Case: M/S. Suryalakshmi Cotton Mills Ltd Vs. M/S. Rajvir Industries Ltd.

2. Private parties herein were the Directors of the appellant Company. They were closely related. It had two units. One was known as Mahaboobnagar Unit and the second was a sales depot at Tirupur. The Managing Director of the Company was Shri L.N. Agarwal. He was stationed at Hyderabad. Allegedly, pursuant to negotiations which took place between him on the one hand, and Shri U.K. Agarwal and Ritesh Kumar Agarwal (Accused Nos. 2 and 3) on the other, representations were made that as process for obtaining cheques from the Managing Director had been taking considerable time, it would be advisable that signed blank cheques be left in the hands of accused Nos. 2 and 3 for efficient management of Mahaboobnagar Unit and Tirupur Sales Depot.3. Relying on or on the basis of the said representation, signed blank cheques were handed over to them during the period 2000 A.D. to 2004 A.D. Disputes and differences arose between the parties in 2005 A.D.4. A Company Petition was filed before the Andhra Pradesh High Court. A Scheme for arrangement submitted by the parties was approved, pursuant whereto Mahaboobnagar unit was transferred in favour of Rajvir Industries Limited (Accused No. 1) and Mahaboobnagar Unit to Shri L.N. Agarwal. For the said purpose, the units were demerged and vested in the respondent No. 1. Allegedly, the said Scheme was fully implemented and the respondent Nos. 2 and 3 by a letter dated 22.4.2005 stated out that they would not make demand of any payment in respect of the said Mahaboobnagar Unit.5. L.N. Agarwal allegedly made oral requests to theaccused Nos. 2 and 3 to return the unused signed blank cheques, in his capacity as the Secretary of the appellant Company.6. However, allegedly on the premise that Respondent Nos. 2 and 3 herein entered into a conspiracy to misuse the said cheques; an informal complaint was filed on 20.10.2006 and another complaint was filed on 30.10.2006 with Mahankali Police Station. An endorsement was made therein that there was no role for the police to play at that stage.7. Respondents herein thereafter issued a letter dated 1.10.2004 as also a telegram dated 20.10.2004 stating that as the institutional liability of the respondent No. 1 had crossed 13.25 crores, with a view to repay a part of the said amount, a cheque of a sum of Rs. 6.28 crores had been drawn by the appellant in favour of the first respondent being the amount of difference which had been deposited for collection. In the telegram, it wasHEREBY INFORM YOU THAT AFTER THE DEMERGER M/S. SURYALAKSHMI COTTON MILLS LIMITED AND M/S. RAJVIR INDUSTRIES LIMITED THE SHARES WERE TRANSFERRED FROM MY SIDE AND YOUR SIDE FOR THE DIFFERENCE OF SHARE TRANSFER AMOUNTS AND AS PER OUR PERSONAL UNDERSTANDING TO CLEAR THE DIFFERENCE AMOUNT OF MY FAMILY HOLDING SHARES YOU HAVE ISSUED TWO CHEQUES ONE FOR RS. 3,39,12,086.00 DATED 31.07.2006 VIDE CHEQUE BEARING NO. 444842 AND ANOTHER CHEQUES BEARING NO. 444841 DATED 31.07.2006 FOR AN AMOUNT OF RS. 3,80,77,646-00, BOTH THE CHEQUES WERE DRAWN ON ANDHRA BANK, TIRUPUR BRANCH, TAMILNADU. THEREAFTER YOU HAVE REQUESTED ME ORALLY TO PRESENT THE SAME IN THE 3RD WEEK OF OCTOBER, 2006. AS PER YOUR INSTRUCTIONS I HAVE DEPOSITED THE SAID CHEQUE FOR COLLECTION WITH OUR BANK. PLEASE HONOUR THE SAME.A First Information Report thereafter was lodged by the appellant before the Station House Officer of the Police Station Mahankali, Hyderabad alleging inter alia that the blank signed cheques issued in the year 2001-2002 had been fraudulently used.9. F.I.R. thereafter was sought to be lodged.10. On a purported refusal by the Police Station to register a complaint on the basis thereof, the appellant filed a complaint petition in the Court of XI Additional Chief Metropolitan Magistrate, Secunderabad. Pursuant to the direction issued by the learned Magistrate, a First Information Report was lodged by the officer-in-charge of the Mahankali Police Station.11. Legal notices were, however, issued by the first respondent upon the appellant with regard to dishonour of three cheques bearing No. 444840 dated 31.7.2006 of Rs. 6.28 crores, Cheque No. 444841 dated 31.7.2006 of a sum of Rs. 3,80,77,646/- and Cheque No. 444842 dated 31.07.2006 of an amount of Rs. 3,39,12,086/-.12. On or about 13.11.2006, an application was filed before the High Court for quashing of the said First Information Report. Admittedly, on 6.12.2006, a complaint petition was filed by the first respondent herein purported to be under Section 138 and 141 of the Negotiable Instruments Act against the appellant and also its Chairman and Managing Director. By reason of the impugned judgment, the said quashing application filed by the respondents herein has been allowed.13. A learned Single judge of the High Court, in his judgment, not only considered the ingredients for the offences under Section 406, 420, 460 of the Indian Penal Code but also the background facts leaving to the dispute between the parties so as to enable it to ascertain whether the ingredients thereof stood satisfied or not. It was held that the said complaint petition was filed on the basis whereof the First Information Report was directed to be lodged only to pre-emt the accused from filing a complaint petition under Section 138 of the Negotiable Instruments Act statingeven if the allegations in the complaint are taken as true and correct, at this stage, they do not make out prima facie case of cheating or criminal breach of trust or forgery. Therefore, continuation of proceedings against the present petitioner is nothing but abuse of process of

Court's reasoning:
16. The parameters of jurisdiction of the High Court in exercising its jurisdiction under Section 482 of the Code of Criminal Procedure is now well settled.20. The High Court, in our opinion, should have further taken into consideration the fact that in the event, the defence of the appellant is accepted in the criminal case, it will have no remedy to prosecute the respondents again. To contend that the acquittal of the appellant would have been the springboard for filing a complaint will not be correct. Nobody knows when the criminal case would come to an end. In a given situation, even it may become barred by limitation. It must also be borne in mind that commercial expediencies may lead a person to issue blank cheques. The course of action in the aforementioned situation, in our opinion, which could be taken recourse to was to make an attempt to find out as to whether the complaint petition even if given face value and taken to be correct in its entirety constitutes an offence under Section 420, 406, 463 of the Indian Penal Code or not.However, a case for proceeding against the respondents under Section 406 has, in our opinion, been made out. A cheque being a property, the same was entrusted to the respondents. If the said property has been misappropriated or has been used for a purpose for which the same had not been handed over, a case under Section 406 may be found to have been made out. It may be true that even in a proceeding under Section 138 of the Negotiable Instruments Act, the appellant could raise a defence that the cheques were not meant to be used towards discharge of a lawful liability or a debt, but the same by itself in our opinion would not mean that in an appropriate case, a complaint petition cannot be allowed to be filed. We cannot also lose sight of the fact that the respondents were keeping watch over the matter. As soon as a first information report was lodged, a notice was immediately sent. A quashing application was filed within a few days for the lodging of the first information report. The investigation was not allowed to take place at all. Whereas it would have been the duty of the Court to uphold and/or to protect the personal liberty of an accused in a case; but where the first information report prima facie discloses commission of a cognizable offence, the High Court, ordinarily, shall not have interfered with investigation thereof by the statutory authority.