Karuna A Shah vs State Of Gujarat
2021 Latest Caselaw 18253 Guj

    R/CR.MA/11361/2017                              JUDGMENT DATED: 09/12/2021




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/CRIMINAL MISC.APPLICATION NO. 11361 of 2017
                                  With
              R/CRIMINAL MISC.APPLICATION NO. 17699 of 2017

FOR APPROVAL AND SIGNATURE:

HONOURABLE MS. JUSTICE GITA GOPI                     Sd/-

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1     Whether Reporters of Local Papers may be allowed to                       --
      see the judgment ?

2     To be referred to the Reporter or not ?                                   --

3     Whether their Lordships wish to see the fair copy of the                  --
      judgment ?

4     Whether this case involves a substantial question of law                  --
      as to the interpretation of the Constitution of India or any
      order made thereunder ?

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                           KARUNA A SHAH & 1 other(s)
                                    Versus
                          STATE OF GUJARAT & 1 other(s)
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Appearance:
ADITYA R GUNDECHA(8869) for the Applicant(s) No. 1,2
MR NARENDRA L JAIN(5647) for the Applicant(s) No. 1,2
NOTICE SERVED BY DS(5) for the Respondent(s) No. 2
MR PRANAV TRIVEDI, ADDITIONAL PUBLIC PROSECUTOR(2) for the
Respondent(s) No. 1
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    CORAM:HONOURABLE MS. JUSTICE GITA GOPI

                                Date : 09/12/2021

                            COMMON ORAL JUDGMENT

1. RULE. Learned Additional Public Prosecutor waives service of notice of Rule on behalf of the respondent - State.

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2. The petitioners have challenged the Special Case Nos.11/2008 and 12/2008 before the City Civil and Sessions Court, Ahmedabad which is under Sections 7, 8, 9, 10, 12 and 13(1)(2) of the Prevention of Corruption Act, 1988 (hereinafter referred to in short as 'the P.C. Act') and and Sections 405, 409, 420, 34 and 114 of the Indian Penal Code.

2.1. The petitioners of Criminal Miscellaneous Application No.11361/2017 are the erstwhile Directors of a Company in the name of Gujarat Steel Tubes Limited, which was engaged in the business of manufacturing of steel tubes in the State of Gujarat.

2.2. The petitioner in Criminal Miscellaneous Application No.17699/2017 is one of the petitioners of the earlier referred matter who states that he is the erstwhile Director of Nika Tubes Limited, which is a sister concern of Gujarat Steel Tubes Limited.

3. It is contended, that both the Companies were facing various financial and operational issues and eventually after seeking opinion of the BIFR and AAIFR, it was ordered to be wound up by the order of this Court in Company Petitions No.7/2001 and 127/1995 respectively. The Liquidator thereafter, has taken control of the

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Company in terms of the Companies Act, 1956 and all other legal consequences have followed.

4. The petitioners state that in the year 2005, the complainant filed a series of complaints not only against the present petitioners but against various other companies and it is stated that the application of the complainant was accepted by the Special Court at Ahmedabad and ACB was directed to conduct an investigation into the allegations made into the complaint. The ACB authority submitted the Report before the Court on 02.05.2007 and 10.07.2007 which were 'C' Summary Report suggesting the closure of the complaint. It is further stated that against the closure, the complainant preferred Protest Petition in both the matters which came to be allowed and thereafter, Special Case No.11/2008 and 12/2008 were registered. The learned Judge issued process against the accused in the year 2008, the present petitioners did appear before the Court.

5. Being aggrieved and dissatisfied by the registration of cases against the present petitioners, they have preferred the present petitions urging that there is no material particulars regarding corruption, allegedly committed by the petitioners and ingredients for invocation of the alleged offences are completely missing and none of the

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petitioners alleged as accused are public servants and therefore, the complaint is not maintainable. It is stated that the criminal prosecution against the petitioners is with a malafide intention and ulterior motive to wreck vengenance, the complainant has merely relied on the information available on the website of the Reserve Bank of India whereby the name of defaulters have been published and misusing the site information, the complainant has even filed similar complaints against various companies as a arm twisting tactic.

6. Learned Advocate Mr. Narendra L. Jain submitted that the same complainant had filed similar complaints against other companies and one such complaint was challenged in this Court and by way of an order dated 09.05.2019 passed in Criminal Miscellaneous Application No.4143/2008, the complaint was set aside considering that it was not maintainable as the petitioners were not the public servants and there were no ingredients against them for attracting offences under Sections 406, 409 and 420 of the Indian Penal Code. Learned Advocate Mr. Jain referred to the order dated 09.05.2013 in Criminal Miscellaneous Applications No.4143/2008, 4642/2008 and 4198/2008 to submit that all the complaints filed by the same complainant had been quashed by this Court. Mr. Jain submitted that the very complaint is not maintainable, since the petitioners are not public servants

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and therefore, the provisions of the P.C. Act cannot be invoked. It is further submitted that the Company has already gone into liquidation and the financial issues and other issues have already been considered by the Court in Company Petition No.127/1995 and 7/2001 and therefore, too the provisions under Indian Penal Code does not get attracted in the matter.

7. To substantiate his arguments, learned Advocate Mr. Jain has relied on the following judgments :-

a) Ashok C. Gandhi vs. State of Gujarat reported in 2011 JX (Guj) 1189 and;

b) Municipal Commissioner and Others vs. State of Gujarat and Others in Special Criminal Applications No.1084/2013 with 3172/2013.

8. The complainant - Ramsagarsingh Parihar had filed a complaint before the Special Judge, ACB, Court No.2, City Civil Court, Ahmedabad, under Sections 7, 8, 9, 10, 12, 13(1)(2) of the Act and under Sections 405, 409, 420, 34 and 114 of the Indian Penal Code. The Court on perusal of the complaint had passed an order under Section 156(3) of the Code of Criminal Procedure, 1973 directing the ACB, Ahmedabad to investigate the offences and file a Report. The police after investigation filed Closure Report in both the matters. Against that protest petition was filed allowing the petitions, the Special

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Judge ordered for the registration of the Special Case with further order of issuance of summons against the present petitioners.

9. The police in its closure report has given detailed reasons for not giving any criminality towards the allegations made. This Court finds that the Special Judge had no reason to interfere with the Closure Report and had materially erred in entertaining the protest Petition filed by the complainant.

10. The Prevention of Corruption Act, 1988 lays down its own mechanisms to deal with the object of the Act which has come into force to consolidate and amend the law relating to matters of corruption and the matters connected therewith. When the Indian Penal Code was enacted it also defined and provided punishment for the office of bribery and corruption amongst public servants. But later on, i.e. during the World War II it was realized that the existing law in Indian Penal Code was not adequate to meet the exigencies of the time and imperative need was felt to introduce a special legislation with a view to eradicate the evil of bribery and corruption and thereby the Prevention of Corruption Act, 1947 was enacted which was later on amended twice; once by the Criminal Law Amendment Act, 1952 and later in 1964 by the Anti-Corruption Laws (Amendment)

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Act, 1964 based on the recommendations of the Santhanam Committee. Inspite of the 1947 Act being amended on the recommendations of the Santhanam Committee, it was found to be inadequate to deal with the offence of corruption effectively. To make the anit- corruption laws more effective by widening their coverage and by strengthening the provisions the Prevention of Corruption Bill was introduced in the Parliament.

11. Thus, the Bill was introduced to incorporate all the provisions and modifications so as to make the provision more effective in combating corruption amongst "public servants". Gujarat Steel Tubes (P) Limited and Nika Tubes Limited are Private Limited Companies and the petitioners are erstwhile Directors of the said Private Limited Company. Thus they would not fall within the definition of being a public servant. Thus, prima-facie the Prevention of Corruption Act, 1988 cannot be invoked against them.

12. The Special Judge had failed to take this fact into consideration while passing an order under Section 156(3) of the Code for investigation by the ACB Ahmeedabad City on 27.07.2005. Inspite of the closure report by the ACB, the learned Judge further entertained the protest petition and had ordered for filing of the case against the petitioners.

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13. This Court had on an occasion to deal with this concept of complaints under the Prevention of Corruption Act and IPC where the Special ACB Judge had declined to take cognizance of the complaint under Section 156(3) of Cr.PC against public servant, this Court by the reasons concurred with the decision of the Special Judge, in the judgement in Criminal Revision Application No.624/2020, while dealing with the submissions made on facts of the case in connection with the provision of law, it was observed as under :-

"9.2 Here in this case, the the Special (ACB) Judge is deemed to be Magistrate under Section 5(4) of the P.C. Act. The private complaint was against public servant. Section 2(c) of the P.C. Act gives meaning of public servant. The complaint was filed under Section 7 of the P.C. Act and Section 409 of the IPC. Section 19 of the P.C. Act provides that no Court shall take cognizance of offence punishable under Sections 7, 10, 11, 13 and 15 alleged to have been committed by a public servant except with the previous sanction. The question of sanction is of paramount importance, thus the application of mind by the Magistrate before exercising jurisdiction under Section 156(3) Cr.P.C. is too of paramount importance.

9.3 The Magistrate who would be a Special (ACB) Judge, as contemplated under Section 5 of P.C. Act, would have to apply his mind before exercising the jurisdiction under Section 156(3) or Section 200 Cr.P.C. and when jurisdiction is exercised on complaint filed in terms of Section 156(3) or Section 200 Cr.P.C., on application of his mind, in such a case Special (ACB) Judge / Magistrate cannot refer

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the matter under Section 156(3) against the public servant without a valid sanction order.

10. Now the question for consideration would be whether the order directing investigation under Section 156(3) Cr.P.C. would amount to taking cognizance of the offence, since contended by Advocate Mr. Ansari, that expression cognizance appearing in Section 19(1) of P.C. Act will have to be construed as postcognizance stage, not pre- cognizance stage. The Apex Court in case of Anil Kumar & Ors. Vs. M.K. Aiyappa & Anr. (supra) in para-10 held as under:

"10. The meaning of the said expression was also considered by this Court in Subramanium Swamy case (supra). The judgments referred to herein above clearly indicate that the word cognizance has a wider connotation and not merely confined to the stage of taking cognizance of the offence. When a Special judge refers a complaint for investigation under Section 156(3) Cr.P.C., obviously, he has not taken cognizance of the offence and, therefore, it is a pre-cognizance stage and cannot be equated with post-cognizance stage. When a Special Judge takes cognizance of the offence on a complaint presented under Section 200 Cr.P.C. and the next step to be taken is to follow up under Section 202 Cr.P.C. Consequently, a Special Judge referring the case for investigation under Section 156(3) is at pre- cognizance stage."

10.1 Next question that was considered in Anil Kumar's case, would also be relevant in the present matter viz. whether the requirement of sanction is a pre-condition for ordering investigation under Section 156(3) Cr.P.C., even at a precognizance stage. It was answered in Para-13, as under:

"13. Learned senior counsel appearing for the appellants raised the contention that the requirement of sanction is only procedural in nature and hence, directory or else Section 19(3) would be rendered otiose. We find it difficult to accept that contention. Sub-section (3) of

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Section 19 has an object to achieve, which applies in circumstances where a Special Judge has already rendered a finding, sentence or order. In such an event, it shall not be reversed or altered by a court in appeal, confirmation or revision on the ground of absence of sanction. That does not mean that the requirement to obtain sanction is not a mandatory requirement. Once it is noticed that there was no previous sanction, as already indicated in varous judgments referred to hereinabove, the Magistrate cannot order investigation against a public servant while invoking powers under Section 156(3) Cr.P.C. The above legal position, as already indicated, has been clearly spelt out in Paras Nath Singh and Subramanium Swamy cases (supra)."

11. Adverting to the facts of the present matter, the Special (A.C.B.) Judge had to follow the procedure as contemplated under Section 210 Cr.P.C., since police investigation was in progress in relation to the offence alleged before the Special Magistrate. The report of the police was found to be cryptic and ambiguous, did not disclose any offence, as alleged. In case of Subramanium Swamy Vs. Manmohan Singh and Another, reported in (2012) 3 SCC 64, it was held that there is no provision in the P.C. Act, 1988 or Cr.P.C., which bars a citizen from filing a complaint for prosecution of a public servant who is alleged to have committed an offence. The complaint was registered by the Court, when the matter was already investigated by P.I., A.C.B. Police Station, Banskantha, the Court could only ask for the report, which did not disclose any offence and the report recommended for departmental inquiry. No sanction order was procured by the A.C.B. Police. Subramanium Swamy case (supra) recognizes the right of private citizen for filing complaint against public servant and to obtain sanction for prosecuting public servant, such right flows from rule of law. The authority concerned are to follow directions given in case of Vineet Narain v. Union of India, reported in (1998) 1 SCC 226, upon sanction application by a private citizen, who has to be informed of the decision on sanction application to enable him to avail appropriate remedy. However, thus, it becomes crystal clear that as soon as complaint is lodged, if the Magistrate goes through the contents of the

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complaint in order to proceed and refer the matter to the police for investigation under Section 156(3) of the Cr.P.C. or to take any other step as contemplated under Section 200 of Cr.P.C., it is deemed that he has taken cognizance of the contents of the complaint and came to the conclusion that it is a fit case either to refer it to the police for investigation or to be inquired into by the Court itself. Thus, even for the purpose of lodging a private complaint, order of sanction is an absolute legal requirement to prosecute under Section 19(1) of the P.C. Act. It is rightly held by the Special (A.C.B.) Judge, Palanpur that a trial without a sanction renders the proceedings ab initio void. There is no irregularity or infirmity in the order by the Special (A.C.B.) Judge."

14. Section 19 as stood prior to amendment dated 26.07.2018, makes it incumbent upon the Judge not to take any cognizance of the offences under Sections 11, 13, 15 without previous sanction necessary for prosecution. The Section itself lays down the authorities who are to be approached for the necessary sanction for prosecuting a public servant. Here in the present case, the ACB had filed a closure report stating the grounds for coming to the conclusion of closing the investigation. The ACB did not find any reason to proceed under the Prevention of Corruption Act. The Police even did not find any reason to approach any concerned authorities for procuring any sanction in this case, further it would not have been possible in this matter since the petitioners are erstwhile Directors of Private Limited Company, so request of sanction could not have been made since the Act provides for prosecution against a public servant.

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The very order of the Special Judge in the instant case under Section 156(3) of the Code is bad in law. Without previous sanction, no such complaint can be entertained. The learned Judge even if comes to the conclusion of taking cognizance in the matter would require sanction of the concerned authorities for prosecuting the public servant. The petitioners herein are private persons. The functions of a Director of a Private Limited company cannot be called as public duty in terms of the definition under Section 2(b) of the Act.

14.1 Section 19 of the Prevention of Corruption Act, 1988 found amendment with effect from 26.07.2018. Prevention of Corruption Act, 1988, has developed the mechanism for raising the grievance of corruption against public servants. The Anti Corruption Bureau are set up in the State under the Act where the aggrieved can move his application. For the Court to take cognizance in the case with allegation of corruption, the amended section 19 of the Prevention of Corruption Act, 1988, lays down that no court shall take cognizance of an offence punishable under Sections 7, 11, 13 and 15 alleged to have been committed by a public servant unless such person has filed a complaint in the competent court about the alleged offences for which the public servant is sought to be prosecuted and the court has not dismissed

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the complaint under Section 203 of the Code of Criminal Procedure, 1973, (2 of 1974) and directed the complainant to obtain the sanction for prosecution against the public servant for further proceedings. Thus the amended Section 19 by way of proviso inserted by Act 16 of 2018 which has come into effect from 26.07.2018 gives recourse to the aggrieved to file a complaint in the competent court about the alleged offence of the public servant. The said proviso further explains that in case of request from a person other than a police officer or an officer of an investigation agency or other law enforcement authority, the appropriate Government or competent authority shall not accord sanction to prosecute a public servant without providing an opportunity of being heard to the concerned public servant, which would be possible only after the Court concerned takes cognizance of the complaint.

15. Gujarat Steel Tubes (P) Limited and sister concern were into the business of manufacturing of steel tubes and when faced with various operational and functional issues, under the order of winding up in Company Petition, all the issues would have been dealt with, so to that fact, it cannot be said that any ingredients for a complaint under Sections 405, 409, 420, 34 and 114 of the Indian Penal Code would be attracted.

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16. In the case of Ashok C. Gandhi (supra), the trial Court had directed to carry out the investigation under Section 156(3) of the Cr.P.C. and to submit a Report. After carrying out the necessary investigation, the final Report under Section 173 of the Cr.P.C. with 'B' Summary was filed. Being aggrieved a protest application was preferred and after hearing both the sides, the Court directed the ACB to carry out re- investigation and to carry out a detailed investigation with respect to the alleged role played by the Bank officials. The Court after considering the facts of the case observed that the petitioners were administrators, Directors of the Company who had borrowed loan of Rs.300 Crores and there was a default in repayment of the loan amount. It was thus observed that the petitioners were not falling within the definition of 'public servant' for attracting the provisions of the Act as it is mandatory that the accused should be a 'public servant' and that the company or any of its office bearers cannot be termed to be a public servant under the provisions of the Act. It was further observed that there were no allegations in the complaint that the petitioners were entrusted with any property or that the petitioners converted to their own use such property or dishonestly used or disposed of such property. Thus, no criminal

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breach of trust was found in the matter and it was held that failure to pay back a loan or debt does not amount to dishonest misappropriation of money. The act of giving loan to somebody for accommodating a person to have money for certain time is not entrustment of money and no offence of cheating was made out.

17. Thus, for the reasons given above and considering the provisions of law as stated hereinabove, both the petitions are allowed. The Special Case No.11/2008 and 12/2008 pending before the City Civil and Sessions Court, Ahmedabad and all other consequential proceedings are quashed and set aside. Rule is made absolute. Direct Service is permitted.

Sd/-

(GITA GOPI,J) Caroline