REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. _________OF 2009

[Arising out of Special Leave Petition (Criminal) No. 3176 of 2008]

STATE OF MAHARASHTRA … APPELLANT

Versus

SAYED MOHAMMED MASOOD & ANR. … RESPONDENTS

J U D G M E N T

S.B. SINHA, J.

1.Leave granted.

2.The State of Maharashtra is before us aggrieved by and dissatisfied

with a judgment and order dated 3

rd

March, 2008 passed by a Division

Bench of the High Court of Judicature at Bombay in Criminal Writ Petition

No. 2333 of 2007 quashing a First Information Report (“FIR”) lodged by the

respondent No.2 herein at the Cuff Parade Police Station, Mumbai.

3.The first respondent is the Chairman-cum-Managing Director of M/s

City Limouzines (India) Ltd. (hereinafter called and referred for the sake of

brevity as, “the said Company”). He established the said Company. A

scheme known as “Go/Vehicle on rental basis and earning by sitting at

home” was floated. In terms of the said Scheme, assurances were given to

the people for earning money in easy way. A public advertisement was also

issued in a newspaper. They also issued pamphlets and thereby attracted

huge investments. In terms of the said Scheme, Rs.97,907/- was to be

invested in ‘rent a car’ scheme wherein agreement was executed inter alia

providing that the car would be purchased in the name of investor but would

be used by the Company on rent to others wherefor the investor would

receive a sum of Rs.4,000/- per month for a period of five years. After 60

months, i.e., at the end of the agreement, the investor may take back his car

in proper working condition. It was equally provided that an investor was

entitled to inspect the vehicle given on lease/rent once in three months upon

giving 15 days prior notice.

4.Clauses 4, 8, 10 and 15 of the said agreement read as under:

“4.Inspection: The Lessor is entitled to inspect

the Vehicle given on Lease/rent once in 3 months

by giving 15 days prior notice to the above stated

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address and inspect the vehicle at any of the

offices of the Lessee in India.

xxx xxx xxx

8.Buy Back:The Lessee will have the option

at the discretion of the Lessor/registered owner to

purchase the vehicle at a fair market value upon

mutual consent after the expiry of the agreement.

However, this buyback clause is not to be

construed to be conferring any enforceable right on

the Lessee but the first option to buy the car shall

be that of the Lessee herein.

xxx xxx xxx

10.Completion of contract:Upon successful

completion of the terms of this agreement, the

Lessor shall receive the leased Vehicle in proper

working condition including the tyres and battery

in good condition with normal wear and tear

acceptable depending on the period of use.

xxx xxx xxx

15.Issue of Preference Shares: The Lessee

undertakes to issue redeemable Preference shares

to the Lessor towards the margin money paid

(excluding Insurance & RTO Charges) which will

be held by the Lessor as security for the entire

period of the validity of the agreement being 60

months from the date of issue to ensure smooth

installment payments to the bank and the lease/hire

charges to the Lessor.”

5.The complainant – respondent No.2, pursuant to the said

advertisement, invested a sum of Rs.97,907/-. Indisputably, he was paid

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Rs.4,000/- per month for a period of five years. However, despite demand,

he was not given the car. He was, however, given three post-dated cheques

of ABN Amro Bank amount to Rs. 25,000/-, Rs.20,000/- and Rs.10,000/-

although he had asked for the said amount in cash.

6.In the said FIR, it was inter alia alleged:

“As mentioned above, Directors of the said

Company in their office without listening anything

from me, as per their own wishes making changes

on the document of agreement, when I noticed that

then I enquired about the same in more detail. It is

transpired that the said company by showing false

inducement about big return in various financial

schemes and transferring the motor vehicle in the

name of investor, till date has accepted deposits of

crores of rupees under various schemes from

25000 investors. But I came to know that said

company has purchased motor car only in the

name of 500 investors.

All aspect of above mentioned schemes are

in existence only on paper but in reality not even a

single scheme is in force as per the scheme shown

on the document. I also came to know that apart

from the above mentioned office of the company at

Bombay, and other places said company has office

on rental basis and Sayyed Masood Jamadar, in

collusion with other directors of the Company,

induces people for making investment and amount

invested by people is being utilized for other

purpose, other than the original purpose and is

being utilized personally or for some other

purposes. The said company on the internet at its

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website namely www.citylimouzines.com &

www.city-money.com has projected the said

company as bearing ISO-9001-2000 certification

and inducing common poor people to invest

money in the said company and thereby cheating

the people. If immediate legal action is not taken

against the said company then there will be huge

financial loss to ordinary investors. Since

Directors of the said company threatened investors

whenever investors go to ask back money

therefore, rein of fear against them is created.

Above mentioned persons namely Sayyed

Mohammad Masood Jamadar and Geeta Razzaki

and other persons have collusively established City

Limouzines Ltd. Company and through that

company several other companies are established

and through them false inducement is given and

financial investments is accepted from the people

and misappropriation of the same on large scale is

done and defrauded citizens and Government.”

7.The respondent No.1 filed a writ petition before the Bombay High

Court praying for quashing the said FIR.

The Division Bench of the High Court keeping in view the various

clauses in the agreement entered into by and between the complainant and

the said Company opined that although the investor might have been entitled

to the car at the end of the period of five years, but as there has been no

intention to defraud him at the time of inception of execution of the

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agreement and the dispute between the parties revolved on interpretation of

the clauses of the agreement, no offence under Sections 406, 420 and 120B

of the Indian Penal Code has been made out, stating:

“13.At the cost of repetition we may mention

that the facts in the present case are not at dispute

at all that the investment made by each of the

consumers to the tune of Rs.97,907/- and in return

they received Rs.2,40,000/-. The only question

which remained was whether the investors were

entitled to the car at the end of the period of five

years or not. There has been no intention to

defraud at the time of inception of execution of the

agreement. There can be made several

interpretations of the clauses in the agreement if

the agreement is taken as a whole. It is a well

accepted principle of interpretation that while

interpreting clause of agreement, whole of the

agreement has to be taken into consideration.

Applying the principles laid down by the various

judgments of the Supreme Court hereinabove

referred, we do not think that in the facts and

circumstances of the case an offence of cheating is

made out.”

The High Court, however, in its judgment only considered the case

from the point of view of Section 420 of the Indian Penal Code and not

Sections 406 and 120B thereof.

8.Mr. T.K. Viswanathan, learned Senior Counsel appearing on behalf of

the State would contend that having regard to the well settled principle of

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law that the High Court does not quash an FIR save and except sparingly

and in rarest of rare cases, the impugned judgment is not sustainable.

9.Our attention in this behalf has been drawn to various grounds taken

in this Appeal to contend that the investigation so far conducted reveals that

a large number of illegalities have been committed by the said Company

including the violation of the provisions of Section 45(1A) of the Reserve

Bank of India Act.

10.Ms. Bindu K. Nair, learned counsel appearing on behalf of the

respondent, on the other hand, would take us through the FIR, agreement

entered into by and between the parties, Lessee’s covenants therein as also

other documents to contend that no offence can be said to have been made

out either under Section 406 of the Indian Penal Code or Section 420

thereof. It was urged that as no car was purchased in the name of the

respondent No.2, there was no property and, thus, there was neither any

question of any entrustment thereof nor any misappropriation. The

complainant himself having redeemed the merging money in terms of the

provisions of the agreement, the ingredients of the offence of Section 406 of

the Indian Penal Code cannot be said to have been made out. Drawing our

attention to the definition of ‘cheating’ as contained in Section 415 of the

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Indian Penal Code, the learned counsel would contend that neither there was

any inducement nor deception having been made and pursuant to the

agreement no property having been delivered in favour of the accused by the

complainant nor there was any act of omission on his part which caused or

likely to cause any damage to the property, the question of commission of

any offence under Section 420 of the Indian Penal Code does not arise.

11.The legal position in regard to exercise of jurisdiction by the High

court for quashing of an FIR is now well settled. It is not necessary for us to

delve deep thereinto as the propositions of law have recently been stated by

this Court in R. Kalyani v. Janak C. Mehta [(2009) 1 SCC 516] in the

following terms:

“15. Propositions of law which emerge from

the said decisions are:

(1) The High Court ordinarily would not

exercise its inherent jurisdiction to quash a

criminal proceeding and, in particular, a first

information report unless the allegations

contained therein, even if given face value and

taken to be correct in their entirety, disclosed

no cognizable offence.

(2) For the said purpose the Court, save and

except in very exceptional circumstances,

would not look to any document relied upon by

the defence.

(3) Such a power should be exercised very

sparingly. If the allegations made in the FIR

disclose commission of an offence, the Court

shall not go beyond the same and pass an order

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in favour of the accused to hold absence of any

mens rea or actus reus.

(4) If the allegation discloses a civil dispute,

the same by itself may not be a ground to hold

that the criminal proceedings should not be

allowed to continue.”

Yet again in Mahesh Choudhary vs. State of Rajasthan & Anr. [2009

(4) SCALE 66], this Court stated the law thus:

“13.The principle providing for exercise of the

power by a High Court under Section 482 of the

Code of Criminal Procedure to quash a criminal

proceeding is well known. The court shall

ordinarily exercise the said jurisdiction, inter alia,

in the event the allegations contained in the FIR or

the Complaint Petition even if on face value are

taken to be correct in their entirety, does not

disclose commission of an offence.”

We may also notice that in State of Maharashtra v. Mohd. Sajid

Husain Mohd. S. Husain [(2008) 1 SCC 213], this Court laid down the law

in the following terms:

“14. The learned counsel would submit that

prima facie the girl was above 16 years and she

being a consenting party and having been getting

consideration, no case under Section 376 IPC has

been made out and, thus, this Court should not

interfere with the impugned judgment.”

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12.There cannot be any doubt or dispute whatsoever that a simple breach

of contract or a case involving pure civil dispute would not attract the penal

provisions contained in the Indian Penal Code either under Section 406 or

Section 420 thereof.

13.Had the dispute between the parties rested in the aforementioned

premise, probably we would not have interfered with the judgment of the

High Court; but then, our attention has been drawn to certain evidences

which have surfaced during investigation and disclosed before us by the

State in the grounds stated in this Memo of Appeal.

We may notice a few of them:

“cc)Because preliminary findings shows that

public at large especially middle class and

lower class people have invested their hard

earned money and or money received at the

time of their VRS or amount received from

insurance companies after casualty of their

legal heirs, are likely to be cheated by the

inducement of “Rosy picture” shown by the

company with respect to motor vehicle

scheme. Because as soon as influx of

investors stops the company will stop

payment to the old investors, as the

company does not have any type of business

which generates fair legal income/profit.

xxx xxx xxx

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ff)Because another witness has stated in his

statement dated 03/10/07 that he has

invested Rs.1,07,000 for Maruti Omni in the

month of January 2005 immediately after

the agreement he has received three post

dated cheques of Rs.4000/- each from CLIL.

Company has taken Rs.25,630/- for RTO &

Insurance Charges but has not purchased a

vehicle in his name.

xxx xxx xxx

ii)Because another witness in his statement

dated 17/11/07 that he is running Travelling

Business in the name as “Amey Tourist.”

He owns Maruti Esteem Car No. MH-01-

JA-6710 and the same is being used for his

business purpose. Neither he has given his

said m/v to CLIL nor has invested money in

C.L.I.L. An enquiry has been made with

Shri Arun Potade because CLIL data on first

mirror image shows this car as one which is

from their scheme as Indica and registered

in the name of Smt. Jayshree Devgude (File

no. 15971 of CLIL).

jj)Because another witness has stated in his

statement dated 19/11/07 that he had Kinetic

Honda Scooter No. MH-01-E-6343 in his

name but due to rusting/damage he had

scraped the said m/v. He does not know

anything about CLIL. An enquiry has been

made with Shri Deepak R. Kalwar because

CLIL data on first mirror image shows that

Maruti Omni Car No. MH-01-E-6343 has

been registered in the name of one Smt.

Asha Thakur (file no.- 1738 of CLIL) and

enquiry with RTO revealed that the vehicle

No. MH-01-E-6343 is Kinetic Honda

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Scooter and registered in the name of

Deepak Kalwar.”

14.The allegation made in the FIR and the materials collected during

investigation, in our considered opinion, should be allowed to be taken to its

logical end.

15.We must, however, acknowledge that Ms. Nair has cited the following

decisions for our consideration.

i.Alpic Finance Ltd. vs. P. Sadasivan & Anr. [(2001) 3 SCC 513]

ii.Radha Ballav Pal & Anr. vs. Emperor [AIR 1939 Calcutta 327]

iii.Velji Raghavji Patel vs. The State of Maharashtra [AIR 1965 SC

1433]

iv.Vir Prakash Sharma vs. Anil Kumar Agarwal & Anr. [(2007) 7

SCC 373]

v.All Cargo Movers (India) Private Limited & Ors. vs. Dhanesh

Badarmal Jain & Anr. [(2007) 14 SCC 776]

vi.New India Insurance Co. Ltd. vs. Sadanand Mukhi & Ors. [(2009)

1 SCALE 252]

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vii.U. Dhar & Anr. vs. State of Jharkhand & Anr. [(2003) 2 SCC 219]

viii.Uma Shankar Gopalika vs. State of Bihar & Anr. [(2005) 10 SCC

336]

In Alpic Finance Ltd. (supra) the dispute was found to be of pure civil

nature.

In Radha Ballav Pal & Anr (supra), the Calcutta High Court looked to

the policies and schemes floated by the Company to opine that in the fact of

the said case no case has been made out for convicting the appellant therein.

But the matter having reached the High court after a judgment of conviction

was recorded, all the materials were brought on record by the parties by that

time.

In Velji Raghavji Patel (supra), it involved a question of dealing with

the assets of a partnership firm by a partner.

In Vir Prakash Sharma (supra), this case primarily revolved around

bouncing of a cheque.

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In Dhanesh Badarmal Jain (supra), the court found only a civil

liability on the part of the accused and opined that it was at best a case of

interpretation of agreement, stating

“16. 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 Respondent 1-plaintiff 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 simpliciter 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 correct, take into consideration 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.”

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Sadanand Mukhi & Ors. (supra) involved a pure civil dispute dealing

with the compensation and insurance policies in the Motor Vehicle Claims

Tribunal (MACT).

Similar was the position in Uma Shankar Gopalika (supra) wherein it

was stated:

“….It is well settled that every breach of

contract would not give rise to an offence of

cheating and only in those cases breach of contract

would amount to cheating where there was any

deception played at the very inception. If the

intention to cheat has developed later on, the same

cannot amount to cheating. In the present case it

has nowhere been stated that at the very inception

there was any intention on behalf of the accused

persons to cheat which is a condition precedent for

an offence under Section 420 IPC.”

Hence the petition of complainant did not disclose any criminal

offence at all much less any offence either under Section 420 or Section

120B of the Indian Penal Code. It was purely civil in nature.

16.We have, however, no doubt in our mind that the Investigating Officer

shall conduct the investigation fairly and impartially and shall allow the

company to carry on its business without any hindrance whatsoever. If any

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books of account or other documents are required, the Investigating Officer

subject to just exceptions may take the xerox copies thereof duly certified by

the accused as also an undertaking that, as and when called upon, they would

produce the said books of account in a court of law.

Subject to the aforementioned directions, the Investigating Officer

shall carry out the investigation in accordance with law.

17.We, therefore, are of the opinion that in the peculiar facts and

circumstances of this case and particularly in view of the materials which

have surfaced during investigation, the impugned judgment cannot be

sustained. It is set aside accordingly. The appeal is allowed with the

aforementioned directions.

……………….…..………….J.

[S.B. Sinha]

..………………..……………J.

[Deepak Verma]

New Delhi;

August 4, 2009

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