[Arising out of SLP(Crl.) No. 2920 of 2007]
S.B. Sinha, J.- Leave granted
Private parties herein were the
Directors of the appellant Company. They were closely related. It had
two units. One was known as Mahaboobnagar Unit and the second was a
sales depot at Tirupur. The Managing Director of the Company was Shri
L.N. Agarwal. He was stationed at Hyderabad. Allegedly, pursuant to
negotiations which took place between him on the one hand, and Shri U.K.
Agarwal and Ritesh Kumar Agarwal (Accused Nos. 2 and 3) on the other,
representations were made that as process for obtaining cheques from the
Managing Director had been taking considerable time, it would be
advisable that signed blank cheques be left in the hands of accused Nos.
2 and 3 for efficient management of Mahaboobnagar Unit and Tirupur Sales
3. Relying on or on the basis of the
said representation, signed blank cheques were handed over to them
during the period 2000 A.D. to 2004 A.D. Disputes and differences arose
between the parties in 2005 A.D.
4. A Company Petition was filed
before the Andhra Pradesh High Court. A Scheme for arrangement submitted
by the parties was approved, pursuant whereto Mahaboobnagar unit was
transferred in favour of Rajvir Industries Limited (Accused No. 1) and
Mahaboobnagar Unit to Shri L.N. Agarwal. For the said purpose, the units
were demerged and vested in the respondent No. 1. Allegedly, the said
Scheme was fully implemented and the respondent Nos. 2 and 3 by a letter
dated 22.4.2005 stated out that they would not make demand of any
payment in respect of the said Mahaboobnagar Unit.
5. L.N. Agarwal allegedly made oral
requests to theaccused Nos. 2 and 3 to return the unused signed blank
cheques, in his capacity as the Secretary of the appellant Company.
6. However, allegedly on the premise
that Respondent Nos. 2 and 3 herein entered into a conspiracy to misuse
the said cheques; an informal complaint was filed on 20.10.2006 and
another complaint was filed on 30.10.2006 with Mahankali Police Station.
An endorsement was made therein that there was no role for the police to
play at that stage.
7. Respondents herein thereafter
issued a letter dated 1.10.2004 as also a telegram dated 20.10.2004
stating that as the institutional liability of the respondent No. 1 had
crossed 13.25 crores, with a view to repay a part of the said amount, a
cheque of a sum of Rs. 6.28 crores had been drawn by the appellant in
favour of the first respondent being the amount of difference which had
been deposited for collection. In the telegram, it was stated;
I HEREBY INFORM YOU THAT AFTER THE
DEMERGER M/S. SURYALAKSHMI COTTON MILLS LIMITED AND M/S. RAJVIR
INDUSTRIES LIMITED THE SHARES WERE TRANSFERRED FROM MY SIDE AND YOUR
SIDE FOR THE DIFFERENCE OF SHARE TRANSFER AMOUNTS AND AS PER OUR
PERSONAL UNDERSTANDING TO CLEAR THE DIFFERENCE AMOUNT OF MY FAMILY
HOLDING SHARES YOU HAVE ISSUED TWO CHEQUES ONE FOR RS. 3,39,12,086.00
DATED 31.07.2006 VIDE CHEQUE BEARING NO. 444842 AND ANOTHER CHEQUES
BEARING NO. 444841 DATED 31.07.2006 FOR AN AMOUNT OF RS. 3,80,77,646-00,
BOTH THE CHEQUES WERE DRAWN ON ANDHRA BANK, TIRUPUR BRANCH, TAMILNADU.
THEREAFTER YOU HAVE REQUESTED ME ORALLY TO PRESENT THE SAME IN THE 3RD
WEEK OF OCTOBER, 2006. AS PER YOUR INSTRUCTIONS I HAVE DEPOSITED THE
SAID CHEQUE FOR COLLECTION WITH OUR BANK. PLEASE HONOUR THE SAME.
8. A First Information Report
thereafter was lodged by the appellant before the Station House Officer
of the Police Station Mahankali, Hyderabad alleging inter alia that the
blank signed cheques issued in the year 2001-2002 had been fraudulently
9. F.I.R. thereafter was sought to
10. On a purported refusal by the
Police Station to register a complaint on the basis thereof, the
appellant filed a complaint petition in the Court of XI Additional Chief
Metropolitan Magistrate, Secunderabad. Pursuant to the direction issued
by the learned Magistrate, a First Information Report was lodged by the
officer-in-charge of the Mahankali Police Station. 11. Legal notices
were, however, issued by the first respondent upon the appellant with
regard to dishonour of three cheques bearing No. 444840 dated 31.7.2006
of Rs. 6.28 crores, Cheque No. 444841 dated 31.7.2006 of a sum of Rs.
3,80,77,646/- and Cheque No. 444842 dated 31.07.2006 of an amount of Rs.
12. On or about 13.11.2006, an
application was filed before the High Court for quashing of the said
First Information Report. Admittedly, on 6.12.2006, a complaint petition
was filed by the first respondent herein purported to be under Section
138 and 141 of the Negotiable Instruments Act against the appellant and
also its Chairman and Managing Director. By reason of the impugned
judgment, the said quashing application filed by the respondents herein
has been allowed.
13. A learned Single judge of the
High Court, in his judgment, not only considered the ingredients for the
offences under Section 406, 420, 460 of the Indian Penal Code but also
the background facts leaving to the dispute between the parties so as to
enable it to ascertain whether the ingredients thereof stood satisfied
or not. It was held that the said complaint petition was filed on the
basis whereof the First Information Report was directed to be lodged
only to pre-emt the accused from filing a complaint petition under
Section 138 of the Negotiable Instruments Act stating :
..Therefore, even if the allegations in the complaint are taken as true
and correct, at this stage, they do not make out prima facie case of
cheating or criminal breach of trust or forgery. Therefore, continuation
of proceedings against the present petitioner is nothing but abuse of
process of Court.
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 Procedure of _________ order been 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 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,
(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 a
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 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 made 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], Janata Dal Vs.
H.S. Chowdhary and Others [(1992) 4 SCC 305], Rupan Deol Bajaj
(Mrs.) and Another Vs. Kanwar Pal Singh Gill and Another [(1995) 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 value 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 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
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 (I) Pvt. Ltd.
& Ors. v. Dhanesh Badarmal Jain & Anr. [2007 (12) SCALE 391], it was
We are of the opinion that the allegations made in the complaint
petition, even if given face value and taken to 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 against 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 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.
While we are not oblivious of the fact that 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 cannot also lose
sight of the 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
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-emt 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 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 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 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 so deceived and which act or omission causes or is
likely to cause damage or harm to that person in body, mind, reputation
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 till the
dispute between the parties admittedly arose much thereafter i.e. in
In B. Suresh Yadav Vs. Sharifa
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 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 have 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 case for proceeding against the
respondent under Section 420 of the Indian Penal Code is therefore, made
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 120B 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 property, the same was entrusted to the
respondents. If the said property has been misappropriated or has been
used for a purpose for which the same had not been handed over, a case
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
Instruments 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 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. A quashing application was filed within a
few days for 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.
27. This appeal is allowed to the
aforementioned extent and with the aforementioned observations and
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