The High Court
Case Details
W.P. (Cr.) No.522 of 2023 IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P. (Cr.) No.522 of 2023 ------ 1. Ajit Maheshwari, aged about 36 yrs. S/o Anup Maheswari, R/o 128/31, D Block, P.O. & P.S. Kidwai Nagar, Dist. Kanpur, U.P., 2. Ajay Kumar Laddha @ Ajay Laddha, aged about 58 yrs. S/o Yograj Laddha, R/o 1/1 Ashutosh Choudhary Avenue, P.O. & P.S. Ballygunge, Dist. Kolkata (W.B.) 3. Arun Kumar Laddha, Arun Laddha, aged about 54 yrs. S/o Yograj Laddha, R/o 1/1 Ashutosh Choudhary Avenue, P.O. & P.S. Ballygunge, Dist. Kolkata (W.B.) 4. Ashok Kumar Gupta, aged about 54 yrs. S/o Hari Ram Gupta R/o 8, Datiya House, P.O. & P.S. Khurshed Bagh, Dist. Lucknow (U.P.) … Petitioners Versus 1. The State of Jharkhand. 2. Biswas Chandra Agarwal, aged about 33 yrs., S/o Kailash Chandra Hemka, Proprietor/Partner of M/s Ginia Care having its office at KF-8, City Centre, Sector-4, B.S. City, P.O. & P.S. Sector-4, District Bokaro, Jharkhand. R/o Sadar Bazar, Chas, P.O. & P.S. Chas, Dist. Bokaro … Respondents ------ For the Petitioners For the State For the Resp. No.2
Legal Reasoning
under the learned A.C.J.M., Bokaro has found a prima facie case for the offence punishable under Sections 406 and 420 of the Indian Penal Code against the petitioners who are stated to be the Directors of M/s YMS Mobitech Private Limited which company is under the order of moratorium by the orders of National Company Law Tribunal, Allahabad Bench in Company Petition (IB) No.127/Ald/2017 and the said case is now pending in the court of learned J.M.-1st Class, Bokaro. 3. The allegation against the petitioners is that M/s YMS Mobitech Private Limited was simply a facilitator in giving insurance claim to the policy holders of the gadgets wherein the beneficiary i.e. the purchaser of the gadget used to buy the insurance policy within ten days of purchase of the said gadget and thereafter get it activated with the company within ten days. The claim meant that the company paid for the repair of the gadget which was insured with them and company, in turn, paid to the various authorized service centres which use to undertake the repair work. 4. Learned counsel for the petitioners submits that admittedly the amount of dues payable to the complainant is under a commercial transaction and the amount is to be paid by the company which is under liquidation and official liquidator has been appointed. So, the remedy for the complainant is to approach the National Company Law Tribunal, Allahabad Bench in connection with the connected case to get his dues back but there is absolutely no allegation against the petitioners of having any intention to deceive the complainant since the beginning of the transaction between M/s YMS Mobitech Private Limited and the complainant nor is there any allegation of 2 W.P. (Cr.) No.522 of 2023 entrustment of any money personally to the petitioners, hence, neither the offence punishable under Section 406 of the Indian Penal Code nor the offence punishable under Section 420 of the Indian Penal Code is made out against the petitioners. To buttress his submission, learned counsel for the petitioners relies upon the judgment of the Hon’ble Supreme Court of India in the case of Maksud Saiyed vs. State of Gujarat & Others reported in (2008) 5 SCC 668 paragraph-13 of which reads as under:- is the Company. The “13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) or Section 200 of the Code of Criminal Procedure, the Magistrate is required to apply his mind. The Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused learned Magistrate failed to pose unto himself the correct question viz. as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the respondents herein were personally liable for any offence. The Bank is a body corporate. Vicarious liability of the Managing Director and Director would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability.” and submits that the Indian Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the Company and in this respect, learned counsel for the petitioners also relies upon the judgment of the Hon’ble Supreme Court of India in the case of S.K. Alagh vs. State of Uttar Pradesh and Others reported in (2008) 5 SCC 662. Hence, it is submitted that the learned Magistrate has committed a grave error by finding a prima facie case for the offences punishable under Sections 406 and 420 of the Indian Penal Code against the petitioners. Hence, it is submitted that the entire criminal 3 W.P. (Cr.) No.522 of 2023 proceeding arising out of C.P. Case No.906 of 2017 as well as the order dated 07.04.2018 passed by learned A.C.J.M., Bokaro which is now pending in the court of learned J.M.-1st Class, Bokaro, be quashed and set aside. 5. Learned AC to AAG-V appearing for the State submits that the State has no serious objection for quashing the entire criminal proceeding arising out of C.P. Case No.906 of 2017 as well as the order dated 07.04.2018 passed by learned A.C.J.M., Bokaro which is now pending in the court of learned J.M.-1st Class, Bokaro. 6. Learned counsel for the opposite party No.2 vehemently opposes the prayer for quashing the entire criminal proceeding arising out of C.P. Case No.906 of 2017 as well as the order dated 07.04.2018 passed by learned A.C.J.M., Bokaro which is now pending in the court of learned J.M.-1st Class, Bokaro and submits that even if the company namely M/s YMS Mobitech Private Limited is under liquidation, that will not absolve the personal liability of the petitioners who are undisputedly the directors of the said company. Hence, it is submitted that this Writ Petition, being without any merit, be dismissed. 7. Having heard the rival submissions made at the Bar and after carefully going through the materials available in the record, it is pertinent to mention here that the Hon’ble Supreme Court of India in the case of Uma Shankar Gopalika vs. State of Bihar & Another reported in (2005) 10 SCC 336 in paragraph-6 has held as under:- “6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of complaint any criminal offence whatsoever is made out much less offences under Sections 420/120- B IPC. The only allegation in the complaint petition against the accused persons is that they assured the complainant that when they receive the insurance claim amounting to Rs 4,20,000, they would pay a sum of Rs 2,60,000 to the complainant out of that but the 4 W.P. (Cr.) No.522 of 2023 same has never been paid. Apart from that there is no other allegation in the petition of complaint. It was pointed out on behalf of the complainant that the accused fraudulently persuaded the complainant to agree so that the accused persons may take steps for moving the Consumer Forum in relation to the claim of Rs 4,20,000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case it has nowhere been stated that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent offence under Section 420 for IPC.”(Emphasis Supplied) an that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. 8. Now, coming to the facts of the case, as already indicated above, there is no allegation against the petitioners of playing any deception upon the complainant at the very inception rather it is the admitted case of the complainant that part payment of the money has been made by the company- M/s YMS Mobitech Private Limited and the company went to liquidation so after that the payment has not been made to the complainant and that, in the considered opinion of this Court, will not amount to commission of the offence of cheating by the petitioners. Hence, this Court has no hesitation in holding that even if the allegations made against the petitioners in the complaint, statement on solemn affirmation and statement of witnesses examined during enquiry are treated to be true in its entirety still the offence punishable under Section 420 of the Indian Penal Code is not made out against the petitioners. 9. So far as the offence punishable under Section 406 of the Indian Penal Code is concerned, it is pertinent to mention here that it is a settled principle of 5 W.P. (Cr.) No.522 of 2023 law that if property entrusted to the accused is used by him mere retention of that property would not amount to dishonest misappropriation of that property as has been held by the Hon’ble Supreme Court of India in the case of Satishchandra Ratanlal Shah vs. State of Gujarat & Another reported in (2019) 9 SCC 148 paragraphs-11 and 13 of which read as under:- 11. Having observed the background principles applicable herein, we need to consider the individual charges against the appellant. Turning to Section 405 read with 406 of IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that the respondent no. 2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, the respondent no. 2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognizes a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment. 13. Now coming to the charge under Section 415 punishable under Section 420 of IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168). In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached the respondent no. 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, the respondent no. 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all the facts in the complaint and material are taken on their face value, no such dishonest representation or inducement could be found or inferred.” (Emphasis supplied) 10. Now, coming to the facts of the case, there is no allegation against the petitioners of entrustment of any money to the petitioners personally and it has been held by the Hon’ble Supreme Court of India in the cases of Maksud Saiyed vs. State of Gujarat & Others (supra) and S.K. Alagh vs. State of Uttar 6 W.P. (Cr.) No.522 of 2023 Pradesh and Others (supra) that the Indian Penal Code does not contain any provision for attaching vicarious liability on the part of the Managing Director or the Directors of the Company when the accused is the Company. Moreover, there is no allegation of entrustment of any money or property to the petitioners. 11. Under such circumstances, this Court is of the considered view that even if the allegations made against the petitioners are treated to be true in its entirety still the offence punishable under Section 406 of the Indian Penal Code is not made out against the petitioners. Under such circumstances, the continuation of this criminal proceedings against the petitioners will amount to abuse of process of law. 12. Accordingly, the entire criminal proceeding arising out of C.P. Case No.906 of 2017 as well as the order dated 07.04.2018 passed by learned A.C.J.M., Bokaro which is now pending in the court of learned J.M.-1st Class, Bokaro, is quashed and set aside. 13. 14.
Arguments
: Mr. Shailesh Kr. Singh, Advocate : Mr. Archna Kumari, AC to AAG-V : Mr. Sahil, Advocate ------ P R E S E N T HON’BLE MR. JUSTICE ANIL KUMAR CHOUDHARY By the Court:- Heard the parties. 2. This Writ Petition (Cr.) under Article 226 of the Constitution of India has been filed with a prayer for grant of an appropriate writ/order for quashing the entire criminal proceeding arising out of C.P. Case No.906 of 2017 as well as the 1 W.P. (Cr.) No.522 of 2023 order dated 07.04.2018 passed by learned A.C.J.M., Bokaro whereby and where
Decision
In the result, this Writ Petition (Cr.) is allowed. In view of disposal of the instant Writ Petition (Cr.), interim relief granted to the petitioners vide order dated 10.08.2023 stands vacated. 15. It is made clear that dismissal of the case will not prejudice the claim of the complainant in appropriate civil suit. (Anil Kumar Choudhary, J.) High Court of Jharkhand, Ranchi Dated the 14th of December, 2023 AFR/ Animesh 7