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

                     3. Kannan                                    ....    Petitioners
                        S/o. Krishnamurthy                               in Crl.O.P.No.26121/2017/


                     1/13

https://www.mhc.tn.gov.in/judis
                                                                     Crl. O.P. No.26121, 25903 and 25904 of 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 dated 20.11.2017 on
                     the file of the Inspector of Police, CCB, Tiruppur City, Tiruppur and quash
                     the same.
                                   For Petitioners ...Mr.J.Franklin
                                                      in Crl.O.P.No. 26121/2017

                                                         Mr.Sunder Mohan
                                                         in Crl.O.P.Nos.25903 & 25904 of 2017

                                       For Respondents ... Mr.S.Vinoth Kumar
                                                           Govt. Advocate (Crl.side)for R1
                                                           in all OPs
                                                          Mr.S.Sathiyanarayanan for R2
                                                          in all OPs
                                                             -----

                                                          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

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

First Information Report in Crime No.26 of 2017 pending on the file of the

respondent police.

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

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

onwards, the first accused Duraisamy started taking decision on his own

without consulting with other partners and has not furnished proper accounts

of 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

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

Section 482 Cr.P.C and prior to filing of this complaint, the dispute was

referred to Arbitration wherein also similar allegations of fraudulent 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

partitioned 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.

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

5. I perused the entire materials available on record. This Court is

obvious 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

other partners' case before the Arbitrator is that the respondents, namely the

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

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 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 based on the

factual finding recorded in the arbitration award.

7. Almost similar allegations contained in the FIR have been made in

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

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 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.

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

f) The parties are directed to give the Auditors all relevant information or, to produce or to provide access to any 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

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

Court in Velji Raghavi Patel Vs. State of Maharashtra reported in AIR

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. But he does not

https://www.mhc.tn.gov.in/judis Crl. O.P. No.26121, 25903 and 25904 of 2017

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 respect to

the award legally passed by the Court 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