Research › Search › Judgment

Uttarakhand High Court · body

2023 DIGILAW 549 (UTT)

D. S. Sharma v. State of Uttarakhand

2023-09-22

RAVINDRA MAITHANI

body2023
JUDGMENT : RAVINDRA MAITHANI, J. 1. The challenge in this petition is made to order taking cognizance/summoning order dated 08.11.2018, passed in Case No. 14919 of 2018, State vs. Daya Shankar Sharma and Others, by the court of Chief Judicial Magistrate, Haridwar (“the case”) by which the petitioners have been summoned to answer accusation under Section 420 IPC, as well as the entire proceedings of the case. 2. Heard learned counsel for the parties and perused the record. 3. The case is based on an FIR lodged by the respondent no. 4, the informant. Briefly stated, according to the informant, he was the Manager in a firm called the Goel Lightings (“the firm”) of which the respondent no. 3, Rakesh Goel is the proprietor. The petitioner nos. 3 and 4 were the Directors of JBS Engineering Works (“the company”). Their representative was petitioner no. 1, D.S. Sharma. In the year 2016, the petitioner no. 1 approached the owner of the firm and offered to sell the land and building of the company. It was also assured that the company will get its matter settled under One Time Settlement Scheme (“OTS”) with the Bank of Baroda (“the Bank”) and, thereafter, transfer all the land and building of the company. Pursuant to this assurance, the owner of the firm, the respondent no. 3, gave various amounts in the name of the company so that the petitioners may clear their dues in terms of OTS. But, according to the FIR, subsequently, the informant came to know that, in fact, the Bank had proceeded to auction the properties of the company. The FIR records that the informant has been cheated. 4. It is this FIR, in which after investigation, charge-sheet was submitted under Section 420 IPC against the petitioners, which is the basis of the case and, in which cognizance order was taken and petitioners have been summoned. It is impugned herein. 5. It is the case of the petitioners that the company was under a liability to pay its dues to the Bank. They were in the process of augmenting their resources. Therefore, they entered into an agreement with the firm so that the dues of the Bank may be paid by the company, and, thereafter, the lands and properties of the company may be handed over to the firm. They were in the process of augmenting their resources. Therefore, they entered into an agreement with the firm so that the dues of the Bank may be paid by the company, and, thereafter, the lands and properties of the company may be handed over to the firm. In pursuance to the agreement, money was given by the firm, which was deposited in the Bank account. But, subsequently, according to the petitioners, since the firm did not pay all the money due under the agreement, so as to enable the company to settle its claim with the Bank, the Bank proceeded against the properties. 6. It is the case of the petitioners that they never cheated the informant or the owner of the firm. According to the petitioners, in fact, it is the inaction of the informant and owner of the firm in not paying the remaining dues under the agreement that the company could not clear its dues under the OTS, as approved by the Bank. 7. State, as well as the respondent nos. 3 and 4, both have filed their counter affidavits. According to the respondent nos. 3 and 4, they have been cheated by the petitioners. According to the respondent nos. 3 and 4, total Rs. 95 Lakhs were taken by the petitioners. It is the case of the respondent nos. 3 and 4 that the petitioners had dishonest intention since inception. They did not get OTS from the Bank, despite receiving Rs. 95 Lakhs from the respondent nos. 3 and 4. 8. State has also filed its counter affidavit, thereby, supporting the charge-sheet. 9. Learned Senior Counsel for the petitioner would submit that it is a case purely civil in nature. He would raise the following points in his submission: (i) The company was under liability to pay its dues to the Bank. Therefore, the company entered into an agreement with the firm on 24.08.2016 with the following stipulations: 2. That the total consideration as in Para 1 above shall be payable to the Transferor/seller as under: (a) Rs. 40,00,000/- (Rupees Forty Lacs only) has been paid vide Ch. No. 813643 Dated 24.8.2016 of Tamil Nadu Mercantile Bank Limited, Delhi. (b) Balance Rs. 3,60,00,000/- (Rupees Three Crores Sixty Lacs only) will be paid within 45 days from letter of settlement released by Bank. 40,00,000/- (Rupees Forty Lacs only) has been paid vide Ch. No. 813643 Dated 24.8.2016 of Tamil Nadu Mercantile Bank Limited, Delhi. (b) Balance Rs. 3,60,00,000/- (Rupees Three Crores Sixty Lacs only) will be paid within 45 days from letter of settlement released by Bank. Above mentioned property is mortgaged by Bank of Baroda and the First party is trying for settle this amount. For start settlement Second Party is ready to give initial amount as advance to First Party. Second Party will open one joint account with first party with Bank of Baroda and deposit Rs. 40 lacs cheque in same account but amount will be released after getting settlement letter from Bank. Our Consideration value is Rs. 4 crores. Bank Settlement amount will be higher than consideration. First party is giving assurance that they will sale their plant and machinery to arrange the balance amount. Due to any circumstances if First Party will unable to clear the Bank dues, First party will return double amount to Second Party. After clearance of Rs. 40 lacs cheque First Party will give physical possession to Second Party to start civil work etc. 3. The Transferor/seller shall on execution of this agreement hand over the originals of all relevant title, regulatory documents and other document listed in Schedule-II, with SIDCUL for transfer purposes, but not limited thereto. (ii) After initial payment of Rs. 40,00,000/- by the firm, the company deposited this amount in their loan account. Initially, the OTS was accepted by the Bank on 22.03.2017, by which it was stipulated that the compromise sanction will be valid till 13.06.2017, but, subsequently it was extended uptil 30.09.2017. (iii) In the month of July, 2017, also, Rs. 30,00,000/- were paid by the firm for depositing in the loan account of the company, which was duly deposited. (iv) Under the agreement, the firm had to pay Rs. 3,60,00,000/- within 45 days from the date of sanction of the OTS, but, this amount has never been paid by the firm. It is the reason that OTS could not be made by company. They were in helpless position. (v) Since the company could not pay its dues, the Bank proceeded against the properties of the company. (vi) It is not a case of cheating. The petitioners never had dishonest intentions. They wanted to clear their dues. Therefore, they entered into an agreement with the firm. They were in helpless position. (v) Since the company could not pay its dues, the Bank proceeded against the properties of the company. (vi) It is not a case of cheating. The petitioners never had dishonest intentions. They wanted to clear their dues. Therefore, they entered into an agreement with the firm. (vii) Learned Senior Counsel for the petitioners would submit that the FIR and the entire proceedings of the case are liable to be quashed because the dispute is purely civil in nature without any element of criminality. 10. On the other hand, learned counsel for the respondent nos. 3 and 4 would admit that there was an agreement entered into between the parties on 24.08.2016, by which in phased manner, money was to be paid by the firm, so that the company may clear its dues under the OTS that may be approved by the Bank. It is argued that despite OTS, the petitioners never informed the firm about it. 11. Learned counsel for the respondent nos. 3 and 4 would also submit that as per the agreement, after clearance of the cheque of Rs. 40 Lakhs given by the firm to the company, the company had to deliver physical possession of the land and building of the company to the firm, which they failed to do. Not only this, it is argued that after clearance of Rs. 40 Lakhs, on the one hand, the company did not deliver physical possession of the property to the firm, on the other hand, the petitioners obtained Rs. 30 Lakhs more from the firm. Therefore, it is argued that it is a case of cheating, and the proceedings have been validly initiated against the petitioners. The impugned order is in accordance with law. It does not require any interference. 12. Learned State Counsel would submit that the investigation has been done in accordance with law. 13. It is a petition under Section 482 of the Code of Criminal Procedure, 1973 (“the Code”). The law on this point is well settled. It is a jurisdiction, which is much wide, so as to give effect to any order under the Code or to prevent abuse of process of any Code or, otherwise, to secure the ends of justice. But, this jurisdiction is much guided by the directions of the Hon’ble Supreme Court, laid down in a catena of decisions. It is a jurisdiction, which is much wide, so as to give effect to any order under the Code or to prevent abuse of process of any Code or, otherwise, to secure the ends of justice. But, this jurisdiction is much guided by the directions of the Hon’ble Supreme Court, laid down in a catena of decisions. In the case of Indian Oil Corporation vs. NEPC India Ltd. and Others, (2006) 6 SCC 736 , the Hon’ble Supreme Court has summed up the principles in Para 12 as follows: 12. The principles relating to exercise of jurisdiction under Section 482 of the Code of Criminal Procedure to quash complaints and criminal proceedings have been stated and reiterated by this Court in several decisions. To mention a few-Madhavrao Jiwajirao Scindia vs. Sambhajirao Chandrojirao Angre, (1988) 1 SCC 692 , State of Haryana vs. Bhajan Lal, 1992 Supp. (1) SCC 335, Rupan Deol Bajaj vs. Kanwar Pal Singh Gill, (1995) 6 SCC 194 , Central Bureau of Investigation vs. Duncans Agro Industries Ltd. (1996) 5 SCC 591 , State of Bihar vs. Rajendra Agrawalla, (1996) 8 SCC 164 , Rajesh Bajaj vs. State NCT of Delhi, (1999) 3 SCC 259 , Medchl Chemicals and Pharma (P) Ltd. vs. Biological E. Ltd. (2000) 3 SCC 269 , Hridaya Ranjan Prasad Verma vs. State of Bihar, (2000) 4 SCC 168 , M. Krishnan vs. Vijay Singh, (2001) 8 SCC 645 and Zandu Pharmaceutical Works Ltd. vs. Mohd. Sharaful Haque, (2005) 1 SCC 122 . The principles, relevant to our purpose are: (i) A complaint can be quashed where the allegations made in 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 the case alleged against the accused. For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint. For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint. (ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable. (iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution. (iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence. (v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. 14. What is essentially being argued on behalf of the petitioners is that it is a dispute purely civil in nature, without any element of criminality. What is further being argued is that under an agreement, the firm had paid Rs. 40 Lakhs in the loan account of the company, but, it is the firm, which failed to discharge its further liability in making payment of remaining amount of Rs. What is further being argued is that under an agreement, the firm had paid Rs. 40 Lakhs in the loan account of the company, but, it is the firm, which failed to discharge its further liability in making payment of remaining amount of Rs. 3,60,00,000/- and this is the reason that the OTS could not be completed. Therefore, impliedly what is being argued is that it was a breach of obligation under the agreement by the firm, which made this situation to happen. 15. On the other hand, what is being argued on behalf of the respondent nos. 3 and 4 is that after approval of the OTS, on 22.03.2017, which was initially valid uptil 30.06.2017, and which was further extended uptil 30.09.2017, the company never informed about the approval of the OTS. He would also submit that since the respondent nos. 3 and 4 were never told about the approval of OTS, the firm could not pay the remaining amount of Rs. 3,60,00,000/- under the agreement dated 24.08.2016. 16. There is a thin line difference between breach of promise and cheating under Section 420 IPC. Section 420 IPC is as follows: 420. Cheating and dishonestly inducing delivery of property - Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. 17. A bare perusal of it reveals that intention plays a very significant role for invoking the provisions of Section 420 IPC. It describes punishment for cheating and dishonesty, inducing delivery of property. What is cheating has been defined under Section 415 IPC. It is as follows: “415. 17. A bare perusal of it reveals that intention plays a very significant role for invoking the provisions of Section 420 IPC. It describes punishment for cheating and dishonesty, inducing delivery of property. What is cheating has been defined under Section 415 IPC. It is as follows: “415. Cheating - Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat” Explanation - A dishonest concealment of facts is a deception within the meaning of this section. 18. A bare reading of Section 415 IPC makes it clear that fraudulent and dishonest act in the very beginning are essence of it, by which some other person is induced to deliver any property. 19. In the case of State of Maharashtra vs. Sayed Mohammed Masood and Another, (2009) 8 SCC 787 , this aspect has been discussed by the Hon’ble Supreme Court. In the case of Sayed Mohammed Masood (supra), the Hon’ble Supreme Court referred to the principles of law, as laid down in the case of Uma Shankar Gopalika vs. State of Bihar, (2005) 10 SCC 336 , wherein, the Hon’ble Supreme Court has observed that “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.” 20. In the instant case, admittedly, there was an agreement entered into between the parties on 24.08.2016. The Firm had paid Rs. 40 Lakhs so that the company could proceed to get OTS approval from the Bank. This amount of Rs. 40 Lakhs, admittedly, has been deposited in the loan amount of the company with the Bank. It is also not in dispute that the Bank had approved OTS, which initially was valid uptil 30.06.2017, but, as stated, it was extended uptil 30.09.2017. 21. This amount of Rs. 40 Lakhs, admittedly, has been deposited in the loan amount of the company with the Bank. It is also not in dispute that the Bank had approved OTS, which initially was valid uptil 30.06.2017, but, as stated, it was extended uptil 30.09.2017. 21. It is the case of the respondent nos. 3 and 4 that, in fact, they had paid Rs. 95 Lakhs. It is admitted that some of the amount was paid even prior to the agreement dated 24.08.2016. That may not be part of agreement. It cannot be said that after the agreement has been entered into between the parties, dishonestly, the petitioners or the company, in any manner, induced the firm to pay that amount to them. 22. Under the agreement, Rs. 40 Lakhs were to be paid by the firm, which they did, and it was deposited in the account of the company with the Bank. On 31.07.2017, the respondent nos. 3 and 4 further deposited Rs. 30 Lakhs in the account of the petitioner. If the respondent nos. 3 and 4/the firm were not aware of the OTS, why did they deposit the amount of Rs. 30 Lakhs in the loan account of the company? It has been argued that after clearance of Rs. 40 Lakhs, that was paid at the time of entering into the agreement on 24.08.2016, the company had to hand over the land, building and other properties of the company to the firm. It is being argued that such handing over the possession has not been done. Had it been the situation, the question arises as to why the firm, at that time, did not seek the possession of the property, if at all it was permissible under law? 23. It is admitted case that initially the agreement was entered into between the parties so that the company may enter into an OTS with the Bank. At that moment, whatever amount was paid by the firm, that had been deposited in the Bank in the loan account of the company, there has been no initial intention to deception. There has been no dishonest intention at the inception. 24. Having considered the entirety of facts, this Court is of the view that it is a case purely civil in nature, without any element of criminality. Accordingly, the petition deserves to be allowed. 25. The petition is allowed. There has been no dishonest intention at the inception. 24. Having considered the entirety of facts, this Court is of the view that it is a case purely civil in nature, without any element of criminality. Accordingly, the petition deserves to be allowed. 25. The petition is allowed. The cognizance/summoning order dated 08.11.2018, passed in the case, as well as the entire proceedings of the case, is, hereby, quashed.