1 IN THE HIGH COURT OF JUDICATURE OF BOMBAY BENCH AT AURANGABAD CRIMINAL APPLICATION NO.1017 OF 2009. 1) Kalpesh s/o Bhanudas Vaishanav Age: 29 Yrs., occu. Service. UNICON Securities Pvt.Ltd. 187, Polan Peth, 2nd Floor, Jalgaon, Dist. Jalgaon. 2) Shri Trinadha Kiran V. Age: 34 Yrs., occu. Service Sovereign NV Securities Pvt.Ltd., 45/90, Cannought Circus, New Delhi. 3) Gajendra Nagpal Age: 40 Yrs., occu. Service. Chief Executive Officer, UNICON Securities Pvt. Ltd., 2nd Floor, Regal Building, Cannought Circus, New Delhi. 4) Smt. Anjali Mukhija Age: 40 Yrs., occu. Service. UNICON Financial Intermedias Pvt.Ltd., 69, 2nd Floor, Regal Building, 2 Cannought Circus,New Delhi. 5) Sanjay Kumar Dube Age: Yrs., occu. Service, UNICON SECURITIES PVT. lTD., 2ND floor, Regal Building, Cannought Circus, New Delhi. 6) Smt. Gurvindar Kaur Age: 40 Yrs., occu. Service, UNICON Securities Pvt. Ltd., 2nd Floor, Regal Building, Cannought Circus, New Delhi. 7) Shri Dinesh Sheravat, Age: Yrs., occ. Service, Compliance and Legal Officer, UNICON Securities Pvt. Ltd., 2nd Floor, Regal Building, Cannought circus, New Delhi. 8) Nilesh Vyavahare Age: 38 Yrs., occu. Service, UNICON Securities Pvt. Ltd. Patil Plaza, 2nd Floor, Canada Corner, Nashik. 9) Virender Rajender Mishra Age: 31 Yrs., occu. Service, 3 UNICON Securities Pvt. Ltd., 187, Polan Peth, 2nd Floor, Jalgaon. - PETITIONERS VERSUS 1) Dilipsinha Narayanrao Patil Age: 79 Yrs., occu. Pensioner, r/o Roopganga Colony, Ganeshwadi, Jalgaon, Tq. & Dist.Jalgaon. 2) Chairman, Sovereign NV Securities Pvt.Ltd. 69, 2nd Floor, Regal Building, Cannought Place, New Delhi. 3) Managing Director, Sovereign NV Securities Pvt.Ltd., 69, 2nd Floor, Regal Building, Cannought Place, New Delhi. 4) Chairman, UNICON Securities Pvt. Ltd., 69, 2nd Floor, Regal Building, Cannought Place, New Delhi. 5) Managing Director, UNICON Securities Pvt. Ltd., 69, 2nd Floor, Regal Building, 4 Cannought Place, New Delhi. 6) Abhay Suryawanshi, UNICON Securities Pvt. Ltd. 187, Polan Peth, 2nd Floor, Jalgaon, Tq. and District Jalgaon. 7) Chairman, Globe Capital Market Ltd. 609, Anasal Bhavan, 16, K.G.Marg, Cannought Place, New Delhi. 8) Managing Director, Globe Capital Market Ltd. 609, Anasal Bhavan, 16, K.G.Marg, Cannought Place, New Delhi. - RESPONDENTS ***** Mr.CK Shinde and Mr.Abhik Kumar, Advocates for Petitioners; Mr.AH Kapadia, Mr.VN Damale, Mr.AS Jondhale & Mr.Hemant Pawar, Advocates for Respondent No.1. ___ 5 WITH CRIMINAL APPLICATION NO. 1185 OF 2009. 1) The Chairman, Globe Capital Market Ltd. 2) The Managing Director, Globe Capital Market Ltd., Applicant Nos. 1 and 2 r/o C/o Globe Capital Market Ltd. 609, Ansal Bhavan, 16, KG Marg, Cannought Place, New Delhi 11001. Through Mr.Mahesh Shriniwas Dagdiya B 12, First Floor, Shri Gajanan Vaibhav Complex, Cannought Place, CIDCO, Aurangabad. .. APPLICANTS (orig. accused nos. 7 and 8 ) VERSUS 1) The State of Maharashtra Through Police Inspector, Zilla Peth Police Station, Jalgaon. 2) Dilipsinha s/o Narayanrao Patil Age: 79 Yrs., occu. Pensioner, r/o 19, Rupganga Colony, 6 Ganeshwadi, Jalgaon. Tq. and Dist. Jalgaon. .. RESPONDENTS (Resp.No.2 is orig complainant) ___ Mr.Swapnil S. Patil, Advocate for Applicants; Mr.KM Suryawanshi, APP for Resp.No.1-State; Mr.Mr.AH Kapadia, Mr.AS Jondhale & Mr.Hemant Pawar, Advocates for Respondent No.2. *** CORAM : K.U.CHANDIWAL, J. DATE : 29th August, 2009. ORAL JUDGMENT : . Rule, Rule made returnable forthwith, by consent of parties, matter is heard finally at admission stage. 2) Issuance of process for an offence under Sections 406, 408, 420, 471 r/w 34 of IPC, by order dated 27.2.2009 by learned Chief Judicial Magistrate, Jalgaon in Criminal Case No. 679/2008 is subject of challenge at the instance of the original accused as they contend that the proceedings are sheer abuse, it is a civil contract between the parties, remedies to the 7 complainant are before the Consumer Forum and even before the National Stock Exchange. The complainant has the forum of arbitration available in terms of the agreement between the parties and hence, to reiterate quashment. FACTS : 3) The complainant is a retired senior citizen, since 14-15 years he has entered into the transaction of purchase and sale of shares. The local representative of Unicon Securities Pvt. Ltd. (accused herein), approached him in August, 2007, represented that said company deals in securities,like shares and company is Share broker. The complainant believed and accepted the rate of brokerage in respect of Future Option at 1 paisa for Rs.100/- and 10 paisa for Rs.100 in respect of shares. 4) The complainant was informed that the software of the company is complete in all respects. There will be no impediment in entering into the transactions, including placing orders for Future Option as per the market rate. 8 Purchase and sale at market rate could have been placed with current market rate. The DEMAT account of the complainant was opened with Glob Capital Market Ltd. There was an agreement entered into by the complainant with four accused. It was a printed form and signed at the residence of the complainant on 24.8.2008 and there was another form for correspondence. Signatures of the complainant were obtained on Account Opening Form for DEMAT. 5) On 3.9.2007, Complainant received a Welcome letter on Letter head of Unicon company. However, it was purportedly signed by officers of Sovereign NV Securities Pvt. Ltd. (hereinafter referred to as Sovereign Securities). The complainant asserts that he had the transaction of purchase and sale with Unicon company and based on their advise, he was dealing with them. 6) The complainant believed in the representations made by the company and entered into several transactions. 7) It is thus clear, there was an agreement 9 dated 24.8.2007 by the complainant with Unicon securities. It was based on the terms reduced in writing to which naturally both the parties are bound to abide. There was ID number issued in favour of the complainant being ID No. JL76, it was a duly signed contract note for both cash markets and Future Option segments. 8) It was on 18.1.2008, the complainant placed an order for purchase of lot of 50 shares of ABAN OFFSHORE @ Rs.4,450/- per share and accordingly his order of purchase came to be executed. There was crash in the market. Consequently, the complainant desired that the shares, which he has purchased, should be immediately sold, which request he has made at 3.12.56 hrs. on the very day. His request/proposal could not be effected/materialized as the computer indicated remark “Exposure not available”. This made the complainant to suffer financial losses. He feels, he has been deceived. 9) The complainant approached the Police, 10 he got negative answer. Then he approached the District Consumer Forum, Jalgaon in December, 2008. He approached the Investor Service Cell on 3.2.2009. The Investor Services Redressal Cell attended the report/grievance of the complainant and having regard to the nature of the grievance, informed him, to pursue his matter to the arbitration, if he so desires by letter/communication dated 10.2.2009. SUBMISSIONS: 10) There was deception initially as the agreement form was of Sovereign Securities while the transaction is alleged to have been entered into with Unicon Securities. The change in the status of the company was dated 11.5.2007. However, the agreement dated 24.8.2007 referred to Sovereign securities. 11) The company has placed on record, at Exhibit-F, page 66, the Change in its name and issuance of fresh Certificate of Incorporation, consequent upon the change of name of the Corporate identity. Mr. Shinde informs, there 11 is no controversy of any liability, even in between Sovereign Securities and Unicorn securities, the Directors are the same, the office address is the same. OBSERVATIONS: 12) If one reads the complaint, there is no grievance about the status of Sovereign Securities or Unicon securities, resulting in any misunderstanding or deception or cheating to the complainant. 13) The matter revolves to the agreement dated 24.8.2007. Both the parties are bound to act in terms of the agreement and in the agreement, in unequivocal terms, the liabilities of the complainant and the risk factors involved, are spelt out. 14) Clause 13 conceive, - “The client and the stock broker agree to refer any claims and/or disputes to arbitrator as per the Rules, bylaws and Regulations of the Exchange and Circulars issued thereunder, as may be in force from time to time.” 12 15) The grievance of the complainant is sale was not allowed to operate on 18.1.2008 when it was intra-day transaction of purchase and sale, it was rightly not done as complainant was not authorized for direct dealing of sale and consequently, the computer indicated - “Exposure not available”. I find from the record that it is not for the first time that on 18.1.2008 the complainant got such indication, but it was even in December, 2007 when he acted in similar manner contrary to the terms of the agreement, he was faced with the same brunt. Thus, Complainant’s grievance of non-providing direct access was not shocking as he knew his limits of operation. The contention of the complainant that not allowing him to sell the shares on that particular day by itself amount to cheating, in the fact situation, is a eyewash to pursue criminal prosecution to create pressure and cloak for civil liability. 16) The complainant, as stated earlier, has approached to Securities Exchange Board of India (for short, SEBI) by his letter dated 21.4.2008. 13 The matter has been dealt with at the level of National Stock Exchange (NSE), who by their letter dated 7.8.2008, on hearing both sides informed, to pursue arbitration mechanism, which is quasi-judicial process for redressal of complaint between Investor and the Trading member or the sub-broker. The complainant was advised to opt for such mechanism. But the complainant did not adhere to that system. 17) Reading the complaint as a whole, I find that no such eventuality is carved out by the complainant, enabling him and the learned Chief Judicial Magistrate to issue process against the Directors of the Company. 18) The ingredients and provisions of Sections 406, 408, 420, 471 are as under - “406. Punishment for criminal breach of trust - Whoever commits criminal breach of trust shall be punished with 14 imprisonment of either description for a term which may extend to three years, or with fine, or with both. ” “408. Criminal breach of trust by clerk or servant - Whoever, being clerk or servant or employed as a clerk or servant, and being in any manner entrusted in such capacity with property, or with any dominion over property, commits criminal breach of trust in respect of that property, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. ” “420. Cheating and dishonestly inducing delivery of property - Whoever cheats and thereby dishonestly induces the person deceived to deliver 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 15 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. ” “471. Using as genuine a forged document -Whoever fraudulently or dishonestly uses as genuine any document which he knows or has reason to believe to be a forged document, shall be punished in the same manner as if he had forged such document. ” 19) One of the contentions raised was about selling the shares without any authority or reason. However, this is no so. That, in-built agreement at clause 9 thereof permits the share broker to liquidate the shares or securities for recovery. Consequently, such liquidation, at the behest of the company, like Glob Capital Market Ltd., will not by itself be contrary to the terms or will not attract penal provisions. 16 20) One of the submissions canvassed was of suppression of facts as the petitioner in Criminal Application No.1185/2009, had approached the learned Chief Judicial Magistrate on 2nd April, 2009, for discharge by application and present petition is tendered on 8.4.2009. Paragraph 6 of the petition solemnly indicates that there is no such identical petition pending or filed. I quite see that the discharge application is subsequently not pressed by endorsing on it on 16.4.2009. However, the fact remains there was such discharge application moved though not signed by accused no.7, or 8, but the power was signed by accused no.8 alone. This discharge application by virtue of subsequent development was withdrawn. 21) In the matter of M/s Prestige Lights India Ltd. Vs. State Bank of India, reported in 2007 (8) SCC 449, in paragraph 33, thereof, the Hon’ble Lordships have observed - “33. It is thus clear that though the appellant- Company had approached the High Court 17 under Article 226 of the Constitution, it had not candidly stated all the facts to the Court. The High Court is exercising discretionary and extraordinary jurisdiction under Article 226 of the Constitution. Over and above, a Court of Law is also a Court of Equity. It is, therefore, of utmost necessity that when a party approaches a High Court, he must place all the facts before the Court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the Writ Court may refuse to entertain the petition and dismiss it without entering into merits of the matter.” 22) As stated above, paragraph 6 of the petition is as under - “6.The respondent no.1 further alleged that UNICON Sovereign and Globe Capital Market Company Office bearers have thus in 18 collusion of each other and in order to have wrongful gain induced me to invest the money in share deposits and thereby committed the offence of criminal breach of trust, cheating, forgery etc. The respondent no.1 alleged that he sustained loss of Rs.57,992.50 in sale of shares of ABAN OFFSHORE as his order of sale of share was not booked and channelized by assigning false and incorrect reason exhibited on the computed as “Exposure not available”. The respondent no. 1 further alleged that, he made complaint to SEBI however, in vain. A complaint was also made to Zilla Peth Police Station, however, the police failed to take cognizance and hence the above said private complaint case is filed in the court of learned CJM, Jalgaon with a prayer to prosecute and deal with the accused persons for the above said offences.” 19 23) Learned Counsel representing Global Capital Market Ltd. (Applicants in Criminal Application No. 1185/2009)/ original accused nos. 7 and 8, informs, that as the petition came to be filed before this Court by Unicon Securities on 25th March, 2009, accused nos. 7 and 8 approached the Counsel and consequently the petition was drafted, verified by the local authority of accused nos. 7 and 8 on 8.4.2009 and it came to be filed. There was no reason for the petitioners/applicants to suppress the fact of filing of earlier application dated 2.4.2009 with any oblique motives and having learnt of defect inadvertently making such application in terms of Section 245 (2) Cr.P.C., on instructions, the advocate representing the accused, had not pressed the application, consequent upon which the learned CJM Jalgaon made an endorsement on 16.4.2009 that the application for discharge is not pressed and it be disposed of. 24) Though filing application before CJM and subsequent in this Court needs, to be 20 deprecated, however, in the light of explanation offered and there is no deliberate intention to sway away with the proceedings or to take benefit at two Forums. The application is not pressed on 16.4.2009, while the first order of this Court came to be passed on 28th April, 2009. The mistake, will not germinate to rout the present petition. It is not a vilification for any gains, after 16th April, 2009. 25) The Counsel for the complainant placed reliance to the Judgment of the Apex court in the matter of Ravindra Kumar Madhanlal Goenka & Anr. Vs. M/s Rugmini Ram Raghav Spinners P.Ltd., reported in 2009 AIR SCW 3211.; to the judgment in the matter of Mahesh Choudhary Vs. State of Rajasthan and Anr. reported in 2009 AIR SCW 2449; and to the judgment of the Apex Court in the matter of State of Punjab & Ors. Vs. Inder Mohan Chopra & Ors. reported in 2009 AIR SCW 1521. These authorities deal with the inherent powers of the Court in terms of Section 482 of Cr.P.C. The powers under Section 482 Cr.P.C. are to be 21 exercised only if the complaint does not disclose any offence or is frivolous, vexatious or oppressive. 26) In the matter of Mahesh Choudhary (cited supra), the Hon’ble Lordships have observed in paragraphs nos. 13 and 14 are under : “13. The principle providing for exercise of the power by a High Court under Section 482 of the Code of Criminal Procedure to quash a criminal proceeding is well known. The court shall ordinarily exercise the said jurisdiction, inter alia, in the event the allegations contained in the FIR or the Complaint Petition even if on face value are taken to be correct in their entirety, does not disclose commission of an offence. 14. It is also well settled that save and except very exceptional circumstances, the court would not look to any document relied upon by the 22 accused in support of his defence. Although allegations contained in the complaint petition may disclose a civil dispute, the same by itself may not be a ground to hold that the criminal proceedings should not be allowed to continue. For the purpose of exercising its jurisdiction, the superior courts are also required to consider as to whether the allegations made in the FIR. or Complaint Petition fulfill the ingredients of the offences alleged against the accused.” 27) The law, relating to exercise of powers and scope of Section 482 Cr.P.C. is indicated in the Judgment of State of Haryana & Ors. Vs. Ch. Bhajan Lal & Ors. reported in AIR 1992 SC 604. The seven categories incorporated therein read as under - “(a) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value 23 and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused; (b) where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R.do not disclose a cognizable offence, justifying an investi- gation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code; (c) where the uncontroverted allegations made in the FIR or 'complaint and the evidence collected in support of the same do not disclose 265 the commission of any offence and make out a case against the accused; (d) 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 24 without an order of a Magistrate as contemplated under Section 155(2) of the Code; (e) 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; (f) 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; (g) where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with 25 an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge. [305D-H; 306A-E] 8.2. In the instant case, the allegations made in the complaint, do clearly constitute a cognizable offence justi- ï7 3 on and this case does not call for the exercise of extraordinary or inherent powers of the High Court to quash the F.I.R. itself.” 28) Section 482 Cr.P.C. demonstrate, it is acceleration of exercise in the following three situations, viz. (i) To give effect to an order under the Code; (ii) To prevent abuse of process of Court; (iii) To otherwise secure the ends of justice. 29) It is well settled, as indicated above, inherent jurisdiction of this court though wide, has to be exercised sparingly, carefully with caution. The Court should not allow the criminal 26 prosecution to be used as an instrument of harassment and humiliation and oppression. 30) In this case, interse agreement between the complainant and the accused provide a specific mechanism of arbitration. There is no element in the transaction, which could attract infraction of penal provisions. The care is taken by the competent authority under SEBI Act, 1992. The member-client agreement makes out several situations in terms of clauses 5, 29 and 34, as under : “5. Without prejudice to the stock broker’s other rights (including the right to refer a matter to arbitration), the stock broker shall be entitled to liquidate/close out all or any of the client’s positions for non-payment of margins or other amounts, outstanding debts, etc. and adjust the proceeds of such liquidation/close out, if any, against the client’s liabilities/obligations. any and all losses and financial charges on account of such liquidation/closing- out shall be charged to and borne by 27 the client.” “29. The CLIENT agrees that the MEMBER shall not be liable or responsible for non-execution of the orders of the CLIENT due to any link/system failure at the CLIENT/MEMBERS/EXCHANGE end.” “34. The Member may at its sole discretion prescribed the payment of Margin in the form of cash instead of securities. The Client accepts to comply with the Member’s requirement of payment of Margin in the form of cash immediately failing which the member may sell, dispose, transfer or deal in any other manner the securities already placed with it as margin or square off all or some of the positions of the Client as it deems fit in its discretion without further reference to the client and any resultant or associated losses that may occur due to such square off/sale shall be borne by the Client, and the Member is hereby fully indemnified and held harmless by the Client in this behalf.” 31) The complainant, as indicated above 28 indeed , has resorted his remedies with three Forums and the prima facie impression generated is having failed as he desired, to make good his loss, he has filed the complaint before the CJM. This appears to be a persecution than legitimate prosecution. The proceedings against the accused/applicants before the CJM, Jalgaon in Criminal Case No. 679/2008 are quashed and set aside. Rule is made absolute in above terms ( K.U.CHANDIWAL ) JUDGE bdv/cran1017.09