Jayaprakash vs The State

S. Nagamuthu, J.—Seeking to quash the FIR in Crime No. 224 of 2010, on the file of the first respondent police, the petitioner, who is the sole accused in the case, has come up with this petition. The second respondent is the de-facto complainant in the case. The said case has been registered for offence under Sections 406 and 420 IPC.

I have heard the learned Senior counsel appearing for the petitioner, the learned Additional Public Prosecutor appearing on behalf of the first respondent the learned counsel appearing for the second respondent and I have also perused the records carefully.

The facts of the case would be as follows:

According to the prosecution, the petitioner/accused induced the second respondent/de-facto complainant during the month August 2007 to invest money to the tune of Rs.60 lakhs in a company to be promoted by the petitioner. He also assured the second respondent that he could be taken as a share holder. Believing the said inducement, it is alleged that the second respondent paid Rs.60 lakhs and he became a shareholder. Later on, the second respondent realised that the petitioner was not doing the business as it was expected of and instead he was going against the promise made. Therefore, according to the second respondent, he insisted for the return of the amount invested by him. It is further alleged that the petitioner accordingly took back the shares from the second respondent, but he did not pay the amount due under the shares to the tune of Rs.60 lakhs. The cheques issued by the petitioner also bounced back. These acts of the petitioner, according to the second respondent, amount to offence punishable under Sections 406 and 420 IPC. On these allegations, the FIR has been registered.

The learned Senior counsel appearing for the petitioner would submit that it is true that the second respondent became a share holder in the company known as M/s. Talen Capital India Pvt. Ltd. He would further submit that the second respondent had 3350 shares. Learned Senior counsel would further point out that there was some mis-understanding between the petitioner and the second respondent, which resulted in a legal notice being issued by the petitioner to the second respondent on 23.04.2010. For the said notice, the second respondent issued a reply notice, wherein he has stated in paragraph Nos. 2 to 5 as follows:

"2. In reply to the averments in paragraph 1 of the notice in reply, I hereby state that I am one of the promoters of M/s. Talent Capital India Pvt. Ltd (hereinafter referred to as ''the company'') and had subsequently resigned as a director of the company solely based on the false promise made by your client that he will purchase my shareholding in the company.

In reply to the averments in paragraphs 2, 3 and 4 of the notice in reply, I hereby state that it is surprising that you have been instructed to state that your client has acquired my shareholding in the company, the same is denied and I further state that I continue to own the 3,350 shares which was the subject matter of the Share Purchase Agreement dated 02.09.2009 due to the default of your client in paying me the consideration agreed to in the said Share Purchase Agreement. I further state that you were very much present at the Board Meeting of the Company that was convened on 05.05.2009 wherein Mr.B.Parthasarathy was appointed as a Director and shares were allotted to him for the sums of money that he paid the Company and the same were minuted, needless to say that your client''s baseless allegation now that the same have taken place without his knowledge coupled with his failure to pay me the agreed consideration for the 3,350 shares of the Company owned by me would clearly establish that he is laying the groundwork to hijack the Company from the other shareholders for his individual benefit to the detriment of the other shareholders.

In reply to the averments contained in paragraphs 5 and 6 of the notice in reply I hereby state that the appointment and resignation of Mr.B.Parthasarathy as director were matters that were decided at Board Meetings wherein your client was present and so to was the allotment of 40,000 equity shares to Mr.B.Parthasarathy and the e-forms for the same were filed with the knowledge of your client and the same have been available in public domain for a long time and now your client''s belated act of attempting to impeach the same as illegal and void ab-initio are untenable. I now understand the oblique motive with which your client insisted that I use my digital signature to sign the aforesaid e-forms, the same was done to enable him to now turn around and accuse me of unilaterally committing the acts complained of in the notice in reply.

In reply to the averments contained in paragraph 7 of the petition I reiterate that the appointment and resignation of Mr.B.Parthasarathy were matters that were decided at Board Meetings wherein your client was present and so to was the allotment of 40,000 equity shares to Mr.B.Parthasarathy, furthermore the reason stated by you in the notice for effecting "stop payment" towards the cheques issued by your client in my favour is nothing but an attempt to wriggle of his obligations under the aforesaid Share Purchase Agreement and the penal consequences for dishonouring of cheques. Needless to state that I continue to own 3,350 equity shares of the Company since as fairly admitted by your client he has failed to pay me the consideration payable as per the Share Purchase Agreement."

This notice is not disputed by the second respondent. Referring to the said notice, the learned Senior counsel for the petitioner would submit that the petitioner even now contends that he continues to own 3,350 equity shares of the company. But, according to the petitioner/accused, shares were transferred in his name by means of mutual agreement. Thus, according to the learned Senior counsel, the allegations do not make out any offence warranting further trial.

It is also seen from the records that on account of an interim stay granted by this Court on 16.10.2010, no investigation has been done by the first respondent so far.

The learned counsel appearing for the second respondent would vehemently oppose this petition. According to him, though in the reply notice sent by the second respondent on 14.05.2010 it is stated that the second respondent continues to own 3,350 equity shares of the company, the fact remains that the shares were transferred in the name of the petitioner and the money due under the shares was not paid to the second respondent. This according to the learned counsel for the second respondent, amounts to offence as alleged in the FIR.

I have considered the above submissions.

From the allegations made in the FIR, I find no material to invoke Section 406 IPC at all. Section 406 IPC and 420 IPC cannot go together, because, Section 406 IPC essentially requires mutual trust, whereas, Section 420 IPC requires an element of deception. It is for these reasons, I have to say that these two provisions cannot be simultaneously invoked in this case. In order to invoke Section 406 IPC, absolutely there is no material to show that the shares were entrusted by way of trust by the second respondent to the petitioner. Thus, I do not find even a prima facie allegation to invoke Section 406 IPC.

Turning to Section 420 IPC, it requires three basic elements prima facie, namely, deception, inducement by means of fraud or dis-honesty. The averments in the FIR do not satisfy any of these requirements. Though it is stated in the complaint that the shares were transferred in the name of the petitioner on the promise that Rs.60 lakhs would be paid by the petitioner to the second respondent in consideration, in the reply notice sent, the second respondent has asserted that he still continues to hold 3,350 shares. Whether the shares were really transferred and whether money is due or not from the petitioner are all matters to be gone into only by the appropriate civil forum. Thus, I hold that the allegations in the FIR do not reflect any of the ingredients of Section 415 IPC., so as to allow the petition. In my considered opinion, it is a clear abuse of process of Court. An attempt has been made to convert a simple civil dispute into a criminal case. Therefore, as has been held by the Honourable Supreme Court in the State of Haryana and Others vs. Bhajanlal and Others (1992 SCC (1) Suppl (1) 335), the FIR deserves to be quashed.

In the result, the criminal original petition is allowed. The FIR in Crime No. 224 of 2010, on the file of the Inspector of Police, Team 1, Central Crime Branch, Egmore, Chennai is hereby quashed. However, it is made clear that it is open to the second respondent to work out his civil remedies before the appropriate forum. Connected miscellaneous petition is closed.