Municipal Corp. Of Faridabad vs State And Ors.
2005 Latest Caselaw 832 Del

JUDGMENT

Manju Goel, J.

1. The present petition is filed by the Municipal Corporation of Faridabad through its Director-cum-Commissioner, Town & Country Planning, Haryana as an intervener seeking quashing of orders dated 23.7.2002 of the Additional Sessions Judge (in short `ASJ') directing release of bank guarantees executed in faovur of the petitioner by the accused. The order was passed in a revision petition challenging the order of the Metropolitan Magistrate dated 29th May, 2002 releasing the bank guarantees. Before coming to the order it will be appropriate to narrate the background in which the FIR was filed.

2. On 6.12.1991, an agreement was entered into between respondent No. 2, Durga Builders Pvt. Ltd. claiming to be the owner in possession of land mentioned in the annexure to the agreement with the Governor of Haryana through Director, Town & Country Planning, Haryana (hereinafter referred to as the `Director') for grant of license for carrying out and completing development work for setting up a colony in village Ismailpur, Tehsil & District Faridabad, Haryana. The agreement, inter alia, required respondent No. 2 to submit bank guarantees to the Director. The bank guarantee could be invoked as per clause 3 on cancellation of license on grounds mentioned in the agreement. Similarly clause 6 provided that the Director could release the bank guarantee after the lay out plans and development works or part thereof in respect of the colony or part thereof was complete. It further provided that 1/5th of the bank guarantee amount was to be kept unreleased to ensure up-keep and maintenance of the colony. It appears that respondent No. 2 invited investors and prospective buyers for the land to be allotted in the colony intended to be developed by it. It also appears that respondent No. 2 obtained investment and price for land from a far larger number of people than the number of plots that could be allotted. The development work did not make much headway and those investors and prospective buyers started demanding return of their money or delivery of possession of land. The FIR in question i.e. FIR No. 48/2001 was registered on the complaint of some such investors.

3. Criminal proceedings were initiated in the Court of Shri M.C.Gutpa, Metropolitan Magistrate. Respondent No. 2 made two applications to the Metropolitan Magistrate for releasing or de-freezing the account of Deutsche Bank, Connaught Place and Central Bank of India, Green Park, New Delhi of M/s.Durga Builders Pvt. Ltd. and for direction to the Crime Branch to release the amount of Rs.3,25,13,000/- of the bank guarantee and FDs lying at the Deutsch Bank to respondent No. 2. Mr. R.K. Nanda of M/s Durga Builders Pvt. Ltd. The respondent No. 2 submitted to the Magistrate that the Crime Branch had seized all the records of respondent No. 2 and had directed the banks not to allow the operation of the accounts on account in which approximately Rs.20 lakhs of respondent No. 2 were lying unutilised, that the bank guarantee lapsed on 6.12.1998 and the bank was relieved and discharged of its obligation towards the liability under the bank guarantee, that the bank can now refund the margin money of the guarantees to respondent No. 2, that accused R.K. Nanda was willing to settle with the investors who are willing to take back the principal amount, that the accused would stand liable for any action initiated by any beneficiary and that the amount be released which could be used for the purpose of a settlement with the investors. The Metropolitan Magistrate heard the accused and the state at length and observed that as per the clauses of the bank guarantee the bank had a discretion to renew or refuse to renew the bank guarantee, that the bank guarantee having lapsed the bank was under no obligation towards the Director, that there was no hurdle for the bank to release the funds in favor of the accused or respondent No. 2 and directed that the margin money for the guarantees in the form of FDRs deposited by R.K. Nanda be released and that the amount be released for settlement of the claims of the investors.

4. The petitioner or the Govt. of Haryana through the Director was not a party in the proceedings before the Metropolitan Magistrate. Nor was the respondent No. 3/Deutsche Bank heard by the Metropolitan Magistrate. The order was challenged in a revision petition by the Deutsche Bank. The impugned order dated 23rd July, 2002 was passed in the revision petition filed by the respondent No. 3. The Additional Sessions Judge who heard the revision petition issued notice to the Govt. of Haryana. The District & Town Planner, Mr. Kamal Kumar appeared before the Court during the hearing. He informed the Court that according to his information, during the period he worked in the organisation i.e up to February, 2002, the bank guarantee had not been invoked by the beneficiary. He further submitted to the Court that although there was no specific invocation of the amount under the bank guarantee, the bank had been asked to freeze the said account as various steps had to be initiated by the Govt. of Haryana for cancellation of license of the accused. The Additional Sessions Judge observed that there was no specific invocation of the bank guarantee by the beneficiary within the period stipulated therein and that the bank was no longer liable to honour its commitments under the bank guarantee after December, 1998. The Additional Sessions Judge further held that the bank guarantee not having been invoked and not being in force, there was no reason for the Bank/respondent No. 3 to hold on to the margin money kept towards the bank guarantee in question. The Additional Sessions Judge directed that the total amount of the money together with all or any interest accruing thereon, be reversed in the account of the accused latest by the evening of 25th of that month and the money be released as directed by the Metropolitan Magistrate.

5. Impugning the order of the Additional Sessions Judge, the petitioner through the Director says that the order was contrary to the provisions of law, that no opportunity for fair hearing was granted, that the Courts below acted beyond their jurisdiction, that the proceedings before the Metropolitan Magistrate and the Additional Sessions Judge arose out of the FIR whereas the adjudication required for disposal of the two applications of the accused were entirely of civil nature, that the criminal courts could not enter into the question of validity of the bank guarantees or the entitlement of the accused for release of the bank guarantees against the interest of the respondent No. 3 and the petitioner who were not parties to the criminal proceedings, that even otherwise the opinion of the Metropolitan Magistrate and the Additional Sessions Judge that the banks were relieved of all liabilities was incorrect, that the petitioner had been actively pursuing the bank guarantees, that as per Rule 11 of the Haryana Development and Regulation of Urban Areas Rules, 1976, the bank guarantees could be released under Rule 20 after the development of the colonies had been carried out by the respondent No. 2, that the petitioner in terms of the letter dated 31st July, 1997 had served a notice on the Durga Builders(P) Ltd./respondent No. 2 directing them to re-validate the bank guarantees or in the alternative to obtain fresh bank guarantees for the same amount and also instructed the respondent No. 3, vide a letter dated 8th January, 1999 that unless and until the petitioner asked the respondent No. 3, the bank could not release the amount of the bank guarantees and that in this situation the impugned order of the Additional Sessions Judge and that of the Metropolitan Magistrate were entirely wrong.

6. The principal ground for challenging the impugned order is that the Courts below did not have any jurisdiction to decide a question which primarily fell within the domain of the civil courts. It is to be seen that the bank guarantees had been submitted for the benefit of the petitioner. Neither the bank i.e. Respondent No. 3 nor the petitioner had anything to do with the criminal proceedings. The right that required adjudication was a matter between respondent No. 3 and the petitioner. The lis before the Courts below was not between the two parties at all. Whether the respondent No. 2 or M/s Durga Builders (P) Ltd. was entitled to the release of the bank guarantees could be decided only in a civil proceeding which could be initiated by the respondent No. 2/ M/s Durga Builders (P) Ltd. It was entirely beyond the scope of any adjudication in the criminal proceedings. In my opinion, both the Courts below were entirely misled into making the two orders mentioned above. The bank guarantees had been executed in favor of the petitioner and only in a proceeding against the petitioner could an order be passed affecting the interest of the petitioner. The mere presence of the officer of the petitioner during the hearing did not convert the lis into one of civil nature between the respondent No. 3 and the petitioner or between the respondent No. 2 on the one hand and between the petitioners and the respondent No. 3 on the other.

7. Further it has to be noticed that the officer present on the date of the hearing merely gave certain information which was within his knowledge on account of his having spent some time as an officer in the concerned department. His statement given to the Court on that day was merely in the nature of some information. Even in that statement he informed the Court that the bank had been asked to freeze the account of the respondent No. 2 as steps were being initiated for cancellation of the license of the respondent No. 2/M/s Durga Builders Pvt. Ltd. The same could not amount to an admission on the part of the petitioner and it cannot be said that the impugned order was passed on admission of the petitioner.

8. Be that as it may, the fact remains that the criminal Courts have passed an order which was entirely beyond the scope of the lis before them and entirely beyond their jurisdiction and the orders are, therefore, liable to be set aside by this Court in exercise of powers under Section 482 Cr.P.C.

9. The next question is what should the appropriate relief in this case. The Bank's counsel says that the bank has released the entire money of the two bank guarantees except a sum of Rs.32,000/-. The banks cannot be held responsible for the amount released because the bank had no option but to do so in compliance with the orders of the Metropolitan Magistrate and of the Additional Sessions Judge. The respondent No. 2 who obtained the benefit of the order against the interest of the petitioner is real beneficiary of two bank guarantees cannot retain the amount received by him in compliance with the two orders. The respondent No. 2 has no option but to return the money to the petitioner.

10. Accordingly, I allow the petition and quash the orders of the Additional Sessions Judge dated 23rd July, 2002 and Metropolitan Magistrate dated 29th May, 2002 and direct the respondent No. 2 to deposit the entire amount received by him on behalf of M/s Durga Builders (P) Ltd. under the two orders with the petitioner within a fortnight from today.