2019 (5) TMI 730 - SC - Companies Law

Supreme Court Halts Criminal Proceedings Deemed Abuse of Process

The Supreme Court set aside the Magistrate's order taking cognizance of the offenses and issuing summons to respondents No.1 to 16, deeming the ... Cognizance under Section 202 CrPC - prima facie case for issuance of process - application of mind by the Magistrate - documents as movable/corporeal property - temporary removal and theft - dishonest intention / wrongful gain and wrongful loss - use of documents in judicial proceedings - abuse of process / quashing under inherent jurisdictionCognizance under Section 202 CrPC - prima facie case for issuance of process - application of mind by the Magistrate - Whether the Magistrate applied his mind and whether the averments and pre-summoning evidence sufficed to justify issuance of process against the respondents. - HELD THAT: - At the Section 202/204 stage the Magistrate must be satisfied on the materials produced by the complainant that there are sufficient grounds for proceeding and such satisfaction must be demonstrably the result of application of judicial mind. The Magistrate here recorded issuance of summons after examining the complainant's representative and one employee, but neither the complaint nor the witness statements contained particulars as to when, where or by whom the alleged removal of documents occurred. The summoning order contains no indication of reasoning or of how the materials satisfied the essential ingredients of the offences alleged. Given the mandatory character of enquiry when accused reside beyond local limits and the requirement that the Magistrate not act mechanically, the Court found that the Magistrate's satisfaction was not well founded and the order taking cognizance and issuing summons was liable to be set aside. [Paras 56, 57, 58, 59, 60]The Magistrate failed to apply his mind to the materials; the order of cognizance and issuance of summons dated 08.10.2010 against respondents No.1 to 16 is set aside.Documents as movable/corporeal property - temporary removal and theft - dishonest intention / wrongful gain and wrongful loss - Whether a document (and the information contained therein) is a 'movable/corporeal property' capable of being the subject of theft and whether temporary removal or replication can constitute theft in law. - HELD THAT: - A 'document' falls within the definition of 'movable property' and is corporeal inasmuch as it has material form; the information recorded thereon is capable of being reproduced and thus can constitute the subject-matter of theft. Precedents establish that temporary removal with intent to appropriate information may satisfy the 'moving' requirement and that wrongful loss need not be permanent. Accordingly the High Court's conclusion that replication/use of information could never be corporeal property was modified: documents and their replicated contents can, in principle, be the subject of theft. [Paras 66, 67, 68, 71, 72]A document and the information contained therein are 'movable/corporeal property' within the meaning of the IPC and, in principle, may be the subject-matter of theft.Use of documents in judicial proceedings - dishonest intention / wrongful gain and wrongful loss - abuse of process / quashing under inherent jurisdiction - Whether, on the facts of this case, production/use of the documents in pending judicial proceedings by the respondents amounted to theft or dishonest misappropriation, and whether continuation of criminal prosecution would constitute abuse of process. - HELD THAT: - Although documents are capable of being stolen in law, the essential ingredient of 'dishonest intention' - intending to cause wrongful loss to the owner or wrongful gain to oneself - is missing on the material before the Magistrate. The respondents filed copies in bona fide civil and company proceedings to substantiate claims of oppression/mismanagement and in suits challenging trust revocations; there is no pleading or pre-summoning evidence demonstrating wrongful gain or loss or particulars of dishonest removal. Given the multiplicity of pending litigations and absence of prima facie materials establishing the mens rea and particulars of theft, permitting criminal proceedings to continue would amount to an abuse of process and an improper attempt to stifle or harass the respondents. Consequently the criminal proceedings insofar as they related to the documents are unsustainable. [Paras 76, 81, 85, 88, 89]On the facts, use/production of the documents in the judicial proceedings did not disclose dishonest intention or wrongful gain/loss; continuation of the criminal prosecution would be an abuse of process and is quashed.Final Conclusion: The Magistrate's order of cognizance and summons dated 08.10.2010 is set aside for lack of application of mind; while documents are legally capable of being 'movable/corporeal property' and, in principle, theft, the materials in this case do not disclose dishonest intention or wrongful gain/loss and continuation of the criminal proceedings would be an abuse of process - the proceedings against the respondents in relation to the documents are therefore quashed. Issues Involved:1. Prima facie case and satisfaction of the Magistrate.2. Non-application of mind in taking cognizance of the offences.3. Quashing of criminal proceedings for documents No.1 to 28.4. Filing of documents in judicial proceedings as theft.5. Dishonest moving of documents causing wrongful loss and gain.6. Filing of documents as theft under Section 378 IPC.Analysis of the Judgment:1. Prima Facie Case and Satisfaction of the Magistrate:The court examined whether the allegations in the complaint and the statements of the complainant and witnesses were sufficient to constitute a prima facie case justifying the Magistrate's satisfaction in issuing process against the respondents. The court emphasized that the Magistrate must be satisfied that there are sufficient grounds for proceeding against the accused based on the allegations made in the complaint and the evidence in support of the same.2. Non-application of Mind in Taking Cognizance of the Offences:The court scrutinized whether the Magistrate's order taking cognizance of the offences under Sections 380, 411, and 120-B IPC and ordering issuance of process against the respondents was vitiated due to non-application of mind. The court held that the Magistrate must apply his mind to the facts of the case and the law applicable thereto, and there must be sufficient indication that there was application of mind by the Magistrate to the facts constituting the commission of the offence.3. Quashing of Criminal Proceedings for Documents No.1 to 28:The High Court quashed the criminal proceedings for documents No.1 to 28 on the ground that mere information contained in the documents cannot be considered as 'movable property' and cannot be the subject of the offence of theft or receipt of stolen property. The Supreme Court modified this finding, holding that the documents and the replication of the documents and the contents thereon have physical presence and therefore, are 'corporeal property' and can be the subject matter of theft.4. Filing of Documents in Judicial Proceedings as Theft:The court considered whether the temporary removal of the documents and filing of photocopies and use of the information/contents of the documents can be the subject matter of theft. The court held that in the facts and circumstances of the case, taking away of the documents temporarily and using them in the pending litigations between the parties would not amount to theft. The court emphasized that there was no 'dishonest intention' or 'wrongful gain' attributed to the respondents, and there was no 'wrongful loss' to the appellants so as to attract the ingredients of theft under Section 378 IPC.5. Dishonest Moving of Documents Causing Wrongful Loss and Gain:The court examined whether there was dishonest moving of documents causing wrongful loss to the appellants and wrongful gain to the respondents. The court held that the intention to take 'dishonestly' exists when the taker intends to cause wrongful loss to any other which amounts to theft. The court found that the respondents used the documents in good faith in the legal proceedings to substantiate their case of oppression and mismanagement, and no dishonest intention or wrongful gain could be attributed to them.6. Filing of Documents as Theft under Section 378 IPC:The court considered whether the filing of documents in the judicial proceedings can be termed as an act of theft causing wrongful gain to oneself and wrongful loss to the opponent so as to attract the ingredients of Section 378 IPC. The court held that the respondents' use of the documents in the litigations pending between the parties would not amount to theft. The court emphasized that there was no intention on the part of the respondents to cause wrongful loss to the appellant or to make wrongful gain for themselves.Conclusion:The Supreme Court set aside the order of the Magistrate dated 08.10.2010 taking cognizance of the offences and the issuance of summons to respondents No.1 to 16. The court held that the continuation of the criminal proceedings would be an abuse of the process of the court. The appeals preferred by the respondents were allowed, and the appeal preferred by the appellants was dismissed.