quash = Sections 120-B, 406, 420 read with Section 34 of the Indian Penal Code, 1860 and 156(3) of the Criminal Procedure Code. = When once the complainant has changed his course of action, from that of a criminal complaint to that of a civil dispute, by giving up the earlier complaint and by making effort to realize the damages, the dispute remains to be only civil dispute thereafter. = when the company is the accused its directors can be roped in only if there is sufficient incriminating evidence against them, coupled with intention, is made. In this case, except against A1 and A2, no allegations against A3 to A6 are made. They are not termed to be the people, who are in-charge of the day-to-day affairs of the petitioner bank. The persons, who signed on the bank guarantee, are the Manager and the Vice President. The manager is not shown in the list of the accused, though the vice president's signature is found. Whether it is of the second petitioner herein or not is not decipherable = However for the reasons aforementioned, prosecution cannot be sustained against any of the petitioners. It can be further said that the conception of the respondents of the act of the petitioner Bank as a criminal act stands erased, by his act of taking a civil course of action i.e. to realize damages. It implies that he has condoned the criminality, if any, in the act of the accused. He cannot, by the manner in which his grievance is addressed, change his line of action and paint the act of the accused, with a brush of criminality as and when he chooses. In the result, the criminal petition is allowed and the proceedings in Cr.No.57 of 2011 on the file of the Police Station Panjagutta, Hyderabad, against the petitioners, are hereby quashed.
SMT JUSTICE T. RAJANI
CRLP.No.1405 of 2011
22-12-2017
Axis Bank Limited and others. PETITIONERS
State of Andhra Pradesh, Rep. by Public Prosecutor, High Court of AP, Hyderabad and another... RESPONDENTS
Counsel for Petitioners:MR. S. NIRANJAN REDDY
For MR. N. NAVEEN KUMAR
Counsel for Respondents : PUBLIC PROSECUTOR
MR. M.V. SURESH R2
<GIST :
>HEAD NOTE:
? Cases referred:
1. (2011) 13 SCC 412
2. (2006) 6 SCC 736
3. 2013(3) SCC 330
4. (2009) 3 SCC 78
5. AIR 1992 SC 604
6. (2002) 1 SCC 652
7. (2001) 7 SCC 659
8. (1986) 3 SCC 67
9. (2001) 2 SCC 17
10. 1998 CRLJ 4865
11. (2015) 6 SCC 287
SMT JUSTICE T. RAJANI
CRIMINAL PETITION No.1405 of 2011
ORDER:
The petitioners figure as accused in Cr.No.57 of 2011 on the file
of the Police Station, Panjagutta, Hyderabad. The offences alleged
against the petitioners are under Sections 120-B, 406, 420 read with
Section 34 of the Indian Penal Code, 1860 and 156(3) of the Criminal
Procedure Code. The petitioners have filed this petition seeking for
quash of the proceedings against them, in the above crime.
2. Heard the counsel for the petitioners, the counsel for the second
respondent and the learned Public Prosecutor appearing on behalf of
the first respondent.
3. The revocation of bank guarantee, which was taken with the
first petitioner bank herein, is the basis of this complaint. From the
averments in the complaint, it can be understood, that the
complainant is a company incorporated under the Companies Act,
1956. During the course of its business, the complainant entered into
a contract with M/s. Orissa Computer Associates (OCA), for
construction and implementation of e-books and as per the terms of
the contract, the said OCA gave a bank guarantee for Rs.2.2 crores,
through the first petitioner and the bank guarantee was executed by
the first petitioner and its Manager and Vice President, D.
Bhattacharaya. The OCA provided copy of the said bank guarantee to
the complainant company, which is known to the first petitioner, which
was formally known as UTI Bank Limited. The tenure of the said bank
guarantee is one year from the date of its execution. One of the
conditions in the bank guarantee is that the first petitioner shall not
revoke the bank guarantee without prior written unconditional
approval/permission from the beneficiary, before expiry of the claim
period of the said bank guarantee. Based on and acting upon letter
dated 15.10.2003 given by the first petitioner, the complainant
company proceeded and opened a letter of credit for US $ 2,00,000
through Barclays Bank dated 18.11.2003 through Habib Bank Ag
Zurich. The first petitioner did not send the original copy of the bank
guarantee, in spite of the demand by the complainant company,
though the same has to be made available to the complainant.
4. The complainant company has been expecting the same to be
delivered to it by the bank, but to its surprise, received a
communication from the first petitioner, dated 10.10.2003, stating
that the bank guarantee has been cancelled at the request of the
applicant for the same i.e. OCA and that the original has been
submitted to it by OCA. This act of cancellation of the bank guarantee
by the bank without written confirmation from the beneficiary is
contrary to well established business norms and is a clear violation of
the trust reposed by the complainant company. It is clear that A1
and A2 colluded with OCA and acted in concert and made the
complainant company to believe that there is existence of valid and
subsisting bank guarantee and acting upon the said belief, the
company opened valuable letters of credit. The Ombudsman, Reserve
Bank of India, Bhuvaneshwar, after scrutinizing all the documents and
transactions, found something fishy and suspicious in the matter and
passed an order awarding damages of Rs.5.75 crores from Axis Bank
Limited and also advised them to file both criminal complaint and civil
suits against the Axis Bank. Now the said amount has bulged into
Rs.10.76 crores with interest. A1 is the company incorporated under
the Companies Act while A3 to A18 are the Chairman cum Managing
Director, Directors and Company Secretary respectively.
5. Aggrieved by the said complaint, which is filed in the year 2010,
that is almost after seven years of taking the bank guarantee, the
petitioners come before this Court by way of this quash petition,
on the following grounds.
The petitioners have nothing to do with the alleged offences.
The transaction, even if it is assumed to be true, is purely civil in
nature and hence, the registration of crime is unsustainable.
The petitioners issued bank guarantee at the request of its constituent
and customer OCA, in favour of the complainant and it appears that
there was a dispute between the customer of the petitioner and the
complainant and subsequently, OCA returned the original bank
guarantee to the first respondent for cancellation and since the original
bank guarantee is returned, as per the banking procedure, the same
was cancelled and the same was duly intimated to the complainant on
31.12.2003. OCA has procured the bank guarantee and as such,
it ought to have made A1 and the correct officials representing it, as
accused and the alleged business transaction of the complainant is
with OCA and not with the petitioner bank. When the guarantee issued
by the petitioner bank has not reached the hands of the complainant,
the contract of guarantee cannot be expected to be commenced. In
fact, till the bank guarantee reached the complainant, no contractual
relationship of guarantor bank and complainant/beneficiary is
established. Moreover, nobody acted under the bank guarantee, since
the same is cancelled by surrendering the original bank guarantee to
the petitioner bank. Therefore, malafides or the ground that the
complainant opened letter of credit cannot be pleaded as a ground for
the complaint. When the complainant has not insisted on the original
bank guarantee, even after coming to know that OCA has agreed to
issue such a bank guarantee to them, clearly shows that no such
contract has come into existence. As per the Contract Law, the original
bank guarantee has to be obtained by the beneficiary and only after
tendering the same to the bank, it can be invoked. When the
complainant itself has no right, it cannot claim or prosecute the
petitioners for the alleged offences. The complaint alleged by the
complainant before the banking ombudsman is rejected by order dated
30.04.2005. The averments in the complaint that damages were
awarded by the Ombudsman is not correct. No such award was passed
by the Ombudsman. Even assuming that the Ombudsman advised the
complainant to file criminal case, lodging a complaint at very belated
stage is a clear, deliberate and intentional act on the part of the
complainant. There are no allegations in the complaint that there was
any fraudulent intention at the time of execution. The bank guarantee
was cancelled in December 2003 and at that time, the
Executives/Directors of petitioner bank, who were arrayed as A3, A4,
A7 to A16, were not in the petitioner bank as Executives/Directors and
all of them joined the petitioner bank at a later period and hence, they
cannot be made liable.
6. From the arguments extended on either side, the points that
come up for consideration are:
1. Whether the allegations in the complaint would
constitute the alleged offences, prima facie
2. Whether the delay in the complaint would vitiate it.
3. Whether the allegations in the complaint would
make all the petitioners liable for the alleged
offences.
4. To what result.
POINT No.1:
7. The offences for which the complaint was filed are section 420
and 406 IPC. The counsel for the petitioners contends that there is no
breach of trust that is committed by the petitioners, as, for a breach of
trust to be committed, there should be entrustment of property,
as required under Section 405 IPC, which defines criminal breach of
trust. The same is extracted hereunder for quick reference and
understanding:
405. 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.
8. The Supreme Court in its decision in M/s. THERMAX LTD. v.
K.M. JOHNY observed as under:
Though a case of breach of trust may be both a civil wrong
and a criminal offence but there would be certain situations
where it would predominantly be a civil wrong and may or may
not amount to a criminal offence
It also observed that in few cases the question arose whether
criminal prosecution can be permitted when the dispute between the
parties is predominantly of civil nature and the proper remedy would
be a civil suit.
In INDIAN OIL CORPN. v. NEPC INDIA LTD. the Supreme
Court extracted the observations made by it in an earlier case, which
are as under:
23. In Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of
Travancore, Cochin [AIR 1953 SC 478], this Court held:
"To constitute an offence of criminal breach of trust, it is
essential that the prosecution must prove, first of all, that
the accused was entrusted with some property or with
any dominion or power over it. It has to be established
further that in respect of the property so entrusted, there
was dishonest misappropriation or dishonest conversion
or dishonest use or disposal in violation of a direction of
law or legal contract, by the accused himself or by
someone else which he willingly suffered to do.
It follows almost axiomatically from this definition that the
ownership or beneficial interest in the property in respect
of which criminal breach of trust is alleged to have been
committed, must be in some person, other than the
accused and the latter must hold it on account of some
person or in some way for his benefit."
9. Whether the interest that the complainant had in the bank
guarantee can be termed as property and whether the revocation of
the bank guarantee without informing it, in violation of the specific
condition to that effect in the bank guarantee, would amount to breach
of trust is the aspect, which needs examination in this case.
The agreement between the complainant and OCA was entered on
29.09.2003. Clause (4) in the said agreement would touch upon the
bank guarantee. The clause reads as under:
4. This EMD may be deposited in the form of a BG/Inland LC in
the name of Atlantic Trade Info PVT Ltd., payable at India.
In case, if the service provider submits a BG, then the format
shall be as approved by the purchaser, such that the same shall
be encasheable on establishment of the relevant LC EMD may
be paid partly in one mode and partly in another mode.
10. From a reading of the above clause, the understanding that
comes is, taking of the bank guarantee by OCA was not a
pre-condition and it was not mandatory. The wording of the said
clause would show that it was an option given to OCA with regard to
the EMD. The wording In case, if the service provider submits a BG,
then the format shall be as approved by the purchaser ... would mean
that at the option of OCA, which is referred as service provider, only,
the bank guarantee shall be taken. The clause wherein it is stated that
EMD may be paid partly in one mode and partly in another mode
would also support the said understanding. But, however, if a bank
guarantee is taken by exercising the option given under the said
agreement and when there is a clause in the bank guarantee to the
specific effect that the bank guarantee shall not be revoked without
prior written unconditional approval/permission from the beneficiary, it
would amount to breach of trust. Whether it would attract and satisfy
the legality underlying the said phrase and whether it would satisfy the
requirement of Section 405 IPC has to be seen.
11. The Supreme Court in INDIAN OIL CORPN.s case (2 supra)
has explained the criminal breach of trust as follows:
22. A careful reading of the section shows that a criminal
breach of trust involves the following ingredients : (a) a person
should have been entrusted with property, or entrusted with
dominion over property; (b) that person should dishonestly
misappropriate or convert to his own use that property, or
dishonestly use or dispose of that property or willfully suffer
any other person to do so; (c) that such misappropriation,
conversion, use or disposal should be in violation of any
direction of law prescribing the mode in which such trust is to
be discharged, or of any legal contract which the person has
made, touching the discharge of such trust. The following are
examples (which include the illustrations under section 405)
where there is 'entrustment':
(i) An 'Executor' of a will, with reference to the estate of
the deceased bequeathed to legatees.
(ii) A 'Guardian' with reference to a property of a minor or
person of unsound mind.
(iii) A 'Trustee' holding a property in trust, with reference
to the beneficiary.
(iv) A 'Warehouse Keeper' with reference to the goods
stored by a depositor.
(v) A carrier with reference to goods entrusted for
transport belonging to the consignor/consignee.
(vi) A servant or agent with reference to the property of
the master or principal.
(vii) A pledgee with reference to the goods pledged by the
owner/borrower.
(viii) A debtor, with reference to a property held in trust
on behalf of the creditor in whose favour he has executed
a deed of pledge-cum-trust. (Under such a deed, the
owner pledges his movable property, generally
vehicle/machinery to the creditor, thereby delivering
possession of the movable property to the creditor and
the creditor in turn delivers back the pledged movable
property to the debtor, to be held in trust and operated
by the debtor).
The examples given by the Supreme Court are not exhaustive
and the trust that was reposed in the bank while the bank guarantee
was taken, would be similar to the trust, which is the third example
cited by the Supreme Court. When once OCA has taken the bank
guarantee in pursuance of an agreement with the complainant, the
interest in the bank guarantee would become a property of the
beneficiary and the breach of trust involved in the said bank guarantee
would definitely be an offence against the beneficiary. It is after all
taken as a guarantee for the performance of the part of the
beneficiary, in the contract. If the bank guarantee becomes a basis of
the contract, it would definitely become a property, held by the bank,
as a trustee of the beneficiary. Hence, the above discussion would
satisfy this Court to come to the conclusion that the monetary interest
involved in the bank guarantee, which is to the benefit of the
beneficiary, would fall within the definition of property under Section
405 IPC.
12. As regards Section 420 IPC, the counsel for the petitioners
contends that in order to constitute the said offence, the complainant
has to prove that there was an intention on the part of the petitioners,
from the inception of the bank guarantee, to cheat the complainant. In
support of his argument, he takes the help of the decision of the
Supreme Court in INDIAN OIL CORPN.s case (2 supra) wherein the
Supreme Court, by cogitating Section 415 IPC and by referring to it's
earlier decision in RAJESH BAJAJ v. STATE OF NCT OF DELHI
[(199) 3 SCC 259] observed that it is not necessary that a
complainant should verbatim reproduce in the body of the complaint,
all the ingredients of the offence he is alleging nor is it necessary that
the complainant should state in so many words that the intention of
the accused was dishonest or fraudulent. It also observed that the
crux of the postulate is the intention of the person who induces the
victim of his representation and not the nature of the transaction
which would become decisive in discerning whether there was
commission of offence or not.
13. In order to understand whether such element of cheating
existed in the minds of the petitioners in this case, it would be
beneficial to refer to the contents of the complaint. Except mentioning
that the first petitioner bank has revoked the bank guarantee without
intimating the same to the complainant, there is no averment in the
complaint that they had an intention to cheat the complainant, from
the inception of the bank guarantee. It is only by virtue of the act of
the petitioner bank, in cancelling the bank guarantee, that the
complainant infers that the petitioner bank has cheated it.
The correspondence between the complaint and the Ombudsman of
the RBI is filed by the counsel for the petitioner. The same is not
refuted by the complainant. By virtue of the decision in RAJIV
THAPAR v. MADAN LAL KAPOOR , the apex court permitted certain
documents to be relied upon. Relevant paragraph reads as follows:
29. The issue being examined in the instant case is the
jurisdiction of the High Court under Section 482 of the Cr.P.C.,
if it chooses to quash the initiation of the prosecution against
an accused, at the stage of issuing process, or at the stage of
committal, or even at the stage of framing of charges. These
are all stages before the commencement of the actual trial. The
1same parameters would naturally be available for later stages
as well. The power vested in the High Court under Section 482
of the Cr.P.C., at the stages referred to hereinabove, would
have far reaching consequences, inasmuch as, it would negate
the prosecutions/complainants case without allowing the
prosecution/complainant to lead evidence. Such a
determination must always be rendered with caution, care and
circumspection. To invoke its inherent jurisdiction under Section
- 482 of Cr.P.C. the High Court has to be fully satisfied, that the
material produced by the accused is such, that would lead to
the conclusion, that his/their defence is based on sound,
reasonable, and indubitable facts; the material produced is
such, as would rule out and displace the assertions contained in
the charges levelled against the accused; and the material
produced is such, as would clearly reject and overrule the
veracity of the allegations contained in the accusations levelled
by the prosecution/complainant. It should be sufficient to rule
out, reject and discard the accusations levelled by the
prosecution/complainant, without the necessity of recording
any evidence. For this the material relied upon by the defence
should not have been refuted, or alternatively, cannot be
justifiably refuted, being material of sterling and impeccable
quality. The material relied upon by the accused should be
such, as would persuade a reasonable person to dismiss and
condemn the actual basis of the accusations as false. In such a
situation, the judicial conscience of the High Court would
persuade it to exercise its power under Section 482 of the
Cr.P.C. to quash such criminal proceedings, for that would
prevent abuse of process of the court, and secure the ends of
justice.
30. Based on the factors canvassed in the foregoing
paragraphs, we would delineate the following steps to
determine the veracity of a prayer for quashing, raised by an
accused by invoking the power vested in the High Court under
Section 482 of the Cr.P.C.:-
(i) Step one, whether the material relied upon by the
accused is sound, reasonable, and indubitable, i.e., the material
is of sterling and impeccable quality?
(ii) Step two, whether the material relied upon by the
accused, would rule out the assertions contained in the charges
levelled against the accused, i.e., the material is sufficient to
reject and overrule the factual assertions contained in the
complaint, i.e., the material is such, as would persuade a
reasonable person to dismiss and condemn the factual basis of
the accusations as false.
(iii) Step three, whether the material relied upon by the
accused, has not been refuted by the prosecution/complainant;
and/or the material is such, that it cannot be justifiably refuted
by the prosecution/complainant?
(iv) Step four, whether proceeding with the trial would
result in an abuse of process of the court, and would not serve
the ends of justice?
If the answer to all the steps is in the affirmative, judicial
conscience of the High Court should persuade it to quash such
criminal - proceedings, in exercise of power vested in it under
Section 482 of the Cr.P.C. Such exercise of power, besides
doing justice to the accused, would save precious court time,
which would otherwise be wasted in holding such a trial (as well
as, proceedings arising therefrom) specially when, it is clear
that the same would not conclude in the conviction of the
accused.
14. The material now relied upon by the petitioners in this case,
would fall within the categories of the material permitted by the Apex
Court, in the above ruling. The complainant reported the matter to
RBI, which acknowledged the receipt of the letter of the complainant
dated 31.10.2004 and mentioned that the complaint was referred to
the concerned bank as per the usual procedure, for necessary action.
The office of the banking Ombudsman addressed a letter to the
complainant referring to the complaint given by the complainant and
calling upon the Branch Manager, UTI Bank Limited, Bhuvaneshwar
Branch and called upon the complainant to be present on a scheduled
date. The findings of the Ombudsman, as reflected in the complaint
given by the complainant, are as under:
(v) It is also a fact that once the LC was established a
transaction had commenced, and on the establishment of the
LC the beneficiary rights under the Bank Guarantee
automatically devolve on the LC opener. There can be no other
interpretation of clause 7 of the Bank Guarantee. Further,
nowhere in the BG it is stated that the original BG is required
for invoking. In banking law and practice it is amply clear that
there should be proof of the identity of the person who invokes
the guarantee and not the mere possession of a certain
document. A document may be lost or misplaced but this in no
way negates the ownership in the eyes of the law. This applies
not only to guarantees but also to other negotiable instrument.
Once it is clear who the beneficiary is he and only he will the
powers to invoke or for that matter revoke the instrument.
(vi) We cannot understand, how UTI bank can come to the
conclusion that whoever have in their possession the original
BG has a right to revoke it even if the beneficiary of the BG is
different. It that were the case then the entire concept, of the
BG mentioning the name and address of the beneficiary is
vitiated and in fact, the entire concept purpose of a BG is
defeated. Whether or not the beneficiary insists on obtaining
the original BG is not a matter for UTI Bank consider. Further,
the UTI Bank is no one to tell how business is to be carried out.
The matters of trust and good faith are as much implicit in a
business as others.
(vii) In para 4 of the letter issued by UTI Bank, on
UTIB/CO/LEG/04/3329 dated 27th May 2004, the bank states
A mere letter from the client stating that he has obtained a
Bank Guarantee is not sound proof to quote the alleged clauses
of the Bank Guarantee It would seem that UTI Bank has
forgotten that they issued a letter confirming the issue of a
Bank Guarantee with a slight amendment to clause 7 of the BG.
(viii) UTI Bank in their above mentioned letter also states that
the undertaking given by them in clause 2 of the BG (Sec 7(a)
is only applicable when the beneficiary has the original
guarantee. This contention is absurd to say the least.
(ix) Lastly, we would like to make it very clear that it is the
banks duty to get written permission of BG beneficiary, before
any attempt of cancellation is made. We at no time gave any
authority to UTI Bank to hand over the original BG to the
applicant. Does the bank hand over the original LC to the
opener?
15. From the said complaint, it can be understood that the defence
taken by the petitioner bank, before the ombudsman, is that the
revocation of bank guarantee is based on the production of original
bank guarantee by OCA. But the fact remains that the original bank
guarantee was not received by the complainant before it was revoked.
Hence, whether the letter of credit taken by the complainant is based
on the assurance underlying the bank guarantee is no understandable.
It also can be understood that the plea of the petitioners before the
ombudsman is that in the usual course, the bank guarantee would be
revoked on the production of original bank guarantee. But, however,
by virtue of the clause under the bank guarantee that the same shall
not be revoked without information to the beneficiary, the bank is
obliged to inform the complainant before the bank guarantee is
revoked, irrespective of at whose instance it is being revoked and
irrespective of the production of original B.G. Whether the element of
cheating was read into the said act of the bank, by the complainant,
and whether it was conceived, as an act of cheating, can be
understood by conduct of the complainant, subsequent to the
revocation of the bank guarantee.
16. As observed earlier, the matter was taken to the Ombudsman
and a letter written to the Ombudsman by the complainant on
05.04.2005 would show that the complainant did not treat the act of
the petitioner bank as an act of cheating and it was satisfied with an
effort to realize the loss caused to it, by way of damages. The letter
stipulates that they are interested in keeping good banking
relationship with UTI Bank and they called upon the UTI to indicate the
compensation amount for the actual loss, which they fondly hope,
would be much reasonable. Hence, the said letter is an evidence of the
satisfaction of the complainant, after the deliberations with
Ombudsman and that it wanted to rest content with recovery of
damages. The complainant also gave another report to the police in
the year 2004 but it appears that it did not go ahead with pursuing the
said report and it took a different course of action by referring the
matter to the Ombudsman and making an effort to realize the amount
from the petitioner bank and it is not known as to what happened to
the above mentioned letter and in the year 2010, the complainant
comes up with filing of this complaint.
POINT No.2: The complaint is assailed by the petitioners as hit by
laches.
17. In M/s. THERMAX LTD.s case (1 supra) the Court came to
deal with the aspect of inordinate delay and laches in the complaint
and held that such delay itself would show that the complaint is
inherently improbable; contains the flavour of civil nature and
considering as such, the Supreme Court held that the Magistrate
committed grave error in calling for a report under Section 156(3) of
the Criminal Procedure Code. In the said case, the dispute related to
the years 1993 1995 and complaint was filed in the year 2002.
In this case, even if the period is construed from the date of filing of
the earlier report i.e. in the year 2004, the delay is about six years.
18. The counsel for the petitioners argues that since the
complainant lost his civil right, he has come up with this compliant
after such a long time.
19. When once the complainant has changed his course of action,
from that of a criminal complaint to that of a civil dispute, by giving up
the earlier complaint and by making effort to realize the damages,
the dispute remains to be only civil dispute thereafter. The Supreme
Court in V.Y. JOSE v. STATE OF GUJARAT observed that there
exists a distinction between pure contractual dispute of a civil nature
and an offence of cheating. Although breach of contract per se would
not come in the way of initiation of criminal proceedings, there cannot
be any doubt whatsoever that in the absence of the averments made
in the complaint petition wherefrom the ingredients of the offence can
be found out, the Court should not be hesitate to exercise its
jurisdiction under Section 482 C.P.C.
20. The counsel for the respondent No.2 furnishes several decisions,
all of which are on the parameters for quash of criminal proceedings.
This Court is aware of the parameters on the basis of which quash of
the proceedings can be done, which were laid down by the Apex Court
in STATE OF HARYANA v. CH. BHAJANLAL , wherein it was held
that in the exercise of the extra-ordinary power under Article 226 or
the inherent powers under Section 482 of the Code of Criminal
Procedure, the following categories of cases are given by way of
illustration, wherein such power could be exercised either to prevent
abuse of the process of any Court or otherwise to secure the ends of
justice, though it may not be possible to lay down any precise, clearly
defined and sufficiently channelised and inflexible guide, myriad kinds
of cases wherein such power should be exercised;
a) Where the allegations made in the First Information Report
or the complaint, even if they are taken at their face value and
accepted in their entirety do not prima facie constitute any
offence or make out a case against the accused;
b) Where the allegations in the First Information Report and
other materials, if any, accompanying the F.I.R. do not disclose
a cognizable offence, justifying an investigation by police
officers under Section 156(1) of the Code except under an
order of a Magistrate within the purview of Section 155(2) of
the Code;
c) Where the uncontroverted allegations made in the FIR or
complaint and the evidence collected in support of the same do
not disclose the commission of any offence and make out a
case against the accused;
d) Where the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable offence,
no investigation is permitted by a police officer without an order
of a magistrate as contemplated under Section 155(2) of the
Code;
e) Where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no
prudent person can ever reach a just conclusion that there is
sufficient ground for proceeding against the accused;
f) Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which a
criminal proceeding is instituted) to the institution and
continuance of the proceeding and/or where there is a specific
provision in the Code or the concerned Act, providing
efficacious redress for the grievance of the aggrieved party;
g) Where a criminal proceeding is manifestly attended with
mala fide and/or where the proceeding is maliciously instituted
with an ulterior motive for wreaking vengeance on the accused
and with a view to spite him due to private and personal
grudge.
The above decision is the basis on which the decision reported
in STATE OF BIHAR v. MD. KHALIQUE is rendered. The decision in
S.M. DATTA v. STATE OF GUJARAI considered the decision in
CH. BHAJANLALs case (5 supra) and the proposition laid down
therein are reiterated. So also, the decision of the Supreme Court in
J.P. SHARMA v. VINOD KUMAR JAIN , though the decision does not
refer to CH. BHAJANLALs case (5 supra), the principles laid down
are the same.
21. The counsel for the respondents also relied on the decision of
the Supreme Court in LALMUNI DEVI v. STATE OF BIHAR in
support of his contention that merely because the complaint spells out
a civil wrong, it is not justified to quash the complaint, if the alleged
acts make out an offence. But, in this case, it s not on the basis of that
the complaint spells out a civil wrong that the crime is held to be liable
as quashed but for the reasons mentioned above. Hence, the said
decision does not bear any relevance. The decision of this Court in
L. RAJA KRISHNA REDDY v. STAWIK DRUGS LIMITES is also on
the same lines and it also referred to CH. BHAJANLALs case
(5 supra).
POINT No.3:
22. With regard to the petitioners being brought to book,
the counsel for the petitioners relied on a decision of the Supreme
Court in SUNIL BHARTI MITTAL v. CENTRAL BUREAU OF
INVESTIGATION wherein an observation that the principle that
criminal intent of person(s) controlling company can be imputed to
company based on the principle alter ego cannot be applied reversely
and when the company is the accused its directors can be roped in
only if there is sufficient incriminating evidence against them, coupled
with intention, is made. In this case, except against A1 and A2,
no allegations against A3 to A6 are made. They are not termed to be
the people, who are in-charge of the day-to-day affairs of the
petitioner bank. The persons, who signed on the bank guarantee, are
the Manager and the Vice President. The manager is not shown in the
list of the accused, though the vice president's signature is found.
Whether it is of the second petitioner herein or not is not decipherable.
23. However for the reasons aforementioned, prosecution cannot be
sustained against any of the petitioners. It can be further said that the
conception of the respondents of the act of the petitioner Bank as a
criminal act stands erased, by his act of taking a civil course of action
i.e. to realize damages. It implies that he has condoned the
criminality, if any, in the act of the accused. He cannot, by the manner
in which his grievance is addressed, change his line of action and paint
the act of the accused, with a brush of criminality as and when he
chooses.
POINT No.4:
In the result, the criminal petition is allowed and the
proceedings in Cr.No.57 of 2011 on the file of the Police Station
Panjagutta, Hyderabad, against the petitioners, are hereby quashed.
As a sequel, the miscellaneous petitions, if any pending, shall stand
closed.
__________
T. RAJANI, J
December 22, 2017
CRLP.No.1405 of 2011
22-12-2017
Axis Bank Limited and others. PETITIONERS
State of Andhra Pradesh, Rep. by Public Prosecutor, High Court of AP, Hyderabad and another... RESPONDENTS
Counsel for Petitioners:MR. S. NIRANJAN REDDY
For MR. N. NAVEEN KUMAR
Counsel for Respondents : PUBLIC PROSECUTOR
MR. M.V. SURESH R2
<GIST :
>HEAD NOTE:
? Cases referred:
1. (2011) 13 SCC 412
2. (2006) 6 SCC 736
3. 2013(3) SCC 330
4. (2009) 3 SCC 78
5. AIR 1992 SC 604
6. (2002) 1 SCC 652
7. (2001) 7 SCC 659
8. (1986) 3 SCC 67
9. (2001) 2 SCC 17
10. 1998 CRLJ 4865
11. (2015) 6 SCC 287
SMT JUSTICE T. RAJANI
CRIMINAL PETITION No.1405 of 2011
ORDER:
The petitioners figure as accused in Cr.No.57 of 2011 on the file
of the Police Station, Panjagutta, Hyderabad. The offences alleged
against the petitioners are under Sections 120-B, 406, 420 read with
Section 34 of the Indian Penal Code, 1860 and 156(3) of the Criminal
Procedure Code. The petitioners have filed this petition seeking for
quash of the proceedings against them, in the above crime.
2. Heard the counsel for the petitioners, the counsel for the second
respondent and the learned Public Prosecutor appearing on behalf of
the first respondent.
3. The revocation of bank guarantee, which was taken with the
first petitioner bank herein, is the basis of this complaint. From the
averments in the complaint, it can be understood, that the
complainant is a company incorporated under the Companies Act,
1956. During the course of its business, the complainant entered into
a contract with M/s. Orissa Computer Associates (OCA), for
construction and implementation of e-books and as per the terms of
the contract, the said OCA gave a bank guarantee for Rs.2.2 crores,
through the first petitioner and the bank guarantee was executed by
the first petitioner and its Manager and Vice President, D.
Bhattacharaya. The OCA provided copy of the said bank guarantee to
the complainant company, which is known to the first petitioner, which
was formally known as UTI Bank Limited. The tenure of the said bank
guarantee is one year from the date of its execution. One of the
conditions in the bank guarantee is that the first petitioner shall not
revoke the bank guarantee without prior written unconditional
approval/permission from the beneficiary, before expiry of the claim
period of the said bank guarantee. Based on and acting upon letter
dated 15.10.2003 given by the first petitioner, the complainant
company proceeded and opened a letter of credit for US $ 2,00,000
through Barclays Bank dated 18.11.2003 through Habib Bank Ag
Zurich. The first petitioner did not send the original copy of the bank
guarantee, in spite of the demand by the complainant company,
though the same has to be made available to the complainant.
4. The complainant company has been expecting the same to be
delivered to it by the bank, but to its surprise, received a
communication from the first petitioner, dated 10.10.2003, stating
that the bank guarantee has been cancelled at the request of the
applicant for the same i.e. OCA and that the original has been
submitted to it by OCA. This act of cancellation of the bank guarantee
by the bank without written confirmation from the beneficiary is
contrary to well established business norms and is a clear violation of
the trust reposed by the complainant company. It is clear that A1
and A2 colluded with OCA and acted in concert and made the
complainant company to believe that there is existence of valid and
subsisting bank guarantee and acting upon the said belief, the
company opened valuable letters of credit. The Ombudsman, Reserve
Bank of India, Bhuvaneshwar, after scrutinizing all the documents and
transactions, found something fishy and suspicious in the matter and
passed an order awarding damages of Rs.5.75 crores from Axis Bank
Limited and also advised them to file both criminal complaint and civil
suits against the Axis Bank. Now the said amount has bulged into
Rs.10.76 crores with interest. A1 is the company incorporated under
the Companies Act while A3 to A18 are the Chairman cum Managing
Director, Directors and Company Secretary respectively.
5. Aggrieved by the said complaint, which is filed in the year 2010,
that is almost after seven years of taking the bank guarantee, the
petitioners come before this Court by way of this quash petition,
on the following grounds.
The petitioners have nothing to do with the alleged offences.
The transaction, even if it is assumed to be true, is purely civil in
nature and hence, the registration of crime is unsustainable.
The petitioners issued bank guarantee at the request of its constituent
and customer OCA, in favour of the complainant and it appears that
there was a dispute between the customer of the petitioner and the
complainant and subsequently, OCA returned the original bank
guarantee to the first respondent for cancellation and since the original
bank guarantee is returned, as per the banking procedure, the same
was cancelled and the same was duly intimated to the complainant on
31.12.2003. OCA has procured the bank guarantee and as such,
it ought to have made A1 and the correct officials representing it, as
accused and the alleged business transaction of the complainant is
with OCA and not with the petitioner bank. When the guarantee issued
by the petitioner bank has not reached the hands of the complainant,
the contract of guarantee cannot be expected to be commenced. In
fact, till the bank guarantee reached the complainant, no contractual
relationship of guarantor bank and complainant/beneficiary is
established. Moreover, nobody acted under the bank guarantee, since
the same is cancelled by surrendering the original bank guarantee to
the petitioner bank. Therefore, malafides or the ground that the
complainant opened letter of credit cannot be pleaded as a ground for
the complaint. When the complainant has not insisted on the original
bank guarantee, even after coming to know that OCA has agreed to
issue such a bank guarantee to them, clearly shows that no such
contract has come into existence. As per the Contract Law, the original
bank guarantee has to be obtained by the beneficiary and only after
tendering the same to the bank, it can be invoked. When the
complainant itself has no right, it cannot claim or prosecute the
petitioners for the alleged offences. The complaint alleged by the
complainant before the banking ombudsman is rejected by order dated
30.04.2005. The averments in the complaint that damages were
awarded by the Ombudsman is not correct. No such award was passed
by the Ombudsman. Even assuming that the Ombudsman advised the
complainant to file criminal case, lodging a complaint at very belated
stage is a clear, deliberate and intentional act on the part of the
complainant. There are no allegations in the complaint that there was
any fraudulent intention at the time of execution. The bank guarantee
was cancelled in December 2003 and at that time, the
Executives/Directors of petitioner bank, who were arrayed as A3, A4,
A7 to A16, were not in the petitioner bank as Executives/Directors and
all of them joined the petitioner bank at a later period and hence, they
cannot be made liable.
6. From the arguments extended on either side, the points that
come up for consideration are:
1. Whether the allegations in the complaint would
constitute the alleged offences, prima facie
2. Whether the delay in the complaint would vitiate it.
3. Whether the allegations in the complaint would
make all the petitioners liable for the alleged
offences.
4. To what result.
POINT No.1:
7. The offences for which the complaint was filed are section 420
and 406 IPC. The counsel for the petitioners contends that there is no
breach of trust that is committed by the petitioners, as, for a breach of
trust to be committed, there should be entrustment of property,
as required under Section 405 IPC, which defines criminal breach of
trust. The same is extracted hereunder for quick reference and
understanding:
405. 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.
8. The Supreme Court in its decision in M/s. THERMAX LTD. v.
K.M. JOHNY observed as under:
Though a case of breach of trust may be both a civil wrong
and a criminal offence but there would be certain situations
where it would predominantly be a civil wrong and may or may
not amount to a criminal offence
It also observed that in few cases the question arose whether
criminal prosecution can be permitted when the dispute between the
parties is predominantly of civil nature and the proper remedy would
be a civil suit.
In INDIAN OIL CORPN. v. NEPC INDIA LTD. the Supreme
Court extracted the observations made by it in an earlier case, which
are as under:
23. In Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of
Travancore, Cochin [AIR 1953 SC 478], this Court held:
"To constitute an offence of criminal breach of trust, it is
essential that the prosecution must prove, first of all, that
the accused was entrusted with some property or with
any dominion or power over it. It has to be established
further that in respect of the property so entrusted, there
was dishonest misappropriation or dishonest conversion
or dishonest use or disposal in violation of a direction of
law or legal contract, by the accused himself or by
someone else which he willingly suffered to do.
It follows almost axiomatically from this definition that the
ownership or beneficial interest in the property in respect
of which criminal breach of trust is alleged to have been
committed, must be in some person, other than the
accused and the latter must hold it on account of some
person or in some way for his benefit."
9. Whether the interest that the complainant had in the bank
guarantee can be termed as property and whether the revocation of
the bank guarantee without informing it, in violation of the specific
condition to that effect in the bank guarantee, would amount to breach
of trust is the aspect, which needs examination in this case.
The agreement between the complainant and OCA was entered on
29.09.2003. Clause (4) in the said agreement would touch upon the
bank guarantee. The clause reads as under:
4. This EMD may be deposited in the form of a BG/Inland LC in
the name of Atlantic Trade Info PVT Ltd., payable at India.
In case, if the service provider submits a BG, then the format
shall be as approved by the purchaser, such that the same shall
be encasheable on establishment of the relevant LC EMD may
be paid partly in one mode and partly in another mode.
10. From a reading of the above clause, the understanding that
comes is, taking of the bank guarantee by OCA was not a
pre-condition and it was not mandatory. The wording of the said
clause would show that it was an option given to OCA with regard to
the EMD. The wording In case, if the service provider submits a BG,
then the format shall be as approved by the purchaser ... would mean
that at the option of OCA, which is referred as service provider, only,
the bank guarantee shall be taken. The clause wherein it is stated that
EMD may be paid partly in one mode and partly in another mode
would also support the said understanding. But, however, if a bank
guarantee is taken by exercising the option given under the said
agreement and when there is a clause in the bank guarantee to the
specific effect that the bank guarantee shall not be revoked without
prior written unconditional approval/permission from the beneficiary, it
would amount to breach of trust. Whether it would attract and satisfy
the legality underlying the said phrase and whether it would satisfy the
requirement of Section 405 IPC has to be seen.
11. The Supreme Court in INDIAN OIL CORPN.s case (2 supra)
has explained the criminal breach of trust as follows:
22. A careful reading of the section shows that a criminal
breach of trust involves the following ingredients : (a) a person
should have been entrusted with property, or entrusted with
dominion over property; (b) that person should dishonestly
misappropriate or convert to his own use that property, or
dishonestly use or dispose of that property or willfully suffer
any other person to do so; (c) that such misappropriation,
conversion, use or disposal should be in violation of any
direction of law prescribing the mode in which such trust is to
be discharged, or of any legal contract which the person has
made, touching the discharge of such trust. The following are
examples (which include the illustrations under section 405)
where there is 'entrustment':
(i) An 'Executor' of a will, with reference to the estate of
the deceased bequeathed to legatees.
(ii) A 'Guardian' with reference to a property of a minor or
person of unsound mind.
(iii) A 'Trustee' holding a property in trust, with reference
to the beneficiary.
(iv) A 'Warehouse Keeper' with reference to the goods
stored by a depositor.
(v) A carrier with reference to goods entrusted for
transport belonging to the consignor/consignee.
(vi) A servant or agent with reference to the property of
the master or principal.
(vii) A pledgee with reference to the goods pledged by the
owner/borrower.
(viii) A debtor, with reference to a property held in trust
on behalf of the creditor in whose favour he has executed
a deed of pledge-cum-trust. (Under such a deed, the
owner pledges his movable property, generally
vehicle/machinery to the creditor, thereby delivering
possession of the movable property to the creditor and
the creditor in turn delivers back the pledged movable
property to the debtor, to be held in trust and operated
by the debtor).
The examples given by the Supreme Court are not exhaustive
and the trust that was reposed in the bank while the bank guarantee
was taken, would be similar to the trust, which is the third example
cited by the Supreme Court. When once OCA has taken the bank
guarantee in pursuance of an agreement with the complainant, the
interest in the bank guarantee would become a property of the
beneficiary and the breach of trust involved in the said bank guarantee
would definitely be an offence against the beneficiary. It is after all
taken as a guarantee for the performance of the part of the
beneficiary, in the contract. If the bank guarantee becomes a basis of
the contract, it would definitely become a property, held by the bank,
as a trustee of the beneficiary. Hence, the above discussion would
satisfy this Court to come to the conclusion that the monetary interest
involved in the bank guarantee, which is to the benefit of the
beneficiary, would fall within the definition of property under Section
405 IPC.
12. As regards Section 420 IPC, the counsel for the petitioners
contends that in order to constitute the said offence, the complainant
has to prove that there was an intention on the part of the petitioners,
from the inception of the bank guarantee, to cheat the complainant. In
support of his argument, he takes the help of the decision of the
Supreme Court in INDIAN OIL CORPN.s case (2 supra) wherein the
Supreme Court, by cogitating Section 415 IPC and by referring to it's
earlier decision in RAJESH BAJAJ v. STATE OF NCT OF DELHI
[(199) 3 SCC 259] observed that it is not necessary that a
complainant should verbatim reproduce in the body of the complaint,
all the ingredients of the offence he is alleging nor is it necessary that
the complainant should state in so many words that the intention of
the accused was dishonest or fraudulent. It also observed that the
crux of the postulate is the intention of the person who induces the
victim of his representation and not the nature of the transaction
which would become decisive in discerning whether there was
commission of offence or not.
13. In order to understand whether such element of cheating
existed in the minds of the petitioners in this case, it would be
beneficial to refer to the contents of the complaint. Except mentioning
that the first petitioner bank has revoked the bank guarantee without
intimating the same to the complainant, there is no averment in the
complaint that they had an intention to cheat the complainant, from
the inception of the bank guarantee. It is only by virtue of the act of
the petitioner bank, in cancelling the bank guarantee, that the
complainant infers that the petitioner bank has cheated it.
The correspondence between the complaint and the Ombudsman of
the RBI is filed by the counsel for the petitioner. The same is not
refuted by the complainant. By virtue of the decision in RAJIV
THAPAR v. MADAN LAL KAPOOR , the apex court permitted certain
documents to be relied upon. Relevant paragraph reads as follows:
29. The issue being examined in the instant case is the
jurisdiction of the High Court under Section 482 of the Cr.P.C.,
if it chooses to quash the initiation of the prosecution against
an accused, at the stage of issuing process, or at the stage of
committal, or even at the stage of framing of charges. These
are all stages before the commencement of the actual trial. The
1same parameters would naturally be available for later stages
as well. The power vested in the High Court under Section 482
of the Cr.P.C., at the stages referred to hereinabove, would
have far reaching consequences, inasmuch as, it would negate
the prosecutions/complainants case without allowing the
prosecution/complainant to lead evidence. Such a
determination must always be rendered with caution, care and
circumspection. To invoke its inherent jurisdiction under Section
- 482 of Cr.P.C. the High Court has to be fully satisfied, that the
material produced by the accused is such, that would lead to
the conclusion, that his/their defence is based on sound,
reasonable, and indubitable facts; the material produced is
such, as would rule out and displace the assertions contained in
the charges levelled against the accused; and the material
produced is such, as would clearly reject and overrule the
veracity of the allegations contained in the accusations levelled
by the prosecution/complainant. It should be sufficient to rule
out, reject and discard the accusations levelled by the
prosecution/complainant, without the necessity of recording
any evidence. For this the material relied upon by the defence
should not have been refuted, or alternatively, cannot be
justifiably refuted, being material of sterling and impeccable
quality. The material relied upon by the accused should be
such, as would persuade a reasonable person to dismiss and
condemn the actual basis of the accusations as false. In such a
situation, the judicial conscience of the High Court would
persuade it to exercise its power under Section 482 of the
Cr.P.C. to quash such criminal proceedings, for that would
prevent abuse of process of the court, and secure the ends of
justice.
30. Based on the factors canvassed in the foregoing
paragraphs, we would delineate the following steps to
determine the veracity of a prayer for quashing, raised by an
accused by invoking the power vested in the High Court under
Section 482 of the Cr.P.C.:-
(i) Step one, whether the material relied upon by the
accused is sound, reasonable, and indubitable, i.e., the material
is of sterling and impeccable quality?
(ii) Step two, whether the material relied upon by the
accused, would rule out the assertions contained in the charges
levelled against the accused, i.e., the material is sufficient to
reject and overrule the factual assertions contained in the
complaint, i.e., the material is such, as would persuade a
reasonable person to dismiss and condemn the factual basis of
the accusations as false.
(iii) Step three, whether the material relied upon by the
accused, has not been refuted by the prosecution/complainant;
and/or the material is such, that it cannot be justifiably refuted
by the prosecution/complainant?
(iv) Step four, whether proceeding with the trial would
result in an abuse of process of the court, and would not serve
the ends of justice?
If the answer to all the steps is in the affirmative, judicial
conscience of the High Court should persuade it to quash such
criminal - proceedings, in exercise of power vested in it under
Section 482 of the Cr.P.C. Such exercise of power, besides
doing justice to the accused, would save precious court time,
which would otherwise be wasted in holding such a trial (as well
as, proceedings arising therefrom) specially when, it is clear
that the same would not conclude in the conviction of the
accused.
14. The material now relied upon by the petitioners in this case,
would fall within the categories of the material permitted by the Apex
Court, in the above ruling. The complainant reported the matter to
RBI, which acknowledged the receipt of the letter of the complainant
dated 31.10.2004 and mentioned that the complaint was referred to
the concerned bank as per the usual procedure, for necessary action.
The office of the banking Ombudsman addressed a letter to the
complainant referring to the complaint given by the complainant and
calling upon the Branch Manager, UTI Bank Limited, Bhuvaneshwar
Branch and called upon the complainant to be present on a scheduled
date. The findings of the Ombudsman, as reflected in the complaint
given by the complainant, are as under:
(v) It is also a fact that once the LC was established a
transaction had commenced, and on the establishment of the
LC the beneficiary rights under the Bank Guarantee
automatically devolve on the LC opener. There can be no other
interpretation of clause 7 of the Bank Guarantee. Further,
nowhere in the BG it is stated that the original BG is required
for invoking. In banking law and practice it is amply clear that
there should be proof of the identity of the person who invokes
the guarantee and not the mere possession of a certain
document. A document may be lost or misplaced but this in no
way negates the ownership in the eyes of the law. This applies
not only to guarantees but also to other negotiable instrument.
Once it is clear who the beneficiary is he and only he will the
powers to invoke or for that matter revoke the instrument.
(vi) We cannot understand, how UTI bank can come to the
conclusion that whoever have in their possession the original
BG has a right to revoke it even if the beneficiary of the BG is
different. It that were the case then the entire concept, of the
BG mentioning the name and address of the beneficiary is
vitiated and in fact, the entire concept purpose of a BG is
defeated. Whether or not the beneficiary insists on obtaining
the original BG is not a matter for UTI Bank consider. Further,
the UTI Bank is no one to tell how business is to be carried out.
The matters of trust and good faith are as much implicit in a
business as others.
(vii) In para 4 of the letter issued by UTI Bank, on
UTIB/CO/LEG/04/3329 dated 27th May 2004, the bank states
A mere letter from the client stating that he has obtained a
Bank Guarantee is not sound proof to quote the alleged clauses
of the Bank Guarantee It would seem that UTI Bank has
forgotten that they issued a letter confirming the issue of a
Bank Guarantee with a slight amendment to clause 7 of the BG.
(viii) UTI Bank in their above mentioned letter also states that
the undertaking given by them in clause 2 of the BG (Sec 7(a)
is only applicable when the beneficiary has the original
guarantee. This contention is absurd to say the least.
(ix) Lastly, we would like to make it very clear that it is the
banks duty to get written permission of BG beneficiary, before
any attempt of cancellation is made. We at no time gave any
authority to UTI Bank to hand over the original BG to the
applicant. Does the bank hand over the original LC to the
opener?
15. From the said complaint, it can be understood that the defence
taken by the petitioner bank, before the ombudsman, is that the
revocation of bank guarantee is based on the production of original
bank guarantee by OCA. But the fact remains that the original bank
guarantee was not received by the complainant before it was revoked.
Hence, whether the letter of credit taken by the complainant is based
on the assurance underlying the bank guarantee is no understandable.
It also can be understood that the plea of the petitioners before the
ombudsman is that in the usual course, the bank guarantee would be
revoked on the production of original bank guarantee. But, however,
by virtue of the clause under the bank guarantee that the same shall
not be revoked without information to the beneficiary, the bank is
obliged to inform the complainant before the bank guarantee is
revoked, irrespective of at whose instance it is being revoked and
irrespective of the production of original B.G. Whether the element of
cheating was read into the said act of the bank, by the complainant,
and whether it was conceived, as an act of cheating, can be
understood by conduct of the complainant, subsequent to the
revocation of the bank guarantee.
16. As observed earlier, the matter was taken to the Ombudsman
and a letter written to the Ombudsman by the complainant on
05.04.2005 would show that the complainant did not treat the act of
the petitioner bank as an act of cheating and it was satisfied with an
effort to realize the loss caused to it, by way of damages. The letter
stipulates that they are interested in keeping good banking
relationship with UTI Bank and they called upon the UTI to indicate the
compensation amount for the actual loss, which they fondly hope,
would be much reasonable. Hence, the said letter is an evidence of the
satisfaction of the complainant, after the deliberations with
Ombudsman and that it wanted to rest content with recovery of
damages. The complainant also gave another report to the police in
the year 2004 but it appears that it did not go ahead with pursuing the
said report and it took a different course of action by referring the
matter to the Ombudsman and making an effort to realize the amount
from the petitioner bank and it is not known as to what happened to
the above mentioned letter and in the year 2010, the complainant
comes up with filing of this complaint.
POINT No.2: The complaint is assailed by the petitioners as hit by
laches.
17. In M/s. THERMAX LTD.s case (1 supra) the Court came to
deal with the aspect of inordinate delay and laches in the complaint
and held that such delay itself would show that the complaint is
inherently improbable; contains the flavour of civil nature and
considering as such, the Supreme Court held that the Magistrate
committed grave error in calling for a report under Section 156(3) of
the Criminal Procedure Code. In the said case, the dispute related to
the years 1993 1995 and complaint was filed in the year 2002.
In this case, even if the period is construed from the date of filing of
the earlier report i.e. in the year 2004, the delay is about six years.
18. The counsel for the petitioners argues that since the
complainant lost his civil right, he has come up with this compliant
after such a long time.
19. When once the complainant has changed his course of action,
from that of a criminal complaint to that of a civil dispute, by giving up
the earlier complaint and by making effort to realize the damages,
the dispute remains to be only civil dispute thereafter. The Supreme
Court in V.Y. JOSE v. STATE OF GUJARAT observed that there
exists a distinction between pure contractual dispute of a civil nature
and an offence of cheating. Although breach of contract per se would
not come in the way of initiation of criminal proceedings, there cannot
be any doubt whatsoever that in the absence of the averments made
in the complaint petition wherefrom the ingredients of the offence can
be found out, the Court should not be hesitate to exercise its
jurisdiction under Section 482 C.P.C.
20. The counsel for the respondent No.2 furnishes several decisions,
all of which are on the parameters for quash of criminal proceedings.
This Court is aware of the parameters on the basis of which quash of
the proceedings can be done, which were laid down by the Apex Court
in STATE OF HARYANA v. CH. BHAJANLAL , wherein it was held
that in the exercise of the extra-ordinary power under Article 226 or
the inherent powers under Section 482 of the Code of Criminal
Procedure, the following categories of cases are given by way of
illustration, wherein such power could be exercised either to prevent
abuse of the process of any Court or otherwise to secure the ends of
justice, though it may not be possible to lay down any precise, clearly
defined and sufficiently channelised and inflexible guide, myriad kinds
of cases wherein such power should be exercised;
a) Where the allegations made in the First Information Report
or the complaint, even if they are taken at their face value and
accepted in their entirety do not prima facie constitute any
offence or make out a case against the accused;
b) Where the allegations in the First Information Report and
other materials, if any, accompanying the F.I.R. do not disclose
a cognizable offence, justifying an investigation by police
officers under Section 156(1) of the Code except under an
order of a Magistrate within the purview of Section 155(2) of
the Code;
c) Where the uncontroverted allegations made in the FIR or
complaint and the evidence collected in support of the same do
not disclose the commission of any offence and make out a
case against the accused;
d) Where the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable offence,
no investigation is permitted by a police officer without an order
of a magistrate as contemplated under Section 155(2) of the
Code;
e) Where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no
prudent person can ever reach a just conclusion that there is
sufficient ground for proceeding against the accused;
f) Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which a
criminal proceeding is instituted) to the institution and
continuance of the proceeding and/or where there is a specific
provision in the Code or the concerned Act, providing
efficacious redress for the grievance of the aggrieved party;
g) Where a criminal proceeding is manifestly attended with
mala fide and/or where the proceeding is maliciously instituted
with an ulterior motive for wreaking vengeance on the accused
and with a view to spite him due to private and personal
grudge.
The above decision is the basis on which the decision reported
in STATE OF BIHAR v. MD. KHALIQUE is rendered. The decision in
S.M. DATTA v. STATE OF GUJARAI considered the decision in
CH. BHAJANLALs case (5 supra) and the proposition laid down
therein are reiterated. So also, the decision of the Supreme Court in
J.P. SHARMA v. VINOD KUMAR JAIN , though the decision does not
refer to CH. BHAJANLALs case (5 supra), the principles laid down
are the same.
21. The counsel for the respondents also relied on the decision of
the Supreme Court in LALMUNI DEVI v. STATE OF BIHAR in
support of his contention that merely because the complaint spells out
a civil wrong, it is not justified to quash the complaint, if the alleged
acts make out an offence. But, in this case, it s not on the basis of that
the complaint spells out a civil wrong that the crime is held to be liable
as quashed but for the reasons mentioned above. Hence, the said
decision does not bear any relevance. The decision of this Court in
L. RAJA KRISHNA REDDY v. STAWIK DRUGS LIMITES is also on
the same lines and it also referred to CH. BHAJANLALs case
(5 supra).
POINT No.3:
22. With regard to the petitioners being brought to book,
the counsel for the petitioners relied on a decision of the Supreme
Court in SUNIL BHARTI MITTAL v. CENTRAL BUREAU OF
INVESTIGATION wherein an observation that the principle that
criminal intent of person(s) controlling company can be imputed to
company based on the principle alter ego cannot be applied reversely
and when the company is the accused its directors can be roped in
only if there is sufficient incriminating evidence against them, coupled
with intention, is made. In this case, except against A1 and A2,
no allegations against A3 to A6 are made. They are not termed to be
the people, who are in-charge of the day-to-day affairs of the
petitioner bank. The persons, who signed on the bank guarantee, are
the Manager and the Vice President. The manager is not shown in the
list of the accused, though the vice president's signature is found.
Whether it is of the second petitioner herein or not is not decipherable.
23. However for the reasons aforementioned, prosecution cannot be
sustained against any of the petitioners. It can be further said that the
conception of the respondents of the act of the petitioner Bank as a
criminal act stands erased, by his act of taking a civil course of action
i.e. to realize damages. It implies that he has condoned the
criminality, if any, in the act of the accused. He cannot, by the manner
in which his grievance is addressed, change his line of action and paint
the act of the accused, with a brush of criminality as and when he
chooses.
POINT No.4:
In the result, the criminal petition is allowed and the
proceedings in Cr.No.57 of 2011 on the file of the Police Station
Panjagutta, Hyderabad, against the petitioners, are hereby quashed.
As a sequel, the miscellaneous petitions, if any pending, shall stand
closed.
__________
T. RAJANI, J
December 22, 2017
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