THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Criminal Petition No.3564 of 2007 (Dated : 22-11-2010) Between: M/s.Sahara India Commercial Corporation Ltd. Represented by Sri G.P.Patnaik S/o Ch.N.Patnaiah and others …Petitioners A n d M/s.Sahara States Owners Welfare Association and another …Respondents THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Criminal Petition No.3564 of 2007 ORDER: This Criminal Petition has been taken out by the accused under Section 482 Cr.P.C in C.C.No.219 of 2007 on the file of the VII Metropolitan Magistrate, Cyberabad, Hyderabad with a prayer to quash the proceedings therein. 2. Background facts, in a nutshell, are:- The petitioners herein are the companies having registered under the Indian Companies Act, 1956. They are the absolute owners and possessors of land admeasuring Ac.44-26 guntas comprising Survey Numbers 26,27, 32 and 34 situated at Mansoorabad, Ranga Reddy District. They purchased the land for the purpose of constructing residential complex. They have earmarked certain concessions in favour of war widows of Sahara’s Karmayogi Workers and handicapped persons. They issued brochure detailing the construction project taken out by them and called for applications from the intending purchasers. They indicated in the brochure the availability of the common facilities such as Commercial Centre, Primary School, Health Care & Welfare Centre, States Club, Local shopping center, play field, place of worship, park, over head water tank, Future Development, Entrance Gate and land for HUDA. They classified the structures into various categories such as Terrace Apartments, Yaman, New Bahar, Bahar, New Malhar, Malhar, Gandhar and Vrindavani. Number of persons responded to the brochure circulated by the petitioners and purchased flats/individual houses. The purchasers paid the money and thereupon, the petitioners executed registered sale deeds. The purchasers formed an association, namely, `M/s. Sahara States Owners Welfare Association’ and got it registered under the Societies Registration Act, vide Registration No.883 of 2003. The purchasers paid various amounts for infrastructure development work. The petitioners collected amounts towards one time maintenance fund from the purchasers and retained the fund with them. The registered association of the purchasers entered into correspondence with the petitioners pointing out various deficiencies in the construction and the facilities indicated in the brochure and non-transfer of One Time Maintenance fund collected from them. They approached the A.P.State Consumer Disputes Redressal Commission by filing a complaint. Their complaints were entertained and enquiry was conducted. The complaints filed by them came to be allowed in part on 30.6.2006 granting various amounts as compensation. The relevant portion of the order passed by the A.P. State Consumer Disputes Redressal Commission on the complaints filed by the purchasers reads as hereunder:- “ Since the opposite parties agreed to provide the following facilities and amenities under Ex.A-1 application form with terms and conditions read along with brochure Ex.A.2 but failed to provide the same, we direct the opposite parties as follows:- 1. To hand over the maintenance of the town ship to the second complainant Association; 2. To provide uninterrupted drinking water supply to the residents of Sahara States; 3. To provide ambulance facility to the residents of Sahara States and hand over the second complainant association; 4. To provide parks and play area as shown in the HUDA approved plan dt.7.7.1999 and hand over the same to the second complainant Association; 5. To complete the construction of 2nd floor on the club and hand over the possession of the same to the second complainant association; 6. To construct the shopping plaza at the place earmarked for it and hand over the possession of the same to the Welfare Association; 7. To provide electrical sub-stations as promised 8. To provide dish antenna 9. To construct the drainage system to the public 10. To construct health care center in the land earmarked for it. 11. To deliver possession of the school building to the second complainant association; 12. To pay compensation of Rs.50,000/- each to the complainants in Type 4 Bahar i.e., complainants in C.D.Nos.52/2003, 77/2003, 78/2003, 80/2003, 81/2003, 84/2003 and 86/2003; 13. To pay compensation of Rs.1,00,000/- each to the complainants in Type 3 Malhar i.e., complainants in C.D.Nos.76/2003, 79/2003, 88/2003, 89/2003, 90 of 2003, 92 of 2003, 93 of 2003 and 94 of 2003. 14. To pay compensation of Rs.40,000/- each to the complainants in Type 1 Vrindavani Apartmets i.e., complainants i n C.D.Nos.82/2003, 83/2003, 85/2003, 87/2003, 91/2003 and 95/2003. 15. To pay a sum of Rs.10,000/- each to the complainant No.1 in all the complaints i.e., C.D.Nos.52/2003 and 76/2003 to 95/2003 towards mental agony and suffering; 16. To pay costs of Rs.2,000/- each to the complainant No.1 in all the complaints i.e., C.D.Nos.52/2003 and 76/2003 to 95/2003”. 3. The petitioners carried the matter in appeal to the National Consumer Disputes Redressal Commission, New Delhi and obtained interim stay subject to certain conditions. The petitioners also filed O.S.No.1566 of 2003 against M/s. Sahara States Owners Welfare Association and 10 others for permanent injunction restraining them from interfering with the maintenance of the common areas development and construction of the entire area of the Sahara Estates. They also moved I.A.No.37 of 2003 under Order 39 Rules 1 and 2 CPC for temporary injunction on the file of Principal Junior Civil Judge (East and North), Ranga Reddy District. The learned Junior Civil Judge, by order dated 21.1.2004, allowed the temporary injunction application. Paras 8 and 9 of the order passed in I.A.No.3793 of 2003 need to be referred and they are thus:- “ As per Bye-laws of the association as contained in Form 5 annexed to A.P.Apartments (Promotion of Construction and Ownership Rules) provided that all persons who have purchased apartments shall automatically be the members of the association. But there is nothing in the counter affidavit filed by the respondents to show that declaration as required U/s.2 of A.P Apartments (Promotion of Construction and Ownership Rights ) Act 1987 submitting to the Provisions of Chapter 3 of aforesaid Act. Chapter 3 of this Act is with regard to the special facilities that is common areas and facilities. In the absence of filing such declaration the provisions of Chapter 3 of the A.P. Apts., (Promotion of Construction and Ownership Rights ) Act 1987 does not apply. 09. As can be seen from Ex.A4 which is sale deed executed in favour of the respondent No.7 that the common areas shall be maintained by the petitioners. The contention of the petitioner that it continues to have right over the maintenance of common areas is in accordance with the recitals of the sale deed executed in favour of respondent No.7. The sale deeds in respect of other respondents have not been filed into the court. The respondents have not disputed the recitals of Ex.A.3. It therefore appears that the recitals of sale deeds in favour of other respondents are also to the same effect. The respondents have not filed their sale deeds. In fact the respondents have not filed any documents. Thus in view of recitals of Ex.A.4 it is clear that the petitioners continued to have right of maintenance over the common areas. As already pointed out no declaration is filed by the respondents U/s2 of A.P. Aprts. (Promotion of Construction and Ownership Rights) Act 1987. Though the association is legally valid one, it does not vest with right of maintenance over the common areas. In the absence of declaration U/s.2 of A.P.Aprts., (Promotion of Construction and Ownership Rights ) Act 1987. The association can only agitate for the welfare of its members. It cannot take over the maintenance of common areas. The respondent association has no right to interfere with the maintenance of common areas by the petitioners and the construction in progress in respect of other apartments, the petitioner has therefore got prima facie case and balance of convenience in their favour. In view of the interference by the respondents the petitioners are entitled for temporary injunction as prayed for”. 4. The 1st respondent-Sahara States Owners Welfare Association presented a complaint before the VII Metropolitan Magistrate, Hayatnagar, Cyberabad at Hyderabad alleging inter alia that the petitioners committed breach of various clauses set out in the brochure and more particularly, retaining One Time Maintenance Fund collected from the purchasers. It is also averred in the complaint that the petitioners herein have alienated common areas indicated in the brochure as well as approved lay out plan. For better understanding of the grievance of the complainant-association, I deem it appropriate to refer paras 11 and 12 of the complaint, which read as hereunder:- “11. The Accused No.1 to 5, while selling the flats and houses to the members of Association and other prospective purchasers of the Township, had collected the huge amounts from them under the head of One Time Maintenance (Sinking Fund) for which a Xerox copy of receipt model along with analysis of O.T.M is filed herewith. According to the agreement between Accused and purchasers, the same will be deposited in any nationalized bank and using the interest accrued by the said F.D for maintaining the entire Township. According to the Clause 7 of the Application form, the sinking fund will be transferred to Resident’s Association after forming the Association. But, Accused No. 1 to 5, though, the Complainant Association, formed in 2003 neither transferred the Sinking Fund to Complainant Association nor disclosed the fact that in which bank/banks, the O.T.M (Sinking Fund) was deposited and what is the rate of interest and how much, interest was accrued and also failed to render the expenditure made by the Accused No. 1 to 5 from the sinking fund to the Township, though the Complainant Association demanded the same for several times. The office copy of the letter dated 24.7.2003 and a letter dated 25-2-2006 is filed herewith to prove the said demand. It may not be out of place to mention that a single pie is not expended by the Accused No.1 to 5, from O.T.M., though the township requires the repairs mentioned under O.T.M Head. Apart from that, the Accused No.1 to 5 falsely collecting the costs for four electrical substations for township, but, even a single sub-station was not provided which is evidenced from the order of the Hon’ble A.P.State Consumer Disputes Redressal Commission, dt.30-6-2006. Hence, it is clear that the Accused No.1 to 5, dishonestly misappropriated the funds collected under One Time Maintenance from the members and residents of Sahara States Township and converts it for their use and accordingly, they have committed an offence under Section 403 of the Indian Penal Code for which they are liable to be punished. 12. The Accused No. 1 to 5, in the capacity of Merchant, while selling the flats in apartments and houses to prospective purchasers , by collecting the amounts for common areas and facilities, created joint interest on them to Members of the Association along with other prospective purchasers of the Township. As in the capacity of promoter and merchant, the accused No.1 to 5, have the possession of all common areas and common facilities like School, Hospital, club, cable T.V etc. and in the like manner, above properties are entrusted on Accused No. 1 to 5. According to law, they have to be transferred by the accused No.1 to 5 to complainant Association, but they did not chose to do the same. Instead of handing over the same to the Complainant Association, the Accused No.1 to 5 started to sell the same to the 3rd parties and lease out to 3rd parties by taking the advantage of their possession on the common facilities. Accordingly, the Accused No. 1 to 5, with a dishonest intention, misappropriated the common property entrusted on them, by using them and disposing them for their use and getting huge monetary benefit, by violating the Section 24 of the A.P.Apartments (Promotion of Construction & Ownership) Act willfully suffers the members of the Association and other prospective purchasers by committing criminal breach of trust in respect of not only common facility properties, but also O.T.M. fund. Hence, they have committed an offence under Section 406 and 409 of Indian Penal Code for which they are liable to be punished”. 5. The learned Magistrate recorded the sworn statements of the complainant and took cognizance of the offences under Sections 270, 403, 406, 409, 417, 418, 4420 , 423, 426 IPC and Section 28 of A.P. Apartments (Promotion of Construction & Ownership ) Act and registered the complaint as C.C.No.219 of 2007 and issued process. Hence, this Criminal Petition by the accused in C.C.No.219 of 2007 with a prayer stated supra. 6. Heard Sri P.Gangaiah Naidu and Sri K.T.S.Tulasi, learned Senior Counsel appearing for the petitioners and Sri Vijaysen Reddy, learned counsel appearing for the 1st respondent and learned Additional Public Prosecutor appearing for the 2nd respondent. 7. Sri P.Gangaiah Naidu, learned Senior Counsel submits that the provisions of A.P.Apartment (Promotion of Construction & Ownership) Act are not applicable since there is no declaration as provided under Section 2 of the Act and the provisions of Chapter III of the Act can be made applicable only on such declaration being registered with the competent authority. He would also submit that the breach of terms of contract between the parties, if any, permits the Association to work out their remedies in Civil Court and initiation of Criminal proceedings basing on the alleged breach of terms of contract amounts to abuse of process of Court. He would also submit that the association and its members have already initiated proceedings before Consumer Disputes Redressal Commission and secured certain orders and thereupon, the petitioners filed appeal before the National Consumer Disputes Redressal Commission and obtained stay orders, in which case, it is impermissible for the Association and its members to base self-same allegations for initiating criminal proceedings against the petitioners. A further contention has been advanced that the very validity of the Association is questioned by the petitioners by filing a suit being O.S.No.66 of 2003 and necessary interim order has been obtained restraining the association and its members from interfering with the management and common areas development and construction of the entire zone of the Sahara States, and therefore, criminal proceedings initiated by the Association, existence of which is seriously disputed, cannot be allowed to be continued. The learned Senior Counsel also refers the brochure, wherein certain concessions have been granted in favour of the war widows, widows of Sahara Karmayogi Workers and handicapped persons. According to the learned senior counsel, One Time Maintenance Fund (Sinking Fund) would be transferred only after the purchasers constitute a valid welfare association and till then the petitioners are to maintain common areas etc. In support of his submissions, reliance has been placed on the following decisions:- 1) Madhavrao Jiwaji Rao Scindia v. Sambhajirao[1] 2) State of Haryana v. Bhajan Lal[2] 3) G.Sagar Suri & Anr. V. State of U.P & Ors.[3] 4) Dalip Kaur & Ors. V. Jagnar Singh & Anr.[4] 5) Ram Biraji Devi v. Umesh Kumar Singh [5] 6) Mohammed Ibrahim v. State of Bihar and Another [6] 7) P.Swarna Latha v. State of A.P and another[7] 8) M.A.Gaffar and others v. State of AP and another [8] 9) Bheemudu Narasimha Kanniyappan v. State of A.P[9] 8. In Madhavrao Jiwaji Rao Scindia ( 1 supra), the Supreme Court held that a case of breach of trust is both a civil wrong and a criminal offence. There would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence. Para 7 of the cited judgment needs to be noted and it is thus:- “( 7 ) THE legal position is well-settled that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the Court is as to whether the uncontroverted allegations as made prima facie establish the offence. It is also for the Court to take into consideration any special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue. This is so on the basis that the Court cannot be utilised for any oblique purpose and where in the opinion of the Court chances of an ultimate conviction are bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the Court may while taking into consideration the special facts of a case also quash the proceeding even though it may be at a preliminary stage.” 9. I n State of Haryana v. Bhajan Lal (2nd supra), the Supreme Court, after exhaustive consideration of the powers of the High Court under Article 226 or under Section 482 Cr.P.C in quashing of investigation, detailed the categories of cases, wherein powers under Article 226 or under Section 482 Cr.P.C be exercised to quash the F.I.R. It is useful to refer para 108 of the cited judgment, which reads as hereunder:- “( 108 ) IN the backdrop of the interpretation of the various relevant provisions of the Code under Ch. XIV and of the principles of law enunciated by this court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under S. 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised. (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. (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 S. 156 (1) of the Code except under an order of a Magistrate within the purview of S. 155 (2) of the Code. (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. (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under S. 155 (2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.” 10. In G.Sagar Suri & Anr. V. State of U.P & Ors ( 3rd supra), the Supreme Court held that in exercise of its jurisdiction High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process, a criminal Court has to exercise a great deal of caution. 11. In Dalip Kaur & Ors. V. Jagnar Singh & Anr( 4 supra), the Supreme Court held that a simple breach of contract would not constitute an offence under Section 406 or 420 IPC. 12. In Ram Biraji Devi v. Umesh Kumar Singh( 5 supra), the Supreme Court reiterated the principle as to when inherent jurisdiction of the High Court under Section 482 Cr.P.C is to be exercised to quash the F.I.R. 13. In Mohammed Ibrahim v. State of Bihar and Another( 6 supra), a learned Single Judge of this Court considering the facts and circumstances of the case therein held that the allegations of the complaint do not disclose that the accused fraudulently or dishonestly induced the complainant either to deliver any property or to consent to the retention thereof by any person or intentionally induced the complainant to do or omit to do anything which he would not do or omit if he were not so deceived, which act or omission cause or likely to cause damage or harm to the complainant in body, mind, reputation or property to be punishable under Section 420 IPC. 14. In M.A.Gaffar and others v. State of AP and another(8 supra), a learned Single Judge of this Court considering the facts and circumstances of the case held that the disputes between the parties therein are predominantly of civil nature. Para 3 of the cited judgment needs to be noted and it is thus:- “( 3 ) AS can be seen from the material available on record, these matters are predominantly of civil nature. It is no doubt true that merely because, these matters are of civil nature, there is no hard and fast rule that no criminal case as such can be registered. This Court in R. G. Chandra Mohan and others v. State of A. P. rep. By Station house Officer, 1 Town Police Station, rajahmundary and another1 held that the power under Section 482 Cr. P. C. , be exercised when the allegations in the FIR or complaint do not make any prima facie case against the accused. Strong reliance was placed in Trilok Singh and others v. Satya deo Tripath. It was a case where the truck was purchased under hire purchase agreement with a default clause, and the said truck was seized for default by the financier and that the purchaser launched criminal prosecution against the financier, wherein the Apex Court held that the dispute raised was purely of civil nature and criminal proceeding initiated was an abuse of the process of the Court and deserved to be quashed. 15. In Bheemudu Narasimha Kanniyappan v. State of A.P( 9 supra), a learned Single Judge of this Court held that in disputes arising out of contractual obligations, the remedy is elsewhere by filing a regular suit for damages or approach any other forum for redressal of his grievance. 16. Learned counsel appearing for the 1st respondent- complainant submits that the petitioners having published the brochure detailing the facilities proposed to be given and induced the members of the complainant-association to purchase the Flats/Independent houses cannot be permitted to contend that the dispute between the parties are predominantly of civil nature. A further submission has been made that the petitioners having collected `One Time Maintenance Fund’, more precisely called Sinking Fund, from the purchasers failed to account for it even on demand, which amounts to misappropriation. Learned counsel took me to the brochure issued by the petitioners inviting applications from the intending purchasers. He would also contend that the members of the complainant association were induced to purchase the Flat/Houses and made them to part with money including Sinking Fund and thereafter, the petitioners not only failed to fulfill their obligations but resorted to harassing the members of the complainant-association by not providing basic minimum necessities for their living and thereupon, the members of the association were driven to approach the State Consumer Disputes Redressal Commission,