Allowed

Chirf Manger v. State of Ap

Andhra Pradesh HC4 Feb 2024CRLP/422/2019

Case brief

AI extract

What is this about?

The High Court quashed an FIR for criminal breach of trust by a banker, holding that the bank's retention of funds was a statutory right under Section 171 of the Contract Act and not dishonest misappropriation. The Court found the complaint an abuse of process intended to harass bank officials.

What did the court decide?

F.I.R. No.32 of 2019 quashed.

Chirf Manger Vs State of Ap — Cheque Dishonour | Andhra Pradesh HC (2024)

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THE HON’BLE SRI JUSTICE TARLADA RAJASEKHAR RAO

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CRIMINAL PETITION No.422 OF 2019

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ORDER:

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The present Criminal Petition is filed under Section 482 of

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the Code of Criminal Procedure, 1973 (Cr.P.C.), praying to call for the records pertaining to F.I.R. No.32 of 2019 of IV Town Police Station, Visakhapatnam City, registered for the offence under Section 409 I.P.C., and to quash the same.

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The 2^nd respondent herein has filed a private complaint under Sections 199 and 200 Cr.P.C. before the I Additional Metropolitan Magistrate, Visakhapatnam, on the following allegations/averments:

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The complainant has maintained immaculate financial records with the bank promptly and he is not the willful defaulter and the petitioners/accused have not followed the several guidelines issued by the Reserve Bank of India (RBI) and declared the complainant’s company as the sick company. Therefore, the company sustained huge financial loss. The said act was done in arbitrary and malfeasant and prior to forcing the company as sick company, the company has directly employed 80 persons and even after irregular classification of the

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complainant unit as NPA, the Hon’ble DRT imposed a stay against the bank preventing from taking coercive measures against the complainant’s unit and properties in its custody and an amount of Rs.59 lakhs was withheld from current account of the complainant and the accused have admitted before the DRT their omissions and commissions and withdrawn the proceedings. Later, they have filed a fresh O.A. against the complainant’s unit in the DRT, Visakhapatnam. Covering their irregularities, the bank has constituted a committee on 08.02.2017 and conducted some dummy meeting and have forged the complainant’s signature to show his mandatory presence therein. Therefore, they have committed an offence and the said act was done in conspicuous grounds of common intention of the accused.

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On the aforesaid allegations made by the complainant, who is arrayed as 2^nd respondent herein, the learned Metropolitan Magistrate has referred the complaint to the police under Section 156(3) Cr.P.C. by order dated 12.02.2019.

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On receiving the complaint from the Court, the police has registered the crime, vide F.I.R.No.32 of 2019 on 23.01.2019 for the offence punishable under Section 409 I.P.C.

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Assailing the above said F.I.R., the present Criminal Petition is filed.

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Heard the learned counsel Sri K.B.Ramanna Dora, for the petitioners and the learned counsel Sri D.Rama Gopal, for the 2^nd respondent-complainant.

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Learned counsel appearing for the petitioners/accused would contend that the learned Metropolitan Magistrate did not apply his mind to the facts of the case and in casual manner referred the complaint to the police and contend that the ingredients of Section 409 I.P.C. do not attract against the petitioners/accused, since no property was entrusted or any amounts are with the petitioners/accused and, in fact, the 2^nd respondent has obtained loans which is the public money and not paid. He would pray the very forwarding the complaint to the police is unsustainable and it is a clear abuse of process of law and therefore he would urge to quash the proceedings and relied on the judgment of the Hon’ble Supreme Court in K.Virupaksha and another vs. State of Karnataka and another¹ . In the said judgment, the complainant has lodged a report to the police for undervaluing the secured assets and a case was

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1 (2020) 4 SCC 440

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registered against the bank officials therein. Assailing the same, the accused therein has filed quash petition before the High Court and the same was dismissed and the accused has approached the Hon’ble Supreme Court. The Hon’ble Supreme Court has held in the following manner:

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"16. We reiterate, the action taken by the Banks under the SARFAESI Act is neither unquestionable nor treated as sacrosanct under all circumstances but if there is discrepancy in the manner the Bank has proceeded it will always be open to assail it in the forum provided. Though in the instant case the application filed by the Complainant before the DRT has been dismissed and the Appeal No.523/2015 filed before the DRAT is also stated to be dismissed the appellants ought to have availed the remedy diligently. In that direction the further remedy by approaching the High Court to assail the order of DRT and DRAT is also available in appropriate cases. Instead the petitioner after dismissal of the application before the DRT filed the impugned complaint which appears to be an intimidatory tactic and an afterthought which is an abuse of the process of law. In the matter of present nature if the grievance as put forth is taken note and if the same is allowed to be agitated through a complaint filed at this point in time and if the investigation is allowed to continue it would amount to permitting the jurisdictional police to redo the process which would be in the nature of reviewing the order passed by the learned Single Judge and the Division

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Bench in the writ proceedings by the High Court and the orders passed by the competent Court under the SARFAESI Act which is neither desirable nor permissible and the banking system cannot be allowed to be held to ransom by such intimidation. Therefore, the present case is a fit case wherein the extraordinary power is necessary to be invoked and exercised.

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The appellants herein had also referred to the provision as contained in Section 32 of the SARFAESI Act which provides for the immunity from prosecution since protection is provided thereunder for the action taken in good faith. The learned senior counsel for the Complainant has in that regard referred to the decision of this Court in the case of General Officer Commanding, Rashtriya Rifles vs. Central Bureau of Investigation & Anr. (2012) 6 SCC 228 to contend that the defence relating to good faith and public good are questions of fact and they are required to be proved by adducing evidence. Though on the proposition of law as enunciated therein there could be no cavil, that aspect of the matter is also an aspect which can be examined in the proceedings provided under the SARFAESI Act. In a circumstance where we have already indicated that a criminal proceeding would not be sustainable in a matter of the present nature, exposing the appellants even on that count to the proceedings before the Investigating Officer or the criminal court would not be justified."

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8. Learned counsel for the 2^nd respondent-complainant

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vehemently opposed the contentions raised by the petitioners

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and stated that the acts committed by the petitioners/accused would fall under Section 409 I.P.C. and he relied on the judgment of the Hon’ble Supreme Court in K.Jagadish vs. Udaya Kumar G.S. and another² for the proposition that even if civil remedy is availed by the party, the complainant is not precluded from setting the law in motion, proceedings in criminal law or continuing with the criminal proceedings if already initiated should continue. Therefore, he would pray to dismiss the Criminal Petition.

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The allegation in the FIR is that S.B.I., i.e., accused bank has withheld the cash deposits in the current account of the complainant, despite grant of stay, thereby making unavailable for him to run the business, the respondent-bank has not disclosed its withholding of the complainant’s fund of Rs.59 lakhs credited into his account post classification of unit as NPA. 10. Before going to whether the petitioners accused have committed an offence under section 409 IPC it is expedient to refer sec 171 of contract act which reads thus:

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171. General lien of bankers, factors, wharfingers, attorneys and policy-brokers.—

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2 (2020) 14 SCC 552

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Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in the absence of a contract to the contrary, retain as a security for a general balance of account, any goods bailed to them; but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.

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Bank can retain as security under Section 171 of the Contract Act, without incurring the risk of commission of an offence such retention is allowed by law unless there is an express contract to that effect.

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Now applying the said Section 171 of contract act to Section 409 I.P.C. whether the petitioners have committed an offence under Section 409 I.P.C. it is necessary to extract Section 409 I.P.C.

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13. Section 409 I.P.C. Criminal breach of trust by public servant, or by banker, merchant or agent :

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Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with [imprisonment for life], or with

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imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine."

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For an offence of criminal breach of trust under section 409 IPC to have been committed, the following ingredients need to be satisfied:

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a. Entrustment of property;

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b. Dishonest misappropriation or conversion to own use or dishonest use or disposal of that property;

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c. Such entrustment/misappropriation should be carried out by an individual in her/his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent.

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As seen from Section 409 I.P.C., the petitioners/accused must have dishonest intention or misappropriation or conversion to own use or dishonest use or disposal of that property. In the entire allegations made in the complaint or in FIR there are no such allegations that the petitioners/accused have misappropriated or converted to their own use and it is only remitted to the loan account. And in this case in hand it was stated all the petitioners/accused have committed the offence under Section 409 I.P.C., but such entrustment/

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misappropriation should be carried out by an individual in her/his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent. There is no allegation with prior concert of mind petitioners / accused have misappropriated the cheque amount. As alleged by the complainant the amount was not misappropriated for personal use it was retained or remitted towards the loan which was advanced to the complainant, not with an intention to cheat or breach or the trust reposed by the complainant in favour of the petitioner / accused.

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Under Section 171 of the Indian Contract Act, in the absence of a contract to the contrary, bankers could retain, as a security for a general balance of account, any goods bailed to them. In the absence of such materials, in my opinion, knowing fully well the petitioners/accused have retained the said documents, by exercising right under Section 171 of the Indian Contract over the property, the complainant who has not made any request at any point of time, has rushed to the Criminal Court with the present complaint, in a hasty manner, and the material filed by the petitioners/accused would show that a notice was issued to the complainant demanding the loan

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amount. Merely the amount which remitted to the loan amount the complainant has filed the present complaint under 199 and 200 Cr.P.C., by circumventing the law and the learned Magistrate without applying its mind has transferred the complaint to police under section 156(3) Cr.P.C.

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Admittedly complainant is have an account in the bank and he has deposited the some amount in the bank and it is an undisputed fact complainant has availed loan from the bank and the complainant company/account was declared as NPA. And the bank has retained the amounts towards loan where the company of the complainant was declared as NPA.

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The Hon’ble Supreme Court in M.N.Ojha and others vs. Alok Kumar Srivastav and another³ has held that the complaint filed against the appellants (bank officials) as counterblast to the action taken by them for releasing loan amount in official capacity and the intention behind initiating the criminal proceedings to prevent public service from discharging their duties held complaint clearly an abuse of judicial process to harass the bank officials.

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3 (2009) 9 SCC 682

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As seen from the allegations in the complaint, the complainant has not stated that who has forged the signature of the complainant and only omnibus allegations were made in the complaint. And the amount of Rs.59 lakhs was withheld or retained by exercising the power vested under Section 171 of the Contract Act. Even as per the law and as per the allegations in the complaint, no case was made against the petitioners even if taking the entire allegations are to be taken as true.

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For the aforesaid reasons and in view of the judgment of the Hon’ble Supreme Court in M.N.Ojha’s (3 supra), the present complaint is filed only to harass the petitioners/accused and the said judgment of the Hon’ble Supreme Court is clearly applicable to the facts of the present case and the impugned proceedings are liable to be quashed.

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Accordingly, the Criminal Petition is allowed and the proceedings in F.I.R. No.32 of 2019 of IV Town Police Station, Visakhapatnam City, are hereby quashed.

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As a sequel, interlocutory applications, pending if any in this case, shall stand closed.

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________________________________________ JUSTICE TARLADA RAJASEKHAR RAO

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Date: 05.02.2024 siva

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THE HON’BLE SRI JUSTICE TARLADA RAJASEKHAR RAO

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CRIMINAL PETITION No.422 OF 2019

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