Rajendra Kumar Gupta & Ors. v. State of Tamil Nadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 15.4.2008.CORAMTHE HON'BLE MR.JUSTICE M.JEYAPAULCrl.O.P.No.599 of 2008andM.P.No.1 of 20081. Rajendra Kumar Gupta2. Ashok Kumar GuptaPetitioners vs. State of Tamil Nadurep by Inspector of Police,CCB Team III, Egmore,Chennai 600 008. RespondentCriminal Original Petition filed under section 482 Cr.P.C.seeking to call for the entire records of the respondent viz., theInspector of Police, CCB Team III, Egmore, Chennai 600 008 comprisedin FIR No.696 of 2007 dated 1.11.2007 and quash the same.For petitioner : Mr.Satish ParasaranFor respondent : Mr.A.Saravanan, Govt. Advocate (Crl. Side)For intervenor: Mr.R.ShanmugamORDERThe petition is filed seeking to quash the criminal proceedingsin FIR No.696 of 2007 dated 1.11.2007 on the file of the respondentpolice. 2. The sum and substance of the first information report lodgedby the de facto complainant with the respondent herein is as follows:-The de facto complainant was one among the Directors/Partnersenjoying equal right in respect of Hotel business viz., Picnic HotelsPrivate Limited at Poonamallee High Road, Chennai. Because of somemisunderstanding between the brothers, several civil cases arepending on the file of this High Court as well as before the CompanyLaw Board. Rajendra Kumar Gupta and Ashok Kumar Gupta, who are thebrothers of the de facto complainant, joined together and created https://hcservices.ecourts.gov.in/hcservices/ false and fraudulent documents and produced the same before thepublic authorities and also before the Company Law Board as if the defacto complainant had resigned from the Directorship of Picnic HotelsPrivate Limited when actually he had been enjoying equal share in theentire business. The above action of the two aforesaid brothers ofthe de facto complainant amounts to cheating. 3. On the basis of the aforesaid allegation found in thecomplaint lodged by the de facto complainant, a case under sections465, 468 and 471 read with 120B of the Indian Penal Code wasregistered as against the petitioners herein. 4. The petitioners would contend that M/s.Picnic Hotels PrivateLimited was run by Rajendra Gupta, Devendra Gupta, Ashok Kumar Guptaand Sanjay Kumar Gupta, sons of late N.D.Gupta as Directors and shareholders. M/s.Hotel Picnic, a partnership firm and M/s.Picnic Plazaanother partnership firm were run by N.D.Gupta and his four sons. Amemorandum of understand was entered into between the family memberson 24.5.1998 dividing the entire family members into two groups viz.,Rajendra Kumar and Ashok Kumar Gupta as the first group (petitionersherein) and Devendra Kumar Gupta (de facto complainant) and SanjayKumar Gupta as the second group. The Company Picnic Hotels PrivateLimited fell to the share of the first group comprising of RajendraGupta and Ashok Kumar Gupta. The partnership firm viz., Picnic Plazafell to the share of the second group comprising Devendra Kumar Gupta(de facto complainant) and Ashok Kumar Gupta. The first and secondgroup have been dealing with the respective business allotted tothem. The second group has converted a part of the partnershipbusiness Hotel Picnic into a company known as Picnic Park HotelsPrivate Limited. The restaurant in Picnic Park Hotels PrivateLimited is still being run in the name of the partnership firm "HotelPicnic". The first group viz., Rajendra Kumar and Ashok Kumar, thepetitioners are not partners in the reconstituted partnership firm ofHotel Picnic nor are they Directors or shareholders of Picnic ParkHotels Private Limited. Hotel Picnic Plaza also was reconstitutedinto new partnership firm by excluding Rajendra Kumar and Ashok KumarGupta. Both the groups effected transfer in the respectivebusinesses pursuant to the memorandum of understanding entered intoin the year 1998. All the parties have acted under the memorandum ofunderstanding and have effected the division in status in thebusiness. Various disputes and differences had arisen between theparties culminating in as many as 7 suits before this court and twoCompany Petitions before the Company Law Board. In suchcircumstances, there is nothing wrong in filing of returns before theRegistrar of Companies showing that Devendra Kumar Gupta and SanjayKumar Gupta are no longer Directors or Shareholders of Picnic HotelsPrivate Limited. The signatures of Devendra Kumar and Sanjay KumarGupta were not forged for the purpose of transferring the shares.Nothing was produced to show that documents were fabricated andforged. The petitioners have been charged with the aforesaid https://hcservices.ecourts.gov.in/hcservices/ offences just because they had given effect to the memorandum ofunderstanding dated 24.5.1998 entered into between the parties.Therefore, the petitioners have contended that the present complainthas been given just to wreak vengeance and harass the petitioners. 5. The de facto complainant was permitted to intervene in thepetition seeking quashment. He has contended that the memorandum ofunderstanding dated 24.5.1998 was not yet implemented fully. In theabsence of compliance of the terms of memorandum of understanding byall the parties, the accused are not entitled to have completecontrol over the management of the business Picnic Hotels PrivateLimited. The de facto complainant and his other brothers have gotequal right, title and interest in the said Hotel business. TheRegistrar of Companies is contemplating action by issuing show causenotice to the petitioners for the submission of returns with falseparticulars. The de facto complainant continued to be a lawfulDirector of Picnic Hotels Private Limited. He continued to enjoy10,000 shares in the said hotel. It is a case where this court waspleased to direct the respondent police to investigate the complaint.Therefore, the de facto complainant has sought to dismiss thepetition seeking quashment. 6. Learned counsel appearing for the petitioners would submitthat the de facto complainant, without producing an iota of materialto show prima facie that the signature of the de facto complainantwas forged by the petitioners herein, has simply lodged a complaintto harass the petitioners. The criminal machinery cannot be used totorment the innocent persons. The petitioners who acted in terms ofthe memorandum of understanding has been implicated in this case.Even otherwise, the act of the petitioners herein in submittingreturns to the Registrar of Companies would invite only civil actionand not criminal prosecution. Completely suppressing the fact thatthe de facto complainant has already reconstituted a partnership firmin terms of the memorandum of understanding, has come out with afalse allegation as against these petitioners as though there was arank forgery and fabrication of records. The present complaint hasbeen given in the face of very many civil litigations between theparties just to intimidate the petitioners to toe the line of the defacto complainant. Therefore, the entire criminal proceedings shallbe quashed, he would contend. 7. Learned Government Advocate (Criminal Side) would submit thatthe respondent police has collected materials to show that thepetitioners herein have stealthily filed returns before the Registrarof Companies completely ignoring the right and title of the de factocomplainant over the shares of the Company. 8. The learned counsel appearing for the de facto complainant,who was permitted to intervene in this matter, would contend that thevery fact that a return was submitted before the Registrar of https://hcservices.ecourts.gov.in/hcservices/ Companies as though the de facto complainant was no longer theDirector of the Company would go to show that the petitioners havefabricated the documents to play fraud not only upon the Registrar ofCompanies but also upon the de facto complainant. Availability ofcivil remedy cannot at all be a reason to stall the criminalprosecution when actually an offence has been committed by theaccused. 9. There is no dispute to the fact that there was a memorandum ofunderstanding entered into between the parties on 24.5.1998. Termsand conditions 1 and 2 found incorporated in the aforesaid memorandumof understanding read as follows:-"1) The Parties of the Second and Third Parts will,hereafter, be solely entitled to manage, administerand be in-charge of the running of the Boarding andLodging House comprising of about 70 rooms atpresent existing in the Old Block under the name'Picnic Hotels (P) Limited, apart from beingentitled to be vested with the facilities containedin the Old Block including Marriage Hall andConference Hall exclusively.2) The Parties of the Second and Third Parts will,hereafter, be also entitled to and exclusively takeover the Licenced Bar which is being run by theCompany 'Picnic Hotels Private Limited' and foreffectuating the running of the said Bard by theParties of the Second and Third parts, the Partiesof the first, fourth and fifth Parts would transferall their shares and interests in the said Companyin favour of the Parties of the Second and ThirdParts and the said transfer of shares is subject tofulfilment of other clauses in this Memorandum ofUnderstanding/Agreement."The word "hereafter" used in both the aforesaid conditions signifiesthat parties have agreed to put in practice the terms and conditionsadumbrated under the memorandum of understanding. Of course, it hasbeen stated therein that the shares and interests in the Companywould be transferred in favour of the other parties subject to thefulfilment of the other clauses found in the memorandum ofunderstanding. 10. It is found that on the very same day of entering into thememorandum of understanding by the parties, a partnership deed wasentered into by the de facto complainant with others wherein the defacto complainant has shown specifically that the petitioners hereinhave relinquished their right in the business earmarked between themunder the memorandum of understanding. The above action of the de https://hcservices.ecourts.gov.in/hcservices/ facto complainant would disclose that the terms of the memorandum ofunderstanding have been put to practice from day one by the de factocomplainant himself. In the petition seeking quashment, thepetitioners have categorically stated that the partnership firmallotted to the share of the de facto complainant and the otherbrother as per the memorandum of understanding was reconstituted tosuit their convenience. Such a factum was not at all denied in thelengthy averment found in the petition filed seeking intervention bythe de facto complainant. Therefore, the fact remains that the defacto complainant has chosen to reconstitute the partnership businessallotted to him and other brother in accordance with the terms of thememorandum of understanding. But, his grievance is that the terms ofthe memorandum of understanding were not fully implemented. Thepetitioners also do not say that the memorandum of understanding wasfully implemented. The action taken by the petitioners would showthat the memorandum of understanding is still under the process ofimplementation. 11. It is pertinent to refer to the averment found in theaffidavit of the de facto complainant in the civil suits filed beforethis court. The de facto complainant has categorically sworn to inthe common affidavit filed by him in C.S.No.14 of 2007 on the file ofthis court as follows:-"I further submit that I came out of the businessi.e., Picnic Hotels Private Limited on and fromthe date of memorandum of understanding dated29.5.1998 and the entire business was taken overby Rajan Gupta and Ashok Gupta physically as perclause 36 of the memorandum of understanding dated29.5.1998"12. The de facto complainant, having thus sworn to in theaforesaid affidavit to the effect that he came out of the business ofPicnic Hotels Private Limited, has now chosen to contend that he hasgot a right over the shares in the said Company despite thememorandum of understanding entered into between the parties.Further, it is found that the de facto complainant and his otherbrother had not attended the Board meetings after the memorandum ofunderstanding was entered into. As per section 283(g) of theCompanies Act, 1956, the office of a Director shall become vacant ifhe absents himself from three consecutive meetings of the Board ofDirectors or from all meetings of the Board for a continuous periodof three months, whichever is longer, without obtaining leave ofabsence from the Board. In such circumstances, there is nothing wrongin filing the returns to the Registrar of Companies that the de factocomplainant and his other brother ceased to be the Directors of theCompany. Even otherwise, such an action may invite civilconsequences and not criminal prosecution as rightly contended by thelearned counsel appearing for the petitioners. https://hcservices.ecourts.gov.in/hcservices/

13. The court also cannot simply ignore the fact that as many asseven suits have been filed by one party or the other after theaforesaid memorandum of understanding was clinched by the parties.That apart, two company petitions also are pending disposal beforethe Company Law Board. The main dispute, it appears, revolves aroundthe division of business in terms of the memorandum of understanding.Such a civil nature of dispute will have to be litigated only beforethe civil court. As rightly pointed out by the leaned counselappearing for the petitioners, no one's signature was forged by thesepetitioners and no iota of material was placed to lay a foundationfor such wild allegation made by the de facto complainant as againstthese petitioners. 14. Of course, the Company Law Board has given a show causenotice to the petitioners on the basis of a strong objection raisedby the de facto complainant as to the suppression of their right inthe shares and their holding in the affairs of the Company. Thepetitioners are going to project their version before the Registrarof Companies who would take appropriate action. But, that cannot bea ground for prosecuting the petitioners who have acted only in termsof the memorandum of understanding. The direction to register a casebased on the allegation found in the complaint does not provide aleverage for the de facto complainant to contend that theinvestigation shall not be snapped. When the allegations do nothave any basis on the own saying of the de facto complainant, thecourt finds that investigation of the case based on such a baldversion found in the complaint would definitely cause irretrievabledamage to the reputation of the petitioners herein. The action of thepetitioners in terms of the memorandum of understanding does notamount to forgery of documents or fabrication of records orcommission of offence of cheating.15. The Supreme Court has observed in INDER MOHAN GOSWAMI ANDANOTHER v. STATE OF UTTARANCHAL AND OTHERS (AIR 2008 SC 251) thatwhen facts reveal that a civil suit was already laid before the civilforum and the dispute is also one of civil in nature, prosecuting aperson for offence under sections 420 and 467 of the Indian PenalCode is liable to be quashed inasmuch as the criminal prosecutioncannot be used as an instrument of harassment for seeking privatevendetta or to exert pressure on the accused with an ulteriormotive. 16. In view of the above facts and circumstances, the court findsthat the de facto complainant has lodged a complaint as against thesepetitioners completely suppressing the memorandum of understandingentered into between the parties just to wreak vengeance on thepetitioners abusing the process of law. Therefore, the entire https://hcservices.ecourts.gov.in/hcservices/ proceedings in FIR No.696 of 2007 dated 1.11.2007 stands quashed andthe petition is allowed. The connected Miscellaneous Petition isclosed. Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.ssk. To1.The Inspector of Police,CCB Team III, Egmore,Chennai 600 008.2.The Public ProsecutorHigh Court Madras.+ 1 CC to Mr. R.Shanmugham Advocate SR NO.20901+ 1 CC to Mr.Satishparasaran Advocate SR NO.20903+ 1 CC to Mr.M.Kempraj Advocate SR NO.20904P.D. ORDER IN Crl.O.P.No.599/2008SJI(CO)JJM(15/04/08)