K. Nagender Rao v. The State of A.P.

Order

These two Criminal Revision Cases are filed by the Petitioner- Respondent under Sections 397 and 401 of the Criminal Procedure Code, 1973 (for short ‘Cr.P.C.’) against common order dated 04-08- 2003, of discharge of the Respondents made in Crl.M.P. No.4237 of 2002 and Crl.M.P. No.5222 of 2002 in C.C. No.1512 of 2000 by the XI Metropolitan Magistrate, Secunderabad registered for offences punishable under Sections 409, 420 and 120 (B) read with Section 34 I.P.C.

2. The Revision Petitioner is the Respondent in Crl.M.P. No.4237 of 2002 and Crl.M.P. No.5222 of 2002 and Complainant in the C.C. No.1512 of 2000 and the Respondents (apart from the State) are the Petitioners in the said Petitions and A-1 to A-7 in the C.C. No.1512 of

3. For the sake of convenience, I refer the parties as arrayed in the Calender Case.

4. The facts of the case which are relevant here are as follows : 4 (a). The Respondent belongs to Katta family and A-1 to A-5 belong to Haridas family. Both the families started business in the name and style of M/s. Feno Fiber Limited, M/s. Feno Plast Limited and various other companies and as some differences arose between both the families, they by a mutual understanding decided to part amicably and entered into a Memorandum of Understanding dated 27-09-1996 (For short, ‘The MOU’) and later another Understanding was arrived at according to which, Haridas Family should pay certain amounts to the Complainant’s family (Katta family) who agreed to transfer 1,89,000 shares of M/s. Feno Fiber Limited held by them as per clause 2 (c) of the MOU and subject to the fulfillment of the clause 2 (c) 4,45,100 shares of M/s. Feno Fiber Limited held by M/s. Feno Investments Limited together with 1,225 shares of M/s. Feno Investments Limited held by Katta family were to be transferred to Haridas Family and consequently at the instance of Haridas family and M/s. M. Anandam & Co., Katta family kept the said shares with the partners of M/s. M. Anandam & Co. i.e., A-6 and A-7 for safe custody and in fact the Katta family believing them in good faith agreed for the same subject to the fulfillment of clause 2 (c) read with clause 13 of the MOU. 4 (b). While the matter stood thus, A-1 to A-5 colluded with A-6 and A- 7 with Criminal and malafide intention and also to have wrongful gain against the Katta family by reason of which, A-1 to A-5 without fulfilling the clause 2 (c) read with clause 13 of the MOU and without intimating the Katta family obtained the shares of Katta family from A-6 and A-7 with whom the shares were kept and A-6 and A-7 falsely informed the complainant’s son by name Mr. K. Sreenivasa Rao on 30-12-1999 that the shares were missing from their office. Immediately on the same day, the Complainant’s son wrote a latter dated 30-12-1999 to M/s. Feno Fiber Limited about the missing of the shares with a request to inform about the procedure to be adopted for obtaining duplicate share certificates of the original shares and he also requested the Auditors of M/s. M. Anandam & Co. to take necessary action but, no action was taken on behalf of M/s. M. Anandam & Co. whereas authorized people of M/s. Feno Fiber Limited replied that only concerned sharers had to apply for the duplicate share certificates, following which on 12-01- 2000 the respective share holders representing Feno Fiber Limited applied for the issuance of duplicate share certificates. However, on the other hand, Mr. K. Sreenivasa Rao received a letter dated 14-01- 2000 from A-1 who is also one of the signatories of the MOU that on 24-12-1999 itself, A-6 and A-7 handed over the said shares and they were transferred in favour of their family complying with necessary payments and further as per the directions of A-6 and A-7 a further sum of Rs.20-00 lakhs was paid to Katta family as per clause 2 (d) of the MOU and Mr. K. Sreenivasa Rao made a false allegation against him that the shares were missing from the Auditors office which allegations were created in order to dupe the Complainant’s family and to avoid making necessary payments as agreed upon. Further, later also the understanding between the two families was not complied with.

5. At the outset, the complaint was forwarded to the concerned police station under Section 156 (3) Cr.P.C. to conduct necessary investigation and file charge sheet but the police filed final report holding that the only dispute between the parties was with regards to the mode of payment of interest and it was civil in nature to impose any Criminal liability against A-1 to A-7. Thereby the matter was closed. However, later on the complainant filed protest petition and then the matter was taken on file after observing necessary formalities, whereas thereafter, A-1 to A-5 filed Crl.M.P. No.4237 of 2002 and A-6 and A-7 filed Crl.M.P. No.5222 of 2002 seeking to discharge them and the Court below observed that the hearing of the matter would be taken up after recording evidence on the Complainant side and before framing necessary charges against which Revisions were preferred before this Court numbered as Crl.R.C. Nos.1625 of 2002 and 1626 of 2002 which were disposed of before admission by common order dated 05-11-2002 with an observation that the said orders were passed without considering the ambit of Section 245 Cr.P.C. with a direction to remand the matter instructing that the Magistrate Court had to proceed with the hearing of the applications on merits.

6. In view of the directions of this Court, the matter was heard by the learned Magistrate and basing upon the material available, the learned Magistrate found that no prima-facie case was made out to prosecute A-1 to A-7 for the alleged offences and allowed the petitions by the common order dated 04-08-2003 following which, the present Criminal Revision Cases have been preferred.

7. While allowing the petitions, it is mainly considered or observed by the learned Magistrate that as per clause 11 of the MOU and ESCROW Scheme therein 9,76,000 shares of Ms. Feno Plast Limited were to be kept with Mr. A.V. Sadasiva and Mr. M.R.Vikram (A-6) of M/s. M. Anandam & Co., Chartered Accountant, Secunderabad and accordingly they were kept with the said persons and the MOU does not cover the question of depositing M/s. Feno Fiber shares under the ESCROW account with the said individuals whereas, it is the contention of learned counsel for A-1 to A-5 also that the M/s. Feno Fiber shares were not kept under ESCROW account. The learned Magistrate also referred to what is pleaded in the Counter filed in Crl.M.P. No.4237/2002 that it is the claim of the Complainant therein that as per the understanding subsequent to the execution of the MOU, they kept the shares of both M/s. Feno Fiber Limited and M/s. Feno Investments Limited under the ESCROW account with A-6 and A-7. Then it is observed by him that the Complainant has made contradictory statements against his pleas apparently one taken in the complaint to the effect that under the ESCROW schedule only M/s. Feno Plast shares were kept for consideration and secondly in the Protest Petition he took a stand that all the shares referred were kept in the safe custody of A-6 and A-7 and thirdly in the counters filed in the two petitions (Crl.M.P. No.4237/2002 and Crl.M.P. No.5222 of 2002 in C.C. No.1512 of 2002) he reverted back to the stand that M/s. Feno Fiber shares were part of the ESCROW schedule and thus he made an attempt to mislead the Court. Further, it is observed by the learned Magistrate that there was substantial compliance of clause 2 (c) of the MOU and by no stretch of imagination it can be said that A-6 and A-7 colluded with A-1 to A-5 and did the alleged mischief in contravention of the guidelines because of the compliance of clause 2 (c) of the MOU and even supposing that M/s. Feno Fiber Limited shares were kept in the safe custody of A-6 and A-7, they (A-6 and A-7) rightly handed over the shares to A-1 to A-5 and hence no criminal responsibility or criminal liability can be fastened to A-1 to A-7. Further, it is observed by the learned Magistrate that the Complainant prima-facie has twisted the facts in order to lodge the case against A-1 to A-7. Further it is observed by him that he has come to such a conclusion not on meticulous and strict evaluation of the evidence but by applying the simple principles and common incidents of the facts. It is further observed by him that the Court on cursory glance of the record is unable to understand as to how the MOU dated 27-09-1996, which was entered into by free consent and free will to buy peace can be termed as an instrument of deception and element of fraudulent and dishonest intention is not at all highlighted. It is further observed by him that it is manifestly clear that on the basis of available record the Complainant has tried to rope in a group of seven persons by attributing to them the deception and fraudulent and dishonest intention whereas, no where he is able to find out any criminal act of A- 1 to A-7. It is also observed by him that the Complainant is having the audacity to attribute to A-6 and A-7 dishonest intention and deliberate violation of a direction, which direction is not at all there in the MOU. It is further observed by him that the learned counsel for the Complainant says that they filed C.P. No.78 of 2000 before the Company Law Board, which is to be considered in respect of the claim of the Complainant but it is a far fetched and untenable submission and it will be an enquiry into trifle matter and the learned counsel for the Complainant in fact, has relied upon that document having found no scope to substantiate his other contentions and as a last bid effort. It is further observed by him that it is settled law which has manifested itself into crystal clear guiding principles to the subordinate judiciary to exercise the discretion given under Section 245 Cr.P.C. in a proper perspective or right manner and accordingly the principles are carried out. With such observations, mainly the learned Magistrate allowed the petitions holding that no prima-facie case was made out against A-1 to A-7.

8. Therefore, the points for consideration are : 1) Whether the Respondent has made out prima-facie case in order to prosecute A-1 to A-7 for the alleged offences? And 2) Whether the common order passed by the learned Magistrate is tenable or not?

9. It is the contention of learned counsel for the Respondent/Complainant that by virtue of Section 245 Cr.P.C. which is concerned with private warrant procedure only, after recording necessary evidence as provided in Section 244 Cr.P.C., the learned Magistrate got discretion to consider the evidence and if he found that no case was made out against A-1 to A-7 consequently, he could have discharged them but emphatically it is the categorical case of the Complainant that subsequent to the execution of the MOU there was an understanding with regards to M/s. Feno Fiber Limited shares and accordingly they were kept with A-6 and A-7 of M/s. M. Anandam & Co., Chartered Accountant and subsequently all of them colluded together and involved in the deception in the manner noted in the complaint and further in fact there is clear admission in C.P. No.78 of 2000 filed by A-1 to A-5 before the Company Law Board about the subsequent arrangement but learned Magistrate failed appreciate the matter properly and just basing upon the MOU earlier executed he came to the conclusion that no prima-facie case was made out against A-1 to A-7 making unwarranted and wild allegations against the Complainant. According to him, the learned Magistrate had gone into the actual merits of the documents but not just into the apparent examination of the documents which is beyond the scope of the directions given by this Court while disposing of the Criminal Revision Case Nos.1625 of 2002 and 1626 of 2002, vide common order dated 05-11-2002. It is also brought to the attention of this Court the said representation made by A-1 to A-5 in C.P. No.78 of 2000 before the Company Law Board and the sworn statement given by the Respondent filed in this context.

10. On the other hand, it is the contention of learned counsel for A-1 to A-7 that M/s. Feno Fiber Limited shares are not included in the MOU and further apparently there is no record with regards to the so called subsequent arrangement with reference to those shares and there is n o prima-facie case against A-1 to A-7 with regards to the alleged offences. It is also contended by the learned counsel for A-6 and A-7 that even though it is according to the Respondent that one A.V. Sadasiva took active part in the matter he was not added as Accused in the case and on the other hand, without any basis added A-7 in the case and further in any case, A-6 and A-7 got no enmity or dispute with the Complainant and even according to the Respondent they only acted as mediators to settle the disputes between the Complainant and A-1 to A-5 and therefore in any case, they should be strictly discharged from the case on the ground that sufficient material is not there to prosecute them for the alleged offences.

11. Point No.1: At first it is to be considered as to what is the ambit or scope of the directions given by this Court in the common order passed in the Criminal Revision Petition Nos.1625 and 1626 of 2002, it only provides that a direction was given to the learned Magistrate to proceed with the hearing of the applications and to dispose of the applications on merits. 12 (a). Section 244 Cr.P.C. provides for recording of evidence for prosecution in private warrant cases, which reads as follows : “Evidence for prosecution : (1) When, in any warrant-case instituted otherwise than on a police report the accused appears or is brought before a Magistrate, the Magistrate shall proceed to hear the prosecution and take all such evidence as may be produced in support of the prosecution. (2) The Magistrate may, on the application of the prosecution, issue a summons to any of its witnesses directing him to attend or to produce any document or other thing.” 12 (b). Section 245 Cr.P.C. deals with the question of discharging accused, which provides : “When the accused shall be discharged : (1) If, upon taking all the evidence referred to in section 244 the Magistrate considers, for reasons to be recorded, that no case against the accused has been made out which, if unrebutted, would warrant his conviction, the Magistrate shall discharge him. (2) Nothing in this section shall be deemed to prevent a Magistrate from discharging the accused at any previous stage of the case if, for reasons to be recorded by such Magistrate, he considers the charge to be groundless.”

13. Therefore, Section 244 Cr.P.C. makes it amply clear that after the appearance of the accused, in such cases the Magistrate concerned shall proceed to hear the prosecution and take all such evidence as could be produced in support of the prosecution and so on whereas, Section 245 Cr.P.C. amply provides that if after recording the evidence and after analyzing the evidence it is found by the Magistrate that no case is made out against the accused to warrant any conviction against him, accordingly, he has to discharge the accused and so on. When there is such a statute there should not be any violation of it and it is to be implemented in true spirit. It is emphatical that it is specifically incorporated in the common order dated 05-11-2002 delivered in the Criminal Revision Case Nos.1625 and 1626 of 2002 by this Court that the common order in Crl.M.P. No.4237 of 2002 and Crl.M.P. No.5222 of 2002 was passed without considering the ambit of Section 245 Cr.P.C. with a direction to remand the matter to proceed with the hearing of the applications and dispose of them on merits. Section 245 Cr.P.C. does not envisage that such an application can be disposed without recording any evidence as contemplated in Section 244 Cr.P.C. Therefore it is to be construed from the said orders of this Court that a direction was given for following the due procedure enunciated in Sections 244 and 245 Cr.P.C. for the disposal of the Petitions.

14. Here it is necessary to refer to Chapter 15 with regards to complaint to Magistrate, Section 202 Cr.P.C. reads as follows : “Examination of complainant - A Magistrate taking cognizance of an offence on complaint shall examine upon oath the complainant and the witnesses present, if any, and the substance of such examination shall be reduced complainant and Magistrate: to writing and shall be signed by the witnesses, and also by Provided that, when the complaint is made in writing, the Magistrate need not examine the complainant and the witnesses- (a) if a public servant acting or purporting to act in the discharge of his official duties or a Court has made the complaint or (b) if the Magistrate makes over the case for inquiry or trial to another Magistrate under section 192: Provided further that if the Magistrate makes over the case to another Magistrate under section 192 after examining the complainant and the witnesses, the latter Magistrate need not re-examine them.” Section 201 Cr.P.C. deal with the question of returning of such complaints filed before a Magistrate when such Magistrate is not competent to take cognizance of them and giving direction to the Complainant to present it before appropriate Court. Section 202 Cr.P.C. deals with the question of postponement of issue of processes, it is postulated in the Section as follows : “(1) Any Magistrate, on receipt of a complaint of an offence of which he is authorized to take cognizance or which has been made over to him under section 192, may, if he thinks fit, postpone the issue of process against the accused, and either inquire into the case himself or direct an investigation to be made by a police officer or by such other person as he thinks fit, for the purpose of deciding whether or not there is sufficient ground for proceeding : Provided that no such direction for investigation shall be made - (a) where it appears to the Magistrate that the offence complained of is triable exclusively by the Court of Sessions or (b) where the complaint has not been made by a Court, unless the complainant and the witnesses present (if any) have been examined on oath under section 200. (2) In an Magistrate may, if he thinks fit, take evidence of witness on oath: inquiry under sub-section (1), Provided that if it appears to the Magistrate that the offence complained of is triable exclusively by the Court of Session, he shall call upon the complainant to produce all his witnesses and examine them on oath. (3) If an investigation under sub-section (1) is made by a person not being a police officer, he shall have for that investigation all the powers conferred by this Code on an officer in charge of a police station except the power to arrest without warrant.” Further, Section 203 Cr.P.C. deals with the question of dismissal of complaint and it reads as follows : “If, after considering the statements on oath (if any) of the complainant and of the witnesses and the result of the inquiry or investigation (if any) under section 202, the Magistrate is of opinion that there is no sufficient ground for proceeding, he shall dismiss the complaint, and in every such case he shall briefly record his reasons for so doing.” Further, Chapter XVI commencement of proceedings before Magistrates. Section 204 Cr.P.C. deals with issue of process, if he finds that there is material to do so. is with regards

15. Section 202 Cr.P.C. is relevant here in the sense that the learned Magistrate having taken cognizance of the case got option either to inquire into the case by himself or direct an investigation to be made by a police officer or by such other person as he thinks fit for the purpose of deciding whether there was sufficient ground proceeding with the matter or not, whereas if he found that no material was made out to do so, he ought to have dismissed the complaint then itself under Section 203 Cr.P.C. and having taken cognizance of the matter he should have then proceeded as contemplated under Sections 204 and then 244 and 245 Cr.P.C.

16. Whereas, after observing necessary formalities covered by Sections 200 to 204 Cr.P.C., the learned Magistrate found that a prima- facie case was made out against A-1 to A-7 and accordingly he took the matter on file and issued summons to them, the question of discharging the accused would arise on considering the matter within the ambit of Sections 244 and 245 Cr.P.C. There is no specific provision with regards to the discharge of the accused before complying with the necessary formalities under Sections 244 and 245 Cr.P.C. Further, when this Court gave directions to the Magistrate to dispose of the matter on merits prima-facie adhering to the provisions of Section 245 Cr.P.C., he was under the obligation to do so. The learned Magistrate misconstrued the scope of the order of this Court and proceeded to dismiss the complaint considering the record already filed.

17. Significantly as per the record, it is the case of the Complainant that subsequent to the execution of MOU there was an arrangement with A-1 to A-5 consequent upon which the shares in question were kept with the partners of M/s. M. Anandam & Co., i.e., A- 6 and A-7 but A-1 to A-5 colluded with A-6 and A-7 with criminal and malafide intentions and also to have wrongful gain, by reason of which, A-6 and A-7 without fulfilling clause 2 (c) read with Clause 13 of the MOU and without intimating his family, A-6 and A-7 handed over the shares to A-1 to A-5 and on the other hand, his son namely K. Sreenivasa Rao on 30-12-1999 that the shares were missing from their office following which his son initiated necessary action approaching the concerned but no action was taken and on the other hand, his son received a letter dated 14-01-2000 that on 24-12-1999 itself A-6 and A- 7 handed over the shares and were transferred in favour of their family members complying with necessary payments and so on. Further, a coy of the petition filed by A-1 to A-5 in C.P. No.78 of 2000 before the Company Law Board, Principal Bench, which is filed provides that an admission was made by them which reads as follows : “17. Before commencement of payments in terms of clause 2 (c), we insisted, because of earlier experience with the petitioner’s family, that all documents pertaining to clause 2 (c) should be kept in escrow with M/s. M. Anandam & Co., the auditors. The Petitioner’s family disagreed to this arrangement but agreed to keep the documents with one of the partners of M/s. M. Anandam & Co., Mr. A. V. Sadasiva. We thought having made up with Mr. A. V. Sadasiva, we can trust Mr. A. V. Sadasiva to deliver the documents as per MOU. On 27- 11-1997, we commenced making payments in terms of The entire payment clause 2 (c) of contemplated under clause 2 (c) of the MOU was paid by 21-11-1998. We had paid a sum of Rs.174 lakhs between 27-11-1997 and 21-11-1998. All the payments were made by us in terms of clause 2 (c) of the MOU and there was some delay in making the payment. We had agreed to pay simple interest @ 24% in terms of the the MOU. terms of MOU. We initially refused to pay interest as the petitioner’s family had committed a breach of their obligations in delivering the necessary share transfer deeds and other documents. Once again M/s. M. Anandam & Co. persuaded us to amicably settle the matter and between January, 1999 and March 1999, we paid a sum of Rs.12 lakhs on account of interest. The Petitioiner’s family made a demand of payment of compound interest. The very demand besides being opposed the MOU was also preposterous. We refused to consider the payment and Mr. A.V. Sadasiva who has always been acting behind the screen in favour of the petitioner’s family prevented the release of documents held by him in Escrow. On the contrary, Mr. A. V. Sadasiva returned all the documents held by him to the petitioner’s family. Once again disputes arose and Mr. Vikram another partner of M/s. M. Anandam & Co. saw logic and justice in our arguments. Subsequently, the documents kept originally with Mr. A. V. Sadasiva under Escrow were again delivered to Mr. Vikram. Who handed over the same to us as per MOU. These documents were those that were to be given to us after fulfilling the payment under clause 2 (c) and this included the resignation letter of Mr. K. Sreenivasa Rao in Feno Investments Ltd., filed as Annexure R4.”

18. In this context, it is necessary to refer to other relevant provisions of the MOU dated 27-09-1996. Clause 3 (a) of the MOU reads that the entire shares of Feno Fibre Limited held by Feno Investments Limited together with the shares of Feno Investments Limited would be transferred and shares to the extent of 1,89,600 held by the Member of second part i.e., Katta family should be transferred to the first part on demand as per the clause 2 (c) of the MOU, which reads as follows : “2. The party of the first part shall pay the remaining amount of Rs.548-00 lakhs as per the following schedule : c. An amount of Rs.174-00 lakhs shall be paid on or before 27-11-1997.” Clause 13 of the MOU reads as follows : “In the event of the party of the first part not paying the amounts as detailed in clauses 2 (c) to 2 (e) above, the party of the second part is entitled to an interest of 24% p.a. on the unpaid amount.”

19. Significantly, it is the claim of the Complainant, which is admitted by A-1 to A-5 in that C.P. No.78 of 2000 that the subsequent arrangement was effected prior to 27-11-1997 and later to the execution of MOU. Even though there is no deed of contract in writing between the parties about the later arrangement, such admission made in writing in particular is also to be taken into consideration for the purpose of deciding the issue in question.

20. In the light of those circumstances enumerated, there is a question to examine and decide as to whether in fact, the Feno Fiber Limited Shares were kept with A-6 and A-7 and consequently A-1 to A- 5 colluded with A-6 and A-7 to gain wrongfully and caused wrongful loss to the Complainant following which A-6 and A-7 gave false information to the Complainant’s son K. Sreenivasa Rao that those shares were lost by which reason his son made efforts to obtain duplicate Feno Fiber Limited shares and further A-6 and A-7 handed over those shares to A-1 to A-5 who thereby got transferred the shares in the name of the first of them and thereby caused wrongful loss to the Respondent and got wrongful gain to themselves and consequently committed the alleged offences.

21. The learned Magistrate failed to examine the question of subsequent arrangement in a right perspective even though that aspect was brought to his notice by the learned counsel for the Complainant therein. On the other hand, he made several unnecessary and unwarranted wild allegations against Complainant concluding that false pleas were taken by him without any truth in it. It is surprising that having failed to consider the factum of making the subsequent arrangement which was brought to his notice, the learned Magistrate made an observation that having found that no prima-facie case was made out, the learned counsel as a last resort relied upon such subsequent arrangement, a false one to uphold his claim. Unless necessary evidence is recorded it is not possible to skull out that the accused acted in the matter deceptionally or fraudulently. It is nothing but misconception of the material available.

22. Therefore it is clearly found that a prima-facie case is made out against A-1 to A-7 for the alleged offences. No doubt, the record makes it very clear that A-6 and A-7 acted as mediators in the matter, which alone is not sufficient to discharge them from the case. When the record prima-facie shows that they acted beyond the scope of the subsequent arrangement accordingly they are also liable to be prosecuted for the alleged offences.

23. Ultimately, the order passed by the learned Magistrate is liable to be set aside and a direction is to be given to him to proceed in the matter as contemplated under Sections 244 and 245 Cr.P.C. In the result, both the Criminal Revision Cases are disposed of accordingly, setting aside the order passed by the learned Magistrate. Date.09-09-2011. Dsh __________________________ G. KRISHNA MOHAN REDDY, J THE HON’BLE SRI JUSTICE G. KRISHNA MOHAN REDDY 148 CRIMINAL REVISION CASE Nos.1656 AND 1718 OF 2003 DSH 09-09-2011