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CASE NO.:

Appeal (crl.) 194 of 2001

PETITIONER:

ALPIC FINANCE LTD.

Vs.

RESPONDENT:

P. SADASIVAN AND ANR.

DATE OF JUDGMENT: 16/02/2001

BENCH:

S. Rajendra Babu & K.G. Balakrishnan.

JUDGMENT:

Balakrishnan, J.

L...I...T.......T.......T.......T.......T.......T.......T..J

Leave granted.

The appellant is a registered company having its head

office at Mumbai. It is a non-banking financial institution

functioning under the regulation of the Reserve Bank of

India. It is carrying on business, inter alia, of leasing

and hire purchase. The first respondent is the Chairman and

founder trustee of a trust by name 'Visveswaraya Education

Trust'. The second respondent, wife of the first respondent

is also a trustee. The trust runs a dental college by name

Rajiv Gandhi Dental College. The respondents entered into

an agreement with the appellant company whereby the

appellant agreed to finance the purchase of 100

hydraulically operated dental chairs. The total cost of the

chairs was around Rs. 92,50,000/-. The appellant company

agreed to finance the respondents for the purchase of these

chairs through a lease agreement and as per the agreement,

the respondents were liable to pay rentals quarterly. The

respondents agreed to pay quarterly a sum of Rs. 7,50,000/-

for the first year; Rs. 12,50,000/- for the second year;

Rs. 8,00,000/- for the third year and Rs. 6,25,000/- for

the fourth year. As per the agreement, the appellant

company, the lessors would have sole and exclusive right,

title and interest in the dental chairs supplied till the

entire hire purchase amount was paid. In accordance with

the agreement, the appellant made payments to M/s. United

Medico Dental Equipments and they delivered the dental

chairs to the respondents. The appellant company alleged

that the respondents were not regular in making the payments

and committed default in payment of the instalments and that

the bank had dishonoured certain cheques issued by the

respondents. The appellant company also alleged that on

physical verification, certain chairs were found missing

from the premises of the respondents and thus they have

committed cheating and caused misappropriation of the

property belonging to the appellant. The appellant company

filed a private complaint under Section 200 Cr. P.C.

before the Chief Metropolitan Magistrate, Bangalore alleging

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that the respondents had committed offences under Sections

420, 406 and 423 read with Section 120-B I.P.C. In that

proceedings, the appellant company moved an application

under Section 93 Cr. P.C. to issue a search warrant to

seize the property in dispute and also to hand over these

items to the complainant. The learned Magistrate took

cognizance of the alleged complaint and issued summons to

the respondents and passed an order on the application filed

under Section 93 of the Cr. P.C. to have a search at the

premises of the respondents and to take possession of the

properties involved in the case. These proceedings were

challenged by the respondents under Section 482 Cr.P.C.

before the learned Single Judge of the Karnataka High Court

at Bangalore. The learned Single Judge was pleased to quash

the entire proceedings and directed the appellant company to

return all the properties seized by the Police pursuant to

the warrant issued by the learned Magistrate. Thus, the

order of the learned Magistrate taking cognizance and

issuing process to the respondents as well as the order of

search and the direction for restoration of the property to

the appellant company were set aside. Aggrieved by the

same, the appellant company has preferred this appeal.

We heard the learned counsel on either side. Learned

senior Counsel for the appellant company Mr. P.S. Mishra

argued in detail and contended that the learned Single Judge

has seriously erred in quashing the proceedings under

Section 482 Cr. P.C. The learned counsel for the appellant

company contended that the allegations in the complaint

clearly made out offences punishable under Section 420, 406,

423, 424 read with Section 120-B I.P.C. The learned Counsel

for the respondents, on the other hand, contended that the

complaint was filed only to harass the respondents and it

was motivated by mala fide intention. It was argued that

the entire transaction was of civil nature and that the

respondents have made a substantial payment as per the hire

purchase agreement and the default, if any, was not willful

and there was no element of misappropriation or cheating.

The respondents also denied having removed any of the items

of the disputed property clandestinely to defeat the

interest of the appellant. The short question arising for

consideration is whether the learned Single Judge was

justified in invoking the powers under Section 482 Cr.P.C.

in setting aside the proceedings pending before the

Magistrate.

Contours of the power under Section 482 Cr. P.C. have

been explained in series of decisions by this Court. In

Smt. Nagawwa vs. Veeranna Shivalingappa Konjalgi and

Others 1976(3) SCC 736, it was held that the Magistrate

while issuing process against the accused should satisfy

himself as to whether the allegations in the complaint, if

proved, would ultimately end in the conviction of the

accused. It was held that the order of Magistrate issuing

process against the accused could be quashed under the

following circumstances: -

(1) Where the allegations made in the complaint or the

statements of the witnesses recorded in support of the same

taken at their face value make out absolutely no case

against the accused or the complaint does not disclose the

essential ingredients of an offence which is alleged against

the accused;

(2) Where the allegations made in the complaint are

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patently absurd and inherently improbable so that no prudent

person can ever reach a conclusion that there is sufficient

ground for proceeding against the accused;

(3) Where the discretion exercised by the magistrate in

issuing process is capricious and arbitrary having been

based either on no evidence or on materials which are wholly

irrelevant or inadmissible; and

(4) Where the complaint suffers from fundamental legal

defects, such as, want of sanction, or absence of complaint

by legally competent authority and the like.

In State of Haryana and Ors. vs. Bhajan Lal and Others

1992 Supp. (1) SCC 335, a question came up for

consideration as to whether quashing of the FIR filed

against the respondent Bhajan Lal for the offences under

Section 161 & 165 of IPC and Section 5(2) of the Prevention

of Corruption Act was proper and legal. Reversing the order

passed by the High Court, this Court explained the

circumstances under which such power could be exercised.

Apart from reiterating the earlier norms laid down by this

Court, it was further explained that such power could be

exercised 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. However, this court in Rupan Deol Bajaj (Mrs.) and

Anr. vs. Kanwar Pal Singh Gill & Anr. 1995 (6) SCC 194,

held that "at the stage of quashing FIR or complaint, the

High Court is not justified in embarking upon an enquiry as

to the probability, reliability or genuineness of the

allegations made therein." In a few cases, the question

arose whether a criminal prosecution could be permitted when

the dispute between the parties is of predominantly civil

nature and the appropriate remedy would be civil suit. In

one case reported in Madhavrao Jiwajirao Scindia and Others

vs. Sambhajirao Chandrojirao Angre and Others 1988(1) SCC

692, this Court held that if the allegations in the

complaint are both of a civil wrong and a criminal offence,

there would be certain situations where it would

predominantly be a civil wrong and may or may not amount to

a criminal offence. That was a case relating to a trust.

There were three trustees including the settlor. A large

house constituted part of the trust property. The

respondent and the complainant were acting as Secretary and

Manager of the Trust and the house owned by the trust was in

the possession of a tenant. The tenant vacated the building

and the allegation in the complaint was that two officers of

the trust, in conspiracy with one of the trustees and his

wife, created documents showing tenancy in respect of that

house in favour of the wife of the trustee. Another trustee

filed a criminal complaint alleging that there was

commission of the offence under Section 406, 467 read with

Sections 34 and 120-B of the Indian Penal Code. The accused

persons challenged the proceedings before the High Court

under Section 482 of the Code of Criminal Procedure and the

High Court quashed the proceedings in respect of two of the

accused persons. It was under those circumstances that this

court observed :

"Though a case of breach of trust may be both a civil

wrong and a criminal offence but there would be certain

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situations where it would predominantly be a civil wrong and

may or may not amount to a criminal offence. The present

case is one of that type where, if at all, the facts may

constitute a civil wrong and the ingredients of the criminal

offences are wanting. Having regard to the relevant

documents, including the trust deed as also the

correspondence following the creation of the tenancy, the

submissions advanced on behalf of the parties, the natural

relationship between the settlor and the trustee as mother

and son and the fall out in their relationship and the fact

that the wife of the co-trustee was no more interested in

the tenancy, it must be held that the criminal case should

not be continued."

In another case recently decided by this Court in

Trisuns Chemical Industry vs. Rajesh Agarwal and Other

1999(8) SCC 686, the complainant company had alleged that

the directors of another company offered to supply "toasted

soyabean extractions" for a price higher than the market

price. The Complainant Company had to pay the price in

advance as demanded by the accused company. Complainant

paid the amount through cheques. However, the accused

supplied the commodity, which was of most inferior and

sub-standard quality and the complainant suffered a loss of

Rs. 17 lakhs. The Complainant alleged that he was induced

to pay the price on the representation that the best quality

commodity would be supplied. A criminal complaint was filed

alleging commission of the offence punishable under Section

420-A. The Magistrate forwarded the complaint for

investigation under Section 156(3) Cr. PC. The accused

directors moved the High Court for quashing the complaint

alleging that the dispute was purely of a civil nature and

hence no prosecution should have been permitted. The High

Court accepted this plea and the complaint was quashed. But

this court held in para 8 and 9 of the judgment as follows:

".........merely because an act has a civil profile is

not sufficient to denude it of its criminal outfit.

................. ................. We are unable to

appreciate the reasoning that the provision incorporated in

the agreement for referring the disputes to arbitration is

an effective substitute for a criminal prosecution when the

disputed act is an offence. Arbitration is a remedy for

affording reliefs to the party affected by breach of the

agreement but the arbitrator cannot conduct a trial of any

act, which amounted to an offence, albeit the same act may

be connected with the discharge of any function under the

agreement. Hence, those are not good reasons for the High

Court to axe down the complaint at the threshold itself.

The investigating agency should have had the freedom to go

into the whole gamut of the allegations and to reach a

conclusion of its own. Pre-emption of such investigation

would be justified only in very extreme cases."

In Pratibha Rani vs. Suraj Kumar 1985(2) SCC 370, the

question arose that when the civil as well as criminal

remedy is available to a party, can a criminal prosecution

be completely barred. In this case, the matter related to

the Stridhan property. The complainant alleged that her

husband, father-in-law and other relatives misappropriated

her jewellery and other valuable articles entrusted to them

by her parents at the time of marriage. The complainant

alleged that these dowry articles were meant for her

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exclusive use and that the accused misbehaved and maltreated

her and ultimately he turned her out without returning the

dowry articles. The accused filed a criminal miscellaneous

petition under Section 482 for quashing the Criminal

proceedings and the High Court quashed the same. The

accused contended that the dispute was of a civil nature and

no criminal prosecution would lie. Under that circumstance,

this court held in paragraph 21 at page 382 as under: -

"... There are a large number of cases where criminal

law and civil law can run side by side. The two remedies

are not mutually exclusive but clearly coextensive and

essentially differ in their content and consequence. The

object of the criminal law is to punish an offender who

commits an offence against a person, property or the State

for which the accused, on proof of the offence, is deprived

of his liberty and in some cases even his life. This does

not, however, affect the civil remedies at all for suing the

wrongdoer in cases like arson, accidents, etc. It is an

anathema to suppose that when a civil remedy is available, a

criminal prosecution is completely barred. The two types of

actions are quite different in content, scope and

import...."

The facts in the present case have to be appreciated in

the light of the various decisions of this Court. When

somebody suffers injury to his person, property or

reputation, he may have remedies both under civil and

criminal law. The injury alleged may form basis of civil

claim and may also constitute the ingredients of some crime

punishable under criminal law. When there is dispute

between the parties arising out of a transaction involving

passing of valuable properties between them, the aggrieved

person may have right to sue for damages or compensation and

at the same time, law permits the victim to proceed against

the wrongdoer for having committed an offence of criminal

breach of trust or cheating. Here the main offence alleged

by the appellant is that respondents committed the offence

under Section 420 I.P.C. and the case of the appellant is

that respondents have cheated him and thereby dishonestly

induced him to deliver property. To deceive is to induce a

man to believe that a thing is true which is false and which

the person practicing the deceit knows or believes to be

false. It must also be shown that there existed a

fraudulent and dishonest intention at the time of commission

of the offence. There is no allegation that the respondents

made any willful misrepresentation. Even according to the

appellant, parties entered into a valid lease agreement and

the grievance of the appellant is that the respondents

failed to discharge their contractual obligations. In the

complaint, there is no allegation that there was fraud or

dishonest inducement on the part of the respondents and

thereby the respondents parted with the property. It is

trite law and common sense that an honest man entering into

a contract is deemed to represent that he has the present

intention of carrying it out but if, having accepted the

pecuniary advantage involved in the transaction, he fails to

pay his debt, he does not necessarily evade the debt by

deception. Moreover, the appellant has no case that the

respondents obtained the article by any fraudulent

inducement or by willful misrepresentation. We are told

that respondents, though committed default in paying some

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installments, have paid substantial amount towards the

consideration.

Having regard to the facts and circumstances, it is

difficult to discern an element of deception in the whole

transaction, whereas it is palpably evident that the

appellant had an oblique motive of causing harassment to the

respondents by seizing the entire articles through

magisterial proceedings. We are of the view that the

learned judge was perfectly justified in quashing the

proceedings and we are disinclined to interfere in such

matters.

The appeal is dismissed with no order as to costs.