REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.1966  OF 2008 (Arising out of SLP (Crl.) No.4957 of 2006)

Mahindra & Mahindra Financial Services Ltd. and Anr. ...Appellants

Vs.

Rajiv Dubey ..Respondent

JUDGMENT

Dr. ARIJIT PASAYAT, J.

1. Leave granted.  

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

of the  Orissa  High Court  declining  to  interfere  with the  order  passed by

learned SDJM, Bhubaneshwar  in  ICC 210 of  2000 taking  cognizance  of

offence punishable under Sections 406 and 420 of the Indian Penal Code,

1

1860  (in  short  the  ‘IPC’).  In  the  complaint  it  was  inter-alia  alleged  as

follows:

The  complainant  as  the  Managing  Director  of  Team  Finance

Company  Pvt.  Ltd.,  Janpath  Tower,  Bhubaneswar  had  availed  hire

purchased finance from Mahindra & Mahindra Financial Services Limited,

accused appellant  No.1 with the consent  and knowledge of its  Managing

Director,  accused  appellant  No.2  in  respect  of  a  vehicle  for  a  sum  of

Rs.1,89,000,00. He had given seven blank cheques drawn on Canara Bank,

Main Branch Bhubaneswar in favour of accused-appellant No.1 in the year.

1994  when  the  agreement  had  been  executed  between  the  parties  with

mutual  understanding  that  the  said  cheques  would  not  be  presented  for

encashment  by the  accused-appellant,  but  then  payments  would be made

through  demand  drafts  regularly  till  the  entire  amount  was  repaid.

According to the complainant, in consonance with the said understanding

the  entire  dues  were  repaid  by  him  through  demand  drafts  and  after

repayment he wrote a letter to accused-appellant No.l for returning the blank

cheques  to  him.  However,  without  doing  so,  the  accused  appellants

mischievously and with ulterior motive presented the cheques in the bank, a

fact he learnt after receiving communication from the concerned Bank, that

2

as sufficient money was not  available in his  account.   The cheques were

presented in bank by the accused-appellants even though their entire amount

had been repaid by the complainant. This was done with a motive to cheat

and harass the complainant and makes out offences under Sections 406 and

420  IPC.  The  court  below  after   recording  the  initial  statement  of  the

complainant under Section 200 of the Code of Criminal Procedure, 1973 (in

short  the  ‘Code’)  perusing  the  materials  produced  before  him and  being

prima  facie  satisfied  about  commission  of  the  aforesaid  offences  took

cognizance thereof.

3. Stand of the appellants before the High Court was that the complaint

was nothing but abuse of the process of the law. It was as a counter blast to

the proceedings initiated under Section 138 of the Negotiable Instruments

Act, 1881 (in short the ‘Act’). The High Court found that it is not a case for

interference under Section 482 of the Code.  

4. Learned counsel for the appellants, inter-alia, submitted as follows:

Pursuant to the minutes of meeting dated 23.6.1995 it was agreed to

enter into a tripartite Agreement between the appellant No.1-Company, the

3

Respondent’s  company  Team  Finance  Corporation  Pvt.  Ltd.  and  the

customers availing the loan and buying the vehicle whereby appellant No.1

agreed to extend loans under hire and purchase/lease directly to customers

with Team Finance Co. Pvt. Ltd.  being the  guarantor for disbursal of the

said loans to the customers  for which the Respondent was given a  margin

of 3-4% to market the loan scheme. As per clause (e) of the said minutes of

the meeting and as per clause (f)  the respondent had to  open a separate

bank account and deposit  all  the post  dated installment cheques received

from  the customers in the said account which was required to be remitted to

the appellant Company on minimum balance basis in its Bombay account by

way  of  Telegraphic  Transfer  and  as  per  clause  (g)  the  respondent  was

required to send reports and statements on monthly basis to the appellant

company.  As  per  clause  (h)  for  any  customer  once  defaults  in  payment

reached a figure of 3, the respondent had to reimburse the said defaulted

installment  to  the  appellant  Company.  This  understanding  was  further

reinforced as per the minutes of discussions held between the appellant and

respondent on 18-07.1996 and certain additional conditions were imposed

on the respondent  by the appellants  whereby a limit  of  Rs.20  lakhs  was

fixed for extending finance per month by the respondent.  

4

5. As  such  several  tripartite  loan  agreements  were  signed  and  loan

disbursed to the customers directly by the appellants  with the Respondent

being a guarantor and as on 25th  March 2000, the total outstanding against

respondent Team Finance Corporation Pvt. Ltd. stood at Rs.2,39,73,795/-

the  said  amount  being  unpaid  despite  several  reminders  to  settle  the

outstanding amount.  

6. The appellants presented 7 cheques on 29-03-2000 bearing numbers

and amounts as following:

Cheque No. Amount Dated 7891578 1655516/- 29-03-2000 7891579 2526794/- 29-03-2000 7891580 1477323/- 29-03-2000 7891581 722419/- 29-03-2000 7891582 19631031/- 29-03-2000 7891583 1942609/- 29-03-2000 7891584 4712236/- 29-03-2000

7. The  appellants  presented  3  cheques  on  2-08-2000  against  the

discharge of the remaining outstanding payments bearing the number and

amounts as follows:

5

Cheque No. Amount Dated

7891585 3515726/- 2.8.2000

7891586 3530903/- 2.8.2000

7891587 1927166/- 2.8.2000

8. All these cheques were returned by the Bank to the appellants with

the endorsement that the account is not valid and insufficient funds.  

9. In  the  meanwhile,  in  order  to  pre-empt  the  impending  proceeding

under sec 138 of the Act, the respondent filed a criminal complaint CC No.

210 of 2000 against the appellants under Sections 406, 420, 294, 506, 34

IPC before SDJM Bhubneshwar on 11-05-2000, inter-alia, claiming that the

cheques  issued  by  respondent  were  towards  an  outstanding  amount  of

Rs.1,89,000/-  and  the  said  payment  has  already  been  made  by  the

Respondent by way of a Demand Draft of which no number, date or any

other details are provided in the complaint. The appellants became aware of

6

institution  of  such  a  case  only  later  when  the  process  was  issued  on

18.04.2001 and the same was received by the appellants.  

10. On 02-08-2000 the appellants filed Case No.753/S/2000 U/s 138 of

the Act read with section 34 of IPC before ACMM, Esplanade, Bombay.  

11. The respondent in the meanwhile kept  on representing that he will

clear the  payments and vide letter  dated 8-11-2000 made an offer  to  the

appellants to agree for the full and final settlement of the outstanding dues

for a mere sum of 25,00,000/- against a balance of 2,39,73,795/-.  

12. On 18.04.2001, the Learned Court of SDJM, Bhubaneshwar in ICC

210 of 2000 issued process against  the appellants  under Section 406/420

IPC.  

13. According to  the appellants  the  ingredients  of  Section  405 are not

present. In any event, the plea of the respondent filing the petition mala fide

is clearly borne out.  

14. Learned counsel for the respondent on the other hand submitted that

the appellants have not come to this Court with clean hands.  

7

15. The appellants have introduced a fabricated letter dated 24.6.1995. It

is their stand that the entire amount was paid and, therefore, on receiving the

full payment, the appellants ought to have returned the cheques which were

held only as a collateral security.  

16. It  is  not  in  dispute  that  the  proceedings  under  Section  138  are

pending.  That being so, the question of proceeding for alleged breach of

trust does not arise.  

17. It is interesting to note that the respondent does not dispute issuance

of cheques. Even a casual reading of the complaint does not show that the

ingredients of Section 406 IPC are in any event made out.  It is also not

understandable as to how Section 294 has any application to the facts of the

case  much  less  Section  506  IPC.   In  addition  to  this,  perusal  of  the

complaint  apparently  shows  the  ulterior  motive.   It  is  clear  that  the

proceeding  initiated  by the  respondent  clearly  amounted  to  abuse  of  the

process of law.  In State of Haryana v.  Bhajan Lal  (AIR 1992 SC 604), it

was, inter-alia, observed as follows:

8

“108. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of  the  principles  of  law enunciated  by this  Court  in  a series  of  decisions  relating  to  the  exercise  of  the extraordinary  power  under  Article  226  or  the  inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible  guidelines  or  rigid  formulae  and  to  give  an exhaustive  list  of  myriad  kinds  of  cases  wherein  such power should be exercised.

(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.

(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

9

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 concerned Act (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  the concerned  Act,  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.”

18. The case at hand falls under category (7).

19. Therefore,  in  view  of  what  has  been  stated  in  Bhajan  Lal’s case

(supra),  the  proceedings  in  ICC  210  of  2000  before  learned  SDJM,

Bhubaneswar stand quashed. The appeal is allowed.  

……………………………… …..J.

(Dr. ARIJIT PASAYAT)

…………….………………… ….J.

         (Dr. MUKUNDAKAM SHARMA)

10

New Delhi, December 4, 2008                    

11