CR.MA/7690/2000 1/10 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD CRIMINAL MISC.APPLICATION No. 7690 of 2000 with CRIMINAL MISC.APPLICATION No. 860 of 2003 For Approval and Signature: HONOURABLE MR.JUSTICE ANANT S. DAVE ====================================== 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 ? ====================================== HOUSING DEVELOPMENT FINANCE CORPOATION LTD. & others Versus SURESHCHANDRA V PAREKH & another ====================================== Appearance : Mr. T.S. Nanavati for the applicants Mr. Sureshchandra V. Parekh, party-in-person, for respondent No.1 Mr. K.T. Dave, Additional Public Prosecutor, for respondent No.2 ====================================== CORAM : HONOURABLE MR.JUSTICE ANANT S. DAVE Date : 28/08/2008 CR.MA/7690/2000 2/10 JUDGMENT ORAL JUDGMENT 1 This application under Section 482 of the Code of Criminal Procedure, 1973 [for short, 'the Code'] is preferred by the applicants for quashing the process issued under Sections 406 and 114 of the Indian Penal Code by the learned Metropolitan Magistrate, Court No.18, Mirzapur, Ahmedabad, dated 13th November 2000, upon the applicant- company and its Managing Director, Directors and the Secretary. 2 On 28.7.1998, respondent No.1 preferred Inquiry Case No.85 of 1998 against the applicants for the offences punishable under Sections 420, 467, 468, 471, and 114 of the Indian Penal Code and the Court concerned passed order dated 28.7.1998 to initiate inquiry under Section 202 of the Code. After recording statement of the complainant, on 30.12.1999, the Court directed the Investigating Officer to obtain hand-writing expert report and, by relying upon the same, on 13.11.2000, the learned Metropolitan Magistrate, Court No.18, Ahmedabad, ordered filing of inquiry case as regular Criminal Case and for issuance of process under Sections 406 and 114 of the Indian Penal Code only. 2.1 Thus, except offence under Sections 406 and 114 of the Indian Penal Code, no process is issued by the concerned Metropolitan Magistrate in respect of any other offence 3 It is the case of the applicants that, originally, seven shares were held in the name of Mrs. Neelaben S. Parekh, jointly with Mr. Sureshchandra V. Parekh of HDFC under Folio No. N 41567. In and around 1992, said Mrs. Neelaben S. Parekh jointly with Mr. Sureshchandra V. Parekh, respondent No.1 herein, sought transfer of the CR.MA/7690/2000 3/10 JUDGMENT said seven shares under the above folio number in the name of Mrs. Neelaben S. Parekh using seven transfer deeds. Each of the transfer deeds was accompanied by one share certificate for one share and the name of Mrs. Neelaben S. Parekh was written in different combinations as follows: Certificate No. No.of shares Transferee 399340 1 Nila Sureshbhai 399335 1 N.S. Parekh 399336 1 Nila S. Parekh 399337 1 Nilaben Parekh 399338 1 Nilaben Parekh 399339 1 Nilaben Suresh 399341 1 Nilaben S. Parekh 3.1 It is the further case of the applicants that, initially, it came to be lodged on different folio numbers, but on realizing that all of the same belong to one entity, they were thereafter placed under single Folio No.N 051110 and, accordingly, the transferee Mrs. Neelaben S. Parekh now holds seven shares under Folio No. N 051110 and, accordingly, Dividend Warrants were issued by the company from 1992-1993 and 1993-1994. It is further case of the applicants that on 20.6.1994 it was decided by the Company that preferential share allotment of HDFC Bank Limited was to be made on the basis of shares held in HDFC Limited as on 20.6.1994 and to be allotted to the shareholders of HDFC Limited in the proportion that, if 1-10 shares are held in HDFC Limited, 100 shares of HDFC Bank to be offered. In view of the above, the wife of respondent No.1 herein got Folio No. N 051110 offering 100 shares against seven shares held. However, respondent No.1 is claiming that, since seven shares were held in different folios, he ought to have been offered 700 shares held by his wife, since allotment of preferential shares of HDFC CR.MA/7690/2000 4/10 JUDGMENT Bank shares was not made as claimed by respondent No.1. 4 In the backdrop of the above facts, various civil litigations were initiated by respondent No.1 against the Company, the details of which are as under: [a] Consumer Complaint No.1260 of 1994 was filed by respondent No.1 and his wife before the Ahmedabad District Consumer Disputes Redressal Forum, which came to be dismissed by order dated 15.7.1997, against which, Appeal No.446 of 1997 preferred on 16.8.1997 before the Gujarat State Consumer Disputes Redressal Commission, was also rejected. At the same time, another Consumer Complaint No.1261 of 1994 filed by respondent No.1 and his wife also came to be disposed of by the Ahmedabad District Consumer Redressal Forum on 15.7.1997, where certain mandatory orders were prayed for for allotment of shares, and Appeal No.445 of 1997 filed against that order before the Gujarat State Consumer Disputes Redressal Commission is pending. [b] Civil Suit No.3235 of 1998 was also filed before the City Civil Court, Ahmedabad, against the applicant-company with injunction application Exh.5, which came to be rejected by the City Civil Court and, subsequently, by order dated 30.8.2000, the learned Judge, Court No.16, City Civil Court, Ahmedabad, rejected the said suit as having become infructuous. [c] Appeal From order No.349 of 2000 filed in this Court against the judgment and order dated 11.72000 passed by the learned Chamber Judge, City Civil Court, Ahmedabad, in Civil Suit No.2554 of 2000, where injunction was sought against inclusion in agenda dated 6.5.1998 being item No.11, and against dropping of resolution for general meeting CR.MA/7690/2000 5/10 JUDGMENT dated 10.7.1978, and for declaring the minutes as null and void, is pending before this Court. [d] Appeal From Order No.392 of 1992 against dismissal of Notice of Motion by the learned Chamber Judge, City Civil Court, Ahmedabad, praying for an injunction in respect of the general meeting to be held on 9.7.1999, was also disposed of by this Court. [e] Civil Suit Nos. 6529 of 1999 and 3629 of 2000 with different prayers for staying extra-ordinary general meeting and proceedings of the company, where injunction applications were preferred, also came to be rejected. 5 Thus, according to the learned counsel for the applicants, having resorted to various remedies available under law and under the Companies Act and after approaching the City Civil Court and Consumer Court, this complaint filed by respondent No.1 is nothing, but vexatious, mala fide and abuse of process of law and none of ingredients of Section 406 of the Indian Penal Code is attracted. It is further submitted by the learned counsel for the applicants that, in the complaint, the complainant has suppressed various facts about his failure of obtaining injunction and rejection of the claim by the consumer court. Not only that, no legal right much less any substantial legal right is vested in the complainant. The design of the complainant is clear to harass the Company so as to succumb to the illegal demand of obtaining 700 shares for one folio, which is not permissible. It is submitted by the learned counsel for the applicants that, so far as ingredients of Section 406 of the Indian Penal Code are concerned, the allegation about entrustment and dishonestly misappropriating or converting for own use of the company the property of the complainant in violation of law, cannot be even CR.MA/7690/2000 6/10 JUDGMENT imagined and, therefore, to prevent abuse of process of law and to secure ends of justice, this is a fit case where this Court may exercise inherent power under Section 482 of the Code and quash the impugned complaint and the process issued thereon. 6 In counter, respondent No.1-Party in Person appeared and vehemently submitted that the basic ingredients of offence under Section 406 read with Section 114 of the Indian Penal Code, in the backdrop of allegations, are attracted. It is further submitted that the Company has tampered with the record of various proceedings and, to deprive the complainant, as a shareholder, of his legitimate right to get 700 shares of different seven folios, subsequently certain interpolation and corrections have been made, which indicates dishonest attempt on the part of the Company. Not only that, but, according to the Party-in-Person, in spite of approaching the Company Officials in person and making various representations to appoint an arbitration through the Bombay Stock Exchange, no fruitful outcome is noticed and, even after transfer of shares, there is over-writing, which remains unexplained as on date. According to the Party-in-Person, there is large-scale fraud committed by the Company and, therefore, the process issued by the learned Magistrate, after recording reasons for the same and prima facie considering the material on record, need not be interfered with. The Party-in-Person has also referred to various resolutions passed by the Board of Directors of the Company from 1998 and 2001 onwards along with SEBI Rules for such kind of transactions and submitted that the original claim of the complainant of allotment of 700 shares on the basis of seven different folios is denied by resorting to forgery, fabrication, over-writing and tampering with company records, which deserves a close scrutiny of this Court. Thus, according to the Party-in-Person, when the complainant and his wife are entitled to hold the shares more CR.MA/7690/2000 7/10 JUDGMENT than one folio, such deprivation would amount to dishonest attempt on the part of the Company and, for that purpose, investigation is necessary. 7 Having heard the learned counsel for the applicants, the Party-in- Person and the learned Additional Public Prosecutor, in my view, the complaint filed by the complainant is nothing, but, an attempt to entangle the Company, its Managing Director, Directors and other Officials in a criminal prosecution. Not only that, but it is also borne out from the record that the complainant has resorted to various civil remedies prior to and subsequent to filing of the complaint by approaching City Civil Court, Ahmedabad, and the Consumer Forum where the claim of the complainant is found to be meritless. The Consumer Forum found that no case was made out by the complainant, the Company had not violated any provisions of the Act and, since the shares were held by one person and it was clubbed in one portfolio, the complainant was entitled to 100 shares and not 700 shares. Even the City Civil Court, prima facie, did not accept the argument of the complainant and interim injunction applications were also rejected. Thus, the allegations made in the complaint do, prima-facie, indicate an effort on the part of respondent No.1 to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution. 8 Now, I will examine whether allegations made in the complaint, when taken at their face value as true and correct, constitute offence defined under Section 406 of the Indian Penal Code. Section 406 of the Indian Penal Code reads as under: “406. Punishment for criminal breach of trust- Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.” CR.MA/7690/2000 8/10 JUDGMENT What is 'criminal breach of trust' is defined in Section 405, which reads as under: “405. Criminal breach of trust- Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits 'criminal breach of trust'.” 8.1 Therefore, to establish 'criminal breach of trust', the first requirement is 'entrustment' with property or with any dominion over property and, thereafter, dishonest attempt to misappropriate or convert such property for own use or to dispose of in violation of any direction of law prescribing the mode in which such trust is to be discharged or of any legal contract, express or implied. Therefore, in the present case, when the Company had given preferential shares of HDFC Bank to the holder of one folio by allotting 100 shares, it cannot be said that the Company had dishonestly misappropriated or converted any property or such property over which the Company had dominion with dishonest intention. I, therefore, hold that the first ingredient of 'criminal breach of trust' is missing to attract prosecution under Section 406 of the Indian Penal Code. 9. So far as other offences, as alleged in the complaint, namely, Sections 467, 468 and 471 of the Indian Penal Code, are concerned, even the learned Magistrate was not satisfied and the process has been issued only for the offences under Section 406 read with Section 114 of the Indian Penal Code. CR.MA/7690/2000 9/10 JUDGMENT 10 The principles relating to exercise of jurisdiction under Section 482 of the Code to quash complaint and criminal prosecution have been stated and reiterated by the Apex Court in several decisions right from State of Haryana vs. Bhajan Lal, reported in AIR 1992 Supreme Court 604. The power under Section 482 of the Code should be used in a rarest of rare cases sparingly, with caution and circumspection, on the following eventualities: [i] A complaint can be quashed where the allegations made in 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 the case alleged against the accused. [ii] Power should be exercised ex debito justitiae to prevent abuse of process of process of court [iii] to secure ends of justice. 11 Considering the above, all the ingredients of Section 482 of the Code are attracted in the present case and issuance of process by the learned Metropolitan Magistrate, in the facts and circumstances of the case and in the back-drop of the allegations made in the complaint, according to this Court, do not attract any of the ingredients of Section 406 read with the definition provided in Section 405 of the Indian Penal Code. In my opinion, issuance of process by the learned Metropolitan Magistrate is nothing, but illegal exercise of power and filing of complaint is an abuse of process of the court. 12 Considering the over-all facts and circumstances of the case and keeping in mind various decisions of the Apex Court, this is a fit case wherein the complaint and the process issued by the learned Metropolitan Magistrate therein deserve to be quashed. CR.MA/7690/2000 10/10 JUDGMENT 13 In the result, this petition is allowed. The process under Sections 406 and 114 of the Indian Penal code dated 13.11.2000 issued by the learned Metropolitan Magistrate, Court No.18, Mirzapur, Ahmedabad, and Inquiry Case No.85 of 1998, now Criminal Case No.2373 of 2000, [Annexure “A”] are quashed. Rule is made absolute. 14 Consequently, Criminal Misc. Application No.860 of 2003 filed by the Party-in-Person stands disposed of accordingly. R & P, if any, be sent back. (ANANT S. DAVE, J.) (swamy)