Ashwinkumar Shetty vs The State Of Maharashtra And Anr
2017 Latest Caselaw 9334 Bom

vks
       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
              CIVIL APPELLATE JURISDICTION

              CRIMINAL APPLICATION NO.613 OF 2016


Ramesh Dahyalal Shah                             ]
age: 54 years,                                   ]
r/o 702, 7th floor, Jay Maharashtra Vikas        ]
CHS, Gulmohar Cross Road No.5,                   ] Applicant.
JVPD Scheme, Juhu,                               ]
Mumbai 400 049                                   ]

               -versus-

1. The State of Maharashtra                      ]
   Joint Commissioner of Police                  ]
   Economic Offence Wing                         ]
   Craford Market , Mumbai                       ]
                                                 ]
2. Senior Inspector                              ]
  Economic Offence Wing                          ]
  Crawford Market, Mumbai                        ] Respondents.
                                                 ]
3. Mr. Tushar Thakkar                            ]
  age:53 yrs, Occn. Denim Fabrics Dealer         ]
  r/o Flat No.50, 12th floor                     ]
  Utkarsh Housing Society                        ]
  Prabhadevi, Mumbai 400 025                     ]


                                ALONGWITH

              CRIMINAL APPLICATION NO.728 OF 2016


Yardi Prabhu Consultants & Valuers Pvt.          ]
Ltd.,                                            ]
Through Narsimha Kini, Sr. V.P                   ] Applicant.
7/8, Samadhan Agarkar Chowk                      ]
Opp. Railway Station, Andheri (E)                ]
Mumbai 400 069                                   ]

               -versus-


                                   1/26
 ::: Uploaded on - 06/12/2017               ::: Downloaded on - 08/12/2017 03:25:32 :::
 1. The State of Maharashtra                   ]
   Economic Offence Wing                      ]
   Crawford Market, Mumbai                    ]
                                              ]
2. Mr. Tushar Thakkar                         ]Respondents
  r/o Flat No.50, 12th floor                  ]
  Utkarsh Housing Society                     ]
   J.A. Marg, Prabhadevi,                     ]
  Mumbai 400 025                              ]


                         ALONGWITH
              CRIMINAL APPLICATION NO.866 OF 2016


Ashwinkumar Shetty                            ]
Adult, Indian Inhabitant                      ]
Aged: 59 years, Occupation: Chartered         ]
Engineer & Government Registered              ] Applicant.
Valuer, having his office at                  ]
103, Navin Asha, First Floor                  ]
126-A, Dadasaheb Phalke Road                  ]
Dadar (East), Mumbai 400 014                  ]

               -versus-

1. The State of Maharashtra                   ]
   Through the Senior Inspector of the        ]
   Economic Offence Wing, GV-II               ]
   Mumbai                                     ]
                                              ]
2. Mr. Tushar Dharamshee Thakkar              ] Respondents.
  r/o Flat No.50, 12th floor                  ]
  Utkarsh Housing Society                     ]
   J.A. Marg, Prabhadevi,                     ]
  Mumbai 400 025                              ]


Mr. Vikram Choudhary, Senior Advocate a/w
Mr. Sujay Kantawala, Ms. Sophia Pinto, Mr.
Kartik Vig, a/w Mr. H. K. Sudhakara i/by
H.K.S. Legal, for applicant in Application
No.613 of 2016.

Mr. Ram Upadhyay a/w Mr. Dharmesh Singh
i/by K/s Law Competere Consultus for the

                                2/26
 ::: Uploaded on - 06/12/2017            ::: Downloaded on - 08/12/2017 03:25:32 :::
 Applicant in Application No.728 of 2016.

Ms. Deepali Thakkar i/by Anandini Fernandes
for the applicant in Application No.866 of
2016.

Mr. F.R. Shaikh APP for the State.

Mr. Girish S. Godbole a/w Mr. Hitesh C. Soni,
Ms. Jia Kanade, N. Jacob, for respondent No.2
-original complainant.


     CORAM : RANJIT MORE &
             DR. SHALINI PHANSALKAR-JOSHI, JJ.

CLOSED FOR JUDGMENT ON : 23 rd NOVEMBER, 2017

JUDGMENT PRONOUNCED ON : 6 th DECEMBER, 2017

JUDGMENT [PER : DR. SHALINI PHANSALKAR-JOSHI, J.]

1] All these three applications are filed by three different

accused invoking extra ordinary writ jurisdiction of this Court

under Article 226 of the Constitution of India and under Section

482 of Code of Criminal Procedure Code, for quashing F.I.R.No.78

of 2016, registered with N.M. Joshi Marg, Police Station, Mumbai.

the Investigation of which is taken over by Economic Offence

Wing.

2] The said F.IR. is registered at the instance of

respondent No.3 Mr. Tushar Thakkar, against the applicants and

other 11 accused, for the offence punishable under Sections 418,

420,465, 467, 468, 471, 477(a), 506(2) read with 120(b) of the

Indian Penal Code.

3] It is stated by respondent No.3 in his complaint that

he is carrying on business of fabrics and clothing through his

companies namely Tushar Fabrics Pvt. Ltd and Tushar Clothing

Pvt .Ltd. He was introduced to applicant Ramesh D. Shah by one

Mr. Jayesh Tanna, who is contractor, in one of the companies of

the applicant Ramesh Shah.

4] In pursuance of the various negotiations held between

the parties, respondent No.3 agreed to invest the substantial

amount of funds in the company of the applicant by accepting

45% equity share holding in ETCO Denim Pvt. Ltd. According to

respondent No.3 on various representations and inducements

made by the applicant Ramesh Shah, he agreed to enter into

Share Holding Agreement on 12.12.2012, according to which he

was to be appointed on the Board of Directors and designated as

Vice Chairman of ETCO Denim on execution of agreement.

Moreover, as Vice Chairman, he was to receive remuneration of

Rs.2.75 lacs per month. All important decisions of the company

were to be taken jointly by him and the applicant Ramesh Shah.

In pursuance of the said agreement respondent No.3 invested

substantial amount through him and his companies in ETCO and

thereby acquired 45% stake in the total share holding of ETCO.

However, he was not called for AGM and EOGM meetings. The

Directors and financers of ETCO were neglecting and avoiding

him. They also did not keep their promises like appointing him as

Vice Chairman, paying remuneration of Rs.2.75 lacs per month,

giving authority to sign all the cheques, inform the change in

share holding to the bank, allow him to take decision of the

company jointly with him etc., and thus, cheated him.

5] It is further case of respondent No.3 that the applicant

Ramesh Shah has submitted project report about erection and

installation of plant of ETCO at Bijapur, Karnataka and availed

loan of Rs.237 crores from Corporation Bank and other four

banks. However, he did not install the machinery and the plant as

per project report, but installed second hand machinery from

Gulf Denim of Dubai which was almost 18 years old. According to

respondent No.3, applicant Ramesh Shah did this in connivance

with other applicants, namely M/s Yardi Prabhu Consultants and

Valuers Pvt. Ltd, Andheri (E), and also in connivance with

Consortium of Govt. Banks. By this act, applicant Ramesh Shah

siphoned of loan amount for his personal gain and thus, he

cheated the Consortium of Government Banks. The applicants

M/s Yardi Prabhu Consultants and Valuers Pvt. Ltd and M/s A.V.

Shetty and Associates, were appointed by Corporation Bank as a

lead bank on the complaint of respondent No.3 for re-verification

of the value of the machinery installed in the Company. However,

the reports submitted by the said applicants being in connivance

with the applicant Ramesh Shah, did not disclose the true state of

affairs. As per respondent No.3, applicant Ramesh Shah has also

over invoiced the machinery in order to get more capital subsidy

and interest subsidy for the next 7 years from Textile Ministry of

Government of India and thereby caused loss to the said Ministry

also.

6] When respondent No.3 raised before applicant

Ramesh Shah, all these issues, on 3.8.2015 he was threatened by

one Mr. Santosh Sawant on behalf of applicant Ramesh Shah. It is

further case of respondent No.3 that if he was given

distributorship as agreed, he would have earned approximately

Rs.35.40 crores. However, by denying such distributorship to him

and his company, applicant Ramesh Shah caused him loss of

Rs.35.40 crores. As a result, he also suffered loss in his goodwill

and reputation. Thus, according to respondent No.3, applicant

Ramesh Shah along with other two applicants and other accused

including the various banks, in connivance with each other,

committed criminal breach of trust and cheated him to the tune of

Rs.94.13 crores in respect of the investments made by him and

his group companies in ETCO Denim Company.

7] It is on this complaint of the respondent No.3 that C.R.

bearing No.78 of 2016 came to be registered and the investigation

thereof is at present being carried out by Economic Offence Wing,

Mumbai.

8] According to learned counsel for the applicants, even

the bare perusal of this complaint is more than sufficient to reveal

that the entire dispute is arising out of the Share Holding

Agreement entered into between the parties and therefore, this

dispute is predominantly of a civil nature and hence availing

criminal remedy to settle the same is totally a gross abuse and

misuse of the law. It is further submitted by learned counsel for

the applicants that respondent No.3 has already availed civil

remedies, including the remedy before the Company Law Board

and also the Arbitration Proceeding. Respondent No.3 has also

filed suits for recovery of this amount which are pending in the

Court. Only after he failed to get the reliefs in other forums, in

order to recover the amount which he could not do in civil

proceeding, Respondent No.3 has resorted to criminal process. It

is urged that none of the ingredients of the offence alleged being

made out and launch of the criminal process being malafide, the

F.I.R. needs to be quashed and set aside.

9] Per contra, according to learned counsel for

respondent No.3, the contents of the F.I.R. clearly reveal

commission of cognizable offences like cheating, fabrication of

accounts etc., and hence merely because civil proceedings are

also resorted to, the complaint cannot be quashed at the

threshold itself. It is submitted that the acts of applicants are not

only causing loss and cheating to respondent No.3, but also to the

Government machinery and the concerned Consortium of banks.

In such situation, this Court should be slow in invoking it's extra

ordinary jurisdiction to quash the complaint under Section 482 of

the Code of Criminal Procedure, which jurisdiction is to be

invoked only in rare and in exceptional cases.

10] In support of their respective submissions, learned

counsel for both parties have relied upon various Judgments of

the Hon'ble Supreme Court to explain the contours of the

jurisdiction of the High Court under Section 482 of the Code of

Criminal Procedure, for quashing the complaint at the initial stage

itself. Learned counsel for both the parties have also relied upon

various case laws in support of their rival submissions as to when

the resort to criminal prosecution can be taken, even when the

dispute is arising out of the agreement entered into by the

parties.

11] The moot question, therefore, arising for our

consideration in these applications is whether the dispute

between the parties is of predominantly civil nature which is

tried to be converted to the criminal nature so as to recover the

amount which respondent No.3 is claiming as due from the

applicant Ramesh Shah?

12] After hearing learned counsel for the parties and after

going through the allegations contained in the complaint and the

material on record, we are of the firm conclusion that the matter

entirely pertains to civil jurisdiction and not even prima facie

case is made out in the complaint for the offence punishable under

Sections 418, 420,465, 467, 468, 471, 477(a), 506(2) read with

120(b) of the Indian Penal Code. In our opinion, even if the

allegations contained in the complaint are taken to be true on

their face value, complaint gives a clear impression that it is

primarily a case where respondent No.3 is alleging breach of the

terms and conditions of the Share Holding Agreement executed

between the parties on the ground that the applicant Ramesh

Shah is not acting in accordance therewith and not making the

payments as demanded by respondent No.3.

13] It is a common ground between the parties that Share

Holding Agreement was entered into between the applicant

Ramesh Shah and respondent No.3 on 12 th December, 2012, a

copy of which is produced at Exhibit "A". Clause (D), (E) and (F)

of the Agreement reads as under :-

"D. That Shareholder No.3 (Respondent No.3) is one of the leading and renowned distributors of the Denim Fabric in India and is well versed with the market conditions. Shareholder No.3 is also the Chairman and equity Shareholder in another two companies i.e. Tushar Clothing Private Limited and Tushar Fabrics Private Limited. Share holder No.3 has shown interest in the business of the Company and accordingly approached Shareholder No.I (Applicant Ramesh Shah), to buy the Shares of the Company either by self and or his nominees.

(emphasis supplied)

E. The Shareholder Nos.I have clearly informed Shareholder No.3 the intention behind selling the equity Shares is to sustain profit to the Company at least for a period of five years as mentioned in para C hereinabove mentioned.

F. The Shareholder No.3 has accordingly agreed to buy the product of the Company that is to the limit of 40 million meter of Fabric as a Sole Distributor either through his company i.e.

Tushar Fabrics Private Limited and/or through other companies brought in by Shareholder no.3 at the cost of sales (fixed cost+variable cost) +fixed profit of Rs.8 per meter, irrespective of the market conditions prevailing then. If the fabric is sold by Shareholder No.3 at a profit of less than R.8 per meter, then the amount of loss will be debited to Shareholder No.3 or his company, i.e. Tushar Fabric Private Limited. Similarly, if the fabric is sold by Shareholder No.3 at a profit of more than Rs.8 per meter, the excess profit will be credited to Shareholder No.3 or his company i.e. Tushar Fabrics Private Limited"

14] These clauses in the Agreement make it clear that it

was respondent No.3 Tushar Thakkar, who has shown interest in

the business of the applicant Ramesh Shah's company and

accordingly approached the applicant Ramesh Shah to buy

shares of the company either by self or by his nominees. The

applicant Ramesh Shah has clearly informed the respondent

No.3 that the intention behind selling equity shares was to sustain

profit to the company at least for a period of five years and

accordingly it was agreed between the parties that respondent

No.3 would buy product of the company i.e. upto the limit of 40

million meter of fabric as a sole distributor. at the cost of sales

plus fixed profit of Rs.8 per meter irrespective of market

condition prevailing then.

15] Clause No.2.3 of the Agreement states that the

company of applicant Ramesh Shah has already taken credit loan

upto Rs.237 crores from various financial institutions in

consortium for which he has furnished guarantee to the value of

the said amount by pledging 55% shares held by him.

16] Further clauses of the Agreement provide for the

appointment of respondent No.3 on the Board of Directors as Vice

Chairman, with remuneration of Rs.2.75 lacs per month.

17] In pursuance of the said Agreement, respondent No.3

has invested total amount of Rs.49.83 crores. The first grievance

of respondent No.3 is that applicant Ramesh Shah has not acted

in accordance with this Agreement and thereby caused

substantial financial loss to him. The crux of this complaint can be

found in the specific averments made in the complaint as

follows :-

"The initial investment made by me and my group companies with ETCO was Rs.49.83 Crores. Taking into consideration aforesaid basic investment, Ramesh Shah and ETCO Denim Pvt. Ltd, are bound to pay the interest amount of Rs.29.35 crores to me and my group companies. Similarly, Ramesh Shah and ETCO Denim Pvt. Ltd were bound to give me and my companies exclusive distributorship of Denim Fabrics to be manufactured by ETCO Denim Pvt. Ltd., from May 2013 onwards. If they had given this distributorship to me and my companies, we

could have earned approximately Rs.35.40 crores as on today. Ramesh Shah and ETCO Denim Pvt. Ltd, by denying this distributorship to us, have caused loss of approx. Rs.35.40 crores to me and our companies. Due to this, we have also sustained heavy loss as far as goodwill and/or reputation of our companies in the market is concerned. I say that Ramesh Shah owes us 1) Rs.29.38 crores against our unsecured loan and security deposit by TCPL and TFPL, 2) Interest amount of Rs.29.35 crores against our unsecured loan and security deposit and 3) Rs.35.40 crores due to failure to supply denim fabrics by him. Ramesh Shah also along with others has, thereby cheated me and my companies to the tune of Rs.94.13 crores".

18] Thus, the case made out in the complaint of

respondent No.3 is to the effect that by avoiding to pay this

amount which, according to him was due to him, applicant

Ramesh Shah and his company has cheated him and his company

to the tune of Rs.94.13 crores.

19] Now in respect of the offence of cheating, the law is

fairly well settled in various judgments of the Apex Court, some of

which are relied upon by learned counsel for the applicants like

Hridaya Ranjan Prasad Verma & ors -vs Stat of Bihar and

anr (2000) 4 SCC 168; wherein it was observed that,

"It is held time and again that the distinction between mere breach of contract and the offence of cheating is a fine one.

It would depend upon the intention of the accused at the time of inducement, which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of transaction that is the time when the offence is said to have been committed. Therefore, it is the intention which is gist of the offence. To hold a person guilty of cheating, it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such an culpable intention right at the beginning that is when he made the promise cannot be presumed"

20] Here in the case, it is nowhere alleged in the

complaint, even for the sake of it, that since beginning the

applicant Ramesh Shah had dishonest or fraudulent intention of

cheating the respondent No.3. Conversely, both the parties are

having their respective rival contentions for not fulfilling the

terms of the Share Holding Agreement. Hence, it is apparent that

the grievance is against subsequent non-fulfillment of terms and

conditions of the Agreement and not of applicant Ramesh Shah

having such intention of cheating since beginning.

21] Even the recitals in the Agreement reveal that it was

the respondent No.3 who has approached the applicant Ramesh

Shah for making investment in the company of the applicant.

Paragraph (d) of the Agreement, as referred above, makes it clear

that it was respondent No.3, who has shown interest in the

business of the applicant's company and accordingly approached

the applicant Ramesh Shah to buy shares of the company. The

Agreement was, therefore, executed at the instance of respondent

No.3 and hence the question of applicant inducing the respondent

No.3 to enter into such an agreement, with fraudulent intention

of cheating him since beginning does not arise. Therefore,

apparently the dispute appears to be in respect of breach of the

Agreement, which may be on account of subsequent

developments, in respect of which allegations and counter

allegations are made by the parties against each other. On the

basis of mere breach of Agreement, it would not be possible to

hold that applicant Ramesh Shah, had since beginning dishonest

or fraudulent intention of cheating respondent No.3.

22] This inference that dispute appears to be of a

predominantly civil nature can be drawn also from the fact that

the dispute was first taken before the Company Law Board,

Mumbai Bench, Mumbai, by respondent No.3 himself. Copy of the

judgment delivered in the Company Petition No.28 of 2014 on

30.4.2015 is produced on record and it shows that in paragraph

No.83, Company Law board was pleased to observe that:-

"83. ... ... ... ... ... In the early stage of hearing, learned counsel for the petitioner (respondent No.3 herein) had proposed on their behalf that if the Respondents agree to pay back their contribution towards the equity as its face value per share and the amount of the unsecured loan advanced to the Company, the Petitioners would withdraw the petition. .. ... ... ... ... ... ..."

23] Thus, the main demand and the grievance of the

respondent No.3 appears to be for the return of the amount

invested by him in the applicant's company.

24] In paragraph No.84 of the judgment, it was further

held that;

"84. ... ... ... ... Upon critical analysis of the facts and circumstances of the case, it is established that both the groups cannot jointly participate in the management of the company. It is further evident that the two groups of shareholders, lack confidence and mutual trust in each other. It is also clear that the two groups cannot run the management of the company together and the company cannot function smoothly by these two rival groups. ... ... ...".

25] Therefore, finding is arrived at in the judgment that on

account of disputes between the parties over the financial

matters, they have to part the company.

26] The allegations which are made in the present

complaint, that of mismanagement of the company by the

applicant Ramesh Shah were also raised in the Company Petition

and in paragraph No.78, of the judgment, the Company Law Board

was pleased to observe that:-

"78. ... ... ... In the facts of the present case, there are no circumstances suggesting that the Respondents in the formation of the Company or management of its affairs have been guilty of fraud, misfeasance or other misconduct towards the Company or any of its members; or that the members of the Company have not been given all the information with respect to its affairs, which they might reasonably expect. Therefore, to my mind, an order for an investigation would be unjust and improper. Further, an investigation may seriously damage the reputation of a Company and should not be ordered without proper material gathered in the manner provided in law. ... ... ...."

(emphasis supplied)

27] Thus, a clear finding is arrived at, about the

allegations made in the complaint, by the Company Law Board

totally ruling out mismanagement of the affairs of the company or

any fraudulent intention. It was also held that there was no

mismanagement and siphoning of funds. The allegations of illegal

alteration of share holding and denial of information to the

complainant were also negated.

28] It is also pertinent to note that two Summery Suits for

recovery of the amounts bearing COMS/188/2016 and

COMS/222/2016, respectively, are pending in the Court which

are filed by Respondent No.3 Company M/s Tushar Fabrics. The

applicant's company Denim Private Limited has also filed

Summery Suit No.COMSL/257/2016 for recovery of Rs.124 crores

towards loss and damages for non lifting of denim by Respondent

No.3. Arbitration Petition No. ARBP/262/2017 under Section 14

has also been filed by the applicant Ramesh Shah against

Respondent No.3.

29] As to the allegations of respondent No.3 made in the

complaint that applicant Ramesh Shah has over-invoiced for

availing loan of Rs.237 crores from Corporation bank and four

banks and he did not install the machinery in the plant as per

project report, but installed second hand machinery from Gulf

Denim Company, which was 18 years old; it is again a matter of

record that the applicant M/s Yardi Prabhu Consultants and

Valuers Pvt. Ltd., was appointed for the purpose of verification of

the same. Thereafter the matter was even referred to the

applicant M/s A.V. Shetty and Associates, which was appointed by

the Corporation Bank. Both of them have also submitted their

project reports negating the allegations made to that effect in the

complaint. The Company Law Board has effectively dealt with

these allegations in its judgment in paragraph No.77 as follows :-

"77. ... ... ... ... ... It is a matter of record that after receipt of various complaints from the Petitioners (the present respondent No.3), the consortium of banks passed an order for conducting special audit of the company. In addition, an independent Engineer was deputed to verify the facts of the complaint. However, after verification as per reports, the banks did not find any substance in the complaints of the Petitioners. It has been rightly contended by Mr. Zal Andhyarujina that the Banks normally do not conduct a forensic audit and they, based on the existence financials of the Company, give their report. Further, the engineer deputed by the Banks also only verified the invoice value and did not enter into the investigation as to the correct market value of the machineries. I also agree that no Bank would invite any adverse report to their own project report prepared by their officers during the time, they decide to advance loans to a Company. However, in absence of any corroborative material, the onus of which was on the Petitioners, there is no reason to disbelieve that reports of independent persons which are in favour of the Respondents".

(emphasis supplied)

30] Thus, as rightly held by the Company Law Board, the

banks would not invite any adverse report to their own project

report prepared by their officers during the time, they decide to

advance loans to a company. However, in absence of any

corroborative material, it becomes difficult to disbelieve the

reports of these independent persons merely because they are

favouring to applicant Ramesh Shah or to infer connivance

between them and applicant so as to implead them also along with

consortium of banks as accused in the case.

31] With regard to the complaint made by respondent

No.3 to the Corporation Bank, in this respect, the bank has in it's

meeting dated 27.3.2014, specifically held that :-

"With regard to valuation of machineries and end use of the loan amount, it was observed that a Competent LIE i.e. M/s Yardi Prabhu from the panel of Lead Bank, was appointed, who has made six visits to the site from time to time. LIE reports and CA's certificates were duly requisitioned at regular intervals for monitoring of the project. On completion of the project, another LIE i.e. M/s A.V. Shetty & Associates from Lead Bank's panel list was also engaged. The fresh valuations have been carried out by M/s A.V. Shetty & Associates and they have already submitted their report wherein the valuation of machinery and the project on the whole have been found to be satisfactory. The report concludes as under:-

"After inspection and verification of the cost of the project based on the data provided by the Company and market information based on

primary and secondary research and analysis of the comparative cost estimates of reputed suppliers (domestic & international) for plant and machinery purchased and installed by the Company the costs incurred by the Company are reasonable and fair and in line with the market norms taking into account the specification/configuration and suitability for the project".

Hence the reports furnished by both LIE's are satisfactory".

32] As regards the allegations of applicant Ramesh Shah

indulging in money laundering or over invoicing and therefore,

being black listed for a period of five years and two years

respectively, by SEBI, it is pointed out by learned counsel for the

applicant Ramesh Shah that the said order of the SEBI has

already been set aside on 07.07.2004 by Securities Appellate

Board Appellate, Mumbai , in Appeal bearing No.118 of 2003.

33] Thus, it is apparent that respondent No.3 has

approached every forum available to him to raise his grievances

and after being unsuccessful there, now he is giving the colour of

criminal offence to this civil dispute by filing the subject

complaint and levelling the same allegations. After realising that

the banks are also not supporting him, he has implicated the

Consortium of Banks also as accused in the case alongwith the

valuers namely the applicants M/s Yardi Prabhu and M/s

M.A.Shetty, thereby trying to disrepute and discredit the

verification of the machinery conducted by them also. The

intention of the respondent No.3, therefore, appears to be to use

the police machinery with malafide intention to recover the

amounts which he is unable to recover by civil mode. Therefore,

it is sheer abuse of the process of law.

34] Here is thus a case which is predominantly of civil

nature and which has been given the robe of criminal offence that

too, after availing civil remedies. Therefore, as held by the Apex

Court in the case of State of Haryana and others -vs- Bhajan

Lal and otherss 1992 Supp (1) SCC 335, where a criminal

proceeding is manifestly attended with malafide intention and/or

the proceeding is maliciously instituted with object to serve the

oblique purpose of recovering the amount, such proceeding needs

to be quashed and set aside. The allegations made in the present

complaint, even after taken, as they are, also do not make out

ingredients of the criminal offence, though at the most they may

attract civil dispute, for which respondent No.3 has already taken

recourse to the civil law and therefore, on this count also,

complaint needs to be quashed and set aside.

35] In this respect, one can safely place reliance on the

observations of the Apex Court in the case of Chandran

Ratnaswami -vs- K.C. Palanisamy and ors (2013) 6 SCC 740,

relied upon by learned counsel for applicant, wherein it was held

that, when the disputes are of civil nature and finally adjudicated

by the competent authority, as in the present case, by the

Company Law Board and the disputes are arising out of alleged

breach of joint venture agreement and when such disputes have

been finally resolved by the Court of competent jurisdiction, then

it is apparent that complainant wants to manipulate and misuse

the process of Court. In this judgment, it was held that, it would

be unfair if the applicants are to be tried in such criminal

proceeding arising out of the alleged breach of a Joint Venture

Agreement. It was further held that the wholesome power under

Section 482 of Code of Criminal Procedure entitles the High Court

to quash a proceeding when it comes to the conclusion that

allowing the proceeding to continue would be abuse of the process

of the Court or that the ends of justice require that the

proceedings ought to be quashed.

36] As a matter of fact in the case in Indian Oil Corpn

-vs- NEPC India Ltd and ors, 2006 (3) SCC Cri 736, the Apex

Court was pleased to caution about the growing tendency in

business circles to convert purely civil disputes into criminal

cases. It was observed that:-

"Any effort to settle civil disputes and claims which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged"

37] Learned counsel for applicant has also relied upon the

judgment of Hon'ble Supreme Court in the case of V.Y. Jose and

anr -vs- State of Gujarat (2009) 3 SCC 78, wherein the Apex

Court was once again pleased to observe that:-

"Section 482 serves a salutary purpose that a person should not undergo harassment litigation, even though no case has been made out against him. A matter which essentially involves disputes of civil nature, should not be allowed to be subject matter of a criminal offence, the latter being a shortcut of executing a decree which is non-existent".

38] As regards the authorities relied upon by learned

counsel for respondent No.3, they pertain to different facts and

circumstances. For example, in the case of M. Viswanathan -vs-

S.K. Tiles and Potteries Private Ltd and ors, (2008) 16 SCC

390, it was found that the issues raised in the complaint were not

adjudicable solely by Civil Court or Company Law Board and

hence quashing of the complaint by High Court under Section 482

was not upheld.

39] In the latest judgment of Apex Court in the case of

Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai Karmur and

ors -vs- State of Gujarat and anr, in Criminal Appeal No.1723

of 2017 dated 4 th October, 2017; also as it was found that the

case involves allegations of extortion, forgery, fabrication of

documents, utilization of those documents to effectuate transfers

of title before registering authorities and the deprivation of the

complainant of his interest in land on the basis of fabricated

power of attorney. Hence, it was held that such allegations in the

F.I.R., cannot be construed to be of a merely private or civil

dispute. They implicate serious offence having a bearing on a vital

societal interest and therefore, it was held that the High Court

was justified in declining to quash the F.I.R., though the matter

was amicably settled between the private parties.

40] In the case of State of Maharashtra and ors -vs-

Arun Gulab Gawali, (2009) 9 SCC 701, relied upon by

learned counsel for respondent No.3, Court has explained the

parameters and ambit of section 482 of the Code of Criminal

Procedure, in the light of decision of Apex Court, in case of State

of Haryana -vs- Bhajanlal. Applying those very parameters,

here in the case we find that allowing prosecution to continue

when the dispute is of civil nature and does not disclose

commission of cognizable offence, would be an abuse of process of

law as the complaint is filed to recover only funds from applicant

Ramesh Shah for which respondent No.3 has already filed civil

suit.

41] Hence, we allow all these three applications and

hereby quash and set aside the F.I.R.No.78 of 2016, registered

with N.M. Joshi Marg, Police Station; the Investigation of which is

taken over by Economic Offence Wing.

42]            Rule is made absolute in above terms.



[DR.SHALINI PHANSALKAR-JOSHI, J.]               [RANJIT MORE, J.]