Case: M/s Thermax Ltd. &amp; Others Vs. K.M. Johny &amp; Others

3) Brief Facts:(a) M/s Thermax Ltd.-the appellant-Company, is a Public 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 L.P.G. Tanks, however, they were capable of manufacturing the same, but needed design help(c) On 20.06.1995, Respondent No. 1 informed the appellant-Company their inability to procure the material (steel) and requested to supply the same and to deduct the material cost from the final bill. On 04.08.1995, the Respondent No. 1 was provided with the necessary steel of the technical specification. On 06.08.1995, an Engineer of the appellant-Company visited the company of the Respondent No. 1 and submitted a report stating that Respondent No. 1 had carried out certain work using the material purchased from the appellant-Company. It was also pointed out in the report that Respondent No. 1 agreed that they would send the material to M/s Bureau Veritas for checking. The report also stated that Respondent No. 1 had not ordered for consumables and no rectification and drawings had been carried out(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 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/- for fabrication and erection of Tower Support Structural etc., for the Mehasana District Taluka Sanstha (Gujarat) Project and also represented that they will hire the machinery of the Respondent No. 1 for the said job at the rate of Rs. 2,400/- per day and believing the same the Respondent No. 1 allegedly purchased brand new machinery worth Rs. 5,80,000/- 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 registered an offence being C.R. No. 91/2002 and initiated proceedings thereunder against the appellant-Company(f) Aggrieved by the said order, the appellant-Company filed two separate Criminal Writ Petitions being Nos. 209 and 443 of 2003 before the Bombay High Court for quashing and setting aside the order dated 30.05.2002 passed by the Judicial Magistrate, First Class, Pimpri. Vide order dated 10.06.2003, the High Court set aside the order dated 30.05.2002 and remitted the matter back to the Judicial Magistrate for reconsideration of the entire prayer and to decide the case afresh, after giving adequate opportunity of hearing to both the sides. Pursuant to the same, the appellant Company preferred an application dated 16.07.2003 under Section 91 of the Code before the Judicial Magistrate praying that the Assistant Commissioner of Police, Crime Branch, Pune City be directed to produce all the records and proceedings of the complaint dated 06.05.2000. After hearing the respective parties, the Judicial Magistrate, vide order dated 11.08.2003 rejected the said application(g) Aggrieved by the same, the appellant-Company preferred Criminal Application No. 3666 of 2003 before the High Court. 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. Pursuant to the said direction, Shri S.B Oahal, Inspector of Police, submitted a reply dated 12.03.2007 stating that the records and proceedings in respect of Crime Register No. 11 of 2000 were destroyed. Pursuant to the same, the Judicial Magistrate, vide order dated 20.08.2007, called for a report under Section 156(3) of the Code from the Respondent No. 2(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.

Court's reasoning:
7) In order to understand the rival contentions, it is useful to refer the complaint of the Respondent No. 1 dated 30.05.2002 which was made before the Judicial Magistrate, First Class, Pimpri in Regular Criminal Case No. 12 of 2002. 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:a) The complainant has been doing the said business in Maharashtra since last more than 27 years. The accused No. 1 is a company and accused No. 2 is the Chairperson of the Accused No. 1. Accused No. 3 was the Managing Director and the Accused Nos. 4 to 15 was doing service as Manager of Accused No. 1 at the relevant time. The Accused No. 1 has its office at the above address. The Accused Nos. 2 to 15 were looking after the management and business of Accused No. 1b) The complainant was doing fabrication job work for the Accused for several years. The accused placed purchase order No. 260062 dated 24.04.1995 of Rs. 3,20,000/- for designing and manufacturing two numbers stationary LPG Storage Tanks. The complainant has been granted the necessary licenses by the Explosives Department for manufacturing LPG Storage Tanks and LPG Storage Tankers. The said job is a specialized job and requires Best quality material as it involves high risks. At the relevant time, the required material was not available in the market. 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. 1,14,098/- by pay order dated 31.07.1995 drawn on the Sadguru Jangli Maharaj Bank, Chinchwad. The Company issued material after receipt of pay order, vide excise gate Pass No. 1328 and 175713 dated 04.08.1995. The complainant received the material and was surprised to see that the accused had supplied scrap material for the manufacturing of LPG Storage Tanks and same was useless for the job. The complainant immediately contacted the accused and informed about the same. The complainant requested the accused to take the scrap material back and issue genuine material. However, accused refused to do so, the complaint has spent the amount of Rs. 60,000/- for drawing and approval etc. and Rs. 1,14,098/- by pay order for the material to the accused. Thus, the accused have cheated the complainant and there by caused wrongful loss to the complainantc) 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 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 dated) The complainant states that he has carried out several fabrication job for the accused and huge amount of Rs. 91,95,054 is outstanding from the accused till the date. In spite of several requests of the complainant, since the accused are very influential, no body has taken cognizance of the complaints of the complainant. The complainant has also filed complaint dated 15.09.1998 with Pimpri Police Station against the accused but all in vaine) 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 Honble Courtf) The complainant is filing herewith all the relevant documents in support of this complaint and submits that the present case warrants detailed investigation under Section 156(3) of Cr.P.C. There is a separate cell of economic offences at Crime Branch, Pune and it is necessary to send the present complaint to Crime Branch, Pune for investigation under Section 156(3) of Cr.P.C The complainant therefore prays that:i) The complaint be sent to Crime Branch, Pune for investigation u/s 156(3) of Cr.P.C. and;ii) After receipt of the report of investigation, the accused be dealt with severally according to law and punished as per provision of law.16) The principles enunciated from the above-quoted decisions clearly show that for proceedings under Section 156(3) of the Code, the complaint must disclose relevant material ingredients of Sections 405, 406, 420 read with Section 34 IPC. If there is a flavour of civil nature, the same cannot be agitated in the form of criminal proceeding. If there is huge delay and in order to avoid the period of limitation, it cannot be resorted to a criminal proceeding.It is seen from the materials placed that three complaints containing similar allegations have been investigated previously and all were closed as the alleged claim was found to be of civil nature. In those circumstances, it did not lie for Respondent No.1-the complainant to approach the Magistrate with the same subject Complaint. Inasmuch as the dispute arose out of a contract and a constituted remedy is only before a Civil Court, the Magistrate ought to have appreciated that Respondent No.1 was attempting to use the machinery of the criminal courts for private gains and for exerting unjust, undue and unwarranted pressure on the appellants in order to fulfill his illegal demands and extract undeserving monetary gains from them18) The Courts below failed to appreciate that Ex. 61 is a reply filed by the Crime Branch-II and Ex. 63 is the statement of Shri V.B. Kadam, which categorically stated that the complaint preferred by Respondent No.1 registered at Crime Register No. 11/2000 was filed as being civil in nature. Even if we accept that the records were destroyed and notwithstanding such destruction, it was a matter of record that the complaint preferred by Respondent No.1 was indeed investigated and categorized as civil in nature. This aspect has not been considered either by the Magistrate or by the High Court19) It is settled law that the essential ingredients for an offence under Section 420, which we have already extracted, is that there has to be dishonest intention to deceive another person. We have already quoted the relevant allegations in the complaint and perusal of the same clearly shows that no such dishonest intention can be seen or even inferred inasmuch as the entire dispute pertains to contractual obligations between the parties. Since the very ingredients of Section 420 are not attracted, the prosecution initiated is wholly untenable. Even if we admit that allegations in the complaint do make out a dispute, still it ought to be considered that the same is merely a breach of contract and the same cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction. Inasmuch as there are number of documents to show that appellant-Company had acted in terms of the agreement and in a bona fide manner, it cannot be said that the act of the appellant-Company amounts to a breach of contract20) Though Respondent No.1 has roped all the appellants in a criminal case without their specific role or participation in the alleged offence with the sole purpose of settling his dispute with appellant-Company by initiating the criminal prosecution, it is pointed out that appellant Nos. 2 to 8 are the Ex-Chairperson, Ex-Directors and Senior Managerial Personnel of appellant No.1-Company, who do not have any personal role in the allegations and claims of Respondent No.1. There is also no specific allegation with regard to their role21) 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.We have already noted that the offence alleged in the criminal complaint filed by respondent No.1 is under Sections 405 and 420 IPC whereunder no specific liability is imposed on the officers of the company, if the alleged offence is by the Company. In the absence of specific details about the same, no person other than appellant No.1-Company can be prosecuted under the alleged complaint23) The Courts below failed to appreciate an important aspect that the complaint came to be filed in the year 2002 when the alleged disputes pertain to the period from 1993- 1995. As rightly pointed out, the Courts below ought to have appreciated that respondent No.1 was trying to circumvent the jurisdiction of the Civil Courts which estopped him from proceeding on account of the law of limitation24) We have already pointed out that respondent No.1 had previously filed three complaints which were concluded after exhaustive enquiry with the respective police authorities. The first complaint was on 06.05.2000 being Javak No. 974/2000 with the Crime Branch-II, Pune which registered the same in its Criminal Register No. 11/2000. Pursuant thereto, the appellants were summoned and exhaustive enquiry was conducted by the Crime Branch-II and after recording the statements and perusal of documents and after undertaking an extensive interrogation, the Crime Branch-II closed the case. The said closure of the case was informed to respondent No.1 by the police authorities by their letter dated 28.07.200025) 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 Station26) Apart from these complaints, respondent No.1 once again filed a third complaint at the Commissioners 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.The said contention is undoubtedly in consonance with the procedure prescribed. However, in view of specific direction of the Division Bench of the High Court by a common order dated 10.06.2003, disposing off the cases by remitting the matter back to the Magistrate for reconsideration of the entire prayer as made by the complainant and to pass fresh orders, after giving adequate opportunity of hearing to both the sides, and decide afresh the application seeking direction under Section 156(3) by giving cogent reasons for coming to such conclusion, the procedure adopted by the Magistrate cannot be faulted with. Though the appellant Company/accused has no right to be heard at this stage in view of the direction of the High Court, no exception be taken to the order of the Magistrate hearing the Complainant and the appellant Company/accused even at the stage of calling for a report under Section 156(3) of the Code29) 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.