Partly allowed

M/S Hongkong and Shanghai Banking Corporation Ltd. v. M/S Lisa Apparels Pvt. Ltd.

Karnataka HC20 Jul 2023CRL.P/8119/2016

Case brief

AI extract

What is this about?

The High Court partly allowed a petition under Section 482 Cr.P.C. filed by two accused challenging a Magistrate's order taking cognizance of offences under Sections 420, 506B and 120B IPC. The Court held that the Magistrate had no inherent power to recall the order dismissing the complaint for default due to the bar under Section 362 Cr.P.C. However, considering the age of the case, the Court res

What did the court decide?

Order dated 17.09.2016 taking cognizance against petitioners set aside. Case remitted to Trial Court for fresh consideration against accused No.1. Criminal proceedings against accused No.9 quashed.

M/S Hongkong and Shanghai Banking Corporation Ltd. Vs M/S… — Quashing and FIR | Karnataka HC (2023)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 20^TH DAY OF JULY, 2023

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BEFORE

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THE HON’BLE MR. JUSTICE R.NATARAJ

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CRIMINAL PETITION NO.8119 OF 2016

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BETWEEN:

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1 . M/S HONGKONG AND SHANGHAI BANKING CORPORATION LTD., WITH ITS REGISTERED OFFICE AT NO.52/60, MAHATMA GANDHI ROAD, MUMBAI-400 001

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WITH ONE OF ITS BRANCH OFFICE AT

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NO.84, GANDHI BAZAAR ROAD, BASAVANAGUDI, BANGALORE-560 004 REPRESENTED BY ITS ASSOCIATE MANAGER

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2 . SRI. MANOJ PARADKAR VICE PRESIDENT, GLOBAL TRADE AND RECEIVABLES, NESCO IT PARK, IT PARK BUILDING 3, 9^TH FLOOR, WESTERN EXPRESS HIGHWAY, GOREGOAN EAST, MUMBAI-400 063

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...PETITIONERS

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(BY SRI. C.V. NAGESH, SENIOR COUNSEL FOR THRIMURTHY B.S., ADVOCATE)

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AND:

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M/S. LISA APPARELS PVT. LTD., NO.191, 3^RD CROSS, PANDURANGA NAGAR,

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OFF:BANNERGHATTA ROAD, BANGALORE-560 076

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…RESPONDENT (BY SRI. ASHOK B. PATIL, ADVOCATE)

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THIS CRL.P IS FILED UNDER SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973 PRAYING TO SET ASIDE THE ORDER DATED 17.09.2016 ON THE FILE OF V ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BANGALORE IN PCR NO.21981/2009 PASSED IN THE CASE DIRECTING REGISTRATION OF A CASE AGAINST THE PETITIONERS FOR OFFENCES WHICH ARE MADE PENAL UNDER SECTIONS 420, 506 (PART-II) AND 120B READ WITH SECTION 34 OF THE INDIAN PENAL CODE, 1860 AND ORDERING PROCESS AGAINST THEM FOR THEIR APPEARANCE IN THE CASE BEFORE THE COURT AND FURTHER BE PLEASED TO QUASH THE PROCEEDINGS IN PCR.NO.21981/2009 IN THE COURT OF THE V ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, BANGALORE THAT ARE BEING RECORDED IN THE CASE.

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THIS PETITION HAVING BEEN HEARD AND RESERVED FOR ORDER ON 21.04.2023 AND COMING ON FOR PRONOUNCEMENT OF ORDER THROUGH VIDEO CONFERENCE THIS DAY, THE COURT MADE THE FOLLOWING:-

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ORDER

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The petitioners being accused Nos.1 and 9, have challenged an order dated 17.09.2016 passed by the V Additional Chief Metropolitan Magistrate, Bengaluru, (henceforth referred to as the 'Trial Court') in PCR NO.21981/2009 taking cognizance of the offences punishable under Sections 420, 506B and 120B read with Section 34 of the Indian Penal Code, 1860 (for short, 'IPC').

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A private complaint registered as PCR No.21981/2009 was filed by the respondent against the petitioners and eight others alleging commission of offences punishable under Sections 420, 506B, 120B read with Section 34 of IPC. It alleged that the accused No.1 claimed that it was engaged in the business of providing factoring facilities. It alleged that the accused No.2 was the Managing Director of accused No.1 and was privy to all information and

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played a critical role in policy and legal matters of the accused No.1. It is alleged that the accused No.2 was recognized all over the World and once was considerably influential with the officials of the Ministry of Finance and the Reserve Bank of India. The accused Nos.3 to 10 were the employees of the accused No.1. It was further alleged that during March 2008, the accused No.1 approached the complainant and represented that it was interested in offering domestic factoring facility and consequently persuaded the complainant to enter into an agreement dated 07.03.2008 for Domestic Factoring Facility of Rs.50,000,000/- (Fifty million Rupees only). As per the agreement, the complainant was to sell all its book debts at 85% of its value to the accused No.1. Later an Invoice Discounting / Factoring Agreement was entered into between the complainant and accused No.1 on 27.03.2008. It was alleged that out

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of the many accounts proposed for factoring, two accounts of M/s.Aravind Brands and M/s.Hasbro Clothing Private Limited were agreed to be purchased by the accused No.1. It claimed that over a period of time, the limit of factoring was increased to Rs.100,000,000/- (Hundred Million Rupees only). It was alleged that when the accused No.1 found it difficult to recover the money from M/s.Aravind Brands and M/s.Hasbro Clothing Private Limited, it started harassing the complainant. A complaint in that regard was filed with the Banking Ombudsman of

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the Reserve Bank of India. The accused No.1 purportedly stifled the complaint and forced the complainant to sign an agreement by which the accused No.1 wanted to resell the debt to the complainant and in the event of default, it could be recovered as a decree of the Debts Recovery Tribunal, which however was not agreed. It was alleged that

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the accused No.1 was not authorized to do factoring business under Section 6 of the Banking Regulation Act, 1949. The accused No.1 issued a notice on 22.04.2009 demanding a sum of

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Rs.8,66,28,184.86Ps., being the amount payable by M/s.Aravind Brands and M/s.Hasbro Clothing Private Limited. The complainant replied to this notice claiming that the Factoring agreement was void. Later, Accused No.1 on 19.06.2009 demanded Rs.10,17,25,446.92Ps. from M/s.Aravind Brands and Rs.6,12,82,850/- against M/s.Hasbro Clothing Private Limited i.e., total of Rs.16,30,08,296.92Ps. from the same transaction which they claimed from the complainant. The complainant alleged that the accused No.1 had also spent money for insurance coverage against risk of loss from unknown insurance companies based in India and other countries and therefore, did not suffer any loss but had actually

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collected money from the insurance companies and was attempting to illegally claim money from the complainant also. Following this, the accused No.1 persuaded the complainant to sign a memorandum of agreement dated 02.07.2009 and started extorting money claiming that it would place the complainant under the Credit Information Bureau (India) Limited (CIBIL) as a Non-performing Asset (NPA). Following this, accused Nos.2 to 10 were criminally intimidating the complainant through antisocial elements and demanding them to pay the money to the accused No.1. A complaint was allegedly lodged before Hulimavu Police Station on 04.09.2009. The complainant claimed that it had filed a suit in O.S. No.5831/2009 which was pending consideration before the I Additional City Civil and Sessions Judge, Bengaluru and a writ petition in W.P. No.28109/2009 was filed before this Court where this Court had

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granted an interim order dated 05.10.2009.

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Notwithstanding the order passed by this Court, the accused allegedly continued to illegally demand the money from the complainant and had illegally presented cheques worth Rs.4,95,00,000/-. The complainant alleged that the accused No.1 was continuously threatening the wife of Managing Director of the complainant of dire consequences and threatened of her life. Hence, a private complaint was lodged praying the Trial Court to take cognizance of the offences punishable under Sections 420, 506 PartII, 120B read with Section 34 of IPC.

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It is stated that the Trial Court by its order dated 15.10.2009, referred the complaint for investigation and report under Section 156(3) of the Code of Criminal Procedure, 1973 (for short, 'Cr.P.C.') to Hulimavu Police Station which was challenged by the accused No.1 and others in Crl.P. No.5627/2009.

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This Court in terms of the Order dated 25.01.2012, set aside the order dated 15.10.2009 passed in PCR No.21981/2009 referring the private complaint under Section 156(3) of Cr.P.C. as it was done without due application of mind and remanded the matter to the learned Magistrate for reconsideration from the stage of presentation of the complaint in the light of the observations made in the said order and in accordance with law. After such remand, the Magistrate allegedly took cognizance of the offences and thereafter posted the case for recording the sworn statement of the complainant. However, the complainant failed to record its sworn statement and the Magistrate was perforced to dismiss the complaint for default on 25.10.2014. It is claimed that on 31.10.2014, the Magistrate disregarding the prohibition contained in Section 362 of Cr.P.C., recalled the order dated 25.10.2014 and restored the complaint and posted the

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case for recording the sworn statement of the complainant. It is alleged that the Magistrate recorded the sworn statement on four different occasions and thereafter directed registration of the case against the accused Nos.1 and 9 / petitioners herein and the other accused for the offences punishable under Sections 420, 506B and 120B read with Section 34 of IPC and issued process to the accused Nos.1 and 9 and other accused. It is this order which is challenged in the present petition.

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Learned senior counsel for the petitioners submitted that the Magistrate committed an error in recalling the order dated 25.10.2014 by which the private complaint was dismissed for default. He submitted that there is an express bar under Section 362 of Cr.P.C. against review of the order passed by the Trial Court. In this regard, he relied upon the judgments of the Hon'ble Apex Court in:

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i. Maj. Genl. A.S. Gauraya and Another v. S.N.Thakur and another [(1986) 2 SCC 709];

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ii. IRIS Computers Limited v. Askari Infotech Private Limited and Others [(2015) 14 SCC 399].

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iii. GHCL Employees Stock Option Trust v. India Infoline Limited [(2013) 4 SCC 505].

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He further contended that the Magistrate did not record reasons before taking cognizance of the offences against the petitioners. In this regard, he referred to the judgment of the Hon'ble Apex Court reported in Krishna Lal Chawla v. State of U.P [(2021) 5 SCC 435] . He further contended that all the accused Nos.2, 3, 5, 8 and 9 were residents of Mumbai and therefore, the Magistrate ought to have followed the procedure contemplated under Section 202(1) of Cr.P.C. In this regard, he referred to the judgment of the Hon'ble Apex Court in Vijay

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Dhanuka Etc. v. Najima Mamtaj Etc. [2014 AIR SCW 2095]. He further contended that the dispute between the parties is purely civil in nature and that they are agitating their respective grievance before the jurisdictional Debts Recovery Tribunal and therefore, issues have to be thrashed out before the said Tribunal. He further contended that the accused No.9 / petitioner No.2 is only a servant of the accused No.1 and the concept of vicarious liability is unknown to criminal law and therefore, the servants of the accused No.1 cannot be proceeded against. In this regard, he relied upon a decision rendered by a coordinate bench of this Court in Crl.P. No. 4676/2020 and Crl.P. No.4712/2020 (decided on 07.01.2021).

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Per contra, the learned counsel for the respondent contended that the petitioners have deliberately not produced the documents marked at the time of recording the sworn statement of the

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complainant. He contended that the documents marked before the Magistrate did indicate that the accused No.1 did not disclose the source of cash remittance into its account at Ex.P16. He contended that such cash remittances were not made by the complainant but the statement of account was manipulated by the accused No.1 to seem as if the account of the complainant was a loan account and not a factoring account. He contended that pursuant to the factoring agreement, the complainant had entrusted the bills / invoices of its customers for recovery to accused No.1. He alleged that the petitioners/accused Nos.1 and 9 and other accused had dishonestly misappropriated the amount recovered from the customers and had not accounted for it. He also alleged that the petitioners and other accused did not take any steps to recover the dues from the customers resulting in the debt becoming

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stale. He contended that it is the petitioners and the other accused who had cheated the complainant by dishonestly inducing it to deliver bills / invoices and cause damage to the finances of the complainant. He further alleged that the accused Nos.1 to 10 were guilty of various offences under Sections 409, 415, 418, 421, 422, 424, 463, 465, 467, 468, 469, 477A of IPC. He contended that the Trial Court did not commit any error in recalling its order dated 25.10.2014 dismissing the complaint for default as the bar of review or altering its judgment is different from the power to recall an order dismissing the complaint for default. He relied upon the judgment of a coordinate Bench of this Court in Giridharilal v. Pratap Rai Mehta [ILR 1989 Kar 2491] . He also relied upon the judgment of a coordinate Bench of this Court in Ibrahimsab v. Faridabi [ILR 1986 Kar 2251] . He

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contended that the Trial Court had recorded the sworn

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statement of the Director of the complainant and after examining the material placed on record, passed the impugned order and therefore, requirement under Section 202(1) of Cr.P.C was complied with. He referred to the judgment of the Hon'ble Apex Court in Ramdev Food Products Private Limited v. State of Gujarat [2015 (6) SCC 439] . He also contended that all the accused had manipulated the accounts of accused No.1 and thus, each one of them were liable and therefore, he contended that there was a common intention on the part of the accused Nos.1 to 10 to commit an offence and therefore, the question of they being not vicariously liable was remote.

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I have considered the submissions made by the petitioners /accused Nos.1 and 9 as well as the learned counsel for the respondent / complainant. I have also perused the material on record.

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7. The questions that arise for consideration

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in this criminal petition are:

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Whether the Magistrate was justified in recalling the order dismissing the complaint for default in the face of Section 362 of Cr.P.C.?

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Whether the Trial court followed the procedure prescribed under Section 202 of Cr.P.C. before taking cognizance and issuing process to the accused No.9 who is residing outside the jurisdiction of the Court?

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Whether there was enough material to take cognizance of the offences against petitioners, punishable under Sections 420, 506B and 120B of IPC read with Section 34 of IPC?

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Whether the dispute was civil in nature, more particularly, in view of the proceedings pending before the Debts Recovery Tribunal?

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Question No.1:

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8. In order to answer the first question, it is

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appropriate to refer to Section 362 of Cr.P.C. which is

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extracted below:

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" 362. Court not to alter judgement .

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Save as otherwise provided by this Code or by any other law for the time being in force, no Court, when it has signed its judgment or final order disposing of a case, shall alter or review the same except to correct a clerical or arithmetical error."

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9. The order sheet of the Trial Court discloses

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that the order dated 15.10.2009 referring the case to the Hulimavu Police Station for investigation was challenged before this Court in Criminal Petition No.5627/2009 and a coordinate Bench of this Court, in terms of the Order dated 25.01.2012, set aside the order dated 15.10.2009 and remanded the matter to

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the learned Magistrate for reconsideration from the

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stage of presentation of complaint in the light of observations made therein and in accordance with law. Later, the Trial Court in terms of the Order dated 25.02.2014, took cognizance of the offences punishable under Sections 420, 506B, 120B of IPC read with Section 34 of IPC against accused Nos.1 to 10 and referred the case to the Police Inspector of Hulimavu Police Station for investigation and to submit its report within three months. The Magistrate entertained an application filed under Section 362 of Cr.P.C. by the learned counsel for the complainant for correcting typographical errors in the order dated 25.02.2014 and while allowing the application, issued summons to the accused returnable by 04.06.2014. This order dated 25.02.2014 was again altered as "Register PCR against A.1 to 10 and this case posted to record sworn statement by 04.06.2014". This conduct of the Magistrate in tampering with the order

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sheet at will is shocking and may border on misconduct. Even though the Court had referred the case to the police officer under Section 156(3) of Cr.P.C., yet the case was listed for recording the sworn statement of the complainant from 04.06.2014 to 18.06.2014 and then to 14.07.2014 and thereafter to 02.09.2014 and lastly on 25.10.2014 on which day, the complainant failed to appear and the complaint was dismissed for default. Two days thereafter a memo was filed by the learned counsel for the complainant seeking restoration of the private complaint. The Trial Court held that no prejudice would be caused to the accused if the memo was entertained. Consequently, memo dated 25.10.2014 was allowed and the PCR No.21981/2009 was restored. The Magistrate failed to consider that when once the case was dismissed for default, then the accused would be automatically discharged, if not

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acquitted, of the offence. The Magistrate failed to consider that under Section 249 of Cr.P.C., if the complainant did not appear on the day appointed for the appearance of the accused, the Magistrate shall discharge the accused and the only remedy is to file an appeal under Section 378(4) of Cr.P.C. to set aside the order of dismissal of the complaint for default. He also has the remedy of approaching this Court under Section 482 of Cr.P.C. or file a second complaint unless the Magistrate has not proceeded to record evidence of any witness in the case. Once the Magistrate signs the order dismissing the private complaint for default, the bar under Section 362 of Cr.P.C. kicks in, as the case would be finally disposed, unless set aside in accordance with law. There is no provision under the Cr.P.C. which vests any inherent power in the Magistrate to recall, alter or review his own order once he has signed the same. The Hon'ble

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Apex Court in the case of Bindeshwari Prasad Singh v. Kali Singh [(1977) 1 SCC 57] precisely

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considered this question and held as follows:

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"We might mention that the order dated November 23, 1968 was a judicial order by which the Magistrate had given full reasons for dismissing the complaint. Even if the Magistrate had any jurisdiction to recall this order, it could have been done by another judicial order after giving reasons that he was satisfied that a case was made out for recalling the order. We, however, need not dilate on this point because there is absolutely no provision in the Code of Criminal Procedure of 1898 (which applies to this case) empowering a Magistrate to review or recall an order passed by him. The Code of Criminal Procedure does contain a provision for inherent powers, namely, Section 561-A which, however, confers these powers on the High Court and the High Court alone. Unlike Section 151 of Civil Procedure Code, the subordinate criminal courts have no inherent powers. In these circumstances, therefore, the learned

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Magistrate had absolutely no jurisdiction to recall the order dismissing the complaint. The remedy of the respondent was to move the Sessions Judge or the High Court in revision. In fact after having passed the order dated November 23, 1968 the Sub-Divisional Magistrate became functus officio and had no power to review or recall that order on any ground whatsoever. In these circumstances, therefore, the order even if there be one, recalling order dismissing the complaint, was entirely without jurisdiction. This being the position, all subsequent proceedings following upon recalling the said order, would fall to the ground including order dated May 3, 1972 summoning the accused which must also be treated to be a nullity and destitute of any legal effect. The High Court has not at all considered this important aspect of the matter which alone was sufficient to put an end to these proceedings. It was suggested by Mr. D. Goburdhan that the application given by him for recalling the order of dismissal of the complaint would amount to a fresh complaint. We are, however, unable to agree with this contention because there was no fresh

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complaint and it is now well settled that a second complaint can lie only on fresh facts or even on the previous facts only if a special case is made out. This has been held by this Court in Pramatha Nath Taluqdar v. Saroj Ranjan Sarkar [AIR 1962 SC 876 : 1962 Supp. 2 SCR 297: (1962) 1 Crl LJ 770]. For these reasons, therefore, the appeal is allowed. The order of the High Court maintaining the order of the Magistrate dated May 3, 1972 is set aside and the order of the Magistrate dated May 3, 1972 summoning the appellant is hereby quashed."

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In the judgment of the Hon'ble Apex Court

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in the case of Maj. Genl. A.S. Gauraya (supra) held that:

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" We would like to point out that this approach is wrong. What the Court has to see is not whether the Code of Criminal procedure contains any provision prohibiting a Magistrate from entertaining an application to restore a dismissed complaint, but the task should be to find out whether the said Code contains any provision enabling a Magistrate to exercise an

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inherent jurisdiction which he otherwise does not have. It was relying upon this decision that the Delhi High Court in this case directed the Magistrate to re-call the order of dismissal of the complaint. The Delhi High Court referred to various decisions dealing with section 367 (old code) of the Criminal Procedure Code as to what should be the contents of a Judgment. In our view, the entire discussion is misplaced. So far as the accused is concerned, dismissal of a complaint for non-appearance of the complainant or his discharge or acquittal on the same ground is a final order and in the absence of any specific provision in the Code, a Magistrate cannot exercise any inherent jurisdiction."

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The judgment of the Hon'ble Apex Court in

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the case of Maj. Gen. A.S. Gauraya (supra) was referred and approved by the Hon'ble Apex Court in its judgment in Samta Naidu and Another v. State of Madhya Pradesh and Another [(2020) 5 SCC

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378] .

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Reliance placed by the learned counsel for

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the complainant on the judgment of a coordinate Bench of this Court in Giridharilal v. Pratap Rai Mehta [ILR 1989 Kar 2491] is not good law since this Court did not refer to the judgment in Maj. Genl. A.S. Gauraya's case (supra) as well as the judgment of the Hon'ble Apex Court in Bindeshwari Prasad Singh's case (supra).

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Thus having regard to the consequences that follow upon a dismissal of a complaint due to default as provided under Section 249 of Cr.P.C., the Magistrate has no inherent power to recall an order dismissing the private complaint for default in view of the express bar contained in Section 362 of Cr.P.C. It is for this reason that a complainant is entitled to file a fresh complaint on the same cause of action as held by the Apex Court in the case of Jatinder singh and others v. Ranjit Kaur [(2001) 2 SCC 570] and

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Ranvir Singh v. State of Haryana and another

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[(2009) 9 SCC 642] . In view of the above, it is held that the Magistrate does not have any inherent power to recall his own order or alter his judgment after it is signed in view of the express bar contained in Section 362 of Cr.P.C. However, having regard to the fact that the private complaint was filed in the year 2009 and the case has remained a non-starter for nearly fourteen years, this Court considers it appropriate to exercise its power under Section 482 of Cr.P.C. to restore the case (PCR No.21981/2009) before the Trial Court by recalling the order dated 25.10.2014.

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Question No.2

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The proceedings of the Trial Court would show that after the case was restored, the statement of the complainant was recorded on 15.03.2016, 05.07.2016, 06.08.2016 and 10.08.2016 and the case

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was posted for hearing on 17.08.2016. Thereafter, the case was heard on 08.09.2016 and the impugned order was passed on 17.09.2016 taking cognizance of the offences punishable under Sections 420, 506B and 120B read with Section 34 of IPC against the accused Nos.1 to 10. The impugned order shows that the Trial Court noticed from the bank statements produced by the complainant that the accused No.1 did not suffer any loss but had not only collected money from the insurance companies but also making illegal claim from the complainant and the customers namely M/s.Aravind Brands and M/s.Hasbro Clothing Private Limited and therefore, felt that a prima facie case was made against the accused Nos.1 and 9 for the offence punishable under Section 420 of IPC. It further held that the accused Nos.1 to 10 extorted money from the complainant by threatening that they would blacklist the complainant as a non-performing asset in CIBIL

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and therefore, held that a case was made out against the petitioners herein under Sections 506B and 120B read with Section 34 of IPC. The accused No.9 is a resident of Mumbai and it is necessary to test whether the procedure under Section 202 of Cr.P.C. was followed or not. Section 202 of Cr.P.C. reads as follows:

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"Section 202 – Postponement of issue of process

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(1). Any Magistrate, on receipt of a complaint of an offence of which he is authorised to take cognizance or which has been made over to him under section 192, may, if he thinks fit, and shall, in a case where the accused is residing at a place beyond the area in which he exercises his jurisdiction, postpone the issue of process against the accused, and either inquire into the case himself or direct an investigation to be made by a police officer or by such other person as he thinks fit, for the purpose of deciding whether or not there is sufficient ground for proceeding:

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PROVIDED that no such direction for investigation shall be made-

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(a). where it appears to the Magistrate that the offence complained of is triable exclusively by the Court of Session; or

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(b). where the complaint has not been made by a court, unless the complainant and the witnesses present (if any) have been examined on oath under section 200.

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(2). In an inquiry under sub-section (1), the Magistrate may, if he thinks fit, take evidence of witnesses on oath:

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PROVIDED that if it appears to the Magistrate that the offence complained of is triable exclusively by the Court of Session, he shall call upon the complainant to produce all his witnesses and examined them on oath.

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(3) If an investigation under sub-section (1) is made by a person not being a police officer, he shall have for that investigation all the powers conferred by this Code on an officer-in-charge of a police station except the power to arrest without warrant."

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The words "and shall, in a case where the

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accused is residing at a place beyond the area in which he exercises his jurisdiction" was inserted by Section 19 of the Code of Criminal Procedure (Amendment) Act, 2005 (Central Act No.25/2005 with effect from 23.06.2006). This amendment, in the opinion of the Legislature was essential as it perceived that false complaints were filed against persons residing at far off places in order to harass them. Therefore, it mandated that an enquiry shall be conducted by the Magistrate or Police Officer before issuance of process. In such an enquiry, the Magistrate is bound to decide whether or not there is sufficient ground for proceeding against the accused and that would meet the requirement of Section 202 of Cr.P.C. The word 'inquiry' is defined under Section 2(g) of Cr.P.C. which refers to every inquiry, other than a trial, conducted under this Code by a

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Magistrate or court. In an inquiry under Section 202 of Cr.P.C., it is necessary that the witnesses are examined whereas under Section 200 of Cr.P.C., the examination of the complainant is sufficient and witnesses if present may be examined. In the private complaint lodged by the complainant, the complainant was a juristic person and had four witnesses which included the Managing Director of the complainant and the Managing Director of the complainant was examined by the Court and this satisfied the requirement of Section 202 of Cr.P.C. Therefore, the contention of the accused Nos.1 and 9 / petitioners that Section 202 of Cr.P.C. was not complied is liable to be rejected.

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The reliance placed by the learned senior counsel for the petitioners on the judgment of the Apex Court in the case of Vijay Dhanuka Etc.

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(supra) would support the case of the complainant

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than the petitioners/accused Nos.1 and 9.

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Question No.3

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In so far as the question No.3 whether

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there was sufficient material for the Magistrate to take cognizance of the offences punishable under Sections 420, 506B and 120B of IPC against accused Nos.1 to 10 is concerned, it is seen from the statement of objections filed by the complainant that as many as 20 documents were filed before the Trial Court and the Trial Court after perusing these documents was of the opinion that the accused No.1 had realized some money from the Insurance Companies and was also attempting to recover money from the complainant and parallelly attempting to recover money from M/s.Aravind Brands and M/s.Hasbro Clothing Private Limited. It also found material that the accused

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threatened to classify the complainant as a nonperforming asset in the CIBIL rankings. It is seen that Ex.P2 was a power of attorney dated 27.03.2008 executed by the complainant in favour of accused No.1 assigning debt set out in the Schedule I to the agreement referred therein. Following this, letters were addressed by the complainant to M/s.Hasbro Clothing Pvt. Ltd. and M/s.Arvind Brands Ltd. on 03.10.2008. Accused No.1 was the beneficial owner of the trade debts of the complainant and hence, complainant instructed M/s.Arvind Brands Ltd. and M/s. Hasbro Clothing Pvt. Ltd. to pay all amounts due, to the accused No.1. This arrangement is also evident

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from Exs.P8 and P9 which are the two notices addressed by the Advocate for the accused No.1 by which a sum of Rs.6,12,82,850/and Rs.10,17,25,446.92Ps. was demanded from M/s. Hasbro Clothing Pvt. Ltd. and M/s.Arvind Brands

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respectively. However, in terms of Ex.P10, accused No.1 claimed that it had sanctioned factoring limits against the receivables from two of the debtors, namely, M/s.Arvind Brands and M/s.Hasbro Clothing Private Limited. However, the complainant for reasons unknown did not furnish the two documents, namely, "factoring agreement vide proposal letter dated 07.03.2008 for Domestic Factoring facility of Rs.50 million and the Invoice Discounting Factoring Agreement signed on 27.03.2008". Therefore, unless the Magistrate perused these documents he could not have arrived at the correct arrangement between the parties and as to whether the complainant had really entered into a factoring facility or had availed a credit facility against the bills receivable and had authorized the accused No.1 to recover the debt. Therefore, the Magistrate did not apply his mind to the facts and circumstances of the case before arriving at a

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conclusion that there was prima facie material to take cognizance against accused Nos.1 to 10 for the offence punishable under Section 420 of IPC. Similarly, no material was placed before the Court to establish any prima facie case for the offence punishable under Section 506B of IPC against accused Nos.1 to 10 as the complainant did not examine his wife who allegedly was threatened of dire consequences. Therefore, there was no material enough to take cognizance of the offence punishable under Section 506B of IPC against accused Nos.1 to 10. In so far as the offence under Section 120B of IPC is concerned, the complainant has not specifically set out the role of accused No.9 in the alleged fraud except an omnibus statement that he is an employee of the accused No.1 and is part of the criminal conspiracy to defraud the complainant. In so far as the accused No.9 is concerned, the complaint is

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clearly silent about his role in the commission of the alleged offence. It is now trite that while proceeding against Directors of a Company, it is incumbent upon the complainant to mention the specific roles played by each of the accused in the commission of the offence. In that view of the matter, the impugned order passed by the Trial Court taking cognizance of the offences punishable under Sections 420, 506B and 120B read with Section 34 of IPC against the accused No.9 is without proper application of mind and therefore, the same deserves to be quashed. However, since there is no proper application of mind in so far as accused No.1 and others, the case deserves to be remitted back to the Magistrate for proper consideration of the material on record.

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Question No.4

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In so far as the question No.4 is concerned,

¶144

indisputably proceedings are now initiated before the

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Debts Recovery Tribunal by accused No.1 for recovery of Rs.5,59,50,149.49Ps. In view of the contention of the complainant that the complainant did not avail any credit facility from the accused No.1 but what was entered into was a factoring facility, the line distinguishing a civil wrong from a criminal wrong in the present case is not distinct but blurred and therefore, it cannot be held that the proceedings are civil in nature and the action for prosecuting the accused Nos.1 to 8, 10 for the offence punishable under Section 420 of IPC cannot be halted.

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In view of the above, the petition is allowed

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in part and the Order dated 17.09.2016 passed by the V Additional Chief Metropolitan Magistrate, Bengaluru, taking cognizance of the offences punishable under Sections 420, 506B and 120B read with Section 34 of the Indian Penal Code, 1860 against accused Nos.1 and 9 / petitioners herein in PCR No.21981/2009 is

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set aside. The case is remitted back to the Trial Court in so far as accused No.1 is concerned, with a specific direction to consider the material on record and thereafter, record its finding whether there is prima facie material to substantiate the offences punishable under Sections 420, 506B, 120B read with Section 34 of IPC as against the accused No.1. In so far as accused No.9 / petitioner No.2 herein is concerned, the criminal proceedings initiated against him in PCR No.21987/2009 is quashed.

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Sd/JUDGE

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sma

M/S Hongkong and Shanghai Banking Corporation Ltd. v. M/S Lisa Apparels Pvt. Ltd.

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M/S Hongkong and Shanghai Banking Corporation Ltd. v. M/S Lisa Apparels Pvt. Ltd.

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