Anil Manohar Munshi vs State Of Gujarat
2021 Latest Caselaw 16450 Guj

R/CR.MA/22302/2017                             CAV JUDGMENT DATED: 21/10/2021




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/CRIMINAL MISC.APPLICATION NO. 22302 of 2017


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE B.N. KARIA

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1 Whether Reporters of Local Papers may be allowed -NO-

to see the judgment ?

2    To be referred to the Reporter or not ?                        -NO-

3    Whether their Lordships wish to see the fair copy              -NO-
     of the judgment ?

4    Whether this case involves a substantial question              -NO-

of law as to the interpretation of the Constitution of India or any order made thereunder ?

========================================================== ANIL MANOHAR MUNSHI Versus STATE OF GUJARAT & 1 other(s) ========================================================== Appearance:

MR. RAHUL R DHOLAKIA(6765) for the Applicant(s) No. 1 MR DEVANG VYAS(2794) for the Respondent(s) No. 2 MR RC KODEKAR(1395) for the Respondent(s) No. 2

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CORAM:HONOURABLE MR. JUSTICE B.N. KARIA

Date : 21/10/2021

CAV JUDGMENT

1. By way of present application, applicant has prayed following reliefs:

A. YOUR LORDSHIPS may be pleased to admit and allow this application;

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B. YOUR LORDSHIPS may be pleased to quash and set aside the order dated 29.06.2017 passed by Ld. Special Judge, CBI Court No.1, Ahmedabad below application Exh. 191 in CBI Special Case No. 15 of 2009, in the interest of Justice.

C. YOUR LORDSHIPS may be pleased to discharge the applicant in connection with CBI Special Case No. 15 of 2009 pending adjudication before the Court of Ld. Special Judge, CBI Court No.1, Ahmedabad, in the interest of justice.

D. Pending hearing and final disposal of this petition, YOUR LORDSHIPS may be pleased to stay further proceedings of CBI Special Case No.15 of 2009 pending adjudication before the court of Ld. Special Judge, CBI Court No.1, Ahmedabad qua the applicant, in the interest of justice.

E. Such other and further relief of relieves as may be deem fit, just and proper, in the facts and circumstances of the case.

2. Heard learned advocates for the respective parties and learned APP for the respondent-State.

3. The brief facts of the case are as under:

3.1 That, a company namely M/s. SYP Agro had applied for Credit Facility with Canara Bank and for availing the same, company had mortgaged 28 properties in all amongst wherein the applicant had stood as guarantor and the property belonging to the applicant situated at Silver Spring Complex, Navrangpura was mortgaged. That a case was registered by CBI, Gandhinagar Branch against one Shri P.L. Paleja, the then Chief Manager, Canara Bank, Ashram Road Branch and others

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on the basis of written complaint dated 17.04.2008 filed by one Shri D.A. Kini, Deputy General Manager, Canara Bank, Ahmedabad alleging the fraud committed during the period between the year 2001-2004 in respect of Inland Letter of Credit (ILC), Guarantee, FDB/ FBE, Supply Bills and TOD in the current accounts of M/s. SYP Agro Food Pvt. Ltd., Ahmedabad. It is also alleged that during the aforesaid period, Shri Agro Foods Pvt. Ltd., Ahmedabad in connivance with Shri P.L. Paleja (the then Chief Manager), Shri Anil Kumar, (the then officer), all of canara Bank, Ashram Road Branch, Ahmedabad abused their official position and used as forged documents cheated with Canara Bank and caused wrongful loss to the bank to the tune of Rs. 873.93 lakhs. That, the investigation of the aforesaid complaint was culminated in filing of charge-sheet against the accused persons wherein the present applicant was not named in the FIR. It is pertinent to note that on perusal of the charge-sheet, more particularly, the prayer made by the respondent No.2 pertaining to the prosecution to be launched against the accused persons, the only section for which the present applicant is charged, is section 420 of the Indian Penal Code. That, it is the case of the prosecution that except the property of the applicant, the other properties were not found in name of the Directors of the borrower. The property belonging to the applicant was also mortgaged to Punjab

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National Bank, Vanijya Bhavan Branch, Kankaria, Ahmedabad in the year 2004 wherein the applicant had stood as guarantor for credit facility of M/s Metro Steel Traders. That, the outstanding amount of credit facility availed from Punjab National Bank was duly cleared on 18.10.2012 and for the same it was produced in the proceedings of Special CBI Case No. 15 of 2009 on record below Exh.191. That, the property mortgaged by the applicant with Canara bank was duly auctioned by Canara Bank in the year 2013 for an amount of Rs. 35,25,000/- (Thirty Five Lakh Twenty Five Thousand) in auction proceedings, which was taken place on 21.01.2014. That, from the perusal of the entire material on record, no where it emerges that the applicant at the time of being a guarantor, had any intention to deceive. That, if the allegations as leveled against the applicant if read as it is, then too, it would amount to merely breach of terms of contract entered between the applicant and Canara Bank and not even the contract itself because the end result of the contract was to the effect that if the amount is not repaid then the Bank can sell the property and recover the outstanding amount. That, in fact, from the subsequent events, applicant has abided with the terms of the contract and nowhere made any hindrance in the auction process and the bank had duly realized the amount of loan qua the applicant herein. That, the outstanding qua

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Punjab National Bank is also settled and No Due Certificate is also issued, and therefore, none of the banks have suffered any monetary loss. That, the Ld. Special Judge, CBI Court No. 1, Ahmedabad was pleaded to pass the impugned order below application Exh. 191 in CBI Special Case No. 15 of 2009 whereby the application for discharge preferred by the applicant u/s. 227 of the Code was rejected. As against the said order, the applicant had preferred Criminal Revision Application No. 712 of 2017 before this Court wherein considering the facts and circumstances of the present case, this Court permitted the applicant to convert the said application into application u/s. 482 of the Code of Criminal Procedure, 1973.

4. Learned advocate for the applicant submits that the order dated 29.06.2017 passed by the Ld. Special Judge, CBI Court No.1, Ahmedabad below application Exh.191 in Special CBI Case No. 15 of 2009 is illegal, incorrect, improper, arbitrary, perverse and against the principle of natural justice. That, the Ld. Judge had failed to appreciate the submissions canvassed and judgments cited before him and committed error by passing the impugned order. That the impugned order passed by the Ld. Judge is based on factually incorrect observations. That, the Ld. Judge has passed the impugned order with the observation that despite the property of the

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applicant was already mortgaged with Punjab National Bank, the same was mortgaged with Canara Bank, and therefore, there is prima-facie case against the applicant. However, it is pertinent to note that even as per case of prosecution the applicant stood as guarantor with Canara Bank in the year 2002 and with Punjab National Bank in the year 2004, therefore, the premise on which the impugned order is passed is incorrect. That the applicant is alleged to have committed an offence punishable under section 420 of the Indian Penal Code and in order to constitute an offence under section 420 of the Indian Penal Code, it is incumbent upon the prosecution to prove the ingredients of section 415 of the Indian Penal Code. That, from the perusal of the charge-sheet papers the offence as alleged would not fall within the scope and ambit of section 415 of the Indian Penal Code.The applicant respectfully submits that in case of cheating, the intention of the accused at the time of inducement, may be judged by a subsequent conduct but for this, the subsequent conduct is not the sole test but mere breach of contract which cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. at the time when the offence is said to have been committed. Therefore, it is his intention, which is the gist of the offence. That from the perusal of the entire material on

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record, nowhere it is emerged that the applicant at the time of being a guarantor had any intention to deceive. That, the allegations as leveled against the applicant if read as it is then too it would amount of merely breach of the terms of the contract between the applicant and Canara Bank and not even the contract itself because the end result of the contract was to the effect that if the amount is not repaid by the borrower then the Bank can sell the property and recover the due amount. That, in fact from the subsequent events, the applicant has abided with the terms of the contract and nowhere made any hindrance in the auction process and the bank had duly realized the amount of loan. Punjab National Bank has also settled the dispute and No Due Certificate is also issued, therefore none of the banks have suffered any monetary loss. In support of his arguments, learned advocate for the applicant has placed his reliance on the following judgments: [i] Hriday Ranjan Prasad Verma & others v/s State of Bihar & Another reported in (2000) SCC (Cri.) 786. [2] Uma Shankar Gopalika vs. State of Bihar & Anr. reported in 2005 (10) SCC 336 [3] Yogesh v/s. State of Maharashtra reported in 2008 (10) SCC

394. At the end, learned advocate for the applicant has requested to allow present application by quashing the complaint qua the applicant.

5. Learned advocate for the respondent No.2 submits that

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property is mortgaged till the dues are cleared. It is a continuous act till property gets released from the concerned mortgagor. That the applicant during this continuous act had cheated the Canara Bank and the property mortgaged with them, mortgaged with the Punjab National Bank, which created hurdle in taking over the possession of the property as the other bank was also claiming for the same property. This very act shows the fraudulent and dishonest intention on the part of the applicant. It is further submitted that cheating done at any point of time is a criminal offence and it should not be interpreted wrongly. Moreover, in simple words, the applicant has given the property to PNB which actually belonged to the Canara Bank. Further, it will be a wrong precedent for the genuine borrowers, if such persons go scot free. That the applicant was a guarantor till the recovery of whole amount/loan given to the borrower. This is a continuous process and any fraudulent or dishonest act during this period shows the intention on the part of applicant, wherein, the applicant has committed offence of cheating by mortgaging the property with other bank, which was ethically and legally wrong and shows his deceptive approach. That the applicant has committed breach of term/contract, which does not allow the same property to be mortgaged with other institution without releasing the same. That the applicant has committed

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the offence of cheating by way of mortgaging the same property at two different institutions and thus is liable to face the trial. However, the conclusion of the trial may lead to the innocence/guilt of the applicant. That the charge-sheet has been filed attracting sections of Prevention of Corruption Act, 1988. It is submitted that the Hon'ble Supreme Court has held in Satya Narayan V/s State of Rajasthan, AIR 2001 SC 2856, that no stay can be granted in the case under the Prevention of Corruption Act, 1988. The accused/applicant is using delay tactics by filing such applications and praying for stay.

6. Learned APP for the respondent state has supported the arguments advanced by landed advocate for the respondent no. 2 and submitted that the essential ingredients to attract Section 420 of Indian Penal Code ie., cheating, dishonest inducement to deliver the property, at the time of making inducement and false representations are clearly established by the prosecution at this stage. It was further submitted that in order to prove the case for the offence of cheating, it is sufficient to prove that false representations had been made by the petitioner with the knowledge and it was made in order to deceive the complainant. That, after investigation, charge sheet was filed against the present petitioner and other co-accused. That, sufficient material is available with the prosecution to show that the present petitioner is involved in the offence punishable

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under Section 420 of the Indian Penal Code. Hence, prayer made by the petitioner may not be granted by this Court. Ultimately, it was requested by learned APP for the respondent- State and learned advocate for the respondent no.2 to dismiss present application.

7. Having heard learned advocates for the respective parties as well as learned APP for the respondent-State and having perused the papers available on record, it appears that the petitioner was the guarantor to the original borrower and had mortgaged his property with the Canara Bank in the year 2002 along with others. As per the prosecution case, total 28 properties were put up as mortgage by the company and out of them, only one property belonging to the petitioner was found genuine, and therefore, he was sought to be charged under Section 420 of the Indian Penal Code. The company M/s. Syp Agro Limited had opened current account bearing No. 21973 with Canara Bank, Ashram Road Branch, Ahmedabad and had applied for credit facilities for Rs. 160 lakhs, which was accorded wherein 5 properties were mortgaged valued at Rs. 125.14 lakhs on 31.10.2001. The bank recommended for advance payment guarantee of Rs. 250 lakhs on additional mortgage of 11 properties on 16th February 2002. It appears that Inland letter of credit of Rs. 150 lakhs was sanctioned by the Canara Bank on 9th April 2002. On 21st June 2002,

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advance payment guarantee of Rs. 350 lakhs was recommended on additional mortgage of 12 properties. Applicant's property was mentioned in the list at Sr. no.3. as per the FIR, present value of the property of the applicant was Rs. 20 to 25 lakhs. On 9th November 2003, account of the company namely M/s. SYP Agro Limited was classified as NPA. As per the prosecution case, on 5th March 2004, property of the applicant, which was mortgaged by the applicant with the Canara Bank, again mortgaged with the Punjab National Bank on behalf of M/s. Metro Steel Traders. An FIR came to be filed for the offence punishable under Sections 120(B), 177, 420, 467, 468, 471 of the Indian Penal Code and under Section 13(2) read with Section 13(1) (d) of the Prevention of Corruption Act. It appears that the name of the applicant was not shown in the FIR dated 17th April 2008. After conclusion of the investigation, charge sheet was filed by the investigating agency wherein applicant was sought as an accused no.11. As per the case of the prosecution, property put up as security by the applicant with the Canara Bank was genuine unlike the other accused persons. The role of the applicant was that he had mortgaged the property put up as security with Canara Bank in the year 2002 was subsequently mortgaged to Punjab National Bank in the year 2004 on behalf of M/s. Metro Steel Traders. The applicant was sought to be charged under Section

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420 of the Indian Penal Code unlike other accused persons. It appears from the record that on 18th January 2012, account of M/s. Metro Steel Traders was closed and no due certificate was issued by Punjab National Bank. On 1st March 2016, property mortgaged by the applicant was sold in auction by Canara Bank for Rs. 35.20 lakhs and sell ceritificate was issued to the applicant. A discharge application filed below Exh. 19 in Special CBI Case No. 15 of 2009 by the applicant was rejected by learned Special CBI Judge, Ahmedabad holding that since the applicant had also mortgaged the property with Punjab National Bank prior to putting up the property as security with Canara Bank, he had an intention to dupe Canara Bank since inception and hence, it cannot be discharged vide order dated 29th June 2017. It appears that initially the present applicant filed Criminal Revision Application No. 712 of 2017 and this court was pleased to permit the applicant to covert under Section 482 of the Code of Criminal Procedure vide order dated 9th August 2017, which came to be numbered as Criminal Misc. Application No. 22302 of 2017.

8. In order to charge the applicant for the offence punishable under Section 420 of the Indian Penal Code, ingredients of Section 415 of the India Penal Code are to be satisfied.

9. Hon'ble Supreme Court in case of Hridaya Ranjan Pd.

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Verma versus State of Bihar, reported in 2000(4) SCC Page No. 168, has dealt with this issue referring Section 415 of the Code and answered in para 13, 14, 15 and 16, as under:

"13. Cheating is defined in Section 415 of the Code as, "Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".

Explanation - A dishonest concealment of facts is a deception within the meaning of this section.

14. The section requires - (1) Deception of any person. (2) (a) Fraudulently or dishonestly inducing that person (i) to deliver any property to any person; or (ii) to consent that any person shall retain any property; or

(b) intentionally inducing that person to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body mind, reputation or property.

15. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. in the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.

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16. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to 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 the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the 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 a culpable intention right at the beginning, that is, when he made the promise cannot be presumed."

10. It appears from the charge sheet papers that it is not even the case of the prosecution that the applicant had deceived or induced the bank with misrepresentation as he put up his property as mortgage in the year 2002.

11. The findings of the learned Special Judge was completely incorrect that the applicant herein had mortgaged the property with Punjab National Bank, and thereafter, with Canara Bank, and therefore, from the inception, the applicant had an intention to deceive. It appears from the record that property of the applicant was mortgaged with the Canara Bank in the year 2002, and thereafter, in the year 2004, he had again mortgaged the said property with the Punjab National Bank.

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12. Further, it appears from the record that account of the Punjab National Bank was closed and no due certificate was also issued. Property of the applicant was also sold in Auction by Canara Bank and liability on behalf of the applicant is already released without any hindrance. It further appears that Punjab National Bank has not filed any complaint against the applicant or other co-accused.

13. Hon'ble Apex Court in case of International Advance Research Centre for Powder Metallurgy & New Materials v/s. Nimra Cerglass Technics Private Limited reported in 2016(1) SCC 348 has dealt with such issue and observed in paragraph nos. 13 and 14 as under:

"13. In the light of the well-settled principles, it is to be seen whether the allegations in the complaint filed against ARCI and its officers for the alleged failure to develop extruded ceramic honeycomb as per specifications disclose offences punishable under Sections 419 and 420 IPC. It is to be seen that whether the averments in the complaint make out a case to constitute an offence of cheating. The essential ingredients to attract Section 420 IPC are: (i) cheating; (ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security and (iii) mens rea of the accused at the time of making the inducement. The making of a false representation is one of the essential ingredients to constitute the offence of cheating under Section 420 IPC. In order to bring a case for the offence of cheating, it is not merely sufficient to prove that a false representation had been made, but, it is further necessary to prove that the representation was false to the

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knowledge of the accused and was made in order to deceive the complainant.

14. Distinction between mere breach of contract and the cheating would depend upon the intention of the accused at the time of alleged inducement. If it is established that the intention of the accused was dishonest at the very time when he made a promise and entered into a transaction with the complainant to part with his property or money, then the liability is criminal and the accused is guilty of the offence of cheating. On the other hand, if all that is established that a representation made by the accused has subsequently not been kept, criminal liability cannot be foisted on the accused and the only right which the complainant acquires is the remedy for breach of contract in a civil court. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of the transaction. In S.W. Palanitkar & Ors. vs. State of Bihar & Anr. (2002) 1 SCC 241, this Court held as under:

"21 ......In order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made. It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating. A mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating." The above view in Palanitkar's case was referred to and followed in Rashmi Jain vs. State of Uttar Pradesh & Anr. (2014) 13 SCC 553.

14. Hon'ble Apex Court in case of Sushil Sethi and Anr.

Versus State of Arunachal Pradesh and Ors., reported in 2020(3) SCC 240 has dealt with such issue in paragraph nos. 8.2, 8.3 and 9, which are reproduced as under:

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" 8.2. It is also required to be noted that the main allegations can be said to be against the company. The company has not been made a party. The allegations are restricted to the Managing Director and the Director of the company respectively. There are no specific allegations against the Managing Director or even the Director. There are no allegations to constitute the vicarious liability. In the case of Maksud Saiyed v. State of Gujarat (2008) 5 SCC 668, it is observed and held by this Court that the penal code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the company when the accused is the company. It is further observed and held that the vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. It is further observed that statute indisputably must contain provision fixing such vicarious liabilities. It is further observed that even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. In the present case, there are no such specific allegations against the appellants being Managing Director or the Director of the company respectively. Under the circumstances also, the impugned criminal proceedings are required to be quashed and set aside.

8.3 At this stage, it is required to be noted that though the FIR was filed in the year 2000 and the chargesheet was submitted/filed as far back as on 28.5.2004, the appellants were served with the summons only in the year 2017, i.e., after a period of approximately 13 years from the date of filing the chargesheet. Under the circumstances, the High Court has committed a grave error in not quashing and setting aside the impugned criminal proceedings and has erred in not exercising the jurisdiction vested in it under Section 482 Cr.P.C.

9. In view of the above and for the reasons stated above, we are of the firm opinion that this is a fit case to exercise the powers under Section 482 Cr.P.C. and to quash the criminal proceedings against the appellants for the offence under Section 420 read

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with Section 120B of the IPC. To continue the criminal proceedings against the appellants would be undue harassment to them. As observed hereinabove, no prima facie case for the offence under Section 420 of the IPC is made out."

15. As observed herein above, name of the present applicant was not disclosed in the FIR lodged against other co-accused persons. Charge sheet was filed against the present applicant for the offence punishable under Section 420 of the Indian Penal Code. However, it is required to be noted that there are no specific allegations and averments in the FIR and/or even in the chargesheet that dishonest intention of the accused was from the very beginning of the transaction. It is required to be noted that land transaction was carried out by the company namely M/s. SYP Agro Limited having Directors namely Yogesh Barot, Bhavana Barot, Yogini Brahmbhatt and when they opened current account bearing No. 21973 with Canara Bank on 19.11.2001, they applied for credit facilities, which was accorded. In the year 2002, Advance Payment Guarantee was also recommended by the bank on additional mortgage and inland Letter of credit of Rs. 150 lakhs was sanctioned by the Canara Bank. Property of the applicant mortgaged by him was mentioned in the list at Sr. No.3 and on 21 st June 2002, Canara Bank recommended for Advance Payment Guarantee of Rs. 350 lakhs on additional mortgage of 12 properties. As per the FIR, value of the property of the applicant was of Rs. 20-25

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lakhs. Account of the company namely M/s. SYP Agro Limited was classified as NPA on 9th November 2003, thereafter, the applicant mortgaged his property to Punjab National Bank on behalf of M/s. Metro Steel Traders on 5th March 2004.

16. From the bare reading of the FIR and even the charge sheet, it appears that there are no allegations against the applicant that there was fraudulent and dishonest intention to cheat with the bank from the very beginning of the land transfer. Even there are no specific specific allegations and averments in the FIR/Charge sheet that applicant was in- charge of the administration or management of the company and would be vicariously liable. In light of the aforesaid, the prayer of the applicant to quash the criminal proceedings against the applicant so far as the offence under Section 420 of the Indian Penal Code is required to be considered.

17. In view of the above and for the reasons stated above, this Court is of the opinion that this is a fit case to exercise the powers under Section 482 of the Code of Criminal Procedure to quash the criminal proceedings against the applicant for the offence punishable under Section 420 of the Indian Penal Code. To continue the criminal proceedings against the applicant would be undue harassment to him. As observed

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hereinabove, no prima facie case for the offence punishable under Section 420 of the Indian Penal Code is made out.

18. Present application is hereby accordingly allowed. The impugned charge sheet filed against the present applicant for the offence punishable under Section 420 of the Indian Penal Code and proceedings of CBI Special Case No. 15 of 2009 qua present applicant are hereby quashed.

19. However, it is made clear that the impugned criminal proceedings is quashed and set aside only against the present applicant and not against any other accused persons against whom, the charge sheet had been filed and proceedings may continue against the other co-accused in accordance with law.

Notice stands discharged.

(B.N. KARIA, J) K. S. DARJI