N.Duraisamy v. State rep by Inspector of Police,CBI (BSNFC),Bangalore

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 22.1.2008.CORAMTHE HON'BLE MR.JUSTICE M.JEYAPAULCrl.O.P.Nos.992 and 993 of 2007andM.P.Nos.1 of 2007N.DuraisamyPetitioner in Crl.O.P.Nos.992 of 2007BhoopathyPetitioner in Crl.O.P.Nos.993 of 2007vs. State rep by Inspector of Police,CBI (BSNFC),Bangalore. Respondent in both casesCriminal Original Petitions filed under section 482 Cr.P.C. tocall for the records and quash C.C.No.18 of 2003 on the file of theII Additional District/Sessions Judge (CBI Cases), Coimbatore.For petitioners: Mrs.Hema Sampath for Ms.R.MeenalFor respondent : Mr.N.Chandrasekaran, Special Public Prosecutor for CBICOMMON ORDERThe fourth accused and the fifth accused in C.C.No.18 of 2003on the file of the learned II Additional Sessions Judge (CBICases), Coimbatore have respectively preferred the aforesaidcriminal original petitions. 2. The common contention of the petitioners is that they werecarrying on partnership business by name M/s.Banu Knitters inexporting garments. N.Muthusamy was the Managing Director and he https://hcservices.ecourts.gov.in/hcservices/ was in incharge of the business, managing the export of garmentsand regulating the financial aspects. The petitioner inCrl.O.P.No.992 of 2007 was looking after the factory and thepetitioner in Crl.O.P.No.993 of 2007 was a sleeping partner. Aloan was raised from Syndicate Bank with the consent of Canara Bankby the partnership firm M/s.Banu Knitters. The Syndicate Bankfiled suit in O.A.No.8 of 1997 against the firm before the DebtRecovery Tribunal, Chennai for recovery of a sum ofRs.2,13,46,834/= from the firm. The money dispute was settledunder a one time settlement scheme and thereupon, the suit waswithdrawn by the bank. The Special Director of Enforcementconducted an enquiry under section 18(2) of the Foreign ExchangeRegulations Act wherein he had found that the said Muthusamy lookedafter all the export activities and was responsible for realisationof the proceeds. The petitioner in Crl.O.P.No.992 of 2007 was justlooking after the factory and the manufacturing activities. Theliability of the bank was also discharged. There is no prima faciematerial to implicate the petitioners and therefore, the complaintlodged as against the petitioners are liable to be quashed, it iscontended. 3. The points that arise for determination arei) Whether the discharge of the debt owed by the firm M/s.BanuKnitters to the Syndicate Bank would absolve all the criminalliabilities including the charge under section 420 of the IndianPenal Code.ii) Whether the petitioners were in charge of the affairs ofM/s.Banu Knitters.4. Based on the source information, a complaint was lodged asagainst M/s.Banu Knitters and its partners including thepetitioners herein. After investigation, charge sheet was laid bythe CBI as against the Branch Manager, Syndicate Bank, ThiruppurBranch, M/s.Banu Knitters and its partners including thepetitioners for offences under sections 120-B read with 420 of theIndian Penal Code and section 13(2) read with section 13(1)(d) ofthe Prevention of Corruption Act, 1988. The major charge is thatthe petitioners herein dishonestly induced Syndicate Bank to partwith funds and thereby they cheated the bank and caused a wrongfulpecuniary loss to the extent of Rs.5.99 crores to Syndicate Bank,Thiruppur Branch and acquired correspondingly wrongful gain tothemselves, having hatched a conspiracy.5. Learned Senior Counsel appearing for the petitioners wouldsubmit that inasmuch as the entire debt owed by M/s.Banu Knitterswas already discharged and the bank which lent loan to the firm has https://hcservices.ecourts.gov.in/hcservices/ now no grievance as against the petitioners, the charge undersection 420 of the Indian Penal Code does not stand scrutiny. Itis further submitted that the complaint is bereft of theallegations that the petitioners were responsible for the conductof the business of the partnership firm. Therefore, all thecharges framed against the petitioners will have to be quashed. 6. Learned Special Public Prosecutor for CBI Cases wouldcontend that the CBI, having investigated the matter, found, primafacie, that a case has been made out as against the petitioners andothers and thereupon, they have laid charge sheet before thecompetent court. The enquiry report of the Enforcement Directorateunder section 18(2) of the Foreign Exchange Regulations Act cannotbe looked into for any purpose by the Trial Court while framing thecharges. Independent of the said report, CBI investigated thematter and arrived at a conclusion that a case has been made out asagainst these petitioners also. It is his vehement submission thatdischarge of the debt owed by M/s.Banu Knitters wherein thepetitioners were also partners cannot be a ground for discharge ascriminal prosecution was not laid based merely on a loantransaction, but, on the allegation of cheating in culmination ofcriminal conspiracy levelled against the petitioners. 7. It is not in dispute that the entire debt owed by M/s.BanuKnitters to the Syndicate Bank was already discharged by the firm.It is to be noted that no criminal actin can be taken for theinability of the borrower to pay the debt to the financier or thebank. The point is whether there is any element of dishonestinducement causing wrongful pecuniary loss to the Syndicate Bank.The respondent has collected furtive information about the cheatingalleged to have been committed by the firm consisting of thepartners therein by misleading the bank and thereby they causedheavy pecuniary loss to the bank. The CBI has collected material,prima facie, to show that a case has been made out for criminalconspiracy and cheating. Therefore, the discharge of the debt doesnot absolve the criminal liability of the firm and its partners.The fact that the entire debt was liquidated amicably by the firmcan be putforth before the Trial Court for the purpose of decidingthe quantum of sentence to be imposed on the petitioners afterconviction. But, the discharge of the debt cannot be a ground toquash the charge sheet laid after collecting sufficient materialsto show, prima facie, a case against the petitioners. 8. The CBI has collected information that the fourth accusedhas signed the initial application seeking the credit facilitiessubmitted to the Syndicate Bank. The fifth accused, on his part, https://hcservices.ecourts.gov.in/hcservices/ signed various documents enclosed with the application seekingcredit facilities from the bank. It has been alleged in the chargesheet that all the partners dishonestly induced Syndicate Bank topart with the huge amount. It is not as if there is no specificallegation as against the petitioners that they were notresponsible for the conduct of the business of the firm. Theaforesaid version of the respondent would go to show, prima facie,that they actively involved themselves in obtaining creditfacilities from Syndicate Bank. The CBI also has collectedmaterials to show that the petitioners associated themselves in theprocess of obtaining loan from Syndicate Bank. Therefore, thepetitioners will have to establish only during the course of trialthat they were not responsible for the conduct of business of thepartnership firm. As rightly pointed out by the learned SpecialPublic Prosecutor for CBI, the enquiry report of the EnforcementDirectorate under section 18(2) of the Foreign Exchange RegulationsAct cannot be looked into by the Trial Court while framing thecharge. The charges will have to be framed only based on thematerials collected by the investigating agency. The accusedcannot thrust upon some document to weigh in the mind of the courtat the time of framing the charge based on the materials collectedby the respondent police. 9. It has been held in the authority reported in STATE OF U.P.v. R.K.SRIVASTAVA (AIR 1989 SC 2222) that if the allegations madein the FIR are taken at their face value and accepted in theirentirety do not constitute an offence, the criminal proceedingsinstituted on the basis of such FIR should be quashed. But, inthis case, the FIR as well as the charge sheet reflects prima faciethe commission of offence. 10. In the authority reported in DELHI MUNICIPALITY v. RAMKISHAN (AIR 1983 SC 67) the Supreme Court has held that if there isno clear allegation against the Directors of the Company that theywere responsible for the business of the Company, the proceedingswill have to be quashed against such Directors. In this case, theFIR has culminated in charge sheet after collecting sufficientmaterials to show that prima face, the petitioners alsoparticipated in the process of obtaining loan from Syndicate Bankand they were in the conduct of business of the firm. 11. In the case reported in C.B.I. v. DUNCANS AGRO INDUSTRIESLIMITED, CALCUTTA (AIR 1996 SC 2452), investigation was notcompleted and charge sheet was not filed for a long time.Compromise decree in a suit for recovery was passed on payment of https://hcservices.ecourts.gov.in/hcservices/ the entire amount by the debtor company. The Supreme Courtobserved that such a development in a criminal case would amount tocompounding the offence of cheating. But, in this case, not onlythe offence under section 420 of the Indian Penal Code but theother offences also have been levelled against the petitioners andothers. The materials collected would, prima facie, show that therewas a criminal conspiracy, cheating and abetting the public servantto cause loss to the banking industry. Further, in this case, theFIR has culminated in charge sheet after investigation wascompleted. 12. Of course, in T.D. Naidu V. State, represented by DeputySuperintendent of Police and another (Criminal Appeal No.137 of2007) by order dated 31.1.2007, the Honourable Supreme Court waspleased to quash the criminal proceedings under section 120-B, 468and 471 of the Indian Penal Code as it was found that there was nomaterial on record to support such charges as admitted by thecounsel appearing on behalf of the respondent police. Such asubmission was not made by the counsel appearing for CBI in thiscase. Further prima facie case has been made out in the instantcase. Therefore, the petitioners cannot seek for quashment in thelight of the aforesaid ratio.13. It has been held in S.D.ASHOK KUMAR v. STATE (1991CRI.L.J. 1963) that the court shall exercise its jurisdiction toquash the proceedings once it is satisfied that the materialscollected by the investigating agency do not show any reasonablesuspension of commission of any offence. But, in this case, thematerials collected would, prima facie, show that offences chargedas against the petitioners were made out. 14. Inasmuch as the case is ripe for framing charges with theabove materials collected by the investigating agency, thepetitioners will have to face the criminal proceedings. Therefore,the court is disinclined to quash the criminal proceedings assought for by the petitioners on the basis of the aforesaidgrounds. 15. In view of the above, both the petitions seeking quashmentof the criminal proceedings as against them in C.C.No.18 of 2003 onthe file of the II Additional District/Sessions Judge (CBI Cases), https://hcservices.ecourts.gov.in/hcservices/ Coimbatore stands dismissed. The connected Miscellaneous Petitionsalso stand dismissed. ssk. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.To1. The II Additional District/ Sessions Judge (CBI Cases), Coimbatore.2. Inspector of Police, CBI (BSNFC), Bangalore. 1 cc to Mrs.R.Meenal, Advocate, SR.2447/08sa (co)dv/31.1. Crl.O.P.No.992 & 993 of 2007