Escorts Yamaha Motors Ltd. vs State And Another
1998 Latest Caselaw 1056 Del

JUDGMENT

Devinder Gupta, J.

1. The petitioner Company has in this petition instituted on 10.7.1998 sought quashing of FIR No. 285/98 registered on 9.5.1998 at P.S. Rajouri Garden for offences under Sections 420/406/468, I.P.C.

2. The complainant Shri Sunil Kumar of M/s. S.K. Automobiles, on whose complaint F.I.R. was registered was not imp leaded as a party. He was permitted to be added as respondent No. 2. A preliminary objection was taken by respondent No. 2 that the persons named in the FIR, namely, the officers of the petitioner Company, had not chosen to approach the Court, instead the petition has been filed by the Company in its own name. To meet with such an objection, the petitioner filed an application (Cr. Misc. No. 5068/98) praying for impleading the officers of the Company named in the F.I.R. as co-petitioners. This application is being opposed by respondent No. 2 in addition to contesting the main petition.

3. On 14.4.1998 a complaint in writing was made by respondent No. 2 to the S.H.O., Police Station, Rajouri Garden alleging that the top senior most officers of the petitioner Company, with dishonest and mala fide intention after hatching a criminal conspiracy, played fraud, criminal breach of trust and misappropriation thereby causing financial loss, business loss, reputation loss and mental agony. It was alleged that M/s. S.K. Automobile was the authorised dealer of M/s. Escorts Yamaha Motor Ltd. since 1989. Its sister concern M/s. S.K. Motors had been appointed as C & F Agent. Considerable amount had been invested in business by M/s. S.K. Motors and its sister concern. Supply of motor cycles has been on cash payments but on the direction of the petitioner Company, blank cheques used to be entrusted to the petitioner Company so that the same may be utilised only against future supply of Motor Cycles and for no other purpose. Through letter dated 19.1.1998 addressed to Mr. D.R. Pabreja, Dy. General Manager (Commercial) a cheque book containing 50 cheques duly signed from Sr. No. 610551 to 610600 drawn on Oriental Bank of Commerce, Vishal Enclave Branch, New Delhi were handed over. Out of these the petitioner had already encashed 28 cheques bearing Nos. 610551 to 610578 worth Rs. 1.40 crores against current supply of Motor Cycles. Remaining cheques were also to be used for the same purpose, for future supply of motor cycles. On 16.3.1998 a letter was received from Shri Rajinder Sharma, an officer of petitioner Company informing that they shall be presenting two cheques bearing Nos. 610579 and 610580 for Rs. 75,00,000/- each, (total Rs. 1,50,00,000/-), being the amount claimed to be due from M/s S.K. Automobiles as outstanding towards the petitioner, on the basis of their own calculation. The complaint alleged that the amount was not due. There was also no occasion or justification for making demand, especially when respondent No. 2 had been duly and fully complying with the payment plan dated 28.11.1997 regularly. As such respondent No. 2 replied to the said letter dated 16.3.1998 pointing out that the cheques should not be presented in bank as the same were not meant for any other purpose other than the future supply of motor cycles after 19.1.1998 and requested for return of the remaining blank signed cheques immediately. Simultaneously the bankers were also informed to stop all payments of the two cheques favouring the petitioner Company.

4. In nutshell the complainant stated that various officials of the petitioner Company in collusion with each other hatched a conspiracy and committed criminal breach of trust by using signed blank cheques, without his permission, which were not meant for the purpose for which the same were issued. At the time of misappropriating/using the cheques, intention of officials of petitioner Company was clear to cheat respondent No. 2 monetarily. They thus caused a financial loss of Rs. 8,982/-, being the amount incurred in getting the payment of the cheques stopped. Thus it was alleged that the officials forged valuable security, namely, signed blank cheques, which were with the petitioner Company as security for specific use. Monetary loss could have been much more had the payment not been got stopped.

5. The ground on which F.I.R. is sought to be quashed is that S.K. Automobiles was appointed by the petitioner as dealer for sale of Motor Cycles manufactured by the petitioner by virtue of Dealer Sale Agreement dated 1.11.1996. On 1.9.1997 respondent No. 2 owed to the petitioner a sum of Rs. 164 lakhs, which he failed and neglected to pay despite repeated demands. A joint meeting was held between the officers of the petitioner and respondent No. 2 in which respondent No. 2 undertook to clear all outstanding dues by March, 1998. This was duly recorded in the Minutes (Annexure-P.2) of the meeting held on 3.9.1997 drawn and signed by both the parties. Despite this respondent No. 2 failed to comply with the undertaking. Instead of even paying monthly installment of Rs. 6,00,000/-, a letter was addressed on 7.11.1997 (Annexure-P. 3) by respondent No. 2 acknowledging his liability towards the petitioner and promising to clear the amount quickly. Again respondent No. 2 failed to abide by its own schedule by not making payment in September, 1997. Another joint meeting was held on 8.11.1997. During discussion respondent No. 2 again acknowledged his liability of S.K. Automobiles to pay the outstanding dues. Minutes (Annexure-P. 4) of the said meeting were duly drawn and signed by the parties. Again respondent No. 2 miserably failed to clear the dues and as transpired later, respondent No. 2 by his false promise and assurances was misleading the petitioner. Respondent No. 2 assured, promised and undertook to make prompt payments against supply of vehicles for which purpose he handed over to the petitioner 50 cheques by way of security for advance payment suggesting to encash the cheques in case of delay or default in payment due or as promised and induced the petitioner to put through the supplies of vehicles, as ordered by respondent No. 2 from time to time. Respondent No. 2 had undertaken to keep the said monies in trust for and on behalf of the petitioner. On the one hand respondent No. 2 continued to take delivery of vehicles, sold them in the market and earned profits, while on the other hand it failed and neglected to pay the petitioner. In good faith and as a concession, the petitioner permitted respondent No. 2 to scale down the outstanding, which stood at a staggering sum of Rs. 164/- lacs as on 1.9.1997, in instalments, as proposed by respondent No. 2 himself. When respondent No. 2 turned dishonest and simply did not want to pay the money long due and payable to the petitioner, on 16.3.1998 a letter was addressed to respondent No. 2, M/s. S.K. Automobiles, cautioning that its cheques No. 610579 and 610580 for Rs. 75,00,000/- each were being presented to their bank for encashment.

6. It is further the petitioner's case that as respondent No. 2 had handed over these cheques to the petitioner as security, on the understanding and with the undertaking that in case of default in due payment by M/s. S.K. Automobiles, the petitioner may instantly and without any advance notice present the cheques to their Bank and that on such presentment, respondent No. 2 would honour them; it was incumbent and obligatory on the part of the complainant to make arrangement for encashment of the cheques. The said notice dated 16.3.1998 (Annexure-P.5) was given by way of abundant caution. However, the cheques were dishonoured on presentation. In order to avoid petitioner's demand for immediate payment of the amount covered by the cheques, S.K. Automobiles filed a petition under Section 11 of the Arbitration and Reconciliation Act, 1996 in this Court for appointment and reference of the disputes, alleged therein, to arbitration. Another application under Section 9 of the Arbitration & Reconciliation Act was also filed by M/s. S.K. Automobiles seeking direction against the petitioner to forthwith resume supplies of vehicles/motor cycles during the pendency of the petition. In the petition, S.K. Automobiles deliberately suppressed material fact that it owed to the petitioner an amount in excess of Rs. 1.64 crores, that it had expressly and repeatedly acknowledged its liability towards the petitioner and had failed to pay up the same despite repeated promises and assurances. M/s. S.K. Automobiles concealed and suppressed this fact that 50 cheques had been entrusted to the petitioner as security on mutual understanding and with the undertaking that the petitioner may encash the cheques in case of delay or default in payment of amounts due and payable to the petitioner without any further notice to respondent No. 2. Arbitration petition is being contested by the petitioner. Furthermore, M/s. S.K. Automobiles could not succeed in obtaining any interim relief.

7. In the above background the petitioner sought quashing of FIR contending that pith and substance of the grievance forming the subject matter of FIR is substantially and specifically raised in the arbitration petition. When M/s. S.K. Automobiles failed to obtain any interim relief in the petition preferred under Section 11 of the Arbitration and Reconciliation Act, 1996, in its attempt to somehow intimidate, blackmail and pressurise the petitioner so that the petitioner may succumb to its unlawful demands, S. K. Automobiles got registered FIR, which was nothing but gross abuse of the process of law. On the complainant's own showing dispute raised is of civil nature. The alleged grievances are civil wrong. M/s. S.K. Automobiles has itself filed petition seeking appointment of Arbitrator and reference of substantially the same dispute, as forming the subject matter of the complaint. Having elected his remedy by filing petition under Arbitration Act, raising substantially the same dispute, FIR filed belatedly is barred by the doctrine of election. Other grounds alleged in the petition are that on the facts alleged in the F.I.R. no case of cheating, misappropriation or forgery is made out.

8. The petition is opposed by the respondent on numerous grounds alleging that FIR has rightly been registered. The officials of petitioner Company committed forgery, intending that the documents forged shall be used for the purpose of cheating and also committed breach of trust by forging the cheques and filling the blanks therein, 50 cheques were entrusted to the petitioner, which the petitioner dishonestly used, in violation of the legal contract. The petitioner dishonestly induced respondent No. 2 to deliver the cheques for a different purpose and dishonestly converted the same to misappropriate the proceeds thereof. When the petitioner in mala fide manner abruptly stopped supply of motor cycles, especially when the petitioner had agreed to supply vehicles on cash basis, S.K. Automobiles had no option but to invoke the arbitration clause. During pending of the said petition, in order to overreach the issues, pending before the Court, a letter was issued terminating the dealership of S.K. Automobiles. The filing of petition seeking appointment of Arbitrator is an independent remedy, which respondent No. 2, in addition to seeking criminal action is entitled to avail. There is absolutely no ground entitling the petitioner to seek quashing of FIR merely at an initial stage, when investigation is still in progress. Filing of this petition is nothing but only gross abuse of the process law.

9. Learned Counsel for the parties were heard at length.

10. On the question of exercise of extraordinary power under Article 226 of the Constitution of India or inherent powers under Section 482 of the Code of Criminal Procedure on analysing series of decisions, the Supreme Court in State of Haryana and Others Vs. Ch. Bhajan Lal and Others, , categorised cases, by way of illustration only wherein such powers could be exercised, either to present abuse of the process by any Court or otherwise to secure the ends of justice, making it clear that it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such powers should be exercised. A note of cation has been given to the effect that power of quashing criminal proceeding should be exercised very sparingly and with circumspection and that too in rarest of rare cases making it further clear that the Court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the F.I.R. or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the Court to act according to its whim or caprice.

11. The principles as culled out in Bhajan Lal's case (supra) were reiterated in State of Bihar and Another Vs. P.P. Sharma and Another, 1992 Supp (1) S.C.C. 222; Rupan Deol Bajaj (Mrs.) and Another Vs. Kanwar Pal Singh Gill and Another, and State of Maharashtra Vs. Ishwar Piraji Kalpatri and Others, . The decisions are also to the extent that if the complaint, which is made, is correct and an offence has been committed, which all have to be established in a Court of law, it is of no consequence that the complainant was a person who was inimical or that he was guilty of mala fides. In other words it has been said in Bajaj's case (supra) that if the ingredients, which establish the commission of the offence or misconduct exist then, the prosecution cannot fail merely because there was an animus of the complainant or the prosecution against the accused. Relying upon the observations made in P.P. Sharma's case (supra), it was held that when an information is lodged at police station and an offence is registered, then the mala fides of the informant would be of secondary importance. It is the material collected during the investigation and evidence led in Court, which decides the fate of the accused person. The allegations of mala fides against the informant are of no consequence and cannot by itself be the basis for quashing the proceedings.

12. In State of H.P. Vs. Pirthi Chand and Another, , the Apex Court held that prime consideration should only whether the exercise of the power would advance the cause of justice or it would be an abuse of the process of the Court. Such inherent powers to quash FIR should be exercised only in the rarest of rare cases.

13. Reiterating the principles the Supreme Court in State of Bihar Vs. Rajendra Agarwala , held that inherent power of the Court should be very sparingly and cautiously used only when the Court comes to the conclusion that there would be manifest injustice or there would be abuse of the process of the Court, if such power is not exercised. It is not open for the Court either to sift the evidence or appreciate the evidence and come to the conclusion that no prima facie case is made out, especially at the initial stage, when investigation is still in progress. The aforementioned principles have further been reiterated in Mushtaq Ahmed Vs. Mohd. Habibur Rehman Faizi and Others, (1996) 7 S.C.C. 400=I (1996) CCR 154 (SC) and State of U.P. Vs. O.P. Sharma (1996) 7 S.C.C. 7051 (1996) CCR 171 (SC).

14. Applying the aforementioned principles, it will have to be seen that whether the facts and circumstances of the case do make it a case for exercise of jurisdiction. It will not be proper for us at this stage to go into the merits of the respective cases of the parties or to appreciate the same and make over comments thereupon. The case will have to be examined in the light of the allegations made in the complaint.

15. The case of the petitioners is that 50 cheques were handed over by respondent No. 2 by way of security for advance payment suggesting to encash the cheques in case of delay or default in payment due or as promised. M/s. S.K. Automobiles had undertaken to keep the said money in trust for and on behalf of the petitioner. On one hand M/s. S.K. Automobiles continued to take delivery of vehicles, sold to them in the market and earned profit while on the other hand it failed and neglected to pay the petitioner. Though no notice was required to be served, a letter dated 16.3.1998 was addressed to M/s. S.K. Automobiles cautioning it that two cheques for Rs. 75,00,000/- each were being presented to their banker for encashment and that on presentment M/s. S.K. Automobiles should ensure that the same are honoured. Thus it was incumbent and obligatory on the part of M/s. S.K. Automobiles to make arrangement for payment of the cheques.

16. The case of respondent No. 2 is that cheques were given to the petitioner for future supply of goods under a covering letter dated 19.1.1998. Instead of utilising the same for the said purpose, the same were misutilised and misappropriated by filling in an amount of Rs. 75,00,000/- on each of cheques. The petitioner had no right or authority to fill the said cheques and utilise them for some other purpose. Therefore, on the same day i.e. 16.3.1998 respondent No. 2 informed the petitioner that the cheques be not presented and simultaneously informed the Bank that the cheques be not honoured.

17. It is the admitted case that the cheques were presented and the same were not honoured. It is not in dispute that in March, 1998, a petition under the Arbitration and Reconciliation Act, 1996 praying for appointment of Arbitrator and referring disputes and differences, mentioned in the said petition, for adjudication by the Arbitrator and also seeking direction against the petitioner Company to resume supply of motor cycles immediately on cash basis was filed in this Court by respondent No. 2. One of the disputes on which reference has been sought by respondent No. 2 is :

"Whether the respondents have any right to misappropriate and convert the blank signed cheques given by the petitioner to the respondents towards the supply of future lot of motor bicycles/motor cycles had a right to forge the said cheques and misappropriate the said amounts for any other purposes or towards the alleged dues, whereas the petitioner has been regularly clearing the payments in accordance with the agreement settlement/arrangements already arrived in between the parties and the respondents had also never objected to the said arrangements and as to how much amount of loss/ damages the petitioner is entitled from the respondents?"

In the said petition by M/s. S.K. Automobiles seeking appointment of Arbitrator, it is alleged that the petitioner through its letter dated 16.3.1998 has threatened to deposit two cheques in the amount of Rs. 75,00,000/- each. The same formed part of 50 blank signed cheques, handed over to the petitioner towards future supply of goods, under a covering letter dated 19.1.1998. The deposit/encashment of the two cheques of Rs. 75,00,000/- each is illegal and mala fide and the petitioner cannot be allowed to misappropriate the said amount, when no such amount is due and payable to the petitioner by M/s. S.K. Automobiles. The petitioner further states that through their letter dated 16.3.1998 the petitioner was informed not to present the cheques and also informed the Bank not to honour the same on presentation. Thus it is a case where the complainant allege breach of an agreement under which blank cheques are stated to have been handed over to the petitioner. Contrary to the alleged terms of agreement (not in writing), the cheques are alleged to have been drawn by filling in the blanks and thereby an effort is alleged to have been made to get them encashed. Much prior to lodging the of complaint, respondent No. 2 approached Civil Court for appointment of an Arbitrator to adjudicate upon the question, which squarely is the subject matter of F.I.R.

18. In Hari Prasad Chamaria Vs. Bishun Kumar Surekha and Others, , appellant therein intending to start business gave in full faith a large amount to respondents for the said purpose. Instead of starting business, as agreed, respondents started business in their own name and refused to render accounts or return the money. It was held that the respondent could not be held criminally liable under Section 420, I.P.C. as there was nothing in the complaint to suggest that the respondent had dishonest or fraudulent intention at the time the appellant parted with the amount and there was nothing to indicate that the respondent induced the appellant fraudulently to pay them the amount. There was also nothing in the complaint that representation was made by the respondent to the appellant or before the time money was paid that respondent knew the same to be false. It was held that non-utilizing of the amount might create civil liability but not criminal one.

19. In Trilok Singh and Others Vs. Satya Deo Tripathi, , it was held that seizure of truck by a financier on default of the purchaser in making default would at the most give rise to a civil dispute and not a dispute of criminal nature. Launching the criminal proceedings under Section 395/468/465/471/412/120B/34, I.P.C. was held to be an abuse of the process of Court and liable to be quashed. The Supreme Court ultimately quashed criminal proceeding observing :

"The question as to what were the terms of the settlement and whether they were duly incorporated in the printed agreement or not were all questions were could be properly and adequately decided in a civil Court. Obtaining signature of a person on blank sheet of paper by itself is not an offence of forgery or the like. It becomes an offence when the paper is fabricated into a document of the kind which attracts the relevant provisions of the Penal Code making it an offence or when such a document is used as a genuine document. Even assuming that the appellants either by themselves or in the company of some others went and seized the truck on 30.7.1973 from the house of the respondent they could and did claim to have done so in exercise of their bona fide right of seizing the truck on the respondent's failure to pay the third monthly instalment in time. It was, therefore, a bona fide civil dispute which led to the seizure of the truck."

20. In Smt. Manju Gupta Vs. Lt. Col, M.S. Paintal, , on the basis of a complaint by landlord alleging that some forged rent receipts were filed in rent control proceedings pending before the Rent Controller, a complaint was filed in which process was issued by Magistrate. This order was quashed holding that criminal process had been resorted to even when civil proceedings are pending and even before the issue whether disputed receipts were forged or genuine was finally decided by the Rent Controller.

21. In Madhavrao Jiwaji Rao Scindia and Another Vs. Sambhajirao Chandroji-rao Angre and Others, , the Apex Court held that a case of breach of trust is both 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.

22. applying the ratio of the aforementioned decisions, without going into the correctness or otherwise of the allegations made in the FIR and the stand taken by the petitioner or giving any finding on the merits of the case, we are of the view that in the facts and circumstances, the alleged breach of trust and misappropriation as alleged in the complaint at the most is predominantly a civil wrong. It may or may not amount to a criminal offence. Moreover much prior to lodging of the complaint, respondent No. 2 had already resorted to civil remedy on the same allegation seeking reference for adjudication by Arbitrator. Without waiting for the decision of the Arbitrator or adjudication on the points, the very act of lodging the complaint with the sole object to get initiated proceedings for criminal action on same and similar allegations will definitely bring the case within the category of abuse of the process of law, namely, initiation of the proceedings maliciously with ulterior motives. The question whether or not blank cheques were given to be utilized only towards future supply of motor cycles and for no other purpose or whether the same were given, as alleged by the petitioner, is a question, which will have to be gone into and decided in arbitration proceedings on the basis of the evidence to be adduced by the parties. For this reason alone, we are of the view that the proceedings initiated on the basis of the complaint of respondent No. 2, the FIR is liable to quashed and set aside.

23. Consequently, we allow the petition, quash the impugned FIR and all other proceedings taken there under by making it clear that any observation made while disposing of the petition will not prejudice, in any manner, the parties on merits of their respective case in any other proceedings.