IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15-2-2011 CORAM THE HONOURABLE MR. JUSTICE G.M. AKBAR ALI CRL.O.P.No.23246 of 2009 and M.P.Nos.1 and 2 of 2010 1.M. Joy Varghese 2.George Varghese 3.Sunil Kumar 4.Geetha Joy 5.K.T. Thankamma ... Petitioners/Accused vs 1. The State rep by Station House Officer Coimbatore DCB Police Station 2. V. Lawrence ... Respondents/Complainant Criminal Original Petition filed under Section 482 Cr.P.C. for the reliefs as stated therein. For petitioner : Mr.Manjeri S. Sunderraj For R.1 : Mr. Hassan Mohammed Jinnah Addl. Public Prosecutor For R.2 : Mr.Karthik for M/s T.S. Gopalan & Co ORDER By consent, the matter is taken up for final hearing. The petition is filed seeking a direction to set aside the order in R.C.No.8/2009 dated 27.4.2009 on the file of the learned Principal Sessions Court, Coimbatore confirming the order dated 20.9.2008 in C.M.P.No.1814/2008 in C.C.No.27/2008 by the learned Judicial Magistrate No.II, Pollachi. 2. The petitioners are the accused in C.C.No.27 of 2008 on the file of the learned Judicial Magistrate No.II, Pollachi on a complaint given by the 2nd respondent for alleged offence under Secs.406 and 420 IPC. The District Crime Branch, Coimbatore has registered the case in Cr.No.57 of 2007 and after investigation, they have filed charge sheet. https://hcservices.ecourts.gov.in/hcservices/ 3. The sum and substance of the charge sheet is as follows: The 1st petitioner was the Managing Director of one Premier Footwear Products Pvt Ltd and was having a factory at Pollachi. The 2nd petitioner is the son-in-law of the 1st petitioner, 3rd petitioner is the Manager and the other petitioners are the Directors of the Company. 4. The petitioners have conjointly conspired in order to cheat the complainant, entered into criminal conspiracy and agreed to sell the machinery and the factory to the defacto-complainant without disclosing the fact that the machinery were already hypothecated with Canara Bank, SSI, Branch, Calicut,Kerala, as per the hypothecation agreement dated 23.4.2002. In pursuant to the above said conspiracy, the petitioners entered into a sale agreement on 29.11.2006 with deceitful intention and received a sum of Rs.25 lakhs as advance. The defacto-complainant had also incurred a further expenditure of Rs.25 lakhs in meeting out the other liabilities of the factory. When the said Canara Bank, Calicut had initiated proceedings over the hypothecation, the defacto-complainant came to know about the design of the petitioners and therefore, he lodged a complaint. However, objecting to the taking cognizance of the offence, the petitioners have filed an application before the learned Judicial Magistrate No.II, Pollachi in CMP No.1814 of 2008 for discharge under Sec.239 of Cr.P.C. 5. The learned J.M.II, Pollachi considered the application and passed final order dismissing the application, against which, the petitioners have filed a revision before the learned Principal Sessions Court, Coimbatore in Crl.R.P.No.8/2009. The learned I Additional District and Sessions Judge, Coimbatore considered the revision and dismissed the same. Aggrieved by which, the petitioners are before this Court under Sec.482 Cr.P.C. 6. The grounds urged before this Court questioning the cognizance taken by the learned Judicial Magistrate are that the defacto-complainant was aware of the fact that the machinery were under hypothecation to the bank and therefore, there is no deception at the initial stage to attract the ingredients of either Sec.415 or 420 IPC. The another point which is urged before this Court is that the courts below have adopted a stand that at the time of hearing of discharge, the court can consider only the police report and documents sent with it and it cannot look into the documents produced by the accused. According to the petitioners, the advance amount was paid towards the discharge of the dues to the bank and the entire dues to the bank has already been paid by the accused. 7. Manjeri. S. Sunderraj, learned counsel for the petitioners would submit that before taking cognizance of offence, https://hcservices.ecourts.gov.in/hcservices/ the Courts below ought to have seen whether there are enough materials to frame charges against the accused and the Court cannot act as the mouth piece of the prosecution without any effective role in considering the matter. The learned counsel further submitted that the Courts below have misconstrued the guidelines laid down in the various decisions that the court cannot look into the defence materials and cannot conduct a roving enquiry while framing charges. The learned counsel submitted that the petitioners have produced reliable materials which ought to have been looked into by the Courts below. The learned counsel relied on the following decisions: 1. (2007) 3 SCC 693 (Saroj Kumar Poddar vs State (NCT of Delhi) ) 2. AIR 2001 SC 175 (Saju vs State of Kerala) 3. AIR 1968 Punjab 416 (Trilochan vs Karnail) 4. AIR 2000 SC 2341 (Haridaya Ranjan Prasad Varma vs State of Bihar 5. AIR 2001 SC 2960 (SW Paletkar vs State of Bihar) 6. 1987 (1) KLT 190 Kerala Film Artistes and Critics Society vs Unnie Menon 7. AIR 1999 SC 2640 (State vs Nalini) 8. AIR 1985 SC 1224 9. (1979) Crl.L.J. 154 10.(1996) 9 SCC 766 (Satish Mehra vs Delhi Administration and another 11. 2008 (1) KLT 425 (SC), JT 2008(1) SC 485 Krishna Janardhana Bhat v Dattatjraya G. Hegde 12. (1992) 1 SCC 217 K.M. Mathew v State of Kerala 8. On the contrary, Mr. Karthik for M/s T.S. Gopalan& Co., for the 2nd respondent would submit that it is now well settled that at the time of framing of charge, the Court is not expected to conduct a roving enquiry, sift and weigh the evidence and cannot look into the defence materials. The learned counsel pointed out that under Sec.239 of Cr.P.C, the Court is bound to consider the police report and the documents sent with it and after hearing the parties, the learned Magistrate is to consider the charges against the accused. The learned counsel relied on a decision reported in AIR 2005 SC 359 (State of Orissa vs Debendra Nath Padhi) https://hcservices.ecourts.gov.in/hcservices/ 9. Mr. Hassan Mohammed Jinnah, Additional Public Prosecutor for the first respondent would submit that the courts below have rightly considered the police report and the materials sent along with it and also negatived the defence materials and this Court need not interfere with the findings of the trial court. 10. The crux of the allegation giving rise to an investigation and filing of the charge sheet against the petitioners for the alleged offence under Secs.406 and 420 IPC are as follows: Sec.406, 420 reads as follows: 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. 420. Cheating and dishonestly inducing delivery of property Whoever cheats and thereby dishonestly induces the person deceived any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. 11. The defacto-complainant entered into an agreement with the petitioners company for the purchase of machinery and paid an advance Rs.25 lakhs. He had also incurred expenditure in clearing certain dues like electricity charges, taxes and other arrears to the tune of Rs.25 lakhs. However, the defacto-complainant came to know that the properties were already hypothecated with the Canara Bank in Kerala State and as such he has been cheated by the petitioners. Indisputably, the bank has initiated the proceedings under SARFEASI Act for the recovery of its dues. 12. The petitioners would contend that the defacto- complainant has suppressed material facts in their complaint. https://hcservices.ecourts.gov.in/hcservices/ According to the petitioners,the defacto-complainant did know about the hypothecation of the machinery to the bank and the amount paid towards advance was in fact paid to the Canara Bank to discharge their liabilities. According to the petitioners, on 26.4.2007, a notice was issued to the defacto -complainant to pay the balance of Rs.75 lakhs and take possession of the properties, but the defacto-complainant failed. According to the petitioners, there is a breach of contract by the defato-complainant, in pursuant to which, a complaint was given against the defacto-complainant in Cr.No.169 of 2007 at Calicut. The petitioners had alleged that the defacto-complainant promised to settle the dues and settle the accounts of the staff of the Company, but again failed. In any event, the amount due to the bank was only 13.24 lakhs which was already paid by the petitioners to the Bank. These materials were placed as defence materials before the trial court when the petitioners have filed an application for discharge under Sec.239 of Cr.P.C. 13. Sec.239 Cr.P.C reads as follows When accused shall be discharged: If, upon considering the police report and the documents sent with it under Section 173 and making such examination, if any, of the accused as the Magistrate thinks necessary and after giving the prosecution and the accused an opportunity of being heard, the Magistrate considers the charge against the accused to be groundless he shall discharge the accused and record his reasons for so doing". 14. The point for consideration is whether the courts below are right in holding that the court need not look into the documents produced by the accused and are not expected to conduct a roving enquiry in sifting and weighing the materials to determine the guilt or innocence of the accused at the stage of framing of charges. 15. In 1979 Crl.L.J 154 (Union of India vs Prafulla Kumar Samual and another) , the Hon'ble Supreme Court has held that 10. Thus, on a consideration of the authorities mentioned above, the following principles emerge: (1) That the Judge while considering the question of framing https://hcservices.ecourts.gov.in/hcservices/ the charges under Section 227 of the Code has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out. (2) Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained the Court will be fully justified in framing a charge and proceeding with the trial. 3. The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal application. By and large however if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving rise to some suspicion but not grave suspicion against the accused, he will be fully within his right to discharge the accused, (4) That in exercising his jurisdiction under Section 227 of the Code the Judge which under the present Code is a senior and experienced Court cannot act merely as a Post Office or a mouth-piece of the prosecution, but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the Court, any basic infirmities appearing in the case and so on. This however, does not mean that the Judge should make a roving enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial". 16. In the case of Satish Mehra vs Delhi Administration and Another (1996 9 SCC 766), the Apex Court has held as follows: "13. Similar situation arises under Section 239 of the Code (which https://hcservices.ecourts.gov.in/hcservices/ deals with trial of warrant cases on police report). In that situation the Magistrate has to afford the prosecution and the accused an opportunity of being heard besides considering the police report and the documents sent therewith. At these two stages the Code enjoins on the court to give audience to the accused for deciding whether it is necessary to proceed to the next stage. It is a matter of exercise of judicial mind. There is nothing in the Code which shrinks the scope of such audience to oral arguments. If the accused succeeds in producing any reliable material at that stage which might fatally affect even the very sustainability of the case, it is unjust to suggest that no such material shall be looked into by the court at that stage. Here the ground may be any valid ground including insufficiency of evidence to prove the charge. 14. The object of providing such an opportunity as is envisaged in Section 227 of the Code is to enable the court to decide whether it is necessary to proceed to conduct the trial. If the case ends there it gains a lot of time of the court and saves much human efforts and cost. If the materials produced by the accused even at the early stage would clinch the issue, why should the Court shut it out saying that such documents need be produced only after washing a lot more time in the name of trial proceedings. Hence, we are of the view that Sessions Judge would be within his powers to consider even materials which the accused may produce at the stage contemplated in Section 227 of the Code. 17. In the case of Hridaya Ranjan Pd. Verma and Others vs State of Bihar and another (AIR 2000 SC 2341), the Apex Court has held as follows: https://hcservices.ecourts.gov.in/hcservices/ "The distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning that is when he made the promise cannot be presumed." 18. In the case of Kerala Film Artists & Critics Society vs Unni Menon (1987 (1) KLT 190), the learned single Judge of High Court of Kerala held as follows: "5. ... Unless there is an allegation in a complaint that the accused had either dishonestly o fraudulently induced the person on whom he played the deception, so offence of cheating can come out of the complaint. It is of course not necessary that those words should find a place in the complaint. If the complaint is silent about that aspect, the consequence is that the complaint would be bereft of the basic ingredient of the offence." 19. In the case of Saju vs State of Kerala (AIR 2001 SC 175), the Apex Court has held as follows: "In the absence of the existence of circumstances suggesting the hatching of criminal conspiracy, https://hcservices.ecourts.gov.in/hcservices/ we are of the opinion that the appellant could not have been convicted and sentenced with the aid of Section 120B or Section 109 IPC. No fact or circumstance with respect to the abetment attracting the applicability of Section 109 IPC has been brought to our notice. To prove the charge of abetment, the prosecution is required to prove that the abettor had instigated for the doing of a particular thing or engaged with one or more other person or persons in any conspiracy for the doing of that thing or intentionally aided by an act of illegal omission, doing of that thing, The prosecution miserably failed to prove the existence of any of the ingredients of Section 107 IPC. 20. The ratio of the judgment relied on by the petitioners in the case of State of UP vs Sukhbasi and others( AIR 1985 SC 1224) is also for the same preposition. 21. In the case of S.N. Palanitkar and others vs State of Bihar (AIR 2001 SC 2960, the Apex Court has held as follows: 21. ..." In order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made. It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating...." 22. The question whether the court can look into the defence materials while framing of the charge was under the consideration of the Apex Court. In the case of Satish Mehra vs Delhi Administration and Another (1996 9 SCC 766) (cited supra), the Apex Court is of the view that on the ground of justice, equity and fairness and also on the touch stone of Art.21 of the Constitution of India, to avoid the harassment of the accused having to face the trial for years, avoid waste of valuable time of the Court, even at the early stage of framing of charge or taking cognizance, if the accused is in a position to produce unimpeachable material of sterling quality to show that there is no prospect of conviction, the courts can look into such defence https://hcservices.ecourts.gov.in/hcservices/ materials. However, a three Judge Bench of the Apex Court in State of Orissa vs Debendra Nath Padhi in AIR 2005 SC 359 had overruled the Satish Mehra's case and laid down the principles as stated below: "We are unable to accept the aforesaid contention. The reliance on Articles 14 and 21 is misplaced. The Scheme of the Code and object with which Section 227 was incorporated and Sections 207 and 207(A) omitted have already been noticed. Further, at the stage of framing of charge roving and fishing inquiry is impermissible. If the contention of the accused is accepted, there would be a mind trial at the stage of framing of charge. That would defeat the object of the Code. It is well-settled that at the stage of framing of charge the defence of the accused cannot be put forth. The acceptance of the contention of the learned counsel for the accused would mean permitting the accused to adduce his defence at the stage of framing of the charge and for examination thereof at that stage which is against the criminal jurisprudence". 23. In the case of Rukmini Narvekar vs Vijaya Satardekar and Others (2008) 14 SCC 1 , the Apex Court has held as follows: " 22. Thus in our opinion, while it is true that ordinarily defence material cannot be looked into by the Court while framing of the charge in view of D.N. Padhi case, there may be some very rare and exceptional cases where some defence material when shown to the trial court would convincingly demonstrate that the prosecution version is totally absurd or preposterous and in such very rare cases the defence material can be looked into by the Court at the time of framing of the charges or taking cognizance. In our opinion, therefore, it cannot be said as an absolute preposition that under no circumstances can the court look into the material produced by the defence at the time of framing of the charges, though this should be done in very rare cases i.e., where the https://hcservices.ecourts.gov.in/hcservices/ defence produces some material which convincingly demonstrates that the whole prosecution case is totally absurd or totally concocted. 24. In the case of Bharat Parikh vs Central Bureau of Investigation and another (2008) 10 SCC 109, the Hon'ble Supreme Court held as follows: "19. As observed in Debendra Nath Padhi case at the stage of framing charge roving and finishing inquiry is impermissible and a mini trial cannot be conducted at such stage. At the stage of framing of charge the submissions on behalf of the accused have to be confirmed to the material produced by the investigating agency. The accused will get an opportunity to prove the documents subsequently produced by the prosecution on the order of the Court, but the same cannot be relied upon to reopen the proceedings once charge has been framed or for invocation of the High Court's Powers under Section 482 of the Code of Criminal Procedure". 25. Therefore, it is well settled that at the time of framing of charge, the learned Magistrate cannot conduct a roving enquiry. However, in the case of Rukmini Narvekar vs Vijaya Sataredekar and others reported in (2008) 14 SCC 1 , Justice Altamas Kabir (concurring) further held as follows: " 38. In my view, therefore, there is no scope for the accused to produce any evidence in support of the submissions made on his behalf at the stage of framing of charge and only such materials as are indicated in Section 227 Cr.P.C can be taken into consideration by the learned Magistrate at that stage. However, in a proceeding taken therefrom under Section 482 Cr.P.C the court is free to consider material that they may be produced on behalf of the accuse to arrive at a decision whether the charge as framed could be maintained. This in my view, appears to be the intention of the legislature in wording. https://hcservices.ecourts.gov.in/hcservices/ Section 227 and 228 the way in which they have been worded and as explained in Debendra Nath Padhi by the larger Bench therein to which the very same question had been referred. 26. Therefore, it is well cleared that there is no scope for the accused to produce any evidence at the stage of framing of charge. However, in a proceeding taken therefrom under Sec.482 Cr.P.C the court is free to consider material that may be produced on behalf of the accused to arrive at a decision whether the charges as framed could be maintained. 27. If we apply these ratio, it will lead to the conclusion that there was no scope for the petitioners to produce any evidence when the learned Magistrate decided that application under Sec.239 Cr.P.C and when the same was challenged in the criminal Revision before the learned Sessions Judge. However, the present proceedings is one under Sec.482 Cr.P.C this Court is free to consider the material produced by the petitioners. 28. Therefore, I venture into considering the materials as produced in the typed set along with the petition. The defacto- complainant had entered into an agreement with one M/s Premier Footwear Products Pvt Ltd on 29.11.2006 represented by the first petitioner. The first petitioner had agreed to sell the machinery described in the schedule for a sum of Rs.1 crore and the 2nd respondent had paid a sum of Rs.25 lakhs. The balance of Rs.75 lakhs was to be paid on or before 15.12.2006 and the possession was to be handed over thereafter. 29. A notice dated 18.4.2007was issued by the first petitioner stating that the 2nd respondent had failed to pay the balance and take possession of the machinery and has called upon to pay the balance and take possession of the machinery. On 4.8.2007 the Manager of the Company had given a complaint in Cr.No.169 of 2007 at Kozhikodu Police Station . In W.P.NO.26295 of 2007 the High Court of Kerala passed a judgment on 8.10.2007 ordering stay of the proceedings under SARFEASI Act on a condition that the petitioner shall remit a sum of Rs.5 lakhs with the bank. The amount due was indicated as 19,49,968.29. This Court while granting bail to the petitioners on 21.42008 in Crl.O.P.No. 8717 of 2008 had observed thus: "Considering the above said facts and considering the undisputed fact that the entire allegations are borne out by records and documents coupled with the fact that the machineries were very well available with the custody and possession of the defacto-complainant and the https://hcservices.ecourts.gov.in/hcservices/ investigation itself is owner and the charge sheet has been filed. 30. The report of the police