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Judgment
M. Jeyapaul, J.—The petition is filed by accused 1 and 2 in C.C. No. 6626 of 2006 pending on the file of the learned XVII Metropolitan
Magistrate, Saidapet, Chennai seeking quashment of the aforesaid proceedings.
The petitioners are facing the case in C.C. No. 6626 of 2006 for offences punishable under sections 403, 406, 417, 418, 420,426,427 of the
Indian Penal Code.
The sum and substance of the complaint lodged by the respondent as against the petitioners which was taken on file by the learned XVII
Metropolitan Magistrate in C.C. No. 6626 of 2006 is as follows:-
The complainant is a Company registered under the Companies Act. The complainant and the first accused Company entered into an agreement
for manufacturing blending and filling lubricants and other lubricant products. The complainant supplied all the raw materials and packing materials
to the accused who was required to blend and pack the lubricants at their plant. The accused are entitled to service charges as per the terms of the
aforesaid agreement. The materials supplied to the accused by the complainant are the properties of the complainant. The agreement expired on
31.3.2003. No manufacturing operations for the complainant was carried on at the plant of the accused subsequent to the said date. The
complainant asked the accused to return all the stocks and lubricants supplied by the complainant to them. But, the accused, have not returned the
stocks and lubricants as on date. The accused deceived and defrauded the complainant and misappropriated most of the materials for their own
use in violation of the legal contract. The complainant provisionally values the materials of the complainant with the custody of the accused at Rs.
27,76,504.69. The accused claim that there were some outstanding dues to them towards their services charges and excise duty. The complainant
agreed to pay the outstanding dues of Rs. 3,69,539/= on return of the materials worth Rs. 27,76,504.69 by the accused. Therefore, the accused
are liable to be punished for the offences punishable under sections 403/406, 417, 418, 420, 426 and 427 of the Indian Penal Code.
The learned XVII Metropolitan Magistrate, Saidapet, Chennai, having come to the conclusion that there is prima facie case to charge the
accused, took the case on file in C.C. No. 6626 of 2006.
The accused/petitioners would contend that no delivery of goods suo motu by the accused is contemplated in the agreement. The excise duty
payable on the goods manufactured by the first accused was also on the account of the complainant. Apart from the service charges of Rs.
3,69,539/=, the complainant is liable to pay as per the agreement, a sum of Rs.l,88,824/= towards the excise duty paid by the accused.
Subsequently, due to the deluge in the State of Mumbai on 26/27th July 2005, the oils and other input products and packing materials kept in the
stores of the factory of the accused were completely washed away or contaminated with water or drained out or damaged. A sham proceedings
have been initiated using the criminal law just to pressurise the accused to fulfill the illegal motive of the complainant. It is purely a civil commercial
transaction and therefore, only civil forum will have to decide the dispute between the complainant and the accused.
Learned Senior Counsel appearing for the petitioner would submit that a commercial transaction of civil nature has been given a criminal colour
abusing the process of law. There is also an arbitration clause in the agreement entered into between the complainant and the accused. The
accused unambiguously admitted in the reply given by them to the complainant that they retained the goods as a lien for the charges and the excise
duty borne by the accused. Even otherwise, no prima facie case was made out as against the accused to charge them for the aforesaid offences.
Learned Senior Counsel appearing for the complainant would vehemently submit that the complaint, as such, reflects commission of offence by
the accused as alleged by the complainant. The ill intention and the idea to mis-appropriate the materials of the complainant are reflected in para 17
of the affidavit filed along with the petition seeking quashment. The accused had taken an atrocious stand at this distance of time that all the goods
had been washed away in the deluge which battered the City of Mumbai. Further, he would submit that though there was a commercial transaction
between the accused and the complainant, the criminal court has every authority to entertain a complaint which reflects commission of crime.
As per the Blending and Filling agreement dated 1.4.2001 entered into by and between the complainant and the accused, the complainant
supplied oil and packing materials for the purpose of blending and filling. There is an arbitration clause in the said agreement to resolve the disputes
or differences arising between the complainant and the accused during the course of the commercial transaction. The accused is entitled to service
charges as per the said agreement. He is also entitled to any excise duty paid for the materials supplied to the accused.
Prior to the institution of the criminal proceedings as against the accused, the complainant issued notice dated 21.3.2005 informing the accused
about his failure to return the materials supplied to them. Of course, the complainant also has stated therein that the accused were trying to deceive
and defraud the complainant by misappropriating the stocks of the complainant. A reply was sent by the accused on 15.4.2005 claiming the job
charges payable by the complainant to the accused and the excise duty borne by the accused. The accused have clearly stated in the counter that
the goods of the complainant are lying in their factory, of course, at the entire risk as to the cost and consequences of the complainant. The
complainant gave a reply stating that the complainant was prepared to pay a sum of Rs. 3,69,539/= towards job charges payable to the accused.
But, they have not admitted the remaining claim of Rs.l,90,000/= towards the excise duty alleged to have been paid by the accused.
The accused have in no uncertain terms admitted that the complainant is the owner of the materials supplied to the accused as per the aforesaid
agreement. The accused have also stated before the prosecution was initiated by the complainant that the entire stock supplied by the complainant
are lying in the factory of the accused. But, the accused have claimed lien over the stock left with the accused towards the job charges and the
excise duty payable by the complainant to the accused.
Of course, the accused have taken a stand in the quash petition that subsequent to the correspondence between the parties prior to the
initiation of the criminal proceedings, there was a deluge at Mumbai on 26/27th July 2005 and the stock of the complainant as well as the valuable
materials of the accused stored in the factory premises were washed away or contaminated with water or drained out or damaged.
The court will have to see what was the concrete stand taken by the accused before the complaint was lodged by the complainant as against
the accused. The above discussion would reflect that the accused had admitted the storage of the materials supplied by the complainant to the
accused at the factory premises of the accused. The accused have claimed only lien over the stock of the complainant. But, the alleged subsequent
development will not have a bearing on the complaint lodged as against the accused alleging criminal breach of trust, misappropriation and
cheating.
The above referred commercial transactions between the complainant and the accused would go to show that there is a serious dispute
between the complainant and the accused as to the excise duty payable by the complainant to the accused. The accused has claimed lien over the
stock of the complainant for the alleged outstanding dues payable by the complainant to the accused. These disputes are found to be only civil in
nature which will have to be placed before the arbitrator concerned or before the civil forum as the case may be.
It is not the case where the accused completely denied the entitlement of the complainant over the stock stored in the premises of the factory
before ever the complaint was lodged as against the accused. The ownership of the complainant over the stock in the premises of the accused was
admitted. The litigate issues involved in the commercial transaction between the complainant and the accused are (1) whether the accused are
entitled to reimbursement of the excise duty alleged to have been borne by them; and (2) whether the accused have got a right of lien over the
stock of the complainant stored at the premises of the accused. Such a civil dispute cannot be the basis for a criminal complaint.
The learned counsel appearing for the complainant referred to an authority reported in Indian Oil Corporation Vs. NEPC India Ltd. and
Others, wherein the Honourable Supreme Court has observed as follows:-
A given set of facts may make out: (a)purely a civil wrong; or (b)purely a criminal offence; or (c)a civil wrong as also a criminal offence. A
commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal
offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint civil remedy is
available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint
disclose a criminal offence or not.
Even in a commercial transaction, a criminal offence may also be committed by the parties to the transaction. Just because there is a breach of
contract in a commercial transaction and civil remedy is available, the complaint which discloses a criminal offence cannot be thrown out.
In this case, it is found that no criminal offence was committed by the accused. But, the complaint has been drafted incorporating the
ingredients for the offences of criminal breach of trust, misappropriation and cheating. But, in a case where no prima facie case is made out, the
complaint drafted incorporating all the ingredients of the criminal offence cannot stand the legal scrutiny as otherwise, there will be miscarriage of
justice.
In view of the above, the court finds that the entire criminal proceedings in C.C. No. 6626 of 2006 on the file of the learned XVII
Metropolitan Magistrate, Saidapet, Chennai are quashed and the petition stands allowed accordingly. The connected Miscellaneous Petitions stand
closed.