Kerala High Court
Hedge Equities Ltd vs State Of Kerala on 13 September, 2024
Author: K. Babu
Bench: K. Babu
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE K. BABU
FRIDAY, THE 13TH DAY OF SEPTEMBER 2024 / 22ND BHADRA, 1946
OP(CRL.) NO. 85 OF 2014
AGAINST THE PROCEEDINGS IN CC NO.3094 OF 2013 OF
JUDICIAL FIRST CLASS MAGISTRATE COURT-I, CHENGANNUR
PETITIONERS:
1 HEDGE EQUITIES LTD.
1205, DALAMAL TOWN, NARIMAN POINT,
MUMBAI-400 021.
2 ALEX K.BABU
MANAGING DIRECTOR, HEDGE EQUITIES LTD.,
HEDGE HOUSE, MAMANGALAM,
PALARIVATTOM, KOCHI-682 025.
BY ADVS.
S.SREEDEV
SRI.PAUL JACOB P
SRI.ENOCH DAVID SIMON JOEL
SRI.RONY JOSE
LEO LUKOSE(K/001131/2016)
KAROL MATHEWS SEBASTIAN ALENCHERRY(K/126/2010)
DERICK MATHAI SAJI(K/1901/2021)
KARAN SCARIA ABRAHAM(K/003189/2023)
ITTOOP JOY THATTIL(K/2716/2024)
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O.P.(Crl.)No.85 of 2014 2
RESPONDENT/STATE & COMPLAINANT:
1 STATE OF KERALA
REPRESENTED BY PUBLIC PROSECUTOR,
HIGH COURT OF KERALA,
ERNAKULAM.
2 DAIZY THOMAS, AGED 42 YEARS
W/O.THOMAS CHACKO,
NADAVALLIL KIZHAKKETHIL HOUSE,
VENMONEY P.O., VENMONEY VILLAGE,
CHENGANNUR TALUK, ALAPPUZHA DISTRICT,
PIN-689 509.
R1 BY PP SMT.NIMA JACOB
R2 BY G.ANANTHA NARAYANAN
THIS OP (CRIMINAL) HAVING BEEN FINALLY HEARD ON
13.09.2024, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
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O.P.(Crl.)No.85 of 2014 3
"C.R."
JUDGMENT
The petitioners who are accused in C.C.No.3094 of 2013 on
the file of the Judicial First Class Magistrate Court-I, Chengannur seek
to quash all further proceedings in the calendar case. The petitioners
and the other accused are alleged to have committed offences
punishable under Sections 406, 420 and 120-B r/w Section 34 of the
Indian Penal Code.
2. The prosecution case was initiated based on Ext.P6
complaint filed by respondent No.2. Petitioners 1 and 2 are accused
Nos.1 and 2, respectively. Accused No.3 is the Branch Manager of
petitioner No.1 firm.
3. Accused No.1 is a stock broking firm registered with the
National Stock Exchange and Bombay Stock Exchange under the
Securities and Exchange Board of India Act, 1992 (for short 'SEBI Act').
Accused No.2 is the Managing Director of the firm.
4. Accused No.1 provides a platform for transactions in
various equities and commodities to clients who open trading accounts
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with them. The complainant/respondent No.2, on 10.6.2010, entered
into an agreement with accused No.1, authorising the former to make
investments for and on behalf of her. Accused No.3, the Branch
Manager of accused No.1 firm, and the complainant belong to the same
village. The complainant used to purchase shares from different
companies since 2009. Accused No.3 induced the complainant to invest
with accused No.1. She invested a total sum of Rs.4,15,650/- between
June, 2010 and March, 2011. She purchased shares of various
companies. She also entrusted shares with accused No.1. She suffered
a loss in the business, and her debit balance as on 18.2.2013 came to
Rs.3259.82.
5. The complainant filed Ext.P6 complaint before the Judicial
First Class Magistrate Court, Chengannur, alleging that the accused
committed offences punishable under Sections 420, 406 and 120-B r/w
Section 34 of the IPC. She alleged cheating and criminal breach of
trust against the accused.
6. The learned Magistrate took cognizance of the offences
and issued process against them. In this Original Petition, the
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petitioners/accused Nos.1 and 2 challenge Ext.P6 complaint and all
further proceedings initiated against them pursuant to it.
Submissions
7. The learned counsel for the petitioners/accused Nos.1
and 2 submitted as follows:-
(1) The complaint does not reveal the ingredients of the offences
alleged.
(2) The pendency of the Calendar Case is an abuse of the process of
the Court.
(3) The complainant had an alternative remedy under Section 26 r/w
Section 27 of the SEBI Act.
8. The learned counsel for respondent No.2/the complainant
submitted as follows:-
(a) The complaint reveals the ingredients of the offences alleged.
(b) The petition filed under Article 227 of the Constitution of India is
not maintainable to quash the proceedings in the Calendar Case.
(c) The accused are not protected under the provisions of the SEBI Act
from any prosecution which might be brought against them under
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different penal statutes as the complaint reveals the offences
alleged.
(d) The High Court is not competent to quash the proceedings
prematurely.
(e) The accused, in a petition seeking quashing of the proceedings
before trial, cannot rely on materials other than the one relied on
by the prosecution.
(f) The petition seeking quashing of the proceedings is not
maintainable in the absence of accused No.3 in the party array.
9. Accused No.1 is "Hedge Equities Ltd.", a firm registered
under the SEBI Act. Accused No.1 is engaged in the share marketing
business. Accused No.2 is the Managing Director of Hedge Equities Ltd.
Accused No.3 is the Manager of its Adoor Branch. Accused No.3 is a
native of the village where the complainant resides. He induced the
complainant to invest with 'Hedge Equities Ltd.'. The complainant had
previous experience in share business. She used to purchase shares of
different companies from 2009 onwards. She invested a sum of
Rs.4,15,650/- in the form of cash and shares worth Rs.5,17,647.25
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during 2010 and 2011 with accused No.1. She suffered heavy loss, and
her account showed a debit balance in 2013.
10. The complainant alleges that she happened to invest in
accused No.1 company based on dishonest and fraudulent inducement
on the part of accused No.3. She alleged that the accused hatched a
criminal conspiracy, as a result of which valuable property was
fraudulently transferred to accused No.1. Therefore, she filed a private
complaint, which forms the basis of the prosecution in C.C.No.3094 of
2013.
11. The learned counsel for the complainant raised a
preliminary objection contending that this Court is not empowered to
quash a criminal proceeding pending before the Subordinate Court in a
petition under Article 227 of the Constitution of India. The
nomenclature under which the petition is filed is not quite relevant, and
that does not deter the court from exercising its jurisdiction, which
otherwise it possesses unless barred. Under Article 227 of the
Constitution, the power of superintendence by the High Court is not
only of administrative nature but is also of judicial nature. This article
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confers vast power to the High Court to prevent the abuse of the
process of law by the inferior courts and to see that the stream of
administration of justice remains clean and pure. The power conferred
on the High Court under Articles 226 and 227 of the Constitution of
India and under Section 482 of the Code have no limits, but the same is
to be exercised with due care and caution (Vide: Pepsi Foods Ltd. and
Ors. v. Special Judicial Magistrate and Ors. [(1998) 5 SCC 749]).
12. The learned counsel for the complainant raised a
contention that while considering a petition seeking to quash a criminal
proceeding at a pre-trial stage, the Court cannot look into the materials
produced by the accused. It is submitted that the Court must only
consider whether the allegations make out a cognizable offence.
13. If the High Court is fully satisfied that the materials
produced by the accused are such that would lead to the conclusion
that his defence is based on sound, reasonable and indubitable facts, or
the same would rule out or displace the assertions in the complaint or
the materials relied on by the accused would reject and overrule the
veracity of the prosecution allegations, it can quash such criminal
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proceedings to avoid or to prevent the abuse of the process of the court
and to secure the ends of justice.
14. While exercising the jurisdiction under Section 482 of
Cr.P.C, the High Court is guided by the following two objectives:
(i) Prevent the abuse of the process of the court.
(ii) Secure the ends of justice.
15. In Rajiv Thapar and Others v. Madan Lal Kapoor
[(2013) 3 SCC 330)], the Apex Court delineated the following steps
to determine the veracity of a prayer for quashment raised by an
accused by invoking the power vested in the High Court under Section
482 of Cr.P.C.:-
"Step one: Whether the material relied upon by the accused
is sound, reasonable, and indubitable ie. the materials is of
sterling and impeccable quality?
Step two: whether the material relied upon by the accused
would rule out the assertions contained in the charges levelled
against the accused ie. the material is sufficient to reject and
overrule the factual assertions contained in the complaint ie. the
material is such as would persuade a reasonable person to
dismiss and condemn the factual basis of the accusations as
false?
Step three: whether the material relied upon by the
accused has not been refuted by the prosecution/complainant;
and/or the material is such that it cannot be justifiably refuted
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by the prosecution/complainant?
Step four: whether proceeding with the trial would result in
an abuse of process of the court, and would not serve the ends
of justice?
If the answer to all the steps is in the affirmative, the
judicial conscience of the High Court should persuade it to quash
such criminal proceedings in exercise of power vested in it under
Section 482 Cr.P.C. Such exercise of power, besides doing
justice to the accused, would save precious court time, which
would otherwise be wasted in holding such a trial (as well as
proceedings arising therefrom) especially when it is clear that
the same would not conclude in the conviction of the accused."
16. The principles enumerated in Rajiv Thapar (Supra) are
reiterated by the Supreme Court in Prashant Bharti v. State (NCT of
Delhi) [(2013) 9 SCC 293].
17. Therefore, it is permissible for the High Court to
consider the materials produced by the accused on the touchstone of
the principles discussed above.
18. The learned counsel for the accused submitted that as
per Section 26 r/w Section 27 of the SEBI Act, a complaint can be
entertained only by the Board, and a complaint is not maintainable
before the Judicial Magistrate of First Class.
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19. Section 26 of the SEBI Act reads thus:-
"26. Cognizance of offences by Courts.-(1) No Court
shall take cognizance of any offence punishable under this Act or
any rules or regulations made thereunder, save on a complaint
made by the Board,"
20. The provisions of Section 26 are only applicable to the
offences under the SEBI Act. (Sections 24 to 27)* of the SEBI Act,
being a complete code for dealing with the offences under the SEBI Act,
cannot in any way bar the initiation of any prosecution alleging a
criminal offence other than the offences under the SEBI Act in a
competent criminal court. This is more evident from Section 21 of the
SEBI Act, which reads thus:-
"21. Savings.- Nothing in this Act shall exempt any person
from any suit or other proceedings which might, apart from
this Act, be brought against him."
21. As per Section 21 of the SBI Act, no person is exempted from
any proceedings which might, apart from this Act, be brought against him.
Therefore, the contention of the accused that a complaint alleging offences
under Sections 420, 406 and 120-B r/w Section 34 of IPC against the accused
is not maintainable before the Judicial First Class Magistrate has no force.
*corrected suo motu as per order dated 24.9.2024.
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22. Now, I shall examine whether the complaint reveals the
offences alleged. The relevant pleadings in the complaint are extracted
below:-
"2. The complainant is a housewife and her husband was
engaged in so many businesses here and afterwards he
obtained a job in a Gulf country in the year 2010 and as per
the family arrangements between the complainant and her
husband, the complainant is entrusted to manage the
savings of her husband and to utilize it in most profitable
ventures. On the basis of the assessment of the
complainant, she was in the impression that by purchasing of
shares as investment and as a result, with her limited
knowledge, she used to purchase shares of different
companies from the year 2009 onwards.
3. The 3rd accused is a native of the complainant. Somehow or
the other, he realized that the complainant was interested in
share market and as a result, the 3rd accused approached
the complainant almost on the 4th month of 2010 and
explained her that he is an authorized officer of the 1st
accused company, which is a most reliable engaged in
investing the amount or transferring the shares by which
they themselves will conduct the purchasing and marketing
of shares on the basis of a calculating assessment by their
company that it will save the investors from causing losses
and in their hands the amount invested will be profitable and
it will never cause any loss to the investors. In order to
convince the complainant, the 3rd accused submitted some
brochures explaining the way of the business which is being
conducted by the 1st accused company.
4. Even though the complainant shown some reluctance in
engaging such risky businesses, the 3rd accused cautiously
induced her presenting some brochures as documents on
which the investors can rely upon by which they can be
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convinced that no loss will be caused to an investor in the
1st accused company in any eventuality. A copy of the
brochure which was produced along with this complaint
reveals that the 1st accused company is "a friend and guide"
affording the utmost service on the basis of technical
research in the field to find out appropriate movement in
which a share is to be marketed assessing the fluctuation in
the market and if the company will be entrusted the
responsibility, the investor will never have to face any risk or
loss in their investment. It is on the basis of such an
inducement and promise from the part of the 3rd accused for
and on behalf of the company, the complainant happened to
be prompted to invest an amount in the 1st accused
company of which the 3rd accused is the Branch Manager of
the Branch Office of the 1st accused company, which was
functioning at Adoor.
5. As a result, on 14.06.2010 the complainant invested an
amount of Rs.20,550/- by way of 2 cheques out of her
account at Federal Bank Ltd., Pandalam Branch. On further
inducement from 3rd accused, she happened to invest
further amount of Rs.20,000/-, Rs.45,000/-, Rs.60,000/-,
Rs.80,000/-, Rs.60,000/- and Rs.50,000 /- in different dates
between the 6th month of 2010 to 3rd month of 2011
through cheques. Those deposits were made as per the
advice of the 3rd accused in Hedge Equities and in between
these periods, on the basis of the direction and inducement
of the 3rd accused another three investments were also
made by the complainant as Rs.100/- on 10.07.2010 and
afterwards Rs.40,000/- and again Rs.40,000/- on 12.7.2010
and 16.7.2010 respectively in Hedge Commodities. Thus, a
total amount of Rs.4, 15,650/ - happened to be invested in
between the 6th month of 2010 and the 3rd month of 2011.
6. At this juncture, it is very humbly submitted that the
complainant is totally in dark about the difference between
Hedge Equities and Hedge Commodities and its merits and
demerit, profit or loss, good or bad, right or wrong, and
correct or incorrect, except the information given by the 3rd
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accused to the complainant in order to persuade her to
invest in Hedges Commodities or Hedges Equities. In other
words, on the basis of false information created by the 3rd
accused in the mind of the complainant about the loyalty,
credibility and the so called reputation of the company of
which one of the idol of the complainant, Mohanlal, Cine
Artist, who is the Brand Ambassador of the |st accused
company, she happened to be totally induced by the 3 rd
accused to make such type of investment believing his
words that it will be marketed and it will be profitable and it
will never cause loss to her.
7. During this transaction, it could be learnt to the 3rd accused
that the complainant is holding share of some companies. He
persuaded her that it would be great risk in retaining those
shares in her hand and if those would be entrusted to the 1st
accused company they will market it profitably by which a
huge financial gain can be attained and those shares will
never be marketed or exchanged for any unprofitable means
and the Company is the most credible firm which have
attained the most scientific experience in this field and from
which point of time a share should be marketed or
exchanged beneficial to the shareholder. As a result, a false
promise and dishonest inducement in addition to the
investment of the amount mentioned above, she happened
to deposit the shares of herself and her husband as detailed
below:
a. ABAN OFSHORE - 110 shares then having a value of
Rs.845.47 per share with a total value of Rs.93,002.10.
b. AXIS BANK- 40 shares then having a value of Rs.1482.25 per
share with a total value of Rs.59,290. 15.
c. ICICI Bank - 80 shares then having a value of Rs.1103.24 per
share with a total value of Rs.88,259.05.
d. SESA GOA - 605 shares then having a value of Rs.344.71 per
share with a total value of Rs.2,08,550.55.
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e. Reliance Capital - 80 shares then having a value of Rs.856.82
with a total value of Rs.68,545.40.
Hence all the above said shares together then valued at
Rs.5,17,647.25 were handed over to the 1st accused through
the 3rd accused during this period.
xxx xxx xxx
10. Atlast, on 18.02.2013 when the complainant's husband
came down on leave, herself along with him happened to
visit the office of the 3rd accused and from some employees
then present there, who might be unaware about the fraud,
which was being played, disclosed to the complainant that
her investment at that time is only 18 shares of South
Indian Bank with a share value of Rs.25.05 per share. If at
all such a share value is there in the name of the
complainant, her account was showing a debit of
Rs.3259.82.
11. In the result, in spite of the investment of Rs.4,15,650/- as
cash and entrustment of shares having a value of
Rs.5, 17,647.25 up to 1.3.2011, which was claimed to have
been increased due to their trading to Rs.17,62, 342.5 as
per their statement of account handed over on 29.09.2012,
but as per the information provided to the complainant on
18.02.2013, it revealed that the complainant lost all his
investments, both in cash and shares, but at the same time
a debit balance of Rs.3259.82 was shown against her
account.
xx xx xx
14. Investment of amount and entrustment of the shares
happened to be made by the complainant on the basis of
the dishonest and fraudulent inducement from the part of
the third accused as a responsible officer of the 1st accused
company and afterwards by giving false, frivolous and
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misleading statement of account from the Adoor Branch of
the company the accused together have committed criminal
breach of trust which is as result of criminal conspiracy
which have committed by the company and its subordinates
and hence such a grave fraud was committed by the 3rd
accused as a result of criminal conspiracy entered into by
the company and its officers and hence the accused
together jointly committed the offences punishable under
section 420, 406 and 120 B r/w Section 34 IPC which are
the offences triable by this Hon'ble Court."
23. The learned counsel for the accused submitted that the
pleadings in the complaint do not reveal the offences alleged. It is
submitted that the materials would reveal that the complainant
voluntarily invested money and shares with accused No.1 with the
knowledge that she was engaging in a risky business. It is the
submission of the learned counsel for the accused that none of the acts
of the accused caused loss to the complainant. If the complainant
suffered a loss in the business, variations in the share value due to
market fluctuations contributed to it. It is submitted that the accused
never had any dishonest intention while entering into an agreement
with the complainant. The learned counsel relied on the agreement
dated 10.6.2010 between the representatives of the accused and the
complainant (Ext.P6) and Ext.P4 notice in support of his contentions.
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Ext.P1 is the agreement between the complainant and the accused.
Some of the relevant terms and conditions in the agreement admittedly
executed between the complainant and the accused read thus:-
"NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL
UNDERSTANDING AS SET FORTH IN THIS AGREEMENT, THE
PARTIES THERETO HAVE AGREED TO THE FOLLOWING TERMS
AND CONDITIONS:
1. The client agrees to immediately notify the stock broker in
writing if there is any change in the information in the 'client
registration form' provided by the client to the stock broker at
the time of opening of the account or at any time thereafter.
2. The stock broker declares that it has brought the contents of
the risk disclosure document to the notice of client and made
him aware of the significance of the said document. The client
agrees that
a. He has read and understood the risks involved in trading
on a stock exchange.
b. He shall be wholly responsible for all his investment
decisions and trades.
c. The failure of the client to understand the risk involved
shall not render a contract as void or voidable and the
client shall be and shall continue to be responsible for all
the risks and consequences for entering into trades in the
segments in which the client chose to trade.
d. He is liable to pay applicable initial margins, withholding
margins, special margins or such other margins as are
considered necessary by the stock broker or the Exchange
or as may be directed by SEBI from time to time as
applicable to the segment(s) in which the client trades.
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The stock broker is permitted in its sole and absolute
discretion to collect additional margins (even though not
required by the Exchange, Clearing House/Clearing
Corporation or SEBI) and the client shall be obliged to pay
such margins within the stipulated time.
e. Payment of margins by the client does not necessarily
imply complete satisfaction of all dues. In spite
of consistently having paid margins, the client may, on
the closing of its trade, be obliged to pay (or entitled
to receive) such further sums as the contract may
dictate/require."
Ext.P1 further contains the risk elements under the heads; (1) Risk of
Higher Volatility (2) Risk of Lower Liquidity (3) Risk of Wider Spreads
and (5) Risk of Rumours (6) System Risk (7) Risk of News
Announcements etc.
24. Ext.P6 complaint reveals that the complainant had
previous experience in the share market. She has pleaded that since
2009 onwards, she had been purchasing shares of different companies.
25. The complainant alleges that the petitioners and the
other accused hatched a criminal conspiracy and committed cheating
and criminal breach of trust.
26. An offence under Section 420 IPC has the following
essentials:
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(i) There must be deception. That is, the accused must have deceived
someone;
(ii) That by the said deception. The accused must induce a person,
(a) to deliver any property; or
(b) to make, alter or destroy the whole or part of the valuable
security or anything which is signed or sealed and which is
capable of being converted into valuable property.
(iii) That the accused intentionally induced 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.
(iv) That the accused did so dishonestly.
27. The essential requirement of attracting an offence under
Section 420 of IPC is a fraudulent or dishonest inducement. A person
who dishonestly induces any person to deliver any property is liable for
the offence of cheating.
28. A guilty intention is an essential ingredient of the
offence of cheating. In other words, the mens rea on the part of the
accused must be established to attract the offence of cheating.
29. Where the charge against the accused is under Section
420 in which the allegation is that he induced the complainant to part
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with his goods, on the understanding that the accused would pay for
the same on delivery but did not pay, if the accused had at the time he
promised to pay cash against delivery an intention to do so, the fact
that he did not pay would not convert the transaction into one of
cheating. But if on the other hand he had no intention whatsoever to
pay but merely said that he would do so in order to induce the
complainant to part with the goods then a case of cheating would be
established. (Vide: Mahadeo Prasad v. State Of West Bengal (AIR
(1954) SC 724))
30. In Hari Prasad Chamaria v. Bishun Kumar Surekha
And Ors. [1973 (2) SCC 823] the Apex Court held that unless the
complaint showed that the accused had dishonest or fraudulent
intention at the time the complainant parted with the money, it would
not amount to an offence under Section 420 of IPC and it may only
amount to a breach of contract. In G.V. Rao v. L.H.V. Prasad & Ors
[(2000) 3 SCC 693) the Apex Court reiterated that a guilty intention
is an essential ingredient of the offence of cheating and therefore, to
secure conviction, "mens rea" on the part of the accused must be
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established. It was further held that in order to constitute an offence of
cheating, the intention to deceive should be in existence at the time
when the inducement was offered. These principles have been
reiterated by the Apex Court in Ajay Mitra v. State of M.P and
others [(2003) 3 SCC 11] and in Archana Rana v. State of Uttar
Pradesh and another [(2021) 3 SCC 751].
31. The essential ingredients of Section 406 IPC are the
following:-
(i) Entrusting any person with property or with any dominion over
property;
(ii) The person entrusted (a) dishonestly misappropriating or converting
to his own use that property; or (b) dishonestly using or disposing
of that property or wilfully suffering any other person so to do in
violation.
(i) of any direction of law prescribing the mode in which such
trust is to be discharged, or
(ii) of any legal contract made touching the discharge of such
trust.
32. The complainant also alleges the offence of criminal
conspiracy.
33. The essential ingredients of the offence of criminal
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conspiracy are (i) an agreement between two or more persons; (ii) the
agreement must relate to doing or causing to be done either (a) an
illegal act; or (b) an act which is not illegal in itself but is done by illegal
means. [vide: Rajiv Kumar v. State of U.P. and Another (2017
KHC 6522 = (2017) 8 SCC 791)]
34. Therefore, it is plain that meeting of minds of two or
more persons for doing or causing to be done an illegal act or an act by
illegal means is the sine qua non of criminal conspiracy. It is extremely
difficult to adduce direct evidence to prove conspiracy. The existence of
a conspiracy and its objective can be inferred from the surrounding
circumstances and the conduct of the accused.
35. I have analyzed the facts of the case on the touchstone
of the principles discussed above. The available material reveals that
the complainant voluntarily invested with accused No.1. She was well
aware of the risk in the business. The complainant failed to show that
the accused had dishonest or fraudulent intentions at the
commencement of the transaction. There is no material to show that
the accused dishonestly misappropriated the funds invested by the
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complainant. There is no element of misappropriation. The
complainant has not established that the accused committed any illegal
act or an act which is not illegal but is done by illegal means.
36. The accused have placed materials of sterling and
impeccable quality to rule out the assertions contained in the complaint.
Those materials are sufficient to reject and overrule the factual
assertions contained in the complaint. The materials relied on by the
accused are sufficient to destroy the factual basis of the accusations
against them. The complainant has not placed any material to rebut
those materials relied on by the accused.
37. The learned counsel for the complainant finally
submitted that as accused No.3 has not been impleaded as a party, the
High Court is not justified in exercising its power to quash the
proceedings on the ground that the proceeding is an abuse of the
process of the Court. The learned counsel relied on Homi Rajvansh v.
State of Maharashtra and Others [(2014) 12 SCC 556] in support
of his contention. In Homi Rajvansh, the Supreme Court considered a
case wherein the High Court quashed the proceedings where the
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offences alleged are punishable under Sections 409, 411, 420, 467, 468
and 471 r/w Section 120-B of the IPC. One of the accused challenged
the order quashing the proceedings by the High Court before the
Supreme Court, raising the contention that no opportunity of being
heard was given to him before recording adverse findings against him
in the judgment. He contended that the findings recorded behind his
back would affect the trial. The Supreme Court, in paragraphs 15 to 18
of the judgment observed thus:-
"15. The High Court committed an error in quashing the
complaint against Respondent No. 3 without hearing the
appellant herein who is a co - accused in the case as their
alleged roles are interconnected. The High Court committed an
error in coming to a finding against the appellant without the
appellant being a party in the writ petition filed by Respondent
No. 3. In fact, the perusal of the impugned order clearly shows
that the High Court simply agreed with the submissions of
Respondent No. 3 against the appellant herein without giving
him an opportunity of being heard.
16. We are satisfied that the High Court, in the impugned order,
over exercised its jurisdiction which is complete violation of
principles of natural justice since the appellant, who is a co -
accused, was not heard on the allegations levelled against him
by Respondent No. 3 herein.
17. Though the High Court possesses inherent powers under
S.482 of the Code, these powers are meant to do real and
substantial justice, for the administration of which alone it
exists or to prevent abuse of the process of the Court. This
Court, time and again, has observed that extraordinary power
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should be exercised sparingly and with great care and caution.
The High Court would be justified in exercising the said power
when it is imperative to exercise the same in order to prevent
injustice.
18. Inasmuch as admittedly the appellant was not impleaded /
shown as one of the parties before the High Court, the specific
finding against his alleged role, based on the submissions of
Respondent No. 3 herein without giving an opportunity of being
heard, cannot be sustained."
38. The proposition in Homi Rajvansh by the Supreme
Court is that the High Court committed an error while recording a
finding against one of the accused without him in the party array in a
proceeding initiated by another accused, which is an overexercise of
jurisdiction. The proposition laid by the Supreme Court in Homi
Rajvansh is not applicable to the present facts. This Court has not
made any observations against the other accused, who is not in the
party array, and the findings recorded in this case do not affect him.
39. While exercising jurisdiction under Section 190 Cr.P.C.
to take cognizance of an offence, the jurisdictional Court has to see that
the complaint contained the facts which constitute the offence alleged.
Mere allegations cannot be termed as facts that constitute the offence.
Summoning an accused in a criminal case is a serious matter. Criminal
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law cannot be set into motion as a matter of course. The prosecution in
the present case is necessarily an abuse of the process of the Court.
40. On exercising the extraordinary power under Article 226
of the Constitution of India or the inherent power under Section 482
Cr.P.C., the Apex Court in State of Haryana v. Bhajan Lal (AIR
1992 SC 604) held thus:-
"102. In the backdrop of the interpretation of the
various relevant provisions of the Code under Chapter XIV
and of the principles of law enunciated by this Court in a
series of decisions relating to the exercise of the
extraordinary power under Article 226 or the inherent
powers under Section 482 of the Code which we have
extracted and reproduced above, we give the following
categories of cases by way of illustration wherein such
power could be exercised either to prevent abuse of the
process of any court or otherwise to secure the ends of
justice, though it may not be possible to lay down any
precise, clearly defined and sufficiently channelised and
inflexible guidelines or rigid formulae and to give an
exhaustive list of myriad kinds of cases wherein such power
should be exercised.
(1) Where the allegations made in the first information
report or the complaint, even if they are taken at their face
value and accepted in their entirety do not prima facie
constitute any offence or make out a case against the
accused.
(2) Where the allegations in the first information report
and other materials, if any, accompanying the FIR do not
disclose a cognizable offence, justifying an investigation by
police officers under Section 156(1) of the Code except
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under an order of a Magistrate within the purview of Section
155(2) of the Code.
(3) Where the uncontroverted allegations made in the
FIR or complaint and the evidence collected in support of
the same do not disclose the commission of any offence and
make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a
cognizable offence but constitute only a noncognizable
offence, no investigation is permitted by a police officer
without an order of a Magistrate as contemplated under
Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint
are so absurd and inherently improbable on the basis of
which no prudent person can ever reach a just conclusion
that there is sufficient ground for proceeding against the
accused.
(6) Where there is an express legal bar engrafted in any
of the provisions of the Code or the concerned Act (under
which a criminal proceeding is instituted) to the institution
and continuance of the proceedings and/or where there is a
specific provision in the Code or the concerned Act,
providing efficacious redress for the grievance of the
aggrieved party.
(7) Where a criminal proceeding is manifestly attended
with mala fide and/or where the proceeding is maliciously
instituted with an ulterior motive for wreaking vengeance on
the accused and with a view to spite him due to private and
personal grudge."
The present case is fully covered by categories 1 and 3, as narrated in
Bhajan Lal.
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Resultantly, the Original Petition is allowed. All further
proceedings in C.C.No.3094 of 2013 on the file of the Judicial First Class
Magistrate Court-I, Chengannur stand hereby quashed.
Sd/-
K.BABU
Judge
TKS
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The part of the second sentence of paragraph 20 of the
judgment dated 13.9.2024 read as "Sections 26 to 28" is suo motu
corrected as "Sections 24 to 27".
Sd/-
24.09.2024 K.BABU
Judge
2024:KER:69948
APPENDIX OF OP(CRL.) 85/2014
PETITIONER EXHIBITS
EXT.P1 TRUE COPY OF THE AGREEMENT DATED 10.6.2010 ENTERED
INTO BETWEEN 1T PETITIONER AND THE 2ND RESPONDENT.
EXT.P2 TRUE COPY OF THE AGREEMENT ENTERED INTO BETWEEN
HEDGE COMMODITIES PVT. LTD (LATER CHANGED TO HEDGE
COMMODITIES LTD) AND THE 2ND RESPONDENT DATED
10.7.2010.
EXT.P3 TRUE COPY OF SOME OF THE DIGITAL REPORT DETAILS AS
INTIMATED TO 2ND RESPONDENT AND MAINTAINED BY THE
1ST PETITIONER.
EXT.P4 TRUE COPY OF THE LAWYERS DATED 20.3.2013 ISSUED ON
BEHALF OF THE 2ND RESPONDENT.
EXT.P5 TRUE COPY OF THE REPLY NOTICE DATED 15.4.2013
ISSUED BY THE 1ST PETITIONER TO 2ND RESPONDENT.
EXT.P6 TRUE COPY OF THE COMPLAINT IN C.C. 3094/2013 ON
THE FILES OF THE JUDICIAL FIRST CLASS MAGISTRATE
COURT-I, CHENGANNUR.
RESPONDENTS' EXHIBITS:
EXT.R2(a) TRUE COPY OF THE STATEMENT DATED 15.3.2013 ISSUED
BY MR.RAJESHKUMAR.P.G.
EXT.R2(b) TRUE COPY OF THE STATEMENT DATED 25.8.2011 ISSUED
BY MR.RAJESHKUMAR.P.G.
EXT.R2(c) TRUE COPY OF THE STATEMENT DATED 19.10.2011 ISSUED
BY MR.RAJESHKUMAR.P.G.
EXT.R2(d) TRUE COPY OF THE STATEMENT DATED 31.08.2012 BY
MR.RAJESHKUMAR.P.G.
EXT.R2(e) TRUE COPY OF THE STATEMENT DATED 31.08.2012 BY
MR.RAJESHKUMAR.P.G.
EXT.R2(f) TRUE COPY OF THE STATEMENT DATED 22.09.2012 BY
MR.RAJESHKUMAR.P.G.
2024:KER:69948
EXT.R2(g) TRUE COPY OF THE STATEMENT DATED 29.09.2012 BY
MR.RAJESHKUMAR.P.G.
EXT.R2(h) TRUE COPY OF THE STATEMENT DATED 18.02.2013 ISSUED
BY THE ADOOR BRANCH OF THE 1ST PETITIONER.
EXT.R2(i) TRUE COPY OF THE ORDER DATED 13.11.2013 IN
C.C.NO.3094/2013 ON THE FILE OF JUDICIAL FIRST
CLASS MAGISTRATE COURT-I, CHENGANNUR.
TKS
