Case: M/S. Gic Housing Finance Limited Vs. The State of Maharashtra &amp; Another

2. The Petitioners are inter alia M/s. General Insurance Corporation Finance Limited (M/s. GIC Finance Limited). It is a public limited company incorporated under the provisions of the Indian Companies Act, 1956 and having its corporate office at the address mentioned in the cause title. Petitioner No. 1 is promoted by General Insurance Corporation of India and other insurance companies being M/s. United India Company Limited, M/s. Oriental Insurance Company Limited, M/s. New India Assurance Company Limited etc. Petitioner No. 2 is the managing director and Petitioner No. 3 is the Assistant Vice President. The other Petitioners are the executives and high level officers including Chairman and Managing Directors of theinsurance companies.3. The first Respondent is the State and the second Respondent is the original complainant.4. At the outset, it must be stated that this Petition was not assigned to us and as per our current Roster. It was assigned to a Division Bench presided over by Her Ladyship Honble Mrs. Justice V. K. Tahilramani. However, the record indicates that this Petition could not be taken up by the Bench presided over by Her Ladyship and equally by the other Bench which is presided over by Honble Mr. Justice Ranjit More.5. On a request and submission in writing of the Registrar (JudicialI) dated 15th July, 2015, this Writ Petition was assigned to our Bench by the Honble the Chief Justice.6. Pursuant to such a direction, Respondent No. 2n made repeated requests that this Writ Petition which was placed for hearing and final disposal on our Weekly Board, is not being taken up. He being aand aged about 70 years, he finds it inconvenient to attend the Court frequently. Therefore, we accepted and granted his request and that is how the Writ Petition was placed before us for hearing and final disposal out of turn. Accordingly, it was heard extensively by us on 11th August, 2015 and today we placed it for Judgment.7. The facts and briefly stated in the memo of the Writ Petition are that the second Respondent, along with his wife Norma Louis approached Petitioner No. 1 and requested to advance a housing loan of Rs.4 lacs. That is stated to be for purchasing of a flat/residential property at Mumbai. The application in writing is dated 20th November, 1995. The second Respondent to this Writ Petition beingexecuted all the documents and furnished a guarantee as well. Accordingly, Petitioner No. 1 agreed and sanctioned the loan and issued a letter of offer dated 22nd March, 1996 to that effect. That incorporates several terms and conditions. They were accepted by Respondent No. 2 and his wife and that is how their signatures were subscribed thereto. Thereafter, the second Respondent and his wife issued a letter dated 3rd April, 1996 to theof Assurances, Mumbai with a request to handover the original agreement for sale dated 15th November, 1995 executed with M/s. Laxmi Corporation for purchase of the flat in order to create a equitable mortgage of the flat. That is how the security interest was created and the asset is termed as a secured asset by the Petitioners. The further documents and receipts acknowledge the receipt of the housing loan.8. According to the Petitioners, there was a default committed in the payment of the housing loan. Therefore, demand was raised and in writing. There was an offer, which was made on 27th September, 2005 by Respondents to pay a sum of Rs.1,32,962/in full and final settlement of the loan liability. The request was made to accept this proposal, but there is a correspondence, namely, reply by Petitioner No. 1 dated 27th October, 2005 and thereafter, there are further letters.9. The Petitioners have pointed out that there was no settlement and as the second Respondent and his wife failed to make the payment, a notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the SARFAESI Act) came to be issued and that was duly served. Thereafter, there was a demand notice by the Petitioners, through their Advocates. The second Respondent replied to this letter on 22nd November, 2005, whereafter also there was a further letter on 4th January, 2006. This correspondence continued, but in the meanwhile, the Petitioners stated that Respondent No. 2 approached the Court of Metropolitan Magistrate, namely, Additional Chief Metropolitan Magistrate, 37th Court, Esplanade, Mumbai and filed a private complaint alleging offences punishable under sections 409, 418, 420 read with section 34 of the Indian Penal Code. A copy of this complaint is at Annexure Q to this Writ Petition from pages 85 to 97 of the paper book. The Petitioners also state that initially this complaint was not entertained and an order was passed thereon on 13th December, 2005, copy of which is at page 98 of the paper book. Thereafter Respondent No. 2 preferred Criminal Revision Application No. 1723 of 2005 in the Sessions Court.10. However, the Second Respondent also filed a criminal complaint on 5th January, 2006 being C. C. No. 2/M/2006 before the learned Additional Chief Metropolitan Magistrate, Esplanade Mumbai alleging offence punishable under section 500 read with section 34 of the Indian Penal Code.11. Even on this complaint, there is an order passed on 21st February, 2006, copy of which is at Annexure S to the Writ Petition.12. The second Respondent then filed the subject complaint and alleging offences punishable under section 383, 384 and 385 of the Indian Penal Code. The Metropolitan Magistrate, by an order dated 3rd February, 2006, directed the Azad Maidan Police Station to investigate the complaint, by exercising its powers under section 156(3) of the Criminal Procedure Code. The Metropolitan Magistrate therefore and in pursuance of his earlier orders, directed the Azad Maidan Police Station to register a FIR. The order to that effect was passed on 21st February, 2006 and the FIR has been registered on 22nd February, 2006. The order dated 21st February, 2006 and the FIR which has been registered pursuant thereto are sought to be quashed in the present Petition.

Court's reasoning:
21. From a reading of the allegations in the complaint and as a whole, we do not find any offence under section 383 being even prima facie made out. The reliance placed by Mr. Barve on the Judgment of the Honble Supreme Court and on a Judgment of a Division Bench of this Court is therefore accurate. None of the allegations, and which we have referred extensively in order not to leave any room for doubt or a complaint for injustice, would make out the offence of extortion. The first Petitioner was acting in furtherance of a contractual stipulation, whereunder it sanctioned the loan. It is a public sector corporation and rather a public financial institution. It is in the business of advancing and lending moneys. In terms of the contract, it was entitled to call upon the second Respondent and his wife to make payment of the loan amount sanctioned and disbursed. That the liability in that behalf is not disputed is clear from the complainants version. That there were cheques handed over and towards repayment of the loan is further undisputed. That there may have been an understanding or otherwise with regard to the deposit of these cheques and that intimation to the second Respondent/complainant but it is the complainants version that only some of the cheques were deposited without intimation, whereas, at least 7 cheques were deposited with intimation to the complainant. We do not see how by such an act and which is alleged to have been committed, namely of deposit of cheques behind the back of the complainant in order to prosecute the complainant lawfully and for offence punishable under section 138 of the Negotiable Instruments Act can be said to be an act within the meaning of section 383 of the Indian Penal Code. A completely voluntary act of handing over the cheques and in due discharge of a admitted liability of the complainant and his wife is not out of any fear of injury to either. Nor this act of handing over post dated cheques for being deposited in Petitioner No. 1s account is because of dishonest inducement to deliver a valuable security. Similarly, the creation of a equitable mortgage in favour of the Petitioner No. 1 is also in return of a loan facility, duly sanctioned and the amount thereunder disbursed and received by the Respondent No. 2 and his wife. This is also a voluntary and contractual act, prima facie. That the cheques on due presentation were not honoured is apparent from the allegations in the complaint itself. Therefore, there is no question of intentionally putting the complainant or the second Respondent in any fear of any injury. Secondly, by issuance of notice under section 13(2) of the SARFAESI Act, we do not see how the offence of extortion is committed. The legal rights and vesting in the Petitioner No. 1 under the parliamentary statute having been exercised, the offence of extortion is not committed prima facie. Precisely, this was the issue before the Honble Supreme Court and in the case of Mrs. Priyanka Srivastava (supra). One Prakash Kumar Bajaj son of Pradeep Kumar Bajaj had availed housing loan from Punjab National Bank Housing Finance Limited. The loan was taken in the name of Respondent No. 3 and his wife, namely Jyotsna Bajaj. As there was default in payment of the installments, the loan account was treated non performing asset in accordance with the guidelines framed by the competent authorities. Thereafter, the financial institution issued notice to the borrower under section 13(2) of the SARFAESI Act and in pursuance thereof, submitted an application on 5th June, 2007 before the District Magistrate, Varanasi for taking appropriate action under section 13(4) of the SARFAESI Act. Thereafter, the Writ Petition of Respondent No. 3 before the High Court was dismissed with liberty to him to approach the Tribunal under section 17 of the SARFAESI. That is how the complaint came to be filed and against all the officers and managers of the financial institution and the allegation was that the offences punishable under section 163, 193 and 506 of the Indian Penal Code are committed. The criminal complaint was dismissed and a Criminal Revision Application was preferred and the Additional Sessions Judge, Varanasi set aside the order passed and remanded the case to the Trial Court. Then, what is transpired is that the Honble Supreme Court referred to the manner in which the Magistrate proceeded to take cognizance. Once the Honble Supreme Court discussed that part of the controversy, what it has referred to are the proceedings before the Tribunal under the SARFAESI Act. Thereafter, a criminal case was filed and series of them and which are referred to in para 7 of the Judgment of the Honble Supreme Court, pursuant to which FIR No. 298 of 2011 was registered. The FIR and then the allegations therein, the offer of one time settlement are all referred in the Honble Supreme Court Judgment and subsequently what the Honble Supreme Court cautioned is that the powers conferred vide section 156(3) of the Criminal Procedure Code cannot be exercised as a matter of course and mechanically by the Magistrates. They are expected to apply their mind and consider as to whether any offence under the penal Act has been committed for the Court to take note of the same. It is in these circumstances that the reliance that has been placed on paras 24 and 25 of this judgment is appropriate. These paras read as under:24. Regard being had to the aforesaid enunciation of law, it needs to be reiterated that the learned Magistrate has to remain vigilant with regard to the allegations made and the nature of allegations and not to issue directions without proper application of mind. He has also to bear in mind that sending the matter would be conducive to justice and then he may pass the requisite order. The present is a case where the accused persons are serving in high positions in the bank. We are absolutely conscious that the position does not matter, for nobody is above law. But, the learned Magistrate should take note of the allegations in entirety, the date of incident and whether any cognizable case is remotely made out. It is also to be noted that when a borrower of the financial institution covered under the SARFAESI Act, invokes the jurisdiction under Section 156(3) Cr. P. C. and also there is a separate procedure under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, an attitude of more care, caution and circumspection has to be adhered to.25. Issuing a direction stating as per the application to lodge an FIR creates a very unhealthy situation in the society and also reflects the erroneous approach of the learned Magistrate. It also encourages the unscrupulous and unprincipled litigants, like the respondent no. 3, namely, Prakash Kumar Bajaj, to take adventurous steps with courts to bring the financial institutions on their knees. As the factual exposition would reveal, he had prosecuted the earlier authorities and after the matter is dealt with by the High Court in a writ petition recording a settlement, he does not withdraw the criminal case and waits for some kind of situation where he can take vengeance as if he is the emperor of all he surveys. It is interesting to note that during the tenure of the appellant No. 1, who is presently occupying the position ofneither the loan was taken, nor the default was made, nor any action under the SARFAESI Act was taken. However, the action under the SARFAESI Act was taken on the second time at the instance of the present appellant No. 1. We are only stating about the devilish design of the respondent No. 3 to harass the appellants with the sole intent to void the payment of loan. When a citizen avails a loan from a financial institution, it is his obligation to pay back and not play truant or for that matter play possum. As we have noticed, he has been able to do such adventurous acts as he has the embedded conviction that he will not be taken to task because an application under Section 156(3) Cr. P. C. is a simple application to the court for issue of a direction to the investigating agency. We have been apprised that a carbon copy of a document is filed to show the compliance of Section 154(3), indicating it has been sent to the Superintendent of police concerned.22. From a perusal of these paragraphs, it is apparent that by issuance of notice under section 13(2) of the SARFAESI Act, no offence is committed by a public financial institution or a Bank and which can be said to be punishable under the IPC or a penal law. Once issuance of notice is in furtherance of the powers and vested by the statute, then, nothing that is punishable as an offence can be attributed to the public financial institution and its officers.23. In the present case as well, we find that the position is that the second Respondent/complainant has approached a criminal court with a complaint and essentially based on the notice under section 13(2) of the SARFAESI Act and the act of the Petitioner No. 1 in issuing the same. We do not see any offence being committed much less punishable under section 383 of the Indian Penal Code. The notice is not intended to extort money but to recover public funds by exercise of powers under the law enacted by the Parliament and found to be constitutionally valid. In these circumstances, the criminal complaint is a gross abuse of the process of the Court. The learned Magistrate ought to have applied his mind and not mechanically pass an order under section 156(3) of the Criminal Procedure Code. He does not stop there and proceeded further to direct registration of FIR. In his entire order, we do not see that he has adverted to the allegations in the complaint and concluded whether they disclose prima facie commission of any offence. That is how he had to proceed in law. He having not proceeded in this manner, we do not find any justification to sustain his order.24. We are left only to deal with the Judgments and authorities brought to our notice. To be fair to him, even if he is not a practicing Advocate, Respondent No. 2 seems to be familiar with principles of law. He has tried to persuade us in applying the tests laid down in the case of State of Haryana vs. Bhajan Lal and Ors. reported in 1992 SCC Supl. (1) 335. It is precisely these tests that we have applied. It is the further test that though inherent powers have to be sparingly exercised, but they have to be exercised to secure the ends of justice that we have held as above. We do not think that we have deviated from any of the principles that have been delineated and summarised in this case. We have also taken note of the decision relied upon by the complainant to the effect that the powers in this Court are extraordinary in nature and should not be a normal and mechanical exercise. We have applied our mind independently and after referring to the complaint and reading it as a whole and taking all the allegations therein at their face value that we are of the firm opinion that no prima facie case of commission of any offence has been disclosed therein.