Ashok Kumar Grover vs State of Haryana

P.K. Jain, J.—This petition has been filed u/s 482 of the Code of Criminal Procedure (for short "the Code"), for quashing F.I.R. No. 366, dated May 2, 1994, registered at Police Station, City Fatehabad, for the offences u/s 406/420 of the Indian Penal Code, 1860, and further proceedings in consequence thereof.

The facts which can be gathered from the record and necessary for the disposal of this petition are that the petitioner secured a cash credit limit to the extent of Rs. 3,00,000 on October 19, 1994, from Punjab National Bank, Fatehabad, repayment of which was guaranteed by one Shri Sant Lal Mehta. The petitioner hypothecated the entire stock belonging to him which was then available with him and which, thereafter, from time to time during the continuance of the agreement would be brought in or stored in or about the premises or godowns of the premises or in transit or wherever the same may be. To secure the repayment of the amount due, the petitioner also created an equitable mortgage in respect of his immovable property in favour of the said bank. This facility was availed of some time up to December, 1992. A sum of Rs. 3,55,456 became due and payable by the petitioner and his guarantor towards principal and interest as on August 17, 1993. After serving a legal notice, the said bank filed a civil suit for the recovery of the said amount and also for enforcing the recovery thereof by the sale of the mortgaged property under Order 34 of the Civil Procedure Code, in the Civil Court at Fatehabad, which suit is admittedly pending till today.

On April 15, 1994, the said bank forwarded a complaint on a printed proforma alleging therein that the petitioner was to pay the loan amount with interest and other charges in instalments, but instead of paying the amount to the bank, with deceitful means, has disposed of the goods without paying the proceeds thereof to the bank and has misappropriated the same for his own use. It was further alleged that this act on the part of the petitioner amounted to criminal breach of trust as well as cheating and Shri Sant Lal, the guarantor, abetted the commission of the said offence. It was also alleged that the intention of these persons from the very beginning was to cheat the bank and by misrepresentation induced the bank to part with the heavy amount and caused loss to it. On the basis of this complaint the impugned first information report was registered at Police Station, City Fatehabad. It has been alleged in the present petition that the cash credit facility was obtained by the petitioner on the personal guarantee of Shri Sant Lal and after creating an equitable mortgage of his immovable property besides the hypothecation of the goods in the store ; that the petitioner suffered heavy losses and could not make the payment in time; that the transaction between the parties was commercial in nature and no offence u/s 420 or Section 406 of the Indian Penal Code, 1860, is made out. It has been alleged that the bank has already filed a civil suit for the recovery of the principal and the interest which is still pending and by means of the present criminal proceedings, the bank is misusing the criminal forum to pressurise the petitioner to repay the loan.

Notice of motion was given to the respondent-State. In reply, it has been stated that after investigation a charge-sheet has been submitted to the court, that the petition is bad for non-joinder of Punjab National Bank, a necessary party, and that after investigation a prima facie case u/s 406/420 of the Indian Penal Code, 1860, was made out against the petitioner. It has been further stated that the petitioner dishonestly disposed of the hypothecated goods without paying the proceeds to the bank and has misappropriated the same and the intention of the petitioner was only to cheat the bank from the very beginning. It is thus stated that the present petition is, in itself, an abuse of the process of the court.

Shri Atul Lakhanpal, advocate and learned counsel for the petitioner, has argued that on the facts mentioned in the complaint made by the bank on the basis of which the impugned first information report has been recorded, no offence either u/s 406 or Section 420 of the Indian Penal Code, 1860, is made out. It has been further argued by learned counsel that the transaction between the parties is a transaction of cash credit facility which is purely civil in nature and criminal process cannot be misused to coerce the petitioner to discharge a civil liability.

On the other hand Shri Raman Gour, advocate, appearing on behalf of the State of Haryana, has argued that this court should not exercise its jurisdiction u/s 482 of the Code and leave the petitioner to approach the trial Magistrate to consider all the pleas being raised by the petitioner before this court. On the merits it has been argued by learned counsel that the petitioner has not repaid the sale proceeds of the hypothecated goods to the complainant-bank which is enough to constitute an offence u/s 406 as well as Section 420 of the Indian Penal Code, 1860.

I have given my careful thought to the respective arguments advanced at the Bar.

In Madhavrao Jiwajirao Scindia and Others Vs. Sambhajirao Chandrojirao Angre and Others, , the apex court expounded the law regarding the exercise of the inherent jurisdiction u/s 482 of the Code by the High Court in such like matter as under (page 711) :

"The legal position is well settled that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the court is as to whether the uncontroverted allegations as made prima facie establish the offence. It is also for the court to take into consideration any special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue. This is so on the basis that the court cannot be utilised for any oblique purpose and where in the opinion of the court chances of an ultimate conviction are bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the court may while taking into consideration the special facts of a case also quash the proceedings even though it may be at a preliminary stage."

After a review of the entire case law available on the subject and examining the various provisions of the Code and the Constitution of India, their Lordships of the Supreme Court of India in a well-known judgment rendered in State of Haryana and others Vs. Ch. Bhajan Lal and others, , illustrate certain categories of cases wherein a court in exercise of its extraordinary powers under Article 226 of the Constitution of India can quash a first information report or a complaint. Categories Nos. 1 and 3 read as under (page 629) :

"1. 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.

Where the uncontroverted allegations made in the first information report 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."

Thus, where the allegations made in a complaint/first information report, even if they are taken at their face value and accepted in entirety, do not constitute prima facie an offence or make out a case against the accused, the court is well within its powers to quash the complaint/first information report.

Turning to the case in hand, it is not disputed that the petitioner had secured cash credit facility up to the limit of Rs. 3,00,000 from the complainant-bank on a guarantee given by Shri Sant Lal Mehta and after creating an equitable mortgage on his immovable property by the petitioner. In addition thereto, the petitioner hypothecated his stock for the repayment of any amount. It is also not disputed that the petitioner operated the said amount, availed of the said facility and made certain payments from time to time for a period of about two years. It is also an admitted fact that when a sum of Rs. 3,55,456 became due as on August 17, 1993, from the petitioner on account of principal and interest, the complainant-hank filed a civil suit for the recovery of the said amount and also to enforce the equitable mortgage for the recovery of the decretal amount on August 18, 1993, which suit is still pending in the civil court at Fatehabad. It was only on April 15, 1994, that the complainant-bank forwarded a complaint, on the basis of which the present first information report had been recorded for the offence u/s 406/420 of the Indian Penal Code, 1860. The question, thus, arises as to whether on these facts any offence can he said to be made out.

To constitute an offence u/s 406 or 420 of the Indian Penal Code, dishonest intention on the part of the offender is essential. Learned State counsel has failed to point out as to how dishonest intention can be inferred on the part of the petitioner from the factual position mentioned above. Admittedly, the cash credit facility was availed of by the petitioner for quite some time and he had been making payment. The balance of the principal along with the interest are duly secured not only by a guarantor but by creating an equitable mortgage of immovable property of the petitioner. If the petitioner has failed to pay the principal and the interest, or has been irregular in making payments within the time agreed upon, the same can be said to be a breach of contract. Such a default cannot constitute an offence either u/s 406 or section 420 of the Indian Penal Code, 1860. The complainant-bank has already instituted a civil suit for the recovery of the amount due from the petitioner and for the enforcement of the equitable mortgage for the realisation of the said amount.

It is well-settled that judicial process should not be an instrument of oppression or needless harassment. Criminal proceedings cannot be used as a means of redressing civil wrongs or for recovery of civil debts in the absence of any provision to that effect. The object of civil proceedings is to recover money or any other property or the enforcement of a right, whereas the object of criminal proceeding is the punishment for an offence. At the stage of summoning a person as an accused in a case like the present one, the court would be circumspect and judicious in exercising discretion and should take all relevant facts and circumstances into consideration before issuing process lest it would be an instrument in the hands of a party to coerce a party opposite for the enforcement of a civil liability.

As a result of the above discussion, I hold that from the admitted factual position discussed above, no offence u/s 406 or Section 420 of the Indian Penal Code, 1860, is made out against the petitioner. The liability, if any, of the petitioner, as disclosed from the complaint made by the bank, is civil in nature. The impugned first information report recorded, on the basis of the said complaint, is merely an abuse of the process of law and liable to be quashed. Consequently, this petition is allowed. First Information Report No. 366, dated May 2, 1994, registered at Police Station, City Fatehabad, for the offences u/s 406/420 of the Indian Penal Code, 1860, and the further proceedings in consequence thereof pending in the court of the Sub-Divisional Judicial Magistrate, Fatehabad, are hereby quashed.