2017 (3) TMI 1926 - SC - Indian Laws

Supreme Court quashes criminal case against Appellants after complaint withdrawal. Insufficient grounds cited.

The Supreme Court quashed the criminal case against the Appellants due to the withdrawal of the complaint against the Kotak Mahindra Bank officers. The ... Recovery of Loan amount - legality of the order of issue of process - whether the material available is sufficient enough to constitute a prima facie case against the accused? - HELD THAT:- When a person files a complaint and supports it on oath, rendering himself liable to prosecution and imprisonment if it is false, he is entitled to be believed unless there is some apparent reason for disbelieving him; and he is entitled to have the persons, against whom he complains, brought before the court and tried. The only condition requisite for the issue of process is that the complainant's deposition must show some sufficient ground for proceeding. Unless the Magistrate is satisfied that there is sufficient ground for proceeding with the complaint or sufficient material to justify the issue of process, he should not pass the order of issue of process. Where the complainant, who instituted the prosecution, has no personal knowledge of the allegations made in the complaint, the magistrate should satisfy himself upon proper materials that a case is made out for the issue of process. Though under the law, a wide discretion is given to magistrate with respect to grant or refusal of process, however, this discretion should be exercised with proper care and caution. Under the terms and conditions, when the Kotak Mahindra Bank was already in an agreement with the Respondent-Company in order to safeguard its interest, the fact of the Assignment Deed between the State Bank of Travancore and the Kotak Mahindra Bank with regard to alleged rights of the State Bank of Travancore pertaining to the immovable properties allegedly mortgaged in its favour, must be communicated by the State Bank of Travancore to the Respondent-Company. More so, the fact of such assignment deed must also be brought to the notice by the Kotak Mahindra Bank to the Respondent-Company when it was responsible to provide necessary assistance to the Respondent-Company. The position becomes more clear from the fact that even after the alleged assignment, in a proceeding before the appellate tribunal, none of the representative of the State Bank of Travancore mentioned about the factum of such assignment. The Respondent-Company came to know about the alleged Assignment after a lapse of 9 months i.e. on 17.01.2007, when an application was moved by the Kotak Mahindra Bank for substituting its name in place of State Bank of Travancore. In the absence of such knowledge, on 11.01.2007, the Respondent-Company entered into a deed of Assignment with the Kotak Mahindra Bank wherein all the dues of a defaulter, viz., Ravishankar Industries Pvt. Ltd., of more than Rs. 32 crores were assigned to the Kotak Mahindra Bank. The Kotak Mahindra Bank was under an obligation to inform the Respondent-Company about the earlier Assignment Deed which was not done. More so, the Kotak Mahindra Bank received a sum of Rs. 225 lakhs in March 2007 from Ravishankar Industries Pvt. Ltd. but without giving any information as to the terms of settlement and the mode of payment to the complainant-Company, approached the Recovery Officer-I for appropriating the same. Thus, there was suppression of facts by both the Banks and the State Bank of Travancore was duty bound to inform the Respondent-Company about the Assignment dated 29.03.2006. As regards the Appellants herein, Appellant No. 1 herein has claimed to have joined the State Bank of Travancore on 11.05.2006 i.e. subsequent to the assignment deed dated 29.03.2006 whereas Appellant No. 2 was the signatory to the said deed - There is no denying the fact that both the Appellants were responsible for day to day functioning of the State Bank of Travancore. Furthermore, admittedly, Appellant No. 1 was in employment of the State Bank of Travancore at the time of the execution of the deed of assignment and the Appellant No. 2 was the signatory to it. On a bare perusal of the complaint, it creates an iota of doubt as to why the Respondent-Company was kept in dark by the State Bank of Travancore at the time of alleged Assignment Deed dated 29.03.2006. However, from the admitted position, it is evident that the complainant-Respondent Company in its wisdom had withdrawn the complaint against the two persons, who were the officers of the Kotak Mahindra Bank Ltd. from a common complaint made against four persons - the complaint against the present Appellants does not survive and in the interest of justice the same is liable to quashed and is accordingly quashed. Appeal allowed. Issues Involved:1. Validity of the Assignment Deed dated 29.03.2006.2. Allegations of criminal breach of trust, cheating, and fraudulent execution of deeds.3. Vicarious liability of the officers of the State Bank of Travancore.4. Whether the criminal case is liable to be quashed.Issue-wise Detailed Analysis:1. Validity of the Assignment Deed dated 29.03.2006:The complainant-Respondent Company borrowed Rs. 900 lakhs from a consortium of banks, leading to a Non-Performing Asset status due to non-payment. The State Bank of Travancore assigned the debts to Kotak Mahindra Bank through an Assignment Deed dated 29.03.2006. The Respondent-Company was unaware of this assignment until 17.01.2007. The Kotak Mahindra Bank then initiated the process to substitute its name in place of the State Bank of Travancore and withdrew two criminal complaints without informing the Respondent-Company. The Respondent-Company filed complaints alleging criminal breach of trust and cheating.2. Allegations of Criminal Breach of Trust, Cheating, and Fraudulent Execution of Deeds:The Respondent-Company alleged that the State Bank of Travancore and Kotak Mahindra Bank acted in collusion to defraud it. The Appellants contended that the assignment was valid and equitable, executed by the Executive Committee of the State Bank of Travancore. They argued there was no wrongful gain or intention to defraud. However, the Respondent-Company claimed that the assignment was done with dishonest intention, and the suppression of facts led to wrongful losses.3. Vicarious Liability of the Officers of the State Bank of Travancore:The Appellants argued that they were not personally liable as the Indian Penal Code does not attach vicarious liability to the directors of a company unless explicitly stated by statute. They cited precedents, including Maksud Saiyed v. State of Gujarat, which emphasized the need for specific statutory provisions to impose vicarious liability. The court noted that a corporate entity acts through its officers, and vicarious liability arises only if the statute provides so.4. Whether the Criminal Case is Liable to be Quashed:The court examined whether there was sufficient ground to proceed with the complaint. It was noted that the Respondent-Company was not informed about the Assignment Deed, which was required under Clause 2.3 of the deed. The court found that both banks failed to inform the Respondent-Company, indicating suppression of facts. However, the court also noted that the Respondent-Company had withdrawn the complaint against the officers of Kotak Mahindra Bank but continued to prosecute the officers of the State Bank of Travancore, which was inconsistent.Conclusion:The Supreme Court concluded that the complaint against the Appellants did not survive due to the withdrawal of the complaint against the Kotak Mahindra Bank officers. The appeal was allowed, and the criminal case against the Appellants was quashed. The court emphasized that there was no sufficient ground to proceed against the Appellants, highlighting the inconsistency in prosecuting only the officers of the State Bank of Travancore while exonerating the Kotak Mahindra Bank officers.