Telangana High Court

Sukesh Gupta vs The State Of Telangana on 22 November, 2022

Bench: K.Surender

      HIGH COURT FOR THE STATE OF TELANGANA
                        AT HYDERABAD
                              *****

                      I.A.No. 1 of 2022
                              In
             Criminal Petition No.1559 OF 2020
                             and
             Criminal Petition No. 1559 of 2020


Between:
Sukesh Gupta & Others                             ... Petitioners
                             And
The State of Telangana,
rep. by Assistant Commissioner of Police
(Through its Public Prosecutor),
High Court for the State of Telangana,
Hyderabad & Another                           ... Respondents

DATE OF JUDGMENT PRONOUNCED:               22.11.2022
Submitted for approval.

THE HON'BLE SRI JUSTICE K.SURENDER
 1   Whether Reporters of Local
     newspapers may be allowed to see             Yes/No
     the Judgments?

 2    Whether the copies of judgment
      may be marked to Law                        Yes/No
      Reporters/Journals

 3    Whether Their Ladyship/Lordship
      wish to see the fair copy of the            Yes/No
      Judgment?


                                                  __________________
                                                        K.SURENDER, J
                                                   2


                        * THE HON'BLE SRI JUSTICE K. SURENDER
                                          +I.A.No. 1 of 2022

                                                  In
                                        CRL.P. No. 1559 of 2020

                                                 and

                                        CRL.P. No. 1559 of 2020

% Dated 22.11.2022

# Sukesh Gupta & Others                                              ... Petitioners
                             And
$ The State of Telangana,
rep. by Assistant Commissioner of Police
(Through its Public Prosecutor),
High Court for the State of Telangana,
Hyderabad & Another                                            ... Respondents

! Counsel for the Petitioners: Sri. H. Rajesh Kumar
^ Counsel for the Respondents: Sri. M.P.K. Aditya

>HEAD NOTE:

? Cases referred
1
    (2000) 2 SCC 636

2
     (2007) 12 SCC 1

3
     (2009) 3 SCC 78

4
     (2009) 7 SCC 495

5
     (2015) 8 SCC 293

6
     (2006) 6 SCC 736

7
     (1972) AIR SC 1490

8
     Criminal Appeal No. 1723 of 2017

9
     1954 CriLJ 1806

10
     1992 (2) ALD (Crl.) 610 (AP)

11
     2001 (1) ALD (Crl.) 551
                                3


           HON'BLE SRI JUSTICE K.SURENDER

                      I.A.No.1 of 2022
                              In
          CRIMINAL PETITION No.1559 OF 2020
                             and
          CRIMINAL PETITION No.1559 OF 2020
ORDER:

1. The petitioners are A1 to A4, filed the petition to quash

the complaint and investigation in FIR No.41 of 2020, dated

28.02.2020 on the file of the Assistant Commissioner of Police,

Division-C, CCS, DD, Hyderabad. However, the investigation

was completed and charge sheet was filed and numbered as

CC No.1247 of 2021 pending on the file of XII Additional Chief

Metropolitan Magistrate, Hyderabad.

2. I.A.No.1 of 2022 is filed to amend the prayer in the

present Criminal Petition to quash the proceedings in CC.

No.1247 of 2021 pending on the file of XII Additional Chief

Metropolitan Magistrate, Hyderabad. I.A. is allowed.

3. Briefly, the case according to the charge sheet is that one

Sri E.Venugopal, Associated Vice President of SREI Equipment

Finance Limited, situated at Banjara Hills filed complaint

stating that the 1st petitioner/A3, 2nd petitioner/A4 who are

partners of M/s.Aashi Realtors(A1) and 3rd petitioner/A5 and

4th petitioner/A6, who are directors of Neeharika

Infrastructure Private Limited(A2), have approached the

defacto complainant company for availing loan of Rs.110.00

Crores.

4. Accordingly, two immovable properties (i) land bearing

Survey No.78 admeasuring Acs.8.08 guntas situated at

Hafeezpet, Sheriilingampally, Hyderabad and (ii) house

property bearing H.No.4-1-1, King Koti, Hyderabad

admeasuring 28106 sq.yds, were mortgaged.

5. Though the installments were to be paid on 5th day of

each quarter commencing from 5th October 2018, petitioners

failed to pay the installments in spite of repeated reminders.

The defacto complainant initiated proceedings under

SARFAESI Act and the first asset was auctioned on

30.12.2019, which fetched Rs.102,60,00,000/-. Then the

complainant company decided to mortgage the 2nd charged

asset, it was found that the 2nd asset which is house property

at King Koti was sold without notice, as such these petitioners

and other accused caused wrongful loss to the company.

6. On the basis of the said complaint, FIR was registered

and having investigated the offence, charge sheet was filed. It

is stated in the complaint that after availing loan from the

complainant company, the petitioners and others intentionally

defaulted in repaying the loan amount, for which reason,

proceedings under SARFAESI Act were initiated and the 1st

mortgaged property was sold and an amount of

Rs.102,60,00,000/- was recovered. However, the balance as

on the date was Rs.58.90 Crores, which includes 24.81 Crores

as OD and Rs.33.81 Crores as ODC-Penalties.

7. Sri V.Ravi Kiran Rao, learned Senior Counsel appearing

on behalf of Sri H.Rajesh Kumar, learned counsel appearing

for the petitioners, submits that even accepting all the

transactions, it is purely of civil dispute, which has to be

decided by the Civil Court. There is no allegation of either

cheating or criminal misappropriation. The defacto

complainant and the petitioners in fact entered into a MOU for

settlement dated 07.09.2020, which was not considered by the

Investigating Officer and without making a mention of the

MOU for Settlement dated 07.09.2020, the said charge sheet

is filed. In the said MOU, there is an understanding that

against the outstanding liability of Rs.42,28,69,014/-, which

includes interest and other charges, 3 cheques were issued.

The three cheques were not presented by the defacto

complainant. It is not the case that the amount was not in the

accounts to honour the said cheques. It was further agreed

that in view of the settlement, the parties shall take steps to

withdraw all the pending cases, which includes the present

Crime No.41 of 2020 initiated by the defacto complainant in

pending investigation by the CCS, DD, Hyderabad. It is

further argued that in case of delay or default in making

balance liability, the defacto complainant/lender, shall be

entitled to enforce and execute award, which would be before

the arbitrator.

8. Learned Senior Counsel further argued that without

resorting to either presenting the three cheques or enforcing

the consent arbitration award, the charge sheet is filed. In

support of his contentions, he relied on the judgment of

G.Sagar Suri and another v. State of U.P and others1, wherein

their Lordships have held that in exercise of jurisdiction under

Section 482 of Cr.P.C, it has to be seen if a matter, which is

essentially of a civil nature, has been given a cloak of criminal

offence. Criminal proceedings are not a short cut of other

remedies available in law and before issuing process a

criminal court has to exercise great deal of caution as it is a

serious matter. Further, in the said case, criminal complaint

under Section 138 of Negotiable Instrument Act was already

filed and the Court found that prosecution under Section 406

and 420 of IPC is abuse of process of law and accordingly

quashed.

(2000) 2 Supreme Court Cases 636

9. In the judgment reported in the case of Inder Mohan

Goswami and another v. State of Uttaranchal2, the Hon'ble

Supreme Court held that when it appears that the proceedings

are abuse of process of court, the High Court in exercise of its

powers should not allow injustice but promote justice and the

Court also held that quashing of proceedings would serve ends

of justice. More so, in business circles where purely civil

disputes are converted into criminal cases and such criminal

prosecution should be deprecated and discouraged. The Court

further held that intention is the gist of offence to attract an

offence under Section 420 of IPC. It has to be seen whether

fraudulent or dishonest intention existed at the time of making

promise and mere failure to subsequently keep up promise, it

cannot be said that such person had culpable intention to

break the promise from the beginning.

10. Learned Senior Counsel also relied upon the judgments

in the cases of V.Y.Jose and another v. State of Gujarat3,

(2007) 12 SCC 1

(2009) 3 SCC 78

Devendra and others v. State of Uttar Pradesh and

another4 and Vesa Holdings Pvt. Ltd., v. State of Kerala

and others5, when pure contractual disputes of civil nature

were converted to criminal proceedings, the Hon'ble Supreme

Court held that the Court should not hesitate to exercise its

jurisdiction under Section 482 of Cr.P.C and consequently

quashed the criminal proceedings having found that the

transactions were purely of civil nature and breach of contract

would not attract criminal prosecution for the offence under

Section 420 or 406 of IPC unless the ingredients are satisfied.

11. In the said circumstances, learned Senior Counsel

submits that since the transaction is one between lender and

the borrower and out of the principal amount of Rs.110.00

Crores, Rs.102.60 Crores was already recovered and for the

remaining amount, when there was MOU entered into between

the parties, the question of attracting offence under Section

(2009) 7 SCC 495

(2015) 8 SCC 293

420 and 406 of IPC does not arise. Accordingly, prayed to

quash the proceedings against the petitioner.

12. On the other hand, Sri M.Govind Reddy, learned counsel

appearing for the 2nd respondent would submit that the

transactions clearly make out an offence under Section 420 of

IPC. When not even a single installment is paid as agreed, it

can only be said that the petitioners had intention from the

inception to cheat. Admittedly, there was MOU dated

07.09.2020 for settlement. However, a request was made by

the 1st petitioner to postpone the presentation of cheques

issued towards outstanding, as such, the intention to cheat is

clear. Further, when the mortgaged property was sold, it

amounts to an offence of cheating. Though, the 2nd property

was mortgaged vide agreement dated 15.07.2018, without the

knowledge of the defacto complainant, the said property was

sold. The amount of loan given is entrusting the said amount,

as such, the petitioners are liable for both cheating and

criminal misappropriation. In cases of a mortgage, under

Section 67 of the Transfer of Property Act, the mortgagee has

the right over the property and the mortgagors, who are the

accused herein are deprived of their rights to sell the property.

He relied upon the judgment of Hon'ble Supreme Court in the

case of Indian Oil Corporation v. NEPC India Limited and

others6 and argued that disputes arising from breach of

contract, though civil remedy is available, the remedy under

criminal law will not be barred, if the allegations in the

complaint discloses criminal offence.

13. Learned counsel further argued that when the accused

knew that interest exists in the 2nd property, which was

mortgaged by the accused, selling the said property without

the knowledge of the defacto complainant amounts to criminal

breach of trust. He relied upon the judgment of Som Nath

Puri v. State of Rajasthan7, wherein the Hon'ble Supreme

Court held that once property was entrusted, if the property is

converted to his own use, it amounts to criminal

misappropriation, which is punishable under Section 409 of

(2006) 6 Supreme Court Cases 736

1972 AIR (Supreme Court) 1490

IPC. Counsel argued that admittedly the 2nd property was sold

without consent. In the judgment of Parbatbhai Aahir @

Parbatbhai Bhimsinhbhai Karmur v. State of Gujarat8, the

Hon'ble Supreme Court laid down the broad principles when a

Court can quash the proceedings under Section 482 of Cr.P.C.

He relied upon the judgment of the Hon'ble Supreme Court in

the case of Mahadeo Prasad v. State of West Bengal9, in

which the Hon'ble Supreme Court upheld the conviction under

Section 420 of IPC. Court held that in a business transaction,

though it was a civil liability, the transactions in the case

would not eschew any criminal liability if the transactions

fulfilled the ingredients of criminal provisions.

14. Admitted facts of the case are that; i) loan agreement

dated 15.07.2008 was entered into in which it was agreed that

there would be first and exclusive mortgage and charge over

the first property. The second charge and mortgage over the

2nd property (which was sold subsequently); ii) both the

Criminal Appeal No.1723 of 2017

1954 CriLJ 1806

properties were free from any encumbrances and there is no

fabrication or misrepresentation; iii) first property when sold

fetched an amount of Rs.102.60 Crores on 30.12.2019; iv)

MOU dated 07.09.2020 was entered into for Settlement under

which, three cheques were given towards outstanding and

both the parties agreed to withdraw all the pending cases

including the present case; v) failure or default in making

payment covered under three cheques, the defacto

complainant is entitled to enforce and execute the award on

the terms in the Arbitration consent award, which was passed

on 25.11.2020.

15. In Ahmed Moosa v. Inspector of Police, Jagtial10, this

Court held as follows:

"10. In this case the property said to have been delivered by the complaint to the accused is said to be the amounts advanced as loan to the three petitioners. Apparently, these amounts were delivered to the petitioners as loan on their request and on their offering registered mortgage deed in respect of immovable property as security as a part of business of the complainant as Finance company. There is no hint or even a remote suggestion that the complainant was induced to deliver these amounts as loan on account of any deception, any fradulent or dishonest inducement practised by the petitioners. From the tenor of the complaint it would appear that it was perfectly a normal loan transaction in which the complainant had advanced loan, to the petitioners by taking the precaution of a registered mortgage deed as security for the loan. There is

1999 (2) ALD (Crl.) 610 (AP)

no allegation that the petitioners made any fradulent representation as to their title to mortgaged property without having such title to the same. The complaint discloses that according to the terms of the loan agreement and mortgage deed the loan was to be repaid within two years, but it was not repaid inspite of lapse of three years. Mere failure to repay the loan within the period agreed upon cannot be construed as a piece of evidence of practising fradulent deception on the part of the accused."

16. In the present case, out of the amount of Rs.110.00

Crores of principal amount, nearly Rs.102.60 crores, which is

95% of the principal amount was recovered by selling the

mortgaged property. It is apparent that the transaction was a

perfectly normal loan transaction and the mortgaged property

when liquidated, fetched the said amount of Rs.102.60 Crores.

The learned Senior counsel appearing for the petitioners

submitted that the defacto complainant was complicit in

causing loss to the petitioners in the process of selling the first

property for 102.60 crores though the property was worth

nearly 165 crores and if such fraud was not played, the entire

loan along with interest would have been discharged. Cheating

if any that was committed during the process of selling the

first property, the petitioners ought to have agitated at the

relevant time and the same cannot be decided in the present

application.

17. The main allegation is that 2nd property which was in the

nature of a second charge apart from the first property, with

the defacto complainant was sold without the consent of the

defacto complainant. It is not the case that there existed a

fraudulent and dishonest intention at the time of entering into

loan agreement. There is no allegation that the Petitioners

made any willful misrepresentation at the time of loan

agreement. The second property was sold after recovery of

102.60 crores. The transactions between the defacto

complainant and the accused at best in the present facts and

circumstances can be described as a breach of contract or

violation of agreement, for which the remedy lies with the Civil

Court. The Hon'ble Supreme Court in G.Sagar Suri and another

v. State of U.P and others's case (supra) and also Alpic Finance

Limited v. P.Sadasivan11 held that unless misrepresentation and

deception are played at the inception, it cannot be said that it is an

offence of cheating under Section 420 of IPC.

2001 (1) ALD (Crl.) 551

The Hon'ble Supreme Court in Alpic Finance Limited v.

P.Sadasivan observed-

"When somebody suffers injury to his person, property or reputation, he may have remedies both under civil and criminal law. The injury alleged may form basis of civil claim and may also constitute the ingredients of some crime punishable under criminal law. When there is dispute between the parties arising out of a transaction involving passing of valuable properties between them, the aggrieved person may have right to sue for damages or compensation and at the same time, law permits the victim to proceed against the wrongdoer for having committed an offence of criminal breach of trust or cheating. Here the main offence alleged by the appellant is that respondents committed the offence underI.P.C. and the case of the appellant is that respondents have cheated him and thereby dishonestly induced him to deliver property. To deceive is to induce a man to believe that a thing is true which is false and which the person practicing the deceit knows or believes to be false. It must also be shown that there existed a fraudulent and dishonest intention at the time of commission of the offence. There is no allegation that the respondents made any willful misrepresentation. Even according to the appellant, parties entered into a valid lease agreement and the grievance of the appellant is that the respondents failed to discharge their contractual obligations. In the complaint, there is no allegation that there was fraud or dishonest inducement on the part of the respondents and thereby the respondents parted with the property. It is trite law and common sense that an honest man entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debt, he does not necessarily evade the debt by deception."

18. The present complaint was filed after recovery of Rs.102.60

crores from the accused. The defacto complainant having entered

into a memorandum of understanding for settlement and having

taken thee cheques failed to present the said cheques. Though it is

stated by the defacto complainant that e-mail was addressed by the

first petitioner to postpone the presentation of cheques, nothing

stopped the defacto complainant from presenting the cheques and

prosecute them. In the initial loan agreement, which was entered

into, there is no allegation of any misrepresentation or fraud that

was played upon by the petitioners. No dishonest intention can be

deduced from the facts when the property mortgaged was genuine

and fetched Rs.102.00 Crores. Subsequently, MOU for settlement