V.P. Shrivastava vs Indian Explosives Ltd. & Ors

3.Shorn of unnecessary details, the facts, material for the purpose of disposal of these appeals may be stated thus:

4.On 20th April 1992, the FCIL's Board of Directors passed a resolution to the effect that the company had become a sick company within the meaning of the Sick Industrial (Special Provision) Companies Act, 1985 (hereinafter referred to as "SICA") and hence a reference should be filed with the Board of Industrial and Financial Reconstruction (hereinafter referred to as "BIFR"). On 6th November 1992, FCIL was declared a "sick company"

5.The complainant -- Indian Explosives Limited (hereinafter referred to as "IEL"), respondent No.1 in these appeals, is engaged in the manufacture and sale of industrial explosives. Ammonium nitrate is a major raw material for the manufacture of explosives, and the same was procured by IEL from FCIL. Some time in the year 2001, FCIL entered into a tripartite agreement 2 with M/s Bharat Coking Coal Limited (hereinafter referred to as "BCCL") and IEL. As per the arrangement under the agreement, it was agreed that FCIL would supply ammonium nitrate to IEL and against this supply, IEL would supply explosives of an equivalent value to BCCL, which in turn would supply coal of equivalent value to FCIL. It is an undisputed fact that pursuant to the said arrangement ammonium nitrate was supplied by FCIL to IEL for some time. However, due to the breakdown of a synchronized gas compressor and other financial difficulties, FCIL stopped supplies of ammonium nitrate to IEL.

6. On 2nd November 2001, BIFR formed its final opinion recommending winding up of FCIL and forwarded the same to the High Court of Delhi. Some time in December 2001, FCIL aggrieved by the opinion of the BIFR, preferred a statutory appeal under Section 25 of SICA before the Appellate Authority for Industrial and Financial Reconstruction (hereinafter referred to as "AAIFR"). However, on 16th April 2002, the AAIFR dismissed the said appeal and confirmed the order of the BIFR for the winding up of FCIL. In June 2002, FCIL and its employees preferred a Writ Petition (CWP No.3298 of 2002) before the High Court of Delhi challenging the said order of the AAIFR. The writ petition was disposed of by the High Court by its order dated 26th November 2002, whereby it remitted the matter back to BIFR for fresh consideration on the revival of the closed units of FCIL. BIFR, upon 3 receiving the reference, directed the winding up of FCIL, except the JMO unit and on 2nd April 2004 sent its opinion to the High Court for confirmation.

7. During the pendency of the writ petition before the High Court, the Government of India, on 30th July 2002, issued a memorandum for closing of all the units of FCIL except the Sindhri and JMO units. On 10th September 2002, the Government of India issued yet another memorandum directing closure of the Sindhri unit as well. It was further directed that FCIL shall implement Voluntary Suppression Scheme in all its units, and all the employees shall be discharged of their employment. The appellants herein availed of the Voluntary Suppression Scheme and were discharged from the service of FCIL.

8.On 22nd May 2003, IEL instituted a criminal complaint (Case No. 2560/2003) in the court of Chief Metropolitan Magistrate, Kolkata under Sections 406, 420 and 120B of the IPC read with Sections 540 and 542 of the Companies Act, 1956 against both the appellants and Mr. A.K. Mukherjee.

9.Simultaneously, on 25th May 2003, IEL also filed a Title Suit No. 34 of 2003 before the 4th Civil Judge, Alipore for recovery of the outstanding amount of Rs.4,20,41,622/- along with future and pendelite interest against 4 FCIL. IEL, on 23rd January 2004, obtained and was granted permission by the BIFR to continue with the said civil suit subject to the condition that they will not execute the decree in the suit without the permission of the BIFR.

12. That the accused persons had therefore acted in collusion and connivance with each other in order to defraud and cheat the company of the complainant to make entrustment of the said sum of Rs.4,20,41,622/- and or equivalent to BCCL for and on the behalf of the company of the accused persons.

(Emphasis supplied by us)

35.Having come to the conclusion that no prima facie case had been made out against the appellants in respect of the alleged offences under Sections 420 and 406 IPC, the question of alleged conspiracy between the appellants does not arise. Nevertheless, in order to bring home the charge of conspiracy within the ambit of Section 120B of the IPC, it is necessary to establish that there was an agreement between the appellants for doing an unlawful act. The complaint lacks any such substance.

36.The upshot of the foregoing discussion is that no prima facie case is made out against the appellants in respect of alleged offences under Sections 420, 406 and 120B of the IPC and, in our opinion, it was a fit case where the High Court should have exercised its jurisdiction under Section 482 of the Code quashing the complaint against the appellants. 14

37.For the aforegoing reasons, the appeals are allowed; the impugned order is set aside and the order of the Magistrate taking cognizance in Complaint Case No.2560 of 2003 is quashed.

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