Vineet Agarwal, Sanghi and Agrawal Capital Services vs State of U.P.

M.K. Mittal, J.—Application has been filed for quashing the proceedings including the charge sheet dated 4.10.1999 under Sections 406, 420 IPC in criminal case No. 637 of 1999 (new No. 2233 of 2003) State v. Vineet pending in the court of 1st A.C.J.M., Varanasi.

Brief facts of the case are that opposite party No. 2 Sri Nath Prasad owner and proprietor of M/s Orient Printers filed an application u/s 156(3) Cr.P.C. against the applicant and two others alleging that he is a peace loving person and earns his livelihood by doing business. His wife Smt Premlata Devi is proprietor of M/s Orient Printers situate in Baradeo Mohalla, P.S. Dashaswamedh, District Varanasi. Accused Vineet Agarwal is proprietor of M/s Singhi and Agarwal Capital Services with registered office in first floor Taksal Nadesar, Varanasi. Accused is also a chartered Accountant and is proprietor of the firm Vineet Agarwal Chartered Accountant Company with office in Sampurnanand Nagar, Sigra Varanasi. Accused met Smt Premlata Devi and proposed for purchase of shares of Unit Trust of India and assured her and made her to believe and also gave a letter No. 139 dated 15.3.1993 in connection thereof. Smt Premlata Devi gave cheques No. 720400 dated 19.3.1993 for Rs. 1.40 lacs and cheque No. 059270 dated 19.3.1993 for Rs. 2.60 lacs to the accused and he acknowledged the receipt by letter Nos. 742 dated 19.3.1993 and 138 dated 15.3.1993. Thereafter Smt Premlata gave another cheque dated 12.7.1993 for Rs. One lakh and its receipt was acknowledged by letter no 538 dated 12.7.1993 by accused Vineet Agarwal. Accused assured Premlata Devi that he would purchase the shares on her behalf and would handover the same without any delay. But inspite of repeated demands the accused neither gave the shares nor returned the money and thus committed breach of trust and also cheated her and misappropriated the money for his own use and thereby has caused the loss to her. The application was earlier given to senior superintendent of Police, Varanasi but when no action was taken this application was filed and the learned Magistrate directed for registration and investigation of the case and after investigation charge sheet has been submitted against the applicant under Sections 406, 420 IPC. 3.

Case of the applicant is that report has been lodged against him with incorrect and false allegations. He was the proprietor of firm M/s Sanghi and Agarwal Capital Services but the same was transferred by transfer deed dated 13.9.1993 to Sri Pankaj Agarwal who was working with the applicant with effect from 1.4.1993. Applicant has filed the transfer deed annexure No. l. According to applicant alleged amount of Rs. 5 lacs was, given through different cheques to his firm and the firm returned the money through the cheques No. 722824 and 722825 in favour of Smt Premlata for a sum of Rs. 4 lacs and one lakh respectively i.e. total of 5 lacs and the amount of these cheques was also cleared and certificate to that effect has been filed as annexure No. 3. But Harinath Prasad developed dishonest intention and filed application u/s 156(3) Cr.P.C. alleging that the applicant is owner and proprietor of M/s Sanghi Agarwal Capital services which carried on the business of broker and shares. The allegations as made in the application u/s 156(3) Cr.P.C. are incorrect and no reference about the payment of Rs. 5 lakhs by the applicant firm through two cheques No. 722824 and 722825 has been made in the application u/s 156 (3) Cr.P.C. It has been further alleged by the applicant that the dispute is of civil nature and the criminal courts jurisdiction is not liable to be abused by raising civil dispute. Sri Nath Prasad and Smt Premlata had raised dispute before the District Consumer Forum, Varanasi and their petitions were dismissed directing them to approach the competent civil court. The dispute is between the two firms and not individual and as such the proceedings are liable to be quashed. According to the applicant from the perusal of the report no case is made out against him under Sections 405, 406, 420 IPC. In the circumstances, the applicant prayed for quashing of the charge sheet.

Opposite party field counter affidavit and contended that applicant is law knowing person and owner of Chartered Accountancy firm and also Sanghi and Agarwal Capital services and was dealing in purchase and sale of shares units etc. In the consumer forum applicant raised objection that the criminal proceedings were pending. The contention of the applicant that there is no criminal liability is baseless and mischievous. Opposite party filed appeal in the State Forum against the order of District Consumer Forum and the same was allowed. Applicant was sole proprietor of the firm namely Sanghi and Agarwal Capital Services and was performing the business of the firm and was also operating the firm Bank account No. CD 1119 till 10.8.1993. It is evident from his own letter dated 10.8.1993 addressed to the Branch Manager, Andhra Bank, Varanasi. The alleged transfer deed dated 13.9.1993 relating to the transfer of applicant''s firm w.e.f. 1.4.1993 is fake and bogus document since it was executed on 13.9.1993 with retrospective effect. Even the Bank statement shows that the applicant had withdrawn Rs. 9,20,137.50 between the 3rd and 7th August, 1993. According to the opposite party applicant had demanded payment for the UTI Master Plus units purchased by him vide his confirmation note no 1889 dated 15.3.1993 to Orient Papers and confirmation note No. 1817 dated 12.7.1993 to Smt Prem Lata Devi and in compliance thereof cheques were given by Smt Premlata to the applicant for supply of UTI Units. The applicant also issued the receipt dated 19.3.1993 for Rs. 1.40 lacs, 19.3.1993 for Rs. 2.50 lacs and 12.7.1993 for Rs. One lakh. Firsth two receipts were issued in the name of M/s Orient Papers and third in the name of Smt Prem Lata Devi. Applicant had given a sum of Rs. 5 lacs on short term loan vide his two cheques no 78222825 dated 5.8.1993 for Rs. One lakh, 722824 dated 5.5.1993 for Rs. 4 lakhs in favour of Orient Papers and not in the personal name of the proprietor as alleged in the affidavit. This loan amount was returned back to him within a week i.e. on 12.5.1993 by cheque No. 094811 dated 12.5.1993 for Rs. One lakh and no 059291 dated 12.5.1993 for Rs. 4 lakhs of M/s Orient Papers and in favour of M/s Sanghi and Agarwal Capital Ltd. These cheques were credited in the bank account No. CD 1119 on 12.5.1993 as per Bank Certificate dated 28.1.1994. The allegations to the contrary are incorrect. The applicant did not return the amount paid through three cheques for purchase of UTI units and neither gave the units and thereby misappropriated the money and caused loss to the opposite parties. The applicant has concealed the fact that the loan amount of Rs. 5 lacs given on 5.5.1993 was paid back on 12.5.1993 through two cheques. Applicant is solely liable for the offences committed by him and his criminal liability is very much there.

The applicant filed rejoinder affidavit and reiterated the pleas as taken by him. In rejoinder affidavit vague allegations have been made regarding the allegations as made in para -8 of the counter affidavit. It has been alleged that the loan was not paid back to the applicant but it was a transaction between two firm and between the Sri Nath Agarwal and Pankaj Agarwal.

Heard Sri Yogendra Agarwal, the learned Counsel for the applicant, Sri Faujdar Rai, learned Counsel for the complainant, learned A.G.A. and perused the material on record.

The contention of the learned Counsel for the applicant is mainly two fold. He has contended that the no amount was paid to him but it was given to the firm and the firm had returned the same through two cheques and secondly that it is a matter of civil liability and no criminal offence is made out against the applicant.

Learned Counsel for the complainant and the learned A.G.A. have contended that applicant h ad taken Rs. 5 lacs for purchase of Unit Shares but he neither delivered the share to Smt Premlata nor returned the money. The applicant had allegedly given the loan of Rs. 5 lacs to the firm of the opposite party which was returned through two cheques within a week on 12.5.1993. Learned Counsel for the opposite party has also contended that the amount of Rs. One lakh was taken by the applicant through cheque from Smt Premlata in July 1993 and that amount could not have been returned by him in May 1993 i.e. even before the amount was taken by him.

Learned Counsel for the opposite party has also contended that it is not a dispute of civil nature and the appeal filed in the forum was allowed and the order passed by the District Forum, Varanasi was set aside and the cases were transferred to District Forum, Mirzapur as per order dated 17.5.1999 (annexure No. C.A.-2). However the parties have not filed any document to show as to what happened thereafter in that matter.

Now it has to be seen if any prima facie case is made out against the applicant as alleged. The contention of learned Counsel for the applicant that the amount was taken by the applicant''s firm and not by the applicant and that the same was returned to the firm of opposite party is prima facie not made out as is evident from the papers on record. The applicant had taken three cheques and he duly acknowledged the receipt. The alleged payment made by his firm was again returned back by the firm of the opposite party as has been stated in the counter affidavit and that fact has not been specifically denied or challenged by the applicant. The fact that he had transferred the business of the firm to Pankaj Agarwal with retrospective effect is also not prima facie correct as he continued to run the business of the firm and to operate the bank account till 10.8.1993 as has been stated by the opposite party and this fact has also not been challenged by the applicant. Therefore if any document was prepared to show the transfer which was not acted upon till 10.8.1993, was not material. On the basis of the alleged transfer document the applicant cannot avoid his liability of having received the money of three cheques totalling Rs. 5 lacs. When he received the money he was the sole proprietor of the firm dealing in purchase and sale of shares.

Contention of learned Counsel for the opposite party is that this money was given to the applicant at his instance for purchase of the units and on the basis of the letters as referred to above. He was required to purchase the shares or units for Smt Premlata and to handover them to Smt Premlata. It is not the case of the applicant that he had purchased any units or that he delivered any units to Smt Prem lata. Section 405 I PC defines criminal breach of trust, which reads as under:

Section 405 IPC Criminal Breach of Trust: Whoever, being in any manner entrusted with property or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits criminal breach of trust.

In this connection, it will be relevant to refer illustration (c) of Section 405 IPC, which is as under:

A, residing in Calcutta, is agent for Z, residing at Delhi. There is an express or implied contract between A and Z, that all sums remitted by Z to A shall be invested by A, according to Z''s direction. Z remits a lakh of rupees to A, with directions to A to invest the same in company''s paper. A dishonestly disobeys the directions and employs the money in his own business. A has committed criminal breach of trust.

In the instant case also the applicant was given the money with express direction that he would purchase the units but he did not do so and did not return the money and misappropriated it to his own use. This illustration is quite close to the act of the applicant in this case.

Learned Counsel for the opposite party has also contended that the offence of cheating is also made out. Section 415 IPC reads as under:

Section 415: Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat".

According to the learned Counsel for the opposite party on the basis of the inducement assurances given by the applicant the payment was made to him but he did not purchase the shares and also did not return the money and by this act damage has been caused to the opposite party and this act is covered by the definition of Section 415 IPC.

Learned Counsel for the applicant has cited the case of Asit Bhattacharjee v. Hanuman Prasad Ojha and Ors. JT 2007 (8) SC 138 where it has been held that fraudulent representation is one of the essential ingredients in respect of commission of an offence u/s 420 IPC. Learned Counsel for the applicant has contended that there was no fraudulent representation and mens rea on the part of the applicant and that the applicant is not liable prima facie u/s 420 IPC. But this contention cannot be accepted at this stage. There are definite allegations that on the representation made by the applicant through his letter the opposite party No. 2 had agreed to transfer the money for purchase of the units but he did not do so and he had no intention to do so and in order to cover up his act he prepared a transfer deed with retrospective effect, which was actually not acted upon. And it shows his fraudulent intention. The intention of the accused at the time of inducement may be judged from his subsequent conduct. Therefore there was fradulent representation from the side of the applicant.

Learned Counsel for the applicant has contended that in case if there is any liability it is of civil nature and not of criminal nature and the charge sheet is liable to be quashed. In support of his contention learned Counsel for the applicant has cited the case of Inder Mohan Goswami and Anr. v. State of Uttaranchal and Ors. JT 2007 (11) SC 499. In that matter dispute was regarding rights over the land. While the civil Court was seized of the dispute, criminal proceedings were initiated consequent to filing of the first information report for offence of forgery, cheating and criminal conspiracy and charge sheet was also filed and the High Court refused to quash the criminal proceedings and it was held by the hon''ble Apex Court that for the mere failure to subsequently keep a promise, one cannot presume that he all along had a culpable intention to break the promise. A fradulent or dishonest intention al the time of making the promise should be there. In that case the basic ingredients of offence of forgery were altogether missing even in the allegations in the first information report. It was also held that the courts must ensure that the criminal prosecution is not used as an instrument of harassment or for seeking private vendetta or with an ulterior motive to pressure the accused. In that matter the appeal was allowed and first information report was quashed. In that case facts were entirely different. The power of attorney had been executed in favuor of respondent No. 3 who was misusing that power of attorney and subsequently that power of attorney was cancelled and the applicant transferred the remaining land in favour of one Sunil Kumar. The respondent No. 3 in whose favour the power of attorney was executed, filed a criminal complaint to the S.H.O. Rishikesh Police Station alleging that there was breach of contractual obligation and that he was cheated by the appellant in connivance with other person by selling a portion of his land to third party and by cancelling the general power of attorney. In that matter Investigating Officer held that it was a matter of civil nature. Another complaint was filed by respondent No. 3 before S.S.P. and first information report was registered. Thereafter respondent No. 3 also filed a civil suit in the court of Civil Judge (Sr. Division) for cancellation of the sale deed executed by the appellant in favour of Sunil Kumar. In the instant case the facts are entirely different and applicant cannot get any help out of the judgement. Here the facts alleged in the first information report show that the ingredients of the offence under Sections 405/406 and 420 IPC are very much there and the fraudulent intention of the applicant was there in the beginning and is also apparent from subsequent conduct as shown above.

Learned Counsel for the applicant also referred the case of G. Sagar Suri and Another Vs. State of U.P. and Others, In that case it was held by the Hon''ble Apex Court that jurisdiction u/s 482 Cr.P.C of the code has to be exercised with great care. In exercise of its jurisdiction High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal Proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice. In that matter complainant had already filed a complaint u/s 138 of N.I. Act which was pending and he also initiated the proceedings u/s 406, 420 IPC by lodging the first information report. In that matter it was held that the proceedings under Sections 406, 420 IPC were abuse of the process and were liable to be quashed as the proceedings u/s 138 N.I. Act were already pending. In the instant case, the facts are different and this ruling also does not help the applicant and it cannot be said that the continuation of the proceedings against the applicant will in any manner amount to abuse of the process of the court. To the contrary there are prima facie allegations against him and the prosecution cannot be scuttled at the threshold.

In the case of Hridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Anr. JT 2000 (3) SC 604 cited by the learned Counsel for the applicant it was held that the reading of the averments in the compliant in entirety and accepting the allegations to be true, the ingredients of intentional deception on the pat of the accused right at the beginning of the negotiations for the transaction has neither been expressly stated nor indirectly suggested in the complaint. In that matter the three brothers had executed a sale deed and two other brothers of the appellant had signed as witnesses and had also executed separate indemnity bond. The possession was delivered. On registration of the sale deed cheques were issued by Secretary of Society to the purchaser. However cheques were dishonoured. Prior to sale one other brother of appellant had filed a suit for partition and had obtained status quo with regard to property except the land in question. The FIR was lodged against the appellants u/s 406, 420, 120-B IPC and charge sheet was thereafter filed. Secretary of society filed a complaint that appellants had concealed the fact of suit for partition and by giving wrongful information induced the vendees to enter into negotiations. In that matter above observations were made and all the proceedings were quashed. However in the instant case facts are entirely different and this ruling also does not help the applicant as there was initial inducement/representation by the applicant for purchasing the units/shares and on that basis the payment was made by the complainant.

Learned Counsel for the opposite party has placed reliance on the case of Smt Kamla Devi Agarwal v. State of West Bengal and Anr. 2002 SC 200. In that case it has been held by the Hon''ble Apex Court that criminal proceedings should not be quashed merely because of pendeny of civil proceedings between the same parties even if it be pending in a higher court. Nature, scope and standard of proof required in civil and criminal proceedings are distinct. The inherent power u/s 482 Cr.P.C. should be exercised sparingly.

In the case of M/s. Medchl Chemicals and Pharma P. Ltd. Vs. M/s. Biological E. Ltd. and Others, it has been held that however whether or not the allegations in the complaint are otherwise correct has to be decided on the basis of the evidence to be led at the trial in the complaint case but simply because of the fact that there is a remedy provided for breach of contract, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy available to the appellant herein. Both criminal law and civil remedy can be pursued in diverse situations. As a matter of fact they are not mutually exclusive but clearly co extensive and essentially differ in their content and consequence. The object of criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect civil remedies at all for suing the wrongdoer in case like arson, accidents etc. It is anathema to suppose that when a civil remedy is available a criminal prosecution is completely barred.

In the case of Ashok Chaturvedi and Ors. v. Shitul H. Chanchani and Anr. 1998 (6) SC 394, it has been held by the Hon''ble Apex Court that "filing of a claim before consumer forum could not make a dispute of civil nature". In the instant case the papers as filed show that the matter pending in the District Consumer Forum Varanasi was transferred to Mirzapur but no document has been filed to show latest position. Even if any case is pending in the consumer forum, on that basis it cannot be said that it is a civil dispute.

Now it is well settled that if the allegations made in the complaint or the first information report prima facie show the commission of an offence the criminal proceedings cannot be curtailed even if the facts give rise to a civil remedy. But if the criminal offence is not made out the criminal proceedings cannot be used as a short cut to harass the accused and the court cannot be used as a tool to achieve that goal.

In the present case the allegations as made in the first information report prima facie show that the accused has committed the offence punishable u/s 406, 420 IPC.

Thus in view of the facts and legal position I come to the conclusion that there are prima facie allegations against the applicant to make out a case under Sections 406, 420 IPC and the application for quashing the proceedings is devoid of merits and is liable to be dismissed and is hereby dismissed.