REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.  925              OF 2008 [Arising out of SLP (Crl.) No. 6351 of 2006]

V.R. Dalal & Ors. …Appellants

  Versus

Yougendra Naranji Thakkar & Anr. …Respondents

J U D G M E N T

S.B. SINHA,  J :

1. Leave granted.

2. A complaint petition was filed by the respondent No. 1 herein in

the  Court  of  Metropolitan  Magistrate,  30th Court  at  Kurla.   It  was

registered as Case No. 271/M of 2002; Accused Nos. 1 to 6 thereof were

partners  of M/s.  N.M. Raiji  and Company and Accused No. 7 was its

employee.  Appellants herein who were arrayed as the Accused Nos. 8 to

13 were partners of another firm known as M/s. Gandhi Dalal and Shah.

The said firm was earlier  known as Dalal  and Shah.   Out of the said

accused,  Accused  No.  8  Mr.  Y.C.  Amin  has  expired.   In  the

aforementioned  complaint  petition,  allegations  were  made  that  all  the

accused  persons  conspired  with  each  other  so  as  to  deprive  the

complainant from deriving the benefits of a firm by dissolving the firm

N.M. Raiji and Company behind his back.   

3. It appears that the firm ‘M/s. Gandhi Dalal and Shah’ which was

constituted  with  effect  from  1.02.2000  was  cancelled  from  the  very

inception as the same is said to have not been acted upon.  The name

M/s.  Gandhi  Dalal  and  Shah  was  surrendered  to  the  Chartered

Accountants of India.  Indisputably, in the complaint petition itself, it has

been accepted that the said M/s. Gandhi Dalal and Shah is no longer in

existence.  It has further not been disputed that one Mahendra Thakkar

also  signed  in  the  original  deed  of  partnership  dated  10.02.2001.   In

relation to the cancellation of the said partnership, it is alleged:

“The  Complainant  states  that  they  have  with some dishonest intention have not prepared any Deed  of  dissolution  which  is  mandatory  for cancellation  of  any  Deed  of  partnership. Merely  by  canceling  Deed  on  piece  of  paper has  no  meaning  in  the  eyes  of  law  and  it  is misguiding but in law the Deed of partnership will remain in force till it is dissolved by deed of dissolution.  The Accused have again played fraud upon the complainant by misrepresenting him  that  they  have  cancelled  the  Deed  of

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partnership.   They  have  also  filed  false documents  with  Institute  of  Chartered Accountants in order to commit fraud.”

4. The role of the appellants herein are said to be that of conspirators.

The complainant stated:

“The  Accused  persons  in  criminal  conspiracy with  each  other  intending  to  kicked  out  the complainant  from  the  said  firm  by  adopting intellectual  tactics,  which  is  evident  from the conduct  and  act  of  the  accused.   The complainant  is  putting  his  full  time  for  the prosperity  of  the  said  firm  and  he  has contributed  Lion  Share  in  creating  good reputation and goodwill of the said Firm among the  Corporate  Sector  and  other  business communities.   The Complainant  is not  having control over the income of the firm.  In spite of the demand of the Complainant for giving him accounts  of  the  firm the  accused  have  failed and neglected to do so as such the complainant is  not  aware  at  present  exact  amount misappropriated by the Accused persons.  The complainant  states  that  it  is  not  only misappropriates  but  it  amounts  to  theft  of  the valuable property of the complainant.”

5. The firm  M/s.  N.M. Raiji  and Company is  a firm of  chartered

accountants.  Some business allegedly had been transferred.  It is stated

that the accused have committed criminal breach of trust in respect  of

income and goodwill  of  the  firm.   According to  the  complainant,  his

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income from the said firm would have been 5% from the profit of the

said firm which was estimated at 30% wherefrom he has allegedly been

deprived, as he was not made a partner in the new firm.

6. Appellants  filed  a  writ  petition  before  the  Bombay High  Court

which  was  marked  as  Criminal  Writ  Petition  No.  315  of  2004.   A

separate writ application was also filed by Accused Nos. 1 to 7 which

was marked as Writ Petition No. 542 of 2003.  The said writ petition was

dismissed.   The  High  Court,  by  reason  of  the  impugned  judgment,

dismissed the writ petition filed by the appellants also stating:

“5  Mr.  Panikar  appearing  for  the  petitioners, does not  dispute that  such an order is passed. However,  he  submits  that  the  case  of  the present petitioners stand on a slightly different footing, although they are accused in the same criminal case, as far as they are concerned, they are  not  the  partners  of  M/s.  N.M.  Raiji  & Company.  This N.M. Raiji and Company was a partnership firm in which all accused 1 to 7 and the complainant were partners.  The petitioners are partners of distinct firm which is known as “Dalal & Shah” and later on “M/s Gandhi Dalal & Shah”.  In such circumstances, it would not be proper to rely upon the order passed in the other writ petition.  These are disputes between persons, who are partners, during the course of administration and management of the business of  the  firm.   It  is  a  purely  civil  dispute. Allowing criminal proceeding according to Shri Panikar  would  be  abuse  of  process  of  the court.”

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7. Mr. Sureshkumar J. Panicker, learned counsel appearing on behalf

of the appellants, would submit that the dispute between the parties being

a civil dispute, if the proceeding is allowed to continue, it would amount

to an abuse of process of law.

8. Mr.  Jatin  Zaveri,  learned  counsel  appearing  on  behalf  of  the

respondents, on the other hand, would contend that as allegations made

in  the  complaint  petition  constitute  an  offence,  this  Court  should  not

interfere with the impugned judgment.

9. The short question which arises for consideration is as to whether

the complaint petition given its face value and taken to be correct in its

entirety constitutes an offence.

M/s.  Gandhi  Dalal  and  Shah  admittedly  was  constituted  as  a

partnership firm on 1.12.2000.  The said partnership firm was constituted

on the premise that four partners of M/s. N.M. Raiji and Company were

representing  the  firm Dalal  and  Shah.   As  indicated  hereinbefore,  an

outsider  was also included therein.   Once the said partnership did not

take off  and the partnership  deed was  cancelled  as  it  had  never  been

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acted upon, the question of any wrongful act on the part of the appellants

did not arise.  It is one thing to say that there exists a dispute amongst the

partners inter se but it is another thing to say that by constituting another

firm  wherein  two  firms  would  be  represented  by  their  respective

nominees  together  with  an  outsider  would  itself  indicate  an  act  of

conspiracy.  Once it has been accepted as of fact that the said partnership

has been cancelled,  the question of  relying thereupon for any purpose

would not arise.   

10. The  learned  counsel  appearing  on  behalf  of  the  respondents,

however, has drawn our attention to a letter dated 28.02.2001 addressed

by Arun R. Gandhi, Mahendra N. Thakkar, Jayesh M. Gandhi, Vinay D.

Balse  and Sujal  A. Shah to Yogendra N. Thakkar wherein one of  the

sequence of events was stated to be as under:

“(3) On getting  you letter  dated  February 7, 2001,  Mr.  Arun  Gandhi  had  discussed  the matter with Mr. Mahendra Thakkar on 9th and 10th February, 2001 who had informed that Mr. Arun Gandhi  that  he need not  worry about  it and  that  everything  would  be  sorted  out  by meeting with you, and that we should go ahead with  the  signing  of  the  partnership  deed  (of Gandhi Dalal & Shah).  On that basis, the said partnership deed was signed on 10th February, 2001,  by  five  signatories.   Mr.  Mahendra Thakker could not sign on that day as he had some urgent work to attend.”

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This  letter  does  not  take  us  anywhere.   It  merely  shows  that

internal dispute leading to abandonment of the concept of starting a new

firm.

11. Mr.  Panicker  has  relied  upon  a  decision  of  this  Court  in  Uma

Shankar Gopalika v.  State of Bihar and Another [(2005) 10 SCC 336]

wherein it has been held that where the dispute is pure civil in nature an

offence under Section 420 or Section 120B of Indian Penal Code cannot

be said to have been made out.   

12. It may be true that  in  the event  the court  finds that  the dispute

between  the  parties  is  civil  in  nature,  it  may  not  allow  the  criminal

proceedings to go on.  But, no law, in our opinion, as such can be laid

down as in a given case both civil suit and criminal complaint would be

maintainable although the cause of action for both the proceedings is the

same.

13. We, however, in this case are satisfied that the appellants by no

stretch  of  imagination  can  be  said  to  have  committed  an  offence

particularly when admittedly the new firm has been cancelled from its

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very inception.  If the new firm has not derived any income, the question

of  depriving  the  claimant  therefrom  does  not  arise.   Whether  the

constitution of the said firm was illegal or mala fide, thus, need not be

gone into as by reason thereof the respondent No. 1 cannot be said to

have suffered any loss.   

14. We may notice that as regards commission of an offence in terms

of Section 405 of Indian Penal Code, this Court in Indian Oil Corpn. v.

NEPC India Ltd. and Others [(2006) 6 SCC 736] held that where the first

ingredient of criminal breach of trust, that is, entrustment is missing, the

same would not constitute a criminal breach of trust.   

As regards essential ingredients of the offence of cheating, it was

stated:

“(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.”

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15. The  aforementioned  ingredients  of  Section  420  of  Indian  Penal

Code are also absent in the instant case.  [See also Suryalakshmi Cotton

Mills Ltd. v. Rajvir Industries Ltd. and Ors. 2008 (1) SCALE 331]

16. When a proceeding is found to be an abuse of the process of court,

this  Court  in  exercise  of  is  jurisdiction  under  Article  142  of  the

Constitution of India may not allow it to continue.  For the said purpose,

the fact  of  the matter  can be looked into.   It  was so done recently in

Sanapareddy Maheedhar  and Another v.  State of  Andhra Pradesh  and

Another [2007 (14) SCALE 321] wherein upon noticing a large number

of decisions of this Court, it was held:

“We are further of the view that in the peculiar facts of this  case, continuation of proceedings of CC No.240/2002 will amount to abuse of the process  of  the Court.  It  is  not  in  dispute  that after  marriage,  Shireesha  Bhavani  lived  with appellant  No.1  for  less  than  one  and  a  half months  (eight  days  at  Hyderabad  and  about thirty  days  at  New  Jersey).  It  is  also  not  in dispute that their marriage was dissolved by the Superior Court at New Jersey vide decree dated 15.12.1999. Shireesha Bhavani is not shown to have  challenged  the  decree  of  divorce.  As  a mater of fact, she married Sri Venkat Puskar in 2000  and  has  two  children  from  the  second marriage.  She also received all  the articles  of dowry (including jewellery) by filing affidavit

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dated 28.12.1999 in the Superior Court at New Jersey.  As  on  today  a  period  of  almost  nine years has elapsed of the marriage of appellant No.1  and  Shireesha  Bhavani  and  seven  years from  her  second  marriage.  Therefore,  Page 0086 at this belated stage, there does not appear to  be  any justification  for  continuation  of  the proceedings  in  CC  No.240/2002.  Rather,  it would  amount  to  sheer  harassment  to  the appellant  and  Shireesha  Bhavani  who  are settled in USA, if they are required to come to India  for  giving  evidence  in  relation  to  an offence  allegedly  committed  in  1998-99.  It  is also  extremely  doubtful  whether  the Government of India will, after lapse of such a long time, give sanction in terms of Section 188 Cr.P.C.”

17. For the reasons aforementioned, the impugned judgment cannot be

sustained.   It  is  set  aside  accordingly.   The  summons  issued  by  the

learned  Magistrate  against  the  appellants  is  quashed.   The  appeal  is

allowed.   

………………………….J. [S.B. Sinha]

..…………………………J. [H.S. Bedi]

New Delhi; May 16, 2008

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