CRL.O.P.No.23367 OF 2006 :1.M/s.Terry Gold India Limited v. M/s.TVS Finance and Services Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED :: 23-11-2007CORAMTHE HONOURABLE MR.JUSTICE S.PALANIVELUCRIMINAL ORIGINAL PETITION Nos.23367 OF 2006AND 1945 of 2007CRL.O.P.No.23367 OF 2006 :1.M/s.Terry Gold India Limited rep.by its Joint Managing Director Mr.D.Vinodh Singh.2.Mr.Vinodh Singh3.Mr.Ajay Singh4.Mr.S.S.R.Kishen...Petitioners-vs-M/s.TVS Finance and Services Ltd.,rep.by its Executive-LegalMr.Sai Kumar...Respondent CRL.O.P.No.1945 OF 2007 :1.M/s.Goldwon Textiles Limited, rep.by its Managing Director Mr.S.S.R.Kishen.2.Mr.S.S.R.Kishen3.Mrs.Shanthi Singh...Petitioners-vs-M/s.TVS Finance and Services Ltd.(Formerly known as M/s.TVS Lakshmi Credit Limited),rep.by its Authorised SignatoryMr.Sai Kumar....RespondentPetitions under Section 482 of the Code of Criminal Procedure tocall for the records in C.C.No.6010 of 2005 and C.C.No.14666 of 2006 onthe file ofthe Learned XI Metropolitan Magistrate, Saidapet and IIIMetropolitan Magistrate, George Town, Chennai. https://hcservices.ecourts.gov.in/hcservices/ For petitioners : Mr.V.KrishnamoorthyFor respondents : Mr.B.Kumar, Senior Counsel, for Mr.P.H.Manoj Pandian.COMMON ORDERWhile Criminal O.P.No.23367 of 2006 has been filed praying forquashing of the proceedings in C.C.No.6010 of 2005 pending on the file ofXI Metropolitan Magistrate, Saidapet, Chennai, Criminal O.P.No.1945 of2007 is for the similar relief with regard to C.C.No.14666 of 2006,pending on the file of III Metropolitan Magistrate, George Town, Chennai.2. Since both the petitions involve an identical issue as also theparties are same, a common order is being passed.3. Learned counsel have advanced arguments for both the petitionsand placed their contentions on the same set of legal positions.4. The gist of the averments in C.C.No.6010 of 2005 (CriminalO.P.No.23367 of 2006) is as under :4.1. First petitioner/accused, represented by second and thirdpetitioners/accused, misled the respondent/complainant by making falserepresentations with a dishonest intention and inducing the respondent toprovide lease finance facility for the machineries. On 31.07.1995, suchfacility for Rs.72,80,000/- was provided by the respondent, by letting onlease the machinery to the first accused, on the basis of a leaseagreement. The first accused company also issued post-dated cheques anddemand promissory notes and deposited 2,50,000 share certificates to thevalue of Rs.25.00 lakhs as collateral security, for the above saidfacility. Accused 2 to 4 stood as guarantors. 4.2. On 01.04.1998, a Memorandum of Understanding was entered intobetween the complainant (formerly known as M/s.Harita Finance Limited) andM/s.TVS Lakshmi Credit Limited, by means of which the assets andliabilities were transferred to the latter. 4.3. By a deed of assignment, dated 17.07.1998, M/s.TVS LakshmiCredit Limited was amalgamated with M/s.Harita Finance Limited. Apromissory note was also executed by the first accused, agreeing to repaythe amounts. However, it did not pay hire charges and additional financecharges. The first accused fell sick and it moved an application beforethe Board for Industrial and Financial Reconstruction (BIFR). 4.4. With a dishonest intention, the accused induced thecomplainant to advance a loan of Rs.49,73,086/-. A Demand LoanAgreement, dated 31.12.2000, was also executed for the purpose, so also apromissory note. https://hcservices.ecourts.gov.in/hcservices/

4.5. On 16.08.2001, a Memorandum of Understanding was entered intobetween the complainant and the first accused. As per Clause 6, shares tothe value of Rs.1,90,00,000/- were agreed to be issued to M/s.HaritaFinance, but it was not fulfilled. 4.6. On 25.11.2002, One Time Settlement was proposed by theaccused. Since the accused were proposing to remove the machinery, thecomplainant filed an application under Section 9 of The Arbitration andConciliation Act,1996, before the High Court and a Commissioner wasappointed to take inventory of the machineries. At the time of inspectionby the Commissioner, the accused created so many problems and they refusedto return back the components of the machineries, which are 10 in number,thereby the accused caused wrongful loss to the complainant. Thecircumstances would clearly establish that the accused have entered intocriminal conspiracy, by misappropriating the machineries, loan and moneyof the complainant and, hence, they are punishable under Sections406,408,420 and 120-B IPC.5. The averments in C.C.No.14666 of 2006 (Criminal O.P.No.1945 of2007) go thus :5.1. With a dishonest intention of cheating the complainant, secondand third respondents approached him for lease finance facility. Themachinery was let for lease to the accused by the complainant. Firstaccused deposited 4.00 lakh shares as collateral security, under the leaseagreement, dated 28.02.1996. There was no payment, despite the agreement.5.2. On 01.04.1998, by means of a Memorandum of Understanding, theassets and liabilities of the complainant were transferred to M/s.HaritaFinance Limited. 5.3. On 17.07.1998, a deed of assignment was entered into betweenthe company and M/s.Harita Finance Limited on the one hand and the firstaccused on the other hand and also a revised payment schedule was agreedupon between the parties. A loan of Rs.46,97,313/- was agreed to besanctioned by M/s.Harita Finance Limited to the first accused and the saidamount was to be adjusted towards part of the outstanding amounts due.The first accused purposefully failed and neglected to pay the instalmentsand additional finance charges to M/s.Harita Finance Limited and M/s.TerryGold India Limited. Rs.1,90,00,000/- was to be paid to M/s.Harita FinanceLimited inter alia, but no such payment was made. Since the accused havecaused a wrongful loss to the complainant by their attitude and with anintention to cheat dishonestly the complainant, the complaint came to belodged and the accused are punishable under Sections 406,415 418 and 420IPC.6. At the outset, it shall be mentioned that in the petitions, itis stated that two different complaints have been lodged by thecomplainant with same set of facts, which is a sheer abuse of process oflaw, but, going by the allegations in both the complaints and for the fact https://hcservices.ecourts.gov.in/hcservices/ that the causes of action for initiating the proceedings are different inboth the matters, it could not at all be stated that both the complaintscame to be filed with similar facts.7. Mr.V.Krishnamoorthy, learned counsel for the petitioners wouldstrenuously contend that the averments in both the complaints would go toshow that they are of civil nature and when a remedy is available beforethe civil Court, the complainant cannot approach the criminal Court forthe same remedy. It is further contended that even if the complaint istaken on its face value, it would attract breach of contract alone and notcheating and that the allegations in the complaints would not constituteany offences under the sections mentioned in the complaints. 8. Concedingly, the first petitioner's establishment has becomesick and the matter is pending before BIFR, due to financial constraints.It is an admitted fact that the accused could not pay the dues in full,in respect of the agreement. But, the point, as to whether it wouldattract a criminal action, is the question to be answered.9. In Application No.3057 of 2003 between M/s.TVS Finance andServices Limited and M/s.Terry Gold India Limited, this Court appointed anAdvocate Commissioner to take possession of the machineries belonging tothe complainant, namely, M/s.TVS Finance and Services Limited, which werein custody of M/s.Terry Gold India Limited, which were in the factory atChityal, Nalgonda District, Andhra Pradesh. The Commissioner filed aninterim report before the Court, a copy of which has been filed by therespondent. 10. Mr.B.Kumar, learned Senior Counsel for the respondents, woulddraw attention of this Court to certain portions of the Commissioner'sReport, to show the continuous fraudulent intention on the part of theaccused, to cheat the respondents. 11. This Court has perused the Commissioner's Report, from which itappears that in order to execute the order of the High Court,Mr.VR.Shanmuganathan, Advocate Commissioner, laboured hard and faced somany problems with the accused, by name, S.S.R.Kishen and his subordinatesand also from the police in Andhra Pradesh. In spite of his hecticefforts taken on various days, he could not take delivery of themachineries in full and he has mentioned in his report that certaincomponents of the machineries could not be taken possession of.12. Learned counsel for the petitioners would contend that sincethe matter is of civil nature, it has been clothed with the colour ofcriminal liability and, hence, no criminal action could be initiated, onthe strength of the complaints. In support of his contention, hegarnered support from a decision of the Supreme Court in G.Sagar Suri andAnother v. State of U.P. and Others, 2000 Supreme Court Cases (Cri) 513),wherein it is observed as under : https://hcservices.ecourts.gov.in/hcservices/ "Jurisdiction under Section 482 of the Codehas to be exercised with great care. In exercise ofits jurisdiction, the High Court is not to examinethe matter superficially. It is to be seen if amatter, which is essentially of a civil nature, hasbeen given a cloak of criminal offence. Criminalproceedings are not a short cut of other remediesavailable in law. Before issuing process, acriminal court has to exercise a great deal ofcaution. For the accused, it is a serious matter.The Supreme Court has laid certain principles on thebasis of which the High Court is to exercise itsjurisdiction under Section 482 of the Code.Jurisdiction under this section has to be exercisedto prevent abuse of the process of any court orotherwise to secure the ends of justice."13. The learned counsel also placed much reliance upon a Full Benchdecision of the Apex Court in Anil Mahajan v. Bhor Industries Ltd. andAnother, 2006 (1) Supreme Court Cases (Cri) 746, in which it is held asfollows :"From mere failure of a person to keep uppromise subsequently, a culpable intention right atthe beginning, that is, when he made the promisescannot be presumed. A distinction has to be kept inmind between mere breach of contract and the offenceof cheating. It depends upon the intention of theaccused at the time of inducement. The subsequentconduct is not the sole test. Mere breach of contractcannot give rise to criminal prosecution for cheatingunless fraudulent, dishonest intention is shown at thebeginning of the transaction. The substance of thecomplaint is to be seen. Mere use of the expression"cheating" in the complaint is of no consequence."14. As per his contention, every promise, which was not fulfilledat the later point of time, will not constitute a criminal breach ofcontract and an offence of cheating and it would only depend upon theinducement on the part of the accused at the inception.15. As far as the said aspect is concerned, prima facie, theaverments in the complaints would show the criminal intention on the partof the accused from the inception. The merits with regard to theirfraudulent inducement could be gathered from the oral evidence of bothparties at the time of trial.16. Learned counsel for the petitioners also drew attention of thisCourt to a decision in Uma Shankar Gopalika v. State of Bihar and another,2006 (2) Supreme Court Cases (Cri) 49, wherein it is observed thus : https://hcservices.ecourts.gov.in/hcservices/ "6....It is well settled that every breach ofcontract would not give rise to an offence of cheatingand only in those cases breach of contract wouldamount to cheating where there was any deceptionplayed at the very inception. If the intention tocheat has developed later on, the same cannot amountto cheating. In the present case, it has nowhere beenstated that at the very inception there was anyintention on behalf of the accused persons to cheatwhich is a condition precedent for an offence underSection 420 IPC." 17. As per the dictum laid down in the above ruling, theallegations in the complaints should show that even from the inception theaccused were acting in a fraudulent manner, to extract benefits from thecomplainant. So far as the case on hand is concerned, a scrutiny of thecomplaints would show that even from the beginning the accused weredealing with the complainant with a dishonest intention to cheat and thesaid allegations are sufficient enough to see prima facie that there was afraudulent intention on the part of the accused right from the beginning.18. Further, according to the learned counsel for the petitioners,the complainant, having filed cases against the petitioners/accused underSection 138 of The Negotiable Instruments Act, cannot subsequentlyinitiate proceedings under every provision of law and such proceedings arenot at all legally sustainable. 19. Repelling the said submission, learned Senior Counsel for therespondent took me to a decision of this Court in V.Kannan v. State, byDistrict Crime Branch, 2007 (2) M.L.J.(Cri) 83, in which a learned Judge,followed the principles laid down by the Supreme Court in Central Bank ofIndia v. M/s.Saxons Farms, 2000 M.L.J.(Cri) 356 (SC) and a Full Benchdecision of the Andhra Pradesh High Court in Opts Marketing Pvt.Ltd. v.State of A.P., 2001 CRL.L.J.1489. The gist of both the decisions, asculled out in the above said decision of this Court, and the view of thisCourt are extracted as under :"9. The Hon'ble Supreme Court of India hasheld in Central Bank of India v. Saxons Farmsreported in (2000) MLJ (Crl) 356 (SC) that :'13.Under Section 142 of theAct, Court can take cognizance of anoffence punishable under Section 138only on a complaint in writing made bythe payee. Therefore, the police couldnot have started investigation underSection 138 of the Act. But if a chequeis dishonoured, drawer may exposehimself to prosecution under varioussections of the Indian Penal Code which https://hcservices.ecourts.gov.in/hcservices/ are cognizable and police could take upinvestigation. What was indicated inthe notice was that in addition to thelegal action by the appellant-bank underthe Act, option was kept open for takingaction against the respondents under theprovisions of Indian Penal Code byinforming the police. Therefore, thecontention of learned counsel for therespondents has no force.'10. The Andhra Pradesh High Court in a FullBench decision in a case in Opts Marketing Pvt.Ltd.v. State of A.P. (2001 Cr.L.J. 1489) has held asfollows :'Even after introduction ofS.138 of the Negotiable InstrumentsAct, prosecution under Section 420I.P.C.is maintainable in case ofdishonour of cheques or post-datedcheques issued towards payment ofprice of the goods purchased or handloan taken, or in discharge of anantecedent debt or towards payment ofgoods supplied earlier, if the charge-sheet contains an allegation that theaccused had dishonest intention not topay even at the time of issuance ofthe cheque, and the act of issuing thecheque, which was dishonoured, causeddamage to his mind, body orreputation.'11. In view of the settled principle of lawlaid down by the Apex Court and the decision of theFull Bench of Andhra Pradesh High Court as citedsupra and in view of the materials available onrecord, this Court is of the considered view thatinitiation of proceedings for the offence underSection 420 I.P.C. against the petitioner in spiteof the proceedings pending against the petitionerfor the offence under Section 138 of the NegotiableInstruments Act would not amount to doublejeopardy."20. The conclusion arrived at by this Court on the strength of thedecision aforestated would make it clear that there would be no questionof double jeopardy and even though the proceedings have been taken underSection 138 of The Negotiable Instruments Act, it would not, in any way,bar the prosecution under the provisions of the Indian Penal Code. https://hcservices.ecourts.gov.in/hcservices/

21. The learned Senior Counsel for the respondents would also citea decision of the Supreme Court in M/s.Indian Oil Corporation v. M/s.NEPCIndia Ltd. & Ors., 2006 (6) Supreme 66, in which the Apex Court hasformulated various guidelines, after referring to its earlier decision.The relevant principle, which is applicable to the facts of the presentcase, is as follows :"A given set of facts may make out : (a)purely a civil wrong; or (b) purely a criminaloffence; or (c) a civil wrong as also a criminaloffence. A commercial transaction or a contractualdispute, apart from furnishing a cause of action forseeking remedy in civil law, may also involve acriminal offence. As the nature and scope of a civilproceeding are different from a criminal proceeding,the mere fact that the complaint relates to acommercial transaction or breach of contract, forwhich a civil remedy is available or has beenavailed, is not by itself a ground to quash thecriminal proceedings. The test is whether theallegations in the complaint disclose a criminaloffence or not."22. As per the rationale laid down by the Supreme Court, merelybecause the allegations in the complaints apparently show the dispute asone of civil nature, it would not be a ground for quashment and the testapplied is, to ascertain whether the allegations make out a criminaloffence or not. 23. A thorough reading of the allegations in the complaints wouldunambiguously shows that they attract criminal offences as against thepetitioners and, by no stretch of imagination, it could be concluded thatthe complaints have to be quashed, though they are also civil in nature.24. In view of the settled legal principles and also in the lightof the reasonings given above, I hold that the prayer for quashing of thecomplaints is not legally sustainable. The complaints have to reach theirlogical conclusions by a competent Court, on the basis of their ownmerits, which could be considered by the said Court, on appreciation oforal evidence on record. Hence, these petitions are dismissed.Consequently, the connected Criminal M.P.Nos.1 of 2006 and 1 of 2007 arealso dismissed.Sd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ dixitTo1. The XI Metropolitan Magistrate,Saidapet, Chennai.2. The III Metropolitan Magistrate,George Town, Chennia.3. 1 & 2 Thro' The Chief Metropolitan Magistrate,Chennai.4. The Public Prosecutor,High Court, Madras.1 cc To Mr.P.H.Manoj Pandian, Advocate, SR.69862.2 cc To Mr.M.V.Krishnamurthy, Advocate, SR.69764, 69765.CRL.O.P.Ns.23367 OF 2006 & 1945 of 2007MS(CO)RVL 04.12.2007