M-S. SURYALAKSHMI COTTON MILLS LTD. v. M-S. RAJVIR INDUSTRIES LTD. & ORS

Citation: [2008] 1 S.C.R. 432

Court: Supreme Court of India

Bench: S.B. SINHA, H.S. BEDI

Case summary

M-S. SURYALAKSHMI COTTON MILLS LTD. v. M-S. RAJVIR INDUSTRIES LTD. & ORS.pdf

Judgment text

[2008] 1 S. C. R 432 M/S. SURYALAKSHMI COTTON MILLS LTD. +-- II. • M/S. RAJVIR INDUSTRIES LTD. & ORS. (Crl. A. No. 62 of 2008) JANUARY 9, 2008 [S. B. SINHA AND HARJIT SINGH BEDI, JJ. ] ,,_ Code of Criminal Procedure, 1973 - ss. 482 and 154 - •• Inherent powers of High Court- Scope of- FIR - Quashing of - FIR alleging commission of offence u/ss 406, 420 and 463 /PC - Quashed by High Court- Correctness of- Held: Though power possessed by High Court u/s 482 is wide, a great deal of caution is required while exercising the same - Where FIR prima facie discloses commission of cognizable offence, High Court should not interfere with investigation - On facts, FIR was quashed before commencement of investigation by Police - Prima facie case for proceeding against accused uls 406 /PC made out - Thus, investigation confined to charge uls 406 - Penal Code, 1860 - ss. 406, 420 and 463. The appellant-company had two units.

During the period 2000-2004, the Managing Director of the appellant company left duly signed blank cheques by him with respondent nos. 2 and 3, the Directors of the appellant company, for business purposes. Thereafter, under the scheme of arrangement, the units were demerged, transferred and vested in respondent no. 1. In the year ;. - 2005, disputes arose between the parties. The Managing Director of the appellant-company requested respondent nos. 2 and 3 to return the unused blank cheques, but the same were not returned. The Director then filed a complaint with the police against respondent nos. 2 and 3 alleging conspiracy to misuse the said cheques, but the -i" complaint was not registered. Thereafter, the respondent issued a letter as also telegram stating that after demerger, M/. S. SURY'ALAKSHMl COTTON "MILLS l TD. v. 433 MIS. RAJVIR INOUSTR1ES LTD. & ORS. for the difference of share transfer amount between the ·-\. appellant company and respondent no. 1, a cheque for Rs. 6.

28 crores was drawn by the appellant in favour of the first respondent which was deposited for collection. The· appellant filed another complaint under sections 406, 420 and 463 IPC but the same was not registered. The appellant then filed ;; complaint petition before the Additional Chief Metropolitan Magistrate and on being ""( directed, the officer-in-charge of the Police Station lodged . ~ an FIR. However, the first respondent issued notices to the appellant for dishonour of cheques. Thereafter, the respondents filed an application under section 482 Cr. P. C. . ' for quashing of the said FIR. Subsequently, respondent no. 1 filed a complaint petition under sections 138 and 141 of the Negotiable Instruments Act againstthe appellant company and also its Chairman and Managing Director. The High Court quashed the FIR. Hence the present appeal. ,J Partly allowing the appeal, the Court HELD: 1. 1 The parameters of jurisdiction of the High Court under section 482 Cr. P. C.

are now well settled. Although it is of wide amplitude, a great deal of caution is also required in its exercise. What is required is application of well known legal principles involved in the matter. [Para 16) [442-B, CJ State ofHaryana vs. Bhajan Lal 1992 Supp (1) SCC 335; .... Janata Dal Vs. H. S. Chowdhary and Ors. 1992 (4) SCC 305; Rupan Deol Bajaj (Mrs. ) and Anr. vs. Kanwar Pal Singh Gill ·and Anr. 1995 (6) SCC 194; Indian Oil Corp. vs. NEPC India Ltd. and Ors. 2006 (6) SCC 736; All Cargo Movers (I) Pvt. Ltd. and Ors. v. Dhanesh Badarmal Jain and Anr. 2007 (12) SCALE 391 - relied on. -~ 1. 2 Ordinarily, a defence of an accused although appears to be pla~sible should not be taken into consideration for exercise of the said jurisdiction. Yet again, the High Court at that stage would not ordinarily .... enter into a disputed question of fact.

It, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the purpose of finding out as to whether continuance of the criminal proceedings would amount to an abuse of the process of Court or that the complaint petition is filed for causing mere harassment to the accused. Although a large number of disputes should ordinarily be determined only by the civil courts, but criminal cases are filed only for achieving the ultimate goal namely to force the accused to pay the amount due to the complainant immediately. The Courts on the one hand should not encourage such a practice; but, on the other, cannot also travel beyond its jurisdiction to interfere with the proceeding which is otherwise genuine. The Courts 0 cannot also lose sight of the fact that in certain matters, both civil proceedings and criminal proceedings would be maintainable. [Para 18] [444-F, G; 445-A, B] 2.

1 In the instant case, the High Court went into various facts including the backdrop of dispute between the parties. It proceeded on the basis that in view of the demerger scheme, the conduct of the appellant in keeping mum for a long time for getting the unused blank cheques returned is tell tale. It entered into the question as to whether the complaint petition was filed only with a view to pre-empt the respondents to take recourse to the remedies available to them to initiate a criminal proceeding under section 138 of the Negotiable Instruments Act or the complaint petition in effect and substance should be permitted to be raised only by way of defence. Maintainability of a criminal proceeding like the instant one should not be determined only upon raising a presumption in terms of section 139 of the Negotiable lnstr. uments Act, it being a rebuttable ·one, [Para 19] [445-B, C, b, E] . MIS. SURYALAKSHMI COTTON MILLS LTD. v. 435 M/S. RAJVIR INDUSTRIES LTD. & ORS. 2.

2 The High Court should have further taken into consideration the fact that in the event, the defence of the appellant is accepted in the criminal case, it would have no remedy to prosecute the respondents again. It must also be borne in mind that commercial expediencies may lead a person to issue blank cheques. The course of action in the aforementioned situation, which could be taken recourse to was to make an attempt to find out as to whether the complaint petition even if given face value and taken to be correct in its entirety constitutes an offence under section 420, 406, 463 IPC. [Para 20] [445-E, F, G; 446-A] 3. 1 A bare perusal of section 415 read with section 420 IPC would clearly lead to the conclusion that fraudulent or dishonest inducement on the part of the accused must be at the inception and not at a subsequent o stage.

In the instant case, blank cheques were handed ~ over to the accused during the period 2000-2004 for use thereof for business· purposes but the dispute between the parties admittedly arose much thereafter i. e. in 2005. Thereofore, no case for proceeding against the respondent under Section 420 IPC is made out. [Paras 21 and 22] [446-D, E; 447-C] B. Suresh Yadav vs. Sharita Bee 2007 (12) SCALE 364 - referred to. 3. 2 Filling up of the blanks in a cheque by itself would not amount to forgery. Whereas in the complaint petition, allegations were made that it was respondent Nos. 2 and 3 who entered into a conspiracy to commit the said offence, in the counter affidavit, it was alleged that the employees of the respondent company did so. Although, section 1208 of the Code has been added, there does not exist any averment that respondent Nos. 2 and 3 ·have entered into any conspiracy with their employees.

Thus, no case for proceeding with the offence of forgery against the respondents has been made out. [Para 23] [447-D,E,F] 436 SUF'REME COURT REPORTS (2008] 1 S. C. R - - 14. Mr. Rakesh Dwivedi, learned senior counsel appearing on behalf of the appellant would submit that the High Court committed a manifest error in quashing the First Information Report at such an early stage and acted in total disregard of the parameters of its jurisdiction under Section 482 of the Code of Criminal Procedure. Taking us through various documents including the notices served by the parties against each other and the Scheme of Demerger, it was urged that the purpose for which the cheques are said to have been issued being not supported by any document or the deed of demerger, it was pre-mature on the part of the High Court to quash the First _. Information Report.

It was contended that it is not the law that for the purpose of constitution of an offence under Section 420 of the Indian Penal Code, subsequent conduct for the purpose of ascertaining intention of the accused in regard to making of a false representation to the complainant cannot be taken into consideration, more particularly in a case, where blank-cheques have been issued on good faith and on a representation made by the accused. After the Scheme of Demerger was framed in March, 2001, it was the duty of the respondent to return the ~ • cheques which were 'properties', within the meaning of the provisions of Section 405 of the Indian Penal Code, and then, it was contended, a case of criminal breach of trust could be made out. Embezzlement and/or conversion thereof, for the purposes other than for which the same had been entrusted, would also ~go to show that the respondents have committed a criminal breach of trust. The theory that the accused must have had a bad intention M/S.

RAJVIR IND. LTD. &ORS. [S. B. SINHA, J] .. -}· at the time of the very inception of the contract would apply only to contractual liabilities and not where some valuable documents are entrusted. In any event, the said principle will have no application in relation to offences made under Section 406 and 463 of the Indian Penal Code. 15. Mr. C. A. Sundaram, learned senior counsel appearing on behalf of the respondent, on the other hand, submitted; -'( (i) The question as to whether the First Information ~ Report in the facts and circumstances of this case should be treated to be an abuse of process of Court or not should be determined having regard to public policy involved namely as to whether a defaulter who has failed to make lawful payment of an amount and thus liable to be prosecuted in respect whereof the cheque had been issued by it can pre-emt filing of complaint petition which would be his defence in the case filed against him under Section 138 of the Negotiable Instruments Act.

(ii) Prosecution under Section 420 of the Indian Penal Code would lie only in the event, an allegation is made in regard to the existence of an intention on the part of the accused from the very inception of the contract and not thereafter. (iii) In the counter affidavit filed before the High Court, it has been alleged that the employees of the ~ respondent No. 1 Company had filled up the blank cheque which is contradictory to and inconsistent with the story made out in the complaint petition that it was respondent Nos. 2 and 3 who did so and, therefore, no charge can be framed for commission of forgery.

~~ (iv) Keeping in view the fact that the cheques were purported to be issued in the years 2000 to 2004 when allegedly the parties were maintaining excellent relationship and the dispute between them having i· • been arisen only in September, 2004, it is wholly improbable that the memorandum of understanding would not contain a clause in regard to handing over of the blank cheques and/or no demand shall be niade to return the same. 16. The parameters of jurisdiction of the High Court in ). exercising its jurisdiction under Section 482 of the Code of Criminal Procedure is now well settled. Although it is of wide " amplitude, a great deal of caution is also required in its exercise. What is required is application of well known legal principles involved in the matter. 17.

It is neither feasible nor practicable to lay down exhaustively as to on what ground the jurisdiction of the High Court under Section 482 of the Code of Criminal Procedure should be exercised, but some attempts have been made in that behalf in some of the decisions of this Court as for example State of Haryana Vs. Bhajan Lal [1992 Supp (1) SCC 335], Jw. Janata Dal Vs. H. S. Chowdhary and Others [(1992) 4 SCC 305], Rupan Deo/ Bajaj (Mrs. ) and Another Vs. Kanwar Pal Singh Gill and Another [(19~5) 6 SCC 194], Indian Oil Corp. Vs. NEPC India Ltd. and Others [(2006) 6 SCC 736]. In Bhajan Lal (supra), this Court held; "(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face tvalue and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.

(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not "i"'"disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate Within the purview of Section 155(2) of the Code. M/S. RAJVIR IND. LTD. & ORS. [S. 8. SINHA, J] (3) Where the uncontroverted allegations made in the FIR orcomplaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where, the allegations in the FIR do not constitute a 8 cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

" We may also place on record that criminal proceedings should not be encouraged when it is found to be mala fide or otherwise abuse of the process of court. In All Cargo Movers (/) Pvt. Ltd. & Ors. v. Dhanesh Badarmal Jain & Anr. [2007 (12) SCALE 391), it was opined : "We are of the opinion that the allegations made in the complaint petition, even if given face value and taken to -t-·~ be correct in its entirety, do not disclose an offence. For the said purpose, This Court may not only take into consideration the admitted facts but it is also permissible to look into the pleadings of the plaintiff-respondent No. 1 in the suit. No allegation whatsoever was made agains\ the appellants herein in the notice. What was contended was negligence and/or breach of contract on the part of the carriers and their agent. Breach of contract simplicitor ;. does not constitute an offence. For the said purpose, allegations in the complaint petition must disclose the necessary ingredients therefor.

Where a civil suit is pending and the complaint petition has been filed one year after filing of the civil suit, we may for the purpose of finding out as to whether the said allegations are prima facie cannot notice the correspondences exchanged by the parties and other admitted documents. It is one thing to say that the Court at this juncture would not consider the defence of the accused but it is another thing to say that for exercising the inherent jurisdiction of this Court, it is impermissible also to look to the admitted documents. Criminal proceedings should not be encouraged, when it is found to be mala fide or otherwise an abuse of the process of the Court. Superior Courts while exercising this power should also strive to serve the ends of justice. " 18. Ordinarily, a defence of an accused although appears to be plausible should not be taken into consideration for exercise of the said jurisdiction.

Yet again, the High Court at tthat stage would not ordinarily enter into a disputed question of fact. It, however, does not mean that documents of unimpeachable character should not be taken into consideration at any cost for the purpose of finding out as to whether continuance of the criminal proceedings· would amount to an .. -abuse of the process of Court or that the complaint petition is filed for causing mere harassment to the accused. While we are not oblivious of the fact that although a large number of disputes should ordinarily be determined only by the civil courts, M/S. RAJVIR IND. LTD. & ORS. [S. B. SINHA, J] .. -~but criminal cases are filed only for achieving the ultimate goal namely to force the. accused to pay the amount due to the complainant immediately. The Courts on the one hand should not encourage such a practice; but, on the other, cannot al~o travel beyond itsjurisdiction to interfere with the proceeding which is otherwise genuine.

The Courts cannot also lose sight of the . B fact that in certain matters, both civil proceedings and criminal ~ proceedings would be maintainable. - 19. The High Court, however, in this case went into various facts including the backdrop of dispute between the parties. It \. proceeded on the basis that in view of the demerger scheme, the conduct of the appellant in keeping mum for a long time for "i" getting the unused blank cheques returned is tell tale. It entered into the question as to whether the complaint petition was filed only with a view to pre-empt the respondents herein to take recourse to the remedies available to them to initiate a criminal proceeding under Section 138 of the Negotiable Instruments Act or the complaint petition in effect and substance should be permitted to be raised only by way of defence.

What has failed to attract the attention of the High Court was that maintainability of a criminal proceeding like the present one should not be determined only upon raising a presumption in terms of Section 139 of the Negotiable Instruments Act, it being a rebuttable one. 20. The High Court, in our opinion, should have further taken into consideration the fact that in the event, the defence of the appellant is accepted in the criminal case, it will have no -f remedy to prosecute the respondents again. To contend that the acquittal of the appellant would have been the springboard for filing a complaint will not be correct. Nobody knows when the criminal case would come to an end. In a given situation, even it may become barred by limitation. It must also be borne -1 in mind that commercial expediencies may lead a person to issue blank cheques.

The course of action in the aforementioned situation, in our opinion, which could be taken recourse to was to make an attempt to find out as to whether the complaint petition even if given face value and taken to be correct in its entirety ~ ·l- . • constitutes an offence under Section 420, 406, 463 of the Indian Penal Code or not. 21. Ingredients of cheating are; (i) deception of a person either by making a false or misleading representation or by other action or omission; and (ii) fraudulent or dishonest inducement of that person to either deliver any property to any person or to · consent to the retention thereof by any person or to intentionally induce that person to do or omit to do anything which he would not do or omit if he were not t 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.

A bare perusal of Section 415 read with Section 420 of the Indian Penal Code would clearly lead to the conclusion that fraudulent or dishonest inducement on the part of the accused must be at the inception and not at a subsequent stage. 22. For the said purpose, we may only notice that blank cheques were handed over to the accused during the period 2000-2004 for use thereof for business purposes but the dispute between the parties admittedly arose much thereafter i. e. in 2005. In B. Suresh Yadav Vs. Sharita Bee [2007 (12) SCALE 364], it was held; "13. For the purpose of establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. In a case of this nature, it is .... -permissible in law to consider the stand taken by a party in a pending civil litigation.

We do not, however, mean to lay down a law that the liability of a person cannot be both civil and criminal at the same time. But when a stand has MIS. RAJVIR IND. LTD. & ORS. (S. 8. SINHA, J] • --1- been taken in a complaint petition which is contrary to or inconsistent with the stand taken by him in a civil suit, it • assumes significance. Had the fact as purported to have been represented before us that the appellant herein got the said two rooms demolished and concealed the said fact at the time of execution of the deed of sale, the matter might tiave been different. As the deed of sale was executed on 30. 9. 2005 and the purported demolition took ~ .. place on 29. 9. 2005, it was expected that the complainant/ first respondent would come out with her real grievance in the written statement filed by her in the aforementioned suit. She, for reasons best known to her, did not choose to do so.

" No cas~ for proceeding against the re~pondent under Section 420 of the Indian Penal Code is therefore, made out. 23. Filling up of the blanks in a cheque by itself would not amount to forgery. Whereas in the complaint petition, allegations ~ have been made that it was respondent Nos. 2 and 3 who had entered into a conspiracy to commit the said offence as indicated hereinbefore, in the counter . affidavit, it has been alleged that the employees of the Respondent Company did so. Although, Section 1208 of the Code has been added, there does not exist any averment that the respondent Nos. 2 and 3 have entered into any conspiracy with their employees. No case for proceeding with the offence of forgery against the + respondents has, thus, also been made out. 24. However, a case for proceeding against the respondents under Section 406 has, in our opinion, been made out. A cheque being a propf3rty, the same was entrusted to the respondents.

If the said property has been misappropriated or --t has been used for a purpose for which the same had not been handed over, acase under Section 406 may be found to have • been made out. It may be true that even in a proceeding under Section 138 of the Negotiable lnstrJ. Jments Act, the appellant +. • could raise a defence that the cheques were not meant to be used towards discharge of a lawful liability or a debt, but the If>. same by itself in our opinion would not mean that in an appropriate case, a complaint petition cannot be allowed to be filed. We cannot also lose sight of the fact that the respondents were keeping watch over the matter. As soon as a first ~ information report was lodged, a notice was immediately sent. ...... quashing application was filed within afew days of the lodging of the first information report. The investigation was not allowed to take place at all.

Whereas it would have been the duty of the Court to uphold and/or to protect the personal liberty of an accused in a case; but where the first information report prima facie discloses commission of a cognizable offence, the High Court, ordinarily, shall not have interfered with investigation thereof by the statutory authority. We, therefore, allow the appeal in part. _..... 25. The investigation by the Officer-in-Charge of Mahankali Police Station may now be confined to the charge under Section 406 of the Indian Penal Code. 26. We hope and trust that the investigation shall be completed and a final report shall be filed before the appropriate court at an early date. In the event, any chargesheet is filed and the cognizance of the offence is taken, both the cases should be tried by the same Court, one after the other, and judgment in both the cases must be delivered at the same time. t 27.

This appeal is allowed to the aforementioned extent and with the aforementioned observations and directions. N. J. Appeal partly allowed. ,.