TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1423
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....fences punishable under Sections 406, 419, 420 read with Section 34 of IPC. The High Court vide order impugned herein dismissed the same. 3. Pending instant appeal before this Court, Appellant No. 1 has died and his name has been deleted vide order dated 29.09.2021. The term 'Appellants' used herein should thus be construed to include only Appellant No. 2. Facts 4. On 07.08.13 Respondent No. 2 had initially executed a Joint Development Agreement (JDA) for developing a particular property with the company of the Appellants (The Appellants being directors in this company), i.e., Rajarajeshwari Buildcon Private Ltd. (hereinafter referred to as 'the builder company'). The property was to be developed either entirely as residential apartments, or as residential apartments with commercial complex. In furtherance of the Joint Development Agreement, a General Power of Attorney (GPA) was also executed on the same date. Respondent No. 2 thereafter also entered into a Supplementary Agreement with the Appellants specifying their respective shares in undivided area and super built up area. 5. Further, on 19.02.15 a Memorandum of Understanding (MoU) was entered into by Respondent No. 2 with....
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....IR No. 185/2016 dated 29.03.2016, was registered against Appellant No. 1 and 2 for offences punishable under section 420 read with 34 of Indian Penal Code. Appellants herein, thereby approached the High Court of Karnataka seeking quashing of the said FIR invoking Section 482 of CrPC. Further on 29.03.17 charge sheet was filed against the appellants for offences under sections 406, 419, 420 read with Section 34 of the Indian Penal Code, which was also sought to be quashed in the said proceedings. 11. Meanwhile, in the arbitration proceedings, the arbitrator partly allowed the claims of the Appellants as well as Respondent No. 2. The arbitrator held that unilateral revocation of GPA by Respondent no. 2 was illegal and that the company had the right to effectuate sale agreements/sale deeds in terms of MoU. Furthermore, regarding the question of sale of four excess flats by the Appellants, the question was left unanswered in the arbitral award as Respondent No. 2 had withdrawn his claim prayed for in paras (e), (f) and (g) of the written submissions in light of pending civil proceedings, with liberty to pursue the issue in those proceedings. Prayer in para (f) in particular being:- ....
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....xamine whether a matter which is essentially of a civil nature has been given a cloak of a criminal offence. Where the ingredients required to constitute a criminal offence are not made out from a bare reading of the complaint, the continuation of the criminal proceeding will constitute an abuse of the process of the court. 24. In the present case, the son of the appellants has instituted a civil suit for the recovery of money against the first respondent. The suit is pending. The first respondent has filed the complaint against the appellants six years after the date of the alleged transaction and nearly three years from the filing of the suit. The averments in the complaint, read on its face, do not disclose the ingredients necessary to constitute offences under the Penal Code. An attempt has been made by the first respondent to cloak a civil dispute with a criminal nature despite the absence of the ingredients necessary to constitute a criminal offence. The complaint filed by the first respondent against the appellants constitutes an abuse of process of court and is liable to be quashed." 17. Learned counsel for the appellant further submits that Respondent No. 2 has neithe....
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....ise correct or not, has to be decided on the basis of the evidence to be led during the course of trial. Simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of the process of the court for exercising inherent powers of the High Court under Section 482 CrPC for quashing such proceedings. 33. We have perused the pleadings of the parties, the complaint/FIR/charge-sheet and orders of the Courts below and have taken into consideration the material on record. After hearing learned counsel for the parties, we are satisfied that the issue involved in the matter under consideration is not a case in which the criminal trial should have been shortcircuited. The High Court was not justified in quashing the criminal proceedings in exercise of its inherent jurisdiction. The High Court has primarily adverted on two circumstances, (i) that it was a case of termination of agreement to sell on account of an alleged breach of the contract....
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....as referred to arbitration and that arbitration proceedings had taken place thereafter. Para 7 of the said judgment has been particularly emphasized upon by Respondent No. 2, wherein it has been observed as under :- "On behalf of respondent No. 2, the submissions which had been urged before the High Court, were reiterated, which, however, appears to be unacceptable having regard to the decision cited by Mr. Adhyaru. We are also of the view that there can be no bar to the simultaneous continuance of a criminal proceeding and a civil proceeding if the two arise from separate causes of action. The decision in Trisuns Chemical Industry's case (Supra) appears to squarely cover this case as well." 23. To simply put, what has been argued on behalf of Respondent No. 2 is that cause of action in civil and criminal proceedings instituted by Respondent No. 2 are separate and independent of each other, i.e., liability for breach of agreement is independent of the liability for commission of offence under sections 405 and 415 of the Indian Penal Code. Therefore, criminal proceedings so instituted against the Appellants herein cannot be quashed. 24. It is further contended that sale dee....
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....e in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits "criminal breach of trust". [Explanation [1].-A person, being an employer [of an establishment whether exempted under section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not] who deducts the employee's contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.] [Explanation 2.-A person, being an employer, who deducts the employees' contribution from the wages payable to the employee for credit to the Employees' State Insurance Fund held and administered by the Employees' State Insurance Corporation established und....
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.... company had sold four excess flats beyond its share, in terms of the JDA and supplementary agreement entered into between the parties. Respondent No. 2 contends that builder company which was entitled to sell only 9 flats in its favour, has instead executed sale deed for 13 flats in total. Thus, the company simply could not have sold the flats beyond 9 flats for which it was authorized and resultantly cannot evade criminal liability on a mere premise that a civil dispute is already pending between the parties. 30. The Appellants on the other hand contend that in terms of a subsequent MoU dated 19.02.15, it was mutually agreed between the parties, that partial payment for a loan amount borrowed by Respondent No. 2 from Religare Finvest Ltd., would be paid out from the sale proceeds of the said development project undertaken by both the parties. Pursuant to this MoU, the Appellants had agreed to get an NOC for 15 flats by making payment of Rs. 40,00,000/- for each flat. 31. The key contention, and also the central point of dispute, made by the Appellants is that, it was specifically agreed between the parties that the Appellants would be entitled to sell additional flats beyond th....
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....ate of NCT of Delhi & Anr. (Supra) and Sri Krishna Agencies Vs. State of Andhra Pradesh & Anr. (Supra), it has been further submitted by Respondent No. 2 that Appellants cannot evade a criminal case by merely contending that the person whose property has been sold has filed a civil suit for recovery of the property, or that the dispute had been referred to arbitration. 37. Although, there is perhaps not even an iota of doubt that a singular factual premise can give rise to a dispute which is both, of a civil as well as criminal nature, each of which could be pursued regardless of the other. In the instant case, the actual question which requires consideration is not whether a criminal case could be pursued in the presence of a civil suit, but whether the relevant ingredients for a criminal case are even prima facie made out. Relying on the facts as discussed in previous paragraphs, clearly no cogent case regarding a criminal breach of trust or cheating is made out. 38. The dispute between the parties, could at best be termed as one involving a mere breach of contract. Now, whether and what, is the difference between a mere breach of contract and an offence of cheating has been di....
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....with law." 42. It was also observed:- "13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors....There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be deprecated and discouraged." 43. On an earlier occasion, in case of G. Sagar Suri and Anr. Vs. State of UP and Ors. (2000) 2 SCC 636 , this Court has also observed:- "8. Jurisdiction under Section 482 of the Code has to be exercised with a great care. In exercise of its jurisdiction High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issui....
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.... is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge." 45. Applying this dictum to the instant factual matrix, it can be safely concluded that the present case clearly falls within the ambit of first, third and fifth category of the seven categories enlisted in the above said judgment. The case therefore warrants intervention by this Court, and the High Court has erred in dismissing the petition filed by the Appellants under section 482 CrPC. We find that there has been attempt to stretch the contours of a civil dispute and thereby essentially impart a criminal color to it. 46. Recently, this Court in case of Randheer Singh Vs. The State of U.P. & Ors Criminal Appeal No. 932 of 2021 (decided on 02.09.2021) , has again reiterated the long standing principle that criminal proceedings must not be used as instruments of harassment. The court observed as under:- "33. ....There can be no doubt that jurisdiction under Section 482 of the Cr.P.C. should be used sparingly for the purpose of preventing abuse of the process o....