SCR.A/2149/2006 1/36 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CRIMINAL APPLICATION No. 2149 of 2006 TO SPECIAL CRIMINAL APPLICATION No. 2153 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE KS JHAVERI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= RASIKLLA DALPATRAM THAKKAR - Applicant(s) Versus THE STATE OF GUJARAT & 2 - Respondent(s) ========================================================= Appearance : MR IH SYED for Applicant(s) : 1, MR PD BHATE APP for Respondent(s) : 1, NOTICE SERVED BY DS for Respondent(s) : 2 - 3. MR K.G. VAKHARIA with MS AVANI S MEHTA for Respondent(s) : 3, ========================================================= CORAM : HONOURABLE MR.JUSTICE KS JHAVERI Date : 15/03/2007 ORAL JUDGMENT SCR.A/2149/2006 2/36 JUDGMENT 1.0 While issuing Notice on 22.12.2006, this Court had stayed the further investigation with respect to the impugned complaints till the returnable date and the same was extended from time to time. Today, when the matter was called out, Mr. I. H. Syed learned Advocate for the petitioner produced on record Draft Amendment in each of the petitions praying to amend the Prayer Clause by incorporating the following Paragraph in each of the petitions; “14(BBB) : This Hon'ble Court be pleased to issue a Writ of Certiorari, or any other Writ, order, direction to quash and set aside the Enquiry Case No. 21 of 2003 filed before the learned Chief Metropolitan Magistrate, Ahmedabad and further be pleased to quash and set aside the order directing investigation u/s. 156(3) of the Cr.P.C. by the learned Chief Metropolitan Magistrate in the Enquiry Case No. 21 of 2003 and be pleased to quash and set aside the proceedings arising out of the same”. 1.1 Looking to the relief which is sought by way of Draft Amendment, it would be relevant to refer to the reliefs claimed in these petitions, which read as under; “A. Your Lordship be pleased to allow the present petition and further be pleased to issue a Writ of Mandamus or any other appropriate Writ, order of SCR.A/2149/2006 3/36 JUDGMENT direction directing the State of Gujarat to transfer the investigation arising out of M. Case No. 10 of 2005 lodged at Gandhinagar Zone Police Station, State CID [Crime] to any police investigating agency of Mumbai. B. Your Lordship be pleased to quash and set aside the order dated 09.07.2003 directing the police to investigate the offence as per Section 156(3) of the Cr.P.C., and further be pleased to quash and set aside the order dated 31.05.2006 passed by the learned Chief Metropolitan Magistrate, Ahmedabad in M. Case No. 10 of 2005 and also be pleased to quash and set aside the order dated 22.09.2006 passed by the learned City Sessions Judge, Ahmedabad in Criminal Revision Application No. 262 of 2006”. C. .... D. .... E. .... 1.2 The reliefs as prayed for in these petitions can be granted only by exercising powers under Article 226 & 227 of the Constitution of India. The amendment which is sought for, by way of these Draft Amendments, is essentially one which could be granted only by exercising powers u/s. 482 of the Code of Criminal Procedure, 1908 [for short, “the Code”]. Thus, the amendment which is sought for by way of the Draft Amendment is contrary to the reliefs claimed in these petitions. Apart from that the relief that SCR.A/2149/2006 4/36 JUDGMENT is sought for by way of Draft Amendment is to quash and set aside the impugned complaints. The impugned complaints have been filed in July 2003 and the relief of quashing the said complaints, by way of Draft Amendment has been made today only, i.e. after a period of almost four years. Therefore, on the ground of delay also, the Draft Amendment cannot be granted. Moreover, the order dated 09.07.2003 passed by the learned Chief Judicial Magistrate, Ahmedabad was not challenged until 26.06.2006, i.e. when the revision application was filed before the City Civil & Sessions Court, Ahmedabad and, therefore, at this stage, it would not be appropriate to entertain the Draft Amendment. Hence, the Draft Amendment is rejected. 2.0 Common questions on law and facts arise in these petitions and, therefore, they are disposed of by this common judgment. 3.0 The brief facts giving rise to the filing of these petitions are as under; 3.1 Respondent – Madhavpura Mercantile Co-operative SCR.A/2149/2006 5/36 JUDGMENT Bank Ltd., [hereinafter referred to as “the Bank” for the sake of brevity] is a Co-operative Bank having its Registered as well as Head Office at Madhupura Market, Shahibaug, Ahmedabad and carrying on banking activities in the State of Gujarat as well as other parts of the country. One of such Branches of the respondent - Bank is situated at Mandvi in the City of Mumbai, Maharashtra. The respondent - Bank is governed by the provisions of the Multi State Co-operative Societies Act, 2002. All the activities of the respondent – Bank, i.e. starting from the approval of the loan application, its sanction, disbursement etc., is done from the Head Office at Ahmedabad. 3.2 The petitioner's Company took some financial assistance from the respondent – Bank in and around the year 1992. On account of the prevailing market conditions, the respondent - Bank had to closed down its business operations somewhere in the year 2001. Thereafter, a Board of Management [Administration] was formed by the Central Registrar, Co-operative Societies, New Delhi for the purpose of executing the Scheme of re-construction, as approved by the Reserve Bank of India. SCR.A/2149/2006 6/36 JUDGMENT 3.3 After going through the records of the Bank, the new Board of Management [Administration] came to the conclusion that a lot of irregularities had been committed in the sanctioning of the loans and its disbursement without following the due procedure as prescribed by the Reserve Bank of India. It was also realized that the said irregularities had taken place only because of the illegal activities of the borrowers who had connived with the then Chief Executive Officer, Managing Director and Chairman of the respondent – Bank. Therefore, several criminal complaints came to registered for offence punishable u/s. 406, 409, 420, 467, 471 and 120-B of the Indian Penal Code, 1860 [for short, “the IPC”] against the borrowers along with the then Chief Executive Officer, Managing Director and Chairman of the respondent – Bank. 3.4 Five such complaints were filed against the petitioner on 09.07.2003, who was one of such Borrower, before the Court of learned Chief Metropolitan Magistrate, Ahmedabad, which were registered as M. Cases referred to hereinabove. On the said complaints, the learned Chief Metropolitan Magistrate, Ahmedabad directed the Economic Offences Wing, State CID [Crime], Ahmedabad to carry out investigation u/s. 156(3) of the Code. SCR.A/2149/2006 7/36 JUDGMENT After completion of the investigation, the investigating agency filed Report stating that the alleged offence has been committed within the territorial limits of the City of Mumbai, Maharashtra and, therefore, the investigation into the alleged offence be transferred to the investigating agency in Mumbai, Maharashtra and the 'C' Summary Report be approved. 3.5 After perusing the said Report, the learned Chief Metropolitan Magistrate, Ahmedabad rejected the same vide order dated 31.05.2006 and directed the investigating agency to carry out further investigation and report as to whether the offence as alleged has been committed or not. Against the said order passed by the learned Chief Metropolitan Magistrate, Ahmedabad the petitioner preferred revision application before the City Civil & Sessions Court at Ahmedabad. However, the said application was also rejected by the learned City Sessions Judge, Court No. 11, Ahmedabad vide judgment and order dated 22.09.2006. Being aggrieved by the same, the petitioner has approached this Court by way of these petitions. 4.0 Mr. I. H. Syed learned Advocate for the petitioner SCR.A/2149/2006 8/36 JUDGMENT submitted that the petitioner had availed of the loan in question from the Mandvi Branch of the respondent – Bank which is situated in the City of Mumbai and that it is an independent entity registered under the Maharashtra Co-operative Societies Act. Learned Advocate submitted that the said amount of loan was also disbursed by the said Branch in the City of Mumbai. 4.1 Learned Advocate submitted that since the offence alleged has been committed in Mumbai, the alleged property has been retained in Mumbai and recovery, if any, is to be effected from Mumbai, no cause of action can be said to have arisen in the State of Gujarat. Hence, the entire investigation is required to be done by the police agency in the City of Mumbai since the offence alleged has taken place within the territorial limits of the City of Mumbai. 4.2 Learned Advocate submitted that pursuant to the order of learned Chief Metropolitan Magistrate, Ahmedabad directing to hold investigation u/s. 156(3) of the Code, the investigating agency submitted its Report wherein, it was categorically stated that since the offence alleged has been committed within the territorial limits of the City of Mumbai, the Courts in Mumbai only have jurisdiction SCR.A/2149/2006 9/36 JUDGMENT to entertain the impugned complaints. Learned Advocate submitted that, however, the learned Chief Metropolitan Magistrate, Ahmedabad has committed serious error in law in rejecting the said Report in spite of the findings of the investigating agency that no cause of action had arisen within the State of Gujarat. 4.3 Learned Advocate for the petitioner has sought reliance on the provisions of the Bombay Police Manual / Special Organizations and submitted that the Officers of the Criminal Investigation Department are specialized Officers and that they are deputed to assist the local Police in the detection of crimes. Learned Advocate submitted that after carrying out extensive investigation into the alleged offence, the investigating agency submitted its Report praying for the grant of the 'C' Summary. Learned Advocate submitted that when the investigating agency, which is the State CID [Crime], had arrived at a conclusion that no cause of action had arose within the State of Gujarat, the learned Chief Metropolitan Magistrate, Ahmedabad ought not to have rejected the Report and ordered further investigation. Hence, the Courts below have committed serious error in law and on facts in rejecting the case of the petitioner. SCR.A/2149/2006 10/36 JUDGMENT 4.4 Learned Advocate for the petitioner has placed reliance on the provisions of The Banking Regulation Act, 1949 and, more particularly, on the definition of “branch” / “branch office” which reads as under; “”Branch” or “Branch Office”, in relation to a banking company, means any branch or branch office, whether called a pay office or sub-pay office or by any other name, at which deposits are received, cheques cashed or moneys lent, and for the purposes of section 35 includes any place of business where any other form of business referred to in sub-section (1) of section 6 is transferred”. 5.0 Learned Advocate for the petitioner has relied upon a decision in the case of The Shamrao Vithal Co-operative Bank Ltd., v. Kasargod Pandhuranga Mallya reported in (1972) 4 S.C.C. 600. In that case, the Co-operative Society was having its Head Office in Bombay and a Branch in Madras. On the facts of the case, it was held that the Registrar, Bombay has no jurisdiction to give an award in respect of a claim concerning the Madras Branch made by the Society under Section 54 of the Bombay Co-operatives Societies Act against a Member residing in Madras and that the dispute would be adjudicated under the Madras Co-operative SCR.A/2149/2006 11/36 JUDGMENT Societies Act, 1932. 5.1 Learned Advocate has next relied upon a decision of the Punjab & Haryana High Court in the case of Madan Lal v. State of Haryana reported in 1984 (3) Crimes 233 wherein it has been held that a trial of an offence stands vitiated if not tried by the Court within whose jurisdiction it was allegedly committed. 5.2 Learned Advocate has next relied upon a decision of the Kerala High Court in the case of Sri. Commen Koshy v. State of Kerala & ors. reported in 1989 (3) Crimes 385. In that case the offence alleged against the petitioner was that the petitioner had obtained a second Passport from the Bombay Passport Office at a time when the Passport issued by the Kerala Passport Office was still valid. The Court held that the investigation of the case by Kerala Crime Branch was unwarranted as no part of the activities constituting the alleged offence took place within the local limits of the Court in Kerala. 5.3 Learned Advocate has next relied upon a decision of the Delhi High Court in the case of Jai Prakash v. Dinesh Dayal & SCR.A/2149/2006 12/36 JUDGMENT anr. reported in 1991 Cri. L. J. 418. In that case the petitioner was carrying on business at 'A' place in the State of U.P. and an agreement was entered between the petitioner and complainant for the supply of goods to the the branch office of the complainant at 'A' and several invoices were also issued by the petitioner to the branch office at 'A'. However, on account of some dispute, a complaint came to be filed against the petitioner at New Delhi. On the facts of the case, it was held that simply because the Head Office of the complainant was situated at that place, the Court at New Delhi had no jurisdiction to entertain the complaint. 5.4 Learned Advocate has next relied upon a decision of the Calcutta High Court in the case of S. R. Sharma v. The State of West Bengal & anr. reported in 1993 Cri. L. J. 831 wherein it has been held that though the offence of criminal breach of trust was committed and money was received, retained and misappropriated by accused at the place where the branch office was situated, the accused is not liable to account for at the Head Office and that the Court at the place of branch office has jurisdiction to try the offence. SCR.A/2149/2006 13/36 JUDGMENT 5.5 Learned Advocate has next relied upon a decision in the case of Satvinder Kaur v. State [NCT of Delhi] reported in 1999 (0) G.L.H.E.L. - S.C. 25549 wherein it has been held that an FIR cannot be quashed by the High Court under Section 482 of the Cr.P.C. on the ground that Police Station Officer of a particular police station was not having territorial jurisdiction to entertain and to investigate the FIR lodged by the appellant. 5.6 Learned Advocate for the petitioner relied upon a decision of the Apex Court in the case of Navinchandra N. Majithia v. State of Maharashtra reported in AIR 2000 S.C. 2966 wherein it has been held that the power conferred on the High Courts under Article 226 could as well be exercised by any High Court exercising jurisdiction in relation to the territories within which “the cause of action, wholly or in part, arises” and it is no matter that the seat of authority concerned is outside the territorial limits of the jurisdiction of that High Court. 5.7 Learned Advocate has next relied upon a decision of the Apex Court in the case of Central Bureau of Investigation, through S.P., Jaipur v. State of Rajasthan & anr. reported in SCR.A/2149/2006 14/36 JUDGMENT (2001) 3 S.C.C. 333 wherein it has been held that under Section 156(3) of the Cr.P.C., a Magistrate has no power to direct the Central Bureau of Investigation to conduct investigation into any offence. 5.8 Learned Advocate has next relied upon a decision in the case of Y. Abraham Ajit & ors. v. Inspector of Police, Chennai & anr. reported in (2004) 8 S.C.C. 100 wherein it has been held that considering Sections 177 & 178 of the Cr.P.C., the general rule is that every offence shall ordinarily be inquired into and tried by a Court within whose local jurisdiction it was committed. However, the said rule is subject to several exceptions. On the facts of that case, it was held that the Magistrate concerned had no jurisdiction to deal with the matter as no part of the cause of action for initiation of proceedings against accused arose within his local jurisdiction and the complainant was given liberty to file complaint in the appropriate Court. 5.9 Learned Advocate has next relied upon a decision in the case of Mosaraf Hossain Khan v. Bhagheeratha Engg. Ltd. & ors. reported in (2004) 8 S.C.C. 106. In that case, none of the facts SCR.A/2149/2006 15/36 JUDGMENT constituting the cause of action, which were required to be proved by the complainant for the purpose of attracting the ingredients of S. 138 of the N.I. Act, arose within the jurisdiction of Kerala High Court and, accordingly, it was held that the Kerala High Court had no jurisdiction to entertain the writ petition. 6. Learned Advocate for the petitioner, therefore, submitted that since no cause of action had arisen within the State of Gujarat and the Mandvi Branch of the respondent – Bank being an independent entity registered under the Maharashtra Co- operative Societies Act, the Courts in the State of Gujarat have no jurisdiction to entertain the complaints. Hence, the investigation is required to be transferred to the police agency in the City of Mumbai. 7. No other contentions have been raised by learned Advocate for the petitioner. 8.0 Mr. K. G. Vakharia learned Sr. Advocate appearing with Ms. Avani S. Mehta for respondent – Bank submitted that the respondent – Bank is registered under the Multi State Co-operative SCR.A/2149/2006 16/36 JUDGMENT Societies Act, 2002 under which the Bank is entitled to have its Branches in different States, over and above its State of origin, and that one such Branch is located at Mandvi in the City of Mumbai, Maharashtra. Learned Advocate submitted that the said Branch at Mumbai is also governed by the provisions of the said Act and not by the provisions of the Maharashtra Co-operative Societies Act, as contended by the petitioner. 8.1 Learned Advocate for respondent – Bank submitted that the Board of Management [Administration] constituted by the Central Registrar, Co-operative Societies, Delhi for the purpose of executing the Scheme of Re-construction of the respondent - Bank, as approved by the Reserve Bank of India, had come to the conclusion that lot of irregularities had been committed in the sanctioning of the loan and its disbursement, without following the due procedure as prescribed by the Reserve Bank of India. Learned Advocate submitted that the petitioner, along with the then C.E.O., M.D. and Chairman of the respondent – Bank, had taken loans to the tune of crores of Rupees from the respondent – Bank by violating the Rules and Regulations and without providing sufficient security or having any legal right or authority to avail of SCR.A/2149/2006 17/36 JUDGMENT the same. Learned Advocate submitted that for the said irregularities, the respondent – Bank has filed several individual criminal complaints and five such complaints have been filed against the petitioner herein. 8.2 Learned Advocate submitted that so far as the case of the petitioner is concerned, in the complaint itself, specific averments have been made to the effect that the entire procedure of sanctioning of the loan and its disbursement was done from the Head Office of the respondent – Bank at Ahmedabad and that after the loan was sanctioned and on completion of the requisite procedure, necessary intimation was given to the Branch Office of the respondent – Bank at Mumbai for the disbursement of the loan amount, which was only as a consequence of the entire transaction. 8.3 Learned Advocate further submitted that since disbursement was done from the Branch Office of the respondent – Bank at Mumbai, which was only a consequential transaction, it cannot be said that the jurisdiction to entertain any complaint/s arising out of the said transaction lies only with the Courts situated within the City of Mumbai. Learned Advocate submitted that since SCR.A/2149/2006 18/36 JUDGMENT the loan was sanctioned at the Head Office of the respondent – Bank, which is situated at Ahmedabad in the State of Gujarat, the cause of action is said to have arisen in the City of Ahmedabad and, therefore, the Courts in the State of Gujarat have jurisdiction to entertain the complaints arising out of the said transaction. 8.4 Learned Advocate for respondent – Bank submitted that after having considered the aforesaid factual aspects, the learned Chief Metropolitan Magistrate, Ahmedabad rejected the Report filed by the Investigating Officer and directed to carry out further investigation and place on record a conclusion as to whether the offence as alleged in the complaint has been committed or not since the investigating agency has no right to give an opinion on the point as to whether a particular Court has jurisdiction to entertain the complaint or not while submitting its Report u/s. 156(3) of the Code. The said order was also confirmed by the revisional Court vide judgment and order dated 22.09.2006. Learned Advocate, therefore, submitted that both the Courts below were also of the view that the cause of action had arisen in the City of Ahmedabad and, accordingly, the Courts below had jurisdiction to entertain the impugned complaints. SCR.A/2149/2006 19/36 JUDGMENT 9.0 Learned Advocate has relied upon the decision of the Hon'ble High Court of Bombay passed in Writ Petition No. 2551 of 2004 dated 20.10.2004 and, more particularly, on the observations made in Paras 2 & 3, which read as under; “2. The petitioners have, in pleadings before the Court, disclosed that in April 1994, the first petitioner availed certain credit facilities from the third respondent at its Mandvi Branch at Mumbai, under which amounts were disbursed by the third respondent to the first petitioner. Thereafter, there is a reference to arbitration proceedings which have been initiated under Section 84 of the Multi State Co-operative Societies Act, 2002. The petition is conspicuously silent about the extent of the credit facilities that were disbursed by the third respondent and of the nature of the claim filed by the third respondent in respect of the outstandings that are due and payable. During the course of hearing, we called upon Counsel appearing on behalf of the petitioners to disclose before the Court, the extent of the outstanding dues and to take instructions on whether the petitioners were in a position to repay the outstandings in instalments. Learned Counsel placed on the record, a compilation containing the agreement entered into with the Bank and stated that the present claim of the Bank is to the extent of Rs.5 Crores. Counsel stated, in response to a query of the Court, that the case of the petitioners is that they are liable to pay only such amounts as are due in accordance with the terms of the agreement. We, thereupon, requested Counsel to take instructions on whether the petitioners would be willing to pay at least what according to them was due and payable. SCR.A/2149/2006 20/36 JUDGMENT Upon taking instructions, Counsel states that the petitioners are not ready and willing to pay anything at all. 3. We have recorded what has transpired before the Court during the course of the hearing because it shows beyond a shadow of a doubt that the petition is not a bona fide petition but merely a attempt to delay and defer the realisation of the dues of the third respondent. The third respondent has taken recourse to its remedies under Section 84 of the Multi State Co-operative Societies Act, 2002. The contention of the petitioners is that Section 84(3) is ultra vires in so far as it renders a decision of the Arbitrator on the question as to whether a dispute touches the constitution, management or business of a Multi State Co-operative Society as final and such that would not