REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.             OF 2008 (Arising out of SLP(Crl.) No. 1707 of 2006)

M. Viswanathan ..Appellant

Versus

M/s. S.K. Tiles & Potteries P. Ltd. & Ors. ..Respondents

J U D G M E N T

Dr. ARIJIT PASAYAT, J.

1. Leave granted.

2. Challenge in this appeal is to the judgment of a  learned Single Judge

of the Madras High Court allowing the application filed under Section 482

of the Code of Criminal Procedure, 1973 (in short the ‘Cr.P.C.’). Prayer in

the petition was to call for the records in Crime No.576 of 2005 in the file of

the Inspector of Police Team IV, Central Crime Branch, Chennai,  and to

quash  the  same.  The  respondents  1  to  4  were  booked  for  alleged

commission of offences punishable under Sections 379, 468, 471, 420, 506

(ii)  of  the  Indian  Penal  Code,  1860  (in  short  the  ‘IPC’)  based  on  the

reference  made  by  learned  Additional  Chief  Metropolitan  Magistrate,

Egmore, on the complaint presented by the present appellant under Section

200 of the Cr.P.C.  

3. In the complaint essentially it was stated as follows:

“3. The  first  accused  is  M/s.  Sri  Krishna  Tiles  and  Potteries

(Madras)  Pvt.  Ltd.,  the  second  accused  is  A.R.  Santhanakrishnan,

Director of  the  first accused-company, the third accused is Mrs.

Radhika Santhanakrishnan, yet another Director of the first accused-

company  and the  -  fourth  accused is  Chandrasekaran,  working as

Commercial  Manager  of  M/s.  Sai  Sri  Krishna  Properties  and

Facilitators (P) Ltd.

4. M/s. Sri Krishna Tiles and Potteries (Madras) Pvt. Ltd., is the

owner  of  property  to  an  extent  of  34.04  acres  in  Thirumangalam

Village,  Anna  Nagar  (West),  Chennai.  The  first  accused-company

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entered into a Memorandum of Understanding with the complainant

on 2.7.2001,  as  per  which  the first  accused-company entrusted  the

land for development with the complainant. The complainant started

developing the properties through his partnership firm `M/s. Sai Sri

Krishna Properties'. `M/s. Sai Sri Krishna Properties' was converted

to  a  private  limited  company,  in  which  the  complainant  was  the

Managing  Director  and  the  third  accused  was  the  Director.  An

agreement was entered into between the said `M/s. Sai Sri Krishna

Properties' and `Sri Krishna Tiles and Potteries (Madras) Pvt. Ltd.' on

24.6.2002. The newly floated `M/s. Sai Sri Krishna Properties' was

appointed as a Facilitator by the accused Nos. 1 to 3 for developing

the  properties  after  obtaining  approval  from Chennai  Metropolitan

Development Authority (C.M.D.A.). Since the  accused  Nos.1  to  3

were not in a position to obtain approval from C.M.D.A., the project

could not be completed at the earliest.

5. Pursuant to the, above agreements, the complainant entered into an

agreement to sell and an agreement to construct with 146 purchasers

and  received  a  sum  of  Rs.2,54,67,091/-  as  sale  advance.  The

complainant  had invested a total  sum of Rs.3 crores approximately

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including  the  said  sum  of  Rs.2,54,67,091/-  for  the  purpose  of

developing the project and maintaining the property. The complainant

had returned a sum of Rs.21,71,360/- to 47 allottees out of the 146

allottees.  A  sum  of  Rs.2,29,71,775/-  has  to  be  refunded  by  the

complainant to the remaining 99 allottees. The accused Nos.1 to 3 are

also  negotiating  with  the  allottees  for  refunding  the  advance  sale

consideration  received  from  them.  The  purchasers  informed  the

complainant that the agreement between the accused Nos.1 to 3 and

the complainant's  private  limited  company had  been terminated  by

mutual consent. The complainant was shocked to see that the records

and the accounts relating to the said private limited company were

found missing at its office. The third accused had illegally taken away

all  the  records  and  accounts  relating  to  the  said  private  limited

company,  including  the  originals  of  the  aforesaid  two  agreements

dated  24.6.2002.  Refunds  have  also  been  made  to  few  of  the

purchasers  with  a  mala  fide  intention of  cheating  the  complainant.

The  complainant  never  entered  into  any  mutual  agreement  for

termination of the aforesaid agreements. The accused Nos.1 to 3 have

fabricated a termination agreement  as  if  it  had  been signed by the

complainant.  On complainant's  enquiry, the accused Nos.1 to 3 are

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threatening to kill him.”

4. In seeking quashment of the proceedings stand of the respondents 1

to 4 was as follows:

(1) Though  the  complainant  committed  as  per  Memorandum of

Understanding that he will deposit Rs.2.5 crores for development of

the project, he did not do so. As per the terms and conditions of the

Memorandum  of  Understanding,  it  will  get  rescinded  if  the  said

amount was not deposited by the complainant within one month from

the  date  of  Memorandum of  Understanding.  The  Memorandum of

Understanding has become a void agreement as the said amount was

not  deposited.  By  way  of  abundant  caution,  the  Memorandum of

Understanding was terminated as on 4.8.2001. As the Board of M/s.

Sai Sri Krishna Properties and Facilitators (P) Ltd, decided to remove

the complainant from his office as Managing Director, a resolution to

that effect was passed on 7.7.2005 in a board meeting conducted to

the  effect  that  the  complainant  was  ousted  from  his  office  as

Managing Director.

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(2) The  accused  with  a  good  intention  in  order  to  avoid  any

unwanted  complications,  made  arrangements  for  repayment  of  the

funds  collected  by the  complainant.  The  second and third  accused

also  made arrangements  by pledging their  own personal  properties

and  the  advance  received  for  allotment  of  flats  was  repaid.  There

cannot  be  a case  of  theft  as  against  a  partner  or  a  director  of  the

company with regard to its own property. The complainant will have

to  remedy  his  grievances  invoking  Sections  627  to  630  of  the

Companies  Act.  The  allegations  made by the complainant  will  not

attract the penal provisions of the Indian Penal Code. Therefore the

accused seek for quashment of the criminal proceedings.

5. The Inspector of Police, inter alia,  stated as follows in the counter

affidavit:

“The investigation reveals that the complainant had spent nearly a sum of Rs.3 crores for the development of the property by doing enormous earthwork, laying of roads etc.  After the complainant asked for the records of the company, the accused have taken away all  the records, books of accounts,  returns,  statutory  registers, agreements etc. The complainant filed a petition before the Company Law Board in C.P.No. 44 of 2005 praying to set aside the allotment of shares and appointment of Additional  Director.  The accused filed a counter  along

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with  two  documents  forging  the  signatures  of  the complainant and the Postal Authority. It is found that the postal seal on the document does not tally with the seal of  the  Postal  Department.  The  Forensic  Science Department has given a report  that  the writings of  the complainant  in  the  documents  dated  29.1.2004  and 5.12.2004 are forged. The accused are also involved in several  other  cases  pending  before  the  Central  Crime Branch (Economic Offences Wing), Chennai.”

6. Respondents 1 to 4 further submitted that the complainant was not a

party to the termination agreement and his signature also did not find place

in  the agreement  and,  therefore,  the question of  manipulation of the said

document does not arise.  He  was curious to allege that one of the directors

of the company had taken away the original documents and records from the

company.  The amounts which had been received by the complainant from

the intending purchasers had been completely accounted by the company.

The complainant’s  stand was that  the complaint  discloses commission of

theft of document, forgery of certain records and criminal intimidation and,

therefore, the police had rightly started the investigation.

7. Learned counsel for the State also submitted that during the course of

investigation it  was found that  the seal  of the postal  department found a

particular document did not tally with the postal seal.  It was also submitted

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that the alleged writing of the complainant in certain documents were not to

be in his hand writing.   

8. The High Court noted in para 12 as follows:

“In the  complaint,  four  types  of  allegations  have  been made.   The  first  allegation  is  that  Mrs.  Radhika Santhanakrishnan,  the  third  accused  in  this  case  had illegally taken away all the records and accounts relating to  M/s.  Sai  Sri  Krishna  Properties  and Facilitators  (P) Ltd.   The  Second  allegation  is  that  the  accused  have fabricated  a  termination  agreement  as  if  the  same had been signed by the complainant.  The third allegation is that  the advance amount received from the prospective purchasers  was  returned  behind  the  back  of  the complainant in order to cheat him and the last allegation is  “on  complainant’s  enquiry,  the  accused  1  to  3  are threatening to kill him.”

9. After  noticing the  factual  aspects  the  High Court  referred to  some

judgments and came to an abrupt conclusion in the following words:

“Here  in  this  case,  there  is  no  forgery  of  documents referred  to  in  the  complaint.    The  first  respondent invents certain documents to show that those documents were not in the handwriting of the complainant.   Further, there  is  no  allegation  that  by  using  such  forged document, the accused has acquired gains.  Therefore the above  authority  will  not  apply  to  the  facts  and circumstances of this case.”

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10. Accordingly, the prosecution was quashed holding that the grievance,

if any, of the complainant will have to be redressed through the Civil Forum

or the Company Law Board. He cannot prosecute the respondents  on the

basis  of  bald  allegation  without  any basis.  Accordingly,  prosecution  has

quashed.

11. Learned  counsel  for  the  appellant  submitted  that  while  exercising

powers conferred under Section 482 Cr.P.C. the parameters have not been

kept  in  view by the High  Court  and matters  which  are  essentially  to  be

resolved  during  trial,  have  been  quashed  by  a  practically  non-reasoned

order.

12. Reading  of  the  complaint  clearly  shows  that  the  allegations  are

substantially  made out.   This  is  not  a  case  where  the  jurisdiction  under

Section 482 Cr.P.C. was to be exercised.  Per contra learned counsel for the

respondents  1  to  4  supported  the  judgment  placing  strong  reliance  on  a

decision of this Court in Zandu Pharmaceutical Works Ltd. & Ors. v. Mohd.

Sharaful Haque & Anr. [2005(1) SCC 122] contending that the parameters

for exercising jurisdiction under Section 482 Cr.P.C. have been kept out and

there is nothing illicit in the impugned judgment to warrant interference.

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13. Learned  counsel  for  the  State  supported  the  stand  taken  by  the

appellant.

14. Exercise of power under Section 482 of the Code in a case of this

nature is the exception and not the rule. The Section does not confer any

new powers on the High Court. It only saves the inherent power which the

Court  possessed  before  the  enactment  of  the  Code.  It  envisages  three

circumstances  under  which  the  inherent  jurisdiction  may  be  exercised,

namely, (i) to give effect to an order under the Code, (ii) to prevent abuse of

the process of court, and (iii) to otherwise secure the ends of justice. It is

neither possible nor desirable to lay down any inflexible rule which would

govern  the  exercise  of  inherent  jurisdiction.  No  legislative  enactment

dealing with  procedure can provide for all  cases that  may possibly arise.

Courts,  therefore,  have inherent  powers  apart  from express  provisions  of

law  which  are  necessary  for  proper  discharge  of  functions  and  duties

imposed upon them by law. That is the doctrine which finds expression in

the section which merely recognizes and preserves inherent powers of the

High Courts. All courts, whether civil or criminal possess, in the absence of

any express provision, as inherent in their constitution, all such powers as

are  necessary  to  do  the  right  and  to  undo  a  wrong  in  course  of

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administration  of  justice  on  the  principle  “quando  lex  aliquid  alicui

concedit, concedere videtur et id sine quo res ipsae esse non potest” (when

the law gives a person anything it gives him that without which it cannot

exist).  While  exercising  powers  under  the  section,  the  court  does  not

function  as  a court  of  appeal  or  revision.  Inherent  jurisdiction  under  the

section  though  wide  has  to  be  exercised  sparingly,  carefully  and  with

caution and only when such exercise is justified by the tests specifically laid

down in the section itself. It is to be exercised ex debito justitiae to do real

and substantial  justice for the administration of which alone courts  exist.

Authority of the court exists for advancement of justice and if any attempt is

made to abuse that authority so as to produce injustice, the court has power

to prevent abuse. It would be an abuse of process of the court to allow any

action which would result in injustice and prevent promotion of justice. In

exercise of the powers court would be justified to quash any proceeding if it

finds that  initiation/continuance  of  it  amounts  to  abuse of  the process  of

court or quashing of these proceedings would otherwise serve the ends of

justice.  When  no  offence  is  disclosed  by  the  complaint,  the  court  may

examine the question of fact. When a complaint is sought to be quashed, it

is permissible to look into the materials to assess what the complainant has

alleged  and whether  any offence  is  made out  even if  the  allegations  are

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accepted in toto.  

15. In  R.  P.  Kapur v.  State  of  Punjab (AIR 1960  SC 866)  this  Court

summarized some categories of cases where inherent power can and should

be exercised to quash the proceedings.  

(i) where it  manifestly appears that there is a legal bar against  the  institution  or  continuance  e.g.  want  of sanction;  

(ii) where the allegations in the first information report or complaint taken at its face value and accepted in their entirety do not constitute the offence alleged;  

(iii) where the allegations constitute an offence, but there is  no  legal  evidence  adduced  or  the  evidence  adduced clearly or manifestly fails to prove the charge.

16. In  dealing  with  the  last  case,  it  is  important  to  bear  in  mind  the

distinction between a case where there is no legal evidence or where there is

evidence which is clearly inconsistent with the accusations made, and a case

where  there  is  legal  evidence  which,  on  appreciation,  may  or  may  not

support the accusations. When exercising jurisdiction under Section 482 of

the Code,  the  High Court  would  not  ordinarily  embark upon an enquiry

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whether  the  evidence  in  question  is  reliable  or  not  or  whether  on  a

reasonable appreciation of it accusation would not be sustained. That is the

function of the trial Judge. Judicial process should not be an instrument of

oppression,  or,  needless  harassment.  Court  should  be  circumspect  and

judicious  in  exercising  discretion  and  should  take  all  relevant  facts  and

circumstances into consideration before issuing process, lest it would be an

instrument  in  the  hands  of  a  private  complainant  to  unleash  vendetta  to

harass  any  person  needlessly.  At  the  same  time  the  section  is  not  an

instrument  handed  over  to  an  accused  to  short-circuit  a  prosecution  and

bring about its sudden death. The scope of exercise of power under Section

482 of  the Code and the categories  of  cases  where the  High Court  may

exercise its power under it relating to cognizable offences to prevent abuse

of process of any court or otherwise to secure the ends of justice were set

out in some detail by this Court in  State of Haryana v.  Bhajan Lal (1992

Supp (1) 335). A note of caution was, however, added that the power should

be exercised sparingly and that too in rarest of rare cases. The illustrative

categories indicated by this Court are as follows:  

"(1) Where the allegations made in the first information report  or 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 a case against the accused.  

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(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by  police  officers  under  Section  156(1)  of  the  Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.  

(3)  Where  the  uncontroverted  allegations  made  in  the FIR or complaint and the evidence collected in support of  the  same  do  not  disclose  the  commission  of  any offence and make out a case against the accused.  

(4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.  

(5) 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.  

(6) Where there is an express legal bar engrafted in any of  the  provisions  of  the  Code  or  the  Act  concerned (under which a criminal proceeding is instituted) to the institution  and  continuance  of  the  proceedings  and/or where there is  a specific provision in the Code or Act concerned,  providing  efficacious  redress  for  the grievance of the aggrieved party.  

(7) Where a criminal proceeding is manifestly attended with  mala  fide  and/or  where  the  proceeding  is maliciously  instituted  with  an  ulterior  motive  for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."  

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As noted above, the powers possessed by the High Court under Section 482

of the Code are very wide and the very plenitude of the power requires great

caution  in  its  exercise.  Court  must  be  careful  to  see  that  its  decision  in

exercise of this  power is  based  on  sound principles.  The inherent  power

should not be exercised to stifle a legitimate prosecution. The High Court

being the highest  court  of a State should  normally refrain from giving a

prima facie  decision  in  a case  where the  entire facts  are  incomplete  and

hazy,  more  so  when  the  evidence  has  not  been  collected  and  produced

before the Court and the issues involved, whether factual or legal,  are of

magnitude and cannot be seen in their true perspective without sufficient

material.  Of course,  no hard-and-fast  rule  can be laid  down in  regard  to

cases in which the High Court will exercise its extraordinary jurisdiction of

quashing the proceeding at any stage. (See: Janata Dal v. H. S. Chowdhary

(1992 (4) SCC 305), and Raghubir Saran (Dr.) v. State of Bihar (AIR 1964

SC 1). It would not be proper for the High Court to analyse the case of the

complainant in the light of all probabilities in order to determine whether a

conviction would be sustainable and on such premises arrive at a conclusion

that the proceedings are to be quashed. It would be erroneous to assess the

material before it and conclude that the complaint cannot be proceeded with.

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In a proceeding instituted on complaint, exercise of the inherent powers to

quash the proceedings is called for only in a case where the complaint does

not  disclose  any  offence  or  is  frivolous,  vexatious  or  oppressive.  If  the

allegations set out in the complaint do not constitute the offence of which

cognizance has been taken by the Magistrate, it is open to the High Court to

quash the same in exercise of the inherent powers under Section 482 of the

Code. It is not, however, necessary that there should be meticulous analysis

of  the  case  before  the  trial  to  find  out  whether  the  case  would  end  in

conviction  or  acquittal.  The  complaint  has  to  be  read  as  a  whole.  If  it

appears that on consideration of the allegations in the light of the statement

made  on  oath  of  the  complainant  that  the  ingredients  of  the  offence  or

offences are disclosed and there is no material to show that the complaint is

mala  fide,  frivolous  or  vexatious,  in  that  event  there  would  be  no

justification  for  interference  by the  High  Court.  When an  information  is

lodged at the police station and an offence is registered, then the mala fides

of  the  informant  would  be  of  secondary  importance.  It  is  the  material

collected during the investigation and evidence led in court which decides

the fate  of  the accused person.  The allegations  of  mala fides  against  the

informant are of no consequence and cannot by themselves be the basis for

quashing the proceedings. (See: Dhanalakshmi v. R. Prasanna Kumar (1990

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Supp SCC 686), State of Bihar v. P. P. Sharma (AIR 1996 SC 309), Rupan

Deol Bajaj v. Kanwar Pal Singh Gill (1995 (6) SCC 194), State of Kerala v.

O. C. Kuttan (AIR 1999 SC 1044), State of U.P. v. O. P. Sharma (1996 (7)

SCC 705), Rashmi Kumar v.  Mahesh Kumar Bhada (1997 (2) SCC 397),

Satvinder Kaur v. State (Govt. of NCT of Delhi) (AIR 1996 SC 2983) and

Rajesh Bajaj v. State NCT of Delhi (1999 (3) SCC 259.

17. The above position was recently highlighted in Zandu Pharmaceutical

Works Ltd. & Ors. v.  Mohd. Sharaful Haque and Another (2005 (1) SCC

122).

18. In the instant case the only conclusions arrived at by the High Court

is  in para 23 of  the judgment  which have been quoted above.  The High

Court has wrongly come to the conclusion that the matter in issue has to be

decided by a Civil Court or the Company Law Board.  The High Court had

referred  to  the  four  types  of  allegations.  Some  of  the  allegations  are

certainly not adjudicable by the Civil  Court  or the Company Law Board.

That  being so the  exercise  of  jurisdiction  by the  High Court  in terms of

Section  482  Cr.P.C.  cannot  be  maintained.  The  impugned  order  is

indefensible and is set aside.

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19. The appeal is allowed.  

…………………………………...J. (Dr. ARIJIT PASAYAT)

…………………………………...J. (Dr. MUKUNDAKAM SHARMA)

New Delhi, November 25, 2008

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