M/S Grc Infra Private Limited vs M/S G R Constructions
2023 Latest Caselaw 1233 Kant

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     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

         DATED THIS THE 9TH DAY OF FEBRUARY 2023

                          BEFORE

           THE HON'BLE MR. JUSTICE K.NATARAJAN

           CRIMINAL PETITION NO.12461 OF 2022

BETWEEN

1.     M/S GRC INFRA PRIVATE LIMITED
       A COMPANY INCORPORATED UNDER THE COMPANIES
       ACT 1956 HAVING ITS REGISTERED OFFICE AT NO.
       161/A, 7TH CROSS,
       TEACHERS COLONY
       K S LAYOUT
       BENGALURU - 560078

       (REP BY ITS DIRECTOR
       MR. G RAMANA BABU)

2.     MR. G RAMANA BABU
       S/O LATE V MUNISAMI NAIDU
       AGED 55 YEARS
       R/AT NO. 124, 3RD MAIN,
       SUN CITY LAYOUT,
       J P NAGAR, VII PHASE,
       BENGALURU - 560078
                                         ... PETITIONERS

(BY SRI B.V. SHANKARA NARAYANA RAO, SENIOR COUNSEL
FOR SRI CHANDRASEKHARA T A., ADVOCATE)

AND

1 . M/S G R CONSTRUCTIONS
    A PARTNERSHIP FIRM HAVING
    ITS OFFICE AT NO. 83/2,
    SHREE DURGA AURA
    1ST FLOOR, 33A CROSS ROAD,
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   9TH MAIN ROAD, 4TH BLOCK,
   JAYANAGAR
   BENGALURU - 560 011

   (REP BY ITS PARTNERS
   R M ESHWAR NAIDU
   AND MAMATHASHREE)

2 . SRI R M ESWAR NAIDU
    AGED 50 YEARS
    S/O LATE R MUNISWAMY NAIDU
    PARTNER
    M/S G R CONSTRUCTIONS
    A PARTNERSHIP FIRM
    HAVING ITS OFFICE AT
    NO. 83/2, SHREE DURGA AURA
    1ST FLOOR, 33A CROSS ROAD,
    9TH MAIN ROAD,
    4TH BLOCK,
    JAYANAGAR
    BENGALURU - 560011

3 . SMT. MAMATHASHREE
    AGED 41 YEARS
    W/O SRI R M ESWAR NAIDU
    PARTNER
    M/S G R CONSTRUCTIONS
    A PARTNERSHIP FIRM HAVING
    ITS OFFICE AT NO. 83/2,
    SHREE DURGA AURA
    1ST FLOOR, 33A CROSS ROAD,
    9THMAIN ROAD, 4TH BLOCK,
    JAYANAGAR
    BENGALURU - 560011
                                       ...RESPONDENTS
(BY SRI CHIDANANDA P., ADVOCATE)

     THIS CRIMINAL PETITION IS FILED UNDER SECTION 439
OF THE CODE OF CRIMINAL PROCEDURE, PRAYING TO QUASH
THE ENTIRE PROCEEDINGS IN C.C.NO.34603/2021 ON THE
FILE OF THE 28TH ADDITIONAL CHIEF METROPOLITAN
MAGISTRATE AT BENGALURU.
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     THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 3.02.2023, THIS DAY, THE COURT
MADE THE FOLLOWING:

                               ORDER

This petition is filed by the petitioner-accused Nos.1

and 2 under Section 482 of Cr.P.C. for quashing the

criminal proceedings in C.C. No.34603/2021 pending on

the file of 28th Additional Chief Metropolitan Magistrate,

Bengaluru, for the offences punishable under Section 138

of Negotiable Instruments Act, 1881 (for short 'NI Act').

2. Heard the arguments of learned counsel for the

petitioners and learned counsel for the respondent Nos.1

to 3.

3. The case of the petitioners is that the

respondents have filed a private complaint under Section

200 of Cr.P.C. read with 138 of NI Act alleging that the

complainant and accused were the directors and share

holders of M/s.GRC Infra Private Limited, a company

incorporated under the Companies Act, 1956, and both of

them were also running the partnership firm in the name

of M/s.G.R. Constructions. Later, there was

memorandum of understanding and settlement between

accused No.2-G. Ramana Babu and the complainant R.M.

Eswar Naidu that the partnership firm shall be continued

by R.M. Eswar Naidu and accused No.2-Ramana Babu shall

retire from the firm and the wife of Eshwar Naidu shall be

inducted as partner and they should run the firm in the

name of M/s. G.R. Constructions. Likewise, the

complainant Eswar Naidu shall come out from M/s. GRC

Infra Private Limited and in place of Eswar Naidu, the wife

of accused i.e. wife of Ramana Babu shall be inducted as

share holder and director of the company. In the

memorandum of settlement and Memorandum of

Understanding, it was stated that some of the properties

shall be transferred from M/s.G.R. Constructions to

M/s.GRC Infra Private Limited and the accused was

required to pay some amount to Eswar Naidu in respect of

receiving the immovable properties. On that back ground

and settlement between the parties, the accused said to

have issued four cheques to the complainant and the

cheques were dishonoured for insufficiency of funds.

Hence, complaint came to be filed for dishonour of four

cheques for Rs.8.00 crores and all four cheques were

issued for Rs.2.00 crores each and the cheques were

dishonoured for stop payment. After registering the

criminal case, summons have been issued, which is under

challenge.

4. The learned counsel for the petitioners has

contended mainly on the ground that there is no legally

enforceable debt in order to file a private complaint. There

was an arbitration clause in the Memorandum of

Understanding and the arbitration proceedings, which is

already been initiated, is pending. Meanwhile, the

complainant has also raised a dispute before the National

Company Law Tribunal, where the dispute came to be

dismissed. The complainant forged the board resolution

and a complaint is also filed before the police against the

accused, which is pending and therefore, continuing the

proceedings against the petitioners is abuse of process of

law and hence, prays for quashing the same.

5. Learned counsel for respondents has contended

that in view of the settlement between the accused and

the complainant, the complainant took over the firm and

the accused took over the company. Some of the

properties of the firm have been transferred to the

individual name of the accused and company, where the

accused and his wife are the directors. The complainant

came out of the company and continued to be a partner in

the firm by inducting his wife as another partner in the

place of accused. In view of transfer of property, the

accused gave 19 cheques, out of them, three cheques

issued by the accused were already honoured. Out of the

three cheques, for Rs.50.00 lakhs, the accused was unable

to pay the amount. On his request, the accused gave two

cheques, for Rs.25.00 lakhs each and the same was

honoured. The issuance of cheques by the accused is not

in dispute. The remaining cheques of Rs.2.00 crores has

been dishonoured for stop payment. The amount payable

to the complainant by the accused is about Rs.8.00 crores.

Therefore, there is legally enforceable debt and

recoverable from the accused and therefore, the complaint

cannot be quashed. It is further contended that the

accused himself raised arbitration proceedings by

admitting the issuance of cheques. Though the Company

Law Tribunal dismissed the claim, but it was on the ground

of that it was personal dispute between the two individuals

and therefore, the contention cannot be available to

accused. The learned counsel further contended that the

accused started paying the amount until the properties

were transferred to the accused company from the firm.

Thereafter, he stopped paying the amount and therefore,

prayed for dismissing the petition.

6. Having heard the arguments of the learned

counsel for the parties, perused the records.

7. The learned counsel for the petitioners has relied

upon the various judgments of the Hon'ble Supreme Court

in the case of G.SAGAR SURI VS. STATE OF UP reported

in 2000(2) SCC 636, INDIAN OIL CORPORATION VS.

NEPC INDIA LIMITED AND OTHERS reported in

(2006)6 SCC 736, STATE OF HARYANA AND OTHERS

VS. BAJAN LAL AND OTHERS reported in 1991

SUPP(1) SCC 335, PEPSI FOODS LTD. AND

ANOTHER VS. SPECIAL JUDICIAL MAGISTRATE AND

OTHERS reported in 1998(5) SCC 749 AND

KRISHNALAL CHAWLA AND OTHERS VS. STATE OF

U.P. and another decided on 08.03.2021.

8. Per contra, learned counsel for respondents has

relied upon the judgment of Hon'ble Supreme Court in the

case of RATHISH BABU UNNIKRISHNAN VS. STATE

(GOVERNMENT OF NCT OF DELHI), decided in Criminal

Appeal Nos.694-695/2022 on 26.04.2022.

9. I have perused the judgments of the Hon'ble

Supreme Court relied on by the parties and perused the

records.

10. It is an admitted fact that the accused and

complainant were running two entities namely M/s.G.R.

Constructions as a firm and M/s.GRC Infra Private Ltd., a

company and subsequently, there were a settlement

between both accused and complainant where the

complainant shall come out from the company and the wife

of accused shall be inducted as director in the company

and the accused shall come out from the partnership firm

and the wife of complainant shall be inducted as partner

and continue the firm. It is also an admitted fact that

there was Memorandum of Understanding entered into

between both parties as per Memorandum of

Understanding dated 31.3.2018 and there was an

agreement of settlement deed on 5.4.2018. There were

various understandings between the parties regarding the

amount payable by the accused to the complainant and

transfer of properties from firm to accused company.

11. It is an admitted fact that the accused gave 19

cheques to the complainant, out of which three cheques

dated 6.7.2019 for Rs.1.00 crore, Rs.50.00 lakhs each

dated 15.7.2019 drawn on Indian Overseas Bank were

honoured by the accused. These four cheques dated

15.7.2019 were among the 19 cheques. It is not in

dispute that some of the immovable properties have been

transferred by the complainant to the accused company as

per the settlement deed and the accused also started

paying some amount to the complainant. Later, the

accused failed to pay the amount and an intimation was

given to the bankers to stop the payment. Thereafter, the

respondent-complainant issued a legal notice, which was

replied by the accused wherein the accused admitted

issuance of the above cheques and contended that still

more cheques are in possession of the complainant and

these are all claimed only to keep the said cheques in

custody. The main contention of the accused is that the

complainants have created the forged board resolution

dated 27.3.2019. In that regard, the petitioners have filed

a complaint against the complainants before

Kumaraswamy Layout police on 26.2.2020 and the

respondent-complainant also has given reply to the police

stating that there was settlement between the parties and

in view of the settlement, the cheques were issued by the

accused and a complaint was lodged for dishonour of

cheques. However, the police have not taken any action

nor FIR has been registered. Therefore, the contention

that there is no legal liability on the part of the accused to

discharge the liability, cannot be acceptable. On the other

hand, the cheques were issued to discharge the liability of

the company for taking over the property of the firm from

the complainant and the amount was payable to the

complainant in respect of the company, as per the

memorandum of settlement and Memorandum of

Understanding and the settlement deed.

12. Another contention of the petitioners is that

there was an arbitration clause in the Memorandum of

Understanding which states that if any dispute arises, the

parties have to make claim before the arbitrator. No

doubt, there is an arbitration clause in respect of any

dispute, but, the accused has already honoured three

cheques and paid Rs.2.00 crores and some of the cheques

issued by the accused especially, four cheques were

dishnoured. It may be the part of claim, but, once the

cheques were dishonoured, which are legally enforceable

debt, then the accused is liable to be prosecuted under

Section 138 of the NI Act. Even if the amount payable by

the accused in the complaint is under Section 138 of the

NI Act, that can be adjusted in the claim made before the

arbitrator and the arbitrator can take note of the amount

payable by the accused to the complainant in respect of

the four cheques. If any other dispute in respect of non-

performance, the parties can approach the arbitrator, but

in respect of dishonour of cheque, a criminal complaint can

be filed against the accused who issued cheques.

Therefore, the said contention cannot be acceptable.

13. As regards to the contention that board

resolution has been forged by the complainant and that

has to be considered by the police on the complaint filed

by the petitioner, cannot be a ground for quashing the

criminal proceedings. That apart, once the accused

admitted the issuance of cheques and made part payment

and some of the cheques are remaining, he cannot deny

the liabilities and he cannot blow hot and cold at the same

time.

14. As regards to dismissal of the complaint raised

by the respondent before the Company Law Tribunal where

the Company Law Tribunal held that it is the private

dispute between both parties and it is not a company

dispute, in this regard, in the present case, it is the

dispute arisen between the complainant and accused in

respect of the amount payable by the accused to the

complainant in view of Memorandum of Understanding and

settlement deed. Therefore, the dismissal of the complaint

by the National Company Law Tribunal will not be helpful

to the case of the accused.

15. The Hon'ble Supreme Court in case of Rathish

Babu Unnikrishnan (supra), by relying upon the various

judgments at para Nos.13, 16, 17 and 18 has held as

under:

"13. Bearing in mind the principles for exercise of jurisdiction in a proceeding for quashing, let us now turn to the materials in this case. On careful reading of the complaint and the order passed by the Magistrate, what is discernible is that a possible view is taken that the cheques drawn were, in discharge of a debt for purchase of shares. In any case, when there is legal presumption, it would not be judicious for the quashing Court to carry out a detailed enquiry on the facts alleged, without first permitting the trial Court to evaluate the evidence of the parties. The quashing Court should not take upon itself, the burden of separating the wheat from the chaff where facts are contested. To say it differently, the quashing proceedings must not become an expedition into the merits of factual dispute, so as to conclusively vindicate either the complainant or the defence.

16. The proposition of law as set out above makes it abundantly clear that the Court should be

slow to grant the relief of quashing a complaint at a pre-trial stage, when the factual controversy is in the realm of possibility particularly because of the legal presumption, as in this matter. What is also of note is that the factual defence without having to adduce any evidence need to be of an unimpeachable quality, so as to altogether disprove the allegations made in the complaint.

17. The consequences of scuttling the criminal process at a pre-trial stage can be grave and irreparable. Quashing proceedings at preliminary stages will result in finality without the parties having had an opportunity to adduce evidence and the consequence then is that the proper forum i.e., the trial Court is ousted from weighing the material evidence. If this is allowed, the accused may be given an un-merited advantage in the criminal process. Also because of the legal presumption, when the cheque and the signature are not disputed by the appellant, the balance of convenience at this stage is in favour of the complainant/prosecution, as the accused will have due opportunity to adduce defence evidence during the trial, to rebut the presumption.

18. Situated thus, to non-suit the complainant, at the stage of the summoning order, when the factual controversy is yet to be canvassed and considered by the trial court will not in our opinion be judicious. Based upon a prima facie impression, an element of criminality cannot entirely be ruled out here subject to the determination by the trial Court. Therefore, when the proceedings are at a nascent stage, scuttling of the criminal process is not merited."

16. In view of the judgment of the Hon'ble Supreme

Court in Rathish Babu Unnikrishnan (supra), I am of the

view that the petition is devoid of merits and this Court

cannot scuttle the criminal process at the pre trial stage

without going into the trial when the presumption is

available in favour of the complainant. At the stage of

summoning the case, the Court should not canvass the

controversy and quash the criminal proceedings.

Therefore, I am of the view that the petition is liable

to be dismissed.

Accordingly, it is dismissed.

Sd/-

JUDGE

CS