REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS. 733-734 OF 2009 [ARISING OUT OF S.L.P. (CRIMINAL) NOS. 7687-7688 OF 2007]

K. ASHOKA      … APPELLANT

Versus

N.L. CHANDRASHEKAR & ORS.   … RESPONDENTS

J U D G M E N T

S.B. SINHA, J.

1. Leave granted.

2. N.G.E.F. Employees House Building Cooperative Society Limited

(for short, “the society”) is a society incorporated and registered under the

Karnataka  Cooperative  Societies  Act,  1959  (for  short,  “the  Act”).

Appellant  herein  was  a  Director  of  the society.   He filed  a  complaint

petition  alleging  inter  alia  that  the  respondents  herein  who  were  the

office-bearers  of  the society,  earned a  huge  amount  for  themselves  by

alloting  a site  bearing  No. 509 measuring  30’ x  40’ for  a sum of  Rs.

2,40,000/- to one Gopal, a name lender who in turn, sold the said site for

a sum of Rs.  28,00,000/-  to  one  Hanumanthegowda by a deed of  sale

dated 3.7.2006.  However, in the sale deed, the consideration amount was

shown as Rs.10,20,000/-.       

It was contended that the respondents in connivance with the said

Gopal  made illegal  gain  as  the market  value  of  the  said  property was

about Rs.28 lakhs.   

3. The following facts are admitted.   

The land in question was acquired in the year 1985-86.  The society

formed a layout and sites were allotted to its members.  However, few

sites remained vacant. One of the persons whose lands were acquired for

the  society,  namely,  Munivenkatappa  (father  of  Gopal)  allegedly  had

requested  the society to  release  one  acre  of  land for  his  personal  use,

pursuant whereto, the society resolved to release 337” x 132” of land in

favour of his family.  Another application was filed by M. Gopal, son of

said Munivenkatappa,  in terms whereof request  was again made to the

said society for allotment of the land.  The said request was received on

27.3.2006 and allotment of a site bearing No. 509 measuring 30’ x 40’ for

a sum of Rs.2,40,000/- was made and a deed of sale was executed in his

favour on 7.4.2006.  A possession certificate was also issued.   

Within a period of three months, said Gopal sold the said property

in favour of Hanumanthegowda for a sum of Rs.28,00,000/-.  However, in

the sale deed, the consideration amount was shown as Rs.10,20,000/-.   

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4. Indisputably, a complaint  was filed before the Joint  Registrar  of

Cooperative Societies to cause an investigation thereinto.  On or about

29.12.2006, a report was submitted by him opining that the office bearers

of the society, namely, the respondents herein in connivance with Gopal

and by making him a tool in their hands, allotted the site which was sold

for  a  sum of  Rs.  27,60,000/-.   A recommendation  for  recovery of  the

amount  from the  office  bearers  of  the  society  was  also  made.   In  his

report, it was furthermore stated:

“There is no site called No.509 in the approved plan  of  the  Society.   The  Society  has  not produced  any  documents/records  to  show that the said Site No. 509 is released by BDA.  The site No. 142 is existing and the same is allotted to one Smt. Shailaja Swamy and registered the same  in  her  name  by  the  Society  as  on 23/2/1995 itself.  The certified copy of the Sale Deed  is  produced  herewith  and  marked  as “Annexure 13”.

As per  the  Orders  of  the  Hon’ble  High Court  of  Karnataka,  it  has  come to  know that the  alternative/another  site  was  given  to  Smt. Shailaja  Swamy  during  the  period  of  Special Officer.  The  copy  of  the  same  is  marked  as “Annexure 14”.  It is further come to know that Smt.  Shailaja  Swamy  had  approached  the Hon’ble  High  Court  of  Karnataka  by  filing  a writ petition against the Society on the grounds that the alternative site allotted to him cannot be made Khatha in her name because the said site is  a  C.A.  site,  which  has  been  allotted  and registered  to  her  by  the  Society.   When  this matter is going on, how can the Society allot the same i.e. No. 142 by naming it as Site No. 509 and  illegally  allotting  to  Sri  Gopal  and registering the same by the Society.  This is an

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illegal  act  committed  by  the  Board  of Directors.”

5. Respondents,  however,  contend  that  the  said  enquiry  was

conducted without hearing them and other office bearers of the Society;

no notice had been issued to them and no opportunity of being heard or to

participate  in  the  enquiry  proceedings  had  been  provided.   It  is

furthermore contended that the proceedings before the Joint Registrar is

still pending.   

6. Thereafter,  on  the  basis  of  the  report  submitted  by  the  Joint

Registrar, a complaint petition under Section 200 of the Code of Criminal

Procedure (for short, “the Code”) in respect of commission of an offence

under Section 420 read with  Section 34 of the Indian Penal  Code (for

short, “the IPC”) was filed by the appellant, inter alia, alleging:

“10. The  Complainant  further  submits  while allotting  site  No.  509  to  Sri  Gopal  the Accused have played a big  fraud on the society.  They do not know that there is already a site  bearing No. 142 which  is existing on the same land.  The Accused have shifted site No. 509 on site No. 142 and registered the same in favour of Sri Gopal.  The Complainant has obtained a certified copy of site No. 142 and site No. 509  and  surprised  to  find  both  the schedules  one  and  the  same.   The  sub registrar  K  R  Puram  Bangalore  who  is having  the  copy  of  approved  plan  of Sadananda Nagar Layout with him should

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have observed this fraud and objected for registering this  site.   While shifting any site by the society in  the approved plan the society will have to obtain permission from the  commissioner  TPM  Bangalore Development  Authority  which  the Accused  have  failed  to  do  the  same. BDA has not released this site at all.

11. The  Complainant  humbly  submits  Sri Gopal or any of his family members are not eligible for any site from the society since the society has  already given 1.00 acre of land to their family way back in 1986 itself.  The accused have made Sri Gopal  as  Benami  Owner  and  allotted  a site in his  favour  at  Rs.200/-  per  square feet and sold the same through him at Rs. 2,500 per square feet which is the market value  at  Sadananda  Nagar  Layout  and distributed  Rs.28,00,000  which  is  a  big booty among all.  This is a clear case of misuse of their position as office bearers and  directors,  cheating,  fraud  and working  against  the  interest  of  the society.”

7.  The said complaint petition filed by the appellant was registered as

CC No. 22069 of 2007 in the Court of Xth Additional Chief Metropolitan

Magistrate,  Mayohall,  Bangalore.  The  learned  Magistrate  took

cognizance of the offence under Section 420 read with Section 34 of the

IPC and issued summons to the respondents.   

8. Respondents  thereafter  filed an application under Section 482 of

the Code being Criminal Petition Nos. 838 and 910 of 2007 in the High

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Court  of  Karnataka  at  Bangalore  for  quashing  the  entire  criminal

proceedings initiated by appellant.  By reason of the impugned judgment,

the said petition has been allowed by the High Court, holding:

“12. At the very outset,  it  may be mentioned that  according  to  the  complainant,  there  is  no site bearing No. 509 in the layout formed by the Society.  It is also submitted that the site bearing No. 142 is  already sold  but  the  boundaries  of that  site  is  mentioned  to  the  site  bearing  No. 509.   The complainant  has  not  made  the said Gopal allottee either as witness or an accused. Taking into consideration the facts of the case, the first aggrieved person would be the allottee Sri Gopal, as the site already sold is allotted to him.   It  is  stated  that  the  site  is  sold  by Mr. Gopal  to Hanumanthe Gowda.  Thus,  the said purchaser Hanumanthe Gowda would have been another aggrieved party to sue the vendor Mr. Gopal.  There is no material placed on record to show that  said Gopal  has  sold  the site  to  Mr. Gowda.  There is no material placed on record to show that said Gopal has sold the site to Mr. Hanumanthe  Gowda  for  a  sum  of Rs.28,00,000/-  and  that  money  was  got distributed  among  the  accused.   All  the averments  made  in  the  complaint  are  nothing but  imaginary.   It  is  crystal  clear  that  the respondent  –  complainant  wants  to  settle  his score  against  the  accused/members  of  the society  by  abuse  of  process  of  law.   Learned Magistrate  erred  in  taking  cognizance  for  the offence alleged against the accused.  It is a fit case for quashing the proceedings.”

9. Mr. G.V. Chandrashekar,  learned counsel appearing on behalf of

appellant would urge:-

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i. Appellant  being  a  member  of  the  society  and  having  an

interest in the running of the affairs thereof could maintain

the aforementioned complaint petition.   

ii. The allegations made in the complaint  petition disclosed a

cognizable  offence and,  thus,  the  High Court  committed a

serious error in passing the impugned judgment.  

iii. Although  Gopal  or  for  that  matter  Hanumanthegowda had

not been made as accused, they can be summoned at a later

stage wherefor such an application can be filed in the inquiry

or trial.

iv. Section 415 of the IPC providing for commission of an act of

cheating  also  in  respect  of  the  property,  the  High  Court

committed a serious error in opining that no case has been

made out for issuance of summons against the respondents.  

10. Mr. S.N. Bhat and Ms. Kiran Suri,  learned counsel appearing on

the behalf of the respondents, on the other hand, would contend:

i. No deception within the meaning of Section 415 of the IPC

having  been  committed  by  the  respondents,  the  learned

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Magistrate  committed  a  serious  error  of  law  in  taking

cognizance of an offence under Section 420 of the IPC.

ii. The allegations made in the complaint petition even if they

are taken at  their  face value and accepted in  their  entirety

would  merely  disclose  a  case  of  misuse  of  power  making

allotment in favour of Gopal at a lower price, which being an

offence within the meaning of the Act, only a complainant in

terms of the provisions thereof was maintainable.

iii. No  reliance  could  be  placed  on  the  report  of  the  Joint

Registrar  by  the  learned  Magistrate  as  the  matter  is  sub

judice before the High Court.   

iv. The complaint petition filed by the appellant is an abuse of

the process of the court inasmuch as he filed the complaint

petition after he lost the election.

11. It  is  now a well  settled  principle  of  law that  the  High Court  in

exercise of its inherent jurisdiction under Section 482 of the Code may

quash a criminal proceeding inter alia in the event the allegations made in

the  complaint  petition  even  if  they  are  taken  at  their  face  value  and

accepted in their entirety does not disclose commission of a cognizable

offence.   

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12. Some of the principles which would be attracted for invoking the

said jurisdiction have been laid down in  Indian Oil  Corpn.  vs.   NEPC

India Ltd. & ors. [(2006) 6 SCC 736], are:

“(i)  A  complaint  can  be  quashed  where  the allegations made in the complaint, even if they are  taken  at  their  face  value  and  accepted  in their entirety, do not prima facie constitute any offence or make out the case alleged against the accused.

For  this  purpose,  the  complaint  has  to  be examined as a whole, but without examining the merits  of  the  allegations.  Neither  a  detailed inquiry nor a meticulous analysis of the material nor  an  assessment  of  the  reliability  or genuineness of the allegations in the complaint is  warranted  while  examining  prayer  for quashing of a complaint.

(ii) A complaint may also be quashed where it is a  clear  abuse  of  the  process  of  the  court,  as when the criminal proceeding is found to have been  initiated  with  maladies/malice  for wreaking vengeance or to cause harm, or where the  allegations  are  absurd  and  inherently improbable.

(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power  should  be used  sparingly and with abundant caution.

(iv) The complaint  is  not  required to verbatim reproduce  the  legal  ingredients  of  the  offence alleged.  If  the  necessary  factual  foundation  is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail,

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the  proceedings  should  not  be  quashed. Quashing  of  the  complaint  is  warranted  only where  the  complaint  is  so  bereft  of  even  the basic  facts  which  are  absolutely  necessary  for making out the offence.

(v)  A  given  set  of  facts  may make  out  :  (a) purely a  civil  wrong;  or  (b)  purely a criminal offence; or (c) a civil wrong as also a criminal offence.  A  commercial  transaction  or  a contractual  dispute,  apart  from  furnishing  a cause of action for seeking remedy in civil law, may  also  involve  a  criminal  offence.  As  the nature  and  scope  of  a  civil  proceedings  are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction  or  breach  of  contract,  for  which  a civil remedy is available or has been availed, is not  by  itself  a  ground  to  quash  the  criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not.”

13. The  primary allegation  against  the  respondents  in  the  complaint

petition  does  not  make  out  an  offence  only  under  the  provisions  of

Section 109 of the Act as contended by Mr. Bhat but also other offences.

A legal embargo in filing a complaint is contained in Section 109(6) of

the Act, which reads as under:-

“109. (6). If any person— (i) not  eligible  to  become a  member  under  Section  17

applies  to  a  co-operative  society  for  admission  as  a member, or becomes a member, or after ceasing to be a member under sub-section (2) of that section acts as or exercises any rights or privileges of a member of any such co-operative society;

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(ii) exercise the rights of a member in contravention of the provisions of Section 19;

(iii) willfully fails to furnish the information or document in contravention of the provisions of sub-section (3) of Section 87;

(iv) grants  a  lease  of  the  mortgaged  property  in contravention of sub-section (1) of Section 95,  

shall  be  punishable  with  imprisonment  for  a term which may extend to three months or with fine  which  may  extend  to  three  thousand rupees.”

14. The  allegations  made  in  the  complaint  petition  disclose

commission of a cognizable offence.  A conspiracy is said to have been

entered into for putting the society and consequentially the members to a

great  loss.   A  conspiracy  is  also  said  to  have  been  hatched  for  the

aforementioned purpose as  a result  whereof not  only an allotment was

made in favour of a person who was not entitled thereto but also allotted

plot was assigned in favour of a third party for a huge sum.   

15. Whether the allegations made in the complaint petition are correct

or not have to be considered during trial.  The High Court in its impugned

judgment proceeded inter alia on the premise that the appellant  has no

locus standi.  It may be true that Gopal and Hanumanthegowda had not

been impleaded as accused but  that  by itself  may not  be a ground for

quashing the order of cognizance taken against the respondents.   If the

role played by them in regard to that  part  of the conspiracy is  only to

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make Gopal a member and got the land allotted in his name by way of

camouflage, appellant as a member of the society had a locus standi to

file a complaint.   

16. The High Court furthermore, in our opinion, is not correct to opine

that no document has been produced by the appellant to show that Gopal

made  an  assignment  of  the  land  in  favour  of  Hanumanthegowda.

Evidently, no document can be produced for the purpose of showing that

the actual amount of consideration for the said transaction amounted to

Rs.28,00,000/-  although  ostensibly  the  amount  of  Rs.10,20,000/-  has

been shown to be amount of consideration in the registered document.  It

may be true that the question as to whether the report of the Registrar can

be relied upon for the purpose of showing as to how the act of cheating

has  been  committed  by  the  respondents  is  a  matter  which  must  be

considered at the time of trial but there cannot be any doubt whatsoever

that so long as the report is not set aside, the same could form the basis

for forming of an opinion at least for the purpose of proceeding against

the  respondents  that  they  manipulated  the  records  of  the  cooperative

society to make unlawful gain for themselves and causing unlawful loss

to the society.  

In Indian Oil Corpn. (supra) whereupon Ms. Suri has placed strong

reliance,  this  Court  in  the  facts  and  circumstances  of  the  case  therein

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although  opined  that  no  case  of  “criminal  breach  of  trust”  as  defined

under Section 405 of the IPC has been made out, holding:

“32. The essential ingredients of the offence of ‘cheating’ are:  (i)  deception of a person either by making a false or misleading representation or by other action or omission, (ii) fraudulent or dishonest  inducement  of  that  person  to  either deliver  any  property  or  to  consent  to  the retention  thereof  by  any  person  or  to intentionally induce that person to do or omit to do anything which he would not do or omit if he were not so deceived and which act or omission causes or is likely to cause damage or harm to that  person  in  body,  mind,  reputation  or property.”

Noticing some earlier decisions, it was opined:

“36.  In this case, the complaints  clearly allege that  the  accused  with  fraudulent  intention  to cheat and defraud the IOC, had induced IOC to resume supply of aircraft fuel on cash and carry basis, by entering into a further agreement dated 20.9.1997  and  undertaking  to  clear  the outstanding  amount  of  Rs.  18  crores approximately within the time stipulated in the Hypothecation  Agreements.  The  sum  and substance of the said allegation read with other averments extracted above, is that NEPC India, having committed default in Page 3170 paying the sum of Rs. 18 crores,  entered into a fresh agreement dated 20.9.1997 agreeing to clear the outstanding  as  per  a  fresh  schedule,  with  the dishonest  and  fraudulent  intention  of  pre- empting  and  avoiding  any  action  by  IOC  in terms  of  the  hypothecation  deeds  to  take possession of the aircrafts. Though the supplies after  20.9.1997  were  on  cash  and  carry basis,

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the  fraudulent  intention  is  alleged  to  emanate from the promise under  the  said  agreement  to make  payment,  thereby  preventing  immediate seizure  (taking  possession)  of  the  aircrafts  by IOC.  This  allegation  made  in  addition  to  the allegation  relating  to  removal  of  engines,  has been lost sight of by the High Court. All that is to be seen is whether the necessary allegations exist  in the complaint to bring the case within Section 415. We are clearly of the view that the allegations in the complaint constitute such an offence. We are not concerned with the proof of such allegations or ultimate outcome of trial at this stage.”

17. The  opinion  of  the  High  Court  that  the  averments  made  in  the

complaint  petition  are  imaginary  is  not  based  on  any  material.   Even

assuming that the complainant had a score to settle against the accused,

the  same  by  itself  may not  be  a  ground  to  quash  the  entire  criminal

proceedings particularly in view of the fact that at least a prima facie case

has been established in view of the report of the Registrar.   

18. Section 109 of the Act provides for commission of offences under

the said Act.  Therein, no statutory embargo has been placed for a court to

take  cognizance  of  an  offence  under  the  provisions  of  IPC.   If  the

allegations  made  in  the  complaint  petition  or  in  the  first  information

report make out a case under the IPC, Section 111 of the Act, to which

our attention has been drawn, would constitute no bar for maintenance

thereof being applicable only in respect of offences committed under the

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said Act.   The said statutory interdict  therefore  cannot  be extended in

regard to commission of an offence under any other Act.

19. For  the  reasons  aforementioned,  the  impugned  judgment  of  the

High Court  cannot  be  sustained,  which  is  set  aside  accordingly.   The

appeals are allowed.  It is made clear that we have not entered into the

merit of the matter and, thus, all contentions of the parties shall remain

open.

……………….…..………….J. [S.B. Sinha]

.………………..……………J.            [Cyriac Joseph]

New Delhi; APRIL 15, 2009

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