Anil Jhawar @APPELLANT@Hash State of Rajasthan & Ors.

These three criminal miscellaneous petitions have been preferred by the accused petitioners with a common prayer to quash the FIR No.2/2012

registered at Police Station Kotwali, District Sri Ganganagar for the offences under Sections 109, 406, 420 and 120-B of the IPC.

The facts in brief are that the respondent No.2 complainant Purshottam Nagpal lodged a complaint in the court of learned Chief Judicial Magistrate,

Sri Ganganagar against seven persons including the petitioners. The names of the accused persons with their respective designation are mentioned

hereinbelow for the sake of ready reference :-

Naresh Goyal, Officer, Karvy Comtrade Limited and KarvyFinancial Services Ltd.

Suresh Rawal, Commodity Operations Head, Karvy Comtrade Ltd.

Rajesh Agarwal, Owner, K.P. Cold Storage, Hathras, Agra

Mahesh Tiwari, Vice President (Logistics), NCDEX

Rohit Shukla, Assistant Product Manager, Delhi Area, NCDEX

Anil Jhanwar, Owner, JICS Logistic Ltd.

Arvind Maheshwari, Officer, JICS Logistics Ltd.

The complainant alleged that the seven accused persons had formed a group, which was involved in cheating innocent traders by fraudulent means.Â

The accused Naresh Goyal called the complainant into his office at 35 E Block, Sri Ganganagar and fraudulently induced him with an offer to provide

him high quality of potatoes through NCDEX. Specific quality of potatoes in terms of the contract were displayed to the complainant with an

assurance that he would be getting the same quality of potatoes and the accused would be financing him in one account and in the other account, he

would get potatoes on loan basis. He was asked to sell potatoes, get the profits and repay the amount to the accused. The complainant fell for the

trap laid by the accused and made an agreement with them to purchase 4500 tonnes of potato through NCDEX. The complainant allegedly paid a

sum of Rs.1,85,00,000/- on the NCDEX platform with the aid of the accused Naresh Goyal and Suresh Rawal. Naresh Goyal provided some

documents to the complainant in his office and informed him that he should collect the consignment of potatoes from Agra office of the JICS Logistic

Ltd., Indore, of which, Anil Jhanwar was portrayed to be the owner and Arvind Maheshwari was alleged to be the authorized officer. The

complainant, alongwith his associate Khemchand reached the office of JICS Logistic Ltd. on 03.10.2011 and presented the documents provided by

Naresh Goyal to Arvind Maheshwari, who kept the papers with him and told the complainant that 80000 bags of potato meant for the complainant

were lying in the K.P. Cold Storage, Hathras Road, Agra and 10000 bags of potato were lying at Atul Ice and Cold Storage, Ramnagar, Khandauli,

Agra and the complainant was asked to lift the same in trucks. The complainant and Khemchand reached the K.P. Cold Storage, Hathras Road,

Agra and requested the concerned staff to show the quality of the potato. However, they were assured that the potatoes met the standards of

NCDEX and there was no need to check the same. Satisfied with this assurance, the complainant and his associate were made to sign the delivery

papers. However, on checking, they were shocked to find that the potatoes were substandard and rotten as well. The cost of such potato would be

one-fourth in the market as compared to what was paid by the complainant on the NCDEX Platform. The complainant, immediately contacted Naresh

Goyal and complained about the substandard quality of potatoes supplied to him by the cold stograge. Naresh Goyal asked the complainant to

contact Arvind Maheshwari and in case, he was not able to resolve the problem, the complainant was advised to contact one Rohit Shukla. The

complainant was also asked to submit the complaint in writing. As advised by Naresh Goyal, the complainant contacted Arvind Maheshwari, who

replied that he would himself come to the cold storage for checking the quality of the potatoes supplied. However, he failed to to turn up at the cold

storage and also stopped answering the complainant’s calls. The complainant, thereupon contacted Rohit Shukla, who assured that Arvind

Maheshwari would come to the cold storage, but thereafter he also stopped picking the complainant’s calls. The complainant sent messages to

Rohit Shukla, who replied that Arvind Maheshwari was not attending his calls and that the issue would be addressed by Mahesh Tiwari. The

complainant and Khemchand thereafter left the truck in the cold storage and sent a complaint in writing to Naresh Goyal and Suresh Rawal. On the

next morning, the complainant returned to the cold storage with Khemchand, where the truck owner cum transporter Chhotu Bhai told them that he

had been advised by Rajesh Agarwal to move the truck out of the cold storage immediately because the delivery documents had been signed. The

complainant tried to stop the truck, but the truck driver went away with the truck without waiting for his instructions. The complainant lodged a

report with the police and the truck could be located after three days. The complainant alleged that this entire sequence of secreting the truck was

aimed at preventing him from getting the quality of the potato verified. Four to five days later, Mahesh Tiwari and Rohit Shukla came to the cold

storage and threatened the complainant that he should accept the consignment as it is or else it would be auctioned and he would not get a single

penny. The complainant felt that he was being cheated, on which he went and made a complaint at the Forward Markets Commission, Mumbai.Â

The officers of the Forward Markets Commission notified Mahesh Tiwari, Rohit Shukla etc., on which they called the complainant and assured that in

future whatever goods were supplied, the same would be meeting the standards of NCDEX. Thereafter the complainant started lifting the

consignment of goods. The complainant came to know from local sources that Rajesh Agarwal, owner of the K.P. Cold Storage had sold the good

quality potato in the local market and substituted the same with substandard potatoes purchased from the local farmers and fraudulently supplied the

same to the complainant causing him huge loss. The complainant made complaints to the ADM, Agra, the DM, Agra, DIG, Agra as well as the

Chief Secretary of Uttar Pradesh Government in person as well as in writing, but no action was taken on his fervent pleas. Rohit Shukla and others

kept on threatening the complainant and forced him to accept the substandard consignments of potatoes and coerced him into signing the documents

and threatened that if he showed any hesitation, no further consignment would be ever given to him. The Manager of the Cold Storage was

having criminal background. A huge sum of Rs.30 lacs of the complainant’s firm was lying as security with the Karvy Comtrade Ltd, of which

Naresh Goyal and Suresh Rawal were partner. But these persons blatantly refused to retun the amount despite the complainant’s lawful claim.

The said complaint was forwarded to the police for investigation, upon which an FIR No.2/2012 came to be registered at the Police Station Kotwali,

Sri Ganganagar and for the offences mentioned above and the investigation was commenced.

The Investigating Officer, recorded the statements of the complainant and his witnesses and collected various contracts, documents, statements of

accounts and the receipts etc. presented by the complainant. The complainant also presented copies of the complaints submitted by him to the

various officials of NCDEX etc. The Investigating Officer also collected the documents pertaining to the status of the accused vis-a-vis

firms/companies/entities involved in the entire transaction. The specifications/standards of the potatoes sold on the NCDEX platform were also

procured. The Investigating Officer finally concluded that investigation done from the officials of the Karvy Comptrade and NCDEX revealed that

when the complainant purchased the potatoes from the NCDEX, the rates were running very high, however, when he went to take delivery, the rates

had fallen drastically and thus, the complainant intentionally stalled accepting the delivery of the goods. The Investigating Officer further concluded

that even if the rates of the potato had fallen after the complainant purchased the same, he could have sold the same at lesser rates to reduce his

losses. As per the Investigating Officer, the complainant had apprised the NCDEX, JICS Logistic Ltd. and Karvy Comtrade Ltd. about the lower

quality of the potato by sending e-mails, phone calls, SMSs etc. on 04.10.2011 itself, but no action was taken thereupon. 05.10.2011, the Final Expiry

Date (FED) of the potato lapsed, whereafter the NCDEX was absolved of its responsibility regarding quality control. The NCDEX officials also

apprised the Investigating Officer that as per circulars dated 10.06.2006 and 22.06.2007, if there was any complaint regarding quality of the goods, the

client concerned was required to submit a proforma complaint with a prayer for resampling. The Investigating Officer found that the formats of the

resampling were not available with the complainant and thus, Karvy Comtrade was under an obligation to provide assistance to the complainant for

prosecuting his complaint regarding the quality of potatoes supplied to him. As per the Investigating Officer, the complainant should not have been

burdened with the onerous procedure of raising the issue regarding the substandard quality of potatoes and that the officials of the Karvy Comtrade

Ltd. should have taken up the issue with the NCDEX. The Investigating Officer further concluded that the complainant was provided the potatoes

on the NCDEX platform by Karvy Comtrade, who took commission of the transaction and its sister concerned, Karvy Financial Services provided

finance facility to the complainant. Security cheques were taken from the complainant pertaining to these transactions. Karvy Comtrade Ltd.

was responsible for providing all assistance and documents to the complainant. After taking the delivery of the first consignment of the 150 Metric

tonnes of potato, the complainant procured the Remat papers from the Karvy Comtrade. However, the complaint’s representative Khemchand

was not allowed to check the quality of the potatoes by the warehouse owner and Manager citing the rules of NCDEX. Khemchand took delivery

of the potato and found the same to be substandard and undersized. A prompt complaint was made to JICS Logistic Ltd., Karvy Comtrade Ltd. and

NCDEX Ltd. on the very same day regarding the quality of potatoes supplied, but the Product Manager of NCDEX kept on waiting for the FED

(Final Expiry Date) of the potato and once the date lapsed, they shook their hands off the entire issue. The Investigating Officer drew a conclusion

that Rohit Shukla, the then Product Manager (Potato), NCDEX should have personally proceeded to Agra on receiving the complaint made by Mr.

Purshottam Nagpal and should have pursued the same. His failure in this behalf was considered as portraying his mens rea and fraudulent

intention. The Investigating Officer further found that the complainant was caused wrongful loss because he was given substandard potatoes

weighing 150 metric tons, which was usually sold in the Agra and Delhi Mandis at cheap rates. The complainant came to know of the substandard

quality and started raising issues about the same, upon which, the disputed consignment of potatoes which was lying in the warehouse, was hastily

auctioned at throwaway prices. Despite that, the NCDEX kept on charging warehouse demurrage from the complainant, which accumulated to

Rs.35 lacs. Karvy Financial Services had extended a loan limit of Rs.6 Crores to the complainant’s firm Pooja Cold Store. Previously also,

Karvy Financial Services had given huge loans to the complainant, which he repaid timely. Considering this fair conduct of the complainant, the

Karvy Financial Services refinanced the complainant, who took a loan of Rs.45 lacs on 21.09.2011 of which a sum of Rs.10.76 lacs had been repaid

by 28.11.2011. For the remaining amount, the complainant was given legal notice by Karvy Financial Services. The complainant prayed for

extension of the loan period, but when the loan was not paid even after the extended period, the complainant’s cheques were presented in the

bank and prosecution was launched against him under Section 138 of the N.I. Act. in the court at Mumbai. Karvy Financial Services also initiated

arbitration proceedings against various firms of the complainant, which were pending before the authorized arbitrator.  The Investigating Officer

found that Naresh Goyal was not connected with Karvy Comtrade, but was serving in Karvy Financial Service, which had no direct nexus with the

commodity exchange. The Karvy Comtrade Ltd. got the deals executed merely on a commission basis. The entire responsibility of ensuring

quality and quantity of the goods that of WSP (Warehouse Service Provider) and the warehouse owner, who were held responsible for supplying

substandard rotten potato to the complainant. The WSP and the NCDEX failed to act upon the timely complaints submitted by the complainant and

intentionally allowed the FED to expire and immediately thereafter, their officials washed hands off the entire dispute, thereby causing a huge

wrongful loss to the complainant. With these conclusions, the Investigating Officer submitted a detailed factual report in the court recording that the

accused Naresh Goyal, Suresh Rawal and Mahesh Tiwari are not responsible for any of the alleged transactions/offences. This court was also

apprised that the complainant had, as a matter of fact, compromised the dispute with Naresh Goyal and Suresh Rawal.Â

Mr. Rajesh Joshi, Senior Advocate, assisted by Mr. Chandraveer Singh and Mr. Sanjeev Johari, Advocates representing for the petitioners,

vehemently urged that there was no privity of contract between the complainant and the accused Anil Jhanwar, Arvind Maheshwari, Mahesh Tiwari,

Rohit Shukla and Rejesh Agrawal, who are now being sought to be prosecuted in the case. They urged that the Investigating Officer has exonerated

the principal accused arraigned by the complainant in his complaint, namely, Naresh Goyal, Suresh Rawal and Mahesh Tiwari from the ambit of

prosecution. They further contended that if at all, the complainant’s allegations are to be accepted, the fraudulent inducement if any, offered to

him is attributed to Shri Naresh Goyal and Shri Suresh Rawal. None of the remaining persons arrayed as accused in the complainant had any

occasion to be in contact with the complainant at the time of execution of the initial deal and when the transactions were initiated. They urged that

for prosecuting anyone for the offence of cheating, it is essential for the prosecution to establish that the intention of the accused was to cheat the

complainant at the time of inception of the contract. Any subsequent act which results into loss would not be sufficient to invoke the provisions of

Section 420 and 406 IPC. They further urged that the Forward Markets Commission, Mumbai has categorically held in its order dated 12.07.2012 that

the complainant himself was responsible for the entire goof up. They, thus, urged that ex facie allowing continuance of the investigation of the

impugned FIR against the petitioners would be nothing short of a gross abuse of process of law and hence, the same deserves to be quashed.

Per contra, learned Public Prosecutor, assisted by the Investigating Officer Mr. Narendra Poonia, C.I., Police Station, Kotwali, Sri Ganganagar and

Mr. C.S. Kotwani, learned counsel representing the complainant, vehemently opposed the submissions advanced by the petitioners’ counsel.Â

They urged that the accused petitioners have been found primarily responsible of cheating the complainant by fraudulent means and causing him huge

wrongful loss. The primary responsibility of supplying potatoes of assured quality meeting the standards of NCDEX was that of JICS Logistic Ltd.

and its associate firms. The potatoes, which were supplied to the complainant, were not only substandard, but were also decayed. The

complainant was virtually forced to lift the potatoes from the various cold storages owned by Rajesh Agarwal and his associates. The complainant

lodged immediate complaint dated 04.10.2011 with the NCDEX and Rohit Shukla being the responsible officer of the NCDEX intentionally avoided to

act thereupon and thereby, allowed the FED to lapse, closing all avenues of relief available to the complainant. They, thus, implored the court to

dismiss these miscellaneous petitions and permit the investigating officer to proceed with the investigation. However, on the issue regarding there

being no privity of contract between the complainant and the accused petitioners (With exoneration of Naresh Goyal, Suresh Rawal and Mahesh

Tiwari), who are now sought to be prosecuted in the case, learned Public Prosecutor and Mr. Kotwani had no option but to agree that there never

existed a privity of contract between the complainant and the accused petitioners.

I have given my thoughtful consideration to the arguments advanced by learned counsel for the parties and gone through the material available on

record.Â

Ex facie, a bald perusal of the complaint on basis whereof the impugned FIR came to be lodged, clearly reveals that the initial contract from which the

entire deal originated was entered into between the complainant and Shri Naresh Goyal and Shri Suresh Rawal, being the office bearers of Karvy

Comtrade Ltd. The Investigating Officer, after concluding thorough investigation has found that these two persons and the petitioner Mahesh Tiwari

are not connected with Karvy Comtrade Ltd. in any manner and are rather associated with its sister concern Karvy Financial Services, which

provided finance facilities to the complainant for buying the disputed consignment of potatoes and for other purpose. Thus, ex facie, the first and

foremost allegation of the complainant that these two persons offered him a fraudulent inducement of buying potato on the platform of NCDEX was

found unsubstantiated by investigation and falls flat on its face. This court, was orally apprised during the course of hearing that the complainant has

compromised and settled the entire dispute with Naresh Goyal and Suresh Rawal, who were arrayed as principal accused in the FIR. There being no

privity of contract between the complainant and the remaining accused petitioners sought to be prosecuted in the case, a serious question mark is cast

on the motive of the Investigating Officer, who still intends to proceed against the remaining accused. It is the fundamental principal of criminal

jurisprudence that for invoking the offence under Section 420 IPC, there must be an allegation that the accused offered some fraudulent inducement to

the victim and that the intention of the accused was to cheat the victim at the inception of the contract. If the loss is cuased by a subsequent event

then, such happening cannot bring the act of the accused within the purview of cheating by fraudulent design. Since, there existed no contract at

inception between the accused petitioners and the complainant, continuing prosecution of these accused for the offences alleged above is indeed

indicative of oblique motive of the Investigating Officer, who in all probabilities is acting under the influence of the complainant.  Furthermore,

even if the complainant’s allegations are accepted as such, there never was executed any kind of transaction between him and any of the accused

petitioners within Rajasthan State so as to even justify registration of the FIR at Sri Ganganagar.

The contents of the letter dated 12.07.2012 issued to the complainant by the Assistant Director, Forward Markets Commission after examining the

complaint submitted by the complainant have a significant bearing on the controversy at hand and are reproduced hereinbelow for the sake of ready

reference:-

“Sub: Complaint against NCDEX, M/s Jics Logistics and M/s. Karvy Comtrade Ltd-bad delivery in September 2011 contract-reg.

Sir,

I am directed to refer to your complaint dated 25.02.2012 and the earlier correspondence on the above mentioned subject and to state that the issues

raised in your complaint were discussed personally with the officers of NCDEX, M/s. JICS Logistics, M/s Karvy Comtrade Ltd. And its sister

concern M/s. Karvy Financial Services.

 2. At the outset this office expresses it’s concern overthe circumstances witnessed by you and for the loss that you incurred out of the

transactions under reference. It may be stated that this office is unable to ascertain your claim of bad delivery. In fact it is claimed that the

delivery was in order by NCDEX, JICS Logistics and the District Horticulture Officer. Moreover, the documents submitted by you do not

substantiate your allegations.

It is observed from the documents that you are foodgrain commission agent in commodities, you have your own Cold Storage and you have been

dealing in futures since March 2011. As such you are aware of the features of the physical as well as futures trading and potato economy. You

may appreciate that the futures trading itself is of speculative in nature and therefore it is conducted under strict rules and regulations. Accordingly,

the participants in futures trading need to comply with them strictly. There are pre defined rules and procedures with respect to delivery process

and retesting of sample which need to be followed. It seems you have not followed the procedure. As per record you have submitted remat

papers of certain quantity after the FED for which the rules do not guarantee quality. It is also revealed from the documents that M/s. Karvy

Comtrade Ltd. and its sister concerned M/s. Karvy Financial Services did not release the remat papers in time, because you had not refunded the loan

of Rs.45 lacs on time. The member takes care of the trading and settlement of client’s transactions only. However, in your case it has provided

you with a loan also. As you had availed the loan and still it is not repaid, this office is unable to take any further action. We find that the actions of

NCDEX and JICS Logistics are as per the rules as they had uniformly applied the same rules to other participants of commodity futures market. In

view of above we are constrained to state that the Commission cannot provide any relief to you.

List of conclusion of enquiry is attached at Annex-Ifor your comments, if any.

Annexure-I

Based on the content of complaints and commentsof the NCDEX, WSP, KCL and KFS the following was observed:

Complainant is well acquainted with the ready aswell as futures trading in commodities, including potato and potato economy as he himself

possesses cold storage.

Complainant availed loan for forward business fromKFS first for futures trading in R/M seed and subsequently for potato against FED Potato for

September 2011.

The futures trading is subject to Exchange’s rules,regulations, bye-laws and member and his client are bound to strictly follow the rules and

regulations etc.

The request for re-testing the quality needs to besubmitted much prior to the FED and before lifting the delivery. If it is lifted after FED,

Exchange does not give the guarantee of original quality.

Out of total 4837 MT of potato, complainant hadonly submitted remat papers of 150 MT before FED (05.10.2011) on 03.10.2012 and after loading

16 MT but claimed the quality of potato was bad, without submission of his claim as prescribed.

8. The NCDEX, WSP carried out verification after FED and found the quality in order. District Horticulture officer also found the quality in

order.

The FMC has no mechanism to confirm the claimthat the delivery was bad, the document enclosed by complainant shows the commodity fetched

lower price, but the commodity was sold after FED.

The Exchange/WSP not only followed up lifting thedelivery with the complainant but with other beneficiaries also and after issuing public notice

carried out auction giving sufficient time to the complainant.

Out of total stock of 12090 MT, there was noquality issue by those who had lifted the delivery even after the FED.

The complainant could not refund the loan inproper time to the KFS and therefore KFS did not hand over remat papers in time, which we feel the

main reason for this development.â€​

The Investigating Officer also wrote a letter to the Forward Markets Commission, Ministry of Finance, Government of India seeking some

clarifications and the commission, in turn, apprised the Investigating Officer about the steps it had taken on the complaint received from the

complainant Purshottam Nagpal. In view of the conclusive findings recorded by the Forward Markets Commission (a statutory body constituted to

deal with such complaints) adjudicating that neither the Karvy Comtrade Ltd. nor the officials of the NCDEX or the JICS Logistic Ltd. can be held

responsible for the allegations made by the complainant, this court is of the view that the accused petitioners cannot be allowed to be prosecuted in this

frivolous prosecution and as a matter of fact, the FIR has been filed on totally fabricated allegations.

In view of the discussion made hereinabove, this court is thoroughly convinced that it is the fittest case for exercising the inherent powers conferred

upon it by Section 482 CrPC so as to quash the further proceedings of the impugned FIR qua the petitioners. Accordingly, these miscellaneous

petitions deserve to be and are hereby allowed. All further proceedings of the impugned FIR No.2/2012 registered at Police Station Kotwali, Sri

Ganganagar being continued against the petitioners are hereby quashed.