Quashed

Mr Rajesh Parekh v. State of Karnataka

Karnataka HC30 Nov 2021CRL.P/4310/2020

Case brief

AI extract

What is this about?

Criminal Petition No.4310 of 2020 filed by directors of Parekh Industries seeking quashing of criminal proceedings for cheating and criminal breach of trust. The Court held that although the charge sheet was filed, the investigations were unwarranted as no trust or entrustment existed, and no loss was caused. Consequently, the proceedings were quashed.

What did the court decide?

Criminal proceedings in C.C.29369/2019 against petitioners for offences under Sections 406, 409, 420, and 120B IPC were quashed.

Mr Rajesh Parekh Vs State of Karnataka — Cheque Dishonour | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 30^TH DAY OF NOVEMBER, 2021

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BEFORE

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THE HON’BLE MR. JUSTICE SREENIVAS HARISH KUMAR

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CRIMINAL PETITION NO.4310 OF 2020

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BETWEEN:

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Mr. Rajesh Parekh, S/o Jamnadas Parekh, Aged about 67 years, President & Chief Executive Officer, M/s. Parekh Industries Limited, No.51/3, Prince House, Marol Co-op. Indus. Estate, M.V.Road, Andheri(E) Mumbai-400059.

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Mrs. Shubhada Gawde, W/o Prakash Gawde, Aged about 51 years, Managing Director, M/s. Parekh Industries Limited, No.51/3, Prince House, Marol Co-op. Indus. Estate, M.V.Road, Andheri(E), Mumbai-400059.

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Mrs. Nayna Rajesh Parekh, W/o Mr. Rajesh Parekh, Aged about 65 years, Director, M/s. Parekh Industries Limited, No.51/3, Prince House, Marol Co-op. Indus. Estate, M.V.Road, Andheri(E), Mumbai-400059.

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…Petitioners

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(By Sri B.S.Radhanandan, Advocate)

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AND:

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State of Karnataka Peenya Police Station, Bengaluru City, Represented by Special Public Prosecutor, High Court of Karnataka, Bengaluru-560001.

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Mr. Ketan S.Dhruv S/o Suresh I. Dhruv Aged about 47 years, No.6/1, Plot No.21A, 1^st Cross, 1^st Phase, Peenya Industrial Area, Bengaluru-560058.

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…Respondents

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(By Sri B.J.Rohith, HCGP, for R1; Sri Kiran S Javali, Advocate, for Sri Madhu N. Rao, Advocate for R2)

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This Criminal Petition is filed under Section 482 of Cr.P.C. praying to quash and set aside the criminal proceedings in Cr.No.207/2019 dated 21.06.2019 for offence punishable under Sections 406, 409, 420, 120B read with Section 34 of IPC which culminated into continuation of the criminal proceedings on the file of the Hon’ble IV ACMM, Bengaluru in C.C.No.29369/2019 at Annexures-A, B and C lodged against the petitioners.

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This Criminal Petition coming on for admission this day, the Court made the following:

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ORDER

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The petitioners who have been charge sheeted

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for the offences under sections 406, 409, 420, 120B read with section 34 IPC have sought quashing of the proceedings against them in C.C.29369/2019 on the file of IV ACMM, Bengaluru.

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The second respondent made a report to the first respondent police for registration of FIR against the petitioners. The first petitioner is the President and Chief Executive Officer, the second petitioner is the Managing Director and the third petitioner is a Director of a company called Parekh Industries Limited. The second respondent is Director of another company called Bangalore Refinery (P) Limited. Both the companies are into the business of manufacturing precious metals. Respondent No.2 is also a close relative of the petitioners. The second respondent in his report

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to the police stated that his company and Parekh Industries started having mutual business transactions in the year 2015 for trading in precious metals and chemicals. In the course of these dealings, Parekh Industries fell in due of Rs.7,36,16,156/- as on 14.3.2019. On 20.3.2019 his company received a cover through courier services. The said cover contained a letter dated 19.3.2019 from Parekh Industries, a tax invoice with number 175 dated 19.3.2019 for 22,000 grams of gold bars of the value Rs.7,15,00,000/with tax of Rs.21,45,000/-, totally amounting to Rs.7,36,45,000/- and two train tickets reserved in the names of two employees of Parekh Industries. It was written in the letter dated 19.3.2019 that as per the telephonic conversation between the two companies, Parekh Industries would be sending 22 kgs of gold bars. But, no order had been placed by Bangalore Refinery for the gold as stated in the letter. Therefore the second

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respondent presumed that Parekh Industries might have done so for discharging its outstanding amount through sale of 22 kgs of gold bars. The second respondent has also stated that sending gold bars through employees by train was never a practice at all and the normal practice was to send the precious cargo only through secure logistic company. On 20.3.2019 itself the second respondent communicated to Parekh Industries that the gold was being sent without their knowledge and consent, however on 21.3.2019, though it was a holiday, second respondent made arrangements and waited at his factory premises to receive the gold under the belief that the gold was really sent. Since no consignment was received although he waited till 6.00 PM on 21.3.2019, he sent a communication to the second petitioner that the gold was not received and that nobody arrived in Bengaluru as scheduled. On 22.3.2019 also, a communication was sent to

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Parekh Industries stating that the gold was not received and that a letter was also written to GST Department, Mumbai and Bengaluru, on 23.3.2019. In the above premise, the second respondent alleged that the petitioners and the employees of their company hatched a conspiracy to commit fraud and deceive them of the payments that they were due by raising false invoice for 22 kgs of gold.

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On the other hand, the petitioners’

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contentions are that Bangalore Refinery used to

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place orders for gold with Parekh Industries orally over the phone and that they used to supply the gold raising proper invoices. On 14.3.2019 when the father of second respondent visited Mumbai, he verbally placed orders for 22 kgs of gold. Therefore on 19.3.2019, an invoice was raised for 22 kgs of gold, and train tickets were booked for dispatching the gold through their two employees.

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They could not send gold to Bangalore Refinery because the train tickets were not confirmed although they waited till the closure of the working hours of their company. The petitioners had also arranged for insuring the consignment arranged to be sent by train. Unless the train tickets were confirmed, they could not go for insurance. Because they did not send gold, the second respondent did not suffer any loss as he had not made payment of Rs.7,36,45,000/- after receiving the invoice. The second respondent is under the false impression that the petitioners wanted to cheat him by sending false invoices.

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Sri B.S.Radhanandan, learned counsel for the petitioners, has argued that the transaction clearly discloses that the second respondent did not suffer any loss nor the petitioners gained anything. It was a practice to send the gold to the second respondent by train through the employees

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after obtaining insurance for the consignment. For the amount said to be due to the second respondent, a suit has been instituted in the City Civil Court, Bengaluru. The petitioners have also instituted a commercial suit in Mumbai to recover an amount of Rs.7,50,00,000/- with interest from Bangalore Refinery. The second respondent has presumed that the petitioners might cheat him and FIR is as a result of presumption. The FIR does not disclose the essential ingredients for constituting offence under section 420 IPC. For invoking the offence under section 406 IPC there was no entrustment of property. To say that there is conspiracy, the commission of offences under sections 406, 409, and 420 should be prima facie made out. FIR essentially lacks these ingredients. The investigation based on a false FIR is illegal and invalid. He submitted that the intention of the second respondent to prosecute the petitioners is to compel them to arrive at a settlement in the

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civil litigations. Therefore the criminal proceeding

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against the petitioners should be quashed.

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Sri. Kiran Javali, counsel for the second respondent contended that since charge sheet has already been filed, the petitioners may make an application under Section 239 Cr.P.C. seeking their discharge. The investigating agency has collected evidence; the petitioners are required to make out a case that there is no scope for charging them based on the materials collected by the investigator, they cannot seek quashing of charge sheet under Section 482 Cr.P.C. In this regard, he has relied upon the judgment of the Supreme Court in the case of Kaptan Singh Vs. State of Uttar Pradesh and Others [(2021) SCC Online SC 580].

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On facts, Sri. Kiran Javali submitted that

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the very fact of sending an invoice to the second respondent in spite of the fact that the second

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respondent had not placed any order for gold on behalf of his company is indicative of the petitioner’s dishonest intention to cheat. The second respondent has instituted a suit against the petitioners, and knowing very well about the suit, if the petitioners sent an invoice, it was a deceptive act likely to cause damage to the second respondent. Therefore there is no scope for interference under Section 482 Cr.P.C.

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I have considered the rival contentions. The petitioners have sought quashing of the proceedings against them after filing of charge sheet. There is subtle distinction between quashing of FIR and the charge sheet. If the FIR does not prima facie disclose constitution of any offence un-warranting investigation, Section 482 Cr.P.C. can be invoked for quashing the FIR. Filing of charge sheet indicates collection of evidence, and in that event two courses are open

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to the accused – one to apply for discharge under

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Section 227 or 239, as the case may be. The accused must point out that the materials collected by the investigator are insufficient to frame charge. But when the charge sheet is sought to be quashed, the accused must point out inherent illegality and infirmity in the charge sheet and that subjecting the accused for prosecution amounts to abuse of process of court. Of course with the expansion of scope of section 482 Cr.P.C., the fine distinction between quashing and discharge appears to have vanished, yet the High Court cannot exercise jurisdiction under section 482 Cr.P.C., whenever there is scope for discharge. In this context, it may be apt to refer to what the Supreme Court has observed in the

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case of Kaptan Singh (Supra)

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“22. At the outset, it is required to be noted that in the present case the High Court in exercise of powers under Section

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482 Cr.P.C. has quashed the criminal proceedings for the offences under Sections 147, 148, 149, 406, 329 and 386 of IPC. It is required to be noted that when the High Court in exercise of powers under Section 482 Cr.P.C. quashed the criminal proceedings, by the time the Investigating Officer after recording the statement of the witnesses, statement of the complainant and collecting the evidence from the incident place and after taking statement of the independent witnesses and even statement of the accused persons, has filed the chargesheet before the Learned Magistrate for the offences under Sections 147, 148, 149, 406, 329 and 386 of IPC and even the learned Magistrate also took the cognizance. From the impugned judgment and order passed by the High Court, it does not appear that the High Court took into consideration the material collected during the investigation/inquiry and even the statements recorded. If the petition under Section 482 Cr.P.C. was at the stage of FIR in that case the allegations in

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the FIR/Complaint only are required to be considered and whether a cognizable offence is disclosed or not is required to be considered. However, thereafter when the statements are recorded, evidence is collected and the charge-sheet is filed after conclusion of the investigation/inquiry the matter stands on different footing and the Court is required to consider the material/evidence collected during the investigation. Even at this stage also, as observed and held by this Court in catena of decisions, the High Court is not required to go into the merits of the allegations and/or enter into the merits of the case as if the High Court is exercising the appellate jurisdiction and/or conducting the trial. As held by this Court in the case of Dineshbhai Chandubhai Patel (Supra) in order to examine as to whether factual contents of FIR disclose any cognizable offence or not, the High Court cannot act like the Investigating agency nor can exercise the powers like an Appellate Court. It is further observed and held that question is required to be

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examined keeping in view, the contents of FIR and prima facie material, if any, requiring no proof. At such stage, the High Court cannot appreciate evidence nor can it draw its own inferences from contents of FIR and material relied on. It is further observed it is more so, when the material relied on is disputed. It is further observed that in such a situation, it becomes the job of the Investigating Authority at such stage to probe and then of the Court to examine questions once the charge-sheet is filed along with such material as to how far and to what extent reliance can be placed on such material.

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23. In the case of Dhruvaram Murlidhar Sonar (Supra) after considering the decisions of this Court in Bhajan Lal (Supra), it is held by this Court that exercise of powers under Section 482 Cr.P.C. to quash the proceedings is an exception and not a rule. It is further observed that inherent jurisdiction under Section 482 Cr.P.C. though wide is to be exercised sparingly, carefully and with caution, only when such exercise is

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justified by tests specifically laid down in section itself. It is further observed that appreciation of evidence is not permissible at the stage of quashing of proceedings in exercise of powers under Section 482 Cr.P.C. Similar view has been expressed by this Court in the case of Arvind Khanna (Supra), Managipet (Supra) and in the case of XYZ (Supra), referred to hereinabove.”

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(underlining by me)

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In the instant case, charge sheet has been filed for the offences under sections 120(B), 406, 409 and 420 read with section 34 of IPC. Section 406 is the penal Section for committing an offence of criminal breach of trust, and section 405 defines criminal breach of trust. The essential requirement for the offence of criminal breach of trust, is entrustment of property on a person, or a person should have dominion over the property of another, and such person must have dishonestly misappropriated the property or converted a

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property for his use or used or disposed of the property in violation of direction of law prescribing the usage or a legal contract.

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To constitute an offence punishable under Section 420 IPC, a person should have been cheated and dishonestly induced to delivery a property or make or alter or destroy the whole or any part of the valuable property. Section 120B deals with conspiracy to commit an offence.

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In the case on hand, neither the FIR nor

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the charge sheet discloses essential requirements to constitute offences under section 406 and section 420 IPC. It is undisputed that the petitioners did not send the gold and that the second respondent did not receive it. If the petitioners say that the invoice came to be raised for 22 kgs of gold on a verbal order placed by the father of second respondent, the 2^nd respondent denies it, and states that the petitioners resorted

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to this dubious method in order to defeat his claim for Rs.7,36,16,156/-. Whatever may be the allegation and counter allegation, no party has neither gained or lost anything. Entrustment of property with the petitioners is also not there. The contention of 2^nd respondent that his company was likely to be cheated, is nothing more than his imagination. If essential ingredients for offences under sections 406, 409 and 420 are conspicuously absent, or in other words offences do not appear to have taken place it is difficult to infer offence of conspiracy under section 120B IPC. This being the factual position, the police should not have proceeded to conduct investigation. Now merely for the reason that charge sheet is filed, the 2^nd respondent cannot contend that the petitioners cannot seek quashing of charge sheet and that they have to apply for discharge. As has been observed already, investigation was totally unwarranted, the 2^nd respondent has already

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instituted a suit against the petitioners and that the petitioners have also filed a commercial suit. When the suits are pending, the 2^nd respondent’s contention that the petitioners intended to cheat them is fallacious. Therefore the conclusion is that the petitioners have made out a case for exercising jurisdiction under section 482 Cr.P.C., and consequently the proceedings against them in C.C.29369/2019 on the file of IV A.C.M.M.,

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Bengaluru, are quashed.

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SD/JUDGE

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ckl/-

Mr Rajesh Parekh v. State of Karnataka

Case brief

What is this about?

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Mr Rajesh Parekh v. State of Karnataka

Case brief

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