Rajeev Agarwal and Ors. Vs Rahul Harlalka

IN THE HIGH COURT AT CALCUTTA CRIMINAL REVISIONAL JURISDICTION APPELLATE SIDE

PRESENT:

THE HON’BLE DR. JUSTICE AJOY KUMAR MUKHERJEE

	C.R.R. 1846 of 2022 CRAN 2 of 2023 Rajeev Agarwal & Ors. Vs. Rahul Harlalkar With CRR 4208 of 2022 CRAN 7 of 2024 Ms. Nidhi Agarwal Vs. Rahul harlalka
For the Petitioners	: Ms. Sutapa Sanyal Mr. Debrup Bhattacharjee Mr. Pradeep Kr. Tulsyan Mr. Tirthankar Dey
For the Opposite Party	: Mr. Moyukh Mukherjee Mr. Siddhartha Sharma Ms. Md. Danish Taslim
Heard on	: 02.12.2024
Judgment on	: 08.01.2025

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Dr. Ajoy Kumar Mukherjee , J.:

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1. The petitioners in both the applications being CRR 1846 of 2022 and CRR 4208 of 2022 have been arraigned as accused persons in respect of a criminal proceeding being CN 632 of 2022 alleging commission of offence punishable under section 405/406/415/420/34 and 120B of the Indian

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Penal Code, which is now pending before the Judicial Magistrate, 19^th Court, Calcutta.

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2. The complaint states that accused no. 1 is the sole proprietor of Mongal Enterprises and accused no. 2 and 3 are the personal gurantors for the finanical assitance made by the complainant to the accused no.1., the accused no.4 is the authorized signatory and engaged in day to day business of Mongal Enterprises. In September 2016, accused persons in conspiracy with each other approached the opposite party complainant for a financial accomodation of Rs. 40 lakhs for the purpose of sustaining their family business. Accused no. 2 and 3 stood as gurantor and they also represented that the proprietorship concern is worth more than Rs. 600 crores and there would be no difficulty in repayment of said financial assitance. Beleiving on the representation of accused no.1 and unconditional assurance/gurantee issued by accused no.2 and 3, complainant/oppsite party herein extended financial accommodation of Rs. 40 Lakhs in two tranches on 16.09.2016 and 22.12.2016, on condition that such sum shall be repaid by the accused no.1 within a period of six months from the date of disbursement of aforesaid sum along with accrued interest. Thereafter on 31.03.2017 accused no. 1 made payment of Rs. 10 lakhs towards repayment of the principal sum of 40 lakhs and the accused persons assured that the remaining principal sum of Rs. 30 lakhs will be paid within a very short period. The further case of the complainant is that beleiving upon the respresntation of the accused persons he agreed to renew the financial assistance of principal sum of Rs. 30 lakhs along with interest on condition that the same shall be repaid on demand by the

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complainant. In line of the same, accused no.1 however continued to make payments of the interest amount which accrued on the principal sum of Rs. 30 lakhs acknowledging their liabilities to repay the principal amount with interest up to date. In order to regain the complainants trust, accused persons handed over two cheques one for Rs. 30 lakhs and the other for Rs. 93,205/- both dated 31^st March, 2020 towards repayment of remaining principal sum along with interest on the said amount. Thereafter accused no.4 on behalf of the accused no. 1 and 3 in response to the email dated 10^th August, 2020, expressed their inability to repay the financial assitance along with interest and thereby assured that the pending dues shall be disbursed soon. It is alleged in the complaint that the accused persons knowingly and intentionally committed an act of fraud upon the complainant by making false representation and by not paying the admitted dues and the accused persons are jointly and severally liable to pay the entire amount, due and payable to the complainant with interest up to date. The accused persons never had any intention to repay the loan taken from the complainant and from the very inception made such false and frivolous representation only to induce the complainant to believe such false representation. Therefore, the accused persons in a calculated and pre meditated manner have caused wrongful loss to the complainant to the tune of total outstanding of Rs. 30 lakhs as principal sum plus Rs. 4,42,568/- as interest accrued and have cheated the complainant herein. 3. learned Magistrate after considering the complaint was pleased to take cognizance of the offence and thereafter on examination of the

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complainant’s witnesses issued process against the accused persons vide order dated 01.04.2022.

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4. Being aggrieved by the aforesaid proceeding, Mrs. Sanyal learned counsel appearing on behalf of the petitioners submits that from the contents of the complaint it is apparent that under no circumstances the petitoner no.1 and 2 can be brought within the ambit of the word ‘gurantor’ as defined under section 126 of the Contract Act. She further argued that from the contents of the complaint, it is clear that complainant comes within the purview of the Bengal Money Lenders Act, 1940 (Act of 1940) and as such to continue with his money lending business, complainant should hold an effective license on the date of disbursement of loan under section 8 of the Act of 1940. She further submits that instant proceeding has been manipulated by the complainant as they were well aware of the fact that in absence of a valid license, no suit for recovery of money lent can be filed considering the specific bar under section 13 of the Act of 1940.

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5. Mrs. Sanyal further argued that the ingredients of the offence punishable under section 420 of the IPC is not present in view of the fact that the complainant admitted that the accused persons paid the interest from time to time. She further contended that complainant has not come before the court with clean hands as he suppressed the fact that a total sum of Rs. 22,31,863/- has already been paid to the opposite party complainant. She further contended that inspite of the receipt of the amount, the complainant has charged a further interest of Rs. 4,42,568/upon the principle amount. Further contention of the petitioner is that

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petitoner no.3 is an employee of the proprietorship firm and only because he had sent an email on 14.08.2020, seeking some accommodaton of time on behalf of his employer, he has been made an accused in this case. She further contended that even if there is any dispute between the parties over the payment of monetary assistance, such dispute is purely civil in nature and as such the present proceeding is liable to be quashed. In this context

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petitioner has relied upon the following judgments.

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(i) V.Y. Jose & anoth4er Vs. State of Gujrat & another reported in 2009 3 SCC 78

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(ii) Satishchabdra Ratanlal Shah Vs. State of Gujrat & anr. Reported in (2019) 9 SCC 148

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(iii) Vijay Kumar Ghai & Ors. Vs. State of West Bengal & Ors. Reported in (2022) 7 SCC 124

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(iv) Auto India Pvt. Ltd. & Ors. Vs. Incred Financial Services Limited (CRR 443 of 2020, decided on 19.06.2023).

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(v) Surendra Singh Bengani Vs. Sudha Kankaria (C.S. No. 142 of 2021, judgment passed on 24.04.2024)

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6. Mr. Mukherjee learned Counsel appearing on behalf of the opposite

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party/complainant submits that the court below after examining the witnessess and on being satisfied, issued process against the petitioners. The proceeding is at the nascent stage. He further submits that on bare reading of the contents of complaint, if the same is taken on its face value, it become evident that said complaint as a whole fulfils the ingredients of the offences alleged. The accused persons who are the petitioners in both the applications, in a calculated and pre meditated manner and by making

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false ornet represntation induced the opposite party no.2 to disburse the loan amount in favour of the petitioners. The accused person including the petitioners never had the intention to repay the loan amount and had fraudulently and dishonestly induced the opposite party no.2. The petitioners intentionally cheated and defrauded the opposite party no.2 and thereby caused wrongful loss to the opposite party no.2 for a sum of Rs. 30 lakhs along with accrued interest.

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7. Mr. Mukherjee further argued if there is dishonest intention to cheat from the very inception, then the transaction between the parties is not of a commercial nature and merely because part payment has been made, it cannot be said that the allegations leveled in the complaint does not constitute an offence. In fact the accused persons i.e. the petitioners in the two Applications in connivance and conspiracy with each other have fradulently mis appropriated the funds of the opposite party no. 2 and thereby defrauded and cheated the opposite party no.2

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8. Mr. Mukherjee further argued that it is not required to be stated in the complaint all the ingredients of the offence alleged nor is it necessary that the complaint should state in so many words that the intention of the accused is dishonest or fraudulent. In this context he relied upon judgment of Rajesh Bajaj Vs. State of NCT Delhi and another , reported in (1999)

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3 SCC 259 . He further argued that the powers possessed by the High Court under section 482 of the Code is to be exercised with great caution and care and must not be exercised to stifle a legitimate prosecution. In a proceeding instituted on complaint, exercise of the inherent power to quash the proceeding is called for only in a case where the complaint does not

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disclose any offence or the allegations are frivolous vexous or oppressive. At this stage High Court has no jurisdiction to examine the correctness or otherwise of the allegations. In this context he relied upon the judgment of

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Pratibha Rani Vs. Suraj Kumar reported in (1985) 2 SCC 370. Accordingly Mr. Mukherjee submits that quasing of the entire proceeding at such an embryonic stage would impede the course of justice and would cause great injustice to the opposite party, if the prayer for quahsing is allowed and as such he pryaed for dismissal of the said application.

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9. I have considered submissins made by both the parties. 10. Now on the face of the contents of the written complaint and the documents filed with the same and from the uncontroverted materials on record, the following facts are very clearly emerges:-

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(a) That accused persons representing themselves as the proprietor of Mongal Enterprises and as guarantor approached the opposite party for financial accommodation of a sum of Rs. 40 lakhs and the complainant duly executed the financial accommodation for a sum of Rs. 40 lakhs in two tranches of Rs. 20 lakhs on 16.09.2016 and 22.12.2016

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(b) The accused no.1 on 31.03.2017 made payment of Rs. 10 lakhs towards repayment of the principle sum of Rs. 40 lakhs. The accuseed no.1 continued to make payment of interest amount which accrued on the rest principal sum of Rs. 30 lakhs.

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(c) The accused persons handed over two cheques one for Rs. 30 lakhs dated 31.03.2020 bearing cheque no. 000122 and another cheque for Rs. 93,205/-dated 31.03.2020 bearing cheque no.000123 towards

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repayment of remaining principle sum along with interest on the said amount.

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11. Thus having a prima facie apprisal of the materials on record it is found that the petitioner took a loan of Rs. 40 lakhs, which according to complainant, the petitioners were supposed to pay along with interest but according to the complainant though the petitioners have paid Rs. 10 lakhs towards principal sum and some other amounts accrued towards interest upon the principal sum but has not paid the remaining outstanding principal amount as well as interest accrued therein and therefore, according to the complainant the accused persons in a calculated and pre meditated manner has caused a wrongful loss to the complainant to the tune of total outstanding of Rs. 30 lakhs as principal sum plus Rs.4,42 568/-towards accrued interest and thereby has cheated the complainant of such a huge sum and that they never have/had the intention to repay the arrear outstanding amount.

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12. It is admitted position that after disbursemnt of loan amount of Rs. 40 lakhs by the complainant, the petitioners have paid Rs. 10 lakhs and thereafter also they have issued two cheques amounting to Rs. 30,93,205/. Therefore, this is not a case where no payment has been made against the outstanding loan amount but admittedly it is a case where part payment has already been made and the cheques were also issued to make the rest of the payment. There is no factual foundation of the allegation of intial deception and such allegation is merely an inference drawn by the complainant from subsequent failure of the petitioner to keep their promise by making payment of the balance amount, even though according to the

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petitioners they have already paid a total sum of Rs. 22,31,863/- which the opposite party/complainant suppressed.

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13. Though the complainant/petitioner alleged in the written complain that accused no.1 and 2 had represented that the proprietroship concern belongs to them is worth more than Rs. 600 crores and there would be no difficulty in repayment of the said financial assistance and believing on such representation made by the accused, the complainant extended the financial accommodation of a sum of Rs. 40 lakhs, however the basic facts constituting initital deception by way of false representation on the part of the accused at the outset of initation of transaction has neither been expressly stated nor there is any evidenciary material in the record to suggest that the petitioners’ proprietorship firm was not solvent enough for repayment of the said loan amount. Furthermore, when the petitioners have admittedly paid Rs. 10 lakhs upon the principal amount and also paid the accrued interest upon rest amount from time to time, it cannot be said that the petitioners had no intention to pay the said amount right from the beginning of the transaction. Thus, initial decpetion which is the basic ingredient of cheating is conspicuously absent in the present case.

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14. The other aspect of the case is also important where it is stated that the complainant had issued two cheques one for Rs. 30 laksh dated 31.03.2020 bearing cheque no. 000122 and another cheque for Rs. 93,205/- dated 31.03.2020 bearing cheque no. 000123 both drawn on overseas bank towards repayment of remaining principal sum along with interest as stated in paragraph 8 of the complaint.

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15. However, it has been averred in the complaint that the accused persons/petitioners requested the complainant not to deposit such cheques in the bank with the assurance that the said cheuqes will be replaced by new cheques as the accused no. 1 and 2 at the relevant point of time were suffering with some financial crunch and being compasionate towards the issue and beleiving upon the false representation, the complainant did not deposit such cheques for encashment and waited in anticipation to receive the fresh cheque from the petitioners.

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16. Although, no material has been placed in support of such contention but even if said contention is taken to be true, it is not understanable how such allegation constitutes an offence under section 420 of the IPC. Neither the failure to pay the balance dues nor the alleged assurance of giving fresh cheques in place of old one to liqudate outstanding balance of pre existing or antecedent liability give rise to an offence under sectio 420 of IPC.

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17. It is well settled that mere inability of the petitioners to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent and dishonest intention is shown right at the beginning of the transaction as it is the mens rea which is the crux of the offence.

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18. The averments in the complaint shows that initially there was no dispute as such between the parties at least from 2016 to March, 2020 when the cheques were given but the dispute arose when petitioners allegedly neither issued fresh cheques nor made the payment of outstanding amount along with interest. Therefore, the ingredients of entrustment with dishonest intention leading to delivery of property and or cheating with knowledge to cause wrongful loss are not on record. The

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entire idea seems to be to convert a civil dispute into criminal and put pressure to the petitioners for return of the amount allegedly paid by the complainant. It is also settled law that the criminal courts are not meant to be used for settling scores or pressurizing parties to settle civil dispute. In the present case the main offence alleged by the complainant is that the petitoner committed the offence of cheating and thereby dishonestly induced him to deliver property. To ‘deceive’ is to induce a man to believe that a thing is true which is false and which the person practicing the deceit knows or believs to be false.

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19. There is nothing to show either in the complaint or in any other document that the petitioner has made any willful misrepresentation. According to the complaint the parties entered into an agreement and in terms of agreement the complainant paid Rs. 40 lakhs to the petitioners which the petitioners were supposed to repay along with interest. Though the petitioners have made part payment but they have failed to discharge their contractual obligation. Accordingly if having accepted the pecuniary advantage from the complainant, the petitioners failed to pay their debt they do not necessarily evade the debt by deception. The principle underlying exercise of jurisdiction by the High Court under section 482 of the Code is well settled that the allegations contained in the complaint even if given face value and taken to be correct in its entirety, do not disclose an offence. As I have stated above that the dispute herein between the parties as appearing from the averments made in the complaint, is a civil dispute, non-payment or under payment of the alleged loan amount by itself does

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not amount to commission of an offence of cheating or criminal breach of trust.

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20. In Hridoy Ranjan Prasad Verma Vs. State of Bihar reported in (2000) 4 SCC 168 the Apex Court reiterated that while determining such question it has to be kept in mind that 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, though for this, subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention shown right at the beginning of the transaction.

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21. Moreover there are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously as in the case of offence of cheating, dishonest intention must exist at the inception of the transaction, whereas in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law and the dishonest intention comes later.

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22. In the circumstances, I find that the continuation of the instant criminal proceeding pending against the present petitioners of CRR 1846 of 2022 and CRR 4208 of 2022 will be sheer abuse of the process of the court. Therefore, I find sufficient material to invoke the inherent power under section 482 of Cr.P.C. so as to quash the entire proceeding. 23. In such view of the matter CRR 1846 of 2022 and 4208 of 2022 are allowed. The impugned proceeding being Case No. CN 632 of 2022 pending

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before learned Judicial Magistrte 19^th Court Calcutta is hereby quashed. In view of disposal of main applications, connected applications are also disposed of accordingly.

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Urgent Xerox certified photocopies of this Judgment, if applied for, be given to the parties upon compliance of the requisite formalities.

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(Dr. AJOY KUMAR MUKHERJEE, J.)

Rajeev Agarwal and Ors. v. Rahul Harlalka

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Rajeev Agarwal and Ors. v. Rahul Harlalka

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