to 9 are of cheating and criminal breach of trust punishable under sections 418 and 420 as well as 406 and 409 of the Indian Penal Code. In order to make out an offence of cheating, it is necessary that there is dishonest intention on the part of the offender since beginning of the transaction and that there has to be some false representation made, which the offender knew it to be false and it must have been made with a view to cause wrongful gain or wrongful loss to somebody. If a promise or representation is made believing it to be true and later on there is a departure from or breach of the representation or the promise, it would not constitute the offence of cheating and would only disclose a cause of action for resorting to civil remedy for recovery of loss and damages. For an offence of criminal breach of trust, the basic requirement is of entrustment of property or dominion over the property and dishonest misappropriation or misuse or disposal of that property in violation of any express or implied direction of law or under any legal contract. When the principal offender is a company, there is a further requirement which is that there must be direct allegations for commission of offences made against the Directors or the officers of the company, unless there is a statutory provision fastening vicarious liability upon them by virtue of their occupying certain positions in the Company. In a given case, it is likely that apart from the allegations disclosing commission of offences, the allegations may give rise to a cause of action for resorting to civil remedy and in such a case only because civil remedy is available, criminal remedy will not be barred. But, if the allegations in the complaint basically disclose a dispute having civil overtones, the complaint would be liable to be dismissed. These are the principles of law which emerge from the cases referred to earlier and relied upon by the learned senior counsel for the applicants/accused Nos. 1 to 9 and learned counsel for respondent No. 2/complainant. But, if the allegations in the complaint basically disclose a dispute having civil overtones, the complaint would be liable to be dismissed. These are the principles of law which emerge from the cases referred to earlier and relied upon by the learned senior counsel for the applicants/accused Nos. 1 to 9 and learned counsel for respondent No. 2/complainant. Now, bearing in mind these principles of law let us consider the complaint filed against the accused Nos. 1 to 9. 16. A careful perusal of the allegations made in the complaint discloses that all the allegations made therein are founded upon the premise that false representations were made by the Company to the complainant with dishonest intention. But, nothing has been stated in the complaint as to how, when and in what manner the false representations with dishonest intention were made by the accused Nos. 1 to 9 or any of them. These persons have been sought to be made accused in this case alleging commission of offences of cheating and criminal breach of trust under various sections of the Indian Penal Code by virtue of their occupying various positions in the Company, such as Chairperson, Executive Vice Chairman, Executive Director, Director, and Chief Executive Officer and Deputy Company Secretary. In Indian Penal Code, there is no provision which makes a person vicariously liable simply by dint of his position in a Company. So in order to make out a prima facie case against a Chairperson or Director or any office bearer of a Company direct allegations are necessary. But, there are no direct allegations made against any of these accused persons that they were behind the execution of the agreement dated 22-5-2006 and were also responsible for the supply of "bad beams" to the complainant with a view to cause wrongful gain to themselves or anybody else or wrongful loss to the complainant and his company. Therefore, I am of the view that in this case no offence, prima facie, relating to cheating has been disclosed against the accused Nos. 1 to 9 or any of them. 17. Therefore, I am of the view that in this case no offence, prima facie, relating to cheating has been disclosed against the accused Nos. 1 to 9 or any of them. 17. The allegation made in the complaint revolves around the core of the facts that because of supplying of yam not conforming to the specifications mentioned in the agreement dated 22-5-2006 and supplying them in lesser numbers, the production of the ancillary unit of the complainant was adversely affected thereby causing loss to the complainant. It is not alleged as to who from amongst the applicants or accused Nos. 1 to 9 was responsible for this and how. It is further incidentally alleged, albeit in general terms, that the accused persons made the complainant purchase second hand machineries or looms which were not of desired efficiency which also contributed to incurring of loss by the complainant. It is, however, not clarified what is meant by inferior quality of machineries which was so essential against the background of an admitted fact of the complainant voluntarily agreeing to purchase and get installed the second hand machineries and as to how the complainant was made to purchase such machineries, whether by making a show that same were as good as brand new ones or by concealing some material facts and by which of the accused persons. Supplying low quality yam and lesser number of beams by itself would not invite any criminal liability, unless it is done with dishonest intention present since the beginning of the transaction. But facts and circumstances necessary to indicate such dishonest intention are neither alleged in the complaint nor discernible from the material present on record. So, all these allegations, which are of general nature, taken at their face value and accepted as they are, would not in any manner constitute the offence of cheating. As stated earlier, there has to be some material available on record which would prima facie disclose that the offender knew at the time when the promise is made by him that it is false or it is not going to be fulfilled by him and this is what amounts to intention to cheat or to cause wrongful gain or wrongful loss since the beginning of the transaction. Such allegations have not been made in the complaint and there is also no material available on record from which a prima facie conclusion could be drawn about existence of any dishonest intention or intention to cheat on the part of accused Nos. 1 to 9 or any of them, since the time when the agreement dated 22-5-2006 was executed by the parties. Thus, examining the complaint from any angle, the only conclusion that is possible in this case is that it does not disclose commission of offences of cheating by the applicants or the accused Nos. 1 to 9. 18. In the circumstances, so far as offences relating to cheating punishable under Sections 418 and 420 of the Indian Penal Code are concerned, I find that the impugned order cannot stand the scrutiny of law as against accused Nos. 1 to 9. 19. As regards the offence of criminal breach of trust, I must say that in the entire complaint there is not even a whisper of allegation that the applicants or accused Nos. 1 to 9 or any of them were entrusted with any property or dominion over the property of the complainant, which has been dishonestly misappropriated or misused or disposed of in violation of any direction of or under law or a legal contract by these persons or any of them. In any case, there are no circumstances stated in the complaint or available in the material on record showing any dishonest intention on the part of the applicants or the accused Nos. 1 to 9. Therefore, even for the offences of criminal breach of trust punishable under Sections 406 and 409 of the Indian Penal Code, this application deserves to be allowed, so far as the case of accused Nos. 1 to 9 is concerned. 20. Learned senior counsel has made submissions with regard to the agreement dated 22-5-2006, the linchpin of the complaint, being false and forged but I do not think it necessary to go into its merits as I have found, even otherwise, the complaint does not prima facie disclose commission of any offences by accused Nos. 1 to 9. 21. It appears that this is a case dominated by a civil flavour. The allegations made against the applicants or the accused Nos. 1 to 9. 21. It appears that this is a case dominated by a civil flavour. The allegations made against the applicants or the accused Nos. 1 to 9 at best only disclose breach of agreement between the complainant and the Company for which, the complainant would have a remedy only in civil law. This is not a case where the allegations disclose both civil and criminal causes of action. It appears that by filing the present complaint, the complainant has made an attempt to convert a civil dispute into criminal perhaps with a view to make the applicants or accused Nos. 1 to 9 come to terms with him. Such an effort cannot be permitted to be made. The application, therefore, would have to be allowed. 22. The application is allowed. 23. The impugned order dated 9-3-2016 so far as it operates against the applicants, is hereby quashed and set aside. 24. The proceedings of the criminal complaint case No. 2181/2011 as against the applicants/accused Nos. 1 to 9, stand quashed and set aside. Application allowed.