Banumathy Sampathkumar, Guarantor v. M/s. TVS Finance and Services Limited by its Authorised Signatory Saikumar3, Jaffar Syrang Street Chennai-1

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 29.10.2009CORAM:THE HONOURABLE MRS.JUSTICE ARUNA JAGADEESANCrl.OP.No.26735/2006MP.No.1/20061.Banumathy Sampathkumar, Guarantor2.M.G.A.Sulochana, GuarantorPetitioners/Accused 3 & 4 VsM/s.TVS Finance and Services Limited byits Authorised Signatory Saikumar3, Jaffar Syrang StreetChennai-1Respondent/ComplainantPrayer:- This Criminal Original Petition is filed to call for therecords in CC.No.10818/2006 on the file of the learned IIIMetropolitan Magistrate, G.T. Court,Chennai and quash the same.For Petitioner:Mr.C.S.DhanasekaranFor Respondent :Mr.Abdul Saleem for M/s.Anand Abdul & Vinodh Asso.ORDER The accused 3 and 4, who are facing criminal Prosecutionfor offences under Sections 406, 409 and 420 of IPC inCC.NO.10818/2006 on the file of the learned III MetropolitanMagistrate, G.T., Chennai seek to quash the proceedings.2. The brief facts are as follows:-The 1st accused Company had entered into a valid agreementdated 15.3.1998 with M/s.Haritha Finance Limited for hiring themachineries and the Petitioners stood guarantee for the 1st accusedCompany and executed a letter of guarantee dated 15.3.1998. Theamount financed was for a total value of Rs.20,61,052/-. Under ascheme of amalgamation, the Company came to be amalgamated withM/s.Harita Finance Limited and came to be known as M/s.HaritaSrinivasa Finance Private Limited and the same was approved by thiscourt vide its order dated 31.7.1998 made in CP.No.142/1998. Laterthe name of M/s.Harita Srinivasa Finance Private Limited waschanged to M/s.Harita Finance Limited and now presently known as https://hcservices.ecourts.gov.in/hcservices/ M/s.TVS Finance and Services Limited.3. The 1st accused Company has become liable to pay thehire charges and additional finance charges and the complainantCompany issued a notice dated 24.2.2003 to the accused calling uponthem to pay the outstanding amount of Rs.39,03,368/-. In reply tothat, the accused issued a reply notice dated 17.3.2003 throughtheir counsel stating that the 1st accused Company is before theBIFR.4. Upon expiry of the period for which the machinerieswere given on hire, the complainant Company had sought forredelivery of the machineries, but the 1st accused Company have notredelivered the same, besides payment of hire charges towards theuse of machineries. When the complainant Company visited thepremises of the 1st accused Company to ascertain the status of themachineries, they had come to know that a part of the saidmachineries had been removed and sold by the accused to the thirdparties without the knowledge and consent of the complainant. It isalleged that the accused with dishonest intention had cheated andplayed fraud upon the complainant and had caused wrongful loss. Itis further alleged that by removing the machineries and selling itto the third parties, the accused had misappropriated the sum socollected and caused wrongful loss to the complainant. Hence, thecomplaint has been filed. 5. It is the submission of the Petitioners that they aresimply the guarantors and they have nothing to do with the daytoday affairs of the Company. Further, the 1st accused Company hadalready approached BIFR for rehabilitation and an enquiry underSection 16 of the Sick Industrial Companies Act (herein afterreferred to as the Act) was conducted, but the same was negativedas barred by limitation. As against the said order, an appeal ispending before the AAIFR (Appellate Authority for Industrial andFinancial Reconstruction).6. That apart, the complainant Company initiated civilproceedings against the 1st accused Company on the file of the 2ndAssistant Judge, City Civil Court, Chennai in OS.NO.4839/2003 forpermanent injunction, restraining 1st accused Company from in anymanner interfering with the complainant's right in enforcing thelegal rights under the hire purchase agreement dated 15.3.1998. Itappears that the said suit has been dismissed. The Petitionersfurther submitted that the 1st accused Company had already paid asum of Rs.9,78,711/- out of Rs.14,20,300/-, thus substantial amounthas been discharged.7. Mr.C.S.Danasekaran, the learned counsel for thePetitioners would submit that mere failure to pay the amountsguaranteed to the complainant cannot constitute the offence ofcheating and the Petitioners as guarantors have nothing to do withthe alleged removal and sale of the machineries. Further, the takeover of the M/s.Harita Finance by the complainant Company was not https://hcservices.ecourts.gov.in/hcservices/ intimated to the accused and no notice was served on them. Hence,the transactions are void and it follows that the guarantee cannotbe a continuing guarantee.8. The learned counsel for the Petitioners would furthercontend that on the face of the allegations made n the complaint,it does not show any fraudulent and dishonest intention on the partof the Petitioners and mere failure to keep the promise at asubsequent stage, the offence of cheating has not been made out.The learned counsel placed reliance on the decision of theHonourable Supreme Court rendered in the case of Anil Mahajan Vs.Bhor Industries Limited and another [2005-10-SCC-228] and AlpicFinance Limited Vs. P.Sadasivan and another [2001-8-SCC-513] insupport of his above said submissions.9. Per contra, the learned counsel for the Respondentwould contend that mens rea to cheat the complainant cannot be goneinto at the initial stage and it is a matter for evidence. Heplaced reliance on the decision of this court rendered in the caseof Meena R.Sampath, Managing Director, Sri Venkatesan Paper andBoards Limited Vs. State by Inspector of Police, District CrimeBranch, Dindigul and another [2005-5-CTC-533], wherein it wasobserved that if the contention of the Petitioner's side that theyhad no mens rea to cheat the complainant is accepted, then in allthe cases, where the deposits are made and subsequently the partiesare cheated, the defence would come forward with a plan statingthat they had no intention to cheat and therefore, the criminalproceedings could not be proceeded with.10. In yet another decision, this court in the case ofTerry Gold India Limited by its Joint Managing Director D.VinodhSingh and others Vs. TVS Finance and Services Limited by itsExecutive Legal Saikumar and others [2008-1-MLJ-Crl-782], has heldthat merely because the allegation in the complaint apparentlyshows the dispute as one of civil nature, it cannot be quashed andthe test applied is to ascertain as to whether the allegations madeout a criminal offence or not.11. In the complaint, the Respondent has madeallegations against the Petitioners making factual foundations forthe offences as alleged in the complaint. The Honourable SupremeCourt in Rajesh Bajaj Vs State of NCT of Delhi and others [JT-1999-2-SC-112] has observed:-"It may be that the facts stated narrated in theprevious complaint would as well reveal a commercialtransaction or money transaction. But, that is hardlya reason for holding that the offence of cheating wouldelude from such a transaction."In fact, many cheating were committed in the course of commercialand also money transactions. One of the illustrations set out https://hcservices.ecourts.gov.in/hcservices/ under Section 415 of IPC (illustration 'b') is worthy of noticenow, which reads as under:-"(b) A, by putting a counterfeit mark on an article,intentionally deceives Z, into a belief that thisarticle was made by a certain celebrated manufacturer,and thus dishonestly induces Z to buy and pay for thearticle. A cheats."12. The crux of the postulate is the intention of aperson who indues the victim of his representation and not thenature of transaction which would become decisive in discerningwhether there was commission of offence or not. The complainanthas stated in the body of the complaint that it was induced tobelieve that the Petitioners would honour payment and that thecomplainant realised later that the intention of the Petitionersand other accused were not clear. It is also mentioned that theaccused have sold them to third parties without the knowledge andconsent of the complainant Company and such averments wouldcertainly prima facie make out a case.13. Right from the case of R.P.Kapur Vs. State of Punjab[AIR-1960-SC-866], the Honourable Supreme Court had held thatrevisional or inherent powers for quashing the proceedings at theinitial stage can be exercised only where the allegations in thecomplaint or the FIR, even if taken at their face value andaccepted in their entirety do not prima facie disclose thecommission of an offence, or where the uncontroverted allegationsmade in the FIR or complainant do not disclose the commission ofany offence against the accused or the allegations are so absurdand inherently improper that on the basis of which no prudentperson could have reached a just conclusion that there weresufficient grounds in proceeding against the accused or there is anexpress legal bar engrafted in any provisions of the code or anyother statute to the institution and continuance of the criminalproceedings or where a criminal proceedings is manifestly activatedwith mala fide and has been initiated maliciously with the ulteriormotive for wrecking vengeance on the accused and with a view tospite him due to private and personal grudge.14. Applying the aforesaid test, it cannot be said thatthe complaint filed by the Respondent did not disclose thecommission of offences as stated or there existed any othercircumstances which can be made the basis for quashing theproceedings. In fact, allegations made in the complaint requiredadjudication and the complaint could not be quashed at thethreshold. The contentions raised by the Petitioners may becanvassed before the learned Magistrate. https://hcservices.ecourts.gov.in/hcservices/

15. In view of the aforesaid discussions and reasons,the impugned complaint cannot be quashed and this Criminal OriginalPetition is liable to be dismissed and accordingly, it isdismissed. Consequently, the connected MP is closed. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarSrcm To:1.The III Metropolitan Magistrate, G.T. Court,Chennai +1cc to Mr.C.S.Danasekaran, Advocate Sr 57585+1cc to M/s.Anand, Abdul & Vinodh Associates Sr 57405SAI(CO)km/17.11.Crl.OP.No.26735/2006