M. Joy Varghese and Others vs The State

By consent, the matter is taken up for final hearing. The petition is filed seeking a direction to set aside the order in R.C. No. 8/2009 dated

27.4.2009 on the file of the learned Principal Sessions Court, Coimbatore confirming the order dated 20.9.2008 in C.M.P. No. 1814/2008 in

C.C. No. 27/2008 by the learned Judicial Magistrate No. II, Pollachi.

The Petitioners are the accused in C.C. No. 27 of 2008 on the file of the learned Judicial Magistrate No. II, Pollachi on a complaint given by

the 2nd Respondent for alleged offence under Sections 406 and 420 IPC. The District Crime Branch, Coimbatore has registered the case in Cr.

No. 57 of 2007 and after investigation, they have filed charge sheet.

The sum and substance of the charge sheet is as follows:

The 1st Petitioner was the Managing Director of one Premier Footwear Products Pvt Ltd and was having a factory at Pollachi. The 2nd Petitioner

is the son-in-law of the 1st Petitioner, 3rd Petitioner is the Manager and the other Petitioners are the Directors of the Company.

The Petitioners have conjointly conspired in order to cheat the complainant, entered into criminal conspiracy and agreed to sell the machinery

and the factory to the defacto-complainant without disclosing the fact that the machinery were already hypothecated with Canara Bank, SSI,

Branch, Calicut, Kerala, as per the hypothecation agreement dated 23.4.2002. In pursuant to the above said conspiracy, the Petitioners entered

into a sale agreement on 29.11.2006 with deceitful intention and received a sum of Rs. 25 lakhs as advance. The defacto-complainant had also

incurred a further expenditure of Rs. 25 lakhs in meeting out the other liabilities of the factory. When the said Canara Bank, Calicut had initiated

proceedings over the hypothecation, the defacto-complainant came to know about the design of the Petitioners and therefore, he lodged a

complaint. However, objecting to the taking cognizance of the offence, the Petitioners have filed an application before the learned Judicial

Magistrate No. II, Pollachi in CMP No. 1814 of 2008 for discharge u/s 239 of Code of Criminal Procedure

The learned J.M.II, Pollachi considered the application and passed final order dismissing the application, against which, the Petitioners have filed

a revision before the learned Principal Sessions Court, Coimbatore in Crl.R.P. No. 8/2009. The learned I Additional District and Sessions Judge,

Coimbatore considered the revision and dismissed the same. Aggrieved by which, the Petitioners are before this Court u/s 482 Code of Criminal

Procedure

The grounds urged before this Court questioning the cognizance taken by the learned Judicial Magistrate are that the defacto-complainant was

aware of the fact that the machinery were under hypothecation to the bank and therefore, there is no deception at the initial stage to attract the

ingredients of either Section 415 or 420 IPC. The another point which is urged before this Court is that the courts below have adopted a stand that

at the time of hearing of discharge, the court can consider only the police report and documents sent with it and it cannot look into the documents

produced by the accused. According to the Petitioners, the advance amount was paid towards the discharge of the dues to the bank and the entire

dues to the bank has already been paid by the accused.

Manjeri. S. Sunderraj, learned Counsel for the Petitioners would submit that before taking cognizance of offence, the Courts below ought to

have seen whether there are enough materials to frame charges against the accused and the Court cannot act as the mouth piece of the prosecution

without any effective role in considering the matter. The learned Counsel further submitted that the Courts below have misconstrued the guidelines

laid down in the various decisions that the court cannot look into the defence materials and cannot conduct a roving enquiry while framing charges.

The learned Counsel submitted that the Petitioners have produced reliable materials which ought to have been looked into by the Courts below.

The learned Counsel relied on the following decisions:

Saroj Kumar Poddar Vs. State (NCT of Delhi) and Another,

Saju v. State of Kerala AIR 2001 SC 175

Tirlochan Singh Vs. Karnail Singh and Another,

Haridaya Ranjan Prasad Varma v. State of Bihar AIR 2000 SC 2341

S.W. Palanitkar and others Vs. State of Bihar and another,

Kerala Film Artistes and Critics Society v. Unnie Menon 1987 (1) KLT 190

State v. Nalini AIR 1999 SC 2640

State of U.P. Vs. Sukhbasi and Others,

(1979) Crl.L.J. 154

Satish Mehra Vs. Delhi Administration and Another,

Krishna Janardhan Bhat Vs. Dattatraya G. Hegde,

12.. K.M. Mathew Vs. State of Kerala and another,

On the contrary, Mr. Karthik for M/s T.S. Gopalan & Co., for the 2nd Respondent would submit that it is now well settled that at the time of

framing of charge, the Court is not expected to conduct a roving enquiry, sift and weigh the evidence and cannot look into the defence materials.

The learned Counsel pointed out that u/s 239 of Cr.P.C, the Court is bound to consider the police report and the documents sent with it and after

hearing the parties, the learned Magistrate is to consider the charges against the accused. The learned Counsel relied on a decision reported in

State of Orissa Vs. Debendra Nath Padhi,

Mr. Hassan Mohammed Jinnah, Additional Public Prosecutor for the first Respondent would submit that the courts below have rightly

considered the police report and the materials sent along with it and also negative the defence materials and this Court need not interfere with the

findings of the trial court.

The crux of the allegation giving rise to an investigation and filing of the charge sheet against the Petitioners for the alleged offence under

Sections 406 and 420 IPC are as follows:

Section 406, 420 reads as follows:

Punishment for criminal breach of trust Whoever commits criminal breach of trust shall be punished with imprisonment of either description for

a term which may extend to three years, or with fine, or with both.

420 . Cheating and dishonestly inducing delivery of property Whoever cheats and thereby dishonestly induces the person deceived any property to

any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of

being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and

shall also be liable to fine.

The defacto-complainant entered into an agreement with the Petitioners company for the purchase of machinery and paid an advance Rs. 25

lakhs. He had also incurred expenditure in clearing certain dues like electricity charges, taxes and other arrears to the tune of Rs. 25 lakhs.

However, the defacto-complainant came to know that the properties were already hypothecated with the Canara Bank in Kerala State and as

such he has been cheated by the Petitioners. Indisputably, the bank has initiated the proceedings under SARFEASI Act for the recovery of its

dues.

The Petitioners would contend that the defacto-complainant has suppressed material facts in their complaint. According to the Petitioners, the

defacto-complainant did know about the hypothecation of the machinery to the bank and the amount paid towards advance was in fact paid to the

Canara Bank to discharge their liabilities. According to the Petitioners, on 26.4.2007, a notice was issued to the defacto -complainant to pay the

balance of Rs. 75 lakhs and take possession of the properties, but the defacto-complainant failed. According to the Petitioners, there is a breach of

contract by the defato-complainant, in pursuant to which, a complaint was given against the defacto-complainant in Cr. No. 169 of 2007 at

Calicut. The Petitioners had alleged that the defacto-complainant promised to settle the dues and settle the accounts of the staff of the Company,

but again failed. In any event, the amount due to the bank was only 13.24 lakhs which was already paid by the Petitioners to the Bank. These

materials were placed as defence materials before the trial court when the Petitioners have filed an application for discharge u/s 239 of Code of

Criminal Procedure

Section 239 Cr.P.C reads as follows

When accused shall be discharged: If, upon considering the police report and the documents sent with it u/s 173 and making such examination, if

any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the

Magistrate considers the charge against the accused to be groundless he shall discharge the accused and record his reasons for so doing.

The point for consideration is whether the courts below are right in holding that the court need not look into the documents produced by the

accused and are not expected to conduct a roving enquiry in sifting and weighing the materials to determine the guilt or innocence of the accused at

the stage of framing of charges.

In 1979 Crl.L.J 154 (Union of India v. Prafulla Kumar Samual and another) , the Hon''ble Supreme Court has held that

Thus, on a consideration of the authorities mentioned above, the following principles emerge:

(1) That the Judge while considering the question of framing the charges u/s 227 of the Code has the undoubted power to sift and weigh the

evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out.

(2) Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained the Court will

be fully justified in framing a charge and proceeding with the trial.

The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal

application. By and large however if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving

rise to some suspicion but not grave suspicion against the accused, he will be fully within his right to discharge the accused,

(4) That in exercising his jurisdiction u/s 227 of the Code the Judge which under the present Code is a senior and experienced Court cannot act

merely as a Post Office or a mouth-piece of the prosecution, but has to consider the broad probabilities of the case, the total effect of the evidence

and the documents produced before the Court, any basic infirmities appearing in the case and so on. This however, does not mean that the Judge

should make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial

In the case of Satish Mehra Vs. Delhi Administration and Another, , the Apex Court has held as follows:

Similar situation arises u/s 239 of the Code (which deals with trial of warrant cases on police report). In that situation the Magistrate has to

afford the prosecution and the accused an opportunity of being heard besides considering the police report and the documents sent therewith. At

these two stages the Code enjoins on the court to give audience to the accused for deciding whether it is necessary to proceed to the next stage. It

is a matter of exercise of judicial mind. There is nothing in the Code which shrinks the scope of such audience to oral arguments. If the accused

succeeds in producing any reliable material at that stage which might fatally affect even the very sustainability of the case, it is unjust to suggest that

no such material shall be looked into by the court at that stage. Here the ground may be any valid ground including insufficiency of evidence to

prove the charge.

The object of providing such an opportunity as is envisaged in Section 227 of the Code is to enable the court to decide whether it is necessary

to proceed to conduct the trial. If the case ends there it gains a lot of time of the court and saves much human efforts and cost. If the materials

produced by the accused even at the early stage would clinch the issue, why should the Court shut it out saying that such documents need be

produced only after washing a lot more time in the name of trial proceedings. Hence, we are of the view that Sessions Judge would be within his

powers to consider even materials which the accused may produce at the stage contemplated in Section 227 of the Code.

In the case of Hridaya Ranjan Pd. Verma and Ors. v. State of Bihar and Anr. (AIR 2000 SC 2341) the Apex Court has held as follows:

The distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time

of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot

give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the

time when the offence is said to have been committed. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of

cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up

promise subsequently such a culpable intention right at the beginning that is when he made the promise cannot be presumed.

In the case of Kerala Film Artists & Critics Society v. Unni Menon (1987 (1) KLT 190 the learned single Judge of High Court of Kerala held

as follows:

... Unless there is an allegation in a complaint that the accused had either dishonestly o fraudulently induced the person on whom he played the

deception, so offence of cheating can come out of the complaint. It is of course not necessary that those words should find a place in the

complaint. If the complaint is silent about that aspect, the consequence is that the complaint would be bereft of the basic ingredient of the offence.

In the case of Saju v. State of Kerala (AIR 2001 SC 175), the Apex Court has held as follows:

In the absence of the existence of circumstances suggesting the hatching of criminal conspiracy, we are of the opinion that the Appellant could not

have been convicted and sentenced with the aid of Section 120B or Section 109 IPC. No fact or circumstance with respect to the abetment

attracting the applicability of Section 109 IPC has been brought to our notice. To prove the charge of abetment, the prosecution is required to

prove that the abettor had instigated for the doing of a particular thing or engaged with one or more other person or persons in any conspiracy for

the doing of that thing or intentionally aided by an act of illegal omission, doing of that thing, The prosecution miserably failed to prove the existence

of any of the ingredients of Section 107 IPC.

The ratio of the judgment relied on by the Petitioners in the case

21 In the case of State of U.P. Vs. Sukhbasi and Others, is also for the same preposition.

2001 SC 2960, the Apex Court has held as follows:

..."" In order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made. It is

necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of

cheating..

The question whether the court can look into the defence materials while framing of the charge was under the consideration of the Apex Court.

In the case of Satish Mehra Vs. Delhi Administration and Another, , the Apex Court is of the view that on the ground of justice, equity and fairness

and also on the touch stone of Article 21 of the Constitution of India, to avoid the harassment of the accused having to face the trial for years,

avoid waste of valuable time of the Court, even at the early stage of framing of charge or taking cognizance, if the accused is in a position to

produce unimpeachable material of sterling quality to show that there is no prospect of conviction, the courts can look into such defence materials.

However, a three Judge Bench of the Apex Court in State of Orissa Vs. Debendra Nath Padhi, had overruled the Satish Mehra''s case and laid

down the principles as stated below:

We are unable to accept the aforesaid contention. The reliance on Articles 14 and 21 is misplaced. The Scheme of the Code and object with

which Section 227 was incorporated and Sections 207 and 207A omitted have already been noticed. Further, at the stage of framing of charge

roving and fishing inquiry is impermissible. If the contention of the accused is accepted, there would be a mind trial at the stage of framing of

charge. That would defeat the object of the Code. It is well-settled that at the stage of framing of charge the defence of the accused cannot be put

forth. The acceptance of the contention of the learned Counsel for the accused would mean permitting the accused to adduce his defence at the

stage of framing of the charge and for examination thereof at that stage which is against the criminal jurisprudence

In the case of Rochiram and Sons Vs. Union of India (UOI) and Others, , the Apex Court has held as follows:

Thus in our opinion, while it is true that ordinarily defence material cannot be looked into by the Court while framing of the charge in view of

D.N. Padhi case, there may be some very rare and exceptional cases where some defence material when shown to the trial court would

convincingly demonstrate that the prosecution version is totally absurd or preposterous and in such very rare cases the defence material can be

looked into by the Court at the time of framing of the charges or taking cognizance. In our opinion, therefore, it cannot be said as an absolute

preposition that under no circumstances can the court look into the material produced by the defence at the time of framing of the charges, though

this should be done in very rare cases i.e., where the defence produces some material which convincingly demonstrates that the whole prosecution

case is totally absurd or totally concocted.

In the case of Bharat Parikh Vs. C.B.I. and Another, , the Hon''ble Supreme Court held as follows:

As observed in Debendra Nath Padhi case at the stage of framing charge roving and finishing inquiry is impermissible and a mini trial cannot be

conducted at such stage. At the stage of framing of charge the submissions on behalf of the accused have to be confirmed to the material produced

by the investigating agency. The accused will get an opportunity to prove the documents subsequently produced by the prosecution on the order of

the Court, but the same cannot be relied upon to reopen the proceedings once charge has been framed or for invocation of the High Court''s

Powers u/s 482 of the Code of Criminal Procedure

Therefore, it is well settled that at the time of framing of charge, the learned Magistrate cannot conduct a roving enquiry. However, in the case

of Rochiram and Sons Vs. Union of India (UOI) and Others, , Justice Altamas Kabir (concurring) further held as follows:

In my view, therefore, there is no scope for the accused to produce any evidence in support of the submissions made on his behalf at the stage

of framing of charge and only such materials as are indicated in Section 227 Cr.P.C can be taken into consideration by the learned Magistrate at

that stage. However, in a proceeding taken therefrom u/s 482 Cr.P.C the court is free to consider material that they may be produced on behalf of

the accuse to arrive at a decision whether the charge as framed could be maintained. This in my view, appears to be the intention of the legislature

in wording. Section 227 and 228 the way in which they have been worded and as explained in Debendra Nath Padhi by the larger Bench therein

to which the very same question had been referred.

Therefore, it is well cleared that there is no scope for the accused to produce any evidence at the stage of framing of charge. However, in a

proceeding taken there from u/s 482 Cr.P.C the court is free to consider material that may be produced on behalf of the accused to arrive at a

decision whether the charges as framed could be maintained.

If we apply these ratio, it will lead to the conclusion that there was no scope for the Petitioners to produce any evidence when the learned

Magistrate decided that application u/s 239 Cr.P.C and when the same was challenged in the criminal Revision before the learned Sessions Judge.

However, the present proceedings is one u/s 482 Cr.P.C this Court is free to consider the material produced by the Petitioners.

Therefore, I venture into considering the materials as produced in the typed set along with the petition. The defacto-complainant had entered

into an agreement with one M/s Premier Footwear Products Pvt Ltd on 29.11.2006 represented by the first Petitioner. The first Petitioner had

agreed to sell the machinery described in the schedule for a sum of Rs. 1 crore and the 2nd Respondent had paid a sum of Rs. 25 lakhs. The

balance of Rs. 75 lakhs was to be paid on or before 15.12.2006 and the possession was to be handed over thereafter.

A notice dated 18.4.2007was issued by the first Petitioner stating that the 2nd Respondent had failed to pay the balance and take possession

of the machinery and has called upon to pay the balance and take possession of the machinery. On 4.8.2007 the Manager of the Company had

given a complaint in Cr. No. 169 of 2007 at Kozhikodu Police Station . In W.P. No. 26295 of 2007 the High Court of Kerala passed a judgment

on 8.10.2007 ordering stay of the proceedings under SARFEASI Act on a condition that the Petitioner shall remit a sum of Rs. 5 lakhs with the

bank. The amount due was indicated as 19,49,968.29. This Court while granting bail to the Petitioners on 21.42008 in Crl.O.P. No. 8717 of

2008 had observed thus:

Considering the above said facts and considering the undisputed fact that the entire allegations are borne out by records and documents coupled

with the fact that the machineries were very well available with the custody and possession of the defacto-complainant and the investigation itself is

owner and the charge sheet has been filed.

The report of the police and the list of witnesses, list of records relied on by the prosecution would show that the defacto-complainant and one

more witness are to speak about the agreement and the suppression of the fact about the hypothecation. The landlady was shown as a witness to

speak about the lease agreement with the complainant and another two witness to speak about the brokerage of the lease agreement. L.W.6 and 7

are the Managers from Canara Bank, Cuddalore and Calicut . The former to speak about the loan application by the complainant and the latter to

speak about the earlier hypothecation. The documents produced were the complaint, the statement u/s 161(3) Cr.P.C, sale agreement, lease

agreement, the other documents related to the hypothecation. As stated the charges are against all Petitioners are 120-B (criminal conspiracy) and

109 ( abetment) and 420 IPC.

The 1st Petitioner is the Managing Director, who entered with a sale agreement with the defacto-complainant. According to the complaint and

the charge sheet, the fact of earlier hypothecation was not disclosed before entering into sale agreement and parting with advance amount. The

Petitioners dispute this fact stating

i) the complainant did know about the hypothecation ii) the amount due to the bank was only Rs. 13.24 lakhs as per the Petitioner or Rs.

19,49,968.29 lakhs as per the order of the High Court iii) the amount has already been repaid iv) a notice was already issued calling upon the

defacto-complainant to perform his part of contract v) there was a breach of contract by the defacto-complainant

The 2nd Petitioner is described as the son-in-law of the 1st Petitioner. The 3rd Petitioner is described as Manager; 4th Petitioner is shown as

Director and the 5th Petitioner is interestingly shown as the Mother. In the report, the Petitioners 4 and 5 were shown as DirectOrs.

Section 120B is as follows:

120B. Punishment of criminal conspiracy (1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death,

2[imprisonment for life] or rigorous imprisonment for a term of two years or upwards shall, where no express provision is made in this Code fro

the punishment of such a conspiracy, be punished in the same abetted such offence.

(2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished

with imprisonment of either description for a term not exceeding six months, or with fine or with both.]

Section 109 reads as follows:

Punishment of abetment if the act abetted is committed in consequence, and where no express provision is made for its punishment

Whoever abets any offence shall, if the act abetted is committed in consequence of the abetment, and no express provision is made by this Code

for the punishment of such abetment, be punished with the punishment provided for the offence.

Explanation: -An act or offence is said to be committed in consequence of abetment, when it is committed in consequence of the instigation or in

pursuance of the conspiracy, or with the aid, which constitutes the abetment

There is no material in the police report and in the documents and none of the witnesses speek about the involvement of Petitioners 2 to 5

either for an offence u/s 120B criminal conspiracy or 109 abetment.

Therefore, it is evident that the charges against the Petitioners 2 to 5 are baseless which calls for the discharge of the Petitioners 2 to 5. As far

as the 1st Petitioner is concerned, there is enough materials to proceed with.

The prosecution has to prove the charge against the first Petitioner for the offence u/s 420 IPC (though first information report was listed for

the offence under Sections 406 and 420 IPC , charge was laid only for the offence punishable u/s 420 IPC). In my considered view, at this stage

this Court need not to consider whether there was an initial deception to attract cheating. As far as other Petitioners are concerned there is no

materials to frame charges.

For the reasons stated above, the criminal original petition stands partly allowed, the charge sheet against the Petitioners 2 to 5 are quashed.

As far as the first Petitioner is concerned, the petition stands dismissed. Consequently, connected Mps are closed.