G. Udayan Dravid And Ors. vs State And Ors. on 30 November, 2006

    G. Udayan Dravid And Ors. vs State And Ors. on 30/11/2006

JUDGMENT

   Badar Durrez Ahmed, J.

   1. These two petitions filed under Section 482 of the Code of Criminal
Procedure, 1973 (hereinafter referred to as 'the Code') are essentially for the
same relief, i.e., quashing of the FIR No. 62/2004 under Section 406/120B IPC
registered at police station Kapashera. The petitioners have sought quashing in
one petition on the ground of compromise / settlement arrived at between the
petitioners on the one hand and the complainant bank (ICICI Bank Ltd) on the
other. Quashing of the FIR has also been sought on merits in the other petition.
However, both the petitions are taken up together and, therefore, they are being
disposed of by this common judgment.

   2. There is no dispute that the FIR referred to above came to be registered
at the instance of the complainant bank on account of the alleged non-payment of
the loans taken by the petitioners for 14 vehicles which stood hypothecated with
the complainant bank. There is also no dispute that the petitioners and the
complainant bank have settled the matter amongst themselves. An affidavit of one
of the petitioners, namely, G. Udayan Dravid dated 16.11.2006 has been filed in
this court as per the draft provided by the complainant bank. It is also clear
that the complainant bank has now no grievance left insofar as the present
matter is concerned.

   3. It is in these circumstances that the learned Counsel appearing on behalf
of the petitioners submitted that it was a fit case for quashing of the FIR and
all proceedings pursuant thereto. The learned Counsel appearing on behalf of the
complainant bank has not opposed this prayer in view of the settlement /
compromise arrived at between the complainant bank and the petitioners.

   4. However, the learned Counsel appearing on behalf of the State has taken an
objection to the quashing of the FIR, whether on compromise or on merits.
According to the learned Counsel for the State, the charge-sheet has been filed
under Section 406/120B IPC against the petitioners. It is his contention that
since the said offence is not compoundable in terms of Section 320 of the Code,
this court ought not to exercise its jurisdiction under Section 482, CrPC and
quash the FIR. He further submitted that a clear case under Section 406 IPC was
made out against the petitioners as borne out by the material collected and
indicated in the charge-sheet. It is his contention that if the matter is
allowed to proceed, he is certain that it would lead to conviction of the
petitioners under Section 406/120B IPC.

   5. Mr Malhotra, the learned senior counsel appearing on behalf of the
petitioners placed reliance on several decisions of this court, both of single
Judges and Division Benches as well as of the Supreme Court in support of his
contention that where the parties have settled and compromised, even if the
offences are not compoundable, the High Court is not powerless in quashing the
FIR and criminal proceedings in exercise of its powers under Section 482, CrPC.
He referred to the following decisions:

     i) Vicky Malhotra and Ors. v. State and Anr. 134 (2006) DLT 4321;

     ii) D.C. Singham v. State and Anr. 133 (2006) DLT 2722;

     iii) Daulat Zia v. Govt. of NCT of Delhi and Ors. 74 (1998) DLT 259 (DB)3.

     iv) Mahesh Chand and Anr. v. State of Rajasthan 1990 (Supp) SCC 681;

     v) B.S. Joshi and Ors. v. State of Haryana 2003 (4) SCC 6754.

   6. Mr Malhotra also made a submission that although the charge-sheet has been
filed under Section 406 IPC, the offence punishable under that Section is not
made out. Section 406 IPC relates to the punishment provided for criminal breach
of trust which is explained in Section 405 IPC. He submitted that before there
can be criminal breach of trust, there must be entrustment. He further submitted
that in a case of hypothecation, there is no question of entrustment and,
therefore, there would be no question of criminal breach of trust. Consequently,
no offence punishable under Section 406 IPC can be said to have been committed
by the petitioners even if all the material placed on record by the prosecution
Along with the charge-sheet is taken at face value. For this proposition, he
placed reliance on the recent Supreme Court decision in the case of Indian Oil
Corporation v. NEPC India Ltd. and Ors. 2006 (2) JCC 11905 where it is clearly
indicated that there is no entrustment in an hypothecation and that, therefore,
no case of criminal breach of trust in such an agreement could be made out. It
was, therefore, contended by Mr Malhotra that, at best, it could be a case of
cheating under section 415 IPC which was punishable under Section 420 IPC. The
said offence, according to Mr Malhotra, being a compoundable offence can easily
be compounded because the complainant bank has already settled and compromised
the matter with the petitioners.

   7. Therefore, according to Mr Malhotra, the learned senior counsel, appearing
on behalf of the petitioners, whichever way one looks at the matter, it is
either a case of compounding of the offence or a case for quashing. If the
offence is treated as one punishable under Section 420, then the same may be
compounded. However, if the court is of the view that Section 406 IPC is to be
maintained, then it may be quashed under Section 482 of the Code.

   8. The learned Counsel for the State placed reliance on a Constitution Bench
decision in the case of Union Carbide v. Union of India as well as the Supreme
Court decision in the case of State of Madhya Pradesh v. Awadh Kishore Gupta and
Ors. to submit that offences which are not compoundable

   ought not to be quashed in exercise of the powers under Section 482 of the
Code. Mr Sharma also relied on the decision of the Supreme Court in the case of
R.P. Kapur v. State of Punjab to

   demonstrate the scope of the powers to be exercised by the High Court under
Section 482, CrPC. In the same context, he relied upon the decision of the
Supreme Court in the case State of Haryana v. Bhajan Lal 1992 Supp 1 SCC 335.

   9. At this stage, the learned Counsel for the petitioner requested for some
time to place further decisions of this court as well as of the Supreme Court on
the issue raised above. The matter was adjourned to the next date, i.e.,
30.11.2006. Today, Mr Harish Malhotra, the learned senior counsel appearing for
the petitioner placed before this court the following decisions:

     i) Ajay Kumar and Ors. v. State and Anr. 2006 [2] JCC 1073;

     ii) Navrang Pal and Ors. v. State 2005 IV AD (Delhi) 657;

     iii) Ramesh Kumar v. State 2003 [69] DRJ 416 (FB);

     iv) Ram Biraji Devi and Anr. v. Umesh Kumar Singh and Anr. .

   Placing reliance on the aforesaid decisions, the learned senior counsel
submitted that in the case of Ajay Kumar (supra), a learned single Judge of this
court had clearly directed the quashing of the proceedings in respect of the
offences under Sections 420/468/471/120B IPC after the parties had arrived at a
compromise and settlement.

   10. With regard to Navrang Pal (supra), the learned Counsel submitted that
the detailed submissions made on behalf of the State, which are virtually
identical to the ones advanced before this court by the learned Counsel for the
State, were considered and rejected. He submitted that Navrang Pal's case
(supra) was one under Section 336/427/506/34 IPC where the parties had entered
into a compromise and settlement. He also referred to the decision in the case
of Ramesh Kumar (supra) wherein a Bench comprising of five Hon'ble Judges of
this court overruled the decision of a Full Bench of this Court in the case of
Gurcharan Singh v. State and Anr. 2002 I AD (Delhi) 576. The Bench of five
Hon'ble Judges followed the decision of the Supreme Court in the case of B.S.
Joshi (supra) and held that the High Court in exercise of its inherent powers
could quash criminal proceedings or FIR or a complaint and that Section 320 of
the Code would not limit or affect the powers under Section 482 of the Code.

   11. With reference to Ram Biraji (supra), the learned senior counsel
submitted that this was also a case under Section 406/419/420 and 120B IPC and
it was at the stage where the Magistrate had taken cognizance and being
aggrieved of the order of taking cognizance, the aggrieved party had approached
the High Court under Section 482 of the Code praying for the quashing of
cognizance taken by the Magistrate. The High Court of Patna had not allowed the
application for quashing and being aggrieved by that order, the Supreme Court
was approached. He submitted that the Supreme Court examined the facts of the
case and came to the conclusion that no guilty intention could be attributed to
the accused nor could there be any intention on their part to deceive the
complainant even if all the material placed on record was accepted to be true
and correct. The court came to the conclusion that essentially the dispute
between the parties therein was a dispute amounting to a civil liability inter
se the parties. Explaining the decision in Trisuns Chemical Industry v. Rajesh
Aggarwal , the Supreme Court in Ram Biraji (supra) allowed the appeal and
directed the quashing of the order whereby the Magistrate had taken cognizance
against the accused for offences under Section 406/419/420 and 120B IPC.

   12. Based on these decisions and the decisions cited earlier by Mr Malhotra,
it was contended by him that in the present case, the loans were taken for the
purposes of purchasing the vehicles which were hypothecated with the complainant
bank. The allegation against the petitioners is that without repaying the loans
in their entirety and without having the hypothecation discharged, the
petitioners are alleged to have sold some of the vehicles to third parties. He
submits that as per the charge-sheet itself, there is no evidence that any
vehicle has been sold, but even if it is assumed that such sales were made, at
best, it could amount to a case falling under Section 415 punishable under
Section 420 IPC and, that too, if it is established that the intention to cheat
was present at the beginning of the transaction. He submitted that, in any
event, in view of the Supreme Court decision in the case of Indian Oil
Corporation v. NEPC (supra), a transaction involving hypothecation did not
amount to entrustment and, therefore, Section 406 IPC could not be invoked.

   13. That being the case, he submits that even if Section 420 IPC is invocable
in this case, since the same is compoundable and the complainant bank is ready
and willing to compound the same, the matter cannot proceed any further.
Therefore, according to him, whichever way the matter is looked at, either as a
case under Section 406 or one under Section 420, in both eventualities, the
petitioners are entitled to an order of quashing in the former case and an order
of compounding in the latter case.

   14. Mr Pawan Sharma, continuing his opposition to the petitioners' case,
submitted that the decision in Navrang Pal (supra) was a dispute between
neighbours and the court permitted quashing for the maintenance of peace and
harmony amongst them. With regard to the Supreme Court decision in B.S. Joshi
(supra), he submitted that the said case pertains to a matrimonial case and the
ratio of that decision has to be read in that context. With regard to Ajay Kumar
(supra), he submitted that the parties therein were private parties and no
public transaction was involved as indicated in para 5 thereof. It is in those
circumstances that the quashing was permitted. As regards the case of Ramesh
Kumar (supra), he submitted that just-like the decision in B.S. Joshi (supra),
that was also a matrimonial case. And, lastly, as regards Ram Biraji (supra), Mr
Sharma submitted that that also pertained to a transaction of a transfer of a
plot between private parties not involving any public transaction. He submitted
that all these cases where quashing has been permitted have been connected with
private transactions or matrimonial matters or disputes between the neighbours
not involving any public transactions. According to him, the ratio of B.S. Joshi
(supra) should be limited to this genre of cases and should not be extended to
cover all the cases.

   15. Mr Sharma referred to a decision in the case of Bankat and Anr. v. State
of Maharashtra 2004 IV AD (Cr.) S.C. 593 wherein the Supreme Court was
categorical in observing that the scheme of compounding of offences was clearly
set out in Section 320 of the Code. It was also categorically pointed out in the
said judgment that in view of the provisions of Section 320(9) of the Code, no
court could compound an offence which was not specifically made compoundable as
per the table contained in the said provision. He referred to this judgment in
the context that Section 406, being a non-compoundable offence, could not be
compounded by the court in view of the statutory provisions and the aforesaid
decision of the Supreme Court. This decision does not apply to the present case
as compounding of the offence under Section 406 is not sought. The petitioners
have prayed for quashing both on the basis of compromise / settlement and on
merits. The latter, on the ground that the offence punishable under Section 406
is not made out.

   16. I have considered the arguments advanced by the parties. The position is
that the Supreme Court in the case of B.S. Joshi (supra), has clearly stated:

     In view of the above discussion, we hold that the High Court in exercise of
its inherent powers can quash criminal proceedings or FIR or complaint and
Section 320 of the Code does not limit or affect the powers under Section 482 of
the Code.

   I am not in agreement with the submissions made by Mr Sharma that this
observation and conclusion of the Supreme Court in B.S. Joshi (supra) has to be
given a limited meaning?limited only to cases pertaining to matrimonial matters
or relations between private parties or close relatives or neighbours. The
Supreme Court in B.S. Joshi (supra) had considered a large number of cases and
it is thereafter that the above observation and conclusion was arrived at. The
said conclusion is essentially a recognition of the wide amplitude of the powers
referred to in Section 482 which are inherent in the High Courts. It is one
matter to say that the High Court has the power under Section 482 to quash even
those cases which are not compoundable and it is another matter to say that in a
particular case that power may not be exercised. But as a general rule, it
cannot be said that the High Court does not have the power under Section 482 of
the Code to quash even those cases which are not of a matrimonial nature or of a
similar class of cases as mentioned by Mr Sharma. The power is there. It is for
the High Court to be circumspect in using the same. And, that is the only
limitation to that power.

   17. In this view of the matter, it is for the court to examine in each case
as to whether the power should be exercised or not. There may be various reasons
why the High Court may think it proper to exercise that power or to refuse the
same. No strait-jacket formula can be laid down for it. However, if the High
Court is of the view that the continuance of criminal proceedings would be an
exercise in futility and would be mere wastage of public money and public time
and time of the court, then it would be appropriate for the High Court to
entertain a petition under Section 482 of the Code and quash the proceedings.
The learned Counsel for the State referred to the Supreme Court decision in
Union Carbide (supra) and Awadh Kishore Gupta (supra) to submit that offences
which are not compoundable ought not to be quashed under Section 482 of the
Code. But, do these decisions say so ? In Union Carbide (supra), as would be
apparent from contention D set out in paragraph 55 thereof, the orders
terminating criminal proceedings were challenged on three grounds that: (i) if
the orders were to be construed as permitting compounding of offences, they ran
in the teeth of the statutory prohibition contained in Section 320(9) of the
Code; (ii) if the orders were construed as permitting a withdrawal of the
prosecution under section 321 of the Code, they would, again, be bad as being
violative of settled principles guiding withdrawal of prosecutions; and (iii) if
the orders amounted to a quashing of the proceedings under section 482 of the
Code, grounds for such quashing did not obtain in the case. With regard to the
first ground, there is no manner of doubt that, in view of the prohibition
contained in Section 320(9) of the Code, no court can compound an offence which
is not compoundable. But, this is not what the petitioners are seeking. The
second ground also does not arise in the present case. And, the third ground
taken is not that the proceedings could not have been quashed under Section 482
of the Code but that ?the grounds for such quashing did not obtain in the case.?
So, the Supreme Court decision in Union Carbide (supra) does not hold that
offences which are not compoundable ought not to be quashed in exercise of the
powers under Section 482 of the Code.

   18. An examination of the Supreme Court decision in Awadh Kishore (supra),
R.P. Kapur (supra) and Bhajan Lal (supra) also does not disclose any finding or
conclusion that a criminal proceeding involving a non-compoundable offence
cannot be quashed by the High Court in exercise of its inherent powers which
have been saved by Section 482 of the Code. In R.P . Kapur (supra) as well as in
Bhajan Lal (supra), the Supreme Court set out illustrative cases / instances
where the inherent power could and should be exercised. These were illustrative
cases / instances and not exhaustive. In fact, the wide amplitude of the
inherent powers of the High Court have been recognized in all these cases as
well as in Awadh Kishore (supra) wherein, with reference to Section 482 of the
Code, it was observed:

     8...The section does not confer any new powers on the High Court. It only
saves the inherent power which the Court possessed before the enactment of the
Code. It envisages three circumstances under which the inherent jurisdiction may
be exercised, namely, (i) to give effect to an order under the Code, (ii) to
prevent abuse of the process of court, and (iii) to otherwise secure the ends of
justice. It is neither possible nor desirable to lay down any inflexible rule
which would govern the exercise of inherent jurisdiction.

   It was also held:

     11. As noted above, the powers possessed by the High Court under Section
482 of the Code are very wide and the very plenitude of the power requires great
caution in its exercise. Court must be careful to see that its decision in
exercise of this power is based on sound principles. The inherent power should
not be exercised to stifle a legitimate prosecution. High Court being the
highest Court of a State should normally refrain from giving a prima facie
decision in a case where the entire facts are incomplete and hazy, more so when
the evidence has not been collected and produced before the Court and the issues
involved, whether factual or legal, are of magnitude and cannot be seen in their
true perspective without sufficient material. Of course, no hard and fast rule
can be laid down in regard to cases in which the High Court will exercise its
extraordinary jurisdiction of quashing the proceeding at any stage....

   19. Thus, the powers exercised by the High Court are very wide. It is true
that in exercising such powers the High Court has to be cautious and
circumspect. There is no gainsaying that the degree of power varies
proportionately with the degree of caution and care that is needed for its
exercise. It is one thing to suggest that care must be taken in exercise of a
power and it is quite another to say that the court has no power. None of the
decisions sought to be relied upon by the learned Counsel for the State lay down
the proposition that a criminal proceeding involving a non-compoundable offence
cannot, under any circumstance, be quashed by the High Court in exercise of the
powers saved by Section 482 of the Code.

   20. In the present case, there are two reasons why the proceedings may be
terminated. First of all, the case does not belong to a category of cases any
different from the ones in which this High Court as well as the Supreme Court
have been permitting quashing. It was the contention of Mr Sharma that in the
present case, public money was involved because the loans were extended by ICICI
Bank Ltd and, essentially, the banks deal with public money. I am unable to
subscribe to this view because the expression ?public money? has an entirely
different connotation. The ICICI Bank Ltd is a limited banking company working
under the guidelines of the Reserve Bank of India like any other private bank.
It is transacting business in the commercial field and is like any other
commercial concern. There is no doubt that the banks accept deposits from the
members of public and extend loans and other facilities to their clients and
make profits out of these transactions. But, this does not mean that ?public
money? is involved in transactions of banks. Most commercial transactions
involve the public. Merchandise sold to the public through retail outlets also
involve transactions with the public. But, the entire money collected through
these transactions cannot be termed as public money. Possibly, the only element
of public money in these transactions would be the sales tax or VAT collected.

   Similarly, just because banks deal in money in place of goods, does not place
them on a different footing. It could be said that public money is involved
where, for example, tax deducted at source is collected by an assessed and he
retains the same. Because, in that case, the tax is collected on behalf of the
Government and it is collected from the public and has all the trappings of what
is known as 'public money'. In the present case, the transactions are purely of
a commercial nature. There is no public element in it and they are governed by
commercial laws, therefore, I am not in agreement with the submissions made by
Mr Sharma that the transactions involved in the present case are any different
from the ones involved in the cases where the courts have permitted quashing of
the offences.

   21. The second reason why quashing should be permitted is that the parties
have compromised and coupled with this is the consideration that, strictly
speaking, the offence under Section 406 IPC is not made out even if all the
material placed on behalf the prosecution is taken to be true and correct. This
aspect has been elaborated above that unless there is entrustment, there cannot
be an offence punishable under Section 406 IPC as held by the Supreme Court in
the case of Indian Oil (supra). Therefore, if that view is taken, at best, the
only offence that can be allegedly made out is the one punishable under Section
420 IPC, which is a compoundable offence and the bank is ready and willing to
compound the same and has compromised / settled the dispute with the
petitioners. So, whether the case is looked at from the standpoint of compromise
or compromise coupled with merits, the ultimate effect would be the same. In the
former case, treating the offence as one under Section 406 IPC, it would amount
to quashing of the criminal complaint whereas in the latter case, considering
the offence to be one under Section 420 IPC, it would amount to compounding. The
effect would be the same?the criminal proceedings shall end.

   22. Considering the fact that Section 406 IPC has been invoked by the
investigating agency in the charge-sheet, I think it would be appropriate if the
former route is taken and the FIR and all the proceedings pursuant thereto are
quashed. Accordingly, these petitions are allowed and the said FIR and the
proceedings pursuant thereto are quashed.