TaxTMI 
TaxTMI 
2024 (3) TMI 442
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....affairs and/or business of petitioner no. 1 and they take all necessary decisions on behalf of the petitioner no. 1/company. 4. The petitioners state that the petitioner no. 1/company deals with the business of export & import and the petitioners are doing such business for a considerable period of time with great reputation. 5. For the purpose of smooth running of the aforesaid business the petitioners used to obtain financial assistance from various banks and other financial institutions. The petitioners further state that in the year 2016, the petitioners being aware of the name of opposite party no. 2 being a company, who used to provide financial assistance to individuals and companies, approached the opposite party no. 2 for a loan and/or financial accommodation to the tune of Rs. 50 Lakhs. 6. After proper verification and inspection, the opposite party no. 2 agreed to provide and/or disburse a loan to the tune of Rs. 50 Lakhs and accordingly on 21.03.2016 the said amount was transferred through RTGS/NEFT in favour of the petitioner no. 1. It was further agreed that the entire money will be repaid within March 2017, if not extended further. 7. After such disbursem....
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....e party no. 2 has preferred the instant application to bring out the false statements made by the abovenamed petitioners in the first revisional application, on oath, with a view to interfere with and obstruct the administration of justice. It is further stated that the abovenamed persons have deliberately resorted to using false evidence and making false statements before this Hon'ble Court in the instant proceedings whereby they also seek to invoke the plenary and inherent powers of this Hon'ble Court under Section 482 of Cr.P.C. which is meant for doing equitable justice. 13. It is further stated that it is required to compare the statements/averments made under oath by the abovenamed petitioners under the said first revisional application to the statements/averments, made under oath, in a subsequent application moved under Section 482 of the Cr.P.C. being CRR No. 1450 of 2022 (hereinafter referred to as the 'said second revisional application'). The said second revisional application has been preferred by the petitioners no. 2 and 4 herein, being petitioner no. 1 and 2 therein respectively, inter alia, praying for quashing of the proceeding in C.S. No. 53426 of 2019 initiate....
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....pposition to the application under Section 340 Cr.P.C. denying all the statements therein and Supplementary Affidavit has been filed by the petitioner, stating that after filing of the revisional application being CRR No. 3637 of 2019, on October 23, 2019, the opposite party no. 2 had filed a petition of complaint before the Court of the Learned Chief Metropolitan Magistrate at Calcutta under Sections 138/141 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "NI Act") on the allegations to the effect that after receiving the Summons in the present case on August 28, 2019, the petitioner no. 3 approached the opposite party no. 2 in the court premises and entered into a settlement and that pursuant to such settlement a cheque bearing Cheque No. 510577 dated August 01, 2019 for Rs. 50,00,000/- drawn on Kotak Mahindra Bank, Brabourne Road, Kolkata, duly signed by the petitioner no. 3 was issued by the petitioner no. 1. It was further alleged that the said cheque on being presented to its banker was returned unpaid with the remark "alteration in date". 18. It is submitted that on April 19, 2022 on the date of examination-in-chief of the PW1, the opposite party no. 2....
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.... amount of Rs. 50,000/- was paid in cash in December, 2016 but there is admittedly no document in support of the said payment in cash, which has been explained as follows:- Accordingly, a Post-dated Cheque bearing No. 510577 date August 01, 2017 (said PDC) was issued by M/s Gurudayal Gangabux in favour of the opposite party no. 2. Subsequently, on the request of the opposite party no. 2, the residue amount was paid in cash with the understanding by and between the parties that the said PDC would not be used. On account of mutual relationship between the parties, the said PDC which had been given by M/s Grurdayal Gangabux to the opposite party no. 2 was also not recalled by M/s Gurudayal Gangabux. 26. The petitioners by way of filing their written argument and a rejoinder have submitted that the dispute if any is civil in nature. 27. It is submitted that from the allegations leveled in the impugned complaint, it would be evident that the case of the opposite party no. 2 was a case of money lent and advanced. In the impugned complaint, the opposite party no. 2 had not only suppressed the factum of repayment of loan and/or issuance of the said PDC but also the fact of d....
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....eeding is tainted with manifest mala fide which is evident from the suppression of material facts which is as follows:- a. servicing of loan by repayment of interest; b. issuance of PDC on April 21, 2017 and receipt thereof by the opposite party no. 2; c. repayment of the loan in cash with the understanding of not to use the said PDC; d. letter dated October 01, 2019 issued by the petitioners in response to the purported Notice under Section 138(b) of the NI Act. 33. It is finally submitted that a proceeding which is an outcome of suppression of material facts swims into nullity. The Hon'ble Supreme Court of India and this Hon'ble Court time and again had frowned on such practice of suppression of material fact and therefore quashed the proceedings which were with the aid of suppression. 34. The opposite party no. 2 has also filed written notes and further notes an Argument relying upon following judgments:- i. Sanapareddy Maheedhar and Anr. vs State of Andhra Pradesh and Anr., (2007) 13 (Add) S.C.R. ii. Neeharika Infrastructure Pvt. Ltd. vs State of Maharashtra and Anr., (2021) SCC online SC 315. iii. Vijayander ....
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....Accused was a public servant, or a banker or merchant or agent or factor or broker or an attorney; (2) In such capacity accused was entrusted with certain property or he gained domain over such property which was not his own; (3) Accused committed criminal breach of trust with respect to such property." 37. The Supreme Court in N. Raghavender vs State of Andhra Pradesh, CBI, Criminal Appeal No. 5 of 2010, on 13.12.2021, held:- "41. Section 409 IPC pertains to criminal breach of trust by a public servant or a banker, in respect of the property entrusted to him. The onus is on the prosecution to prove that the accused, a public servant or a banker was entrusted with the property which he is duly bound to account for and that he has committed criminal breach of trust. (See: Sadupati Nageswara Rao v. State of Andhra Pradesh, (2012) 8 SCC 547). 42. The entrustment of public property and dishonest misappropriation or use thereof in the manner illustrated under Section 405 are a sine qua non for making an offence punishable under Section 409 IPC. The expression 'criminal breach of trust' is defined under Section 405 IPC which provides, inter alia, th....
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....eneric expression. While the initial onus lies on the prosecution to show that the property in question was 'entrusted' to the accused, it is not necessary to prove further, the actual mode of entrustment of the property or misappropriation thereof. Where the 'entrustment' is admitted by the accused or has been established by the prosecution, the burden then shifts on the accused to prove that the obligation vis-à-vis the entrusted property was carried out in a legally and contractually acceptable manner." 38. In Deepak Gaba & Ors. vs State of Uttar Pradesh & Anr., in Criminal Appeal No. 2328 of 2022, on 2 January, 2023, the Supreme Court held:- "13. Section 406 of the IPC prescribes punishment for breach of trust which may extend to three years or with fine or with both, when ingredients of Section 405 of the IPC are satisfied. For Section 406 of the IPC to get attracted, there must be criminal breach of trust in terms of Section 405 of the IPC. For Section 405 of the IPC to be attracted, the following have to be established: (a) the accused was entrusted with property, or entrusted with dominion over property; 406. Punishment for criminal brea....
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....r vs State of Andhra Pradesh (Supra)) and (Deepak Gaba & Ors. vs State of Uttar Pradesh & Anr. (Supra)). (v) There has been no 'actual use' of the property by the petitioner and no dishonest intention and thus no mis-appropriation. (vi) As such the two fundamental ingredient of 'criminal breach of trust' within the meaning of Section 405 IPC has not been proved in the present case (N. Raghavender vs State of Andhra Pradesh (Supra)). 40. Thus the ingredients required to constitute the offence of criminal breach of trust are absent (no materials on record). 41. In the present case, the dispute relates to a loan and its repayment. There is absolutely no material on record to prima facie show that the accused has dishonestly mis-appropriated or converted the property for his own use. There is a strong case of repayment in this case. 42. It is also submitted that the continuance of both the proceedings under Sections 406/409/420/120B of the Indian Penal Code (CRR 3637 of 2019) as also under Section 138 of the Negotiable Instruments Act (CRR 1450 of 2022) is not maintainable in the eye of law as both cases relate to repayment of the same loan amount. 43. The....
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....n case of exoneration, however, on merits where the allegation is found to be not sustainable at all and the person held innocent, criminal prosecution on the same set of facts and circumstances cannot be allowed to continue, the underlying principle being the higher standard of proof in criminal cases." The ratio of the aforesaid judgment is not applicable in this case for the reason that proceedings under Section 138 of N.I. Act are still sub judice as the appeal is pending and the matter has not attained finality. 27. Admittedly, the appellant had been tried earlier for the offences punishable under the provisions of Section 138 N.I. Act and the case is sub judice before the High Court. In the instant case, he is involved under Sections 406/420 read with Section 114 IPC. In the prosecution under Section 138 N.I. Act, the mens rea i.e. fraudulent or dishonest intention at the time of issuance of cheque is not required to be proved. However, in the case under IPC involved herein, the issue of mens rea may be relevant. The offence punishable under Section 420 IPC is a serious one as the sentence of 7 years can be imposed. In the case under N.I. Act, there is a legal presum....
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.... Deol Bajaj vs. Kanwar Pal Singh Gill [1995 (6) SCC 194], Central Bureau of Investigation v. Duncans Agro Industries Ltd., [1996 (5) SCC 591], State of Bihar vs. Rajendra Agrawalla [1996 (8) SCC 164], Rajesh Bajaj v. State NCT of Delhi, [1999 (3) SCC 259], Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [2000 (3) SCC 269], Hridaya Ranjan Prasad Verma v. State of Bihar [2000 (4) SCC 168], M. Krishnan vs Vijay Kumar [2001 (8) SCC 645], and Zandu Phamaceutical Works Ltd. v. Mohd. Sharaful Haque [2005 (1) SCC 122]. The principles, relevant to our purpose are : (i) A complaint can be quashed where the allegations made in the complaint, even if they are taken at their face value and accepted in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused. For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint. (ii) A complaint ma....
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....gar Suri vs. State of UP [2000 (2) SCC 636], this Court observed : "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 issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this Section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice." While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law. One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exerc....
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....ith regard to the commission of the offence punishable u/s 420 IPC................" 49. The amount due in the present case is also the subject matter in a separate proceedings under Section 138 of the N.I. Act (CRR 1450 of 2022). 50. In the present case, admittedly there was a business transaction between the parties but there is no case against the petitioners that he dishonestly induced the complainant. There was neither any deceit nor any inducement to deceive the complainant. The transaction was admittedly for the benefit of both the parties. The fact of wrongful loss of one resulting in wrongful gain of another is not present in this case as loan has been admitted and the dispute relates to its repayment. Thus the ingredients required to constitute the offence under Section 420 IPC are clearly absent in the present case. 51. This Court also relies upon the following judgments of the Supreme Court:- a) Sushil Sethi and Anr. vs The State of Arunachal Pradesh and Ors., AIR 2020 SC 765, Criminal Appeal No. 125 of 2020 (arising out of SLP (Crl.) No. 590 of 2019), on 31 January, 2020, the Supreme Court held:- "7.2 In the case of Vesa Holdings Private Limit....
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....right from the time of making the promise or misrepresentation. Nothing has been said on what those misrepresentations were and how the Ministry of Health was duped and what were the roles played by the appellants in the alleged offence. The appellants, in our view, could not be attributed any mens rea of evasion of customs duty or cheating the Government of India as the Cancer Society is a nonprofit organisation and, therefore, the allegations against the appellants levelled by the prosecution are unsustainable. The Kar Vivad Samadhan Scheme certificate along with Duncan [(1996) 5 SCC 591 : 1996 SCC (Cri) 1045] and Sushila Rani [(2002) 2 SCC 697 : (2002) 2 Apex Decisions] judgments clearly absolve the appellants herein from all charges and allegations under any other law once the duty so demanded has been paid and the alleged offence has been compounded. It is also settled law that once a civil case has been compromised and the alleged offence has been compounded, to continue the criminal proceedings thereafter would be an abuse of the judicial process." It is further observed and held by this Court in the aforesaid decision that to bring home the charge of conspiracy within the a....
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....is further observed and held that inherent jurisdiction of the High Courts under Section 482 Cr.P.C. though wide has to be exercised sparingly, carefully and with caution and only when it is justified by the tests specifically laid down in the statute itself. 8. Applying the law laid down by this Court in the aforesaid decisions to the facts of the case on hand, we are of the opinion that this is a fit case to exercise powers under Section 482 Cr.P.C. and to quash the impugned criminal proceedings." b) Birla Corporation Ltd. vs. Adventz Investments and Holdings Limited & Ors., Criminal Appeal nos. 875, 876, 877 of 2019, wherein the Court held:- "86. In Indian Oil Corpn. v. NEPC India Ltd. and Others (2006) 6 SCC 736, the Supreme Court after observing that there is a growing tendency in business circles to convert powerful civil disputes in criminal cases held as under:- "14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil....
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....unts to bringing pressure upon the accused, in exercise of the inherent powers, such proceedings can be quashed. In Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi and Others (1976) 3 SCC 736, the Supreme Court reviewed the earlier decisions and summarised the principles as to when the issue of process can be quashed and held as under:- "5. .............. Once the Magistrate has exercised his discretion it is not for the High Court, or even this Court, to substitute its own discretion for that of the Magistrate or to examine the case on merits with a view to find out whether or not the allegations in the complaint, if proved, would ultimately end in conviction of the accused. These considerations, in our opinion, are totally foreign to the scope and ambit of an inquiry under Section 202 of the Code of Criminal Procedure which culminates into an order under Section 204 of the Code. Thus it may be safely held that in the following cases an order of the Magistrate issuing process against the accused can be quashed or set aside: (1) where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value ....