G. Sagar Suri & Anr. vs State Of U.P. & Ors. on 28 January, 2000

    G. Sagar Suri & Anr. vs State Of U.P. & Ors. on 28/1/2000

JUDGMENT

   D.P. Wadhwa, J.

   1. Leave granted.

   2. This appeal is directed against the judgment dated June 5, 1999 of
Allahabad High Court dismissing the application of the appellants filed under
Section 482^1 of the CrPC (for short, the 'Code'). By this application the
appellants had sought quashing of the criminal proceedings pending against them
under Section 406/402^2 of the Indian Penal Code (for short, the I.P.C.) in the
Court of Chief Judicial Magistrate, Gaziabad and arising out of Case No. 674 of
1997 of Police Station Noida, district Gautam Budh Nagar.

   3. The First Information Report (FIR No. 517 dated August 17, 1997) was filed
against

   4. During the course of investigation, statement of the complainant was again
recorded on March 25, 1998 by the Investigating Officer. Now his version was
different. He said that in the first week of June 1996 Ashwani Kumar Suri and
Mukender Singh contacted his company with the intention to cheat and play fraud.
They told him that they and Shalini Suri, Shama Suri, Charanjit Singh and M.L.
Kampani were the Directors and arranged conversation with them over the
telephone. Ashwani Suri and Mukender Singh then said that they would come later.
Complainant said they stated that they would refund the entire amount with
interest by September 13, 1996 and thereafter they kept on visiting the Finance
Company turn by turn and kept on requesting for the loan for their company M/s.
Ganga Automobile Ltd. which they said was running a good business and that their
company would earn more profit if a loan of Rs. 50,00,0007 was given to their
company. Relying on these fraudulent promises and without knowing their mala
fide intention, an amount of Rs. 50,00,000/- by means of cheque was given to
them after completing necessary formalities. For repayment of the loan, the
accused issued two cheques towards principal and interest. These cheques when
presented for payment were returned dishonoured. The Finance Company then
contacted the accused persons of the Ganga Automobiles Ltd. telephoned them and
also wrote letters asking to refund the money. The accused, however, failed to
refund the money and started "hiding" themselves and avoided any contact. Again
the accused came to the office of the Finance Company on January 2, 1997 and
wanted six months further time for them to make repayment. Complainant then said
that the money of the Finance Company had been blocked and since there were
financial constraints he was again compelled to believe the accused who gave two
chigoes dated July 2, 1997. These cheques were also returned dishonored when
presented for payment. The complainant then stated that the accused persons had
committed this fraudulent, act with common consent with the intent to cheat and
grab the money of the Finance Company. Again he confirmed the contents of the
First information Report lodged by him.

   5. Before lodging of the First Information Report for offences under Section
406/420, I.P.C. the complainant, P.K. Sengupta, had already instituted a
complaint under Section 138 ^3 of the Negotiable Instruments Act in the Court of
the Additional Chief Judicial Magistrate, Ghaziabad. He had named eight accused,
namely (1) M/s. Ganga Automobiles Ltd. (2) Ashwani Suri, Managing Director, (3)
Shalini Suri, w/o Ashwani Suri, (4) G. Sagar Suri, Director, (5) Shama Suri w/o
G. Sagar Suri, (6) Mukender Singh (7) Charanjit Singh and (8) M.L. Kampani, the
accused 4 to 8 also being shown as Directors of M/s. Ganga Automobiles Ltd. In
this complaint the case set out is that accused 2 to 8 came to the office of the
Finance Company in the month of June 1996 and wanted loan for M/s. Ganga
Automobiles Ltd. for Rs. 50,00,000/- which they promised to repay with interest.
On their representations the Finance Company gave them a loan of Rs. 50,00,000/-
by means of a cheque after the accused executed promissory note and agreement to
repay the principal amount with interest by September 13, 1996. By getting this
loan M/s. Ganga Automobiles Ltd. started earning profits after investing the
amount in its business. The accused issued two cheques for repayment of the
principal amount and the interest. Both these cheques when presented for payment
were returned dishonoured. After the return of the cheques unpaid, the Finance
Company contacted the accused by telephone and also sent letters and wanted
repayment of its money but the accused failed to pay the same and in fact
started avoiding themselves, On January 2, 1997 the accused again came to the
office of the Finance Company and said that some Mis happening had occurred with
them and six months more time might be given to them. The Finance Company was
compelled to believe their statement and after mutual consideration the accused
gave two cheques dated July 2, 1997 for the principal amount and the interest.
Again the cheques were returned dishonoured when presented for payment. The
Finance Company sent a notice to the accused on July 17, 1997 for repayment of
the amount within 15 days and in spite of that no payment was made. It was,
thus, alleged that the accused committed an offence under Section 138 of the
Negotiable Instruments Act. While describing the accused 2 to 8 as Managing
Director and Directors of M/s. Ganga Automobiles Ltd., the complainant stated
that they were "directly responsible and liable for all the activities and
affairs of the company and carry out and execute all the affairs in normal
course of business with mutual consultation and participate in each and every
work of the company". Obviously, it was necessary to state to make all the
accused 2 to 8 liable for offence under Section 138 of the Negotiable
Instruments Act. After examining the complainant, learned Additional Chief
Judicial Magistrate was of the opinion that there was prima facie case made out
against the accused persons for an offence under Section 138 of the Negotiable
Instruments Act and by his order dated August 27, 1997 ordered summoning them
all.

   6. In the Investigation of FIR No. 517 of 1997 it was found that both G.
Sagar Suri and his wife Shama Suri were not the Directors of M/s. Ganga
Automobiles Ltd. In the counter affidavit filed by L.V. Singh styling himself as
authorised signatory on her half of the second respondent P.K. Senguptai, the
complainant, it is admitted that the appellants are not the directors of Ganga
Automobiles Ltd. It is, however, stated that G. Sagar Suri is not only the
authorised signatory on behalf of Ganga Automobiles Ltd. but he is also
authorised to sign cheques on behalf of that company and further that G. Sagar
Suri is the major shareholder of the company. It was submitted that the cheques
which bounced were signed by G. Sagar Suri as authorised signatory of Ganga
Automobiles Ltd. In the counter affidavit filed by B.S. Chandel. Sub-inspector
on behalf of the first respondent it is stated that both G. Sagar Suri and his
wife Shama Suri are the parents of Ashwani Kumar Suri, Managing Director of
Ganga Automobiles Ltd. and "they have full control over the day to day affairs
of the company." As to how the later part of this statement has been made,
nothing has been said. This counter-affidavit is also silent as to why charge
sheet was filed only against 4 persons, namely, Ashwani Kumar Suri, Managing
Director, his wife Shama Suri and his parents G. Sagar Suri and Shama Suri and
why other Directors were left out and why investigation against the left out
Directors is still pending and at what stage and particularly when common role
is assigned to all of them. From this it would appear that four persons have
been roped in order to coerce on them to refund the money to the Finance
Company. Charge sheet also does not show if the investigating agency looked into
the complaint filed under Section 138 of the Negotiable Instruments Act.

   7. It was submitted by Mr. Lalit, learned Counsel for the second respondent,
that the appellants have already filed an application in the Court of Additional
Judicial Magistrate for their discharge and that this Court should not interfere
in the criminal proceedings which are at the threshold. We do not think that on
filing of any application for discharge. High Court cannot exercise its
jurisdiction under Section 482 of the Code. In this connection, reference may be
made to two decisions of this Court in Pepsi Foods Ltd. v. Special Judicial
Magistrate and Ashok Chaturvedi v. Shitul H.

   Chanchani , wherein it has been specifically held that though the Magistrate
trying a case has jurisdiction to discharge the accused at any stage of the
trial if he considers the charge to be groundless but that does not mean that
the accused cannot approach the High Court under Section 482 of the Code or
Article 227 of the Constitution to have the proceeding quashed against them when
no offence has been made out against them and still why must they undergo the
agony of a criminal trial.

   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 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.

   9. In State of Karnataka v. L. Muniswamy this Court said that in the exercise
of the wholesome power under Section 482 of the Code High Court is entitled to
quash a proceeding if it comes to the conclusion that allowing the proceeding to
continue would be an abuse of the process of the Court or that the ends of
justice require that the proceedings are to be quashed.

   10. In Kurukshetra University v. State of Haryana

   High Court in exercise of its powers under Section 482 of the Code quashed
the First Information Report when police had not even commenced investigation
into the complaint. This Court said that inherent powers do not confer an
arbitrary Jurisdiction on the High Court to act according to whim or caprice and
that statutory power has to be exercised sparingly, with circumspection and in
the rarest of rare cases. In the case First Information Report was lodged by
Warden, Kurukshetra University. Acting on that report the police registered a
case under Sections 448 and 452, I.P.C. against one Vinay Kumar, who filed a
petition in the High Court praying that FIR be quashed High Court without
issuing notice to the University quashed the FIR. Not only that High Court
directed the State of Haryana to pay a sum of Rs. 300/-by way of cost to Vinay
Kumar. High Court even made observations concerning the University's power to
enforce discipline in the Campus. This Court observed that the High Court seemed
to fail that outsiders can with impunity flout the University rule that no
outsider shall stay in a University hostel. It said that such a view is plainly
calculated to subvert discipline in a sphere where it is most needed. This Court
said that High Court ought not to have made these observations without, at
least, giving a hearing to the University. This Court set aside the judgment of
the High Court and allowed investigation to proceed.

   11. In Chandrapal Singh v. Maharaj Singh , the

   judgment started as under (Para 1):

     A frustrated landlord after having met his waterloo in the hierarchy of
Civil Courts, has further enmeshed the tenant in a frivolous criminal
prosecution which prima facie appears to be an abuse of the process of law. The
facts when stated are so telling that the further discussion may appear to be
superfluous.

   This Court said (Para 14):

     We see some force in the submission but it is equally true that chagrined
and frustrated litigants should not be permitted to give vent to their
frustration by cheaply invoking jurisdiction of the criminal Court. Complainant
herein is an Advocate. He lost in both Courts in the rent control proceedings
and has now rushed to the criminal Court. This itself speaks volumes. Add to
this the fact that another suit between the parties was pending from 1975. The
conclusion is inescapable that invoking the jurisdiction of the criminal Court
in this background is an abuse of the process of law and the High Court rather
glossed over this important fact while declining to exercise its power under
Section 482, Cr. P.C.

   12. This Court said that the Chief Judicial Magistrate, Secunderabad ought
not to have taken cognizance of the proceedings. It said it considered it to be
a fit case to invoke jurisdiction under Section 482 of the Code.

   13. In the circumstances of the case in hand conclusion is inescapable that
invoking the jurisdiction of criminal Court for allegedly having committed
offences under Sections 406/420, I.P.C. by the appellants is certainly an abuse
of the process of law. In the counter affidavit filed on behalf of the
complainant it is now admitted that none of the two appellants is a director of
Ganga Automobiles Ltd. Only in respect of the first appellant it is stated that
he is the authorised signatory of that company and that in fact he had signed
the cheques which were returned dishonoured. Apart from making the omnibus
statement that the first appellant with dishonest intentions and
misrepresentations got loan of Rs. 50,00,000/-from the complainant company for
Ganga Automobiles Ltd. there is nothing said as to what were those
misrepresentations arid how the complainant company was duped. The only part
attributed to the second appellant is that the first appellant along with
Ashwani Suri, Managing Director and Mukender Singh, Director approached the
complainant in June, 1996 arid had represented that they and Shalini Suri, Shama
Suri (Appellant No. 2), Charanjit Singh and M.L. Kampani were the Directors of
Ganga Automobiles Ltd. There is nothing stated in the counter affidavit about
the role, if any, played by the second appellant. A complaint under Section 138
of the Negotiable Instruments Act has already been filed by the complainant.
There is no allegation of any corrupt practice by any of the accused as if they
duped the Finance Company in parting with the amount of Rs. 50.00.000/-. As
normally understood business of a finance company is to invite deposits, pay
interest on that arid also to give loans and earn interest. A finance company
also advances short term loans. In that case it is essentially a commercial
transaction. After first two cheques were dishonoured two cheques were again
issued, which again were dishonoured resulting in filing of complaint under
Section 138 of the Negotiable Instruments Act. None of the respondents has been
able to explain as to why offences under Sections 406/420, I.P.C. were not added
in the complaint filed under Section 138 of the Negotiable Instruments Act and
why resort was had to filing of a separate First Information Report. Certain
motive has been attributed to the Investigating Officer but we think we need not
go into that. There is also no answer as to why investigation against three
other directors was still stated to be pending when same role is assigned to all
the accused. In the FIR it is Sukhvender Singh, who first approached the
complainant, but later it is Mukender Singh. There is no answer as to why there
are two different names. As to who are the directors of Ganga Automobiles Ltd.
could have been easily found by the complainant after going through the records
of Register of Companies and also about its status. As noted above, in the
subsequent statement by the complainant he does not assign any role to the first
appellant. The allegation that in the first instance three persons contacted the
complainant company, who told the complainant of other Directors with whom the
complainant conversed on telephone appears to be rather improbable.

   14. We agree with the submission of the appellants that the whole attempt of
the complainant is evidently to rope in all the members of the family
particularly who are the parents of the Managing Director of Ganga Automobiles
Ltd. In the instant criminal case without regard to their role or participation
in the alleged offences with a sole purpose of getting the loan due to the
Finance Company by browbeating and tyrannizing the appellants of criminal
prosecution. A criminal complaint under Section 138 of the Negotiable
Instruments Act is already pending against the appellants and other accused.
They would suffer the consequences if offence under Section 138 is proved
against them. In any case there is no occasion for the complainant to prosecute
the appellants under Sections 406/420, I.P.C. and in his doing so it is clearly
an abuse of the process of law and prosecution against the appellants for those
offences is liable to DC quashed, which we do.

   15. The appeal is allowed arid judgment of the High Court dated June 5, 1999
is set aside and prosecution of the appellants under Sections 406/420, I.P.C. in
Criminal Case No. 674/97 (now Criminal Case No. 6045/98) and pending in the
Court of Chief Judicial Magistrate, Ghaziabad is quashed.

   1. 482. Saving of inherent powers of High Court - Nothing in this Code shall
be deemed to limit or affect the inherent powers of the High Court to make such
orders as may be necessary to give effect to any order under this Code, or to
prevent abuse of the process or any Court of otherwise to secure the ends of
justice.

   2. 405. Criminal breach of trust.- Whoever being in any manner entrusted with
property, or with any dominion over property, dishonestly misappropriates of
converts to his own use that property, or dishonestly uses or disposes of that
property in violation of any direction of law prescribing the mode 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.

   406. Punishment for criminal breach of trust.- Whoever commits criminal
breach of trust shall be punished with imprisonment of either description for a
term which may extend to three years, or with fine or with both.

   415. Cheating.- Whoever, by deceiving any person, fraudulently or dishonestly
induces the person so deceived to deliver any property to any person, or to
consent that any person shall retain any property, or intentionally induces the
person so deceived to do or omit to do anything which he would not do or omit if
he were not so deceived, and which act or omission causes or is likely to cause
damage or harm to that person in body, mind, reputation or property, is said to
"cheat.

   420. Cheating and dishonestly inducing delivery of property.- Whoever cheats
and thereby dishonestly induces the person deceived to deliver any property to
any person, or to make, alter or destroy the whole or any part of a valuable
security, or anything which is signed or sealed, and which is capable of being
converted into a valuable security shall be punished with imprisonment of either
description for a term which may extend to seven years, and shall also be liable
to fine seven persons including the two appellants by Mr. P.K. Sen Gupta
(Respondent No. 2), General Manager, M/s. Phoenix International Finance Ltd.,
NOIDA (for short, the 'Finance Company). He alleged that Ashwani Suri, G. Sagar
Suri (the first appellant) and Sukhvinder Singh contacted his company on
telephone in the first week of June, 1996 with intention to cheat and commit
fraud on him. They had stated that they along with Shalini Suri, Shama Suri (the
second appellant), Charanjit Singh and M.L. Kampani were the Directors of M/s.
Ganga Automobiles Ltd. and that they would come later for a meeting personally.
They had also told that their company Ganga Automobiles Ltd. was doing good
business and that if complainant's company could give a loan of Rs. 50,00,000/-
(Rupees fifty lakh only) to M/ s. Ganga Automobiles Ltd, the loan would be
repaid with interest by September 13, 1996. The complainant then alleged that
the "above said accused persons turn by turn continued visiting the applicant's
office" for making request for grant of loan. Relying on their persuasion but
without realising their mala fide and fraudulent intentions, the Finance Company
gave Rs. 50,00,000/- by means of cheque No. 375453 dated June 19, 1996 drawn on
the Punjab & Sind Bank, New Delhi, Complainant then said "the accused persons
issued two cheques to the applicant company for repayment of above said money
bearing No. 08-4049 and 84450 both dated 13-9-1996 for rupees fifty lakhs
towards payment of principal sum and Rs. 86G25/- towards payment of interest
respectively and drawn on Corporation Bank". When these cheques were presented
for payment, these were returned dishonoured with the remarks that sufficient
funds were not available. The Finance Company again contacted the accused
persons many times on telephone as well as by writing letters and asked them to
make payment but they failed to do so and even started avoiding the complainant.
However, the accused persons again came to the office of the Finance Company on
January 2, 1997 and asked the Finance Company six months further time for the
payment of the amount as they said "a mishappening took place with them as a
result of which they are suffering financial constraint." The complainant said
he believed their wordings and the accused again issued two cheques on July 2,
1997 for Rs, 50,86,625/- towards principal and Rs. 9,40,008/- towards interest.
This time these cheques were drawn on the Grindleys Bank, Connaught Place, New
Delhi and again when presented for payment were returned dishonoured with the
endorsement "insufficient funds" Complainant thus said in his report that the
aforesaid acts of the accused persons were fraudulent and committed with the
common object to cheat the Finance Company. They did not want to refund the
money in any way. lie therefore, requested for legal action against the accused
persons. On the basis of the First information Report, the Police registered the
case against seven persons, namely, Ashwani Suri, G. Sagar Suri (the first
appellant), Surrender Singh, Shalini Suri, Shama Suri (the second appellant),
Charanjit Singh and M.L. Kampani, After the investigation, the Police submitted
charge sheet dated June 4, 1998 in the Court of the Chief Judicial Magistrate
against four persons, namely, G. Sagar Suri (the first petitioner), Shama Suri
(the second petitioner), Ashwani Suri and Shalini Suri describing all of them as
Directors of M/s. Gariga Automobiles Ltd. It was stated in the charge sheet that
investigation was still pending against Charanjit Singh, M.L. Kampani and
Mukender Singh.

   3. 138. Dishonour of cheque for insufficiency, etc. of funds in the account.-
Where any cheque drawn by a person on an account maintained by him with a banker
for payment of any amount of money to another person from out of that account
for the discharge in whole of or part, of any debt or other liability, is
returned by the bank unpaid, either because of the amount of money standing to
the credit of that account is insufficient to honour the cheque or that it
exceeds the amount arranged to be paid from that account by an agreement made
with that bank, such person shall be deemed to have committed an offence and
shall, without prejudice to any other provision of this Act, be punished with
imprisonment for a term which may extend to one year, or with fine which may
extend to twice the amount of the cheque, or with both.

   Provided that nothing contained in this section shall apply unless-

     (a) the cheque has been presented to the bank, within a period of six
months from the date on which it is drawn or within the period of its validity,
whichever is earlier;

     (b) the payee or the holder in due course of the cheque, as the case may
be, makes a demand for the payment of the said amount of money by giving a
notice, in writing, to the drawer of the cheque, within fifteen days of the
receipt of information by him from the bank regarding the return of the cheque
as unpaid; and

     (c) the drawer of such cheque fails to make the payment of the said amount
of money to the payee or, as the case may be, to the holder in due course of the
cheque, within fifteen days of the receipt of the said notice.