Case: Ramesh Dahyalal Shah &amp; Others Vs. The State of Maharashtra Joint Commissioner of Police Economic Offence Wing Craford Market &amp; Others

Appeal bearing No.118 of 2003.33. Thus, it is apparent that respondent No.3 has approached every forum available to him to raise his grievances and after being unsuccessful there, now he is giving the colour of criminal offence to this civil dispute by filing the subject complaint and levelling the same allegations. After realising that the banks are also not supporting him, he has implicated the Consortium of Banks also as accused in the case alongwith the valuers namely the applicants M/s Yardi Prabhu and M/s M.A.Shetty, thereby trying to disrepute and discredit the verification of the machinery conducted by them also. The intention of the respondent No.3, therefore, appears to be to use the police machinery with malafide intention to recover the amounts which he is unable to recover by civil mode. Therefore, it is sheer abuse of the process of law.34. Here is thus a case which is predominantly of civil nature and which has been given the robe of criminal offence that too, after availing civil remedies. Therefore, as held by the Apex Court in the case of State of Haryana and others -vs- Bhajan Lal and otherss 1992 Supp (1) SCC 335, where a criminal proceeding is manifestly attended with malafide intention and/or the proceeding is maliciously instituted with object to serve the oblique purpose of recovering the amount, such proceeding needs to be quashed and set aside. The allegations made in the present complaint, even after taken, as they are, also do not make out ingredients of the criminal offence, though at the most they may attract civil dispute, for which respondent No.3 has already taken recourse to the civil law and therefore, on this count also, complaint needs to be quashed and set aside.35. In this respect, one can safely place reliance on the observations of the Apex Court in the case of Chandran Ratnaswami -vs- K.C. Palanisamy and ors (2013) 6 SCC 740 , relied upon by learned counsel for applicant, wherein it was held that, when the disputes are of civil nature and finally adjudicated by the competent authority, as in the present case, by the Company Law Board and the disputes are arising out of alleged breach of joint venture agreement and when such disputes have been finally resolved by the Court of competent jurisdiction, then it is apparent that complainant wants to manipulate and misuse the process of Court. In this judgment, it was held that, it would be unfair if the applicants are to be tried in such criminal proceeding arising out of the alleged breach of a Joint Venture Agreement. It was further held that the wholesome power under Section 482 of Code of Criminal Procedure entitles the High Court to quash a proceeding when it comes to the conclusion that allowing the proceeding to continue would be abuse of the process of the Court or that the ends of justice require that the proceedings ought to be quashed.36. As a matter of fact in the case in Indian Oil Corpn -vs- NEPC India Ltd and ors, 2006 (3) SCC Cri 736, the Apex Court was pleased to caution about the growing tendency in business circles to convert purely civil disputes into criminal cases. It was observed that:-Any effort to settle civil disputes and claims which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged.37. Learned counsel for applicant has also relied upon the judgment of Honble Supreme Court in the case of V.Y. Jose and anr -vs- State of Gujarat (2009) 3 SCC 78 , wherein the Apex Court was once again pleased to observe that:-Section 482 serves a salutary purpose that a person should not undergo harassment litigation, even though no case has been made out against him. A matter which essentially involves disputes of civil nature, should not be allowed to be subject matter of a criminal offence, the latter being a shortcut of executing a decree which is non-existent.38. As regards the authorities relied upon by learned counsel for respondent No.3, they pertain to different facts and circumstances. For example, in the case of M. Viswanathan -vs- S.K. Tiles and Potteries Private Ltd and ors, (2008) 16 SCC 390 , it was found that the issues raised in the complaint were not adjudicable solely by Civil Court or Company Law Board and hence quashing of the complaint by High Court under Section 482 was not upheld.39. In the latest judgment of Apex Court in the case of Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai Karmur and ors -vs- State of Gujarat and anr, in Criminal Appeal No.1723 of 2017 dated 4th October, 2017; also as it was found that the case involves allegations of extortion, forgery, fabrication of documents, utilization of those documents to effectuate transfers of title before registering authorities and the deprivation of the complainant of his interest in land on the basis of fabricated power of attorney. Hence, it was held that such allegations in the F.I.R., cannot be construed to be of a merely private or civil dispute. They implicate serious offence having a bearing on a vital societal interest and therefore, it was held that the High Court was justified in declining to quash the F.I.R., though the matter was amicably settled between the private parties.40. In the case of State of Maharashtra and ors -vs- Arun Gulab Gawali, (2009) 9 SCC 701 , relied upon by learned counsel for respondent No.3, Court has explained the parameters and ambit of section 482 of the Code of Criminal Procedure, in the light of decision of Apex Court, in case of State of Haryana -vs- Bhajanlal. Applying those very parameters, here in the case we find that allowing prosecution to continue when the dispute is of civil nature and does not disclose commission of cognizable offence, would be an abuse of process of law as the complaint is filed to recover only funds from applicant Ramesh Shah for which respondent No.3 has already filed civil suit.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]27. Thus, a clear finding is arrived at, about the allegations made in the complaint, by the Company Law Board totally ruling out mismanagement of the affairs of the company or any fraudulent intention. It was also held that there was no mismanagement and siphoning of funds. The allegations of illegal alteration of share holding and denial of information to the complainant were also negated.28. It is also pertinent to note that two Summery Suits for recovery of the amounts bearing COMS/188/2016 and COMS/222/2016, respectively, are pending in the Court which are filed by Respondent No.3 Company M/s Tushar Fabrics. The applicants company Denim Private Limited has also filed Summery Suit No.COMSL/257/2016 for recovery of Rs.124 crores towards loss and damages for non lifting of denim by Respondent No.3. Arbitration Petition No. ARBP/262/2017 under Section 14 has also been filed by the applicant Ramesh Shah against Respondent No.3.29. As to the allegations of respondent No.3 made in the complaint that applicant Ramesh Shah hasfor availing loan of Rs.237 crores from Corporation bank and four banks and he did not install the machinery in the plant as per project report, but installed second hand machinery from Gulf Denim Company, which was 18 years old; it is again a matter of record that the applicant M/s Yardi Prabhu Consultants and Valuers Pvt. Ltd., was appointed for the purpose of verification of the same. Thereafter the matter was even referred to the applicant M/s A.V. Shetty and Associates, which was appointed by the Corporation Bank. Both of them have also submitted their project reports negating the allegations made to that effect in the complaint. The Company Law Board has effectively dealt with these allegations in its judgment in paragraph No.77 asIt is a matter of record that after receipt of various complaints from the Petitioners (the present respondent No.3), the consortium of banks passed an order for conducting special audit of the company. In addition, an independent Engineer was deputed to verify the facts of the complaint. However, after verification as per reports, the banks did not find any substance in the complaints of the Petitioners. It has been rightly contended by Mr. Zal Andhyarujina that the Banks normally do not conduct a forensic audit and they, based on the existence financials of the Company, give their report. Further, the engineer deputed by the Banks also only verified the invoice value and did not enter into the investigation as to the correct market value of the machineries. I also agree that no Bank would invite any adverse report to their own project report prepared by their officers during the time, they decide to advance loans to a Company. However, in absence of any corroborative material, the onus of which was on the Petitioners, there is no reason to disbelieve that reports of independent persons which are in favour of the Respondents.(emphasis supplied)30. Thus, as rightly held by the Company Law Board, the banks would not invite any adverse report to their own project report prepared by their officers during the time, they decide to advance loans to a company. However, in absence of any corroborative material, it becomes difficult to disbelieve the reports of these independent persons merely because they are favouring to applicant Ramesh Shah or to infer connivance between them and applicant so as to implead them also along with consortium of banks as accused in the case.31. With regard to the complaint made by respondent No.3 to the Corporation Bank, in this respect, the bank has in its meeting dated 27.3.2014, specifically heldregard to valuation of machineries and end use of the loan amount, it was observed that a Competent LIE i.e. M/s Yardi Prabhu from the panel of Lead Bank, was appointed, who has made six visits to the site from time to time. LIE reports and CAs certificates were duly requisitioned at regular intervals for monitoring of the project. On completion of the project, another LIE i.e. M/s A.V. ShettyAssociates from Lead Banks panel list was also engaged. The fresh valuations have been carried out by M/s A.V. ShettyAssociates and they have already submitted their report wherein the valuation of machinery and the project on the whole have been found to be satisfactory. The report concludes asinspection and verification of the cost of the project based on the data provided by the Company and market information based on primary and secondary research and analysis of the comparative cost estimates of reputed suppliers (domesticinternational) for plant and machinery purchased and installed by the Company the costs incurred by the Company are reasonable and fair and in line with the market norms taking into account the specification/configuration and suitability for the project.Hence the reports furnished by both LIEs are satisfactory.32. As regards the allegations of applicant Ramesh Shah indulging in money laundering or over invoicing and therefore, being black listed for a period of five years and two years respectively, by SEBI, it is pointed out by learned counsel for the applicant Ramesh Shah that the said order of the SEBI has already been set aside on 07.07.2004 by Securities Appellate Board Appellate, Mumbai, in Appeal bearing No.118 of 2003.33. Thus, it is apparent that respondent No.3 has approached every forum available to him to raise his grievances and after being unsuccessful there, now he is giving the colour of criminal offence to this civil dispute by filing the subject complaint and levelling the same allegations. After realising that the banks are also not supporting him, he has implicated the Consortium of Banks also as accused in the case alongwith the valuers namely the applicants M/s Yardi Prabhu and M/s M.A.Shetty, thereby trying to disrepute and discredit the verification of the machinery conducted by them also. The intention of the respondent No.3, therefore, appears to be to use the police machinery with malafide intention to recover the amounts which he is unable to recover by civil mode. Therefore, it is sheer abuse of the process of law.34. Here is thus a case which is predominantly of civil nature and which has been given the robe of criminal offence that too, after availing civil remedies. Therefore, as held by the Apex Court in the case of State of Haryana and othersBhajan Lal and otherss 1992 Supp (1) SCC 335, where a criminal proceeding is manifestly attended with malafide intention and/or the proceeding is maliciously instituted with object to serve the oblique purpose of recovering the amount, such proceeding needs to be quashed and set aside. The allegations made in the present complaint, even after taken, as they are, also do not make out ingredients of the criminal offence, though at the most they may attract civil dispute, for which respondent No.3 has already taken recourse to the civil law and therefore, on this count also, complaint needs to be quashed and set aside.35. In this respect, one can safely place reliance on the observations of the Apex Court in the case of Chandran RatnaswamiK.C. Palanisamy and ors (2013) 6 SCC 740  , relied upon by learned counsel for applicant, wherein it was held that, when the disputes are of civil nature and finally adjudicated by the competent authority, as in the present case, by the Company Law Board and the disputes are arising out of alleged breach of joint venture agreement and when such disputes have been finally resolved by the Court of competent jurisdiction, then it is apparent that complainant wants to manipulate and misuse the process of Court. In this judgment, it was held that, it would be unfair if the applicants are to be tried in such criminal proceeding arising out of the alleged breach of a Joint Venture Agreement. It was further held that the wholesome power under Section 482 of Code of Criminal Procedure entitles the High Court to quash a proceeding when it comes to the conclusion that allowing the proceeding to continue would be abuse of the process of the Court or that the ends of justice require that the proceedings ought to be quashed.36. As a matter of fact in the case in Indian Oil CorpnNEPC India Ltd and ors, 2006 (3) SCC Cri 736, the Apex Court was pleased to caution about the growing tendency in business circles to convert purely civil disputes into criminal cases. It was observedeffort to settle civil disputes and claims which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged.37. Learned counsel for applicant has also relied upon the judgment of Honble Supreme Court in the case of V.Y. Jose and anrState of Gujarat (2009) 3 SCC 78  , wherein the Apex Court was once again pleased to observeAs regards the authorities relied upon by learned counsel for respondent No.3, they pertain to different facts and circumstances. For example, in the case of M. ViswanathanS.K. Tiles and Potteries Private Ltd and ors, (2008) 16 SCC 390  , it was found that the issues raised in the complaint were not adjudicable solely by Civil Court or Company Law Board and hence quashing of the complaint by High Court under Section 482 was not upheld.39. In the latest judgment of Apex Court in the case of Parbatbhai Aahir @ Parbatbhai Bhimsinhbhai Karmur and orsState of Gujarat and anr, in Criminal Appeal No.1723 of 2017 dated 4th October, 2017; also as it was found that the case involves allegations of extortion, forgery, fabrication of documents, utilization of those documents to effectuate transfers of title before registering authorities and the deprivation of the complainant of his interest in land on the basis of fabricated power of attorney. Hence, it was held that such allegations in the F.I.R., cannot be construed to be of a merely private or civil dispute. They implicate serious offence having a bearing on a vital societal interest and therefore, it was held that the High Court was justified in declining to quash the F.I.R., though the matter was amicably settled between the private parties.40. In the case of State of Maharashtra and orsArun Gulab Gawali, (2009) 9 SCC 701  , relied upon by learned counsel for respondent No.3, Court has explained the parameters and ambit of section 482 of the Code of Criminal Procedure, in the light of decision of Apex Court, in case of State of HaryanaBhajanlal. Applying those very parameters, here in the case we find that allowing prosecution to continue when the dispute is of civil nature and does not disclose commission of cognizable offence, would be an abuse of process of law as the complaint is filed to recover only funds from applicant Ramesh Shah for which respondent No.3 has already filed civil suit.