M/S Thermax Ltd.& Ors vs K.M.Johny & Ors

Limited Company having its registered office at Chinchwad, Pune and is engaged in the field of energy and environment management. Mr. K.M. Johny-the original complainant, Respondent No. 1 herein, is the proprietor of M/s Rini Engineers and M/s Sherly Engineers, which are small-scale industries undertaking fabrication job work for the appellant Company for the past several years.

(b) On 26.05.1995, the appellant-Company placed three Purchase Orders on Respondent No.1 being Order No. 260062 for designing and manufacturing two numbers of stationary L.P.G. Storage Tanks and Order Nos. 260063 and 260064 were for the supply of consumables and other accessories to the said Tanks. On 01.06.1995, M/s Unique Engineering Services, the Consultants of the appellant Company addressed a letter specifying that they had assessed the companies of the Respondent No. 1 and in their opinion even though they have not made any static bullets and have made quite a few mobile 2 L.P.G. Tanks, however, they were capable of manufacturing the same, but needed design help.

(d) By letter dated 10.08.1995, the Consultants informed the appellant-Company that there was no progress in the work status for the last 45 days and it was observed that Respondent No. 1 was not interested in executing the 3 assignment. In pursuance of the same, a meeting was held between the officials of both the Companies and the Respondent No. 1 agreed to complete the job by all means by 22.09.1995. Since Respondent No. 1 failed to carry out the work as per the Schedule, the appellant-Company, vide letter dated 13.09.1995 cancelled the order placed and it was made effective from 26.05.1995 i.e., from the date when the order was placed.

(e) On 06.05.2000, Respondent No. 1 filed a complaint with the Crime Branch, Pune alleging that they had carried out several fabrication job works for the appellant-Company and huge amount of Rs. 91,95,054/- was outstanding till date despite several requests. In the said complaint, it was further alleged that the appellant-Company also placed Purchase Order being No. 240307 dated 22.03.1993 for Rs. 8,00,000/-

specially for the said project and dispatched the same to the Mehasana site. Respondent No. 1 completed the said job according to schedule and to the satisfaction of the appellant-

Company and also carried out additional work at the site as per their request. It was alleged that balance outstanding for the said work of Rs.2,47,570/- was still receivable from the appellant-Company. An amount of Rs.58,32,000/- towards hiring charges for the machinery is yet to be paid by the appellant-Company. Therefore, a total sum of Rs.68,79,750/-

became due from the appellant-Company to respondent No.1 and the same was not paid till date. Since the Crime Branch did not take any cognizance, the said complaint was filed in the Court of Judicial Magistrate, First Class, Pimpri being RCC No. 12 of 2002 and by order dated 30.05.2002, the Judicial Magistrate issued a direction under Section 156(3) of the Code of Criminal Procedure, 1973 (in short `the Code') and referred the same to Crime Branch, Pune, Respondent No. 2 herein, for investigation. Pursuant to the same, Respondent No. 2 5 registered an offence being C.R. No. 91/2002 and initiated proceedings thereunder against the appellant-Company.

The High Court, vide order dated 18.10.2006, issued rule and interim relief by directing the Assistant Commissioner of Police, Crime Branch-II, Pune city to produce the documents within six weeks in the Court of Judicial Magistrate, Pimpri.

(h) Being aggrieved, the appellant-Company preferred Criminal Writ Petition being No. 1622 of 2007 before the High Court. The High Court, vide order dated 11.01.2008, dismissed the writ petition as misconceived on the ground that the Magistrate has adhered to the directions and has given reasons for coming to his conclusion. Aggrieved by the said decision, the appellant-Company has preferred this appeal before this Court by way of special leave petition.

Respondent No. 1 herein is the complainant and all the appellants herein have been shown as accused. The said criminal complaint was made for the offences under Sections 420, 406 read with 34 IPC. The complaint proceeds that complainant is the Proprietor of M/s Rini Engineers and M/s Sherly Engineers which are small-scale industries doing fabrication job work for various industries, namely, TELCO, Ion Exchange Ltd., etc. The following averments in the complaint are relevant for our consideration:

Therefore, the complainant requested the Accused for the supply of material for the said order and to debit the material cost from the final bill. The accused initially agreed for the same. However, subsequently insisted for payment before delivery of material. Therefore, complainant paid Rs.

c) The accused placed Purchase Order No. 240307 dated 22.03.1993 for Rs. 8,00,000/- for the fabrication and erection of Tower Support Structural etc. for the Mehasana (Gujarat) Project. The accused also represented that they will hire the machinery of the complainant for the said job at the rate of Rs. 2,400/- per day. Believing the same, the complainant purchased brand new machinery of Rs.

5,80,000/- specially for the said project and dispatched the 1 same to Mehasana site. The complainant has completed the said job according to schedule and to the satisfaction of the accused. The complainant also carried out additional work at the site as per the request of the accused. The balance outstanding for the said work is Rs. 2,47,570/- and is still receivable from the accused. The amount towards the hiring charges for the machinery is Rs. 58,32,000/- is yet to be paid by the accused. The accused have not returned the machinery of the complainant till the date and have been using the same for their other jobs also. Thus the accused owe the complainant Rs. 68,79,750/- and the same is not paid till the date.

e) Thereafter the complainant filed complaint dated 06.05.2000 with Crime Branch, Pune against the accused, however, till the date police have not taken any cognizance of the same in spite of the positive opinion of the police prosecutor attached to the Officer Commissioner of Police, Pune. The accused are very influential and the complainant has no other option but to file the present complaint in Hon'ble Court.

10) Before considering the validity or acceptability of the complaint and the consequential action taken by the Judicial Magistrate under Section 156(3) of the Code, let us advert to various decisions on this aspect. In Suresh vs. Mahadevappa Shivappa Danannava & Anr., (2005) 3 SCC 670, this Court, on the ground of delay/laches in filing the complaint and the dispute relates to civil nature finding absence of ingredients of alleged offence of cheating under Section 420 IPC, set aside the order of the Magistrate and that of the High Court. In that case, the alleged agreement to sell was executed on 25.12.1988. A legal notice was issued to the appellant therein on 11.07.1996 calling upon him to execute the sale deed in respect of the premises in question. Thus, the complaint was submitted after a gap of 7= years of splendid silence from the date of the alleged agreement to sell i.e. 25.12.1988. The appellant therein responded to the legal 1 notice dated 11.07.1996 by his reply dated 18.07.1996 through his lawyer specifically denying the alleged agreement and the payment of Rs 1,25,000/- as advance. Nothing was heard thereafter and the complainant after keeping quiet for nearly 3 years filed private complaint under Section 200 of the Code before the IVth Additional CMM, Bangalore on 17.05.1999. The Magistrate, on the same date, directed his office to register the case as PCR and referred the same to the local police for investigation and to submit a report as per Section 156(3) of the Code. A charge-sheet was filed on 04.08.2000 by the police against the appellant-Accused No. 1 only for offence under Section 420 IPC. The Magistrate took cognizance of the alleged offence under Section 190(1)(b) of the Code and issued summons to the accused-appellant therein.

Aggrieved by the aforesaid process order dated 04.08.2000 passed by the Magistrate, the appellant-accused preferred the criminal revision which was dismissed by the High Court. The order of the High Court was under challenge in that appeal. It was contended that as per the averments in the complaint, even as per the police report, no offence is made out against 1 Accused Nos. 2-4 therein. Despite this, the Magistrate issued process against Accused Nos. 2-4 as well which clearly shows the non-application of mind by the Magistrate. It was further pointed out that a perusal of the complaint would only reveal that the allegations as contained in the complaint are of civil nature and do not prima facie disclose commission of alleged criminal offence under Section 420 IPC. After finding that inasmuch as the police has given a clean chit to Accused Nos.

12) In Alpic Finance Ltd. vs. P. Sadasivan & Anr. (2001) 3 SCC 513, this Court highlighted the grounds on which criminal proceedings are to be quashed under Section 482 of the Code and noted the ingredients of Section 420 IPC. In that case, the appellant was a registered company having its head office at Mumbai. It was a non-banking financial institution functioning under the regulations of Reserve Bank of India. It was carrying on business, inter alia, of leasing and hire purchase. The first respondent therein was the Chairman and founder-trustee of a trust by name "Visveswaraya Education Trust". The second respondent was wife of the first respondent, and was also a Trustee. The Trust runs a dental college by name Rajiv Gandhi Dental College. The respondents therein entered into an agreement with the appellant-Company therein whereby the appellant agreed to finance the purchase of 100 hydraulically-operated dental chairs. The total cost of the chairs was around Rs.92,50,000/-. The appellant-Company agreed to finance the 1 respondents for the purchase of these chairs through a lease agreement and as per the agreement, the respondents were liable to pay rentals quarterly. The respondents agreed to pay quarterly a sum of Rs 7,50,000/- for the first year; Rs 12,50,000/- for the second year; Rs 8,00,000/- for the third year and Rs 6,25,000/- for the fourth year. As per the agreement, the appellant-Company, the lessors would have sole and exclusive right, title and interest in the dental chairs supplied till the entire hire-purchase amount was paid. In accordance with the agreement, the appellant made payments to M/s United Medico Dental Equipments and they delivered the dental chairs to the respondents. The appellant-Company alleged that the respondents were not regular in making the payments and committed default in payment of the instalments and that the bank had dishonoured certain cheques issued by the respondents. The appellant-Company also alleged that on physical verification, certain chairs were found missing from the premises of the respondents and thus they have committed cheating and caused misappropriation of the property belonging to the appellant. The appellant-

13) In Anil Mahajan vs. Bhor Industries Ltd. & Anr. , (2005) 10 SCC 228, again, a three-Judge Bench of this Court considered the issuance of process by a Magistrate for an offence under Sections 415, 418 and 420 IPC. This Court also analysed the difference between breach of contract and cheating. The appellant therein was the accused in a complaint filed against him by the respondent-Company for offence under Sections 415, 418 and 420 IPC. Based on the averments in the complaint, the Magistrate, by order dated 25.06.2001, issued the process against the accused. The order of the Magistrate notices that the complainant has filed the documents on record in which the accused promised to pay the amount but has not paid with the intent to deceive the complainant and, therefore, the complainant has made out a case to issue process against the accused under Sections 415, 418 and 420 IPC. The said order of the Magistrate was challenged before the Court of Sessions. The learned Additional Sessions Judge, Pune by order dated 19.10.2001, 2 set aside the order of the Magistrate issuing process. The order of the learned Additional Sessions Judge was set aside by the High Court. This Court, in paragraphs 8 & 9 of the judgment, observed as under:

25) The materials placed further show that notwithstanding the complaint dated 06.05.2000 which was closed by the Crime Branch-II, another complaint on the same facts, was filed by respondent No.1 at the Bhosari Police Station being Javak No. 3142/2001. It is pointed out that the appellant and its officers attended the Bhosari Police Station, thereafter the said complaint was also closed after the facts were placed before the officers of the Bhosari Police Station.

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.

After saying so, allowed the appeal in relation to Appellant No.2 and quashed the order of the Magistrate taking cognizance against appellant No.2 in Complaint No. 476 of 2004.

21) Apart from the fact that the complaint lacks necessary ingredients of Sections 405, 406, 420 read with Section 34 IPC, it is to be noted that the concept of `vicarious liability' is unknown to criminal law. As observed earlier, there is no specific allegation made against any person but the members of the Board and senior executives are joined as the persons looking after the management and business of the appellant-

Company.

26) Apart from these complaints, respondent No.1 once again filed a third complaint at the Commissioner's Office, Crime Branch, Pune being Javak No. 100/2001. The officers of appellant-Company appeared before the Crime Branch, who after perusing the documents and the written statements of appellant No.1, informed the appellants that the matter was closed.

29) The entire analysis of the complaints with reference to the principles enunciated above and the ingredients of Sections 405, 406, 420 read with Section 34 IPC clearly show that there was inordinate delay and laches, the complaint itself is inherently improbable contains the flavour of civil nature and taking note of the closure of earlier three complaints that too after thorough investigation by the police, we are of the view that the Magistrate committed a grave error in calling for a report under Section 156(3) of the Code from the Crime Branch, Pune. In view of those infirmities and in the light of Section 482 of the Code, the High Court ought to have quashed those proceedings to safeguard the rights of the appellants. For these reasons, the order passed by the 3 Judicial Magistrate First Class, Pimpri in CC No. 12 of 2002 on 20.08.2007 and the judgment of the High Court dated 11.01.2008 in Criminal Writ Petition No. 1622 of 2007 are set aside. The complaint filed by Respondent No.1 herein is quashed.

30) For the reasons stated above, the appeal is allowed.

SEPTEMBER 27, 2011.