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CASE NO.: Appeal (crl.) 194  of  2001

PETITIONER: ALPIC FINANCE LTD.

       Vs.

RESPONDENT: P. SADASIVAN AND ANR.

DATE OF JUDGMENT:       16/02/2001

BENCH: S. Rajendra Babu & K.G. Balakrishnan.

JUDGMENT:

Balakrishnan, J. L...I...T.......T.......T.......T.......T.......T.......T..J

       Leave granted.

   The  appellant  is a registered company having its  head office at Mumbai.  It is a non-banking financial institution functioning  under  the  regulation of the Reserve  Bank  of India.   It is carrying on business, inter alia, of  leasing and hire purchase.  The first respondent is the Chairman and founder  trustee of a trust by name ’Visveswaraya  Education Trust’.  The second respondent, wife of the first respondent is  also a trustee.  The trust runs a dental college by name Rajiv  Gandhi Dental College.  The respondents entered  into an   agreement  with  the   appellant  company  whereby  the appellant   agreed   to   finance   the  purchase   of   100 hydraulically operated dental chairs.  The total cost of the chairs  was around Rs.  92,50,000/-.  The appellant  company agreed  to finance the respondents for the purchase of these chairs  through a lease agreement and as per the  agreement, the  respondents were liable to pay rentals quarterly.   The respondents agreed to pay quarterly a sum of Rs.  7,50,000/- for  the first year;  Rs.  12,50,000/- for the second  year; Rs.   8,00,000/- for the third year and Rs.  6,25,000/-  for the  fourth  year.   As  per the  agreement,  the  appellant company,  the  lessors would have sole and exclusive  right, title  and  interest in the dental chairs supplied till  the entire  hire  purchase amount was paid.  In accordance  with the  agreement, the appellant made payments to M/s.   United Medico  Dental  Equipments  and they  delivered  the  dental chairs  to  the respondents.  The appellant company  alleged that the respondents were not regular in making the payments and committed default in payment of the instalments and that the  bank  had  dishonoured certain cheques  issued  by  the respondents.   The  appellant company also alleged  that  on physical  verification,  certain chairs were  found  missing from  the  premises  of the respondents and thus  they  have committed  cheating  and  caused   misappropriation  of  the property  belonging to the appellant.  The appellant company filed  a  private  complaint  under Section  200  Cr.   P.C. before the Chief Metropolitan Magistrate, Bangalore alleging

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that  the respondents had committed offences under  Sections 420,  406  and 423 read with Section 120-B I.P.C.   In  that proceedings,  the  appellant  company moved  an  application under  Section  93 Cr.  P.C.  to issue a search  warrant  to seize  the  property in dispute and also to hand over  these items  to  the  complainant.  The  learned  Magistrate  took cognizance  of  the alleged complaint and issued summons  to the respondents and passed an order on the application filed under  Section 93 of the Cr.  P.C.  to have a search at  the premises  of  the respondents and to take possession of  the properties  involved  in the case.  These  proceedings  were challenged  by  the  respondents under Section  482  Cr.P.C. before  the learned Single Judge of the Karnataka High Court at Bangalore.  The learned Single Judge was pleased to quash the entire proceedings and directed the appellant company to return  all the properties seized by the Police pursuant  to the  warrant  issued by the learned Magistrate.   Thus,  the order  of  the  learned  Magistrate  taking  cognizance  and issuing  process to the respondents as well as the order  of search  and the direction for restoration of the property to the  appellant  company  were set aside.  Aggrieved  by  the same, the appellant company has preferred this appeal.

   We  heard  the learned counsel on either side.   Learned senior  Counsel for the appellant company Mr.  P.S.   Mishra argued in detail and contended that the learned Single Judge has  seriously  erred  in  quashing  the  proceedings  under Section 482 Cr.  P.C.  The learned counsel for the appellant company  contended  that  the allegations in  the  complaint clearly made out offences punishable under Section 420, 406, 423, 424 read with Section 120-B I.P.C.  The learned Counsel for  the respondents, on the other hand, contended that  the complaint  was  filed only to harass the respondents and  it was  motivated  by mala fide intention.  It was argued  that the  entire  transaction  was of civil nature and  that  the respondents  have made a substantial payment as per the hire purchase  agreement and the default, if any, was not willful and  there  was no element of misappropriation or  cheating. The  respondents also denied having removed any of the items of  the  disputed  property   clandestinely  to  defeat  the interest  of the appellant.  The short question arising  for consideration  is  whether  the  learned  Single  Judge  was justified  in invoking the powers under Section 482  Cr.P.C. in   setting  aside  the   proceedings  pending  before  the Magistrate.

   Contours  of the power under Section 482 Cr.  P.C.  have been  explained  in series of decisions by this  Court.   In Smt.   Nagawwa  vs.   Veeranna  Shivalingappa  Konjalgi  and Others  1976(3)  SCC  736, it was held that  the  Magistrate while  issuing  process against the accused  should  satisfy himself  as to whether the allegations in the complaint,  if proved,  would  ultimately  end  in the  conviction  of  the accused.   It was held that the order of Magistrate  issuing process  against  the  accused could be  quashed  under  the following circumstances:  -

   (1)  Where the allegations made in the complaint or  the statements  of the witnesses recorded in support of the same taken  at  their  face  value make out  absolutely  no  case against  the accused or the complaint does not disclose  the essential ingredients of an offence which is alleged against the accused;

   (2)  Where  the  allegations made in the  complaint  are

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patently absurd and inherently improbable so that no prudent person  can ever reach a conclusion that there is sufficient ground for proceeding against the accused;

   (3)  Where the discretion exercised by the magistrate in issuing  process  is  capricious and arbitrary  having  been based either on no evidence or on materials which are wholly irrelevant or inadmissible;  and

   (4)  Where the complaint suffers from fundamental  legal defects,  such as, want of sanction, or absence of complaint by legally competent authority and the like.

   In State of Haryana and Ors.  vs.  Bhajan Lal and Others 1992   Supp.    (1)  SCC  335,  a  question  came   up   for consideration  as  to  whether  quashing of  the  FIR  filed against  the  respondent Bhajan Lal for the  offences  under Section  161 & 165 of IPC and Section 5(2) of the Prevention of Corruption Act was proper and legal.  Reversing the order passed  by  the  High  Court,   this  Court  explained   the circumstances  under  which such power could  be  exercised. Apart  from reiterating the earlier norms laid down by  this Court,  it  was further explained that such power  could  be exercised where the allegations made in the FIR or complaint are  so  absurd  and inherently improbable on the  basis  of which  no  prudent person can ever reach a  just  conclusion that  there is sufficient ground for proceeding against  the accused.  However, this court in Rupan Deol Bajaj (Mrs.) and Anr.   vs.  Kanwar Pal Singh Gill & Anr.  1995 (6) SCC  194, held  that  "at the stage of quashing FIR or complaint,  the High  Court is not justified in embarking upon an enquiry as to  the  probability,  reliability  or  genuineness  of  the allegations  made  therein."  In a few cases,  the  question arose whether a criminal prosecution could be permitted when the  dispute  between the parties is of predominantly  civil nature  and the appropriate remedy would be civil suit.   In one  case reported in Madhavrao Jiwajirao Scindia and Others vs.   Sambhajirao Chandrojirao Angre and Others 1988(1)  SCC 692,  this  Court  held  that  if  the  allegations  in  the complaint  are both of a civil wrong and a criminal offence, there   would   be  certain   situations  where   it   would predominantly  be a civil wrong and may or may not amount to a  criminal  offence.  That was a case relating to a  trust. There  were  three trustees including the settlor.  A  large house   constituted  part  of   the  trust  property.    The respondent  and the complainant were acting as Secretary and Manager of the Trust and the house owned by the trust was in the possession of a tenant.  The tenant vacated the building and the allegation in the complaint was that two officers of the  trust,  in conspiracy with one of the trustees and  his wife,  created documents showing tenancy in respect of  that house in favour of the wife of the trustee.  Another trustee filed   a  criminal  complaint   alleging  that  there   was commission  of the offence under Section 406, 467 read  with Sections 34 and 120-B of the Indian Penal Code.  The accused persons  challenged  the proceedings before the  High  Court under  Section 482 of the Code of Criminal Procedure and the High  Court quashed the proceedings in respect of two of the accused persons.  It was under those circumstances that this court observed :

   "Though  a  case of breach of trust may be both a  civil wrong  and  a  criminal offence but there would  be  certain

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situations where it would predominantly be a civil wrong and may  or  may not amount to a criminal offence.  The  present case  is  one of that type where, if at all, the  facts  may constitute a civil wrong and the ingredients of the criminal offences  are  wanting.   Having   regard  to  the  relevant documents,   including   the   trust   deed  as   also   the correspondence  following  the creation of the tenancy,  the submissions  advanced on behalf of the parties, the  natural relationship  between the settlor and the trustee as  mother and  son and the fall out in their relationship and the fact that  the  wife of the co-trustee was no more interested  in the  tenancy, it must be held that the criminal case  should not be continued."

   In  another  case  recently  decided by  this  Court  in Trisuns  Chemical  Industry  vs.  Rajesh Agarwal  and  Other 1999(8)  SCC  686, the complainant company had alleged  that the  directors of another company offered to supply "toasted soyabean  extractions"  for a price higher than  the  market price.   The  Complainant  Company had to pay the  price  in advance  as  demanded by the accused  company.   Complainant paid  the  amount  through cheques.   However,  the  accused supplied  the  commodity,  which was of  most  inferior  and sub-standard  quality and the complainant suffered a loss of Rs.   17 lakhs.  The Complainant alleged that he was induced to pay the price on the representation that the best quality commodity would be supplied.  A criminal complaint was filed alleging  commission of the offence punishable under Section 420-A.    The  Magistrate  forwarded   the   complaint   for investigation  under  Section 156(3) Cr.  PC.   The  accused directors  moved  the High Court for quashing the  complaint alleging  that the dispute was purely of a civil nature  and hence  no prosecution should have been permitted.  The  High Court accepted this plea and the complaint was quashed.  But this court held in para 8 and 9 of the judgment as follows:

   ".........merely  because an act has a civil profile  is not  sufficient  to  denude  it   of  its  criminal  outfit. .................   .................   We   are  unable  to appreciate  the reasoning that the provision incorporated in the  agreement for referring the disputes to arbitration  is an  effective substitute for a criminal prosecution when the disputed  act  is an offence.  Arbitration is a  remedy  for affording  reliefs  to the party affected by breach  of  the agreement  but the arbitrator cannot conduct a trial of  any act,  which amounted to an offence, albeit the same act  may be  connected  with the discharge of any function under  the agreement.   Hence, those are not good reasons for the  High Court  to  axe down the complaint at the  threshold  itself. The  investigating agency should have had the freedom to  go into  the  whole  gamut of the allegations and  to  reach  a conclusion  of  its own.  Pre-emption of such  investigation would be justified only in very extreme cases."

   In  Pratibha Rani vs.  Suraj Kumar 1985(2) SCC 370,  the question  arose  that  when the civil as  well  as  criminal remedy  is available to a party, can a criminal  prosecution be  completely barred.  In this case, the matter related  to the  Stridhan  property.  The complainant alleged  that  her husband,  father-in-law and other relatives  misappropriated her  jewellery and other valuable articles entrusted to them by  her  parents at the time of marriage.   The  complainant alleged  that  these  dowry  articles  were  meant  for  her

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exclusive use and that the accused misbehaved and maltreated her  and ultimately he turned her out without returning  the dowry  articles.  The accused filed a criminal miscellaneous petition  under  Section  482   for  quashing  the  Criminal proceedings  and  the  High  Court quashed  the  same.   The accused contended that the dispute was of a civil nature and no criminal prosecution would lie.  Under that circumstance, this court held in paragraph 21 at page 382 as under:  -

   "...   There are a large number of cases where  criminal law  and  civil law can run side by side.  The two  remedies are  not  mutually  exclusive but  clearly  coextensive  and essentially  differ  in their content and consequence.   The object  of  the  criminal law is to punish an  offender  who commits  an offence against a person, property or the  State for  which the accused, on proof of the offence, is deprived of  his liberty and in some cases even his life.  This  does not, however, affect the civil remedies at all for suing the wrongdoer  in  cases like arson, accidents, etc.  It  is  an anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred.  The two types of actions   are   quite  different  in  content,   scope   and import...."

   The  facts in the present case have to be appreciated in the  light  of  the various decisions of this  Court.   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 under  Section 420 I.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.   Moreover,  the appellant has no case  that  the respondents   obtained  the  article   by   any   fraudulent inducement  or  by willful misrepresentation.  We  are  told that  respondents,  though committed default in paying  some

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installments,  have  paid  substantial  amount  towards  the consideration.

   Having  regard  to  the facts and circumstances,  it  is difficult  to  discern an element of deception in the  whole transaction,  whereas  it  is   palpably  evident  that  the appellant had an oblique motive of causing harassment to the respondents   by  seizing  the   entire   articles   through magisterial  proceedings.   We  are  of the  view  that  the learned  judge  was  perfectly  justified  in  quashing  the proceedings  and  we  are disinclined to interfere  in  such matters.

   The appeal is dismissed with no order as to costs.