Naresh and Others vs Amritlal

P.D. Waingankar, J.—This petition is one under section 482 Cr.P.C. to quash the proceedings initiated against the petitioners in C.C. No. 2167/2015 on the file of JMFC-I Court, Hubli for the offences punishable under Sections 403 , 405 , 415 , 420 , 423 and 463 of IPC.

The facts in brief which led to the filing of this petition are as under:--

"One Pukraj and his three sons Amritlal-the complainant, Naresh and Prakash-the accused were partners of the firm M/s. JBM Industries having its office at Hubli and branch office at Bangalore. All the three sons were having 30% share each in the partnership firm and their father Pukraj had 10% share in the profit and loss of the firm. Their father Pukraj died on 23.7.2014. After his death, all the three sons succeeded to his 10% share in the firm in equal proportion. Amritlal-the complainant is a passive partner of the firm. The business of the firm at present is being looked after by the accused No. 1 and 2-the other two brothers.

It is the case of the complainant that by taking undue advantage of the passive involvement of the complainant in the day to day business of the firm, the accused No. 1 and 2 started mis-utilising the funds of the firm to make unlawful gain and to cheat the complainant by manipulation of accounts. They also opened their individual accounts wherein they started depositing the income derived from the business of the firm rather than crediting the amount to the account of the firm without the consent, knowledge and approval of the complainant. Both the accused utilizing the income of the firm to their personal gain, without bringing it to the notice of the complainant. Thus the accused not only cheated the complainant, but also misappropriated the funds of the firm and thereby they committed the offence of Criminal breach of trust. Therefore, the complainant filed a complaint under Section 200 Cr.P.C. before the Magistrate for the offences punishable under Sections 403 , 405 , 415 , 420 , 423 and 463 of IPC. The Magistrate recorded the sworn statement and issued process against the accused."

The petitioner-accused have denied all the allegations made out against them by the complainant in his complaint. They further contended that in the event of dispute, the parties have to approach the arbitrator for resolution of the dispute, the complainant has already approached the arbitrator and at the same time, he filed a complaint only with an intention to harass and yield to the demand made by the complainant, which is nothing but an abuse of process of law. It is further contended that even if the entire allegations made out in the complaint are taken to their face value, they do not constitute any of the offences alleged in the complaint and hence the petitioners have filed this petition to quash the proceedings.

I have heard both the learned counsel appearing for the petitioners-accused and the respondent-complainant. Perused the records.

The learned Senior counsel Sri. M.T. Nanaiah appearing for the petitioners would submit that the dispute between the parties is purely a civil dispute which has to be resolved through the process of arbitration, that the respondent-complainant has already invoked the arbitration clause in the partnership deed and with an intention to harass the petitioners, he filed a false complaint. The learned Senior Counsel would further submit that the entire allegations made out in the complaint are accepted as it is, they do not make out the case for any of the offences mentioned in the complaint and that the prosecution has been initiated with malicious and ulterior motive as a pressure tactics to yield to the illegal demands put forth by the respondent-complainant and to settle score with the accused and hence the learned counsel sought to quash the proceedings. The learned Senior Counsel relied upon the following decisions in support of his case:--

"i) U. Dhar and Another Vs. The State of Jharkhand and Another,

ii) 2013 AIR (SC) (Cri) 1317 in the case of Chandran v/s K.C. Palaniswamy."

On the other hand, the learned counsel appearing for the respondent-complainant Sri. Prakash K. Jawalkar has submitted before me that the proceedings cannot be quashed merely because arbitration is a remedy for affording relief to a party, whether the allegations made in the complaint are correct or not has to be tried during the course of trial, the object of Criminal Law is to punish the accused, the allegations made out in the complaint prima-facie disclose the offences of cheating, misappropriation of funds of the firm and criminal breach of trust and hence the petition filed by the petitioners to quash the proceedings is liable to be dismissed as bereft of merits.

The learned counsel relied upon the following decision in support of his argument:--

"i) Trisuns Chemical Industry Vs. Rajesh Agarwal and others,

ii) M/s. Medchl Chemicals and Pharma P. Ltd. Vs. M/s. Biological E. Ltd. and Others, .

iii) 1991 Cr.L.J. 588 Madras Grahadurai and others v. Subhas Chandra Bose."

Having heard both the learned counsel and on perusal of the material on record, the only point that would arise for my determination is:--

"Whether the proceeding initiated against the petitioner in C.C. No. 2167/2015 on the file of JMFC-I Court, Hubli is abuse of process of law so as to quash the proceedings?"

Before dwelling on the merits of the case, it would be useful to recall the broad principles of law laid down by the Apex Court on the scope and ambit of the power of the High Court under Section 482 Cr.P.C. It has been laid down that inherent power under Section 482 Cr.P.C. though wide has to be exercised sparingly, carefully and with great caution and only when such an exercise is justified by the text specifically laid down in the section itself, only for the advancement of justice. If any abuse of process leading to injustice is brought to the notice of the court, the court would be justified in preventing injustice by invoking inherent powers.

In the case of R.P. Kapur Vs. The State of Punjab, , the Supreme Court has made some categories of cases where inherent power can and should be exercised to quash the proceedings. In the said decision, the following three broad categories are spelt out where the High Court would be justified in exercise of its inherent powers under Section 482 of Cr.P.C. They are:

"i. Where it manifestly appears that there is legal bar against the institution or continuance of proceedings.

ii. Where the allegations in the first information report or complaint taken at their face value and accepted in its entirety does not constitute the offence alleged.

iii. Where the allegations constitute an offence, but there is no legal evidence to prove the charge."

The Apex Court in the case of State of Haryana and others v. Bhajan Lal and others has also laid down that 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 proceedings and/or where there is specific provision in the Code or the concerned Act, providing efficacious redress for the grievances of the aggrieved party and that where a criminal proceeding is manifestly attended with malafide 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.

Bearing in mind the aforesaid principles laid down, it is to be seen whether the impugned order of the Magistrate taking cognizance against the petitioner deserves to be quashed.

The complaint filed under Section 200 Cr.P.C. discloses that the complainant and the accused are brothers, they are partners of the firm M/s. JBM Industries. It is also borne out from the complaint that the complainant is a sleeping partner. The day to day business affairs of the firm is being looked after by the accused the other two brothers. It appears that after the death of their father Pukhraj, the differences arose between the brothers. Though the allegations are made against the accused that they are misappropriating the funds of the firm, that they have opened their individual account, wherein they are depositing the income derived from the firm, it is not supported by any documentary evidence so as to constitute ingredients of the offences punishable under sections 403 , 405 , 415 , 420 , 423 and 463 IPC. The parties have already approached and submitted to the jurisdiction of the arbitrator for resolution of the dispute as agreed. It is true that merely because the parties have approached the arbitrator for resolution of their dispute or for that matter the parties have civil remedy of instituting the suit, that by itself is not a ground to quash the criminal proceedings initiated. The remedy under criminal law is independent of civil remedy. Except some bare allegations that the accused are collecting the amounts of the firm and utilizing the same for their personal gain and profits and that they opened up individual accounts in their names and directing the customers of the firm to pay the cheques in their individual names and that the customers are paying the cash in respect of their dues to the firm and that cash amount is being credited to the individual accounts of the accused are all vague allegations. There is nothing on record to substantiate that the accused have misappropriated the funds of the firm and committed a breach of trust. No documents are forthcoming to show that the income derived from the firm is credited to the individual account of the accused. Under such circumstances, it has to be held that no ingredients have been made out in the complaint itself so as to constitute the aforesaid offences. The differences of opinion between the partners regarding the partnership firm business cannot be equated to the misappropriation of funds of the partnership firm or for that matter they committed an offence of Criminal breach of trust. It is the accused who were looking after the day to day affairs of the firm during the life time of their father and they continued to look after the day-to-day business even after the death of their father. Be that as it may, the parties have submitted to the jurisdiction of Arbitral Tribunal. Under such circumstances, the initiation of criminal proceedings and continuation of the same would amount to abuse of process of the court having regard to the averments made out in the complaint. As such, the proceedings are liable to be quashed.

For the reasons stated above, the petition is allowed. The proceedings initiated against the petitioners in PCR No. 226/2015 on the file of JMFC I Court, Hubli are quashed.