1. Heard learned counsel for the petitioners and the learned counsel for the State as also learned counsel for the complainant-opposite party No. 2.
2. The petitioners are aggrieved by the order dated 11.05.2007 passed by Sri R.S. Mishra, learned Judicial Magistrate, Ranchi, in Complaint Case No. 1451 of 2006, whereby prima facie offence under Section 418 of the Indian Penal Code has been found against the petitioners and summons were directed to be issued against them. The petitioners have also prayed for quashing the entire criminal proceeding against them in the said complaint case.
3. It may be stated that earlier by order dated 16.08.2010 this application was disposed of with a direction to the petitioners to appear before the Court below to face the trial. However, the said order was passed on technical ground and not on merits, which was challenged by the petitioners in the Supreme Court of India in Criminal Appeal No. 1009 of 2014, arising out of SLP (Crl.) No. 9077 of 2011. By order dated 29.04.2014 passed therein, the Hon’ble Supreme Court has set aside the order dated 16.08.2010 passed by this Court, asking this Court to decide the case on merits. This is how this application is again before us for consideration.
4. Complaint Case No. 1451 of 2006 was filed by the complainant opposite party No. 2 in the Court of the Chief Judicial Magistrate, Ranchi, against the petitioners. Petitioner No. 1 is a private limited company engaged in manufacturing animal feeds. Petitioners Nos. 2, 3 and 4 are described as the President, Managing Director and the Vice-President in the said Company, whereas petitioner No. 5 has been described as the Business Head of the Company in the complaint petition. However, this is disputed by petitioners Nos. 2 and 3, in this application and it is stated that they are only part time Directors of the Company and they are not responsible for the day to day business activities of the Company.
5. In the complaint petition it is stated that the complainant firm was engaged in poultry business having its branches at Hazaribag, Jamshedpur and Dhanbad. The accused Company was looking for distributor and they approached the complainant and offered distributorship to the complainant to work on cash and carry basis. It is alleged that the then Sales Officer of the Company namely, Mr. B. Patra, informed the complainant that though the Company did not want any cash security / bank guarantee etc., but they desired that the complainant should at least hand over three blank undated cheques to the Company as security for distributorship, which were accordingly handed over and received in the Company on 13.07.2000. Thereafter, the complainant was appointed as distributor of the Company and the business with the Company was going on smoothly and without any dispute from the either side, except that the cheques were demanded back by the complainant, but they were not returned back. It is alleged that in the month of November 2003 a wrong supply was made by the Company which proved disastrous and harmful to the users causing mortality and no growth in the chicks. Upon complaint the Company along with their doctor visited the places of the poultry farmers and they acknowledged and admitted to adjust the loss suffered by the complainant to the tune of Rs.38,00,000/- lakhs, which however, was not compensated. It is alleged that thereafter the Company started showing harsh attitude and started sending late supply and at times also less supplies. It is further alleged that in the months of February and March, 2005 the accused again sent poor and toxic consignments to the complainant, as a result of which the complainant suffered a loss to the tune of Rs.1,20,00,000/- and again the Company agreed to compensate the complainant. It is alleged in the complaint petition that by May 2005, the complainant had an admitted claim of Rs.1,58,00,000/- against the accused Company upon which they had agreed to pay back Rs.38,00,000/- in one go, and Rs.1,20,00,000/- in phased manner within a period of one year. As the Company did not compensate the complainant the complainant was compelled to stop the business with the accused after June 2005. It is further stated in the complaint petition that the complainant repeatedly requested the Company to return the three cheques, which were given as security, but the same were not returned and ultimately the complainant received a legal notice dated 21.8.2006 from the Company, informing that two cheques which were for the total sum of Rs.1,38,99,900/- were dishonored. Alleging that the accused owe the complainant, claim worth Rs.1,58,00,000/-- and just to avoid their liabilities and to cheat the complainant for hushing up the claim against them, the cheques were deposited in the Bank after filling the amount and the date 10.7.2006, the complaint was filed against the Company and its officials for the offences under Sections 420, 406, 467, 468, 469 and 120-B of the Indian Penal Code.
6. The statement of the complainant’s proprietor was recorded on solemn affirmation and the statements of three witnesses were also recorded at the enquiry stage, on the basis of which prima facie offence under Section 418 of the Indian Penal Code was found against the Company and its officials and summons were directed to be issued, by the impugned order dated 11.05.2007 passed by the Court below.
7. The order dated 29.04.2014 passed by the Apex Court in Criminal Appeal No. 1009 of 2014, also shows that the petitioner Company had filed a P.C.R. No. 18585 of 2006 in the competent Court at Bangalore, against the complainant, which was transferred by the Apex Court to the Court of the Chief Metropolitan Magistrate, Kolkata. This complaint case was filed by the Company against the present complainant O.P. No.2, for the offence under Section 138 of the N.I. Act, on account of the dishonour of those cheques. The complaint petition in P.C.R. No. 18585 of 2006 has been brought on record, which shows that it was filed on 12.10.2006, whereas the present complaint case has been filed by the complainant-opposite party No. 2 on 17.10.2006, i.e., in close proximity of filing the complaint case under Section 138 of the N.I. Act against the complainant-opposite party No. 2 at Bangalore.
8. Learned counsel for the petitioners has submitted that the impugned order passed by the Court below is absolutely illegal, in as much as, the complaint petition would clearly show that there was business transaction between the parties, and even if the entire allegations made in the complaint petition are accepted in their entirety, it is apparent that the dispute between the parties is purely of civil nature, as both the parties have predominantly the money claim against each other. Learned counsel accordingly, submitted that no offence can be said to be made out against the petitioners and the criminal proceeding against the petitioners is the sheer abuse of the process of law. It is further submitted that in any event, no offence can be said to be made out against the petitioners Nos. 2 to 5, who are the Directors and official of the Company, as the main person with whom there was dealing with the complaint, i.e., the then Sales Officer Mr. B. Patra, has not been made accused in the present case and the offence if any, can be made out only against the Company and Mr. B. Patra and not against the petitioners Nos. 2 to 5, there being no provision for vicarious liability in the Indian Penal Code. It is further submitted that the complaint has been filed by the complainant opposite party No.2, with an ulterior and malicious motive, only as a counter blast to the case filed against the complainant for the offence under Section 138 of the N.I. Act, and on this score as well the complaint is fit to be quashed.
9. In support of his contention that there being no provision of vicarious liability in the Indian Penal Code, the offence cannot be made out against the petitioners Nos. 2 to 5, learned counsel has placed reliance upon the decision of the Supreme Court in Maksud Saiyed Vs. State of Gujarat and Ors., reported in (2008) 5 SCC 668, wherein it has been held as follows:-
"13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) of Section 200 of the Code of Criminal Procedure, the Magistrate is required to apply his mind. The Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the Company. The learned Magistrate failed to pose unto himself the correct question viz. as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability." (Emphasis supplied).
10. Learned counsel for the petitioners has also placed reliance upon the decision of the Apex Court in Chandran Ratnaswami Vs. K.C. Palanisamy and Ors., Reported in (2013) 6 SCC 740, wherein where, there was a dispute arising out of a joint venture agreement between the parties regarding the transferring of immovable assets of the company, which was finally settled by the Company Law Board and the Madras High Court in appeal, but the respondent approached the Economic Offences Wing, who refused to entertain the complaint and thereafter he filed the complaint before the Judicial Magistrate, the Apex Court held that the disputes between the parties were civil in nature, which were finally adjudicated by the competent authority, i.e., the Company Law Board and the High Court in appeal, and allowing the criminal proceeding to continue would be an abuse of the process of Court and therefore, for the ends of justice such proceedings ought to be quashed (paragraphs 57, 59 & 60). In this decision, the Apex Court had taken into consideration its earlier decisions, including the one, in State of Haryana & Ors. Vs. Bhajan Lal & Ors., reported in 1992 Supp (1) SCC 335, wherein certain categories of cases have been enumerated, in which the extraordinary jurisdiction under Article 226 of the Constitution of India, or the inherent powers under Section 482 of the Cr.P.C., could be exercised for quashing the F.I.R., or the Complaint, either to prevent abuse of the process of the Court or otherwise to secure the ends of justice, which are as follows:-
'102. (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 a case against the accused.
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(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.'
11. Learned counsel has further placed reliance upon the decision of the Supreme Court in Hridaya Ranjan Pd. Verma & Ors. Vs. State of Bihar and Anr., Reported in 2000 (3) Supreme 13, wherein, while explaining the definition of 'Cheating' in Section 415 of the Indian Penal Code, it has been held as follows:-
"15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a find one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning that is, when he made the promise cannot be presumed.
16. Judged on the touchstone of the principles noted above, ------------------ the case comes within the first category of cases enumerated in State of Haryana & Ors. V. Bhajan Lal & Ors. (supra) and as such warrants interference by the Court. Reading the averments in the complaint in entirety and accepting the allegations to be true, the ingredients of intentional deception on the part of the accused right at the beginning of the negotiations for the transaction has neither been expressly stated nor indirectly suggested in the complaint. ------------------------ In such a situation continuing the criminal proceeding against the accused will be, in our considered view, an abuse of process of the court. The High Court was not right in declining to quash the complaint and the proceedings initiated on the basis of the same." (Emphasis supplied).
12. Placing reliance on these decisions learned counsel has submitted that there being predominantly civil dispute between the parties in which both the parties have monetary claim against each other, as also in view of the fact that there is no vicarious liability against the petitioners Nos. 2 to 5, as also there being no fraudulent intention at the inception of the transaction, and in view of the fact that the complaint has been filed maliciously with an ulterior motive for wreaking vengeance on the petitioners for bringing the action against the complainant for the offence under Section 138 of the N.I. Act, the impugned order passed by the Court below is absolutely illegal and it is a fit case for quashing the entire criminal proceeding against the petitioners.
13. Per contra, learned counsel for the State as also learned counsel for the complainant opposite party No.2 have submitted that there is no illegality in the impugned order, in as much as, on the basis of the allegations made in the complaint petition and the statements of the complainant recorded on solemn affirmation and of the witnesses recorded in the enquiry stage, the prima facie offence is made out against the petitioners. Learned counsel for the complainant opposite party No.2 submitted that the petitioners were having the fraudulent intention, due to which sub-standard feeds were sent to the complainant causing heavy loss to the complainant. Learned counsel has placed reliance upon the decision of the Supreme Court of India in Indian Oil Corporation v. NEPC India Ltd. & Ors., reported in (2006) 6 SCC 736, wherein also there was business transaction between the two companies, in the facts of the case it was held as follows:-
"15. Coming to the facts of this case, it is no doubt true that IOC has initiated several civil proceedings to safeguard its interests and recover the amounts due. ----------------------- These acts show that civil remedies were and are available in law and IOC has taken recourse to such remedies. But it does not follow therefrom that criminal law remedy is barred or IOC is stopped from seeking such remedy."
14. Reliance has also been placed by the learned counsel upon the decision of the Apex Court in Lee Kun Hee, President, Samsung Corporation, & Ors. Vs. State of Uttar Pradesh & Ors., reported in (2012) 3 SCC 132, wherein also in the facts of that case it was held as follows:-
"73. ----------- We are of the considered view that in offences of the nature contemplated under the summoning order there can be civil liability coupled with criminal culpability. What a party has been deprived of by an act of cheating can be claimed through a civil action. The same deprivation based on denial by way of deception, emerging from an act of cheating, would also attract criminal liability. In the course of criminal prosecution, a complainant cannot seek a reciprocal relief for the actions of the accused. As in the instant case, the monetary consideration under the bill of exchange dated 1-2-2001 cannot be claimed in the criminal proceedings for that relief the remedy would be only through a civil suit. It is therefore not possible for us to accept that since a civil claim has been raised by the complainant JCE Consultancy, based on the alleged breach of the agreement dated 1-12-2001, it can be prevented from initiating proceedings for penal consequences for the alleged offences committed by the accused under the Penal Code.
74. ------------------ The culpability (if at all) would emerge only after evidence is adduced by the rival parties before the trial court. The only conclusion that needs to be drawn at the present juncture is that even on the basis of the last submission canvassed on behalf of the appellants it is not possible to quash the summoning order at this stage. --------------------- ." (Emphasis supplied).
15. Placing reliance on these decisions it has been submitted that even if there may be civil dispute between the parties, but the criminal offence of cheating is also made out against the petitioners on the basis of the allegations against them, and the complainant opposite party No. 2 cannot be deprived of pursuing the criminal case simply on the ground that the dispute between the parties is of civil nature also. It is submitted that in the present case also, the culpability of the petitioners shall emerge after evidence is adduced in the trial.
16. After having heard learned counsels for both the sides and after going through the record, I find that in the present case admittedly there was a business truncation between the parties. The complainant was the distributor of the petitioners and the business was going on smoothly between the parties except for the allegations that in the month of November 2003, as also in the months of February and March 2005, sub-standard, poor and toxic feeds were allegedly supplied by the Company, due to which the complainant suffered the monitory loss. If that was the primary cause of action for filing the complaint against the petitioners, the same ought to have been filed either in the year 2003 or in the year 2005 itself, but no such action was brought to the Court during those periods. It was only after the complainant received the notice for the action initiated by the petitioner Company for the offence under Section 138 of the N.I. Act, and actually after the complaint was filed in the competent Court at Bangalore on 12.10.2006, the present complaint was filed by the complainant opposite party No. 2 on 17.10.2006. This action of the complainant clearly, shows that the complaint has been filed maliciously with an ulterior motive for wreaking vengeance on the petitioners for bringing the action against the complainant for the offence under Section 138 of the N.I. Act. This apart, even if the allegations made in the complaint petition are accepted in entirety, it clearly shows that the complainant is raising the claim of RS.1,58,00,000/- against the petitioners whereas the petitioners’ claim against the complainant is of Rs. 1,38,99,990/-, and there is dispute regarding these monetary claims between both the parties, which also primarily makes out the dispute of the civil nature and in the facts of this case it is apparent that predominantly for this dispute the present complaint has been filed against the petitioners. This apart, I also find force in the submission of the learned counsel for the petitioners that the offence under Sections 418 of the Indian Penal Code cannot be said to be made out against the petitioners in view of the fact that it could not be said that there was any fraudulent intention on the part of the petitioners at the very inception of the transaction, in as much as the business was going on between the parties smoothly, but the dispute arose only in the course of the business. It is well settled that to hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. Mere failure to keep up the promise subsequently, such a culpable intention right at the beginning, when the promise was made, cannot be presumed. The law is also equally well settled that there being no provision for vicarious liability in the Indian Penal Code, the petitioners Nos. 2 to 5 cannot be found guilty for any offence allegedly committed by the Company in absence of any direct allegation against them, which is not there in the entire complaint petition.
17. In my considered view the facts of this case are fully covered by the decisions of the Apex Court relied upon by the learned counsel for the petitioners. Even in Indian Oil Corporation’s case (supra), relied upon by the learned counsel for the opposite party N
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o. 2, it has been held as follows:- "13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. Such a tendency is seen in several family disputes also, leading to irretrievable breakdown of marriages/families. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged. ------------ .' 18. In view of the aforementioned discussions, I find and hold that the dispute between the parties is prima facie and predominantly of civil nature in which both the parties have monetary claim against each other. I also find there could be no fraudulent intention at the inception of the transaction, as there was smooth business transaction between the parties for several years and the dispute arose only in the course of the business. There being no provision of vicarious liability in the Indian Penal Code, the offence cannot be made out against the petitioners Nos. 2 to 5, in absence of any direct allegation against them, which is not there in the entire complaint petition. These apart, the complaint appears to have been filed maliciously with an ulterior motive for wreaking vengeance on the petitioners for bringing the action against the complainant for the offence under Section 138 of the N.I. Act. Accordingly, the continuance of the of the criminal proceeding against the petitioners is sheer abuse of the process of law as well as the process of the Court and the same cannot be allowed to continue. As such, this is a fit case for exercise of the inherent power under Section 482 of the Cr.P.C., for quashing the same. 19. Accordingly, the impugned order dated 11.05.2007 passed by Sri R.S. Mishra, learned Judicial Magistrate, Ranchi, in Complaint Case No. 1451 of 2006, as also the entire criminal proceeding against the petitioners in the said complaint case, are hereby, quashed. This application is accordingly, allowed.