L.M.L. Limited And Ors. vs Kailash Narain Rai on 18 January, 2008

    L.M.L. Limited And Ors. vs Kailash Narain Rai on 18/1/2008

ORDER

   A.P. Shrivastava, J.

   1. By taking aid of inherent jurisdiction of this Court under Section 482 of
Cr.P.C. petitioners have challenged the impugned order dated 9-1 -2007, passed
by the Chief Judicial Magistrate, Datia (M.P.) in Complaint Case No. 259 of 2007
and consequent orders compelling the attendance of the petitioners, by bailable
warrants of arrest.

   2. The facts of the case are that, as per document Annexure-A/7, respondent
filed a complaint against the petitioners under Section 420 of IPC. The learned
trial Court recorded the statement of the complainant under Section 200 of
Cr.P.C. on 22-12-2006 and posted for inquiry under Section 202 of Cr.P.C. on
9-1-2007. On 9-1-2007, it is informed by the respondent that he does not want to
give evidence and the Court after hearing the arguments and perusal of
statement, registered a complaint against the petitioners under Section 420 of
IPC and issued bailable warrants in the sum of Rs. 5,000/- (Rupees five thousand
only) each, to secure their appearance before the Court.

   3. Being aggrieved by the aforesaid orders passed by Chief Judicial
Magistrate, Datia, the petitioners have filed petition under Sections 482 of
Cr.P.C. on the following grounds:

     (a) That, the petitioner No. 1 L.M.L. Limited, is a public limited company
incorporated under the Companies Act, 1956, having its registered office at C-3,
Panki Industrial Estate, Kanpur, and factory at C-6 to 10 Panki Industrial
Estate, Kanpur, carrying on inter alia, the business of manufacture and sale of
two-wheelers, (scooters and motorcycles) and parts thereof. There was illegal
strike followed by lockout because of labour problems in January, 2006 and the
industrial disputes relating thereto, are the subject-matter of different
proceedings before the competent Courts. In the meanwhile, the petitioner
Company's business could not be carried on as hitherto before due to financial
constraints, industrial sickness and the need for revival and rehabilitation in
accordance with the Sick Industrial Companies (Special Provisions) Act, 1985 (in
short 'SICA') and reference to the Board of Industrial and Financial
Reconstruction (in short 'BIFR') has, therefore, been made which has been
registered vide the order of BIFR, Annexure No. 1.

     (b) That, under Section 22(1) of the special legislation i.e. SICA, the
respondent is restrained from enforcing his claims under Section 21(1) of SICA
before the competent Civil Court even where it may be otherwise necessary to
invoke. Therefore, there is a statutory bar to the enforcement of the right of
any creditor in any forum before any Civil Court having jurisdiction or through
other proceedings under appropriate applicable laws, the respondent has
illegally and unjustifiably, without the authority of law filed the illegal,
malicious, baseless and unwarranted complaint before the Chief Judicial
Magistrate, Datia (M.P.) by impleading petitioners No. 2, 3, 4 and 5 as accused
persons and deliberately excluding petitioner No. 1 with whom alone he had
dealings as dealer of two-wheelers manufactured by it.

     (c) That, the impugned order also challenged by the petitioners on the
grounds that it would lead to grave injustice to them be sides causing serious
miscarriage of justice, hardship and harassment.

     (d) That, the petitioners have had no transaction or acquaintance with the
respondent at any time and nor collected any money from the respondent with any
promise or assurance from their side personally nor have they individually
received any money or transacted any business with the respondent within any
design of cheating and the false allegations made by the complainant, are
totally baseless and frivolous.

   4. Arguments heard at length. The main contention of learned Counsel for the
petitioners is that the complainant has filed baseless and frivolous complaint
against the petitioners and the learned trial Court has committed error for not
conducting proper inquiry as laid down in Section 202 of Cr.P.C. Further, the
learned trial Court has ignored Section 22 of SICA and the dispute between the
respondent and the petitioners covers under the civil remedy and no offence is
made out punishable under Section 420 of IPC. It is further submitted that as
per Dealership Agreement Annexure No. 9, in case of dispute, if any, between the
parties to resolve through arbitration and jurisdiction would be at Kanpur.
Further, the factory of the petitioners was locked out due to illegal strike by
the employees, therefore, the supplies could not be made in terms of the
agreement.

   5. The arguments on behalf of the petitioners are that in view of Section 22
of SICA, the legal proceedings cannot be carried out against the petitioners and
further, the dispute covers in the ambit of civil disputes. Therefore, no case
of cheating as laid down in Section 420 of IPC, is made out against the
petitioners.

   6. A series of cases were cited by learned Counsel for the petitioners, in
which it is laid down that the condition on which prosecution of criminal
complaint/proceeding can be quashed by the Court, if it is found a case in
question purely covers under the civil dispute and further intention to deceive
should be in the existence at time when inducement was made, if the provision
can be used when there is miscarriage of justice or prejudice caused to the
petitioners. On behalf of the petitioners, learned Counsel placed reliance on
the following citations which are as follows:

     (i) Uma Shankar Gopalika v. State of Bihar (2006) 2 SCC (Cri) 49.

     (ii) Indian Oil Corporation v. NEPC India Ltd. .

     (iii) Minu Kumari v. State of Bihar (2006) SCC (Cri) 310 : 2006 Cri LJ
2468.

     (iv) Jay Engineering Works v. Industry Facilitation Council .

     (v) G. Sagar Suri v. State of U. P. (2000) 1 BC 273 (SC) : 2000 Cri LJ 824.

     (vi) S.N. Palanitka v. State of Bihar .

     (vii) Larsen & Toubro Ltd. v. State of Uttar Pradesh 2005 Cri LJ 1982.

     (viii) Alok Prahladkar v. Dilip Wadhwani in M.Cr. C. No. 212 of 2006
decided by High Court of M. P. Bench at Gwalior, vide order dated 5-7-2007.

   7. On the other hand, learned Counsel for the respondent categorically denied
that the transaction is purely of civil in nature and this is a question of fact
that can be ascertained after investigation. The learned trial Court has not
committed any illegality by registering the complaint against the petitioners
under Section 420 of IPC. Further, the inquiry was made under Section 202 of
Cr.P.C. and after considering the material on record, registered the complaint
against the petitioners.

   8. The main contention of learned Counsel for the respondent is that under
Section 22(1) of SICA, suspension of legal proceedings against sick company,
protection to guarantor of loan of sick company-limited to suit' for enforcement
of guarantee. The term 'suit' cannot be construed to cover recovery proceedings.
Therefore, this provision is not applicable in criminal proceedings.

   9. Counsel for the respondent also submits that no reason has been assigned
by the petitioners against registration of the complaint and also submits that
the provision of Section 482 of Cr.P.C. may be exercised by the Court, which is
an exceptional provision and this power will be utilized if ingredient of
alleged offence is absent in the complaint and availability of civil remedy. But
in this case, the contentions raised by the petitioners cannot be resolved
unless the evidence is adduced by the parties and the petitioners may challenge
their contentions during the proceedings of the trial. He also submits that
quashing of criminal proceedings is not proper on the ground of mala fide or
omnibus allegations on the complaint when prima facie case is made out.

   10. Regarding sickness of industry, learned Counsel for the respondent relied
on following citations:

     (i) Kailash Nath Agarwal v. Pradeshiya Indust and Inv. Corp. of U.P. .

     (ii) Gujarat Steel Tube Co. Ltd. v. Virchandbhai B. Shah .

   11. About the question of maintainability of petition, learned Counsel for
the respondent placed reliance in a case rendered by this High Court in the case
of Dr. Mukesh Mathur v. Dr. K.L. Jatav in M.Cr. C. No. 204 of 2004, vide order
dated 24-11-2006 and also placed reliance in the case of Deepti & Arati Rai v.
Akhil Rai 1996 (II) MPJR 301.

   12. The condition in which criminal proceeding can be quashed, learned
Counsel for the respondent also relied on following citations:

     (i) Medcl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. 2000 (II) MPJR
334 : AIR 2000 SC 1869 : 2000 Cri LJ 1487.

     (ii) Ashok Singh Rathore v. State of M.P. 2000 (1) MPJR 190.

     (iii) State of M.P. v. Rakesh (2006) 1 SCC (Cri) 760.

     (iv) Indian Oil Corporation v. NEPC India Ltd. .

     (v) N. Rangachari v. Bharat Sanchar Nigam Limited. .

   13. Learned Counsel for the respondent Argued that the actual manner of
misappropriation of the property by the petitioners need not be proved. In this
regard, he placed reliance in the case of State of H.P. v. Karanvir .

   14. The contentions of the petitioners regarding non-conducting of inquiry as
laid down under Section 202 of Cr.P.C. is not convincing because the learned
trial Court examined the complainant under Section 200 of Cr.P.C. and then
postponed the issuance of process and fixed for further inquiry. In Section 202
of Cr.P.C. it lays down that any Magistrate, on receipt of a complaint of an
offence of which he is authorized to take cognizance or which has been made over
to him under Section 192, may, if he thinks fit, postpone the issue of process
against the accused, and either inquire into the case himself or direct an
investigation to be made by a police officer or by such other person as he
thinks fit, for the purpose of deciding whether or not there is sufficient
ground for proceeding the matter.

   15. The learned trial Court postponed the case for recording the evidence of
the complainant's witness, but no witness has been given by the complainant.
Then on the basis of material on record, the learned trial Court registered the
complaint against the petitioners. Therefore, it cannot be said that the learned
trial Court has committed any illegality or irregularity, even otherwise the
order of Magistrate, issuance of process is not an interlocutory order, the
petitioners have an efficacious alternative remedy under Criminal Procedure
Code.

   16. In this case, looking to the divergent contentions as raised by the
parties, the question of fact is involved as to what was in the agreement
entered into between the respondent and the petitioners and whether due to non-
performance of the agreement, it amounts to mischief committed by the
petitioners which comes under the definition of Section 420 of IPC and further,
whether the Court (Chief Judicial Magistrate, Datia) has jurisdiction to
entertain the complainant.

   17. Regarding the question of fact and exercising of inherent jurisdiction,
the Apex Court in the case of The Delhi Development Authority v. Lila D. Bhagat
held that:

     It was a question of fact in each case whether the Master Plan had
specified a particular use of a particular building and whether the person
prosecuted had incurred the penal liability under Section 29(2) for the alleged
violation of Section 14. The High Court instead of leaving that matter to be
decided by the Criminal Court unjustifiably and illegally on the facts and in
the circumstances of the cases, took upon itself the task of holding on
interpretation of and on reading the Master Plan that it had not specified any
use of building as distinguished from land. It was primarily and essentially
within the domain of the Criminal Court whether the prosecutions were pending to
arrive at its own conclusion on appreciation Of the entire evidence placed
before it.

   18. The Apex Court in the case of Kurukshetra University v. State of Haryana
observed that:

     Inherent powers do not confer an arbitrary jurisdiction on the High Court
to act according to whim or caprice. That statutory power has to be exercised
sparingly, with circumspection and in the rarest of rare cases. Thus, the High
Court in exercise of inherent powers under Section 482. Criminal Procedure Code
cannot quash a first information report more so when the police had not even
commenced the investigation and no proceeding at all in pending in any Court in
pursuance of the said FIR.

   19. In Medcl Chemicals and Pharma Pvt. Ltd. 2000 Cri LJ 1487 (supra) case,
the Apex Court also observed that: criminal proceeding cannot be quashed merely
on the grounds that civil remedy is available. In the matter of exercise of High
Court's inherent power, the only requirement is to see whether continuance of
the proceeding would be a total abuse of the process of Court. The Criminal
Procedure Code contains a detailed procedure for investigation, charge and trial
and in the event, the High Court is desirous of putting a stop to the known
procedure of law, the High Court must use a proper, circumspection and as
noticed above, very great care and caution has to be taken to quash the
complaint in exercise of its inherent jurisdiction.

   20. In the case of Paragon Associates v. Pasupati Feeds 2001 Cri LJ 3737, the
Hon'ble Orissa High Court held that:

     Quashing of criminal proceedings-Accused allegedly charged for cheating for
non-supply for machinery in breach of contract-Whether or not allegations in
complaint are otherwise correct has to be decided on the basis of evidence to be
led at the time of trial-Proceedings cannot be quashed merely because there is
civil law remedy for breach of contract.

   21. Looking to the entire facts and circumstances and the propositions as
laid down by the Apex Court in the cases referred to hereinabove and the
controversy involved between the parties, it would not be appropriate to
interfere in the impugned orders because the petitioners have an alternative
remedy available and they may contest the criminal proceedings in the trial
Court. There is an alternative remedy available and it is not a case in which
the interference by way of inherent jurisdiction is required. Therefore, in view
of the above discussions, the petition of the petitioners stands dismissed.

   22. Respondent has also filed I.A. No. 14921/07, which is an application
under Section, 215 of the Constitution of India read with Section 2(c) and
Sections 10 & 12 of the Contempt of Court Act, 1971. Office is directed to
register the application separately and list before the appropriate Bench.