Madras High Court
R.Duraisamy vs The State By Inspector Of Police on 16 December, 2021
Crl. O.P. No.26121, 25903 and 25904 of 2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 16.12.2021
CORAM
THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR
Crl. O.P. No.26121, 25903 and 25904 of 2017
&
Crl.M.P.Nos.14939, 14940, 15018 of 2017
& Crl.M.P.Nos.85 and 86 of 2018
1. R.Duraisamy
2. Dhanalakshmi .... Petitioners
in Crl.O.P.No.25903/2017/
A1 & A2
S.Ramaraj .... Petitioner in
S/o.Sambasivam Crl.O.P.No.25904 / 2017/A5
1. B.Shanmugavadivel
Sunrise Knitting Mills Pvt. Ltd.,
Kullavayal Thottam,
Kullengoundanpudur,
Andipalayam Post,
Tiruppur 641 687.
2. Mahesh
S/o. Krishnamurthy
1/14
https://www.mhc.tn.gov.in/judis
Crl. O.P. No.26121, 25903 and 25904 of 2017
3. Kannan .... Petitioners
S/o. Krishnamurthy in Crl.O.P.No.26121/2017/
A3, A4 & A6
Versus
1. The State by Inspector of Police,
Central Crime Branch,
Tiruppur City.(Crime No.26 of 2017)
2. Vengatachalam.M .... Respondents in all Crl.O.Ps.
COMMON PRAYER : Criminal Original Petitions filed under Section
482 of Cr.P.C. to call for records in Crime No.26 of 2017 on the file of the
Inspector of Police, CCB, Tiruppur City, Tiruppur and quash the same.
For Petitioner ... No appearance
For Respondents ... Mr.S.Vinoth Kumar for R1
Mr.M.R.Sheik Abdul Rahim for R2
-----
ORDER
Crl.O.P.No.25903 of 2017 has been filed by accused 1 and 2,
Crl.O.No.25904 of 2017 has been filed by accused No.5 and
Crl.O.P.No.26121 of 2017 has been filed by accused 3, 4 and 6 to quash the
First Information Report in Crime No.26 of 2017 pending on the file of the
respondent police.
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2. The accused 1 and 2, who are husband and wife, are partners and
accused 3 and 4 are their sons-in law and accused 5 and 6 are employees of
the firm known as Sunrise Knitting Mills. The shorts facts of the case is that
originally a partnership firm, by name “Sunrise Knitting Mills” was
constituted in the year 2007, by the De facto complainant along with his
three friends Shanmugam, Santhamani and Dhanalakshmi contributing 25%
share each. Subsequently, Santhamani has resigned and in her place one
Duraisamy, Son of Ramasamy Gounder was inducted as a partner. After
such induction, A1 and A2 was holding 40% of the share in the firm. After
the death of one of the partners, namely Shanmugam, his son-in-law, namely
Sivaraman was also inducted as a partner. The first accused Duraisamy was
given incharge to look into the affairs of the firm and from the inception, the
firm was running profitably till 2016. The annual turn over was Rs.150
Crores. At the relevant point of time, by mortgaging or pledging or
hypothecating the properties of the firm as well as individual partners, a sum
of Rs.34 Crores was borrowed from Indian Overseas Bank. From 2016
onwards, the first accused Duraisamy started taking decision on his own
without consulting other partners and has not furnished proper accounts of
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the firm. Accordingly, the first accused with other accused conspired in the
year 2015 and misappropriated the properties of the firm worth several
crores and fraudulently started a new company by name Sunrise Knitting
Mills Pvt. Ltd., on 16.12.2015 wherein accused 3 and 4 were directors.
Thereafter, the business transaction of the firm was diverted to the company,
besides company's property was also leased out to accused 3 and 4 for lesser
amount thereby caused loss to the Company and all the assets of the
Company worth about Rs.50 Crores was also misappropriated, thereby they
committed offences punishable under Sections 120B, 420, 467, 468 and 471
of IPC.
3. It is the contention of the learned counsel appearing for the
petitioners that the entire First Information Report is an abuse of process of
law and the dispute in a partnership firm has been given a criminal colour.
It is the further contention of learned counsel that this First Information
Report itself filed on the basis of the direction of this Court in a petition filed
under Section 482 Cr.P.C and prior to filing of this complaint, the dispute
was referred to Arbitration wherein also similar allegations of fraudulent
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Crl. O.P. No.26121, 25903 and 25904 of 2017
activities has been raised. Learned Arbitrator, a retired judge of this Court
has given a finding to the effect that allegation of the de facto complainant
and others has not been established and finally passed an award for
dissolution of the firm and the manner in which the immovable properties of
the firm has to be divided among partners. When the entire dispute relating
to the affairs of the firm has already culminated into an award, suppressing
the aforesaid arbitration award and to overcome the award, using the police
machinery the present complaint has been filed before the police authorities
and the same is nothing but an abuse of process of law and prays for
quashing the complaint.
4. Per contra, learned counsel appearing for the respondent
vehemently contended that the Arbitrator has not given any finding
regarding the misappropriation of the assets of the firm and the immovable
properties have been sold to the son-in-laws and there are huge
misappropriation of the firm's assets, besides there is also allegation of the
forged bills and therefore, this case requires investigation and opposed for
quashing the FIR.
5. I perused the entire materials available on record. This Court is
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aware of the fact that when prima facie allegations are made in the FIR, the
same requires deep investigation. Normally, this Court will not interfere
with the investigation exercising power under Section 482 Cr.P.C., but, at
the same time, when it is established that the entire FIR is a result of civil
dispute and given a colour of criminality, the Court will not hesitate to
interfere with such FIR.
6. As narrated above, the crux of the allegation in the FIR is with
regard to transfer of assets to the company owned by accused 3 and 4 and
the properties have been fraudulently sold to Sunrise Knitting Mills Pvt.
Ltd.,, The FIR itself indicates that the entire management of the firm was
in the hands of first accused and the firm was running profitably till 2016.
Only thereafter, it appears that the dispute arose among the partners. It is
relevant to note that the de facto complainant and other partners have
invoked arbitration in this matter, which culminated into an award dated
27.10.2017 made in A.O.P.No.421 of 2016 prior to the filing of the FIR.
The crux of the partners' case before the Arbitrator is that the respondents,
namely the accused 1 and 2 have misappropriated the funds of the firm, the
properties of the firm were leased out to son-in-laws (A3 and A4) and suits
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are also pending before the Court and such misappropriation caused huge
loss to the firm and foreign orders meant for the firm has been diverted to
the company owned by A3 and A4. After considering the evidence on both
sides, the learned Arbitrator, a retired judge of this Court, passed an award
and while considering Point Nos.3 and 4 has held that though the properties
of the firm were leased out to the Company, whether the quantum of lease
amount is sufficient or not cannot be decided at present and the same will be
taken in to account by the Auditor. Similarly, the learned Arbitrator
recorded a finding that no semblance of evidence for diverting the business
of the firm to the company and recorded a finding that merely because one
of the partners of the firm has helped son-in-laws in the different business, it
cannot be said that there was cheating and funds were diverted. Similarly, it
is also recorded that there is no evidence to show that foreign orders were
cancelled Such finding recorded in the arbitration award is based on facts.
7. Almost similar allegations contained in the FIR have been made in
the Arbitration OP. It is also stated before this Court that the award passed
in the year 2017 has not been challenged by the de facto complainant and
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other partners and ultimately, the learned Arbitrator passed the final award,
which reads as follows:
“a) That M/s. Sunrise Knitting Mills, partnership firm is ordered
to be dissolved.
b) That account of Sunrise Knitting Mills, shall be taken
from the date of re-constitution of partnership, namely,
12.03.2012, till the actual date of accounting, taking into
consideration all the relevant materials, including liability, if any.
c) M/s.A.Loganathan & T.Venketasen, Chartered
Accountants who are having their office at Sabari Towers, No
28(1)/20A KKR Layout, Main Street, Mangalam Road, Tirupur –
641 604, are appointed as Auditors for the purpose of taking the
account are stated above.
d) That the Auditors shall suggest the allotment of share of
profits and loss, as the case may be, according to the share of the
parties, regarding the business income;
e) That, Auditors shall, further divide the immovable
properties namely Item Nos. 1 to 9 described in the claim
statement, paragraph No.17 by metes and bounds, according to
the share namely 60% to the claimants, 40% to the respondents
(10+30) by taking into account the value of the properties and
other relevant matters suggesting the share as said above.
f) The parties are directed to give the Auditors all relevant
information or, to produce or to provide access to any
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related/relevant, documents, goods or other property for their
inspection;
g) The Auditors after taking account and dividing the
immovable properties as stated above shall file a detailed report
for accounting and division of properties within two months from
the date of receipt of copy of the order.
h) The fee payable to the Auditors, at their request as fixed
by them shall be paid by both the parties, in equal share
i) That on filing the report by the Auditors as said above the
parties shall file an application before the Arbitrator for
appropriate order.
j) That the rest of the claim of claimants and counter claims
are dismissed without cost.
k) That the parties shall bear their respective costs, since
each of them succeeded, partially.
l) That the Arbitral tribunal shall have a lien on the arbitral
award for the UN paid cost of the arbitration.”
8. Therefore, when the civil dispute has already ended in an award
for dissolution of the firm and the mode of division of immovable properties
has also been set out in the award, once again the same allegation cannot be
pressed into service in the form of FIR that there was forgery and
misappropriation of funds. It is relevant to refer to judgment of the Apex
Court in Velji Raghavi Patel Vs. State of Maharashtra reported in AIR
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1965 SC 1433 wherein in paragraph 9 the Apex Court has held that a
partner has undefined ownership along with other partners over all the
assets of the partnership, if he chooses to use any of them for his own
purposes he may be accountable civilly to the other partners, but that will
not amount to any misappropriation. For better appreciation, the entire
paragraph 9 is extracted hereunder:
“9. Mr Chatterjee finally contends that the act of the
appellant will at least amount to dishonest misappropriation of
property even though it may not amount to criminal breach of
trust and, therefore, his conviction could be altered from one
under Section 409 to that under Section 403. Section 403 runs
thus:
“Whoever dishonestly misappropriates or converts to his
own use any movable property, shall be punished with
imprisonment of either description for a term, which may extend to
two years, or with fine, or with both.”
It is obvious that an owner of property, in whichever way he
uses his property and with whatever intention will not be liable for
misappropriation and that would be so even if he is not the
exclusive owner thereof. As already stated, a partner has,
undefined ownership along with the other partners over all the
assets of the partnership. If he chooses to use any of them for his
own purposes he may be accountable civilly to the other partners.
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But he does not thereby commit any misappropriation. Mr.
Chatterjee's alternative contention must be rejected.”
9. Following the above judgment of the Apex Court, this Court in
Crl.O.P.No.29176 of 2017 has held that the dispute in a partnership firm
cannot be given a criminal colour. Admittedly, in this case, the entire
allegations pressed into service in the FIR is also decided in the arbitration.
Therefore, by using the police machinery, once again, the defacto
complainant cannot reopen the dispute, which has already culminated in an
arbitration award. If such thing is allowed, it will amount to undue the
award legally passed by the Arbitrator in a civil dispute. The very allegation
in the FIR itself indicates that as the firm was running profitably for several
years, there was no dispute whatsoever arose between the parties. Only
when the income of the firm was reduced after 2016, there arose all the
dispute. Now the entire allegation in the FIR has been made as if all the
properties have been diverted and sold. It is relevant to note that the award
itself is passed prior to the lodging of the FIR and the mode of division of the
immovable properties has also been set out in the award. In such view of the
matter, as the civil dispute is intended to be given a criminal colour, this
Court is of the view that continuation of investigation against the petitioners
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is an abuse of process of law and these Criminal Original Petitions are liable
to dismissed.
Accordingly, these Criminal Original Petitions are allowed and the
FIR in Crime No.26 of 2017 is quashed. Consequently, the connected
miscellaneous petitions are closed.
16.12.2021
gpa
To
1. The Inspector of Police
CCB, Tiruppur City
Tiruppur
2. The Public Prosecutor
Madras High Court
Chennai
https://www.mhc.tn.gov.in/judis
Crl. O.P. No.26121, 25903 and 25904 of 2017
N. SATHISH KUMAR, J
gpa
Crl. O.P. No.26121, 25903 and 25904 of 2017 &
Crl.M.P.Nos.14939, 14940, 15018 of 2017
& Crl.M.P.Nos.85 and 86 of 2018
16.12.2021
https://www.mhc.tn.gov.in/judis
