Allowed

Smt. Asha Sinha v. State Of Bihar and Anr.

Patna HC15 May 2014CR. MISC./18103/2013

Case brief

AI extract

What is this about?

The High Court quashed the FIR and investigation against a guarantor in a cheque bounce case. The court held that since the borrower settled the dues and the FIR contained no allegations of dishonest intention against the guarantor, the dispute was civil in nature, and continuing proceedings was an abuse of process.

What did the court decide?

FIR and investigation against the petitioner are quashed.

Smt. Asha Sinha Vs State Of Bihar and Anr. — Cheque Dishonour | Patna HC (2014)

¶1

IN THE HIGH COURT OF JUDICATURE AT PATNA

¶2

Criminal Miscellaneous No.18103 of 2013

¶3

======================================================

¶4

Smt. Asha Sinha, W/O Sri. R.K. Sinha, Road No.1, B/96, New Pataliputra Colony, P.S.- Pataliputra, District- Patna.

¶5

.... .... Petitioner

¶6

Versus

¶7

The State of Bihar.

¶8

Punjab National Bank through Yasho Vardhan Sinha, Senior Manager, S.S.I. Branch, Boring Canal Road, Patna.

¶9

.... .... Opposite Parties

¶10

======================================================

¶11

CORAM: HONOURABLE MR. JUSTICE ASHWANI KUMAR SINGH ORAL ORDER

¶12

5. 15-05-2014 By invoking the inherent jurisdiction of this Court under Section 482 of the Code of Criminal Procedure, the petitioner seeks quashing of the F.I.R. of Budha Colony P.S. Case No.176 of 1998 dated 15^th October, 1998 registered for the offences punishable under Sections 406, 420 and 120B of the Indian Penal Code so far as the petitioner is concerned.

¶13

The opposite party no.2 lodged the aforesaid F.I.R. against the petitioner and two others. The case, as disclosed in the F.I.R., is that M/s. Kwality Project (P) Ltd. through its Directors, namely Akhilesh Kumar and Rajesh Sinha applied for a term loan of Rs.15,00,000.00 and a cash credit limit of Rs.10,00,000.00 for expansion of its business. The Bank sanctioned the aforesaid loan on 22nd February, 1996 to which

¶14

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶15

2/10

¶16

effect an agreement of loan and letter of hypothecation of goods were executed by the borrowers. The letter of guarantee was executed by the petitioner. Two loan accounts, namely T/L Account No.31 and C.C. Account No.41 were opened in the name of the borrowers. As per terms and conditions of the loans, the borrowers were to deposit the monthly instalment of the term loan in the term loan account and they were further required to route the daily sale proceeds of their business through the C.C. Account and produce the stock statements of their firm before the Bank for verification. The borrowers withdrew the money and they further operated upon the C.C. account for the financial transaction.

¶17

It has been further alleged that after lapse of sometime, the borrowers started defaulting in making the instalments with interest in the term loan account and routing their daily sale proceeds through the C.C. account and producing the stock statements for verification of the Bank. As a result, the above two Bank accounts became irregular. The Bank in order to persuade the borrowers to regularise the accounts wrote several letters and reminders and lastly a legal notice was issued to the borrowers on 16th September, 1997, but to no avail.

¶18

When the officials of the Bank made a physical inspection of the firm of the borrowers, they found that the

¶19

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶20

3/10

¶21

borrowers had removed their stock which they had hypothecated to the Bank as primary security.

¶22

On the basis of the allegations made hereinabove, the informant alleged that the borrowers by their above illegal act committed a criminal breach of trust and played fraud upon the Bank. Accordingly, the F.I.R. was registered for the offences mentioned above and investigation was taken. It has been stated that though the F.I.R. was registered on 15th October, 1998, the police have not submitted their report under Section 173 of the Code of Criminal Procedure as yet.

¶23

Learned counsel for the petitioner has contended that it is not in dispute that the letter of hypothecation was executed by the borrowers only and not by the guarantor, i.e. the present petitioner. It has been submitted that from the entire allegation as alleged in the F.I.R. it would appear that the borrowers removed their stock which they hypothecated with the Bank. Nothing has been stated against the guarantor and not even a word has been alleged against the petitioner. The petitioner is unnecessarily being dragged in the case with borrowers, namely Akhilesh Kumar and Rajesh Sinha.

¶24

Learned counsel for the petitioner has further submitted that the company in question was granted financial

¶25

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶26

4/10

¶27

assistance by the Punjab National Bank and on account of default in repayment of loans, the Bank filed an application for recovery of amount before the Debt Recovery Tribunal, Patna (hereinafter referred to as ‘the DRT’). The application for recovery filed before the DRT was compromised between the parties on payment of Rs.14,50,000.00. After the compromise was arrived at between the parties, the Bank issued a ‘no dues certificate’ to the Company in question.

¶28

It has been contended that since the subject matter of dispute is settled between the borrowers and the Bank, it would be unreasonable to continue with the criminal proceedings against the petitioner, who had simply executed the letter of guarantee. In this regard, he has relied upon the judgment of the Hon’ble Apex court in the case of Nikhil Merchant Vs. Central Bureau of Investigation and another, reported in (2008) 9 SCC 677 .

¶29

It has further been contended that the allegations made in the FIR do not constitute any offence as against the petitioner. In such view of the matter, allowing the FIR to stand and the investigation to continue against the petitioner would be an abuse of the process of the Court.

¶30

Per contra, learned counsel for the State has submitted that the matter is under investigation. There is

¶31

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶32

5/10

¶33

allegation in the FIR that the borrowers removed their stock which they hypothecated to the Bank as primary security. The said allegation would certainly constitute an offence of criminal breach of trust. If that be so, the FIR against the petitioner should not be quashed. He has contended that in case the investigating agency fails to find any material against the petitioner, it would submit a final report, but at the stage of investigation, it would not be proper for this Court to form an opinion in respect of outcome of the investigation.

¶34

A counter affidavit has also been filed in the present case on behalf of the opposite party no.2. In paragraph 5 of the counter affidavit it has been admitted that the Bank has entered into an agreement for one time settlement with the Company M/s. Kwality Project (P) Ltd. and as per compromise, amount of Rs.14,50,000.00 has already been deposited. The Bank has also admitted that presently, there is no outstanding due against M/s Kwality Project (P) Ltd.

¶35

Learned counsel appearing for the Bank has conceded that the Bank has no objection if the prosecution of the petitioner in the present case is quashed.

¶36

I have heard the parties and perused the record. The offence of criminal breach of trust punishable under Section

¶37

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶38

6/10

¶39

406 of the Indian Penal Code is defined in Section 405 of the Indian Penal Code The ingredients of offence of criminal breach of trust are ;

¶40

of trust are ;

¶41

(1) entrusting any person with property or with any dominion over property;

¶42

(2) the person entrusted (a) dishonestly misappropriating or converting to his own use that property; or (b) dishonestly using or disposing of that property or willfully suffering any other persons so to do in violation –

¶43

(i) of any direction of law prescribing the mode in which such trust is to be discharged; or

¶44

(ii) of any legal contract made touching the discharge of such trust.

¶45

The offence of cheating punishable under

¶46

Section 420 of the Indian Penal Code is defined under Section 415

¶47

of the Indian Penal Code which reads as under:-

¶48

“415. Cheating.- Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act of omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”.

¶49

The offence of cheating cannot be said to have

¶50

been made out unless the following ingredients are satisfied:

¶51

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶52

7/10

¶53

(i) deception of a person either by making a false or misleading representation or by other action or omission;

¶54

(ii) fraudulently or dishonestly inducing any person to deliver any property; or

¶55

(iii) to consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.

¶56

It is well settled that for the purpose of constituting an offence of cheating and criminal breach of trust, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Sections 406 or 420 of the Indian Penal Code can be said to have been made out.

¶57

In the case of Dalip Kaur and others Vs. Jagnar Singh and another, reported in (2009) 14 SCC 696, the Hon’ble Supreme Court has held that an offence of cheating would be constituted when the accused has fraudulent or dishonest intention at the time of making promise or representation. A pure and simple breach of contract does not constitute an offence of

¶58

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶59

8/10

¶60

cheating. The Hon’ble Supreme Court has further held that if the dispute between the parties was essentially a civil dispute resulting from a breach of contract on the part of the appellants by non-refunding the amount of advance the same would not constitute an offence of cheating. The Hon’ble Apex court held that similar is the legal position in respect of an offence of criminal breach of trust having regard to its definition contained in Section 405 of the Penal Code.

¶61

Taking into consideration the facts and circumstances of present case, it would be apparent that there is nothing in the F.I.R. on the basis of which it can be alleged that the petitioner had any fraudulent or dishonest intention at the time when she executed the letter of guarantee. Hence, the offence of criminal breach of trust and cheating punishable under Sections 406 and 420 of the Indian Penal Code would not be attracted against the petitioner. Moreover, the borrower- Company has settled the dispute with the Bank. The dispute between the borrower and the Bank is essentially of a civil nature. However, while saying so this Court is clear in its mind that removal of hypothecated goods dishonestly without informing the Bank by the borrower may constitute an offence of cheating and/or criminal breach of trust, but even for that act, there cannot be any

¶62

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶63

9/10

¶64

vicarious liability on the petitioner. In the FIR not even a word has been stated against the petitioner.

¶65

The question which arises for consideration is that when the F.I.R. does not disclose commission of a cognizable offence against the petitioner, whether the same can be allowed to continue as against her. It has repeatedly been held by the Hon’ble Supreme court as well as by this Court that an investigation can be quashed if the allegations made in the FIR do not disclose any cognizable offence.

¶66

In State of Haryana and others Vs. Ch. Bhajan Lal and others, reported in A.I.R. 1992 S.C.604 after considering all the earlier decisions, the category of cases, in which the Court can exercise its extra-ordinary power under Article 226 of the Constitution or the inherent power under Section 482 of the Code of Criminal Procedure, either to prevent abuse of the process of any Court or to secure the ends of justice, were summarized in paragraph 108 and sub-paras (1) to (3) thereof reads as under:-

¶67

“(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.

¶68

(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of

¶69

Patna High Court Cr.Misc. No.18103 of 2013 (5) dt.15-05-2014

¶70

10/10

¶71

the Code except under an order of a Magistrate within the purview of Section 155 (2) of the Code.

¶72

(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.”

¶73

As mentioned earlier, the allegations made in the FIR, even if they are taken at their face value and accepted in their entirety, do not constitute any offence as against the petitioner. Under such circumstance allowing the investigation to continue as against the petitioner would certainly be an abuse of the process of Court.

¶74

In view of the discussions made hereinabove, the FIR and investigation of Budha Colony P.S. Case No.176 of 1998 dated 15^th October, 1998 so far as the petitioner is concerned, is quashed.

¶75

The application stands allowed.

¶76

(Ashwani Kumar Singh, J)

¶77

Sunil/-

Smt. Asha Sinha v. State Of Bihar and Anr.

Case brief

What is this about?

What did the court decide?

Smt. Asha Sinha v. State Of Bihar and Anr.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Gauri Shankar Sah and Ors. Vs State Of Bihar and Anr.

Md. Alam Khan @ Alam Khan and Ors. Vs State Of Bihar and Anr.

Vijay Kumar Chaurasia Vs The State Of Bihar

Sarita Kumari and Anr. Vs The State Of Bihar and Ors.

Poonam @ Poonam Devi Vs The State Of Bihar

Munnu Kumar @ Munnu Kumar Singh Vs The State Of Bihar