M/S. G.S. Fertilisers Pvt. Ltd. ... vs M/S. Dhanlaxmi Engineering ...
2016 Latest Caselaw 761 Bom

                                               -1-

             IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                        CRIMINAL APPLICATION NO. 3848 OF 2005




                                                                                   
    1.    M/s. G. S. Fertilisers Pvt. Ltd.




                                                           
          Having its address at Podar Point,
          113, Park Stree, Block-A,
          1st floor, Kolkata, 700 016.

    2.    Mr. Amit Kumar Sanei,




                                                          
          aged 26 years,
          having his address at Podar Point,
          113, Park Street, Block-A,
          1st Foor, Kolkata 700 016.                               ......    Applicants




                                               
                  Versus

    1.
                                   
          M/s. Dhanlaxmi Engineering Enterprises
          a partnership firm, having its office at
          D-1, Vibha Co.op Society Ltd.,
                                  
          73/1, Erandavane, Pune 411 004.

    2.    State of Maharashtra                                     ......    Respondents
           

    Mr. Subodh Desai, Advocate for the Applicants.
        



    Mr. Ishwar Nankani & Ms. Ruja Pol I/b M/s. Nankani & Asso. For the Respondent
    no. 1.

    Ms. M. R. Tidke, APP for the State-Respondent no. 2.





                                           Coram :-        C. V. BHADANG, J

                    Reserved for Judgment of Date :        11th March, 2016





                     Judgment Pronounced on Date:          21st March, 2016


    JUDGMENT

By this application, under Section 482 of the Code of Criminal

Procedure, the Applicants, (original Accused nos. 1 and 2) are challenging the

CRI-APP-3848-05

Order dated 23.04.2004 passed by the learned J.M.F.C. (AC) Pune in R.C.C. no.

1296 of 2004. By the impugned Order, the learned Magistrate has issued process

against the Applicants for the offence punishable under Section 420 read with

Section 34 of the Indian Penal Code.

2. The brief facts necessary for the disposal of the application may be

stated thus :

That, the Applicant no. 1 is a private limited Company registered

under the Companies Act, 1956 having a registered office at Kolkata. The

Applicant no. 2 is a Director of the Applicant no. 1. The Applicant-Company is, inter

alia, engaged in manufacture and sale of fertilizers. The first Respondent is a

partnership firm having office at Pune.

3. In the year 1997, the Applicant no. 1 had invited tenders for design

engineering, supply, erection and commissioning on turn-key basis of 10 TPH NPK

Granulation plant at Orgaon Burdwan. It appears that eventually the first

Respondent was granted the work order by the Applicants on 11.06.1997 for the

turn-key project. The material term being Clause no. 5 of the work Order, reads

thus :

"Sales Tax & Excise :

For the equipments to be supplied by you from Maharashtra, CST @4% against Form 'C' will be given by us. For the equipments to be purchased by you in West Bengal on our account, the purchase should be made in our name as we enjoy exemption of W. B.

Sales Tax against P.C. These local purchases will be

CRI-APP-3848-05

adjusted to your account. Excise duty on Rs.70,00,000/- @ 3% equal to Rs.2.10 Lacs max. shall

be payable by G. S. Fertilisers Private Ltd. Any extra payment on account of Excise shall be taken care of

M/s Dhanalaxmi Engineering Enterprise."

The work order further stipulated that the plant should be ready for

production by 28.02.1998 and, in the event of failure thereof, the first Respondent

was liable to a penalty as stipulated in the Order.

4. According to the Applicants, from time to time, an amount in excess of

Rs. 1 Crore has been paid to the first Respondent towards the bills raised.

However, inspite of the payment, the first Respondent failed to complete the work in

terms of the Work Order/Contract dated 11.06.1997. The Applicants also claimed

that the first Respondent deviated from the specifications for the granulation plant

by supplying defective machineries. In short, certain disputes arose between the

parties as to the compliance to the work orders/contract and the Applicants claimed

that the first Respondent failed to rectify the defects inspite of being called upon to

do so. It further appears that the Applicants had invoked the Arbitration Clause

under contract and had approached the Calcutta High Court. However, according

to the Applicants, the first Respondent requested and prevailed upon the said

Applicants not to press the said Application and undertook to rectify the defects and

to give performance trial guarantee. However, the first Respondent again failed to

keep the promise.

5. According to the Applicants, in order to camouflage their shortcomings

CRI-APP-3848-05

and in order to escape from their liabilities under the Work Order/Contract dated

11.06.1997, the first Respondent issued a notice to the Applicants on 04.09.2002

calling upon the Applicant no. 1 to submit form 'C' under the Central Sales Tax Act.

It was contended that the non-submission of the said forms was in breach of the

Contract as a result of which the first Respondent had to incur financial loss since

the assessment for the years 1997-98 and 1998-99 were completed without

submission of the said forms. According to the first Respondent, this had resulted

in a demand raised by the Sales Tax Authorities against the first Respondent

towards difference in the Sales Tax applicable at the normal rate which was 13%

and the Sales Tax at concessional rates at 4% on submission of the form 'C'.

Further, according to the first Respondent, the Applicants had wrongfully gained

Rs.15,32,378/- and had misappropriated the said amount.

6. It is in these circumstances, that the first Respondent filed a private

complaint before the learned JMFC at Pune alleging commission of offences under

Section 403, 406 and 420 read with Section 34 of the Indian Penal Code. In short,

the case made out in the complaint was that the Applicants misrepresented that

they had the necessary authority and permission to issue form 'C' on the basis of

which the first Respondent supplied to the Applicants the materials and raised

invoices charging therein sales tax at 4% against submission of form 'C' to be

issued by the Applicants. It was contended that the Applicants dishonestly induced

the first Respondent to deliver the material by charging @ 4% sales tax against

form 'C' without having the form 'C' or the authority to issue form 'C'.

CRI-APP-3848-05

7. The learned Magistrate by the impugned Order issued process

against the Applicants for the offence punishable under Section 420 read with

Section 34 of the Indian Penal Code. Feeling aggrieved, the Applicants are before

this Court.

8. I have heard the learned Counsel appearing for the Applicants, the

learned Counsel appearing for the Respondent no. 1 and the learned APP

appearing for the Respondent no. 2.

9.

It is submitted by the learned Counsel for the Applicants that no

ingredients of the offence punishable under Section 420 of the Indian Penal Code

are made out. It is submitted that the dispute is essentially of a civil nature arising

out of the breach of Contract, that too by the first Respondent. It is submitted that

only by way of a counter blast and to camouflage the breach of the Contract by first

Respondent, that the first Respondent raked up the issue of non-submission of the

form 'C'. It is submitted that out of the consideration of Rs.103.75 lacs, the amount

of Rs.103.50 lacs has already been paid to the first Respondent and, as such, no

intention to cheat can be gathered. It is submitted that the learned Magistrate failed

to apply mind to the complaint and the allegations therein and erred in issuing

process for an offence of which no ingredients are made out.

It is next submitted that the Contract was entered into in West Bengal

and the machinery was also to be supplied in West Bengal and thus Pune Court

cannot have territorial jurisdiction to entertain the complaint. It is submitted that the

learned Magistrate failed to address himself on this aspect and erroneously

CRI-APP-3848-05

assumed jurisdiction, when there existed none, while issuing the process. It is

submitted that the complaint read as a whole, does not make out a case for

issuance of process and the complaint deserves to be quashed.

10. On the contrary it is submitted on behalf of the first Respondent that

the Applicant has alternate remedy of challenging the order in a revision

application and, as such, this Court may not invoke its inherent powers under

Section 482 of the Code of Criminal Procedure. In so far as merits are concerned,

it is submitted that the issue about the alleged breach of Contract or non-

compliance with the Work Order/Contract, is not involved in this case and the

material issue is about a misrepresentation and deceit practiced by the Applicants

of inducing the first Respondent to deliver the machinery by charging sales tax at a

concessional rate and of misrepresentation about the submission of the form 'C'

when the Applicants were not having the 'C' form or the authority to do so. It is

submitted that this was the intention of the Applicants since inception and the

learned Magistrate was justified in finding that a case for the issuance of process

under Section 420 of the Indian Penal Code, is made out.

11. In so far as the objection to the territorial jurisdiction of the Court at

Pune is concerned, it is submitted that the Court within whose jurisdiction

consequences ensue will have territorial jurisdiction. The learned Counsel has

referred to the complaint in order to show that the consequences had ensued in

Pune where under the Sales Tax authorities had raised a demand against the first

Respondent for the difference in the sales tax. He submitted that the matter is at a

CRI-APP-3848-05

preliminary stage and the Applicants would get an opportunity to establish their

innocence at the trial and this is not a case where the Court should exercise

inherent jurisdiction under Section 482 of Code of Criminal Procedure.

12. I have given my anxious consideration to the rival circumstances and

the submissions made. Undoubtedly, the matter arises out of a contract for supply,

erection and commissioning of a plant and to that extent the dispute may have

over tones of a civil dispute. However, in a given case, an act of commission or

omission can give rise to a liability which may be both civil and criminal in nature.

The essential difference between a claim for breach of Contract simpliciter and

fraud/cheating is about the intention of the party at the inception of the contract. If it

is shown that since beginning the intention was not to abide by the Contract and/or

where there is a misrepresentation, the act/omission would also involve criminal

consequences. At the stage of issuance of process, the Magistrate was required to

confine himself to the allegations in the complaint and the verification recorded.

The probable defence, if any, would not come in picture at the stage of issuance of

process. The first Respondent has contended in Para 9 of the complaint that the

first Respondent during his personal visit in or around March-April 2002 had visited

the Commercial Tax Department, West Bengal, where he learnt that the Applicants

had not even applied to the Sales Department, West Bengal till that time for

authority to issue form 'C'. Indisputably, as per Clause 5 of the Work

Order/Contract reproduced above, the Applicants had agreed to submit form 'C' on

the basis of which CST at the concessional rate of 4% was chargeable. Clause no.

5 further makes it clear that this pertains to the equipments supplied by the first

CRI-APP-3848-05

Respondent from Maharashtra, inasmuch as the equipments to be purchased by

the first Respondent for supply to the Applicants in West Bengal was to be in the

name of the Applicants as the Applicants were enjoying exemption under the West

Bengal Sales Tax Act against P.C. Thus, the material dispute essentially turns

upon, as to whether the Applicants were indeed having the form 'C' or the authority

to issue the same on the date on which the Work Order/Contract was

issued/entered on 11.06.1997. This aspect can be gone into by the learned

Magistrate when the complaint proceeds further.

13.

There is one more aspect of the matter which may be significant. The

process is issued for the offence punishable under Section 420 of the Indian Penal

Code and, as such, the Criminal case before the Magistrate would be a warrant

triable case which is instituted otherwise than on police report. Thus, in view of the

provisions of the Code of Criminal Procedure, the Magistrate would be obliged to

record evidence before charge and then decide whether charge needs to be

framed after hearing the first Respondent and the Applicants. Thus, the Applicants

would get an opportunity to contest the matter and demonstrate that no case for

framing of charge is made out, It will always be open for the Applicants to

demonstrate that they were indeed having the form 'C' or the necessary authority

to issue the same on the date on which the Work Order was issued. The learned

Magistrate shall consider the said aspect and then decide whether a case for

framing of charge is made out.

14. The offence under Section 420 of the Indian Penal Code can be seen

CRI-APP-3848-05

as a species of the offence of cheating as defined under Section 415 of the Indian

Penal Code. The offence under Section 415 of the Indian Penal Code envisages

deceit where any person fraudulently or dishonestly induces the person so

deceived to deliver any property to any person, or to consent that any person shall

retain any property or intentionally induces the person so deceived 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 or property. The explanation to Section 415 of the Indian Penal

Code, makes it clear, that dishonest concealment of fact is a deception, within the

meaning of said Section. Thus, intentional inducement and dishonest concealing

whereunder the person deceived is induced to do or omit to do anything, which he

would not have done or omitted, if he was not so deceived and the consequent

damage or harm is a sina qua non for the offence of cheating. Section 420 of the

Indian Penal Code envisages the offence of cheating and dishonestly inducing

delivery of property.

15. The learned Counsel for the Applicants had referred to a copy of form

'7' issued under the West Bengal Sales Tax Rules, 1995, to show that the sales of

class/classes of goods of the business of the Applicants as set out in the said form

'7' were exempted from tax under sub-clause (xi) of clause (a) of sub-section (3) of

Section 17. Prima facie, at this stage, the issue is about the submission of form 'C'

under the Central Sales Tax Act and the Clause no. 5 as referred earlier, would

show that the submission of form 'C' was agreed insofar as the equipments which

were to be supplied from Maharashtra are concerned.

CRI-APP-3848-05

In such circumstances, I am unable to persuade myself to hold that a

case for invoking inherent powers under Section 482 of Cr. P. C. for quashing of the

complaint is made out.

16. Insofar as the issue about territorial jurisdiction is concerned, the

learned Counsel appearing for the first Respondent has submitted that the offence

can also be tried where the consequences had ensued which may be an argument

referable to Section 179 of the Code of Criminal Procedure. Indisputably, the said

Section would be attracted only where the Act alleged, is an offence by reason of

anything, which has been done and of consequences which have ensued. It will

be thus open for the Applicants to raise this issue before the learned Magistrate

and the learned Magistrate shall decide the same whilst deciding whether a charge

needs to be framed in the light of the documentary and other evidence on record

and the provisions of Section 179 of Code of Criminal Procedure. As the complaint

is still pending before the learned Magistrate, I do not propose to record any

conclusive finding, so as to prejudice any of the parties.

17. The learned Magistrate shall appropriately consider the relevant

provisions of Section 415 and 420 of the Indian Penal Code along with Section 179

of the Code of Criminal Procedure and shall decide on the question of territorial

jurisdiction also. Needless to mention that the learned Trial Court shall proceed to

decide the matter uninfluenced by any of the observations herein as this Court has

not recorded any final or binding opinion on merits.

CRI-APP-3848-05

18. In the result, the Criminal Application is hereby dismissed.

C. V. BHADANG, J.

arp/*

CRI-APP-3848-05