MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. AND ANR. v. RAJIV DUBEY

Citation: [2008] 16 S.C.R. 1186

Court: Supreme Court of India

Bench: ARIJIT PASAYAT, MUKUNDAKAM SHARMA

Case summary

MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. AND ANR. v. RAJIV DUBEY.pdf

Judgment text

[2008] 16 S. C. R. 1186 MAHINDRA AND MAHINDRA FINANCIAL SERVICES LTD. .. AND ANR. II. RAJIV DUBEY (Criminal Appeal No. 1966 of 2008) DECEMBER 4, 2008 _. , [DR. ARIJIT PASAYAT AND DR. MUKUNDAKAM SHARMA, JJ. ] I \ Code of Cfiminal Procedure, 1973 - s. 482 - Cheques towards instalment issued to accused company against hirepurchase finance - Cheques on presentation dishonoured - Accused initiating proceedings u/s 138 of Negotiable Instruments Act - Complaint by guarantor of the ioan that presentation of chequf1 amounted to breach of trust as they were presented despite the FJntire money having been paid through demand draft as agreed between the parties - Initiation of proceedings uls 406 and 420 /PC - Quashing of the proceedings - Sought - RejeGted by High Court - On appeal, held: In the facts of the case, the offences complained are not made out - The complaint apparently shows that it was with ulterior motive and thus amounted to abuse of the process of law- Penal Code, 1860 - ss.

406 and 420. The respondent filed a complaint as the Managing Director of a Finance Company u/ss. 406, 420, 294, 506/ r 34 IPC. He alleged hat respondent availed hire-purchase finance from the appellant No. 1 - accused company in respect of a vehicle. Tough he had· given cheques for payment of instalments in favour of the appellant company, but an agreement was executed between the parties that appellant company shall not present the ;. _ cheque, and the payment shall be made through demand drafts. Despite the entire amount; having paid by demand drafts, ctppellant-company did not return the cheques and AND ANR. v. RAJIV DUBEY presented the same with the bank. Judicial Magistrate ; took cognizance of the offence punishable u/ss. 406 and 420 IPC. Petition u/s 482 Cr. P. C. by the appellant-accused was dismissed by High Court.

In appeal to this Court appellant-accused stated that 8 several tripartite loan agreements were signed and loans were disbursed to the customers directly by the appellant to which the respondent was a guarantor. As per1the agreement the respondent was required to open separate bank account and deposit all post dated instalment cheques received from the customers. It was also required to reimburse the default in payment by the customer. Appellants when presented the cheques. the same were dishonoured. Hence, proceedings u/s 13B of Negotiable Instruments Act, 1881 was initiated. Appellant contended that the complaint was as a counter blast to the proceedings u/s 138 of Negotiable Instruments Act. Allowing the appeal, the Court HELD: It is not in dispute that the proceedings under . Section 138 are pending. That being so, the question of proceeding for alleged breach of trust does not arise. The respondent does not dispute issuance of cheques.

Even a casual reading of the complaint does not show tha' the . ingredients of Section 406 IPC are in any event made 'out It is also not understandable as to how Section 294 has any application to the facts of the case much less Section 506 IPC. In addition to this, perusal of the complaint apparently shows the ulterior motive. It is clear that the proceeding initiated by the respondent clearly amounted to abuse of the process of law. The criminal proceeding is manifestly attended with ma/a 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 gru~ge. [Para 16 and 17] (1192-E, F, G; 1194-D-E] State of Haryana v. Bhajan Lal AIR 1992 SC 604, relied on. Case Law Reference: AIR 1992 SC 604 Relied on. Para 17 CRIMINAL APPElLATE JURISDICTION : Criminal Appeal No. 1966 of 2008. From the final Judgment and Order dated 20. 6.

2006 of the High Court of Orissa at Cuttack in Crl. M. C. No. 6246 of 2001. Mukul Rohtagi, Prashant Kumar, Triveni Potekar, Manoj, Vandana and Chander Shekhar Ashri for the Appellants. V. Shekhar, Manoj Aparna Sinha and Abhijat P. Medh for the Respondent. 0 The Judgment of the Court was delivered by 1 DR. ARIJIT PASAYAT, J. 1. Leave granted. 2. ChaHenge in this appeal is to the judgment of a learned Single Judge of the Orissa High Court declining to interfere with the order passed by learned SDJM, Bhubaneshwar in ICC 210 of 2000 taking cognizance of offence punishable under Sections 406 and 420 of the Indian Penal Code, 1860 (in short the 'IPC'). In the complaint it was inter-alia alleged as follows: The complainant as the Managing Director of Team Finance Company Pvt. Ltd. , Janpath Tower, Bhubaneswar had availed hire purchased finance from Mahindra & Mahindra Financial Services Limited, accused appellant No. 1 with the cons.

ent and knowledge of its Managing Director, accused appellant No. 2 in respect of a vehicle for a sum of Rs. 1,89,000,00. He had giv~n seven blank cheques drawn on Canara Bank, Main Branch Bhubaneswar in favour of accusedappellant No. 1 in the year. 1994 when the agreement had been executed between the parties with mutual understanding that lhe said cheques would not be presented for encashment1 by the accused-appellant, but then payments would be made through demand drafts regularly till the entire amount "¥as repaid. According to the complainant, in consonance with the said understanding the entire dues were repaid by him through demand drafts and after repayment he wrote a letter to accused-appellant No. I for returning the blank cheques to him. However, without doing . so, the accused appellants ...

mischievously and with ulterior motive presented the cheques in the bank, a fact he learnt after receiving communication frqm the concerned Bank, that as sufficient money was not available I in h'. s account. The cheques were presented in bank by the accusAd-appellants even though their entire amount had been repaid by the complainant. This was done with a motive to chGat 2nd harass the complainant snd makes out offences under Sections 406 and 420 IPC. The court below after recording the initial statement of the complainant under Secti9n 200 of the Code of Criminal Procedure, 1973 (in short the 'Code') perusing the materials produced before him and beihg prima facie satisfied about commission of the aforesaid offences took cognizance thereof. 3. Stand of the appellants before the High-Court was th,at the complaint was nothing but abuse of the process of the law.

It was as a counter blast to the proceedings initiated under Section 138 of the Negotiable Instruments Act, 1881 (in short the 'Act'). The High Court found that it is not a case for interference under Section 482 of the Code. ~ 4. Learned counsel for the appellants, inter-alia, submitted as follows: Pursuant to the minutes of meeting dated 23. 6. 1995 it w~s agreed to enter into a tripartite Agreement between the I ~ appellant No. 1-Company, the Respondent's company Team Finance Corporation Pvt. Ltd. and the customers availing the loan and buying the vehicle whereby appellant No. 1 agreed tb .. extend loans under hire and putshase/lease directly to ~ customers with Team Finance Co. Pvt. Ltd. being the guarantor for disbursal ofthe said loans to the customers for which the Respondent was given a margin of 3-4% to market the loan scheme.

As per clause (e) of the said minutes of the meeting and as per clause (f) the respondent had to open a separate I bank account and deposit all the post dated installment c },, cheques received from the customers ir:i the said. account which . i. - ~ was required to be remitted to the appellant Company on minimum balance basis in its Bombay account by way of Telegraphic Transfer and as per clause (g) the respondent was reqμired to send reports and statements on monthly basis to the appellant company. As per clause (h) for any customer once defaults in payment reached afigure of 3, the respondent had •' to reimburse the said defaulted installment to the appellant Company. This understanding was further reinforced as per the minutes of discussions held between the appellant and respondent on 18-07. 1996 and certain additional conditions ,,. were imposed on the respondent by the appellants whereby a limit of Rs. 20 lakhs was fixed for extending finance per month by the respondent. 5.

As such-several tripartite loan agreements were signed and loan disbursed to the customers directly by the appellants j; :with the Respondent being a guarantor and as on 25th March 2009, the total outstanding against respondent Team Finance Corporation Pvt. Ltd~ stood at Rs. 2,39;73,795/- the said amount /rbeing u~paid despite several reminders to settle the ... \ outstanding amount. 6. The appellants presented 7 cheques on 29-03-2000 Ibearing numbers and amounts as following: l Cheque No. Amount- Dated \ 7891578 1655516/- 29-03-2000 " 7891579 2526794/- 29-03-2000 '---- 7891580 1477323/- 29-03-2000 1. .. > 7891581 722419/- 29-03-2000 7891582 19631031/- 29-03-2000 7891583 1942609/- 29-03-2000 7891584 4712236/- 29-03-2000 7. The appellants presented 3 cheques on 2-08-2000 against the discharge of the remaining outstanding payments bearing the number and amounts as follows: Cheque No. Amount Dated 7891585 3515726/- 2. 8. 2000 7891586 3530903/- 2. 8. 2000 7891587 1927166/- 2. 8. 2000 8.

All these cheques were returned by the Bank to the appellants with the endorsement that the account is not valid and insufficient funds. 9. In the meanwhile, in order to pre-empt the impending proceeding under sec 138 of the Act, the respondent filed criminal complaint CC No. 21_0 of 2000 against the appellants under Sections 406, 420, 294, 506, 34 IPC before SDJM Bhubneshwar on 11-05-2000, inter-alia, claiming that the cheques issued by respondent were towards an outstanding amount of Rs. 1,89,000/- and the said payment has already been made by the Respondent by way of a Demand Draft of which no number, date or any other details are provided in the complaint. The appellants became aware of institution of such a case only later when the process was issued on 18. 04. 2001 and the same was received by the appellants. 10. On 02-08-2000 the appellants filed Case No. 753/S/ 2000 U/s 138 of the Act read with section 34 of IPC before ACMM, Esplanade, Bombay. 11.

The respondent in the meanwhile kept on representing that he will clear the payments and vide letter dated 8-11-2000 made an offer to the appellants to agree for the full and final ·. settlement of the outstanding dues for a mere sum of 25,00,000/ - against a balance of 2,39,73,795/... 12. On 18. 04. 2001, the Learned Co1. Jrt gf §G~M, Bhubaneshwar in ICC 210 of 2000 issued process again§t ~h~ appellants under Section 406/420 IPC. 13. According tO the appellants the ingredients of Section 405 are not present. In any event, the plea of the respondent filing the petition mala fide is clearly borne out. 1·4. Learned counsel for the respondent on the other hand submitted that the appellants have not'come to thj~ Court with clean hands. 15.. The appellants have introduced a fabricated letter dated 24. 6. l995.

It is their stand· that the entire amount was paid and, ther~ore, on receiving the full p~yment, the appellants ought to have returned the cheques which were held only ~s @ collateral security. 16. It is not in dispute that the proceedings under Section 138 are pending. That being so, the question of proceeding for alleged breach of trust does not arise. 17. It·is interesting to note that the respondent does not dispute issuance of cheques. Even a casual reading of the complaint does not show that the ingrepients of Section 406 IPC are in any event made out. It is also not unaer$tandable as to how Section 294 has any application to the facts of ·th~ case much less Section 506 IPC. In addition to this, perusal of the complaint apparently shows the ulterior motive. It is clear that the proceeding initiated by the respondent clearly amounted to abuse of the process of Jaw. In State of Haryana " v. Bhajan Lal (AIR 1992 SC 604), it was, inter-a/ia, observed as follows: "108.

In the backdrop of the interpretation of the various I MAHINDRA AND MAHlNDRA FINANCIAL SERVICES LTD. 1193 > relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of, cases by way of illustration wherein such power could be exercised either to prevent ~buse of the process of any court or otherwise to secure the ends of justice, though' it rnay not, be possible tg lay-down any precise, clearly defined and sufficiently channelised and inflexible , guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.

(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out case against the accused. (2) Where the alleg~tions in the first information report and other materials, if any, accompanying the FIR do not 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. (3) Where the uncontroverted allegations made in the FIR or complaint 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 cognizable offence but constitute only a noncognizable 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 ~ver reach a just conclusion that there is sufficient ground for proceeding against the accused. ,,. '~)l. . 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. ",, 18. The case at hand falls under category (7). 19. Therefore, in view of what has been stated . in Bhajan La/'s case (supra), the proceedings in ICC 210 of 2000 before learned SDJM, Bhubaneswar stand quashed. The appeal is allowed. K. K. T. Appeal allowed. I I