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CASE NO.:

Appeal (crl.) 1248 of 2007

PETITIONER:

Maksud Saiyed

RESPONDENT:

State of Gujarat & Ors

DATE OF JUDGMENT: 18/09/2007

BENCH:

S.B. Sinha & Harjit Singh Bedi

JUDGMENT:

J U D G M E N T

CRIMINAL APPEAL NO. 1248 OF 2007

[Arising out of SLP (Crl.) No. 923 of 2006]

S.B. SINHA, J :

1. Leave granted.

2. Respondent No. 2 is a former Chairman-cum-Managing Director of

Dena Bank. He is presently the Chairman and Managing Director of Bank

of Baroda, Mumbai. Respondent Nos. 3 to 11 are Directors of Dena Bank.

Appellant is a Director of Nagami Nicotine Pvt. Ltd. (hereinafter referred to

as "the Company"). He had transactions with the said Company. He had

taken loan from Dena Bank. As loans were not paid, admittedly, an original

application was filed against him before the Debts Recovery Tribunal,

Ahmedabad for recovery of a sum of Rs. 120.13 lakhs from the Company.

3. The Bank floated a public issue of 8 crores equity shares of Rs. 10/-

each for cash at a premium of Rs. 17/- i.e. at a price of Rs. 27/- each.

Prospectus was published for the purpose of public issue and therein some

false and misleading information had been given with regard to sanction

limits, the dues and export bills of the Company. It was alleged that the

Company had committed an offence punishable under Sections 120B, 425,

191, 192, 177, 181 as also 500 of the Indian Penal Code. A criminal

complaint was filed before the Chief Judicial Magistrate, Vadodara by the

appellant on or about 28.02.2005 alleging:

"(A) Following false, fabricated and fraudulent

documents illegally and dishonestly misused by

Shri G.C. Garg in the absence of the sanction

letters of the Bank along with its stipulated

sanctioned terms and conditions for the sanctioned

so called credit facilities, evidently acceptance of

Complainant's Company for the stipulated

sanctioned terms and conditions does not exist.

Hence following false, fabricated and fraudulent

dishonestly and purposefully misused documents

with malafide intention are illegal, invalid and not

maintainable. Thus, Shri G.C. Garg solemnly

affirmed and signed the verification of the

aforesaid Original Application by dishonestly

making false claim under Section 209 by giving

false and fabricated statements, information and

evidences under Sections 177, 181, 191, 192, 196,

199, 200, 470 and 471 of IPC."

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4. An order under Sub-section (3) of Section 156 of the Code of

Criminal Procedure was passed by the learned Chief Judicial Magistrate

relying on or on the basis of allegations made in the said complaint petition.

The learned Chief Judicial Magistrate by an order dated 28.02.2005 directed

the police authorities to investigate the complaint. Respondent filed an

application under Section 482 of the Code of Criminal Procedure for

quashing the complaint and the investigation on 10.05.2005. By reason of

the impugned judgment dated 9.01.2006, the said application has been

allowed.

5. Mr. Bishwajit Bhattacharyya, learned counsel appearing on behalf of

the appellant would submit that the High Court committed a serious error in

passing the impugned order insofar as it failed to take into consideration that

it had no jurisdiction to quash the police investigation at that stage.

According to the learned counsel, the acts of omission and commission on

the part of the bank in causing loss of reputation of the appellant is evident

on its face. Such an action on the part of the officers of the appellant's bank

was wholly irresponsible.

6. The jurisdiction of the High Court to quash a FIR in exercise of its

jurisdiction under Section 482 of the Code of Criminal Procedure is well-

known. The court may not enter into determination of a disputed question of

fact at that stage. It may, however, take note of the allegations made in the

complaint petition vis-`-vis the conduct of the parties. It is not disputed that

the bank had filed an original application before the Debts Recovery

Tribunal, Ahmedabad. A civil suit was filed at Vadodara in the year 2003.

In the prospectus issued, it was stated:

"Sr.

No.

Suit

details,

Date of

Filing

Name of the

party

Branch

Amount

claimed

(Rs. in

lacs)

Nature of claim made

against the Bank

4

DRT,

A'bad

28.3.03

M/s.

Nagami

Nicotine

Pvt. Ltd.

A.R.B.

A'bad

993.74

The case is filed against

the Bank for non-

submission of export

bills and non-releasing of

the sanctioned limits.

We have taken plea that

since the borrower is not

clearing the dues of the

Bank, Bank has not

released the export bills

as per procedure of

UCPDC rules."

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7. It is not in dispute that in the year 2003, the matter was pending

before the City Civil Court, Ahmedabad. Other relevant facts stated in the

said prospectus were not incorrect. The stand taken by the respondents

therein as contained in Column under the Head "Nature of claim made

against the Bank" is also not incorrect as the same was subject matter of a

civil suit. Appellant in its notice addressed to Respondent No. 2 herein

through his advocate dated 25.01.2005 stated:

"My client says and submits that the litigation you

are mentioning does not exist at DRT,

Ahmedabad. On the contrary my client has filed

Special Civil Suit No. 178/2003 on 28.3.2003 and

the same is pending for adjudication in the Civil

Court Vadodara before the Hon'ble Civil Judge

(SD) Vadodara. Besides my client does not know

ARB, Ahmedabad and also not aware of its place

of existence and its whereabouts in Ahmedabad

and ARB, Ahmedabad has nothing to do with the

suit."

8. A case of defamation was found only on that basis. It is not in dispute

that Respondent No. 2 in reply to the said notice dated 5.02.2005 through his

advocate stated:

"5. The averments made in para 3 of your legal

notice are not true and correct and are not

admitted. The export bills were sent to Bank of

Fujirah and the same were returned unpaid due to

discrepancy in the documents, and again, the said

export bills were sent to HSBC Bank but, the same

were returned unpaid by HSBC bank without

payment on account of discrepancy in the Export

bills L/C. There is no negligence on the part of

Bank in respect of Export bills under L/C. Thus,

to pressurize the Bank, your client has filed the

Special Civil Suit No. 178/2003 in the Civil Court

at Vadodara. In fact, in para 51 of your client's

plaint, it is claimed that the branch did not release

the CC hypothecation limit.

*** *** ***

7. The contents of para 5 of your notice are not

true and correct and the same are denied by my

client and there is no question of concealing any

facts in the prospectus as alleged by you.

There is no question of any concealment or

suppression of facts in the prospectus. Had the

notice been given in time the bank could have

taken corrective steps in time to include the fact

which was omitted unintentionally. The public

issue was closed on 29.01.2005 (Saturday) as

mentioned in the prospectus.

Draft prosecectus of public issue was filed

by the Bank with SEBI on 3.12.2004 and was kept

on the Website of the bank, SEBI and Lead

Manager M/s. SBI Caps and a press note was

released. Final prospectus of the issue was filed

with SEBI on 10.1.2005 and was kept on Website

of the Bank, SEBI and lead Manager M/s. SBI

Caps, and a press note was released. Statutory

advertisement was published in the newspapaer on

12.1.2005. The public issue opened on 24.1.2005

and closed on 29.1.2005.

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My client received your notice on

27.1.2005, but it was not readable and hence my

client informed on fax to send the same again.

However, the notice was not refaxed and instead

my client received the notice on 28.1.2005 by post.

The fact that the notice was served belatedly,

suggests that the intention of your client is to

pressurize and put the bank into uncomfortable

position. Thus, there is no bonafide intention on

the part of your client except to harass my client

and to avoid your client's liability towards the

repayment of the Bank's dues.

*** *** ***

9. In view of the above, my client has not acted

with malafide intention and has not concealed or

suppressed any material facts against the interest

of the public at large and investors in particulars.

The error is by inadvertence and was not

intentional.

We hope that wiser counsel shall prevail

upon your client and advise your client to

withdraw the notice forthwith. We request you

that you will desist from taking unwarranted

actions against the bank.

In spite of the above if your client takes any

action against my client, my client will defend the

same at the cost of your client and your client will

be held liable and responsible for the costs and

consequences thereof."

9. An inadvertent mistake committed by the bank in referring to the case

being pending before DRT instead of City Civil Court cannot, in our

opinion, give rise to a cause of action for filing a complaint petition far less

under Section 500 of the Indian Penal Code particularly when the other

particulars contained therein were not found to be incorrect.

10. It is pertinent to notice that the learned Chief Judicial Magistrate in its

order dated 28.02.2005 proceeded on the basis that the respondents are

Managers and Branch Managers of Dena Bank. There has, thus, been a total

non-application of mind on the part of the learned Chief Judicial Magistrate.

The learned Chief Judicial Magistrate noticed:

"\005As per the say of the Complainant, Dena Bank

has come out with public issue and on page no. 87

of its Prospectus, the published false information

damages the Complainant's Company and

endangers credit of the Company. This apart, the

Bank fabricated false documents in spite of

Complainant has not taken amount under loan and

in violation of the rules and regulations of banking

law and practice, the Bank deceived the company

by filing false suit before DRT, by false

submissions and producing false affidavit are the

allegations of the Complainant. This apart, the

Bank withheld export bills of the Complainant's

Company under its custody under the pretext of the

false excuses by cheating and committed criminal

offence, despite no amount of demand loan taken

by the Complainant, the Bank fabricated false

reasons and committed offence against the

Complainant's Company are the subject matter of

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the Complaint and looking to this, if the Police

investigates the present complaint, more and better

investigation is possible. Hence the present

complaint is necessitated for the investigation by

the Police, therefore following order is given."

11. Allegations contained in the complaint petition, as noticed by the

learned Magistrate, may give rise to tortuous liability on the part of Dena

Bank. Principal allegations were made against the bank. Who had acted on

behalf of the bank was not disclosed. The acts of omission and commission

on the part of the bank, if any, by withholding export bills of the bank may

give rise to a statutory violation on its part but the respondents were not

personally liable therefor.

12. In Saroj Kumar Poddar v. State (NCT of Delhi) and Anr. [2007 (2)

SCALE 36], this Court held :

"Apart from the Company and the appellant, as

noticed hereinbefore, the Managing Director and all other

Directors were also made accused. The appellant did not

issue any cheque. He, as noticed hereinbefore, had

resigned from the Directorship of the Company. It may

be true that as to exactly on what date the said resignation

was accepted by the Company is not known, but, even

otherwise, there is no averment in the complaint petitions

as to how and in what manner the appellant was

responsible for the conduct of the business of the

Company or otherwise responsible to it in regard to its

functioning. He had not issued any cheque. How he is

responsible for dishonour of the cheque has not been

stated. The allegations made in paragraph 3, thus, in our

opinion do not satisfy the requirements of Section 141 of

the Act."

[See also Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of Delhi and

Ors. JT 2007 (5) SC 529 and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla

and Anr. 2007 (3) SCALE 245]

13. Where a jurisdiction is exercised on a complaint petition filed in terms

of Section 156(3) or Section 200 of the Code of Criminal Procedure, the

Magistrate is required to apply his mind. Indian 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.

14. It will bear repetition to state that throughout the complaint petition,

no allegation had been made as against any of the respondents herein that

they had any thing to deal with personally either in discharge of their

statutory or official duty. As indicated hereinbefore, in the prospectus, a

bona fide mistake had been committed. The fact that such a mistake had

been committed stands accepted. In any event, the statement that the matter

was pending before the DRT in stead and place of the City Civil Court,

Ahmedabad, per se, cannot be said to be defamatory as the fact that a suit

was pending for recovery of the huge amount is neither denied nor disputed.

Whether such a suit was maintainable and/ or is ultimately to be decreed or

disposed of is a question which has to be gone into in the suit itself. A

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criminal court cannot even take that factor into consideration. The High

Court considered the matter at some great details. Having analysed the

materials placed before it, it was held:

"\005It was, therefore, stated that there was no

suppression or concealment of any facts and it did

not amount to criminal breach of trust and cheating

on the part of the Bank as alleged by the

complainant. The said export bills under L/C were

negotiated by the Bank under the provisions of

UCPDC 500 1995 Revision. The Bank has also

informed vide its letter dated 8.2.2005 to M/s. SBI

Capital Markets Ltd. It was stated therein that the

Bank has not concealed or suppressed any material

fact against the interest of the public at large and

investors in particular. The bonafide mis-

description in setting out the nature of claim was

unintentional. It was further stated that the

material particulars like the amount of claim, date

of filing and name of the company was correctly

mentioned. The mis-description did not materially

influence/affect the decision of the

investors/public\005"

It was furthermore opined:

"It appears to the Court that the learned Chief

Judicial Magistrate has not applied his mind while

passing the order under Section 156(3) of the

Criminal Procedure Code directing the police to

investigate in the matter. The impugned order, on

the face of it, reveals that he has not gone through

the complaint. He has stated in the order that the

accused Nos. 1 to 10 are Manager and Branch

Manager of Dena Bank. As a matter of fact, the

accused No. 1 was the Ex-Chairman and Managing

Director of Dena Bank, and the accused No. 2 was

the Executive Director. The accused Nos. 3 to 10

are Directors of Dena Bank. None of these

persons are Managers or Branch Manager. Despite

this, the learned Chief Judicial Magistrate has

mentioned in his order that they are Managers or

Branch Managers. With regard to the prospectus

he has simply stated that the Bank has issued

prospectus for its public issue and at page No. 87

false informations were given so as to cause

damage to the Company and to jeopardize the

reputation of the Company. Despite the fact that

the litigations are pending before the Civil Court

he has mentioned about non-returning of export

bills etc. On these facts he has passed order under

Section 156 (3) of the Criminal Procedure Code,

directing the PSI, Sayajiganj Police Station to

make inquiry in the matter."

The approach of the High Court, with respect, is entirely correct.

15. This Court in Pepsi Foods Ltd. and Another v. Special Judicial

Magistrate and Others [(1998) 5 SCC 749], held as under:

"28. Summoning of an accused in a criminal case is a

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serious matter. Criminal law cannot be set into motion as

a matter of course. It is not that the complainant has to

bring only two witnesses to support his allegations in the

complaint to have the criminal law set into motion. The

order of the Magistrate summoning the accused must

reflect that he has applied his mind to the facts of the

case and the law applicable thereto. He has to examine

the nature of allegations made in the complaint and the

evidence both oral and documentary in support thereof

and would that be sufficient for the complainant to

succeed in bringing charge home to the accused. It is not

that the Magistrate is a silent spectator at the time of

recording of preliminary evidence before summoning of

the accused. The Magistrate has to carefully scrutinise

the evidence brought on record and may even himself put

questions to the complainant and his witnesses to elicit

answers to find out the truthfulness of the allegations or

otherwise and then examine if any offence is prima facie

committed by all or any of the accused."

The learned Magistrate, in our opinion, shall have kept the said

principle in mind.

16. For the reasons aforementioned, there is no merit in this appeal which

is dismissed accordingly with costs. Counsel's fee assessed at Rs. 25,000/-.