1. The criminal revision arises out of the order dated 2nd September, 2003, passed by the learned Metropolitan Magistrate, 8th Court, Calcutta whereby the learned Magistrate had dismissed the complaint under Section 203 of the Code of Criminal Procedure in connection with Case No. 4581 of 2003 under Section 406/420/120B of the Indian Penal Code.
2. The revisional applicant, namely ICICI Bank Ltd. was the patitioner-complainant and it alleged commission of an offence by the opposite parties under Section 406/420/120B IPC.
3. Accused No. 1 was the company, namely Maikaal Fibres Ltd. and accused No. 4 namely, Migrenda Jalan. Accused No. 3 is another company namely, Dinjoyee Tea Estate Pvt. Ltd. and accused No. 2 Mahadeo Jalan was the Managing Director of accused No. 3 that is Dinjoyee Tea Estate Pvt. Ltd.
4. The sum and substance of the allegations made out in the complaint is this:
The accused No. 2 Mahadeo Jalan, was the Managing Director and/or the livewiare of accused No. 3 that is the Dinjoyee Tea Estate Pvt. Ltd. and he was in complete control of the day-to-day business and/or affairs of the accused No. 3. Accused No. 4 that is Mrigendra Jalan being the Managing Director of accused No. 1 that is Maikaal Fibres Ltd. was in complete control of the day-to-day business and/or affairs of the accused No. 1 that is Maikaal Fibres Ltd.
5. Now, these accused persons had approached the petitioner-Bank (ICICI Bank) for providing Corporate Rupee Loan facility for the purpose margin money for working capital and normal capital expenditure for not exceeding Rs. 50 millions. A Corporate Rupee Loan agreement was entered into on 29th September, 2000 between the accused No. 1 and the ICICI Bank Ltd. The said money of 50 millions (5 crores) was advanced by the ICICI Bank as a result of false representation made by the accused persons. Necessary documents including a deed of guarantee whereby Dinjoyee Tea Estate Pvt. Ltd., that is accused No. 3, guaranteed repayment, were executed. The terms of repayment was mentioned in the agreement between the parties. When repayment became due the accused opposite party No. 3, Maikaal Fibres Pvt. Ltd., its Managing Director refused to make any payment. In terms of the agreement of the said guarantee the complainant was free to proceed against the guarantor and as such the complainant made a demand for payment from the guarantor that is the accused No. 3, Dinjoyee Tea Estate and its Managing Director. But on receipt of a notice of demand the Managing Director/accused denied that he ever executed such a guarantee. The accused persons had entered into a criminal conspiracy and thereby cheated the complainant of the entire sum of money obtained as advance from the Bank upon false inducement and representation. The said illegal and wrongful acts had been committed by the accused persons deliberately to prevent the petitioner to realise its legal dues. Therefore, it was alleged that the accused persons were guilty of offences punishable under Section 406 read with Sections 420, 120B of the Indian Penal Code. And so, prayer was made before the learned Court to direct issuance of process against the accused so as to frame charge and for the accused to stand trial in due process of law.
6. The said complaint was filed by the ICICI Bank Ltd. before the learned Chief Metropolitan Magistrate, Calcutta, and the complaint was registered as complain case No. 4581 of 2003. The learned Chief Matropolitan Magistrate, Calcutta, thereafter took cognizance of the offence alleged in the said complaint and transferred the case to the learned 8th Metropolitan Magistrate, Calcutta, for enquiry and disposal.
7. The learned 8th Metropolitan Magistrate, Calcutta, thereafter examined two witnesses adduced by the petitioner that is the ICICI Bank Ltd. in its favour. Thereafter, the learned Magistrate was pleased by his impugned order dated 2.9.2003 to dismiss the complaint filed by ICICI Bank on the grounds that the, dispute between the parties was civil in nature and the learned Magistrate did not find any element of the offences under Section 406/420/ 120B of the IPC.
8. Being aggrieved by the said order dated 2.9.2003 passed by the Metropolitan Magistrate, Calcutta, the ICICI Bank Ltd. filed the instant revisional application before this Court under Section 406 read with Section 482 of the Code of Criminal Procedure.
9. Detailed submissions were made by learned senior Advocates for both the parties.
10. Let me first summarise the arguments placed by the learned senior Advocate appearing on behalf of opposite parties numbers 1 and 4, Sri Sekhar Basu.
11. The opposite party No. 1 that the company is a juristic person and cannot be charged with an offence wherein imprisonment is a mandatory form of punishment as held by the Apex Court in the case of Assistant Commissioner of Income Tax v. Velliappa Textiles Ltd. . It is, therefore, submitted that the opposite party No. 1, by no stretch of imagination can be prosecuted for the offence under Section 420 of the Indian Penal Code inasmuch as the said offence provides for imprisonment as a mandatory from of punishment.
12. With regard to the offence under Section 406 of the Indian Penal Code, it is submitted that the instant case relates to a loan transaction where the ownership of the money loaned shifts from the hand of the creditor to the debtor. There is no element of entrustment in a loan transaction inasmuch as the creditor loses his right of ownership in the loaned amount and the same stands transferred in the hand of the debtor. However, to disclose the ingredients of the offence of criminal breach of trust, there must be a case of entrustment where the ownership remains with the entrustor but the property is transferred into the hands of the entrustee. There is no such transaction in the instant case. In the absence of any case of entrustment of money being made out in the uncontroverted allegations of the petition of complaint, the essential ingredients of Section 406 of the IPC is not made out. In this regard, reference may be made to the case State v. Jaswant Lal Nathalal.
13. It is submitted that it is a settled law that the distinction between breach of an agreement and criminal offence of cheating depends as to whether a dishonest or fraudulent intention existed in the mind of the accused at the time when the representation was made and/or the agreement was executed resulting in delivery of property.
14. In the instant case, no such case of initial deception or dishonesty has been made out. It is settled law that mere failure to keep up a promise is not per se cheating, State of Kerala v. A. Pareed Pillai . In fact, in the petition of complaint or in the initial deposition there is nothing to show or prima facie establish that from the inception of the transaction the accused, the opposite party Nos. 1 and 4 have dishonest intention not to pay the money to the complainant bank. In this regard reference can also be made to the decision of the Apex Court in the case of Hari Prasad Chamaria v. Bishnu Kumar Surekha reported in 1974 Cr. LJ 352.
15. It is nobody's case that the execution of the agreement and parting with money was on the basis of the misrepresentation made by the accused persons. In this regard, reference may be made to the decision of the Apex Court in the case of G. Sagar Suri v. State of U.P. reported in J.T. 2000 Vol. 1 page 126. In similar manner it is normally understood that the complainant bank would advance loan deposits to its customers and/or callers and there cannot, even prima facie, be any allegation of dishonesty of mala fide in making such advance.
16. It is further submitted that the Supreme 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. Reference has been made to a judgment of the Supreme Court in G. Sagar Suri and Anr. v. State of U.P. . In view of such finding of the Apex Court it is submitted that to set aside the order of dismissal of the complaint and direct further enquiry would only be a resurrection of a lame prosecution which is an abuse of the process of Court. Documents have been submitted on behalf of opposite party Nos. 1 and 4 to show that substantial assets have been mortgaged to the complainant bank as security to the aforesaid loan. The assessment of the value of such assets far exceeds the liability of the opposite party Nos. 1 and 4 towards the complainant bank. In the backdrop of such fact, it cannot be stated that the opposite party Nos. 1 and 4 acted dishonestly in obtaining the said loan. The complainant bank was otherwise secured by substantial collateral securities and has the right to proceed against the opposite party No. 1 with regard thereto. However, for reasons best known to itself, the complainant bank has chosen not to do so and has so ought to harass and humiliate the opposite parties by instituting the impugned criminal case as a short-cut method/substitute for civil litigation.
17. It is further submitted that there is no intention to cause wrongful loss to the complainant bank and wrongful gain to the accused parties and the essential ingredients of Section 420 IPC are not satisfied. Reference is made to a judgment of the Apex Court in Dr. Sharma's Nurshing Home v. Delhi Admn. and Ors. reported in 1999 SCC (Cri) 91. Another case being Hriday Ranjan Pd. Verma and Ors. v. State of Bihar and Anr. reported in 2000 C Cr.LR (SC) 293 has been referred to. Referring to yet another judgment of the Supreme Court in the case of Alpic Finance Ltd. v. V.P. Sadasivan and Anr. , it has been submitted that mere entering into a loan agreement and subsequently failing to comply with its terms would not per se make out a case of cheating. In this connection reference has also been made a couple of judgments of the Apex Court, namely, U. Khar and Anr. v. State of Jharkhand and Anr. and in the case of Ajay Mitra v. State of M.P. and Ors. reported in JT 2003 (1) SC 418.
18. It has been further submitted that the deposition of PW 1 on solemn affirmation also does not improve the case of the complainant bank since none of the ingredients of the aforesaid offences are divulged in the deposition.
19. It is further submitted that no case for interference with the order of dismissal of the complaint has been made out inasmuch as the essential ingredients of the offence of cheating or criminal breach of trust has not been disclosed in the instant case. In the absence of the essential ingredients of the substantive offences, it is submitted that there is no manner of application of the offence of criminal conspiracy in the instant case.
20. The learned Magistrate was, therefore, wholly justified in dismissing the petition of complaint as the same merely discloses a case of breach of contract and not the offences of cheating or criminal breach of trust.
21. The learned senior Advocate for the opposite party Nos. 1 and 4, Mr. Sekhar Basu, then has concluded his submissions by referring to a judgment cited on behalf of the petitioner in the case Grindlays Bank Limited and Ors. v. Directorate of Enforcement and Ors. . It is submitted that in the said judgment of three-Judges Bench of the Apex Court have observed that there has been prima facie agreed with the ratio laid down in Velliappa Textile and has been referred the matter for reconsideration to a larger Bench. In view of such decision it has been submitted that the ratio in Velliappa Textile is no longer good law. It is settled law that a co-ordinate Bench of the Apex Court cannot overrule the law declared by another co-ordinate Bench and the same must be referred to a larger Bench for decision. This is exactly what has been done by the Apex Court in ANZ Grindlays Bank case. In doing so the Apex Court cannot be said to have overruled to its earlier decision till the issue is decided by the Constitution Bench to which it has been referred. In this regard it will be apposite to refer to the decision of the Apex Court in the case of Md. Anis v. Union of India reported in 1994 Supplementary (1) SCC 145, wherein the Apex Court has observed as follows:
"In our view, merely because the issue is referred to a larger Bench everything does not grind to a halt" (para 6). In view of such observation of the Apex Court it is submitted that ratio in Velliappa Textile is good law and is binding in our Courts till the same is set aside by a larger Bench of the Apex Court.
22. In view of the fact, the issue is presently res integra and is pending consideration for the Apex Court and it is submitted that the instant case be kept in abeyance till the decision is arrived at by the Apex Court in the matter.
23. The senior Advocate for the opposite party Nos. 2 and 3 Mr. Milon Mukherjee has also taken pains to make a detail submission and here is a summary of his submissions as under.
24. At the outset, it is submitted that for issuance of process against the accused persons, it is necessary that the petition of complaint as also the documents relied upon by the complainant and the evidence of the witnesses adduced by the complainant recorded under solemn affirmation must substantiate, prima facie, the ingredients of the offences as alleged against the accused persons. The bank had alleged that a corporate guarantee w as provided by the opposite party No. 3, M/s Dinjoyee Tea Estate Pvt. Ltd. in respect of the loan of Rs. 50 millions provided by the Bank to the opposite party No. 1. It is also alleged that the opposite party No. 2 had thereafter denied that it had granted such guarantee in favour of the bank and as such it is the allegation of the Bank that by such method they had been cheated by the opposite party No. 3 and its Managing Director, the opposite party No. 2.
25. The Bank in order to prove its case relied upon the copy of the said corporate guarantee allegedly provided by the opposite party No. 3. From a perusal of the said corporate guarantee it becomes clear that the said corporate guarantee was executed on behalf of the opposite party No. 3 by the opposite party No. 4 namely Mrigendra Jalan. The said corporate guarantee also refers to a resolution of the Board of Directors of Dinjoyee Tea Estate Pvt. Ltd. passed on 31.7.2000 thereby authorizing the opposite party No. 4 provide such corporate guarantee on behalf of the opposite party No. 3 for the loan taken by the opposite party No. 1 from ICICI Bank Ltd. However, the Bank has failed to produce such resolution dated 31.7.2000 passed by the Board of Directors of the opposite party No. 3.
26. The complaint also narrates the different steps of transaction which were undertaken in course of such grant of loan of Rs. 50 millions in favour of the opposite party No. 1 company. The relevant portion would clearly go to show the absence of participation on the part of the accused No. 2 in the said transactions.
27. It is further submitted that the annexures on which ICICI Bank intends relying upon gives a clear picture that Mahadeo Jalan had neither signed the corporate guarantee nor had anything to do with Maikaal Fibres which had taken loan of Rs. 50 millions (Annexure 'B' of the revisional application at page 34). Moreover, it has to be brought to the notice of the Court that in paragraph 3 of the revisional application the petitioner Bank has stated that the opposite party No. 2 was the live wire of opposite party No. 3 and in spite of the documents proving otherwise have sought to state in paragraph 11 of the revisional application that the said corporate guarantee on behalf of the opposite party No. 3 was executed by the opposite party No. 2 even though the documents annexed to the revisional application being Annexure 'B' show that in respect of the opposite party No. 3, the opposite party No. 4 signed the corporate guarantee.
28. In the complaint also they have agreed that they accepted the corporate guarantee being signed by the opposite party No. 4 on behalf of the opposite party No. 3 even though they have specifically stated that the opposite party No. 2 is the live wire of the opposite party No. 3.
29. The Bank has also alleged commission of offence under Section 406 read with Section 420 of the Indian Penal Code but the charge under Section 406 of the Indian Penal Code cannot exist with the charge under Section 420 of the IPC.
30. It is submitted that criminal breach of trust presupposes handing over of valuable property by the aggrieved to the accused bereft of any inducement and in a voluntary manner. However, in case of offences of cheating, delivery of valuable property is obtained by the accused through false and fraudulent representation. Thus a single fact cannot give rise to both the offences of criminal breach of trust or cheating.
31. In the event it is assumed that the offence of criminal breach of trust has been committed, it is apparent that the bank had not been induced by grant of corporate guarantee on behalf of the opposite party No. 3 and had handed over the said sum of money to the opposite party No. 1 voluntarily without being affected by such grant of corporate guarantee. In such circumstances no offence can be said to have been committed by the opposite party Nos. 2 and 3.
32. However, in the event the charge under Section 420 of the IPC is said to have been committed, it becomes clear that the opposite party No. 2 had not taken part in any of the transactions relating to such grant of loan by the Bank to the opposite party No. 1 company. The same is apparent from the fact that the corporate guarantee had been executed on behalf of the opposite party No. 3 company by the opposite party No. 4. In an offence, as provided under Section 420 of the IPC, the active participation as also presence of "mens rea" on the part of the accused would be an essential ingredient. It becomes clear that the opposite party No. 2 had not taken any part in the transaction with the Bank. In such circumstances no charge can be levelled against the opposite party No. 2 in the absence of any material on record to justify such charge against the opposite party No. 2.
33. Moreover, it must be appreciated that the opposite party No. 3 had provided sufficient security in favour of the Bank for grant of the loan by the Bank to the opposite party No. 1. The corporate guarantee was in the form of an additional security. The Bank, however, instead of attempting to satisfy its dues from the properties and securities provided by the opposite party No. 3 initiated the instant proceedings. Thus criminal intent cannot be ascribed to any of the opposite parties in view of the failure on the part of the Bank to satisfy its dues through the securities provided by the opposite party No. 1 company. The security provided by the opposite party No. 3 was much higher than the value of the loan amount which further goes to disprove the presence of criminal intent on the part of the opposite parties.
34. The accused No. 3 is a juristic personality being a company incorporated under the Companies Act. The Hon'ble Supreme Court in its much celebrated judgment of Kalpanath Rai v. State reported in 1998 Criminal Law Journal, 369 held that in case of offences which require mens rea as its ingredient, or where the statute does not provide for prosecution of companies and its officers like the Essential Commodities Act, Prevention of Food Adulteration Act etc., proceedings against companies, which is a juristic body, would not be maintainable. In view of the said pronouncement of the Hon'ble Supreme Court, it becomes clear that the opposite party No. 3 cannot be prosecuted for commission of the offence under Section 406/420 of the Indian Penal Code, as the said offences require mens rea as one of its ingredients.
35. In such circumstances, it becomes apparent that the proceedings cannot be sustained against the opposite party No. 2 on the ground of absence of any material in the complaint as also the statements of the witnesses recorded on solemn affirmation to justify the charges against him. The opposite party No. 8 is also immune from the prosecution as the same is a company having no mine of its own and as such incapable of possessing necessary mens rea.
36. In such circumstances the impugned order is proper and the application filed by the petitioner needs to be dismissed.
37. In support of his submission the learned Advocate has referred to the following case laws:
(i) Assistant Commissioner, Assessment-II, Bangalore and Ors. v. Velliappa Textiles Limited and Anr. 2004 SCC (Cri) 1214.
(ii) Dr. Sharma's Nursing Home v. Delhi Administration and Ors. 1998 (8) SCC 745.
(iii) Hridaya Ranjan Pd. Verma and Ors. v. State of Bihar and Anr. AIR 2000 SC 2341;
(iv) G. Sagar Suri and Anr. v. State of U.P. and Ors.
(v) Anil Kumar Bose v. State of Bihar ;
(viii) Ajay Mitra v. State of Madhya Pradesh and Ors. JT 2003 (1) SC 418;
(ix) Hari Prasad Chamaria v. Bishnukumar Surekha and Ors. 1974 Cr.LJ 352.
38. Now, on behalf of the petitioner, the ICICI Bank, Sri Balai Chandra Roy, the learned Advocate General, has made the following submission.
39. In the instant revisional application validity of the order of discharge passed under Section 203 of the Code of Criminal Procedure by the learned Metropolitan Magistrate, 8th Court, Calcutta on 2nd September, 2003 has been challenged. The complainant stated inducement by false representation made by the accused by which the complainant ICICI Bank advanced Rs. 50 millions (five crores) to the accused No. 1 Maikaal Fibres Ltd. Among various false representations one that the accused made was that accused No. 3 Dinjoyee Tea Estate (P) Ltd. was offering an irrevocable, containing guarantee enforceable against the guarantor irrespective of other securities the borrower might offer. Necessary documents including the deed of guarantee whereby Dinjoyee Tea Estate guaranteed repayment were executed. The terms of repayment was mentioned in the agreement between the parties. When payment became due the accused opposite party No. 1 Maikaal Fibres (P) Ltd. and its Managing Director, the accused No. 2 Mahadeo Jalan refused to make any payment. In terms of the agreement of guarantee the complainant was free to proceed against the guarantor and as such the complainant made a demand for payment from the guarantor the accused No. 3 Dinoy Tea Estate (P) Ltd. and its Managing Director, the accused No. 4 Mrigendra Jalan. On receipt of a notice of demand, Mrigendra denied that he ever executed such a guarantee. The accused persons had entered into criminal conspiracy to cheat the complainant of the entire sum of money obtained as advance from the bank on false inducement. More important averment in the complaint are as under:
(i) All the four accused men connived and conspired to procure by-cheating margin money amounting to 50 million rupees (5 crores) from the complainant. (Paras 3, 7 & 8)
(ii) Deception was practised by falsely representing that accused No. 1 Maikaal Fibres Ltd. and its Managing Director, accused No. 2 Mahadeo Jalan would procure guarantee for repayment and give an irrevocable, continuing, unconditional guarantee from such guarantor. (3.3 at p. 48).
(iii) Such guarantee was executed by using common seal [vide Section 34 read with Section 48(2) of the Company, (paragraphs 4, 5 and 6)].
(iv) Corporate guarantee was offered by accused No. 3 Dinjoyee Tea Estate (P) Ltd. through accused No. 4 Mrigendra Jalan (7, 8), who was duly authorised by the Board of Director to execute the guarantee using the common seal.
(v) Accused persons and in particular accused No. 4 Mrigendra falsely denied that any guarantee was executed by accused No. 3 Dinjoyee Tea Estate (P) Ltd. (para 6).
(vi) The accused persons have denied the existence of the guarantee for wrongful gain. Present dues are more than 6.45 crores (paras 7 & 8).
40. These averments, it is submitted, undoubtedly disclose ingredients of cheating under Section 420 and conspiracy to cheat under Section 120B IPC.
41. It is further submitted that it also appears from the complainant that the loan or advance was made by the complainant in trust created by the representation of the accused persons. The trust was so created by representing that the advance or loan would be repaid in terms of the agreement. But when the repayment became due the accused men refused to make any payment.
42. The complainant is a body corporate and it examined a competent officer as PW-1. Another witness was also examined by the complainant as PW-2. PW/1 inter alia stated the gist of the complaint. Bank advanced the money on the representation made in the application for loan agreement on 29th September, 2000.
43. The learned Magistrate dismissed the complaint on the ground that the dispute between the parties were of a civil nature and no elements of Section 406/420/120B of the Indian Penal Code were made out.
44. From the averments in the complaint that have already been indicated, the ingredients of the offence under Sections 420, 420/120B and 406 IPC have clearly been made out.
45. It is submitted that implication of using the common seal of Dinjoyee Tea Estate (P) Ltd. and putting the signature of accused No. 4 Mrigendra Jalan duly authorised by the Board of Directors in execution thereof is conclusive proof that such guarantee was duly executed. The following submissions in this regard have been made:
(i) Under Section 34 of the Companies Act every company on incorporation must have a common seal.
(ii) Under Section 48 of the Companies Act deeds are executed by the use of common seal by any person duly authorised.
(iii) Under Section 147(i)(b) of the Companies Act common seal contains the name of the company engraved in legible character on its seal.
(iv) Section 48(2) of the Companies Act binds the company when such a seal has been affixed.
46. Hence neither Dinjoyee Tea Estate (P) Ltd. nor its Managing Director accused No. 4 could successfully deny execution of such a guarantee.
47. It is further submitted that it is significant that simultaneously on the same day namely 29th September, 2000 the loan agreement as also the corporate guarantee using the common seal of each company were issued. The representation about procuring the guarantee is at page 22 Clause 3.3. Common seal was authenticated by accused No. 4 Mrigendra Jalan and signed by him.
48. Clauses 3, 4 (page 30) 6 and 7 (page 31) are clear representation by the guarantor which the guarantor knew from the beginning were falsely made. That is why he denied execution.
49. Reliance has been placed on the decision of W.A. Mahony v. Liquidator of the East Holyform Mining Company (Ltd.) 1875 LR 869 (at page 883). The relevant pootion is quoted hereunder:
It is found by the jury that there was no such resolution, but the bankers did not know that the statement was false, and, as is found by the jury, believed it was accurate, and, according to the decision in Royal British Bank v. Turguand 9 EI. & BI. 327, were not called upon to inquire whether it was true or false. They were told by the persons who alone acted as directors, and who along had authority to pass any resolution, that it had been passed, and that they, the directors, were acting on the authority given to them by that resolution.
50. Hence, it was not for the complainant to enquire whether the guarantee executed was true or false. In the decision in the case of Country of Gloucester Bank v. Rudry Merthyer Steam and House Coal, Colliery Company 1895 (1) Ch. 629 (633) Lord Halsbury, held that "All the public documents with which an outside person would be acquainted in dealing with the company would only show this, that by some regulations of their own, what Lord Haterley described as their indoor management, they were capable if they had thought right of making any quorum they pleased; and an outside person knowing that, and not knowing the internal regulation, when he found a document sealed with the common seal of the company and attested and signed by two of the directors and the secretary, was entitled to assume that was the mode in which the company was the mode in which the company was authorised to execute an instrument of that description".
51. It is submitted that since the document of guarantee was sealed with the common seal and on the authority of the Board of Directors signed by the accused, Mrigendra Jalan, it was not for the Bank to make further enquiry as to the correctness of the representation. In fact, use of such common seal conclusively binds the company under Sub-section (2) of Section 48. Result is that there the Court shall ordinarily hold in favour of its existence and denial is false.
52. It is further submitted that it is settled law that if a prima facie case is made out at the stage of issue of process no further enquiry is necessary. Reliance may be placed on the decision of Chandra Deo v. Prakash Chandra .
53. What is meant by prima facie case came up for consideration, in the case of Martin Burn Ltd v. R.N. Banerjee . The Court held that "a prima facie case does not mean a case proved to the hilt but a case which can be said to be established if the evidence which is led in support of the same were believed, While determining whether a prima facie case had been made out the relevant consideration is whether on the evidence led it was possible to arrive at the conclusion in question and not whether that was the only conclusion which could be arrived at on that evidence". This view was approved in the case of Management of the Bangalore Woollen Cotton and Silk Co. Ltd. Appellant v. B. Dasappa, M.T. Respondent .
54. It is further argued by Sri Roy that on behalf of the opposite party it has been submitted that in view of the decision of the Supreme Court in Assistant Commissioner v. Velliappa Textiles Ltd. (Three-Judge) no prosecution is permissible of a company if the offence is punishable compulsorily with sentence of imprisonment. This no more is a correct decision. In a later Three-Judge Bench in the case of ANZ Grindlays Bank Limited v. Directorate of Enforcement the Court held that "we do not prima facie agree with the ratio laid down in Velliappa Textiles". In paragraph 5 of this judgment the Court held "that in view of the matter, upon taking recourse to the principle of purposive construction as has been held by a three-Judge Bench of this Court in Balram Kunawat v. Union of India , an attempt should be made to make Section 56 of the Act workable. It is possible to read down the provisions of Section 56 to the effect that when a company is tried for commission of an offence under the Act, a judgment for conviction may be passed against it, but having regard to the fact that if it is a juristic person, no punishment of mandatory imprisonment can be imposed". In this judgment it was also pointed out that even if the company could not be punished the real person could certainly be punished. This decision has placed reliance on are earlier judgment in M.V. Javali v. Mahajan Borewell and Co. and Ors. 1997 SCC (Cri.) 1239.
55. Moreover this is also a question to be decided on evidence.
56. It is further submitted that the only other question is how far the learned Magistrate is justified in finding that the dispute is of a civil nature and on that finding whether the learned Magistrate was justified in discharging the accused.
57. In course of submission the opposite party also supported this finding before this Hon'ble Court. It is now settled law that same set of facts may exhibit elements of criminal offence although it may certainly involve civil wrong.
58. In Lalmoni Devi v. State of Bihar and Ors. the Supreme Court held that "however, it is also settled law that facts may give rise to a civil claim and also amount to an offence. Merely because a civil claim is maintainable does not mean that the criminal complaint cannot be maintained.
59. The same view has been taken by the Supreme Court in the undermentioned cases.
60. The learned Advocate finally submits that in spite of existence of civil dispute the question is whether ingredients have been made out. The very fact that statutorily binding guarantee of Dinjoyee has been denied by accused No. 4 Mrigendra clearly makes out deception on initial misrepresentation.
61. Hence, he concludes, the order of the learned Magistrate ought to be set aside.
62. I have carefully gone through the submissions made on behalf of both parties and also the case-laws cited.
63. The limited point for determination in this criminal revision is whether by the impugned order dt. 2.9.2003, the learned Metropolitan Magistrate was justified in dismissing the complaint made by the ICICI Bank Ltd. under Section 406/420/120B of the IPC against the four accused on the grounds stated in his order.
64. Plainly, the only reasons he virtually nipped the complaint in the bud were--that the dispute between the parties were civil in nature and that he did not find any element of offence under Section 406/420/120B IPC in connection with the case.
65. Now, the learned Magistrate broadly outlined in gist the allegations of the complaint and prima facie considered the evidence of the two witnesses for the complainant. So, his finding that the dispute was of civil nature is at least backed by some reasons. But so far as his finding that he did not find any element of offence under Section 406/420/120B IPC, it was just a bald, sweeping half of a sentence which betrayed total non-application of mind because it was completely barren of reason. He did not apparently give his mind to the ingredients of the offences under those penal sections. Nor did he say why, in the face of specific allegations they did not at all fit in with ingredients of the said offences. That is one serious infirmity which hits at the bottom of the impugned order that shuts out a complaint itself at the very initial stage of the proceeding, viz the issuance of process.
66. For another thing, the finding, that the dispute is of a civil nature and therefore, the criminal case is not maintainable suffers from a wrong conception. It is settled law, as the Supreme Court has said in Lalmoni Devi v. State of Bihar , that facts may give rise to a civil claim and also amount to an offence, that merely because a civil claim is maintainable it does not mean that the criminal complaint cannot be maintainable.
67. Indeed, talking of the scope and object of enquiry under Section 202(1) Cr.P.C. a four Judges' Bench of the Supreme Court, most importantly, has this to say in Chandra Deo Singh v. Prakash Chandra Bose .
68. For determining the question whether any process is to be issued or not, what the Magistrate has to be satisfied is whether there is sufficient ground for proceeding and not whether there is sufficient ground for conviction. Whether the evidence is adequate for supporting the conviction can be determined only at the trial and not at the stage of enquiry. As stated in Sub-section (1) of Section 202 itself, the object of the enquiry is to ascertain the truth or falsehood of the complaint, but the Magistrate making the enquiry has to do this only with reference to the intrinsic quality of the statements made before him at the enquiry which would naturally mean the complaint itself, the statement on oath made by the complainant and the statements made before him by persons examined at the instance of the complainant.
69. Where the Magistrate has dismissed the complaint without giving reasons as required by Section 203 Cr.P.C. the error is of a kind which goes to the root of the matter. It is possible to say that giving of reasons is a prerequisite for making an order of dismissal of a complaint under Section 203 Cr.P.C. and absence of the reasons would make the order a nullity. Even assuming, however, that the rule laid down in (s) AIR 1956 SC 116 applies to such a case, prejudice is writ large on the fact of the order. The complainant is entitled to know why his complaint has been dismissed with a view to consider an approach to a Revisional Court. Being kept in ignorance of the reasons clearly prejudices his right to move the Revisional Court and where he takes a matter to the Revisional Court, renders his task before that Court difficult, particularly in view of the limited scope of the provisions of Sections 438 and 439, Code of Criminal Procedure.
70. Thus, in view of what has been stated above and in the light of the judgment of the Apex Court, the order of the learned Magistrate in question which virtually results in quashment of the entire criminal complaint cannot be sustained. In this connection, I might add that Court should be abundantly cautious and circumspect before drastically doing away with a criminal case at its very inception except for adequate and sound reasoning. After all, a criminal offence affects the society as a whole.
71. Now, the next point is--what as a Revisional Court, a High Court that is, we are sitting here for? Yes, to prevent the abuse of the process of Court or otherwise to secure the ends of justice are primary considerations in the matter of exercise of the inherent powers of the High Court under Section 482 of the Code of Criminal Procedure, the scope of which again is quite limited. The primary considerations under Section 482 Cr.P.C. spoken to above also must cut both ways--for the one who being aggrieved makes the complaint and for the other who is made an accused. The scale of justice must also at the end tilt one way or the other in favour of one party and against another. But then, it is the weight of materials or evidence as we call it that tilts that scale to seal the fate of the case.
72. And here precisely comes the question of the term oftly quoted--"prima facie". Ordinarily, it simply means, 'on the face of it'. Now, the settled proposition is, in the context of our instant case, the 'prima facie' materials or evidence are the determining factor to close the case no sooner than it has begun or to proceed with the case, see to the trial after evidence are adduced by both sides. I think, the normal rule of prudence and caution demands that it should be the latter course of action 'to secure the ends of justice'. Unless, of course, the complaint together with evidence of witnesses on solemn affirmation are so blatantly shorn of substance, so frivolous or fanciful that "on the face of it", the very foundation of the alleged offences is not laid out. And if it is not, it is said, there has been an 'abuse of the process of law' which the Court seeks to prevent by quashing the complaint.
73. Now, the point is, is the complaint by the ICICI Bank alleging criminal offence against the accused opposite parties under Section 406/420/120B so hollow of materials, so frivolous, so designedly drawn up just to malign the opposite parties or so as to say that it is guilty of the abuse of the process of law? The overall facts and circumstances disclosed in the complaint coupled with the initial deposition of the witnesses, in my view, must not inevitably lead to an answer to that in the affirmative. A close reading of paras 5, 6, 7, 8 and 9 is necessary and they are reproduced below:
In terms of such agreement the corporate guarantee was executed by the accused No. 3 through the accused No. 4 by using the common seal of the company whereby and wherein the said accused No. 3 agreed to be treated as a principal borrower in case of default on the part of accused No. 1 and to pay off the entire dues with all interest whatsoever. The said and/or other terms will appear from the said corporate guarantee dated 29th September, 2000 is annexed hereto and marked with the letter 'B' as part of this application.
In the said Deed of Guarantee the accused No. 3 categorically undertaken to indemnify your petitioner against all losses, damages, costs, claims and expenses whatsoever which your petitioner may suffer, pay or incur by reason of or in connection with such default on the part of the borrower including legal proceedings taken against the accused No. 1 and/or accused No. 3 for recovery of loan, interest, liquidated damages or other monies to your petitioner. The said guarantee is a continuing, irrevocable, unconditional guarantee. Inasmuch as the accused No. 1 company filed to pay off the dues of your petitioner, your petitioner duly invoked the guarantee vide its letter dated 28th June, 2003. A copy of the said letter is annexed hereto and marked with the letter 'C as part of this application.
Such notices as stated above had to be issued by your petitioner since the accused persons started taking peculiar, fraudulent mala fide stand and it stated that the accused No. 3 did not execute any guarantee whatsoever. In this connection letters exchanged between the parties are annexed hereto and collectively marked with the letter 'D'.
It is proved from the facts as stated above that the accused Nos. 2, 3 and 4 induced in Bank to disburse the loan of Rs. 50 millions by furnishing the guarantee of accused No. 3. The accused persons wilfully and deliberately and with full knowledge and executed the Guarantee with sole motive of depriving your petitioner from realising and/or recovery of its legal lawful dues which is a public money for wrongful rains and unjust enrichment knowing fully well that your petitioner deals with public money.
It appears that the accused persons especially the accused person No. 2 and accused No. 4 who are father and son and are controlling the accused Nos. 1 and 3 respectively and have connived illegal with each other and your petitioner respectfully states that the accused persons have adduced and abetted with each and entered into a criminal conspiracy and thereby cheated your petitioner causing wrongful gain to themselves and wrongful loss to your petitioner as there has been a sum of Rs. 6,45,37,658/- as on June 27, 2003 is due and payable by the accused No. 1 to your petitioner and such illegal and wrongful acts have been committed deliberated to prevent your petitioner to realise its such legal lawful dues.
Your petitioner respectfully submits that in view of the above unlawful activities committed by the accused should be taken into account as the accused persons are guilty to the charges punishable under Section 406 read with Sections 420, 120B of the Indian Penal Code.
In the facts and circumstances of the case it is humbly submitted that the learned Court should direct for issuance of process as against the accused so as to frame charge and stand the accused on trial in due process of law.
74. It would appear from the chain of allegations spelt out in the complaint together with the initial testimony of the witnesses that at least the foundation of the offences complained of is firmly laid--it is just not all frivolous and fanciful. There appears to be prima facie materials for the complainant for the satisfaction of the Court to set the wheel of criminal justice moving by issuing of the process and see to the end of the dispute by means of the trial on the basis of material evidence both parties may adduce. Conversely, to my mind, it cannot be said that, the allegations even taken on their 'face value' do not at all constitute the offence so as to nip the process in the bud. One wonders, if justice itself then becomes the casualty.
75. Indeed, the fact of the matter is, there may be more than what meets the eyes, such as, conduct of the parties and attending circumstances entwined with the transactions in question which only the material evidence at the trial can really elicit. This is not the stage for such a probe. After all, call it conspiracy, inducement, fraud, 'mens rea' or misrepresentation and so on, they are all basically the working of the inner mind which comprehensive evidence at the full trial, such as in a case like this, can really fathom.
76. As for the question whether the company can be prosecuted or not, it still remains a disputable issue awaiting final decision by the Apex Court and I believe, we may afford to leave it at that and proceed with the case to settle the dispute or claim of the complainant at the appropriate stage of the trial in the interest of both the parties.
77. In the result, the revisional application succeeds and is accordingly allowed. The impugned order of the learned Metropolitan Magistrate dated September 2, 2003, is hereby set aside and the learned Magistrate is directed to issue process to all the accused persons, proceed with the trial and dispose of the case on the merits in accordance with law as expeditiously as possible.
78. Let a copy of this order together with the L.C.R. be sent down to the learned Court below at once.
79. Urgent xerox certified copy of this order, if applied for, be given to the parties.