Criminal Rev. No.1593 of 2011(O&M) 1 In the High Court of Punjab and Haryana at Chandigarh Criminal Rev. No.1593 of 2011(O&M) Date of decision: 25.7.2011 Yashpal and another ......Petitioners Versus State of Punjab .......Respondents CORAM: HON'BLE MRS. JUSTICE SABINA Present: Ms.Sukhpreet Kaur, Advocate, for the petitioners. **** SABINA, J. The petitioners had faced trial under Section 406 of the Indian Penal Code (IPC for short), 1860 in FIR No.68 dated 3.5.2000 registered at police Station Mallanwala. The prosecution case, in brief, was that Punjab State Warehousing Corporation (PSWC for short) had allotted paddy for milling to M/s Sandeep Rice and General Mills, Gulami Wala (Mallanwala) (hereinafter referred to as the Mill ) relating to crop for the year 1998-99. An agreement was executed between the miller and PSWC for milling of 103076 bags of Grade 'A' paddy. The Mill could only do the needful qua 28344 bags of paddy and had Criminal Rev. No.1593 of 2011(O&M) 2 misappropriated the remaining bags of paddy. The trial Court convicted the petitioners under Section 406 IPC vide judgment dated 21.1.2009. Vide order of the even date, the petitioners were sentenced to undergo rigorous imprisonment for a period of two years and to pay a fine of ` 1,000/- each. Appeals preferred by the petitioners against the said judgment and order of conviction and sentence by the trial Court were dismissed by the Sessions Judge vide judgment dated 6.6.2011. Hence, the present petition. After hearing learned counsel for the petitioners, I am of the opinion that the present petition deserves to be dismissed. In Pawan Kumar vs. State of Haryana, 2006(2) RCR (Criminal) 162, this Court has held as under:- “The last contention raised by the counsel for the petitioner that as pursuant to the arbitration clause, in the agreement, arbitration proceedings are pending, the present FIR should be quashed, in my considered opinion, lacks merit. It is no doubt true that an arbitration clause exists and binds parties to seek adjudication of their disputes, before an Arbitrator. The existence of an arbitration clause, in my considered opinion, cannot, in the facts and circumstances of the present case, be construed to be a bar to criminal proceedings. As already held hereinbefore, a given set of facts may give rise to both civil and/or criminal consequences. The existence of one would not necessarily rule out the Criminal Rev. No.1593 of 2011(O&M) 3 other. An arbitration clause enables parties to seek adjudication of the civil consequences of the violation of a contract. An arbitration clause does not envisages adjudication of criminal consequences of an alleged breach of contract. The Arbitrator, would obviously adjudicate the civil consequences of the violation of the the contract and if this violation leads to the commission of a criminal offence, the Arbitrator would have no jurisdiction to investigate or launch prosecution, in respect thereof. The mere existence of an arbitration clause or the pendency of arbitration proceedings would, in my considered not opinion, not oust the jurisdiction of criminal Courts, to consider whether on the facts narrated in the FIR, a criminal offence has been committed. The judgments relied upon by learned counsel for the petitioner namely; Bal Kishan Das vs. P.C.Nayar (Supra), and Kailash Verma Vs. Punsup and another, (supra), in my considered opinion, do not aid the petitioner in any manner. In the aforementioned judgments the Hon'ble Supreme Court has not laid down any absolute proposition of law that the existence of an arbitration clause or the pendency of arbitration proceedings would entail an automatic quashing of an FIR. In Bal Kishan Das (supra), after examining Criminal Rev. No.1593 of 2011(O&M) 4 the facts of the case and specifically taking note of the fact that after registration of a case under Section 409 of the IPC, the Vigilance Department dropped the case and that arbitration proceedings were pending for more than 17 years, the Hon'ble Supreme Court quashed criminal proceedings. This judgment, in my considered opinion, cannot be construed to be a precedent for the proposition that the existence of an arbitration clause bars the filing of a complaint or any FIR for an offence under Sections 406/409 of the IPC etc. The next judgment namely: Kailash Verma's case (supra) also does not set down any absolute proposition that the existence of an arbitration clause would necessarily oust the right of an aggrieved party to lodge an FIR nor does the aforementioned judgment lay down any absolute rule of law that the existence of an arbitration clause would bar criminal proceedings. In Kailash Verm's case (supra), the appellant was discharged by the trial Court. The said order was reversed and the matter remitted to the trial Court. The Supreme Court held that as there was no prima facie evidence of entrustment of paddy or shortage of rice supplied to the Corporation, and the dispute disclosed being civil in nature, the petitioner could not be prosecuted.” In Trisuns Chemical Industry vs. Rajesh Agarwal and Criminal Rev. No.1593 of 2011(O&M) 5 others, JT 1999 (6) SC 618, it was held as under:- “We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arrbitration is an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in Bhajan Lal v. State of Haryana (supra)” Admittedly 103076 bags of paddy were entrusted to the Mill for milling qua crop for the year 1998-99. The agreement was duly executed between the Mill and PSWC. The Mill could only do the needful qua 28344 bags of paddy. Thus, there was shortage of 74732 bags of paddy. Although arbitration proceedings are pending between the parties yet the criminal proceedings could also continue against the petitioners. In these circumstances, the argument raised by learned counsel for the petitioners that in view of the arbitration Criminal Rev. No.1593 of 2011(O&M) 6 clause no criminal proceedings could continue against the petitioners is liable to be rejected. The paddy was allegedly in joint custody of PSWC and the miller in terms of the agreement. However, the paddy was lying in the Mill. Moreover, even it is assumed that some of the officials of PSWC had also some role to play in the misappropriation of paddy, yet the petitioners cannot be absolved qua their liability. The paddy in question was stored in the Mill belonging to the petitioners. The petitioners were liable to mill the entire paddy handed over to them. The petitioners are responsible qua the shortage of bags of paddy and hence, the Courts below had rightly convicted and sentenced the petitioners under Section 406 IPC. No ground for interference by this Court is made out. Accordingly, this petition is dismissed. (SABINA) JUDGE July 25, 2011 anita