1996 (7) TMI 552 - SC - Companies Law

Supreme Court affirms High Court decision quashing FIRs due to civil disputes; no criminal elements found.

The Supreme Court dismissed the appeals and affirmed the High Court's decision to quash the FIRs. The Court held that the allegations did not establish ... - Issues Involved:1. Whether the allegations in the FIRs constitute the offence of criminal breach of trust.2. Whether the allegations in the FIRs constitute the offence of forgery.3. Whether the allegations in the FIRs constitute the offence of cheating.4. Whether the High Court was justified in quashing the FIRs.Summary:1. Criminal Breach of Trust:The FIRs alleged that M/s Duncans Agro Industries Ltd. (DAIL) and its officials conspired with bank officials to transfer credit limits to New Tobacco Company without proper verification, leading to misappropriation of hypothecated stocks. The Supreme Court noted that the essential ingredients for criminal breach of trust u/s 405 IPC include entrustment of property and dishonest misappropriation. Mr. Tulsi argued that the allegations satisfied these ingredients, but Mr. Shanti Bhushan contended that there was no entrustment as the stocks were hypothecated, not pledged. The Court held that hypothecation does not constitute entrustment as required for criminal breach of trust.2. Forgery:The FIRs alleged that bank officials falsified documents to facilitate the transfer of credit limits. Mr. Tulsi argued that the essential ingredients of forgery u/s 464 IPC were met. However, Mr. Shanti Bhushan contended that even if the legal opinion given by the bank's Chief Officer was incorrect, it was not given with ill motive. The Court found no prima facie case of forgery as the legal opinion was considered by the Board of Directors, and there was no evidence of fraudulent intent.3. Cheating:The FIRs alleged that DAIL and its officials induced banks to grant credit facilities based on false representations about the value of hypothecated stocks. Mr. Tulsi argued that the allegations constituted cheating u/s 415 IPC. Mr. Shanti Bhushan countered that the stocks were hypothecated, not pledged, and the value of hypothecated property was always more than the loan amount. The Court held that the allegations did not make out a case of cheating as the transactions were essentially civil disputes, and the banks had already settled their claims through civil suits.4. Quashing of FIRs:The Supreme Court upheld the High Court's decision to quash the FIRs, noting that the investigations had not been completed despite ample time and that the banks had settled their claims through civil suits. The Court emphasized that further investigation would not be expedient, given the long lapse of time and the civil settlements. The Court concluded that the High Court's decision did not warrant interference under Article 136 of the Constitution.Conclusion:The Supreme Court dismissed the appeals, affirming the High Court's quashing of the FIRs on the grounds that the allegations did not prima facie constitute criminal offences and that further investigation was not expedient.