Rahul Pratapbhai Rao (Barot) vs State Of Gujarat
2021 Latest Caselaw 15976 Guj

     R/CR.MA/707/2021                               ORDER DATED: 11/10/2021




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

              R/CRIMINAL MISC.APPLICATION NO. 707 of 2021
                                 With
              R/CRIMINAL MISC.APPLICATION NO. 173 of 2021
==========================================================
                        RAHUL PRATAPBHAI RAO (BAROT)
                                   Versus
                             STATE OF GUJARAT
==========================================================
Appearance:
MR TEJAS M BAROT(2964) for the Applicant(s) No. 1
MS NIDHI N PRAJAPATI(10572) for the Respondent(s) No. 2
MS SHRUTI PATHAK, APP (2) for the Respondent(s) No. 1
==========================================================

 CORAM:HONOURABLE MR. JUSTICE ILESH J. VORA

                                Date : 11/10/2021

                            COMMON ORAL ORDER

1. Since the issues raised in both the writ applications are interrelated, those were heard analogously and are being disposed of by this common order.

2. For the sake of convenience, Criminal Misc. Application No.707 of 2021 is treated as the lead matter.

3. By this writ application, the writ applicant has prayed for the following reliefs:

"(A) Hon'ble Court be pleased to issue an appropriate order or direction quashing proceedings of ACB Case No.40 of 2012 pending in the Court of Ld. Special Judge, Ahmedabad arising out of FIR being M-Case No.14 of 2002 registered with Gandhinagar Zone CID Police Station;

(B) Pending admission, hearing and final disposal of the present petition, Hon'ble Court be pleased to stay further proceedings of ACB Case No.40 of 2012 pending in the Court of Ld. Special

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

Judge, Ahmedabad arising out of FIR being M-Case No.14 of 2002 registered with Gandhinagar Zone CID Police Station;"

4. The writ applicants seek to invoke the provisions of Section 482 of Cr.P.C. for quashing the impugned proceedings of ACB Case No.40 of 2012 pending with the learned Special Judge, Ahmedabad arising out of FIR being M-Case No.14 of 2002 registered with Gandhinagar Zone CID Police Station for the offfence punishable under Sections 406, 409, 467, 471 and 120B of IPC. The impugned FIR is filed inter alia, alleging that the applicant

- proprietor of M/s. RP Consultancy availed loan of Rs.20,00,00,000/- for stock trading, wherein accused no.2- Jayesh Barot stood as guarantor. It is further alleged that due to good relations with the office bearers of the bank, loans were advanced to the accused without furnishing any collateral security, as a result of which, the applicants failed to repay the loan amount to the respondent-bank. The respondent-bank had filed the impugned FIR on 06.10.2002 against the present applicants and office bearers of the bank for the outstanding due amount of Rs.2,18,18,118/-. During the pendency of criminal proceedings, the respondent-bank had floated a one time settlement scheme (OTS) called Final Settlement Scheme (FSS-2016) in the year 2016. The applicants had applied for the scheme for the outstanding against the loan availed by them from the bank and the same had been approved and as a result under the FSS, the writ applicants were required to pay the outstanding amount of Rs.29,78,592/- by 29.12.2019 as a full and final settlement against the financial facilities availed by them.

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

By official communication dated 30.12.2016, the respondent-bank approved the application and informed the writ applicants and accordingly, they have repaid the entire settlement amount. The bank has closed the account as the outstanding is settled and on 13.11.2019 had issued "No Due Certificate" to the present applicant in favour of M/s. RP Consultancy.

5. Heard Mr. Tejas Barot, learned advocate for the applicants, Ms. Nidhi N. Prajapati, learned advocate for the respondent no.2-bank and Ms. Shruti Pathak, learned APP for the respondent-State.

6. Mr. Tejas Barot, learned advocate appearing for the applicants submitted that the present applicants had availed a loan facility and due to financial constraints, the applicants failed to repay the same. Thus, as such there is no falsification of documents as alleged in the FIR. The transaction was simply loan transaction, however, due to technical issue, the bank had invoked criminal machinery. Thus, the allegations made in the FIR and the charge- sheet case papers, if they are taken on their face value and accepted in their entirety, do not prima-facie constitute any offence or make out a case against the applicants under Sections 406, 409, 467, 471 and 120B of IPC. He has placed reliance on the decision delivered by Co-ordinate Bench of this Court quashing the criminal proceedings in which the respondent no.2 bank was the complainant. He has referred to the judgment and order passed by Co-ordinate Bench of this Court in Special Criminal Application No.5238 of 2015 and allied matters

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

dated 08.03.2019.

7. Under such circumstances, referred to above, Mr. Barot, learned advocate for the applicants in light of aforesaid decision, pray that both the applications be allowed and criminal proceedings be quashed.

8. On the other hand, Ms. Nidhi N. Prajapati, learned advocate for the respondent no.2-bank vehemently opposed both the applications and submitted that though the entire amount has been paid by the writ applicants by which they have discharged their civil liabilities, but the same by itself would not absolve them from their criminal liability and therefore, there is sufficient material on record for the offence of breach of trust, the powers may not be exercised by this Court.

9. Both the writ applications have also been opposed by Ms. Shruti Pathak, learned APP for the respondent-State. Learned APP by and large has adopted the submissions advanced by Ms. Nidhi Prajapati, learned advocate for the respondent no.2-bank.

10. Having heard learned advocates appearing for the respective parties and having gone through the materials available on record, it appears that M/s. RP Consultancy had availed loan from the respondent no.2-bank for which the applicants failed to repay the loan amount. Pursuant to the loan transaction and mismanagement undertaken by the office bearers of the bank authority, the respondent-bank had filed the impugned FIR against the

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

applicants for the outstanding due amount of Rs.2,18,18,118/-. It is not in dispute that the proposal for one time settlement for the outstanding loan availed by the applicants accepted by the bank and pursuant to it, the applicants were required to pay an amount of Rs.29,78,592/- by 29.12.2019 as full and final settlement. On payment of due amount as accepted by the bank under one time settlement scheme, the entire amount was paid by the writ applicants and their account has been closed and the bank has also issued "No Due Certificate" in favour of the firm. This Court has considered the submissions as well as affidavit in reply duly sworn by Officer on Special Duty (Legal) whereby it has been disclosed that on account of failure of repayment of amount of loan facility availed by the applicants, the FIR in question was registered against the applicants.

11. In the aforesaid facts, prima-facie, it appears that there is nothing on record to indicate that any forge or false documents were furnished at the relevant point of time for the purpose of obtaining loan in connivance of office bearers of the bank. In this context, it is apt to refer to and rely upon the decision rendered in case of Alpic Finance Ltd. Vs. P. Sadasivan and another, reported in AIR 2001 SC 1226, wherein the Apex Court held that since there are no allegations that respondent made any willful representation, no allegation that there was fraud or dishonest inducement and in view of the fact that respondent has paid substantial payment, no element of misappropriation or cheating and the quashing of proceedings was proper and legal. Paragraph-10 of the

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

said decision is as under:

"...Here the main offence alleged by the appellant is that respondents committed the offence under section 420 IPC and the case of the appellant is that respondents committed the offence under section 420 IPC and the case of the appellant is that respondents have cheated him and thereby dishonestly induced him to deliver property. To deceive is to induce a man to believe that a thing is true which is false and which the person practising the deceit knows or believes to be false. It must also be shown that there existed a fraudulent and dishonest intention at the time of commission of the offence. There is no allegation that the respondents made any willful misrepresentation. Even according to the appellant, parties entered into a valid lease agreement and the grievance of the appellant, is that the respondents failed to discharge their contractual obligations. In the complaint there is no allegation that there was fraud or dishonest inducement on the part of the respondents and thereby the respondents parted with the property. It is trite law and common sense that an honest man entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debt, he does not necessarily evade the debt by deception...."

12. I may also refer to and rely upon the decision rendered in case of Satishchandra Ratanlal Shah vs. State of Gujarat and another [Criminal Appeal No.9 of 2019 decided on 3rd January, 2019] wherein the Supreme Court while quashing and setting aside the judgment delivered by this Court has observed that mere failure to repay the loan amount, by itself, would not amount to cheating. The Supreme Court has taken the view that there has to be something in the complaint and other materials on record to prima facie indicate that the intention of the accused was to cheat the complainant

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

right from the inception. The relevant observations reads as under:

"10 Before we analyse this case, it is to be noted that the criminal application preferred by the accused before the High Court was against the order of the Trial Court at the stage of framing of charges, wherein it is the duty of the court to apply its judicial mind to the material placed before it and to come to a clear conclusion that a prima facie case has been made out against the accused. An order for framing of charges is of serious concern to the accused as it affects his liberty substantially. Courts must therefore be cautious that their decision at this stage causes no irreparable harm to the accused.

11 Coming to the aspect of quashing of the charges, it is well settled that such exercise needs to be undertaken by the High Court in exceptional cases. It is also well settled that the framing of charges being initial stages in the trial process, the court therein cannot base the decision of quashing the charge on the basis of the quality or quantity of evidence rather the enquiry must be limited to a prima facie examination. [refer to State of Bihar vs. Ramesh Singh, 1977 CriLJ 1606].

12 Having observed the background principles applicable herein, we need to consider the individual charges against the appellant. Turning to Section 405 read with 406 of IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that the respondent no.2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, the respondent no. 2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognizes a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

13 In this context, we may note that there is nothing either in the complaint or in any material before us, pointing to the fact that any property was entrusted to the appellant at all which he dishonestly converted for his own use so as to satisfy the ingredients of Section 405 punishable under Section 406 of IPC. Hence the learned Magistrate committed a serious error in issuing process against the appellants for the said offence. Unfortunately, the High Court also failed to correct this manifest error.

14 Now coming to the charge under Section 415 punishable under Section 420 of IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168). In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached the respondent no. 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, the respondent no.2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all the facts in the complaint and material are taken on their face value, no such dishonest representation or inducement could be found or inferred.

15 Moreover, this Court in a number of cases has usually cautioned against criminalizing civil disputes, such as breach of contractual obligations [refer to Gian Singh v. State of Punjab, (2012) 10 SCC 303]. The legislature intended to criminalize only those breaches which are accompanied by fraudulent, dishonest or deceptive inducements, which resulted in involuntary and inefficient transfers, under Section 415 of IPC."

13. In case of Jeffrey J. Diermeier & Anr. Vs. State of West Bengal & Anr. reported in 2010 6 SCC 246, the

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

Apex Court explained the scope and ambit of High Court under Section 482 of Cr.P.C. The relevant paragraphs no.20 and 22 are reproduced herein:

"20....................................................................... The Section itself envisages three circumstances under which the inherent jurisdiction may be exercised, namely, (i) to give effect to an order under the Code; (ii) to prevent abuse of process of Court; and (iii) to otherwise secure the ends of justice. Nevertheless, it is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction of the Court. Undoubtedly, the power possessed by the High Court under the said provision is very wide but is not unlimited. It has to be exercised sparingly, carefully and cautiously, ex debito justitiae to do real and substantial justice for which alone the court exists. It needs little emphasis that the inherent jurisdiction does not confer an arbitrary power on the High Court to act according to whim or caprice. The power exists to prevent abuse of authority and not to produce injustice.

.....................................................................

22. In Dinesh Dutt Joshi v. State of Rajasthan [(2001) 8 SCC 570], while dealing with the inherent powers of the High Court, this Court has observed thus (SCC p.573, para 6):

"6 .....The principle embodied in the section is based upon the maxim: quando lex aliquid alicui concedit, concedere videtur et id sine quo res ipsae esse non potest i.e. when the law gives anything to anyone, it gives also all those things without which the thing itself would be unavailable. The section does not confer any new power, but only declares that the High Court possesses inherent powers for the purposes specified in the section. As lacunae are sometimes found in procedural law, the section has been embodied to cover such lacunae wherever they are discovered. The use of extraordinary powers conferred upon the High Court under this section are however

R/CR.MA/707/2021 ORDER DATED: 11/10/2021

required to be reserved, as far as possible, for extraordinary cases."

14. Bearing in mind the afore-stated legal position in regard to the scope and width of the power of the High Court under Section 482 of the Code, I am of the considered view that the dispute arises out of loan transaction between the parties for which the applicants failed to repay the amount and thereafter, the respondent-

bank had approved the settlement scheme and accepted the agreeable settlement amount and issued a "No Due Certificate". Thus, the very purpose for lodging the FIR was to recover the amount of loan. Thus, the basic ingredients for invoking Sections 406, 409, 467, 471 and 120B of IPC are missing and prima-facie, there is nothing on record to indicate that the applicants have provided forge documents for availing the alleged loan.

15. In view of the foregoing discussion, I am of the view that permitting the bank authority to continue with the criminal proceedings would nothing but abuse of process of the Court. In the result, both the writ applications succeed. The M-Case No.14 of 2002 registered with Gandhinagar Zone CID Police Station is hereby quashed so far as present applicants are concerned. Direct service is permitted.

(ILESH J. VORA,J) TAUSIF SAIYED