Telangana High Court

Rajesh Jhalani, vs The State Of Andhra Pradesh, on 7 January, 2022

Bench: G.Radha Rani

        THE HON'BLE Dr. JUSTICE G. RADHA RANI

             CRIMINAL PETITION No.9153 of 2013
ORDER:

This petition is filed by the petitioners-A2 and A3 under

Section 482 Cr.P.C. to quash the proceedings in CC No.351 of 2013

on the file of IX Metropolitan Magistrate, Kukatpally, Cyberabad,

taken on file against them for the offence under Section 420 IPC.

2. The 2nd respondent filed a private complaint before the IX

Metropolitan Magistrate, Cyberabad at Miyapur, which was referred

to the police and the police registered the same as Crime No.300 of

2012 for the offence under Section 420 read with 34 IPC against

Accused Nos.1 to 4 and after completing investigation, the Sub-

Inspector of Police, Madhapur Police Station, Cyberabad filed charge

sheet against A2 to A4 showing them as A1 to A3 by deleting the

company as A1.

3. The complainant in his private complaint stated that it was a

company incorporated under the Companies Act, represented by its

Chief Finance Officer authorised by the Board of Directors by

resolution passed on 17.04.2012. The accused persons, representing

M/s.Logic Eastern (India) (P) Ltd., approached the complainant and

promised several enhancements to the complainant company and

induced the complainant into entering into a Memorandum of

Understanding (MOU). The complainant fell prey to the promises of

the accused. The terms of Memorandum of Understanding dated

03.08.2010 contemplate that the complainant should pay amount to Dr.GRR,J

accused and the complainant would be paid back the amount with

interest at 18% per annum. The accused also promised under clause-

4.11 of Memorandum of Understanding several enhancements under

claue-4 setting up responsibilities for achieving targets for each

month. Clause - 4 of Memorandum of Understanding included the

complainant company in existing deal flow of [email protected] 190 products

of the accused company so as to earn a Profit Before Tax (PBT) of

Rs.35.00 lakhs for the complainant company assuring minimum

margin (PBT) of 10% for the complainant to accept the deal. In

pursuance of such inducement, the complainant had paid an amount of

Rs.25.00 lakhs on 19.08.2010 vide RTGS and again paid

Rs.24,06,140/- on 06.10.2010 at the instance of the accused. As on

31.03.2012, the accused were liable to pay an amount of

Rs.1,16,94,093/- to the complainant. The accused paid an amount of

Rs.2,25,000/- on 28.02.2011. All the accused with a common

intention had planned to cheat the complainant, having received the

money from the complainant.

5. Heard the learned counsel for the petitioners, the learned

counsel for the 2nd respondent and the learned Additional Public

Prosecutor.

6. Learned counsel for the petitioners submitted that the 3rd

respondent was the promoter and the Chief Executive Officer and

Chief Technology Officer and was into the business of assembling of

Set Top Boxes, having its unit at Noida, Uttar Pradesh and was wholly

incharge of the day to day affairs of M/s.Logic Eastern (India) (P) Ltd.

Dr.GRR,J

In the entire complaint there was no whisper that all the accused were

in-charge and responsible for all the affairs of the company M/s.Logic

Eastern (India) (P) Ltd, and it was a reputed firm in New Delhi,

having more than 50 years of standing and the 1st petitioner was a

senior partner and was having a standing of 22 years as Chartered

Accountant. The 2nd petitioner was 77 years old and a retired

Professor in the field of Electronics. The 3rd respondent floated the

company M/s.Logic Eastern (India) (P) Ltd., and he was in-charge of

the day to day affairs of the company. There was dispute interse

between the company M/s.Logic Eastern India (P) Ltd., and one of its

investor Cogent Corporate Path Finders Ltd., along with 2nd petitioner

and other shareholders before Company Law Board in CP No.36

(ND)/2009 under Section 397 of the Companies Act and the matter

was settled before the Company Law Board and the 1st petitioner was

inducted as director of the Company M/s.Logic Eastern (India) (P)

Ltd., but having found that the 3rd respondent representing company

was indulging in debts which were detrimental to the interest of the

company unilaterally without approval of the Board of Directors, the

1st petitioner resigned as Director of M/s.Logic Eastern (India) (P)

Ltd. The 1st petitioner was inducted into the Board only to protect the

interest of the shareholders and the investment of shareholders, who

were his clients. The petitioners had not committed any offence. There

was no foundation for proceeding against the petitioners. The

averments in the complaint would not constitute an offence

warranting prosecution. The provisions of Section 420 IPC were not Dr.GRR,J

attracted. The facts narrated in the complaint only would make out a

civil liability. No notice was given by the police either during

investigation or after filing the charge sheet, to the petitioners. The

petitioners had never met or dealt with the complainant in respect of

the alleged MOU nor were signatories to the alleged MOU nor were

parties to any of the Board meetings. The 3rd respondent had not

fulfilled the obligations under the settlement recorded before the

Company Law Board. Due to various irregularities committed by the

3rd respondent, the petitioners resigned from the Board of Directors of

the company vide letter dated 20.01.2011 and letter dated 15.10.2011

respectively and the same was duly intimated to the Registrar of

Companies and also to other Directors and the petitioners never

visited Hyderabad and never met the de facto complainant at any

point of time and prayed to quash the proceedings against them in CC

No.351 of 2013 on the file of IX Metropolitan Magistrate, Kukatpally,

Cyberabad.

7. Learned counsel for the 2nd respondent - complainant

contended that the Memorandum of Understanding was dated

03.08.2010 and the resignations of the petitioners - A2 and A3 were

stated to be on 20.01.2011 and 15.10.2011, which were during the

subsistence of the MOU between the parties. All the directors were

liable for the offence occurred during their tenure. Whether the

offence occurred during their tenure or not, was a triable issue which

had to be decided by the trial court. The MOU was executed in New

Delhi. Hence the petitioners could not take shelter on the ground that Dr.GRR,J

they had resigned from the company. Learned counsel relied upon the

judgments of the Hon'ble Apex Court in M/s.Neeharika

Infrastructure Pvt. Ltd. v. State of Maharashtra and others1 and

The State of Telangana v. Habib Abdullah Jeelani & Ors.2 on the

scope of Section 482 Cr.P.C.

8. Perused the record. The 2nd respondent filed private

complaint against M/s.Logic Eastern (India) (P) Ltd., as A1 and the

3rd respondent herein as A2 and the petitioners herein as A3 and A4.

The complainant had not stated the individual roles of the accused but

had referred all of them as accused. He stated that on the promise

made by the accused, he entered into an MOU with the accused on

03.08.2010 and paid an amount of Rs.25.00 lakhs on 19.08.2010 and

Rs.24,06,140/- on 06.10.2010 at the instance of the accused. He

stated that the accused cheated him with a dishonest intention and

issued a cheque bearing No.022059 dated 19.12.2011 for

Rs.10,30,000/- and cheques bearing Nos.022061 dated 16.04.2012

and 022060 dated 16.04.2012 for Rs.10,30,000/- each and they were

presented on 16.04.2012 and the same were dishonoured and that he

initiated separate action for the dishonour of the said cheques. He

contended that the accused did not respond to his phone calls and

e-mails and with a dishonest intention, cheated him and put him into

wrongful loss while wrongfully enriching themselves. It is stated that

2021 SCC OnLine SC 315

Crl.A. No.1144/ 2016 (Special Leave Petition (Crl.) No.5478 of 2015) Dr.GRR,J

all the accused planned to cheat him having received the amount from

him.

9. The Police, after investigation, deleted the name of

M/s.Logic Eastern (India) (P) Ltd., from the list of the accused and

had shown the 3rd respondent herein as A1 and the petitioners herein

as A2 and A3 in the charge sheet. Thus, the company was not arrayed

as an accused and the petitioners along with the 3rd respondent were

responsible for their individual acts. The learned counsel for the

petitioners submitted that the petitioners were neither signatories to

the MOU nor even witnesses to the said document, or issued the

cheques and there was no vicarious liability upon them and since the

cheques were issued it could not be presumed that there was any

dishonest intention attracting the ingredients of Section 420 IPC. No

proceedings under Section 138 of the Negotiable Instruments Act

were initiated against the petitioners. But, the learned counsel for the

petitioners failed to file the copy of the MOU or copies of the cheques

before this Court to ascertain the said facts stated by him. In the

absence of the said documents, this Court cannot come to a conclusion

that the petitioners were not signatories the MOU in order to issue the

cheques.

10. Learned counsel for the petitioners relied upon the

judgments of the Hon'ble Apex Court in G. Sagar Suri and another

v. State of U.P. and others3, Uma Shankar Gopalika v. State of

2000 (2) SCC 636 Dr.GRR,J

Bihar and another4 and V.Y. Jose and another v. State of Gujarat

and another5.

In G. Sagar Suri case (3 supra), the Hon'ble Apex Court held

that:

"13. In the circumstances of the case in hand conclusion is inescapable that invoking the jurisdiction of criminal court for allegedly having committed offences under Sections 406/420 IPC by the appellants is certainly an abuse of the process of law. In the counter affidavit filed on behalf of the complainant it is now admitted that none of the two appellants is a Director of Ganga Automobiles Ltd. Only in respect of the first appellant it is stated that he is the authorised signatory of that company and that in fact he had signed the cheques which were returned dishonoured. Apart from making the omnibus statement that the first appellant with dishonest intentions and misrepresentations got loan of Rs. 50,00,000 from the com- plainant company for Ganga Automobiles Ltd. there is nothing said as to what were those misrepresentations and how the complainant company was duped. The only part attributed to the second appellant is that the first appellant along with Ashwani Suri, Managing Director and Mukender Singh, Director approached the complainant in June, and had represented that they and Shalini Suri, Shama Suri (Appellant No. 2), Charanjit Singh and M.L. Kampani were the Directors of Ganga Automobiles Ltd. There is nothing stated in the counter affidavit about the role, if any, played by the second appellant. A complaint under Section 138 of the Negotiable Instruments Act has already been filed by the complainant. There is no allegation of any corrupt practice by any of the accused as if they duped the Finance Company in parting with the amount of Rs. 50,00,000, As normally understood business of a finance company is to invite deposits, pay interest on that and also to give loans and earn interest. A finance company also advances short term loans. In that case it is essentially a commercial transaction. After first two cheques were dishonoured two cheques were again issued, which again were dishonoured resulting in filing of complaint under Section 138 of the Negotiable Instruments Act. None of the respondents has been able to explain as to why offences under Sections 406/420 IPC were not added in the complaint filed under Section 138 of the Negotiable Instruments Act and why resort was had to filing of a separate First Information Report. Certain motive has been attributed to the investigating officer but we think we need not go into that. There is also no answer as to why investigation against three other directors was still stated to be pending when same role is assigned to all the accused. In the FIR it is Sukhvender Singh, who first approached the complainant, but later it is Mukender Singh. There is no answer as to why there are two different names. as to who are the Directors of Ganga

2005 (10) SCC 336

20089 (3) SCC 78 Dr.GRR,J

Automobiles Ltd. could have been easily found by the complainant after going through the records of Registrar of Companies and also about its status. As noted above, in the subsequent statement by the complainant he does not assign any role to the first appellant. The allegation that in the first instance three persons contacted the complainant company, who told the complainant of other Directors with whom the complainant conversed on telephone, appears to be rather improbable."

In Uma Shankar Gopalika case (4 supra), the Hon'ble Apex

Court held that:

"6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of complaint any criminal offence whatsoever is made out much less offences under Sections 420/120-B IPC. The only allegation in the complaint petition against the accused persons is that they assured the complainant that when they receive the insurance claim amounting to Rs 4,20,000, they would pay a sum of Rs 2,60,000 to the complainant out of that but the same has never been paid. Apart from that there is no other allegation in the petition of complaint. It was pointed out on behalf of the complainant that the accused fraudulently persuaded the complainant to agree so that the accused persons may take steps for moving the Consumer Forum in relation to the claim of Rs 4,20,000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating, in the present case it has nowhere been stated that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC.

7. In our view petition of complaint does not disclose any criminal offence at all much less any offence either under Section 420 or Section 120-B IPC and the present case is a case of purely civil dispute between the parties for which remedy lies before a civil court by filing a properly constituted suit. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of court and to prevent the same it was just and expedient for the High Court to quash the same by exercising the powers under Section 482 CrPC which it has erroneously refused."

In V.Y. Jose and another case (5 supra), the Hon'ble Apex

Court held that:

"29. An offence of cheating may consist of two classes of cases:

(1) where the complainant has been induced fraudulently or dishonestly. Such is not the case here;

Dr.GRR,J

(2) When by reason of such deception, the complainant has not done or omitted to do anything which he would not do or omit to do if he was not deceived or induced by the accused.

30. It is in that sense, a distinction between a mere breach of contract and the offence of cheating should be borne in mind. We, having regard to the facts and circumstances of the case, are of the opinion that no case has been made out against the appellant so as to hold that he should face the criminal trial."

11. Learned counsel for the petitioners also relied upon the

judgment of the Hon'ble Apex Court in State of Haryana and others

v. Bhajan Lal and others6, on the aspect that a preliminary enquiry

need to be conducted prior to registering the FIR but, the said

observations are made with regard to registering the case against a

public servant, in the cases of corruption but not in all other cases.

12. There is no dispute with regard to the observations made by

the Hon'ble Apex Court relied upon by the learned counsel for the

petitioners in the above cases. But, the petitioners failed to file copy

of the MOU or the cheques to examine all the facts by this Court. The

petitioners had filed the documents to show that they had resigned

from the Directorship of the company on 20.01.2011 and on

15.10.2011, prior to registering the complaint, but whether the MOU

was in existence and whether they had any role in cheating the

complainant or not, can be decided only after a full-fledged trial. As

the petitioners had not filed the entire material relied by them to prove

their innocence before this Court, it is considered not fit to quash the

proceedings in CC No.351 of 2013 on the file of IX Metropolitan