Om Prakash Dhanuka vs The State Of Bihar Through The ...
2023 Latest Caselaw 5267 Patna

          IN THE HIGH COURT OF JUDICATURE AT PATNA
                    Criminal Writ Jurisdiction Case No.204 of 2021
            Arising Out of PS. Case No.-244 Year-2020 Thana- RIGA District- Sitamarhi
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1. OM PRAKASH DHANUKA Son of Late Purshottam Lal Dhanuka Chairman cum managing Director, Riga Sugar Company Ltd. resident of Dhanuka Gram, P.O. and P.S. - Riga, District - Sitamarhi.

2. Ram Kumar Pandey Son of Late Gajadhar Pandey General Manager (Commercial), Riga Sugar Company Ltd. resident of Riga Sugar Mill, Dhanuka Gram, P.O. and P.S. Riga, District - Sitamarhi.

... ... Petitioner/s Versus

1. THE STATE OF BIHAR THROUGH THE PRINCIPAL SECRETARY HOME DEPARTMENT, GOVERNMENT OF BIHAR

2. The Director General of Police, Bihar, Patna.

3. The District Magistrate, Sitamarhi,Bihar.

4. The Superintendent of Police, Sitamarhi, Bihar.

5. The officer In Charge, Riga Police Station, Sitamarhi.

6. The Cane officer, Muzaffarpur.

7. The Cane Commissioner, Sugarcane Department, Government of Bihar, Patna.

8. The Bank of India, Kolkata Large Corporate Branch 5 BTM, Sarani, Kolkata- 700001 represented through its General Manager, Local Office at Sitamarhi, Bihar

9. The Union Bank of India, Head Office at 39, Vidhan Bhawan Marg, Nariman Point, Mumbai- 400021, through its General Manager having Local office at Sitamarhi, Bihar

... ... Respondent/s ====================================================== Appearance :

For the Petitioner/s : Mr. Y.V. Giri, Sr. Counsel

Mr.Ashish Giri , Advocate

For the Respondent/s : Mr. Suman Kumar Jha AC to AAG -3

Mr. Kumar Alok, Advocate

Mr. Sanjay Singh Thakur, Advocate

Mr. Baua Jha, Advocate

====================================================== Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

CORAM: HONOURABLE MR. JUSTICE ANIL KUMAR SINHA CAV JUDGMENT Date : 11-10-2023

1. Two petitioners have filed the present writ application

for quashing of the F.I.R bearing Riga P.S. Case No. 244 of

2020 [Annexure-1] dated 18/08/2020 registered for the offences

under Sections 406, 409, 420 & 34 of the I.P.C. and for

quashing of entire prosecution against the petitioners including

the order of cognizance dated: 16/04/2022 taken by the court of

learned A.C.J.M.-VI, Sitamarhi in G.R. Case No. 2917 of 2020

under Sections 406, 420 & 34 of the I.P.C., which has been

challenged by way of I.A. No. 1 of 2022.

2. The petitioner No. 1 is the Chairman -cum- Managing

Director and the petitioner no. 2 is the General Manager

(Commercial) of the Riga Sugar Company Limited [hereinafter

referred to as the 'sugar company'].

3. The factual background of the case in brief is that in

the year 2013 a tie-up arrangement was entered into by the bank

for KCC loan in favour of sugarcane growers in which sugar

company was a guarantor for the repayment. On 20-09-2013 a

letter was issued by the Bank of India providing the procedure

for KCC loan in favour of the sugarcane farmers at the instance

of sugar company which became the guarantor and took the

liability to re-pay the loan amount. Clause (vi ) of the aforesaid Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

letter states that the loan was to be disbursed only as per the

advice of the sugar company and in terms of clause (vii ) the re-

payment was to be made by the sugar company along with

interest and other charges. Similar arrangement was again

entered into with the bank on 07.07.2016 [Annexure-2A].

Agreement was also entered with the sugarcane growers and

sugar company and in terms of the same the sugarcane growers /

farmers authorized the sugar company to pay to the bank the

sale proceeds of the sugarcane, which is sold by the farmers to

the sugar company, as against re-payment of KCC advance /

loan. Copy of the agreement is at Annexure-3 to the writ

application.

4. The sugar company thus gave an undertaking to the

bank with regard to recovery of advances meaning thereby that

the sugar company undertook to pay the sale proceeds of the

sugarcane to the bank itself against liability towards advance /

loan given to the farmers / sugarcane growers. The sugar

company executed a deed of guarantee for re-payment of the

advance / loan. The guarantee agreement is at Annexures- 4 & 5

to the writ application.

5. The KCC advance / loan was paid to the farmers by the

bank at the instance of sugar company. The sugar company Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

instead of directly paying the sugarcane prices to the farmers

had to repay the loan / advance given to the farmers by the bank

under KCC. Thus, it was an alternative arrangement of cane

price payment as could be evident from the tripartite / tie-up

arrangement between the company, bank and the farmers. The

bank gave three lakh KCC loan / advance to the farmers. The

farmers were not required to pay the loan amount but the sugar

company had to re-pay the loan of the farmers on condition that

the farmers had to give / supply sugarcane to the sugar

company. In other words, the farmers appointed the sugar

company to re-pay the loan amount on their behalf to the bank

for sugarcane supply made by them to the sugar company. As

per the arrangement the farmers would not claim the price of

sugarcane from the sugar company as the said amount was to be

paid to the bank as against re-payment of KCC advance / loan.

This process was going on smoothly since 2013 and cane prices

to the farmers were duly being paid to them by way of re-

payment of KCC advance amount by the sugar company in

terms of the above mentioned understanding.

6. According to the petitioners the said arrangement from

the very beginning was within the knowledge of the State

Officials and the Officers of the Cane Department, Government Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

of Bihar. The interest of the farmers, bank and the sugar

company was duly protected by way of such arrangement as the

cane prices were timely being paid to the farmers without

casting any liability upon them. On 22.08.2016 the Cane

Commissioner, Sugarcane Department, Govt. of Bihar through

his letter enquired from the sugar company regarding the

manner as to how KCC loan was shown as payment towards

cane prices for the year 2015-16, which was immediately

replied by the sugar company by its letter dated 23.08.2016

explaining therein the KCC arrangement and further stating that

since the sugar company was under precarious condition and

were undergoing losses, the bank denied to give capital loan and

accordingly an alternative arrangement of KCC loan to the

farmers with liability of the sugar company to repay the KCC

loan amount was made. This benefitted the farmers as well as

the bank. The said arrangement continued up to 2018 after

which the sugar company pursuant to the direction of the Cane

Commissioner, Govt. of Bihar started making payment of the

prices of the sugarcane directly into the account of the farmers

but dispute arose when the company failed to repay the loan

amount and the account was declared N.P.A. The bank issued

notice to the farmers and the allegation of fraud was made upon Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

the petitioners. According to the petitioners they have repaid the

loan between 2013-18. The petitioners vide their letters dated:

02.01.2019, 13.07.2019, 17.07.2019, 14.08.2019, 23.11.2019,

06.03.2020 wrote to the G.M., Bank of India, Principal

Secretary, Department of Sugarcane Industry and Cane

Commissioner etc. intimating them that the sole liability for

repayment of the loan was upon the company and hence demand

notice could not be issued to the farmers.

7. The petitioners also requested that they may be

permitted to pay some due amount. Annexure- 12 is a letter

dated 13.05.2020 issued by the Department of Sugarcane

Industry, Government of Bihar to the sugar company by which

an explanation has been sought from the sugar company with

regard to KCC loan and the same was replied by the sugar

company through the Chief General Manager on 14/05/2020. A

report dated 18.02.2020 was submitted by the Assistant Cane

Commissioner that the sugar company had not taken any prior

approval from the Sugarcane Department and the sugar

company opened KCC loan account of the farmers who are

12,000 in number but actually the amount deposited in the loan

account of the farmers were not the cane price payment but was

repayment of KCC loan advance given to the farmers which is Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

around rupees sixty crores. Accordingly, Cane Commissioner

vide letter no. 632 dated 08.06.2020 issued direction to the Cane

Officer, Muzaffarpur to lodge an F.I.R. and charge sheet has

been submitted on 30.10.2021 and cognizance has been taken

on 16.04.2022.

8. Mr. Y.V. Giri learned senior counsel for the petitioners

argued that entire prosecution against the petitioners is fit to be

quashed as being an abuse of the process of law inter alia on the

ground that prosecution is not maintainable against the officials

of the sugar company in absence of sugar company not made a

party inasmuch as no vicarious liability is there against the

officials of the sugar company under the alleged offences. He

further submits that upon bare perusal of the First Information

Report no offence much less any offence under Sections 406,

420, 34 of the I.P.C. is made out against the petitioners as

nothing in the entire investigation has come to show such

ingredients for constituting the said offences qua the petitioners.

This is out and out a civil dispute arising out of tie-up / tripartite

agreement. The company has undergone liquidation in which

the issue of KCC loan has also been taken note of and respective

claims have been filed by the respondent- Banks. The issue

stands covered under special enactment providing remedy for Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

such breach of agreement and hence general offence under the

I.P.C. is not attracted. The order of cognizance and summoning

is mechanical without application of judicial mind. Elaborating

his argument learned senior counsel submits that the enquiry

report which has been made the basis of the F.I.R. and is a part

of the F.I.R. shows that the above arrangement / scheme of loan

was entered into with the consent of the farmers. There is no

role of the petitioners in the entire transaction but they have

merely been made accused because they are holding post in the

sugar company. The sugar company has not been made party

and there is no allegation against them in individual capacity.

They are not the signatory of the tri-partite or the tie- up

arrangement. The sugar company being a juristic person having

a legal entity entered into the agreement through its

representatives hence it can be sued in its personal capacity

which gives limb to the argument of the petitioners that no

vicarious liability could be fastened against them. In absence of

the sugar company being made a party prosecution against the

petitioners who are the officials of the sugar company became

untenable in the eyes of law.

9. Learned counsel relies upon the judgment of the

Hon'ble Apex Court in this regard reported in Sharad Kumar Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

Sanghi vs Sangita Rane (2015) 12 SCC 781; Shiv Kumar Jatia

vs State (NCT of Delhi) reported in (2019) 17 SCC 193 and

(2020) 3 SCC 240.

10. He next argues that the dispute in hand is totally civil

in nature in terms of the tie-up arrangement and agreement

executed by the farmers, bank and sugar company. The sugar

company being the guarantor to the bank and also the payer of

loan amount of the farmers could be held liable for recovery

under Public Debt Recovery Act or Bihar & Orissa Public

Demand Recovery Act, 1914 and also there is special enactment

i.e. Bihar Sugarcane (Regulation of Supply and Purchase) Act,

1981 [hereinafter referred to as the 'Sugarcane Act'] wherein

recovery proceedings as provided in terms of Section 43 read

with Rule 32 and non payment has been made punishable under

Section 52 of the Sugarcane Act. In support of this argument,

learned senior counsel relies upon (2009) 7 SCC 526; (2017) 2

SCC 18 and (2012) 2 PLJR 413.

11. One of the financial creditor namely Anit Finevest

Pvt. Ltd. has filed a petition under Section 7 of the Insolvency

and Bankruptcy Code, 2016 before the N.C.L.T. bearing Case

No. CP (IB) No. 68 / KB / 2021 against the sugar company in

which the N.C.L.T. vide its order dated 05.08.2021 has admitted Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

the case and has directed for moratorium under Section 14.

Further the Bank of India and the Union Bank Of India under

Insolvency and Bankruptcy Regulation Code, 2016 have filed

their claim which amongst other includes the KCC loan amount.

In the said case notice has been issued along with agenda and

resolutions proposed to be passed have been undertaken. Thus

the contention is that since appropriate recovery proceedings

under the Insolvency and Bankruptcy Code, 2016 have been

initiated by the creditor against the sugar company accordingly

continuation of the instant F.I.R. will amount to the abuse of the

process of law. No criminal offence under the provisions of the

I.P.C. gets attracted as such the continuation of the F.I.R. is bad

in law and is wholly unjustified.

12. Learned counsel also argued that the essential

ingredient of the offence as alleged in the F.I.R. as well as order

taking cognizance is not made out against the petitioners.

Section 409 & 406 of the I.P.C. is not made out as the

petitioners are neither public servants or bank or merchant nor

there is any criminal breach of trust as the petitioners were

never entrusted with any property of the farmers or they ever

misappropriated or converted such property for their own use

either in official capacity or in their individual capacity. In fact Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

there is no allegation in the F.I.R. that any cane price payable to

the farmers has been utilized by the present petitioners or such

amount instead of being deposited in the account of the farmers

has been deposited in the account of the petitioners.

13. Similarly, Section 420 I.P.C. is also not attracted as

the petitioners have not entered into any agreement with the

farmers nor they have cheated or dishonestly induced the

farmers to deliver any property. This is not the case of the

informant or the respondents that from the very inception the

intention of the petitioners was to cheat the farmers rather the

case is that the farmers have been duly paid the prices of the

cane by the sugar company. There was no intention to cheat the

farmers from the beginning. He has relied upon (2019) 2 SCC

401.

14. On the other hand, learned counsel appearing for

respondent nos. 6 & 7 i.e. Cane Officer, Muzaffarpur and Cane

Commissioner, Govt. of Bihar argued that upon application

made by the Secretary of the sugarcane growers, the Cane

Commissioner, Sugarcane Department, Government of Bihar

constituted a three men committee to inquire into the matter

who submitted their report before the Sugarcane Commissioner

on 18-02-2020. As per the report, the sugar company opened Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

accounts of the farmers in lieu of making cane price payment

but in actuality the amount deposited in the accounts of farmers

were not against cane price payment but was KCC loan advance

payment which is around sixty crores in favour of about 12,000

farmers. Now the situation is that the loan account has become

N.P.A. and the bank is issuing notice to the farmers for recovery

of the loan amount. Accordingly, Cane Commissioner vide letter

dated 632 dated 08.06.2020 issued direction to the Cane Officer,

Muzaffarpur to lodge an F.I.R. thereafter Riga P.S. Case No. 244

of 2020 has been registered, charge sheet has been submitted

and cognizance has been taken. The sugar company is a

habitual defaulter and also several cases are pending against it

under Public Demand Recovery Act, 1914 before the Certificate

Officer, Sitamarhi. Taking into consideration this fact the

Department took a decision that sugar company has to make

payment to the sugarcane growers directly into their account for

the sugarcane prices. Even today huge amount is pending and

the sugar company is closed for the last two crushing seasons.

Some of the paragraphs of the case diary support the

prosecution case. The sugar company management never took

prior approval of the sugarcane industries department with

regard to KCC loan.

Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

15. On the other hand, learned counsel for the respondent

nos. 8 & 9 / Banks argued that the Bank is not the complainant

and has appeared on notice before this Court. They submit that

the farmers were unaware about the loan and they were of the

impression that payment to them is for the sugarcane which they

have sold. The Bank was in tie with the sugar company to

provide loan to the farmers. Loan was given for the expenses of

the seeds, fertilizers and for growing of sugarcane. The loan was

for cultivation of sugarcane and it was not for purchase of

sugarcane. The loan amount given to the farmers was utilized by

the petitioners. This amount was returned by way of repayment

to the bank till 2017 but thereafter the company defaulted. The

petitioners and their wife were guarantor in their individual

capacity.

16. I have heard learned counsel for the parties and have

perused the materials on record carefully. The basis of the First

Information Report is the enquiry report submitted by Assistant

Cane Commissioner, Bihar Patna and others dated 18.02.2020.

In the enquiry report the enquiry committee has noted that the

Bank of India produced M.O.U. and copy of the loan decision

and stated that KCC loan process was initiated between 2013 to

2018 in which 3036 farmers were sanctioned a total loan Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

amount of rupees 4928.90 lakh and at present a sum of Rs.

36,08,53,328.00 with interest up to September, 2019 is due to

the bank towards the loan amount. The report further says that

the loan was granted to the farmers on the basis of a tie-up

arrangement between the sugar company and the farmers for the

purposes of growing sugarcane in which the farmers have also

given their consent for grant of KCC loan. The sugar company

is the guarantor of the loan given to the farmers and the farmers

are the principal borrowers. From the M.O.U. of both the banks

it is clear that farmers were given advance amount by way of

loan for sowing and growing the sugarcane on the assurance /

guarantee of the sugar company and the liability to pay the loan

amount along with interest is upon sugar company. The sugar

company has given written undertaking in this regard. The sugar

company has accepted the liability and has reiterated the KCC

loan amount given to the farmers shall be returned to the bank.

The company is bound to repay KCC loan amount to the bank.

17. The report further describes that no guarantee was

taken from the farmers at the time of payment of KCC loan.

Though the regional offices of both the banks paid the KCC

loan to the farmers on the basis of M.O.U. however no

information in this regard in the past was given to the Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

Department nor any approval was taken by the sugar company.

The KCC loan amount was credited in the bank account of the

farmers. The report concluded that it is the responsibility of the

sugar company under the M.O.U. to repay the KCC loan

amount along with interest to the bank. On the basis of enquiry

report, Cane Commissioner, Bihar directed for registration of

F.I.R. and Cane Officer, Muzaffarpur has lodged the F.I.R. with

the allegation that management of sugar company / occupier and

the Director misappropriated and cheated to the Government by

representing the repayment of KCC loan as the payment of cane

prices to the farmers.

18. The F.I.R. was lodged on 18-08-2020 on the basis of

enquiry report dated 18.02.2020 alleging that the sugar company

kept the department in dark regarding payment of sugarcane

price to the farmers whereas sugarcane price was being paid via

re-payment of KCC loan with interest. It is also not disputed

that between 2013 to 2018 arrangement of KCC loan / advance

to the farmers by the bank and repayment of the same by the

sugar company continued uninterruptedly. It is only due to loss

suffered by the sugar company and loan account being declared

N.P.A. due to non payment of loan amount with interest by the

sugar company the present problem started after 2018-19. The Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

sugar company has gone in liquidation in accordance with

Section 33 of Insolvency and Bankruptcy Code, 2016 where the

banks have raised their claim against the sugar company in

liquidation. During the course of argument learned senior

counsel appearing for the petitioners has submitted that the

sugar company being the guarantor is liable to pay the loan

amount to the bank with interest and the matter is at present

pending before N.C.L.T. under the Insolvency and Bankruptcy

Code, 2016 in which moratorium under Section 14 of the

Insolvency and Bankruptcy Code, 2016 has been granted.

19. Upon perusal of the letter dated 22.08.2016 of the

Cane Commissioner, Bihar, kept at Annexure- 6 it appears that

the Cane Commissioner had enquired from the sugar company

regarding the manner in which KCC loan was shown as

payment against the cane price for the year 2015-16. The

aforesaid letter of the Cane Commissioner was immediately

responded by the sugar company by its letter dated 23.08.2016

explaining the KCC arrangement akin to cash credit account

which was opened with the objective to pay cane price timely

and faster without any liability of the farmers inasmuch as KCC

arrangement did not cast any responsibility upon the farmers

and that the repayment of loan and interest was purely the Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

responsibility of the sugar company. The same ground was

reiterated in the sugar company's letter dated 03/ 09 / 2018. The

aforesaid letters show that the Department was well informed by

the sugar company regarding the KCC loan arrangement which

goes to show that from the very beginning there was no

intention on the part of the sugar company or its officials to

deceive or cheat the Department, banks or the farmers. In terms

of KCC loan arrangement it is evident that the sugarcane

farmers authorized the Sugar Company to pay to the bank the

sale proceeds of the sugarcane which in turn was sold by the

farmers to the sugar company as against repayment of KCC

advances. The sugar company by letter dated 13.07.2019 and

17-07-2019 intimated the bank as well as Principal Secretary,

Department of Sugarcane Industry, Govt. of Bihar that the

repayment was the sole responsibility of the sugar company and

not of the farmers.

20. Chapter-V of the Sugarcane Act deals with payment

of price of cane and other matters. Section 43 of the same talks

about payment of price of cane and sub section (1) of Section 43

says that the occupier of a factory shall make such agreements

for payment of price of cane as may be prescribed. Sub-section

5 of Section 43 stipulates that notwithstanding anything Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

contained in sub-section (2), sub section (3), sub section (4) the

occupier of the factory or the Secretary or the Treasurer of the

Co-operative Society or any other person in-charge of payment

on behalf of such society or the owner of the unit shall be

punished under Section 52 for failure to make payment of the

price in time. Sub section (6) of Section 43 says that any arrears

of the price of cane, with interest thereon, if any, shall be

recoverable as public demand or arrear of land revenue. Proviso

to Section 44 of the Sugarcane Act says that no deduction from

the cane price shall be made without prior or due voluntary

agreement of the concerned cane-grower. Section 50 of the

Sugarnce Act deals with advance of loan by occupier of factory

which says that occupier of a factory or any person working on

his behalf or any bank may advance loan to a cane-grower or a

co-operative society for such purposes connected with

cultivation or supply of cane to the extent or the amount and the

manner as may be prescribed. Chapter VI of the Sugarcane Act

deals with miscellaneous provision and Section 52 of the same

deals with penalty for offences committed under the Sugarcane

Act and says that if any person contravenes or attempts to

contravene or abets the contravention of any provision of this

Act or the Rules or of any order made or direction given Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

thereunder or the terms and conditions of any licence, he shall

be punishable with imprisonment which may extend to six

months or with fine which may extend to five thousand rupees

or with both and in case of a continuing contravention with an

additional fine which may extend to one thousand rupees for

every day during which such contravention continues after

conviction for the first contravention.

21. Upon close scrutiny of the provisions of the

Sugarcane Act it appears that the occupier of a factory can make

agreement for the payment of price of cane with prior approval

and due agreement of the concerned cane growers. The failure

to make payment to the cane growers is punishable under

Section 52 of the Sugarcane Act. The provisions of advance /

loan by occupier of a factory or any bank to a cane grower or a

co-operative society for the purpose connected with cultivation

or supply of cane to the extent of the amount and in the manner

as may be prescribed is also permissible under the Sugarcane

Act. The sugar company taking cue from the provisions of the

Sugarcane Act entered into a tripartite / tie- up agreement for

providing advance / loan to the farmers / cane growers for the

purposes of cultivation of sugarcane and supply of cane to the

sugar company in which sugar company became guarantor for Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

loan amount paid to the farmers as KCC advance. The farmers

also voluntarily agreed to this arrangement / agreement and

accepted the loan for the purposes of cultivation of sugarcane.

The bank with open eyes sanctioned and disbursed the loan

amount to the farmers. The loan amount with interest was being

paid regularly for a substantial period of five years between

2013 to 2018 by the sugar company, however, subsequent

failure on part of the sugar company or any breach of agreement

cannot be said to be dishonest intention to deceive and cheat the

Department. The Department was also informed in 2016

regarding this arrangement but it failed to take any action at that

point of time and after the loan accounts having been declared

N.P.A. and the loan amount became due, all these exercises have

been undertaken by the Department. If there is some default in

re-payment of loan, the same may constitute an offence under

the Sugarcane Act. From perusal of the FI.R. as well as enquiry

report it is evident that no material has come to show that any

property was entrusted to the sugar company or the petitioners

which they dishonestly converted for their own use so as to

satisfy the ingredients of Section 405 I.P.C., which is punishable

under Section 406 I.P.C. Likewise Section 420 I.P.C. is also not

made out.

Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

22. In the present case admittedly the sugar company

went for liquidation after loan account has been declared N.P.A.

In order to recover the loan amount with interest the banks have

filed petitions before N.C.L.T. The mere inability of the sugar

company to return the loan amount to the banks cannot give rise

to criminal prosecution for cheating unless fraudulent or

dishonest intention is shown from the very inception. It is not

disputed that the loan amount was paid regularly in the

beginning for about five years.

23. In Hridaya Ranjan Prasad Verma & Ors. versus The

State of Bihar & Another, reported in (2000) 4 SCC 168 the

Hon'ble Supreme Court has held that 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 of

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 Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

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.

24. Upon reading of the F.I.R. and the enquiry report

which is the part of the F.I.R. on its face value without adding or

subtracting anything in my considered view the basic essential

ingredients of dishonest intention, misappropriation and

cheating are missing. There is no allegation in the F.I.R. as well

as in the enquiry report of cheating or dishonestly inducing the

sugarcane farmers by the petitioners. The farmers voluntarily

and willingly agreed to the arrangement / tie up agreement with

the bank and the sugar company for advance of KCC loan for

the purpose of cultivation of sugarcane and supply of it to the

sugar company with further understanding that against the price

of sugarcane payable to the cane growers by the sugar company

the sugar company shall repay the KCC loan / interest disbursed

to the farmers directly to the bank and the amount so paid to the

bank was adjustable against the cane price payable to the

farmers. These kinds of agreement / understanding is

permissible under the various provisions of the Sugarcane Act.

25. Upon having heard learned counsel for the parties and Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

discussions held hereinabove on facts as well as on laws, I am

of the view that no offence under Sections 406 & 420 of the

I.P.C. is made out against the petitioners, therefore, continuation

of the criminal proceedings against them is abuse of the process

of law.

26. In Shiv Kumar Jatia versus State of NCT of Delhi

reported in (2019)17 SCC 193 in paragraph no. 19 the Hon'ble

Supreme Court has held as follows:-

"19. The liability of the Directors / the controlling authorities of company, in a corporate criminal liability is elaborately considered by this Court in Sunil Bharti Mittal. In the aforesaid case, while considering the circumstances when Director/person in charge of the affairs of the company can also be prosecuted, when the company is an accused person, this Court has held, a corporate entity is an artificial person which acts through its officers, Directors, Managing Director, Chairman, etc. If such a company commits an offence involving mens rea, it would normally be the intent and action of that individual who would act on behalf of the company. At the same time it is observed that it is the cardinal principle of criminal jurisprudence that there is no vicarious liability unless the statute specifically provides for. It is further held by this Court, an individual who has perpetrated the commission of an offence on behalf of the company can be made an accused, along with the company, if there is sufficient evidence of Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

his active role coupled with criminal intent. Further it is also held that an individual can be implicated in those cases where statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision."

27. In absence of sugar company being made an accused

vicarious liability of the petitioners for an offence alleged under

the provisions of the I.P.C., who are Chairman cum Managing

Director and General Manager (Commercial) of the sugar

company would only arise provided any provision exists in that

behalf in the statute. The statute must contain provisions fixing

such vicarious liability. Even for creating vicarious liability it is

incumbent on the part of the informant to make specific

allegation which would make them vicariously liable but in the

present case there is no such specific allegation against the

petitioners who are Chairman cum Managing Director and

General Manager (Commercial) respectively. The F.I.R. and the

entire criminal proceedings against the petitioners is fit to be

quashed on this ground also.

28. In the result, I come to the conclusion that

continuance of criminal proceeding against the petitioners shall

be in abuse of the process of law and as such to prevent abuse of

the process of law and to secure the ends of justice the F.I.R.

contained in Annexure - 1 as well as order taking cognizance Patna High Court CR. WJC No.204 of 2021 dt.11-10-2023

dated 16.04.2022 and the entire prosecution against the

petitioners are hereby quashed.

29. The application stands allowed.

                                                (Anil Kumar Sinha, J)
praful/-AFR
AFR/NAFR                AFR
CAV DATE                07-08-2023
Uploading Date          11-10-2023
Transmission Date       11-10-2023