TaxTMI 
TaxTMI 
2004 (11) TMI 605
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....sed No. 2 Mahadeo Jalan, was the Managing Director and/or the livewiare of accused No. 3 that is the Dinjoyee Tea Estate Pvt. Ltd. and he was in complete control of the day-to-day business and/or affairs of the accused No. 3. Accused No. 4 that is Mrigendra Jalan being the Managing Director of accused No. 1 that is Maikaal Fibres Ltd. was in complete control of the day-to-day business and/or affairs of the accused No. 1 that is Maikaal Fibres Ltd. 5. Now, these accused persons had approached the petitioner-Bank (ICICI Bank) for providing Corporate Rupee Loan facility for the purpose margin money for working capital and normal capital expenditure for not exceeding Rs. 50 millions. A Corporate Rupee Loan agreement was entered into on 29th September, 2000 between the accused No. 1 and the ICICI Bank Ltd. The said money of 50 millions (5 crores) was advanced by the ICICI Bank as a result of false representation made by the accused persons. Necessary documents including a deed of guarantee whereby Dinjoyee Tea Estate Pvt. Ltd., that is accused No. 3, guaranteed repayment, were executed. The terms of repayment was mentioned in the agreement between the parties. When repayment became d....
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....t me first summarise the arguments placed by the learned senior Advocate appearing on behalf of opposite parties numbers 1 and 4, Sri Sekhar Basu. 11. The opposite party No. 1 that the company is a juristic person and cannot be charged with an offence wherein imprisonment is a mandatory form of punishment as held by the Apex Court in the case of Assistant Commissioner of Income Tax v. Velliappa Textiles Ltd. . It is, therefore, submitted that the opposite party No. 1, by no stretch of imagination can be prosecuted for the offence under Section 420 of the Indian Penal Code inasmuch as the said offence provides for imprisonment as a mandatory from of punishment. 12. With regard to the offence under Section 406 of the Indian Penal Code, it is submitted that the instant case relates to a loan transaction where the ownership of the money loaned shifts from the hand of the creditor to the debtor. There is no element of entrustment in a loan transaction inasmuch as the creditor loses his right of ownership in the loaned amount and the same stands transferred in the hand of the debtor. However, to disclose the ingredients of the offence of criminal breach of trust, there must be a ca....
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....ri and Anr. v. State of U.P. . In view of such finding of the Apex Court it is submitted that to set aside the order of dismissal of the complaint and direct further enquiry would only be a resurrection of a lame prosecution which is an abuse of the process of Court. Documents have been submitted on behalf of opposite party Nos. 1 and 4 to show that substantial assets have been mortgaged to the complainant bank as security to the aforesaid loan. The assessment of the value of such assets far exceeds the liability of the opposite party Nos. 1 and 4 towards the complainant bank. In the backdrop of such fact, it cannot be stated that the opposite party Nos. 1 and 4 acted dishonestly in obtaining the said loan. The complainant bank was otherwise secured by substantial collateral securities and has the right to proceed against the opposite party No. 1 with regard thereto. However, for reasons best known to itself, the complainant bank has chosen not to do so and has so ought to harass and humiliate the opposite parties by instituting the impugned criminal case as a short-cut method/substitute for civil litigation. 17. It is further submitted that there is no intention to cause wrongf....
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.... the ratio in Velliappa Textile is no longer good law. It is settled law that a co-ordinate Bench of the Apex Court cannot overrule the law declared by another co-ordinate Bench and the same must be referred to a larger Bench for decision. This is exactly what has been done by the Apex Court in ANZ Grindlays Bank case. In doing so the Apex Court cannot be said to have overruled to its earlier decision till the issue is decided by the Constitution Bench to which it has been referred. In this regard it will be apposite to refer to the decision of the Apex Court in the case of Md. Anis v. Union of India reported in 1994 Supplementary (1) SCC 145, wherein the Apex Court has observed as follows: "In our view, merely because the issue is referred to a larger Bench everything does not grind to a halt" (para 6). In view of such observation of the Apex Court it is submitted that ratio in Velliappa Textile is good law and is binding in our Courts till the same is set aside by a larger Bench of the Apex Court. 22. In view of the fact, the issue is presently res integra and is pending consideration for the Apex Court and it is submitted that the instant case be kept in abeyance til....
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....o Jalan had neither signed the corporate guarantee nor had anything to do with Maikaal Fibres which had taken loan of Rs. 50 millions (Annexure 'B' of the revisional application at page 34). Moreover, it has to be brought to the notice of the Court that in paragraph 3 of the revisional application the petitioner Bank has stated that the opposite party No. 2 was the live wire of opposite party No. 3 and in spite of the documents proving otherwise have sought to state in paragraph 11 of the revisional application that the said corporate guarantee on behalf of the opposite party No. 3 was executed by the opposite party No. 2 even though the documents annexed to the revisional application being Annexure 'B' show that in respect of the opposite party No. 3, the opposite party No. 4 signed the corporate guarantee. 28. In the complaint also they have agreed that they accepted the corporate guarantee being signed by the opposite party No. 4 on behalf of the opposite party No. 3 even though they have specifically stated that the opposite party No. 2 is the live wire of the opposite party No. 3. 29. The Bank has also alleged commission of offence under Section 406 read ....
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.... to any of the opposite parties in view of the failure on the part of the Bank to satisfy its dues through the securities provided by the opposite party No. 1 company. The security provided by the opposite party No. 3 was much higher than the value of the loan amount which further goes to disprove the presence of criminal intent on the part of the opposite parties. 34. The accused No. 3 is a juristic personality being a company incorporated under the Companies Act. The Hon'ble Supreme Court in its much celebrated judgment of Kalpanath Rai v. State reported in 1998 Criminal Law Journal, 369 held that in case of offences which require mens rea as its ingredient, or where the statute does not provide for prosecution of companies and its officers like the Essential Commodities Act, Prevention of Food Adulteration Act etc., proceedings against companies, which is a juristic body, would not be maintainable. In view of the said pronouncement of the Hon'ble Supreme Court, it becomes clear that the opposite party No. 3 cannot be prosecuted for commission of the offence under Section 406/420 of the Indian Penal Code, as the said offences require mens rea as one of its ingredients.....
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....agreement between the parties. When payment became due the accused opposite party No. 1 Maikaal Fibres (P) Ltd. and its Managing Director, the accused No. 2 Mahadeo Jalan refused to make any payment. In terms of the agreement of guarantee the complainant was free to proceed against the guarantor and as such the complainant made a demand for payment from the guarantor the accused No. 3 Dinoy Tea Estate (P) Ltd. and its Managing Director, the accused No. 4 Mrigendra Jalan. On receipt of a notice of demand, Mrigendra denied that he ever executed such a guarantee. The accused persons had entered into criminal conspiracy to cheat the complainant of the entire sum of money obtained as advance from the bank on false inducement. More important averment in the complaint are as under: (i) All the four accused men connived and conspired to procure by-cheating margin money amounting to 50 million rupees (5 crores) from the complainant. (Paras 3, 7 & 8) (ii) Deception was practised by falsely representing that accused No. 1 Maikaal Fibres Ltd. and its Managing Director, accused No. 2 Mahadeo Jalan would procure guarantee for repayment and give an irrevocable, continuing, uncon....
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....ration must have a common seal. (ii) Under Section 48 of the Companies Act deeds are executed by the use of common seal by any person duly authorised. (iii) Under Section 147(i)(b) of the Companies Act common seal contains the name of the company engraved in legible character on its seal. (iv) Section 48(2) of the Companies Act binds the company when such a seal has been affixed. 46. Hence neither Dinjoyee Tea Estate (P) Ltd. nor its Managing Director accused No. 4 could successfully deny execution of such a guarantee. 47. It is further submitted that it is significant that simultaneously on the same day namely 29th September, 2000 the loan agreement as also the corporate guarantee using the common seal of each company were issued. The representation about procuring the guarantee is at page 22 Clause 3.3. Common seal was authenticated by accused No. 4 Mrigendra Jalan and signed by him. 48. Clauses 3, 4 (page 30) 6 and 7 (page 31) are clear representation by the guarantor which the guarantor knew from the beginning were falsely made. That is why he denied execution. 49. Reliance has been placed on the decision of W.A. Mahony v. Liquidator of th....
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.... Burn Ltd v. R.N. Banerjee . The Court held that "a prima facie case does not mean a case proved to the hilt but a case which can be said to be established if the evidence which is led in support of the same were believed, While determining whether a prima facie case had been made out the relevant consideration is whether on the evidence led it was possible to arrive at the conclusion in question and not whether that was the only conclusion which could be arrived at on that evidence". This view was approved in the case of Management of the Bangalore Woollen Cotton and Silk Co. Ltd. Appellant v. B. Dasappa, M.T. Respondent . 54. It is further argued by Sri Roy that on behalf of the opposite party it has been submitted that in view of the decision of the Supreme Court in Assistant Commissioner v. Velliappa Textiles Ltd. (Three-Judge) no prosecution is permissible of a company if the offence is punishable compulsorily with sentence of imprisonment. This no more is a correct decision. In a later Three-Judge Bench in the case of ANZ Grindlays Bank Limited v. Directorate of Enforcement the Court held that "we do not prima facie agree with the ratio laid down in Velliappa Textiles". In....
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.... by the impugned order dt. 2.9.2003, the learned Metropolitan Magistrate was justified in dismissing the complaint made by the ICICI Bank Ltd. under Section 406/420/120B of the IPC against the four accused on the grounds stated in his order. 64. Plainly, the only reasons he virtually nipped the complaint in the bud were--that the dispute between the parties were civil in nature and that he did not find any element of offence under Section 406/420/120B IPC in connection with the case. 65. Now, the learned Magistrate broadly outlined in gist the allegations of the complaint and prima facie considered the evidence of the two witnesses for the complainant. So, his finding that the dispute was of civil nature is at least backed by some reasons. But so far as his finding that he did not find any element of offence under Section 406/420/120B IPC, it was just a bald, sweeping half of a sentence which betrayed total non-application of mind because it was completely barren of reason. He did not apparently give his mind to the ingredients of the offences under those penal sections. Nor did he say why, in the face of specific allegations they did not at all fit in with ingredients of the....
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....ght to move the Revisional Court and where he takes a matter to the Revisional Court, renders his task before that Court difficult, particularly in view of the limited scope of the provisions of Sections 438 and 439, Code of Criminal Procedure. 70. Thus, in view of what has been stated above and in the light of the judgment of the Apex Court, the order of the learned Magistrate in question which virtually results in quashment of the entire criminal complaint cannot be sustained. In this connection, I might add that Court should be abundantly cautious and circumspect before drastically doing away with a criminal case at its very inception except for adequate and sound reasoning. After all, a criminal offence affects the society as a whole. 71. Now, the next point is--what as a Revisional Court, a High Court that is, we are sitting here for? Yes, to prevent the abuse of the process of Court or otherwise to secure the ends of justice are primary considerations in the matter of exercise of the inherent powers of the High Court under Section 482 of the Code of Criminal Procedure, the scope of which again is quite limited. The primary considerations under Section 482 Cr.P.C. spoken....
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....h the letter 'B' as part of this application. In the said Deed of Guarantee the accused No. 3 categorically undertaken to indemnify your petitioner against all losses, damages, costs, claims and expenses whatsoever which your petitioner may suffer, pay or incur by reason of or in connection with such default on the part of the borrower including legal proceedings taken against the accused No. 1 and/or accused No. 3 for recovery of loan, interest, liquidated damages or other monies to your petitioner. The said guarantee is a continuing, irrevocable, unconditional guarantee. Inasmuch as the accused No. 1 company filed to pay off the dues of your petitioner, your petitioner duly invoked the guarantee vide its letter dated 28th June, 2003. A copy of the said letter is annexed hereto and marked with the letter 'C as part of this application. Such notices as stated above had to be issued by your petitioner since the accused persons started taking peculiar, fraudulent mala fide stand and it stated that the accused No. 3 did not execute any guarantee whatsoever. In this connection letters exchanged between the parties are annexed hereto and collectively marked....