I. PARTIES ARE BOUND BY TERMS OF THE AGREEMENT.

IF
AGREEMENT PERMITS REPOSSESSION OF VEHICLE, THE
FINANCIER HAS A RIGHT OF REPOSSESSION:

Managing Director, Orix Auto Finance (India) Ltd. v. Jagmander Singh, (SC) : Law
Finder Doc Id # 115648

2006(2) ALL MR 68 : 2006(2) ALL MR(SC) 68 : 2006(1) R.C.R.(Civil) 756 :

2006(2) R.C.R.(Criminal) 386 : 2006(1) Apex Criminal 594 : 2006(2) JT
344 : 2006(1) PLR 601 : 2006(2) SCC 598 : 2006(1) PLJ 525 : 2006(1) ISJ
(Banking) 662 : 2006(2) ICC 425 : 2006(2) Scale 297 : 2006(2) SCR 169 :
2006(1) W.L.C. 588 : 2006(2) MLJ 21 : 2006(3) M.L.W. 130 : 2006(1)
Supreme 708 : 2006(2) All WC 1174 : 2006(2) BCR 543 : 2006(2) BC 108 :
2006(1) KLT 814 : 2006(1) WBLR 696 : 2006(3) Cal. H.C.N. 1 : 2006(2)
Andh LD 33 : 2006(1) J.K.J. 55 : 2006(3) J.C.R. 72 : 2006(127) DLT 278 :
2006(39) AIC 90 : 2006(62) ALR 783 : 2007(2) C.P.J. 45 : 2006(1) CTC
670 : 2006(1) Law Herald 680 : 2006(2) RJ 1160 : 2006(2) M.P.W.N. 96 :
2007(2) C.P.C 10 : 2006(1) L.R.C. 197 : 2006(1) Apex Court Judgments (SC)
675

SUPREME COURT OF INDIA

Before :- Arijit Pasayat & S.H. Kapadia, JJ.

Civil Appeal No. 1070 of 2006 (Arising out of S.L.P. (C) No. 22535 of 2004). D/d.
10.2.2006

The Managing Director, Orix Auto Finance (India) Ltd. - Appellant

Versus

Jagmander Singh & Anr. - Respondents

For the Appellant :- P.K. Seth and Sudhir Kumar Gupta, Advocates.

For the Respondents :- S.K. Sabharwal, Ajay Siwach, Pardeep Dahiya and Sandeep
Sharma, Advocates.

Contract Act, 1872, Sections 37, 39 and 51 - Contract Act, 1872, Section 73 -
Vehicle purchased under hirer purchase agreement - Default in payment of
instalment - Financier can re-possess the vehicle if agreement permits for
re-possession - There is no legal impediment on such possession being
taken - Of course, the hirer can avail such statutory remedy as may be
available.

[Para 9]
 JUDGMENT

Arijit Pasayat, J. - Leave granted.

2. Challenge in this appeal is to the order passed by a learned Single Judge of the
Punjab and Haryana High Court dismissing the Civil Revision filed under Section 115
of the Civil Procedure Code, 1908 (in short the 'Code').

3. The background facts in a nutshell are as follows :

Under a Hire Purchase Agreement executed between the appellant

(hereinafter referred to as the 'Financier') and the respondent No. 1
(hereinafter referred to as 'Hirer') possession of truck No. HR-46-C-3689 was
handed over to the hirer subject to compliance of the terms and conditions of
the agreement. As per the terms and conditions stipulated in the agreement,
the hirer was to repay the total financed amount of Rs. 9,24,000/- in 33
monthly instalments of Rs. 28,000/- each. As per the agreement the first
instalment was payable on 25.10.2000 and the last instalment was payable
on 25.6.2003. In case of default in making payment of the monthly
instalment the hirer was liable to pay delay charges. Clause 10 of the
agreement which is relevant for this purpose of this appeal reads as follows :

"10. In case the Hirer shall during the continuance of this Agreement do or
suffer any of the following acts or things, viz. either :

a. fail to pay any of the hiring (rent) instalments or any such monies which
has fallen due within the provisions of this agreement, within or at the
stipulated time, whether demanded or not;

b. die, become insolvent, or compound with its creditors;

c. the Hirer, being a Limited Company, shall pass a resolution for voluntary
winding up or shall have a petition for winding up presented against it or if a
Receiver shall be appointed of its undertaking;

d. pledge or sell or hypothecate or charge or mortgage or let or assign or

attempt to pledge or sell or assign or part with possession of or otherwise
alienate or transfer the vehicle;

e. do or suffer any act or thing whereby or in consequence of which the said

vehicle may be distrained or taken in execution under legal process or by
legal process or by any public authority;

f. fail to keep or cause the vehicle comprehensively insured during the period
of the Agreement;

g. fail to indemnify the Owner, the Insurance premium paid by the Owner,
resulting from the Hirer's failure to keep the insurance effective at any point
of time during the currency of this Hire Agreement.
 h. fail to pay to the Government or any public authority any tax or surcharge
or other levies due in respect of the vehicle;

i. remove the vehicle to another State and get it re-registered there;

j. break or fail to perform or observe any of the conditions on its part herein
contained.

Then, on the occurrence of any such event, the right of the Hirer under this
Agreement shall forthwith stand determined ipso facto without any notice to
the Hirer and all the instalments previously paid by the Hirer shall be
absolutely forfeited by the Owner who shall thereupon be entitled to enter
into any house or place where the said vehicle may then be, remove and
retake possession of the same and to sue for all the instalments due and for
damage for breach of the Agreement and for all the costs of retaking
possession of the said vehicle and all costs occasioned by the Hirer's default."
(Underlined for emphasis)

4. According to the financier there was default in making payment of the monthly
instalments and the hirer was requested to clear the amounts due by several letters.
In spite of several requests/demands the hirer did not pay the amount due and as on
27.8.2002 he was in arrears of Rs. 1,34,000/- on account of monthly instalments
due excluding other charges payable on account of delay in making payment.
Accordingly, the appellant repossessed the vehicle on 27.8.2002. According to the
financier in view of the violation of the terms by the hirer the agreement stood
terminated. Therefore, by registered letter dated 27.8.2002 the financier called upon
the hirer to pay a sum of Rs. 4,27,485/- which was the amount due. The notice
stipulated that the amount was to be paid within 10 days from the date of the receipt
of the letter. The hirer did not make any payment and on the other hand made a
false complaint to the Reserve Bank of India (in short 'RBI'), and filed a civil suit in
the Court of Civil Judge, Senior Division, Sonepat for declaration with consequential
reliefs and permanent injunction along with mandatory injunction. In the said civil
suit the hirer also filed application under Order 39 Rule 1 and 2 read with Section
151 of the Code praying for interim relief. On receipt of the summons, written
statement was filed by the appellant. The matter was taken up 13.9.2002. A prayer
was made for an adjournment of the date as learned counsel for the appellant had
met with an accident. The matter was adjourned for arguments on the said
application on 27.9.2002. But at the same time learned Civil Judge directed the
appellant to release the vehicle subject to deposit of the balance of instalments along
with interest amounting to Rs. 1,61,504/-. The said order was the subject-matter of
challenge in Civil Revision No. 4680/2002. Initially the High Court had granted stay
of the operation of the order. The hirer filed an application for vacation of the order
of stay. By the impugned order the High Court dismissed the Civil Revision upholding
the order passed by the Trial Court.

5. According to learned counsel for the appellant the order passed is clearly
unsustainable. The suit filed was not maintainable. While passing order for release,
the trial Court did not take note of the fact that according to the appellant the
arrears were much higher than the defaulted instalments. It was not considered by
the Trial Court as to how the appellant would recover its dues if the suit was
ultimately dismissed.
6. Learned counsel for the respondent on the other hand submitted that the re-
possession as taken by the appellant was clearly contrary to law. Merely because the
hirer had signed the agreement which permitted re-possession that would not give
arbitrary power to the financier to take possession of the vehicle. It was pointed out
that in several cases different High Courts have deprecated the practices of the
financers taking possession of the financed vehicles.

7. By order dated 16.11.2004 while issuing notice interim stay was granted subject
to the opposite party-respondent depositing Rs. 2,50,000/- with the Registry of this
Court within four weeks without prejudice to the claims involved. Admittedly the
amount has been deposited.

8. So far as the question of re-possession is concerned, it is clearly permissible in

terms of Clause 10 of the Hire purchase agreement referred to above. What
ultimately is to be decided by the Trial Court in the suit is the amount to which the
appellant is entitled to. Learned counsel for the appellant has submitted that without
taking note of the defaulted amount which according to him is in the neighbourhood
of Rs. 10 lakhs, the vehicle was directed to be released on payment of the defaulted
instalments. The said amount has also been deposited. But at the same time it was
imperative for the High Court to ensure that in the event the suit is dismissed, and
the hirer is liable to pay the amount, how the same is secured. It is not disputed that
the vehicle if not used would lose its value. In the peculiar circumstances of the case
we direct that in case the respondent No. 1-hirer pays the appellant a sum of Rs.
1,50,000/- in addition to the amount already deposited within 10 days from today,
the vehicle shall be released. The respondents shall file an undertaking before the
Trial Court that in the event of non-success the vehicle shall be returned to the
financier, unless the Trial Court fixes some other terms. It is made clear that we
have not expressed any opinion on the merits of the case which shall be decided in
accordance with law.

9. Before we part with the case, it is relevant to take note of submission of learned
counsel for the Hirer that in several cases different High Courts have passed orders
regarding the right to re-possess where the High Courts have entertained writ
petitions including writ petitions styled as PIL on the question of right of financiers to
take possession of the vehicle in terms of the agreement. It is stated that directions
have been given to the RBI for framing guidelines in this regard. If it is really so, the
orders prima facie have no legal foundation, as virtually while dealing with writ
petitions subsisting contracts are being re-written. It is still more surprising that
petitions styled as PIL are being entertained in this regard. Essentially these are
matters of contract and unless the party succeeds in showing that the contract is
unconscionable or opposed to public policy the scope of interference in writ petitions
in such contractual matters is practically non-existence. If agreements permit the
financier to take possession of the financed vehicles, there is no legal impediment on
such possession being taken. Of course, the hirer can avail such statutory remedy as
may be available. But mere fact that possession has been taken cannot be a ground
to contend that the hirer is prejudiced. Stand of learned counsel for the respondent
that convenience of the hirer cannot be overlooked and improper seizure cannot be
made. There cannot be any generalisation in such matters. It would depend upon
facts of each case. It would not be therefore proper for the High Courts to lay down
any guideline which would in essence amount to variation of the agreed terms of the
agreement. If any such order has been passed effect of the same shall be considered
 by the concerned High Court in the light of this judgment and appropriate orders
shall be passed.

The appeal is allowed to the aforesaid extent. No orders as to costs.

Appeal allowed.

II. DISPUTE RAISED BY BORROWER IN RELATION TO

REPOSSESSION OF THE VEHICLE BY FINANCIER IS OF CIVIL
NATURE:

Manager, ICICI Bank Ltd. v. Prakash Kaur, (SC) : Law Finder Doc Id # 125945

2007(2) R.C.R.(Criminal) 76 : 2007(1) Recent Apex Judgments (R.A.J.)

810 : 2007(4) JT 39 : 2007 AIR (SC) 1349 : 2007(1) ISJ (Banking) 434 :
2007(3) AICLR 207 : 2007(2) SCC 711 : 2007(3) Scale 507 : 2007(3) SCR
253 : 2007(1) Crimes 407 : 2007 AIR (SCW) 1667 : 2007(2) RajCriC 757 :
2007(2) RLW 1229 : 2007(2) RajCriC 751 : 2007(1) OriLR 472 : 2007(1)
M.L.W. 880 : 2007(3) Air Kar R 128 : 2007(2) Supreme 422 : 2007(2) MLJ
854 : 2007(2) BC 226 : 2007(2) Cri.CC 1 : 2007(2) CalCriLR 315 : 2007(1)
CompL.J. 561 : 2007(2) BankJ 729 : 2007(3) All. LJ 245 : 2007(1) W.L.C.
694 : 2007(1) DCR 754 : 2007(3) Andh LD 79 : 2007(3) J.C.R. 175 : 2007(3)
ADJ 211 : 2007(1) J.K.J. 23 : 2007 Cri. L.R. (SC) 264 : 2007(1) D.R.T.C.
685 : 2007(138) DLT 248 : 2007(136) Comp Cas 327 : 2007(1) Ker L.J.
846 : 2007(2) Cal. H.C.N. 63 : 2007(52) AIC 113 : 2007(67) ALR 179 :
2007(2) L.R.C. 145 : 2007(2) RJ 799 : 2007(2) CTC 334 : 2007(25) LCD
999 : 2007(3) CivilLJ 860 : 2007(1) KHC 894 : 2008(1) BBCJ 136 : 2007(3)
B.L.Jud. 146 : 2007(2) CLR 231 : 2007(36) Orrisa Cri. R. 815 : 2007(1) Ori.
Law Rev. 472 : 2007(2) Apex Court Judgments (SC) 88

SUPREME COURT OF INDIA

Before :- Dr. AR. Lakshmanan and Altamas Kabir, JJ.

Criminal Appeal No. 267 of 2007 (Arising Out of SLP (Crl.) No. 15 of 2007). D/d.
26.2.2007

Manager, ICICI Bank Ltd. - Appellant

Versus
 Prakash Kaur & Ors. - Respondents

For the Appellants :- Harish N. Salve, Mukul Rohatgi, Sr., Advocates, P.S. Shroff,
Tejas Karia, Ms. Misha, Advocates.

For the Respondents :- Manjeet Chawla and Javed Mahmud Rao, Advocates.

IMPORTANT

Hire purchase - Advance of loan by Bank for purchase of Vehicle - Default in

payment of instalments - Bank cannot take possession of Vehicle by hiring
musclemen.

A. Contract Act, Sections 172 and 176 - Indian Penal Code, Section 409, 511
and 420 - Hire purchase - Bank advanced loan for purchase of truck -
Default in payment of instalments by borrower - Bank taking possession of
truck by hiring musclemen - High court directed to register FIR against Bank
- Order of High Court set aside as parties agreed to settle the matter
privately.

[Paras 14 and 15]

Per Altamas Kabir, J. (Dr. A.R. Lakshmanan, J. concurring)

B. Indian Penal Code, Sections 406, 409 and 511 - Hire purchase - Advance
of loan for purchase of vehicle - Default in payment of instalments - Bank
taking possession of vehicle through its recovery agent - Practice of hiring
recovery agents, who are musclemen - Bank should resort to procedure
recognised by law to take possession of vehicles in cases where the
borrower may have committed default in payment of the instalments
instead of taking resort to strong arm tactics.

[Paras 15 and 34]

Per Altamas Kabir, J. (Dr. A.R. Lakshmanan, J. concurring)

C. Indian Penal Code, Section 409, 406 and 511 - Hire purchase - Advance of
loans by Banks for purchase of vehicles etc. - Default in payment of
instalments - Recovery of loans or seizure of vehicles could be done only
through legal means - The Banks cannot employ goondas to take possession
by force - Guidelines for advance and recovery of loans given.

[Para 34]

Case referred :

Ramesh Kumari v. State (N.C.T. of Delhi), 2006(2) RCR(Crl.) 197 : 2006(1) Apex
Criminal 541 (SC) : 2006(1) Crimes 229 (SC).

JUDGMENT
Altamas Kabir, J. - Leave granted.

2. This appeal has been filed by the Manager, I.C.I.C.I. Bank Ltd. against the order
dated 7th December, 2006, passed by the Allahabad High Court in Criminal
Miscellaneous Petition No. 11210/2006 disposing of the petition with a direction upon
the S.S.P. Allahabad, to ensure the registration of a case on the basis of Annexure 7
to the Writ Petition and its investigation by a competent police officer.

3. Before adverting to the subject-matter of the writ petition, it may be pointed out
that in the writ petition, the writ petitioner has chosen to implead as respondents,
not only the Union of India and other police authorities of Uttar Pradesh but also the
President/Chairman/Managing Director of the I.C.I.C.I. Bank, the General Manager,
Loans, I.C.I.C.I. Bank, Branch Sardar Patel Marg, Civil Lines, Allahabad and M/s.
Kartik Associates, Banaras Automobiles, Kodopur, Ram Nagar, Varanasi, through its
authorised Goonda Officers and Goonda Employees and Institutions created against
the law for doing work and persons of the Institutes, Criminals to do work for
I.C.I.C.I. Bank.

4. The subject matter of the writ petition relates to a loan taken by the writ
petitioner from the I.C.I.C.I. Bank, Allahabad Branch for purchase of a truck. It
appears that the writ petitioner defaulted in payment of the instalments and in terms
of the agreement entered into between the writ petitioner and the Bank, the writ
petitioner's truck was taken possession of by the bank authorities by use of force on
13th July, 2006. It also appears that the writ petitioner requested the Chief Manager
(Loans), I.C.I.C.I. Bank, Sardar Patel Marg, Civil Lines, Allahabad, for release of the
truck which was alleged to have been forcibly taken possession of by M/s. Kartik
Associates, acting as the agents of the Bank. The writ petitioner appears to have also
written to the said agents on 25th July, 2006, requesting them to provide details of
the instructions given to them to seize the petitioner's truck.

5. Since the truck was not returned to the writ petitioner, she caused a legal notice
to be served on M/s. Kartik Associates but the same was returned unserved as
having been refused.

6. The writ petitioner contended that the Bank and its officials had systematically
conspired to cheat the writ petitioner by advancing the loan for purchase of the truck
and accordingly wrote to the police authorities on 3rd/4th September, 2006,
requesting them to register the First Information Report of the alleged offences
punishable under Sections 120-B,
400/403/406/409/417/418/419/420/421/422/424/466/467/ 468/469/571 and 511
Indian Penal Code. It was also urged that since no steps had been taken by the
police authorities on the basis of the application dated 3rd/4th September, 2006, the
respondent Nos. 1, 2, 5, 6, 7 & 8, being the Union of India and other officers of the
U.P. Police, had committed offences punishable under Sections
166/167/212/217/218/ 221/120-B Indian Penal Code and Section 13 of the
Prevention of Corruption Act.

7. On the basis of the aforesaid allegations, the writ petitioner, inter alia, prayed for
a direction upon the respondent Nos. 1, 2, 4, 5, 6, 7 & 8 to register a First
Information Report in Civil Lines Police Station, Allahabad, against the respondent
Nos. 9 to 13 and during the period of investigation, to save the losses of the writ
petitioner by recovering the truck along with all the documents relating to the truck
and to hand over the same to the writ petitioner. The writ petitioner also prayed for
a writ of mandamus to direct the respondent Nos. 1 and 3 to cancel the licence of
I.C.I.C.I. Bank and for other ancillary reliefs.

7. On the basis of the aforesaid writ application, the Division Bench of the Allahabad
High Court while disposing of the writ petition passed the following order :-

"The relief sought in this Writ Petition is for issuance of a direction for
Registration of the case against the Respondents.

Heard learned counsel for the petitioner and the learned AGA for the State
and perused the record.

The contention for the learned counsel for the petitioner is that a perusal of
Application dated 03/09/06 (Annexure VII) to the Writ Petition discloses
commission of a cognizable offence. It was obligatory on the part of the police
to have registered the case and to proceed with the investigation but it was
not done. The petitioner is a lady and she has approached this Court for the
relief sought therein and in support of his contention he has relied on
Ramesh Kumari v. State (N.C.T. of Delhi) & Ors., reported in 2006(2)
RCR(Crl.) 197 : 2006(1) Apex Criminal 541 (SC) : 2006(1) Crimes 229
(SC) wherein the Apex Court was pleased to issue direction for registration of
the case.

We have perused the application dated 03.09.2006 which shows the alleged
commission of cognizable offence. Consequently we direct the SSP Allahabad
to ensure the registration of a case on the basis of Annexure-VII to the Writ
Petition and its investigation by a competent police officer.

The Writ Petition stands disposed off accordingly."

8. Appearing for the appellant, Mr. Harish Salve, learned senior advocate with Mr.
Mukul Rohatgi, learned senior advocate, submitted that the disputes between the
parties, if any, were entirely of a civil nature relating to the instalments payable by
the writ petitioner on the loan taken by her from the Bank and accounting of all
payments actually made and there was no element of criminal intent in the entire
transaction. Mr. Salve submitted that while the writ petition had been filed with the
intention of exerting pressure on the Bank and its authorities to release the truck,
the High Court should have also looked into the pleadings and the frame of the writ
petition before passing the impugned order dated 7th December, 2006. A glance at
the pleadings would make it quite clear that the dispute involved was of a purely civil
nature and did not warrant any direction as has been given.

9. However, while make his submissions, Mr. Salve also conveyed the Bank's
willingness to compromise the matter by foregoing the interest which was payable on
the outstanding dues which amounted to Rs. 1,62,917/-. Mr. Salve also submitted
that in the event the writ petitioner had any doubts regarding the payments made by
her and credited to her account, she could sit with the officers of the Bank along with
her agent and verify the accounts and in the event it was found that any payment
made by her had not been credited to her account, she would be entitled to receive
credit for the same.

10. Mr. Salve submitted that if the writ petitioner paid an initial sum of Rs. 50,000/-
(Rupees Fifty thousand) only, the truck could be returned to her and upon final
accounting the balance principal amount found payable by her could be paid off in
suitable instalments.

11. On behalf of the writ petitioner/respondent, it was contended that the amount
said to be due towards principal was highly inflated since according to the writ
petitioner she had defaulted in making payment of only one instalment.

12. Be that as it may, we are inclined to accept Mr. Salve's suggestion and we
accordingly direct that upon deposit of a sum of Rs. 50,000/- (Rupees Fifty
thousand) only, the Bank shall forthwith release to the writ petitioner or her agent
the truck bearing registration No. UP-78-AN-1951 which had been seized from the
writ petitioner's possession. The writ petitioner assisted by her agent, will sit with the
Bank officials for the purpose of reconciling the accounts and in the event it is found
that the writ petitioner had not been given credit for certain payments made by her,
such payments are to be taken into account and the balance principal amount will
then be paid by the writ petitioner-respondent to the Bank in six equal monthly
instalments, the last instalment being for any broken amount, if any. The writ
petitioner-respondent undertakes not to encumber or dispose of the truck till the
final accounting is completed and all dues are cleared. In case of default in payment
of subsequent instalments, if any, the Bank will be entitled to re-possess the vehicle
in accordance with law.

13. The Bank shall forego the interest said to be payable by the writ petitioner and
the writ petitioner will also not be entitled to make any claim on account of any
damage and wear and tear that may have been caused to the writ petitioner's
vehicle while in the custody of the Bank and its officials.

14. The appeal is accordingly allowed and the order impugned in the appeal is set
aside. If any First Information Report has already been registered in terms of the
impugned order, the same shall also stand quashed along with the investigation
commenced thereupon.

15. Before we part with this matter, we wish to make it clear that we do not
appreciate the procedure adopted by the Bank in removing the vehicle from the
possession of the writ petitioner. The practice of hiring recovery agents, who are
musclemen, is deprecated and needs to be discouraged. The Bank should resort to
procedure recognised by law to take possession of vehicles in cases where the
borrower may have committed default in payment of the instalments instead of
taking resort to strong arm tactics.

16. There shall be no order as to costs.

Dr. AR. Lakshmanan, J. - 17. I had the privilege of perusing the judgment
proposed by my learned Brother - Hon'ble Mr. Justice Altamas Kabir. While
respectfully concurring with the conclusion arrived by the learned Judge, I would like
to add the following few paragraphs :-
 1) Regarding the role of Recovery Agents - use of abusive language - due
process of law RBI guidelines.

FACTORS :

18. The issue of Banks employing alternate means of recovery other than by due
process of law i.e., either through Courts, Tribunals, Adalats or Commissions is an
issue that has to be viewed from two angles (1) from the angle of the common man
and (2) from the angle of the bank.

REASONS :

- First of all, the entrance of the multi national banks into the country has
spread the culture of Credit Cards, Loans on an unimaginable level where
rather than the rich, it is the middle class, the lower middle class and the
lower class who are at the receiving end of the bonanzas promised by the
Banks.

- Inadequate information on the Credit Card application, Loan Applications,

Advertisements or even while meeting the bankers in person in respect of the
lending rates and hidden charges, leads to this class of people being lured
into the buying of the Credit Cards or taking of the home loan or education
loan without knowing the ramifications of non-payment and default.

- The first mistake here is most definitely on the part of the bank who does
not believe in educating the masses regarding the promises. Once the credit
card or loan is taken and there appears a default, then the witch-hunt begins.

- Now the bank is the aggressor and the public is the victim. The first step to
recovery of the money due is through the so called RECOVERY/COLLECTION
AGENTS. A very dignified term used for paid recovery agents who are
individual and independent contractors hired by the Banks to trace the
defaulters and to both physically, mentally and emotionally torture and force
them into submitting their dues.

- A man's self respect, stature in society are all immaterial to the agent who
is only primed at recovery. This is the modernised version of Shylock's pound
of flesh. No explanation is given regarding the interest charge and the bank
takes cover under the guise of the holder of the card or loan having signed
the agreement whose fine print is never read or explained to the owner.

- When a harassed man approaches the Court or the police station he is not
armed with a recording phone and finds it difficult to give evidence of the
abuse he has suffered. Here the bank gets away with everything. Young and
Old members of the family threatened on streets, institutions and also at
home at godforsaken hours by these agents who have the full support of their
contractor bank. The stance taken by the bank in any suit alleging such
incidents is that no such agent has been appointed by them or their agents do
 not misbehave in the manner aforesaid and if found guilty the agents have to
bear the cross and the bank gets away scot free.

- Using of the abusive language for recovery is the norm of the day for most
nationalised or multi national bank or non-nationalized bank. Though some
are smart enough to record the abuse and proceed to establish the same
through Court of Law, most of them are unfortunate not to have recourse to
it. Such people form the majority and such litigations are pending in large
volumes before the Civil and Consumer Courts. Again the banks escape
liability since these agents are not salaried employees of the bank and hence
not directly liable for anything.

- Taking it from the angle of the common man the inflow of software money
and high salaries has resulted in uncontrolled expenditure. Rather than utility
it is a fashion to carry a card for it makes a statement depending on the type
of card one carries.

- To maintain ones image one pays the price of utilising the card without
realising that even a single day's delay in payment results in more than 100
to 200 rupees being charged as default and penalty charges, which if
accumulates over a month, results in the charges exceeding the actual
payment due.

- As for loans, when litigation is commenced by the customer against the

bank or an institution, then they refuse to divulge the true statement of
account stating that it will be produced in court. This gives ample scope for
manipulation.

SUGGESTIONS

- Chronic defaulters should mean a default of a maximum of three months if

intermittent payments have been made.

- It is mandatory that the banks be held vicariously liable for such acts of
agents. These agents have to be identified as registered agents of the bank
and should be bought directly under the purview of the RBI.

- It may be useful that in view of the enormous amount of litigation pending

and being filed against the banks that the recovery agents be made
employees of the bank and the bank be held liable directly for all actions of
such employees.

- Also every statement sent by the bank should disclose clearly the rate of
interest and the default interest and penalty charges separately calculated
and added to the amount pending and due by the customer.

- At the very first month of default, the card should automatically be

terminated by the bank to prevent further use/misuse.
 - At the time of issuance of card itself, the issuance letter should contain
every single charge being made, explained in simple terms and the penalty
the customer will bear for such non-payment.

- These agents should be held responsible for every background check done
on the person to whom the card is issued and the defaulter should be made
liable along with the agent. This would ensure that the agent does not source
illegal or fraudulent customer.

- This is dealt with elaborately in the RBI guidelines issued on 21.11.2005 but
which still remains only on paper and is not being followed.

2) HIRE PURCHASE :

FACTORS :

19. Very many banks and more importantly banks like ICICI have extended liberal
credit facilities for purchase of vehicles whether two wheelers or four wheelers, more
the number the targets are achieved. This results in a certain amount of default
cases. The default can be two-fold - (1) genuine and (2) fraudulent. Both, in the case
of genuine and fraudulent the method usually adopted by these institutions is to
engage thug/hooligan/gangster for recovery or the two wheelers or four wheelers.
Many times even notice is not given to them. They seize the vehicles even in public
places deliberately to cause embarrassment. There is no codification till date. This
requires immediate attention. In all the cases of hire purchase, advance cheques for
a period of 36 months or 48 months or 60 months are obtained and since there is no
proper collection process, they not only seize the vehicles but also continue to
present the cheques merely to harass the customers. A recent incident has taken
place when the Recovery Agent had gone and threatened a school going child for the
money due by the father.

Unless we have an effective supervisory system the abuse will continue.

SUGGESTION

20. Most of the non-banking financial institutions adopt the arbitration route for the
purpose of getting a commissioner of the Court appointed for seizing the vehicles.

The most important aspect would be a broad guideline for fixing the targets, whether
they be for lending or for recovery. This would result in a proper balance between
the extreme differences of working conditions between the Multinational Commercial
Banks and Nationalised and Non-nationalized Banks who are doing the very same
credit business with dignity.

3) Agency systems to be abolished

FACTORS

21. Though there are voices raised stating that the agency system should be
abolished, this has to be examined from the view of the bank for whom this system
has proved to be extremely productive in view of chronic and regular defaulters and
customers who have a premeditated intention of cheating the bank. Such people are
identified easily by the agents and produced physically before the bank who resort to
all means including the local police help to force such customers to repay their dues.

REASON

22. The delay in the Courts and the in-effective and corrupt police structure enables
the bank to seek the help of such agencies which proves to be cost effective and less
cumbersome.

SUGGESTION

23. Abolition of the system is not the answer but effective control over the agency by
the respective banks is essential.

- Even though, the Reserve Bank of India Guidelines permit the use of an
Independent Agency, no prescribed qualification or licence is granted.

- If there could be a guideline only licensed recovery agents would be

employed and misuse of the agents as against the borrowers can be
eradicated.

- License also should be granted after the respective agents get through in a
course conducted by the banks.

- In accordance with the RBI Guidelines, in any proven cases the license of
the agent should be cancelled with penal consequences on them.

- This could be the best alternative if the banks do not come forward to
employ their own personnel and depute them for recovery of outstandings.

4) RBI Guidelines

24. The widely published and circulated guidelines dated 21.11.2005 has constituted
a working group on regulatory mechanisms and for fair trade practices.

- It came into effect as of 30th November, 2005 and covers a wide area
pertaining to the rights of the customers and right to privacy, confidentiality,
practice of debt collections, Redressal of grievances and monitoring systems
to be implemented by the banks.

- Pursuant to this certain knowledgeable persons/executives aggrieved by the

agencies behaviour took recourse through the Ombudsman.

- Not many are aware of this forum and the banks continue to be safe.

5) Banking Regulations Act

25. Banking Regulations Act does not, in any way, provide the details of the conduct
of the bank business.

- It only contemplates the registration of a bank, incorporation of a bank and

thereafter puts the bank under the control of RBI.

- While there are guidelines both for lending and recovery which contemplates
that no use of force or abuse is used in recovery proceedings, in the absence
of an effective overseeing body, these abuses continues.

- Since every bank should hold a license issued to carry on the banking
business in India by the RBI in accordance with the conditions imposed by the
RBI, if and when both nationalised and MNB's violate any of the rules and
regulations consistently over a period of time, then strictures ought to be
imposed on such digressing banks to curb their high handed activities and to
make them answerable to the general public.

- Only this would reinstate the confidence of the masses in the banking
system who are already burdened with the population of over 60 years of age
having lost tremendously on the lowering of the interest rates.

- The banking procedures should be people friendly at the same time, strict in
its enforcement and educative enough to guide the public on the benefits of
prudent banking and savings and at the same time, enlighten them on the
pitfalls of borrowing or taking credit from institutions for various purposes,
way beyond their means.

CONCLUSION :

26. On an overall assessment of the system presently existing in India, the Multi
National Banks score over the nationalised banks in terms of connectivity and ease in
functioning, since they are highly automated and efficient. The staff too is well
trained and well paid also. The disadvantage here is that the more the pay, the
greater the pressure. Every facility is provided but work is extracted to the maximum
irrespective of the age or personal circumstances. In a nationalised bank, since there
is no fear of immediate removal, the attitude of the staff is tolerant. No effort is
made to go a little more to help the masses. Burden is shifted easily at the lower
level. The middle management and higher management are under tremendous
pressure, since they are to achieve targets on par with the Multi National Banks.
Though there is job security and comfort in pension, there is no answerability. This
leads to a recalcitrant attitude and apathy.

As a conclusion, one can state that though efficiency is necessary, it should not be
attained under pressure and this situation would only improve if answerability is
made the prime criteria in both the sectors.

ADDITIONAL INPUTS

27. Considering the difficulties of the customers as well as banks, the concept to be
developed is to create distinct and separate department for recovery. This should be
manned by persons who will not resort to violence or force when they are in the
process of recovery of the dues.

28. While the fraudulent defaulters can be dealt with by taking the Police help for
such action, it is only when law is taken into the hands of the so called recovery
agents, who are appointed on contract basis, the issue gets aggravated. A separate
wing, wherein appropriate training is given in accordance with RBI guidelines would
facilitate the bank in its recovery process and also would provide more
responsibilities to the persons so engaged.

29. Yet another suggestion would be that of loans whether they are Personal Loans
or Credit Cards or Housing Loan with less than Rs. 10 lakhs exposure, can be
referred to Lok Adalat which can be specially created for resolving the issues
between the banks and the borrowers. In fact, the Lok Adalat should be used as an
effective machinery to resolve the issues and concentrate with reference to keeping
the fine balance between the Banks and Borrowers.

30. If the Agency System is inescapable, then the Agency must be coupled with a
license issued after conducting examination. Appropriate training should be given to
the agents who should have requisite qualification and maturity to handle delicate
and sensitive situation. Merely because the Agency System is convenient to the
banks, and has been approved by RBI, it should not lead to lawlessness and conduct
resulting in challenge to rule of law.

31. While performance of the banks are always co-related with reference to its
growth, its assets utilisation and finally profit in the balance sheet, that and that
alone cannot be relied upon, with reference to a country like India, where there is
enormous disparity in respect of various sections of the society. These are all
positive steps that would bring in the over all balance in the working of all these
institutions.

32. Whether it is a bank, which concentrate on higher segment of banking or it is a

bank which concentrate upon middle class, lower middle class and such other
segment of the Indian Public who look to and requires the banking comfort, it is not
mere question of lending the money that matters, but also the consequences
thereafter. The social responsibility is larger than the banks profit and growth ratio
alone.

33. Keeping in mind the social responsibility, it is absolutely necessary to appoint a

Special Committee who will look into the disparity in working conditions, at least
upto the managerial level and make such recommendations to the RBI and Union of
India for all remedial actions.

34. In conclusion, we say that we are governed by a rule of law in the country. The
recovery of loans or seizure of vehicles could be done only through legal means. The
Banks cannot employ goondas to take possession by force.

.
III. NO CRIMINAL OFFENCE IN CASE FINANCIER SEIZES THE
VEHICLE:

Anup Sarmah v. Bhola Nath Sharma (SC) : Law Finder Doc Id # 400785

2012(6) Recent Apex Judgments (R.A.J.) 141 : 2012(4) R.C.R.(Civil) 1002 :

2013(1) R.C.R.(Criminal) 62 : 2013(1) CalCriLR 605 : 2012(120) AIC 223 :
2013(1) CivCC 160 : 2013(80) ACrC 220 : 2013(1) Cri.CC 103 : 2013(1)
SCC(Cri) 518 : 2013(1) Law Herald (SC) 160 : 2013(1) SCC 400 : 2012(11)
SCR 360 : 2012(11) Scale 1 : 2013(2) J.K.J. 88 : 2012(11) JT 79 : 2013 ALL
MR(Cri) 789 : 2013(2) MPHT 1 : 2012(4) C.P.J. 3 : 2012(4) ACC 697 :
2013(1) C.P.C 202 : 2012(8) SLT 491 : 2012(3) Apex Court Judgments (SC)
700

SUPREME COURT OF INDIA

Before :- B.S. Chauhan and Fakkir Mohamed Ibrahim Kalifulla, JJ.

Special Leave Petition (Crl.) No. 8907 of 2009. D/d. 30.10.2012.

Anup Sarmah - Petitioner

Versus

Bhola Nath Sharma and others - Respondents

For the Appellant :- Gopal Singh, Rituraj Biswas and Ms. Sujaya Bardhan, Advocates.

For the Respondent :- Naresh Kaushik, Sanjeev Kumar Bhardwaj, Mrs. Vivya Nagpal
and Mrs. Lalita Kaushik, Advocates.

Indian Penal Code, Sections 379, 395, 465 and 471 - Hire Purchase Act,
1972, Sections 13 and 14 - Hire-purchase - Vehicle purchased by petitioner
on hire-purchase - Default in payment of instalments - Financier seized the
vehicle - No offence made out - Held :-

(i) In an agreement of hire purchase, the purchaser remains merely a

trustee/bailee on behalf of the financier/financial institution and ownership
remains with the latter - Thus, in case the vehicle is seized by the financier,
no criminal action can be taken against him as he is repossessing the goods
owned by him. AIR 1979 SC 850 : 1996(7) SCC 212 : 2001(4) RCR (Crl.)
192, relied.

[Para 8]

Cases Referred :
Charanjit Singh Chadha v. Sudhir Mehra, 2001(4) R.C.R.(Criminal) 192 : (2001)7
SCC 417.

Instalment Supply (Private) Ltd. v. Union of India, AIR 1962 SC 53.

K.A. Mathai alias Babu v. Kora Bibbikutty, (1996)7 SCC 212.

K.L. Johar & Co. v. The Deputy Commercial Tax Officer, Coimbtore III, AIR 1965 SC
1082.

M/s. Damodar Valley Corporation v. The State of Bihar, AIR 1961 SC 440.

Sundaram Finance Ltd. v. State of Kerala, AIR 1966 SC 1178.

Trilok Singh v. Satya Deo Tripathi, AIR 1979 SC 850

ORDER

1. This petition has been filed against the impugned judgment and order dated
22.6.2009 passed by the High Court of Assam at Gauhati in Criminal Revision No.
156 of 2009 rejecting the case of the petitioner against the respondents that they
had forcibly taken the custody of the vehicle purchased by the petitioner on hire-
purchase from them. The court has quashed the criminal proceedings against the
respondents.

2. Learned counsel for the petitioner has submitted that respondents-financier had
forcibly taken away the vehicle financed by them and illegally deprived the petitioner
from its lawful possession and thus, committed a crime. The complaint filed by the
petitioner had been entertained by the Judicial Magistrate (Ist Class), Gauhati
(Assam) in Complaint Case No. 608 of 2009, even directing the interim custody of
the vehicle (Maruti Zen) be given to the petitioner vide order dated 17.3.2009. The
High Court has wrongly quashed the criminal proceedings pending before the learned
Magistrate.

3. On the contrary, learned counsel appearing on behalf of the respondents, has

submitted that under the hire-purchase agreement, the financier remains the owner
of the vehicle till the entire payment is made and, therefore, possession taken by the
financier for non-payment of instalments by the petitioner could not be held an
offence. Thus, the High Court has rightly quashed the proceedings and no
interference is required.

4. We have considered the rival submissions raised by the learned counsel for the
parties and perused the records.

5. In Trilok Singh & Ors. v. Satya Deo Tripathi, AIR 1979 SC 850, this Court
examined the similar case wherein the truck had been taken in possession by the
financier in terms of hire purchase agreement, as there was a default in making the
payment of instalments. A criminal case had been lodged against the financier under
Sections 395, 468, 465, 471, 12B/34, I.P.C. The Court refused to exercise its power
under Section 482, Criminal Procedure Code and did not quash the criminal
proceedings on the ground that the financier had committed an offence. However,
reversing the said judgment, this Court held that proceedings initiated were clearly
an abuse of process of the Court. The dispute involved was purely of civil nature,
even if the allegations made by the complainant were substantially correct. Under
the hire purchase agreement, the financier had made the payment of huge money
and he was in fact the owner of the vehicle. The terms and conditions incorporated in
the agreement gave rise in case of dispute only to civil rights and in such a case, the
Civil Court must decide as what was the meaning of those terms and conditions.

6. In K.A. Mathai alias Babu & Anr. v. Kora Bibbikutty & Anr., (1996)7 SCC
212, this Court had taken a similar view holding that in case of default to make
payment of instalments financier had a right to resume possession even if the hire
purchase agreement does not contain a clause of resumption of possession for the
reason that such a condition is to be read in the agreement. In such an eventuality,
it cannot be held that the financier had committed an offence of theft and that too,
with the requisite mens rea and requisite dishonest intention. The assertions of
rights and obligations accruing to the parties under the hire purchase agreement
wipes out any dishonest pretence in that regard from which it cannot be inferred that
financier had resumed the possession of the vehicle with a guilty intention.

7. In Charanjit Singh Chadha & Ors. v. Sudhir Mehra, 2001(4) R.C.R.

(Criminal) 192 : (2001)7 SCC 417, this Court held that recovery of possession of
the vehicle by financier-owner as per terms of the hire purchase agreement, does
not amount to a criminal offence. Such an agreement is an executory contract of sale
conferring no right in rem on the hirer until the transfer of the property to him has
been fulfilled and in case the default is committed by the hirer and possession of the
vehicle is resumed by the financier, it does not constitute any offence for the reason
that such a case/dispute is required to be resolved on the basis of terms
incorporated in the agreement. The Court elaborately dealt with the nature of the
hire purchase agreement observing that in a case of mere contract of hiring, it is a
contract of bailment which does not create a title in the bailee. However, there may
be variations in the terms and conditions of the agreement as created between the
parties and the rights of the parties have to be determined on the basis of the said
agreement. The Court further held that in such a contract, element of bailment and
element of sale are involved in the sense that it contemplates an eventual sale. The
element of sale fructifies when the option is exercised by the intending purchaser
after fulfilling the terms of the agreement. When all the terms of the agreement are
satisfied and option is exercised a sale takes place of the goods which till then had
been hired. While deciding the said case, this Court placed reliance upon its earlier
judgments in M/s. Damodar Valley Corporation v. The State of Bihar, AIR
1961 SC 440; Instalment Supply (Private) Ltd. & Anr. v. Union of India &
Ors., AIR 1962 SC 53; K.L. Johar & Co. v. The Deputy Commercial Tax
Officer, Coimbtore III, AIR 1965 SC 1082; and Sundaram Finance Ltd. v.
State of Kerala & Anr., AIR 1966 SC 1178.

8. In view of the above, the law can be summarised that in an agreement of hire
purchase, the purchaser remains merely a trustee/bailee on behalf of the
financier/financial institution and ownership remains with the latter. Thus, in case the
vehicle is seized by the financier, no criminal action can be taken against him as he
is re-possessing the goods owned by him.
9. If the case is examined in the light of the aforesaid settled legal proposition, we
do not see any cogent reason to interfere with the impugned judgment and order.
The petition lacks merit and, accordingly, dismissed.

Petition dismissed.

Trilok Singh v. Satya Deo Tripathi, (SC) : Law Finder Doc Id # 104817

1979 AIR (SC) 850 : 1979(4) SCC 396 : 1979 Cri. L.R. (SC) 86 : 1979 UJ
(SC) 306 : 1979(6) CriLT 117 : 1979(3) MahLR 89 : 1979 All WC 465 : 1980
Cri. App. R (SC) 338 : 1979 All. LJ 634 : 1979 SCC(Cri) 987 : 1980 CriLJ
822 : 1979 AllCrR 335 : 1979(81) PLR (Delhi) 114 : 1980 SCCriR 262

SUPREME COURT OF INDIA

Before :- N.L. Untwalia and S. Murtaza Fazl Ali, JJ.

Criminal Appeal No. 283 of 1977. D/d. 11.1.1979.

Trilok Singh and others - Appellants

Versus

Satya Deo Tripathi - Respondent

Criminal Procedure Code, 1973, Section 482 - Hire-purchase Agreement -

Purchase of truck - Default clause - Seizure of truck, on default by financier
- Purchaser launching criminal prosecution against financier - Held that the
dispute raised was purely of civil nature and criminal proceeding initiated
was an abuse of the process of the Court and deserved to be quashed -
Orders of High Court and Magistrate quashed.

[Paras 2, 5, 7]

JUDGMENT

Untwalia, J. - On May 1, 1976 the respondent in this appeal by special leave filed a
complaint against 10 persons, including the three appellants, under Sections 395,
468, 465, 471, 412, 120-B/34 of the Penal Code in the Court of the Chief Judicial
Magistrate, Kanpur. An inquiry under Section 202 of the Code of Criminal Procedure,
1973, hereinafter called the Code, was held by the Magistrate. Thereafter on January
17, 1977 the Magistrate passed an order directing the issue of summons against nine
accused only under Section 395 of the Penal Code. He dismissed the complaint
against accused No. 10 Smt. Ram Misra, wife of Shri B. C. Misra, accused No. 9.
Before the summonses were actually issued, on the same day i.e. January 17, 1977
the appellants moved the Allahabad High Court to quash the criminal proceeding in
question in exercise of its inherent power under section 482 of the Code. The High
Court by its order dated February 21, 1977 has refused to quash the said proceeding
and dismissed the appellants' application. Hence this appeal.

2. We do not consider it necessary to state and discuss all the points involved in this
case in any detail. Only a few of them may, however, be mentioned for the purpose
of allowing this appeal and quashing the criminal proceeding initiated was clearly an
abuse of the process of the Court.

3. The dispute between the parties relates to the purchase of a truck from Sardar
Harbans Singh, accused No. 5. The total cost incurred in the purchase of the truck
was in the neighbourhood of Rs. 60,000. We do not mention the exact amount as
there is some difference between the parties in regard to the same. On March 29,
1973 an agreement was entered into between the respondent and his then partner
one Bhagwati Prasad, accused No. 6 on the one hand and M/s. Sardar Finance
Corporation, Kanpur on the other, which firm was represented by appellant No. 1 as
its partner, in accordance with which about half the money was advanced by the said
firm which enabled the complainant and his partner to acquire the truck. According
to the complainant's case the amount advanced by the said firm was by way of loan
while according to the case of the appellants it was on the basis of a hire-purchase
agreement entered into between the parties in support of which a formal agreement
in writing was also executed. The complainant's case is that only a blank form was
got signed by him along with other several papers bearing stamps and the form had
not been duly filled up. The complainant's case further was that he had paid back
two monthly instalments the total of which was Rs. 3,566 and the third instalment
was payable on July 31, 1973.

But before that all the accused in a high-handed manner during his absence came to
his house and in spite of protest by his wife forcibly under threat of arms removed
the truck and thus they are said to have committed the various offences including
the offence of dacoity. The case of the appellants was that according to the hire-
purchase agreement a sum of Rs. 1,783 was to be paid every month by the 15th day
of the month. The first instalment payable was on the 15th May, 1973 second on the
15th June, 1973 and the third on the 15th July, 1973 and so on. The entire sum due
was to be cleared in twenty-three instalments. On default of any one monthly
instalment the Financier had the right to terminate the hire-purchase agreement
even without notice and seize the truck. Since the July instalment was not paid by
the 15th of that month the complainant and his partner surrendered the truck on
24th July, 1973. Some more events happened thereafter which are not necessary to
be mentioned here. In nutshell the case of the appellants was that the respondent's
case against them and others that they committed any offence on the 30th July,
1973 was absolutely false.

4. It ought to be stated here that the respondent had previously lodged a First
Information Report with the police on August 20, 1973 in respect of the alleged
occurrence. There was prolonged investigation by the various Police Officers for a
long time and ultimately a Final Report was submitted by the Investigating Agency.
The respondent filed objection petition before the Magistrate who dealt with the Final
Report. But the Magistrate accepted the report by his order dated April 28, 1975.
The respondent filed a revision before the Sessions Judge from the order of the
Magistrate accepting the Final Report. The revision was dismissed by the Sessions
Court. The respondent then went to the High Court under section 482 of the Code.
The High Court by its order dated April 16, 1976 summarily dismissed the same.
Thereafter the present complaint was filed on May 1, 1976.

5. We are clearly of the view that it was not a case where any processes ought to
have been directed to be issued against any of the accused. On the well-settled
principles of law it was a very suitable case where the criminal proceeding ought to
have been quashed by the High Court in exercise of its inherent power. The dispute
raised by the respondent was purely of a civil nature even assuming the facts stated
by him to be substantially correct. Money must have been advanced to him and his
partner by the financier on the basis of some terms settled between the parties.
Even assuming that the agreement entered on 29th March, 1973 was duly filled up
and the signature of the complainant was obtained on a blank form, it is to be
noticed that the amount of the two monthly instalments admittedly paid by him was
to the tune of Rs. 3,566 exactly @ Rs. 1,783 per month. The complaint does not say
as to when these two monthly instalments were paid. In the First Information Report
which he had lodged he had not stated that the third monthly instalment was
payable on July 31, 1973. Rather, from the statement in the First Information Report
it appears that the instalment had already become due on 28-7-73, when the
complainant went out of Kanpur according to his case. The question as to what were
the terms of the settlement and whether they were duly incorporated in the printed
agreement or not were all questions which could be properly and adequately decided
in a civil court.

Obtaining signature of a person on blank sheet of paper by itself is not an offence of

forgery or the like. It becomes an offence when the paper is fabricated into a
document of the kind which attracts the relevant provisions of the Penal Code
making it an offence or when such a document is used as a genuine document. Even
assuming that the appellants either by themselves or in the company of some others
went and seized the truck on 30-7-1973 from the house of the respondent they
could and did claim to have done so in exercise of their bonafide right of seizing the
truck on the respondent's failure to pay the third monthly instalment in time. It was,
therefore, a bonafide civil dispute which led to the seizure of the truck. On the face
of the complainant petition itself the highly exaggerated version given by the
respondent that the appellants went to his house with a mob armed with deadly
weapons and committed the offence of dacoity in taking away the truck was so very
unnatural and untrustworthy that it could not take the matter out of the realm of
civil dispute. Nobody on the side of the respondent was hurt. Even a scratch was not
given to anybody.

6. In our opinion on the facts and in the circumstances of this case the criminal
prosecution deserves to be quashed. On behalf of the respondent it was argued that
the appellants' filing a petition in the High Court for quashing the proceeding before
issuance of the summons was premature and the High Court could not have quashed
it. In our opinion the point is so wholly without substances that it has been stated
merely to be rejected. Since the parties during the course of the hearing in this
appeal showed their inclination to settle up and end all their disputes and quarrels in
relation to the matter in question after we indicated our view that we are going to
allow the appeal and quash the proceedings, we have not thought it necessary to
elaborately give other reasons in support of our order.
7. In the result we allow the appeal, set aside the order of the High Court as also of
the Magistrate and quash the criminal proceeding in question initiated by the
respondent against the appellants and others.

Appeal allowed.

Charanjit Singh Chadha v. Sudhir Mehra, (SC) : Law Finder Doc Id # 10155

2001(4) Crimes 26 : 2002(1) Mh.LJ 401 : 2001(4) R.C.R.(Criminal) 192 :

2001(3) PLR 833 : 2001 AIR (SC) 3721 : 2001 CriLJ 4255 : 2001(3) LJR 529
: 2001(4) AICLR 60 : 2002(1) ISJ (Banking) 555 : 2001(7) SCC 417 :
2001(6) Scale 29 : 2001(7) JT 226 : 2001 SCC(Cri) 1557 : 2002(1) M.P.L.J.
321 : 2001(43) ACrC 691 : 2001(3) ECrC 186 : 2001 Cri. L.R. (SC) 561 :
2001(2) Ker L.J. 609 : 2007(2) C.P.J. 41 : 2001(4) CTC 102 : 2001 AIR
(SCW) 3487 : 2001(3) RLW 405 : 2002(1) All. C.J. 141 : 2001(7) Supreme
239 : 2001(2) Apex Court Journal 331 : 2001(6) SLT 312 : 2002(2) B.L.Jud.
119 : 2001(2) CLR 409 : 2001(21) Orrisa Cri. R. 520

SUPREME COURT OF INDIA

Before :- K.T. Thomas and K.G. Balakrishnan, JJ.

Criminal Appeal No. 883 of 2001 (Arising out of SLP (Crl.) No. 1084 of 2001). D/d.
31.8.2001

Charanjit Singh Chadha - Appellants

Versus

Sudhir Mehra - Respondent

For the Appellants :- Mr. K.G. Bhagat, Mr. Vineet Bhagat and Mr. Debasis Misra,
Advocates.

For the Respondent :- Mr. Mahabir Singh, Mr. S.R. Sharma and Mr. Ajay Pal Singh,
Advocates.

A. Indian Penal Code, Sections 420, 406 and 379 - Criminal Procedure Code,
1973, Section 482 - Hire-purchase agreement - Accused purchased a vehicle
under hire-purchase agreement - As per agreement hirer (accused) would
not become owner of vehicle until he paid entire instalments - Default in
payment of instalments by hirer - Owner re-taking possession of vehicle
without consent of hirer - No criminal offence of theft, criminal breach of
trust or cheating made out - Complaint quashed. 1979(4) SCC 396 and
1996(7) SCC 212 relied.
[Paras 10 to 13 and 17]

B. Indian Penal Code, Sections 406, 379 and 420 - Hire-purchase agreement
- Concept of hire-purchase agreements explained - Hire-purchase
agreement in law is an executory contract of sale and confers no right in
rem on hirer until the conditions for transfer of the property to him have
been fulfilled - Therefore, the re-possession of goods as per term of the
agreement may not amount to any criminal offence.

[Paras 17, 6 and 7]

Cases referred :

M/s Damodar Valley Corporation v. State of Bihar, AIR 1961 Supreme Court 440.

K.L. Johar and Co. v. Deputy Commercial Tax Officer, AIR 1965 Supreme Court
1082.

Instalment Supply (Pvt.) Ltd. and Anr. v. Union of India and Ors., AIR 1962 Supreme
Court 53.

Sundaram Finance Ltd. v. State of Kerala, AIR 1966 Supreme Court 1178.

Sardar Trilok Singh and Ors. v. Satya Deo Tripathi, [1979] 4 SCC 396.

K.A. Mathai and Anr. v. Kora Bibbikutty and Anr., [1996] 7 SCC 212.

JUDGMENT

K.G. Balakrishnan, J. - Leave granted.

2. The appellants are running a non-banking financial institution, by name, Messrs

Deluxe Leasing Private Limited. The respondent, Sudhir Mehra, partner of a
partnership firm, entered into a hire-purchase agreement with the appellants on
3.5.1994 whereunder a motor vehicle was handed over to the respondent. The total
consideration agreed to be paid by the respondent was Rs. 3,02,884/- and the
respondent made an initial payment of Rs. 69,308/- and the balance amount was to
be paid in 36 monthly instalments of Rs. 8,400/- each starting from 3.6.1994.
According to respondent, he had been paying the instalments regularly. The
respondent filed a criminal complaint before the Judicial Magistrate, Amritsar on
3.12.1998 alleging that the motor vehicle in question had developed some trouble
and it was entrusted to a motor mechanic on 14.9.1996 for carrying out repairs and
that in the night of 16.9.1996 the appellants forcibly took away the vehicle from the
motor mechanic and thus committed offences under Section 406/420/120B Indian
Penal Code. Pursuant to the complaint, the Magistrate took cognizance of the
offences and issued summons to the appellants. Appellants filed a petition under
Section 482 of Criminal Procedure Code before the High Court of Punjab and Haryana
to quash the complaint proceedings. In the petition, it was alleged by the appellants
that respondent had committed default in paying the instalments and that as on
1.9.1996 an amount of Rs. 1,34,887/- was outstanding against the respondent and
therefore the appellants were constrained to terminate the hire-purchase agreement
and that the respondent surrendered the motor vehicle to the appellants. The
learned Single Judge of the High Court declined to quash the proceedings and held
that the allegations in the complaint were capable of making out offences punishable
especially under Section 379 Indian Penal Code and, therefore, the petition under
Section 482 Criminal Procedure Code, 1973 was dismissed. Aggrieved by the same,
the appellants have filed the instant appeal.

3. We heard learned counsel on either side. The counsel for the appellants contended
that the allegations made in the complaint would not make out an offence punishable
under law and that the appellants had exercised their right under the hire-purchase
agreement. It was argued that even if it is proved that the vehicle was forcibly taken
away from the custody of the respondent, that may not be an offence punishable
under law as the hire-purchase agreement clearly provided for re-possession of the
vehicle by the owner, namely, the appellants, in the event of default by the
respondent.

4. Admittedly, the respondent entered into a hire-purchase agreement with the

appellants and pursuant thereto the respondent obtained a motor vehicle and agreed
to pay the balance consideration in instalments. According to the appellants, the
respondent committed default in paying the instalments and the hire-purchase
agreement was terminated, whereas the respondent would contend that he had
paying the instalments regularly though in the complaint it is admitted that a cheque
issued by the respondent for a sum of Rs. 84,000/- was dishonoured by the bank
and the appellants had filed a criminal complaint under Section 138 of the Negotiable
Instruments Act.

5. Hire-purchase agreements are executory contracts under which the goods are let
on hire and the hirer has an option to purchase in accordance with the terms of the
agreement. These types of agreements were originally entered into between the
dealer and the customer and the dealer used to extend credit to the customer. But
as hire-purchase scheme gained popularity and in size, the dealers who were not
endowed with liberal amount of working capital found it difficult to extend the
scheme to many customers. Then the financiers came into picture. The finance
company would buy the goods from the dealer and let them to the customer under
hire-purchase agreement. The dealer would deliver the goods to the customer who
would then drop out of the transaction leaving the finance company to collect
instalments directly from the customer. Under hire-purchase agreement, the hirer is
simply paying for the use of the goods and for the option to purchase them. The
finance charge, representing the difference between the cash price and the hire-
purchase price, is not interest but represents a sum which the hirer has to pay for
the privilege of being allowed to discharge the purchase price of goods by
instalments.

6. Though in India the Parliament has passed a Hire Purchase Act, 1972, the same
has not been notified in the official gazette by the Central Govt. so far. An initial
notification was issued and the same was withdrawn later. The rules relating to hire-
purchase agreements are delineated by the decisions of higher courts. There are
series of decisions of this Court explaining the nature of the hire-purchase
agreement and mostly these decisions were rendered when the question arose
whether there was a sale so as to attract payment of tax under the Sales Tax Act.
7. In M/s Damodar Valley Corporation v. State of Bihar, AIR 1961 Supreme
Court 440, this Court took the view that a mere contract of hiring, without more, is
a species of the contract of bailment, which does not create a title in the bailee, but
the law of hire-purchase has undergone considerable development during the last
half a century or more and has introduced a number of variations, thus leading to
categories and it becomes a question of some nicety as to which category a
particular contract between the parties comes under. Ordinarily, a contract of hire-
purchase confers no title on the hirer, but a mere option to purchase on fulfilment of
certain conditions. But a contract of hire-purchase may also provide for the
agreement to purchase the thing hired by deferred payments subject to the condition
that title to the thing shall not pass until all the instalments have been paid. There
may be other variations of a contract of hire-purchase depending upon the terms
agreed between the parties. When rights in third parties have been created by acts
of parties or by operation of law, the question may arise as to what exactly were the
rights and obligations of the parties to the original contract.

8. In K.L. Johar and Co. v. The Deputy Commercial Tax Officer, AIR 1965
Supreme Court 1082, this Court took the view that a hire-purchase agreement has
two elements : (1) element of bailment; and (2) element of sale, in the sense that it
contemplates an eventual sale. The element of sale fructifies when the option is
exercised by the intending purchaser after fulfilling the terms of the agreement.
When all the terms of the agreement are satisfied and the option is exercised a sale
takes place of the goods which till then has been hired.

9. Similar views were expressed earlier in Instalment Supply (Pvt.) Ltd. and. v.
Union of India and Ors., AIR 1962 Supreme Court 53; and reiterated in
Sundaram Finance Ltd. v. State of Kerala, AIR 1966 Supreme Court 1178.

10. The agreement executed by the parties in this case also is to the effect that the
hirer would not become the owner of the property until he pays the entire
instalments. A copy of the agreement is produced as Annexure P-1 wherein the
appellants are referred to as the first party and the respondent as the second party
and it is specifically stated that the first party would be the absolute owner of the
vehicle and the respondent-second party agreed to pay all the instalments
punctually. Clause 7 of the agreement says that the hirer may at any time before the
final payment under the hire-purchase agreement falls due and after giving the
owners not less than fourteen days notice in writing of his intention to do so and re-
delivering the vehicle to the owners at their office, terminate the hire-purchase
agreement. Clause 8(viii) gives a right to the owner to re-possess the vehicle in case
of default by the hirer. Clause 9(ii) gives the owner an irrevocable licence to enter
any building, premises or place where the vehicle may be or supposed to be for the
purpose of inspection, re-possession or attempt to repossess the vehicle and the
owner of the vehicle will not be liable for any civil or criminal action at the instance of
the hirer. It is also made clear that the hirer would be liable for all the expenses of
the owner in obtaining re- possession or attempting to obtain re-possession of the
vehicle.

11. The whole case put forward by the respondent-complainant is to be appreciated

in view of the stringent terms incorporated in the agreement. If the hirer himself has
committed default by not paying the instalments and under the agreement the
appellants have taken re-possession of the vehicle, the respondent cannot have any
grievance. The respondent cannot be permitted to say that the owner of the vehicle
has committed theft of the vehicle or criminal breach of trust or cheating or criminal
conspiracy as alleged in the complaint. When the agreement specifically says that
the owner has got a right to re-possess the vehicle, there cannot be any basis for
alleging that the appellants have committed criminal breach of trust or cheating.

12. Before the learned Single Judge, the respondent had contended that the vehicle
was in the possession of the respondent and it was taken out of his custody without
his consent and, therefore, the offence of theft is made out. This plea is also without
any basis as the appellants have taken re-possession of the vehicle in exercise of
their right under the agreement. There may be instances where the owner of the
goods may commit theft of his own goods. The illustration (k) of Section 378 Indian
Penal Code, which is an instance of such a theft, is to the following effect :

"Again, if A, having pawned his watch to Z, takes it out of Z's possession

without Z's consent, not having paid what he borrowed on the watch, he
commits theft, though the watch is his own property in-as-much as he takes
it dishonestly."

13. But in the instant case, the owner re-possessing the vehicle delivered to the hirer
under the hire-purchase agreement will not amount to theft as the vital element of
'dishonest intention' is lacking. The element of 'dishonest intention' which is an
essential element of constitute the offence of theft cannot be attributed to a person
exercising his right under an agreement entered into between the parties as he may
not have an intention of causing wrongful gain or to cause wrongful loss to the hirer.
It is appropriate to note that the term 'dishonestly' is defined under Section 24 of the
Indian Penal Code as follows :

"Dishonestly" ---- Whoever does anything with the intention of causing

wrongful gain to one person or wrongful loss to another person, is said to do
that thing "dishonestly".

14. It is also to be noticed that learned author R.M. Goode, in his book Hire Purchase
Law and Practice (Second Edn.) has observed as follows at page 846 :-

"It would seem that so long as the hirer is in possession of the goods they
belong to him for the purpose of the Act [The Theft Act, 1968] even though
his possession is unlawful, e.g. because the hire-purchase agreement has
come to an end. If the owner has an enforceable right to possession then he
will not be guilty of theft in seizing the goods if he knew of his legal rights
since he will not be acting dishonestly but will have taken the goods in the
well founded belief that he has a right to resume possession."

15. This Court also had occasion to consider this question. One of the earlier
decisions is Sardar Trilok Singh and Ors. v. Satya Deo Tripathi, [1979] 4 SCC
396. In that case, the parties had entered into a hire-purchase agreement. The
complainant alleged that the accused, in a high handed manner during his absence
came to his house and forcibly removed the truck and thereby committed the offence
of a dacoity. The police investigated the case and filed a final report. The accused
filed his objection before the Magistrate, but the objection was not considered. The
accused filed a revision before the sessions court which was dismissed. Thereafter
the accused filed a petition under Section 482 Criminal Procedure Code, 1973 to
quash the proceedings. That was summarily dismissed by the High Court to quash
the proceedings. That was summarily dismissed by the High Court and the matter
reached up to this Court at the instance of the accused. In paragraph 5 of the
judgment, this Court observed :

"We are clearly of the view that it was not a case where any processes ought
to have been directed to be issued against any of the accused. On the well-
settled principles of law it was a very suitable case where the criminal
proceeding ought to have been quashed by the High Court in exercise of its
inherent power. The dispute raised by the respondent was purely of a civil
nature even assuming the facts stated by him to be substantially correct.
Money must have been advanced to him and his partner by the financier on
the basis of some terms settled between the p a r t i e
s ........................................................... Even assuming that the
appellants either by themselves or in the company of some others went and
seized the truck on July 30, 1973 from the house of the respondent they
could and did claim to have done so in exercise of their bonafide right seizing
the truck on the respondent's failure to pay the third monthly instalment in
time. It was, therefore, a bonafide civil dispute which led to the seizure of the
truck".

16. In K.A. Mathai and Anr. v. Kora Bibbikutty and Anr., [1996] 7 SCC 212,
the bus was obtained by the complainant on a hire-purchase agreement. The
complainant paid only part of the consideration and defaulted in paying the
instalments and the vehicle was taken possession of by the financier and at that
time, both the first accused who had driven away the bus from the possession of the
complainant and the second accused were present in the bus. They were prosecuted
for the offence punishable under Section 379 read with Section 114 Indian Penal
Code. This Court holding that the bus was taken away at the instance of the financier
and the accused had not committed any offence observed as under :

"Though we do not have the advantage of reading the hire-purchase

agreement, but as normally drawn it would have contained the clause that in
the event of the failure to make payment of instalment/s the financier had the
right to resume possession of the vehicle. Since the financier's agreement
with A-2 contained that clause of resumption of possession, that has to be
read, if not specifically provided in the agreement, as part of the sale
agreement between A-2 and the complainant. It is in these circumstances,
the financier took possession of the bus from the complainant with the aid of
the appellants. It cannot thus be said that the appellants, in any way, had
committed the offence of theft and that too, with the requisite mens rea and
requisite dishonest intention."

17. The hire-purchase agreement in law is an executory contract of sale and confers
no right in rem on hirer until the conditions for transfer of the property to him have
been fulfilled. Therefore, the re-possession of goods as per the term of the
agreement may not amount to any criminal offence. The agreement [Annexure P-1]
 specifically gave authority to the appellants to re- possess the vehicle and their
agents have been given the right to enter any property or building wherein the
motor vehicle was likely to be kept. Under the hire-purchase agreement, the
appellants have continued to be the owners of the vehicle and even if the entire
allegations against them are taken as true, no offence was made out against them.
The learned Single Judge seriously flawed in his decision and failed to exercise
jurisdiction vested in him by not quashing the proceedings initiated against the
appellants. We, therefore, allow this appeal and set aside the impugned judgment.
The complaint and any other proceedings initiated pursuant to such complaint are
quashed.

Order accordingly.

IV. Criminal proceedings can be quashed if manifestly attended

with malafide and/or where the criminal proceedings is
maliciously intituted:

Mahindra and Mahindra Financial Services Ltd. v. Rajiv Dubey (SC) : Law Finder
Doc Id # 181787

2009(1) CalCriLR 295 : 2009(1) BC 449 : 2008(16) Scale 62 : 2009(1) SCC

706 : 2009(64) ACrC 669 : 2008(sup) AIR (SC) 821 : 2009(74) AIC 71 :
2009(2) DCR 332 : 2009(2) Mh.LJ (Crl.) 357 : 2009(1) SCC(Cri) 603 :
2009(1) SCC (Civil) 321 : 2009 ALL MR(Cri) 2186 : 2009(1) L.R.C. 291 :
2009(1) CLR 288

SUPREME COURT OF INDIA

Before :- Dr. Arijit Pasayat and Dr. Mukundakant Sharma, JJ.

Criminal Appeal No. 1966 of 2008. D/d. 4.12.2008.

Mahindra and Mahindra Financial Services Ltd. and Anr. - Appellants

Versus

Rajiv Dubey - Respondent

Criminal Procedure Code, 1973, Section 482 - Indian Penal Code, 1860,
Sections 294, 406, 420 and 506 - Negotiable Instruments Act, 1881, Section
138 - Quashing of proceedings - Even a casual reading of the complaint does
not show that the ingredients of Section 406 Indian Penal Code are in any
event made out - Not understandable as to how Section 294 has any
application to the facts of the case much less Section 506 Indian Penal Code
- Perusal of the complaint apparently shows the ulterior motive -
Proceeding initiated by the respondent clearly amounted to abuse of the
process of law - In view of what has been stated in Bhajan Lal's case the
proceedings before SDJM quashed.

[Paras 16 to 19]

Cases Referred :

State of Haryana v. Bhajan Lal, I (2006) CCR 209 9 (SC) .

JUDGMENT

Dr. Arijit Pasayat, J. - Leave granted.

2. Challenge in this appeal is to the judgment of a learned Single Judge of the Orissa
High Court declining to interfere with the order passed by learned SDJM, a
Bhubaneswar in ICC 210 of 2000 taking cognizance of offence punishable under
Sections 406 and 420 of the Indian Penal Code, 1860 (in short the 'Indian Penal
Code'). In the complaint it was inter alia alleged as follows :

The complainant as the Managing Director of Team Finance Company Pvt.

Ltd., Janpath Tower, Bhubaneswar had availed hire purchased finance from
Mahindra & Mahindra Financial Services Limited, accused appellant No. 1 with
the consent and knowledge of its Managing Director, accused appellant No. 2
in respect of a vehicle for a sum of Rs. 1,89,000,00. He had given seven
blank cheques drawn on Canara Bank, Main Branch Bhubaneswar in favour of
accused-appellant No. 1 in the year 1994 when the agreement had been
executed between the parties with mutual understanding that the said
cheques would not be presented for encashment by the accused-appellant,
but then payments would be made through demand drafts regularly till the
entire amount was repaid. According to the complainant, in consonance with
the said understanding the entire dues were repaid by him through demand
drafts and after repayment he wrote a letter to accused appellant No. 1 for
returning the blank cheques to him. However, without doing so, the accused
appellants mischievously and with ulterior motive presented the cheques in
the bank, a fact he learnt after receiving communication from the concerned
Bank, that as sufficient money was not available in his account. The cheques
were presented in bank by the accused-appellants even though their entire
amount had been repaid by the complainant. This was done with a motive to
cheat and harass the complainant and makes out offences under Sections 406
and 420, Indian Penal Code. The Court below after recording the initial
statement of the complainant under Section 200 of the Code of Criminal
Procedure, 1973 (in short the 'Code') perusing the materials produced before
him and being prima facie satisfied about commission of the aforesaid
offences took cognizance thereof.

3. Stand of the appellants before the High Court was that the complaint was nothing
but abuse of the process of the law. It was as a counter-blast to the proceedings
initiated under Section 138 of the Negotiable Instruments Act, 1881 (in short the
'Act'). The High Court found that it is not a case for interference under section 482 of
the Code.

4. Learned Counsel for the appellants, inter alia, submitted as follows :

Pursuant to the minutes of meeting dated 23.6.1995 it was agreed to enter

into a tripartite Agreement between the appellant No. 1 -Company, the
respondent's company Team Finance Corporation Pvt. Ltd. and the customers
availing the loan and buying the vehicle whereby appellant No. 1 agreed to
extend loans under hire and purchase/lease directly to customers with Team
Finance Co. Pvt. Ltd. being the guarantor for disbursal of the said loans to the
customers for which the respondent was given a margin of 34% to market the
loan scheme. As per Clause (e) of the said minutes of the meeting and as per
Clause (f) the respondent had to open a separate bank account and deposit
all the post-dated instalment cheques received from the customers in the said
account which was required to be remitted to the appellant company on
minimum balance basis in its Bombay account by way of Telegraphic Transfer
and as per Clause (g) the respondent was required to send reports and
statements on monthly basis to the appellant company. As per Clause (h) for
any customer once defaults in payment reached a figure of 3, the respondent
had to reimburse the said defaulted instalment to the appellant company.
This understanding was further reinforced as per the minutes of discussions
held between the appellant and respondent on 18.7.1996 and certain
additional conditions were imposed on the respondent by the appellants
whereby a limit of Rs. 20 lakh was fixed for extending finance per month by
the respondent.

5. As such several tripartite loan agreements were signed and loan disbursed to the
customers directly by the appellants with the respondent being a guarantor and as
on 25th March, 2000, the total outstanding against respondent Team Finance
Corporation Pvt. Ltd. stood at Rs. 2,39,73,795/- the said amount being unpaid
despite several reminders to settle the outstanding amount.

6. The appellants presented 7 cheques on 29.3.2000 bearing numbers and amounts

as following :

Cheque No. Amount Dated

7891578 1655516/- 29-03-2000

7891579 2526794/- 29-03-2000

7891580 1477323/- 29-03-2000

7891581 722419/- 29-03-2000

7891582 19631031/- 29-03-2000

 7891583 1942609/- 29-03-2000

7891584 4712236 29-03-2000

7. The appellants presented 3 cheques on 2.8.2000 against the discharge of the
remaining outstanding payments bearing the number and amounts as follows :

Cheque No. Amount Dated

7891585 3515726/- 2.8.2000

7891586 3530903/- 2.8.2000

7891587 1927166/- 2.8.2000

8. All these cheques were returned by the Bank to the appellants with the
endorsement that the account is not valid and insufficient funds.

9. In the meanwhile, in order to pre-empt the impending proceeding under Section

138 of the Act, the respondent filed a criminal complaint CC No. 210 of 2000 against
the appellants under Sections 406, 420, 294, 506, 34, Indian Penal Code before
SDJM, Bhubaneswar on 11.5.2000, inter alia, claiming that the cheques issued by
respondent were towards an outstanding amount of Rs. 1,89,000/- and the said a
payment has already been made by the respondent by way of a Demand Draft of
which no number, date or any other details are provided in the complaint. The
appellants became aware of institution of such a case only later when the process
was issued on 18.4.2001 and the same was received by the appellants.

10. On 2.8.2000 the appellants filed Case No. 753/S/2000 under Section 138 of the
Act read with Section 34 of Indian Penal Code before ACMM, Esplanade, Bombay.

11. The respondent in the meanwhile kept on representing that he will clear the
payments and vide letter dated 8.11.2000 made an offer to the appellants to agree
for the full and final settlement of the outstanding dues for a mere sum of
25,00,000/- against a balance of 2,39,73,795/-.

12. On 18.4.2001, the learned Court of SDJM, Bhubaneswar in ICC 210 of 2000
issued process against the appellants under sections 406/420, Indian Penal Code.

13. According to the appellants the ingredients of Section 405 are not present. In
any event, the plea of the respondent filing the petition mala fide is clearly borne
out.

14. Learned Counsel for the respondent on the other hand submitted that the
appellants have not come to this Court with clean hands.

15. The appellants have introduced a fabricated letter dated 24.6.1995. It is their
stand that the entire amount was paid and, therefore, on receiving the full payment,
the appellants ought to have returned the cheques which were held only as a
collateral security.
16. It is not in dispute that the proceedings under Section 138 are pending. That
being so, the question of proceeding for alleged breach of trust does not arise.

17. It is interesting to note that the respondent does not dispute issuance of
cheques. Even a casual reading of the complaint does not show that the ingredients
of Section 406 Indian Penal Code are in any event made out. It is also not
understandable as to how Section 294 has any application to the facts of the case
much less Section 506 Indian Penal Code. In addition to this, perusal of the
complaint apparently shows the ulterior motive. It is clear that the proceeding
initiated by the respondent clearly amounted to abuse of the process of law. In
State of Haryana v. Bhajan Lal, I (2006) CCR 209 9 (SC) , it was, inter alia,
observed as follows :

"108. In the backdrop of the interpretation of the various relevant provisions

of the Code under Chapter XIV and of the principles of law enunciated by this
Court in a series of decisions relating to the exercise of the extraordinary
power under Article 226 or the inherent powers under section 482 of the Code
which we have extracted and reproduced above, we give the following
categories of cases by way of illustration wherein such power could be
exercised either to prevent abuse of the process of any Court or otherwise to
secure the ends of justice, though it may not be possible to lay down any
precise, clearly defined and sufficiently channelised and inflexible guidelines
or rigid formulae and to give an exhaustive list of myriad kinds of cases
wherein such power should be exercised.

(1) Where the allegations made in the First Information Report or the
complaint, even if they are taken at their face value and accepted in their
entirety do not prima facie constitute any offence or make out a case against
the accused.

(2) Where the allegations in the First Information Report and other materials,
if any, accompanying the FIR do not disclose a cognizable offence, justifying
an investigation by police officers under Section 156(1) of the Code except
under an order of a Magistrate within the purview of Section 155(2) of the
Code.

(3) Where the uncontroverted allegations made in the FIR or complaint and
the evidence collected in support of the same do not disclose the commission
of any offence and make out a case against the accused.

(4) Where, the allegations in the FIR do not constitute acognizable offence
but constitute only a non-cognizable offence, no investigation is permitted by
a police officer without an order of a Magistrate as contemplated under
Section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are so absurd and
inherently improbable on the basis of which no prudent person can ever reach
a just conclusion that there is sufficient ground for proceeding against the
accused.
 (6) Where there is an express legal bar engrafted in any of the provisions of
the Code or the concerned Act (under which a criminal proceeding is
instituted) to the institution and continuance of the proceedings and/or where
there is a specific provision in the Code or the concerned Act, providing
efficacious redress for the grievance of the aggrieved party. (7) Where a
criminal proceeding is manifestly attended with mala fide and/or where the
proceeding is maliciously instituted with an ulterior motive for wreaking
vengeance on the accused and with a view to spite him due to private and
personal grudge."

18. The case at hand falls under category (7).

19. Therefore, in view of what has been stated in Bhajan Lal's case (supra). the
proceedings in ICC 210 of 2000 before learned SDJM, Bhubaneswar stand quashed.
The appeal is allowed.

Appeal allowed.

V. POWER UNDER SECTION 156(3) WARRANTS APPLICATION OF

JUDICIAL MIND:

Priyanka Srivastava v. State of U.P. (SC) : Law Finder Doc Id # 659349

2015(2) Ker L.J. 491 : 2015(3) ALT (Crl.) 26 : 2015(2) Cri.CC 713 : 2015(2)
Law Herald (SC) 1124 : 2015(2) Crimes 179 : 2015 AIR (SCW) 2075 :
2015(2) CCR 168 : 2015(3) Recent Apex Judgments (R.A.J.) 433 : 2015(2)
JCC 974 : 2015 All SCR 1592 : 2015 AIR (SC) 1758 : 2015(5) JT 203 : 2015
CriLJ 2396 : 2015(130) SCL 472 : 2015(2) AIR Jhar R. 837 : 2015 RajCriC
424 : 2015(2) KLT 451 : 2015(6) SCC 287 : 2015(2) BankJ 730 : 2015(3)
AICLR 183 : 2015(3) PLJR 78 : 2015(2) D.R.T.C. 1 : 2015(3) SCC (Civil)
294 : 2015(2) JLJR 496 : 2015(3) RLW 2404 : 2015(2) R.C.R.(Criminal)
1034 : 2015(4) Scale 120 : 2015(3) CTC 103 : 2015(2) Law Herald 1622 :
2015(2) Crimes 209 : 2015(2) Apex Court Judgments (SC) 381 : 2015(3)
MadWN (Cri) 171 : 2015(61) Orrisa Cri. R. 719 : 2018 Cri. L.R. (SC) 663

SUPREME COURT OF INDIA

Before :- Dipak Misra and Prafulla C. Pant, JJ.

Criminal Appeal No. 781 of 2012. D/d. 19.3.2015.

 Mrs. Priyanka Srivastava and Another - Appellants

Versus

State of U.P. and Others - Respondents

For the Appellants :- Ajay Kumar and Sudeep Dey, Advocates.

For the Respondents :- Vikrant Yadav, Gaurav Dhingra, Ashutosh Sharma, Sunil
Kumar Jain, Kaushik Chaudhary and Akarsh Garg, Advocates.

A. Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 Sections 32, 13(2) and 132(4) Criminal
Procedure Code, 1973 Section 156 (3) Abuse of process - Accused persons
are serving in high positions in the bank - Respondent No. 3 availed housing
loan from financial institutions (PNB-HFL) - Default in Consecutive payment
of instalments - Loan account was treated as a Non-Performing Asset (NPA)
- Financial institution taking appropriate action the SARFAESI - Respondent
No. 3 filed an application under Section 156(3) Criminal Procedure Code
against Vice-President and the valuer respectively- Magistrate ordered for
Registration of FIR - FIR quashed - Held :-

i) When a borrower of the financial institution covered under the

SARFAESI Act, invokes the jurisdiction under Section 156(3) Criminal
Procedure Code 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.

ii) Learned Magistrate should take note of the allegations in entirely,

the date of incident and whether any cognizable case is remotely
made out.

iii) 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
to take adventurous steps with courts to bring the financial
institutions on their knees.

[Para 1]

B. Criminal Procedure Code, 1973 Sections 156(3) and 154 Registration of

Case - Investigation in Cognizable Cases - Abuse of process of Law -
Quashing of FIR - A litigant at his own whim cannot invoke the authority of
the Magistrate - Power under Section 156(3) warrants application of judicial
mind - A principled and really grieved citizens with clean hands must have
free access to invoke the said power - However, when pervert litigation's
takes this route to harass their fellows citizens, efforts are to be made to
scuttle and curb the same - In the instant Case FIR Quashed.
[Para 26]

C. Criminal Procedure Code, 1973 Sections 154 and 156(3) Investigation in

Cognizable offence - Prayer of registration of FIR - There has to be prior
applications under Section 154(1) and 154(3) while filing a petition under
Section 156(3) - Necessary documents to that effect shall be filed - Section
156 (3) Criminal Procedure Code applications are to be supported by an
affidavit duly sworn by the applicant who seeks the invocation of the
jurisdiction of the Magistrate - It is because, once an affidavit is found to be
false, he will be liable for prosecution in accordance with law - Magistrate
would be well advised to verify the truth and also can verify the veracity of
the allegations - It cannot be done to take undue advantage in a criminal
court as if somebody is determined to settle the scores.

[Para 27]

Quotations

Financial institutions - Harassment to Statutory authorities - A scenario which is not

only disturbing but also has the potentiality to create a stir compelling one to ponder
in a perturbed state how some unscrupulous, unprincipled and deviant litigants can
ingeniously and innovatively design in a nonchalant manner to knock at the doors of
the Court, as if, it is a laboratory where multifarious experiments can take place and
such skillful persons can adroitly abuse the process of the Court at their own will and
desire by panting a canvas of agony by assiduous assertions made in the application
though the real intention is to harass the statutory authorities, without any remote
remorse, with the inventive design primarily to create a mental pressure on the said
officials as individuals, for they would not like to be dragged to a Court of law to face
in criminal cases, and further pressurise in such a fashion so that financial institution
which they represent would ultimately be constrained to accept the request for "one-
time settlement" with the fond hope that the obstinate defaulters who had borrowed
money from if would withdraw the cases instituted against them.

[Para 1]

Cases Referred :

Anil Kumar v. M.K. Aiyappa, 2013(4) R.C.R.(Criminal) 586 : 2013(5) Recent Apex
Judgments (R.A.J.) 479 : (2013) 10 SCC 705.

CREF Finance Ltd. v. Shree Shanthi Homes (P) Ltd., 2005(4) R.C.R.(Criminal) 26 :
(2005) 7 SCC 467.

Devarapalli Lakshminarayana Reddy v. V. Narayana Reddy, (1976) 3 SCC 252.

Dilawar Singh v. State of Delhi, 2007(4) R.C.R.(Criminal) 115 : 2007(5) Recent Apex
Judgments (R.A.J.) 37 : (2007) 12 SCC 496.

Lalita Kumari v. Govt. of U.P., 2013(4) R.C.R.(Criminal) 979 : 2013(6) Recent Apex
Judgments (R.A.J.) 389 : (2014) 2 SCC 1.
Manharibhai Muljibhai Kakadia v. Shaileshbhai Mohanbhai Patel, 2012(4) R.C.R.
(Criminal) 689 : 2012(5) Recent Apex Judgments (R.A.J.) 162 : (2012) 10 SCC 517.

Prakash Kumar Bajaj v. P.N.B. Housing Finance Ltd., Criminal Complaint Case No.
1058 of 2009.

Ramdev Food Products Private Limited v. State of Gujarat, 2015(2) R.C.R.(Criminal)

372 : 2015(2) Recent Apex Judgments (R.A.J.) 303 : Criminal Appeal No. 600 of
2007. D/d. 16.03.2015.

JUDGMENT

Dipak Misra, J. - The present appeal projects and frescoes a scenario which is not
only disturbing but also has the potentiality to create a stir compelling one to ponder
in a perturbed state how some unscrupulous, unprincipled and deviant litigants can
ingeniously and innovatively design in a nonchalant manner to knock at the doors of
the Court, as if, it is a laboratory where multifarious experiments can take place and
such skillful persons can adroitly abuse the process of the Court at their own will and
desire by painting a canvas of agony by assiduous assertions made in the application
though the real intention is to harass the statutory authorities, without any remote
remorse, with the inventive design primarily to create a mental pressure on the said
officials as individuals, for they would not like to be dragged to a court of law to face
in criminal cases, and further pressurise in such a fashion so that financial institution
which they represent would ultimately be constrained to accept the request for "one-
time settlement" with the fond hope that the obstinate defaulters who had borrowed
money from it would withdraw the cases instituted against them. The facts, as we
proceed to adumbrate, would graphically reveal how such persons, pretentiously
aggrieved but potentially dangerous, adopt the self-convincing mastery methods to
achieve so. That is the sad and unfortunate factual score forming the fulcrum of the
case at hand, and, we painfully recount.

2. The facts which need to be stated are that the respondent No.3, namely, Prakash
Kumar Bajaj, son of Pradeep Kumar Bajaj, had availed a housing loan from the
financial institution, namely, Punjab National Bank Housing Finance Limited
(PNBHFL) on 21st January, 2001, vide housing loan account No.IHL-583. The loan
was taken in the name of the respondent No.3 and his wife, namely, Jyotsana Bajaj.
As there was default in consecutive payment of the installments, the loan account
was treated as a Non-Performing Asset (NPA) in accordance with the guidelines
framed by the Reserve Bank of India. The authorities of the financial institution
issued notice to the borrowers under Section 13(2) of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002,
(for short, 'the SARFAESI Act') and in pursuance of the proceedings undertaken in
the said Act, the PNBHFL, on 5th June, 2007, submitted an application before the
District Magistrate, Varanasi, U.P. for taking appropriate action under section 13(4)
of the SRFAESI Act.

3. At this juncture, the respondent No.3 preferred W.P. No.44482 of 2007, which
was dismissed by the High Court on 14th September, 2007, with the observation
that it was open to the petitioner therein to file requisite objection and, thereafter, to
take appropriate action as envisaged under section 17 of the SRFAESI Act. After the
dismissal of the writ petition with the aforesaid observation, the respondent No.3,
possibly nurturing the idea of self-centric Solomon's wisdom, filed a Criminal
Complaint Case No.1058 of 2008, under Section 200 Cr.P.C. against V.N. Sahay,
Sandesh Tiwari and V.K. Khanna, the then Vice-President, Assistant President and
the Managing Director respectively for offences punishable under Sections 163, 193
and 506 of the Indian Penal Code (IPC). It was alleged in the application that the
said accused persons had intentionally taken steps to cause injury to him. The
learned Magistrate vide order dated 4th October, 2008, dismissed the criminal
complaint and declined to take cognizance after recording the statement of the
complainant under Section 200 Cr.P.C. and examining the witnesses under Section
202 Cr.P.C.

4. Being grieved by the aforesaid order, the respondent No.3 preferred a Revision
Petition No.460 of 2008, which was eventually heard by the learned Additional
Sessions Judge, Varanasi, U.P. The learned Additional Sessions Judge after
adumbrating the facts and taking note of the submissions of the revisionist, set aside
the order dated 4th October, 2008 and remanded the matter to the trial Court with
the direction that he shall hear the complaint again and pass a cognizance order
according to law on the basis of merits according to the directions given in the said
order. Be it noted, the learned Additional Sessions Judge heard the counsel for the
respondent No.3 and the learned counsel for the State but no notice was issued to
the accused persons therein. Ordinarily, we would not have adverted to the same
because that lis is the subject matter in the appeal, but it has become imperative to
do only to highlight how these kind of litigations are being dealt with and also to
show the respondents had the unwarranted enthusiasm to move the courts. The
order passed against the said accused persons at that time was an adverse order
inasmuch as the matter was remitted. It was incumbent to hear the respondents
though they had not become accused persons. A three-Judge Bench in Manharibhai
Muljibhai Kakadia and Anr. v. Shaileshbhai Mohanbhai Patel and others,
2012(4) R.C.R.(Criminal) 689 : 2012(5) Recent Apex Judgments (R.A.J.)
162 : (2012) 10 SCC 517 has opined that in a case arising out of a complaint
petition, when travels to the superior Court and an adverse order is passed, an
opportunity of hearing has to be given. The relevant passages are reproduced
hereunder:

46. .......If the Magistrate finds that there is no sufficient ground for
proceeding with the complaint and dismisses the complaint under Section 203
of the Code, the question is whether a person accused of crime in the
complaint can claim right of hearing in a revision application preferred by the
complainant against the order of the dismissal of the complaint. Parliament
being alive to the legal position that the accused/suspects are not entitled to
be heard at any stage of the proceedings until issuance of process under
Section 204, yet in Section 401(2) of the Code provided that no order in
exercise of the power of the revision shall be made by the Sessions Judge or
the High Court, as the case may be, to the prejudice of the accused or the
other person unless he had an opportunity of being heard either personally or
by pleader in his own defence.

xxxxx xxxxx xxxxx

48. In a case where the complaint has been dismissed by the Magistrate
under Section 203 of the Code either at the stage of Section 200 itself or on
completion of inquiry by the Magistrate under Section 202 or on receipt of the
report from the police or from any person to whom the direction was issued
by the Magistrate to investigate into the allegations in the complaint, the
effect of such dismissal is termination of complaint proceedings. On a plain
reading of sub-section (2) of Section 401, it cannot be said that the person
against whom the allegations of having committed the offence have been
made in the complaint and the complaint has been dismissed by the
Magistrate under Section 203, has no right to be heard because no process
has been issued. The dismissal of complaint by the Magistrate under Section
203 although it is at preliminary stage-nevertheless results in termination of
proceedings in a complaint against the persons who are alleged to have
committed the crime. Once a challenge is laid to such order at the instance of
the complainant in a revision petition before the High Court or the Sessions
Judge, by virtue of Section 401(2) of the Code, the suspects get the right of
hearing before the Revisional Court although such order was passed without
their participation. The right given to "accused" or "the other person" under
Section 401(2) of being heard before the Revisional Court to defend an order
which operates in his favour should not be confused with the proceedings
before a Magistrate under Sections 200, 202, 203 and 204. In the revision
petition before the High Court or the Sessions Judge at the instance of the
complainant challenging the order of dismissal of complaint, one of the things
that could happen is reversal of the order of the Magistrate and revival of the
complaint. It is in this view of the matter that the accused or other person
cannot be deprived of hearing on the face of the express provision contained
in Section 401(2) of the Code. The stage is not important whether it is pre-
process stage or post process stage.

xxxxx xxxxx xxxxx

53. We are in complete agreement with the view expressed by this Court in P.
Sundarrajan, Raghu Raj Singh Rousha and A.N. Santhanam. We hold, as it
must be, that in a revision petition preferred by the complainant before the
High Court or the Sessions Judge challenging an order of the Magistrate
dismissing the complaint under Section 203 of the Code at the stage under
Section 200 or after following the process contemplated under Section 202 of
the Code, the accused or a person who is suspected to have committed the
crime is entitled to hearing by the Revisional Court. In other words, where the
complaint has been dismissed by the Magistrate under Section 203 of the
Code, upon challenge to the legality of the said order being laid by the
complainant in a revision petition before the High Court or the Sessions
Judge, the persons who are arraigned as accused in the complaint have a
right to be heard in such revision petition. This is a plain requirement of
Section 401(2) of the Code. If the Revisional Court overturns the order of the
Magistrate dismissing the complaint and the complaint is restored to the file
of the Magistrate and it is sent back for fresh consideration, the persons who
are alleged in the complaint to have committed the crime have, however, no
right to participate in the proceedings nor are they entitled to any hearing of
 any sort whatsoever by the Magistrate until the consideration of the matter
by the Magistrate for issuance of process."

Though the present controversy is different, we have dealt with the said facet as we
intend to emphasise how the Courts have dealt with and addressed to such a matter
so that a borrower with vengeance could ultimately exhibit his high-handedness.

5. As the narration further proceeds, after the remand, the learned Magistrate vide
order dated 13th July, 2009, took cognizance and issued summons to V.N. Sahay,
Sandesh Tripathi and V.K. Khanna. The said accused persons knocked at the doors of
the High Court under Section 482 Cr.P.C. and the High Court in Crl. Misc. No.13628
of 2010, by order dated 27th May, 2013, ruled thus:

"A perusal of the complaint filed by the respondent no.2 also indicates that
the issues were with regard to the action of the bank officers against
respondent no.2 on the ground of alleged malafide and as such an offence
under sections 166/500 I.P.C. was made out. Both the sections are non
cognizable and bailable and triable by Magistrate of First Class. For the
foregoing reasons the 482 Petition deserves to be allowed and the criminal
complaint filed by the respondent no.2 being Complaint Case No.1058 of
2009 is liable to be quashed.

Accordingly the application under Section 482 Cr.P.C. is allowed and the
Criminal Complaint Case No.1058 of 2009, Prakash Kumar Bajaj v.
P.N.B. Housing Finance Ltd. And others, pending in the Court of
Additional Chief Judicial Magistrate, Court No.2 Varanasi is quashed."

6. Presently, we are required to sit in the time machine for a while. In the
interregnum period the borrowers filed an objection under section 13(3A) of the
SRFAESI Act. Be it noted, as the objection was not dealt with, the respondent No.3
preferred W.P. No.22254 of 2009, which was disposed of on 5th May, 2009 by the
High Court, directing disposal of the same. Eventually, the objection was rejected by
the competent authority vide order dated June 1, 2009. Being grieved by the
aforesaid order of rejection, the respondent No.3 filed Securitisation Appeal No.5 of
2010, before the Debt Recovery Tribunal (DRT), Allahabad, U.P., which was rejected
vide order dated 23rd November, 2012. The non-success before the DRT impelled
the borrowers to prefer an appeal before the Debts Recovery Appellate Tribunal
(DRAT), Allahabad, U.P.

7. At this stage, it is apposite to state that the third respondent, if we allow

ourselves to say so, have possibly mastered how to create a sense of fear in the
mind of the officials who are compelled to face criminal cases. After the High Court
had quashed the earlier proceeding, the third respondent, in October, 2011, filed
another application under Section 156(3) Cr.P.C. against V.N. Sahay, Sandesh
Tripathi and V.K. Khanna alleging criminal conspiracy and forging of documents
referring to three post-dated cheques and eventually it was numbered as Complaint
Case No. 344/2011, which gave rise to FIR No. 262 of 2011 under sections 465, 467,
468, 471, 386, 506, 34 and 120B IPC. Being not satisfied with the same, on
30.10.2011, he filed another application under Section 156(3) against the present
appellants alleging that there has been under-valuation of the property. It was
numbered as Complaint Case No. 396/2011 wherein the Trial Magistrate directed the
SHO to register FIR against the present appellants. Pursuant to the said order, FIR
No. 298/2011 was registered.

8. At this juncture, it is imperative to state that the third respondent made the
officials agree to enter into one time settlement. The said agreement was arrived at
with the stipulation that he shall withdraw various cases filed by him on acceptance
of the one time settlement. As the factual matrix would reveal, the third respondent
did not disclose about the initiation of the complaint cases no. 344/2011 and
396/2011. On 28.11.2011, the one time settlement was acted upon and the third
respondent deposited L 15 lakhs.

9. At this stage, it is apt to mention that V.N. Sahay and two others approached the
High Court of Allahabad in Writ (C) No. 17611/2013 wherein the learned Single
Judge heard the matter along with application under Section 482 Cr.P.C. in Crl. Misc.
No. 13628/2010. We have already reproduced the relevant part of the order passed
therein. Be it noted, the writ petition has also been disposed of by the High Court by
stating thus:

"Heard Mr. Manish Trivedi, learned counsel for the petitioner, Mr. Vivek
Kumar Srivastava, learned counsel appearing on behalf of respondent no.3
and learned AGA.

It is submitted by learned AGA that in the present case investigation has been
completed and final report has been submitted, considering the same, this
petition has become infructuous.

The interim order dated 2.12.2011 is hereby vacated.

Accordingly, this petition is disposed of."

10. At this juncture, we are impelled to look at the past again. The respondent had
preferred, as has been stated before, an appeal before the DRAT. The said appeal
was numbered as Appeal No. 5 of 2013. In the said appeal, the following order came
to be passed:

"During the pendency of the said application, a proposal was submitted by the
borrower to settle the claim for an amount of L 15.00 lacs. The said proposal
was accepted by the Bank by its letter dated 15.11.2011 and the appellant
also deposited the full amount, for which the settlement was arrived at i.e. L
15.00 lacs. Thereafter, the grievance of the appellant was that since the full
amount of the settlement has been paid by the appellant, therefore, the bank
should be directed to return the title deed, as the title deed was not returned.

The Tribunal was of the view that since the matter has been settled,
therefore, the securitization application was dismissed as infructuous and the
Tribunal did not pass any order for return of the title deed. Therefore, the
appellant being aggrieved of the judgment dated 23.11.2011 passed by the
Tribunal has filed the present appeal.
 Learned counsel for the appellant submitted that after when the full amount
under the settlement has been paid, the respondent-Bank was duty bound to
return the title deed, which has not been returned to the appellant.

It is contended on behalf of the respondent-Bank that the settlement was

accepted by letter dated 14.11.2011, wherein the condition was mentioned
that the appellant shall withdraw the complaint case which he has filed before
the Criminal Court.

Learned counsel for the appellant submitted that he has no objection to

withdraw the complaint case but the title deed must be returned to the
appellant.

The title deed shall be returned by the respondent-Bank to the appellant

within seven days from today and thereafter, the appellant shall move an
application to withdraw the Criminal Case No.1058/09 which is pending before
the Chief Judicial Magistrate, Varanasi."

11. The labyrinth maladroitly created by the respondent No.3 does not end here. It
appears that he had the indefatigable spirit to indulge himself in the abuse of the
process of the Court. The respondent No.3 had filed an application under Section
156(3) Cr.P.C. before the learned Additional Chief Judicial Magistrate on 30th
October, 2011, against the present appellants, who are the Vice-President and the
valuer respectively. In the body of the petition, as we find in the paragraphs 19 and
20, it has been stated thus:

"That the aforesaid case was referred to the Deputy Inspector General of
Police, Varanasi through speed post but no proceeding had been initiated till
today in that regard.

That the aforesaid act done by the aforesaid accused prima-facie comes in the
ambit of section 465, 467, 471, 386, 504, 34 & 120B IPC and in this way
cognizable offence is made out and proved well."

12. On the basis of the aforesaid application the learned Additional Chief Judicial
Magistrate, Varanasi, U.P., called for a report from the concerned police station and
received the information that no FIR had been lodged and hence, no case was
registered at the local police station. Thereafter, the learned Additional Chief Judicial
Magistrate observed as follows:

"It has been stated clearly in the application by the applicant that it is the
statement of applicant that he had already given 3 postdated cheques to the
financial bank for payment and despite the availability of the postdated
cheques in the financial society, even a single share in the loan account has
not been got paid. The opposite parties deliberately due to conspiracy and
prejudice against applicant have not deposited previously mentioned
postdated cheques for payment and these people are doing a conspiracy to
grab the valuable property of the applicant. Under a criminal conspiracy,
illegally and on false and fabricated grounds a petition has been filed before
 District Collector (Finance & Revenue) Varanasi, which comes under the ambit
of cognizable offence. Keeping in view the facts of the case, commission of
cognizable offence appears to be made out and it shall be justifiable to get
done the investigation of the same by the police."

After so stating it directed as follows:

"In the light of the application, SHO Bhelpur, Varanasi is hereby directed to
register the case and investigate the same."

13. On the basis of the aforesaid order, F.I.R. No.298 of 2011 was registered, which
gave rise to case Crime No.415 of 2011 for the offences punishable under Sections
465, 467, and 471 I.P.C. Being dissatisfied with the aforesaid order, the appellants
moved the High Court in Crl. Misc. No.24561 of 2011. The High Court in a cryptic
order opined that on a perusal of the F.I.R. it cannot be said that no cognizable
offence is made out. Being of this view, it has declined to interfere with the order.
Hence, this appeal by special leave.

14. In course of hearing, learned counsel for the State of U.P. has submitted that the
investigating agency has already submitted the final report on 21st November, 2012.
The said report reads as follows:

"Complainant in the present case has not appeared before any of the
investigators, even after repeated summoning. And that the action of Smt.
Priyanka Srivastava has been done as per her legal rights in 'good faith',
which is protected under section 32 of the SRFAESI Act, 2002. With the
abovestated investigations, the present report is concluded."

15. On a query being made, learned counsel for the State would contend that the
learned Magistrate has not passed any order on the final report. Mr. Ajay Kumar,
learned counsel appearing for the appellants would submit that the learned
Magistrate has the option to accept the report by rejecting the final form/final report
under Section 190 Cr.P.C. and may proceed against the appellants or may issue
notice to the complainant, who is entitled to file a protest petition and, thereafter,
may proceed with the matter and, therefore, this Court should address the
controversy on merits and quash the proceedings.

16. We have narrated the facts in detail as the present case, as we find, exemplifies
in enormous magnitude to take recourse to Section 156(3) Cr.P.C., as if, it is a
routine procedure. That apart, the proceedings initiated and the action taken by the
authorities under the SARFAESI Act are assailable under the said Act before the
higher forum and if, a borrower is allowed to take recourse to criminal law in the
manner it has been taken it, needs no special emphasis to state, has the inherent
potentiality to affect the marrows of economic health of the nation. It is clearly
noticeable that the statutory remedies have cleverly been bypassed and prosecution
route has been undertaken for instilling fear amongst the individual authorities
compelling them to concede to the request for one time settlement which the
financial institution possibly might not have acceded. That apart, despite agreeing for
withdrawal of the complaint, no steps were taken in that regard at least to show the
bonafide. On the contrary, there is a contest with a perverse sadistic attitude.
Whether the complainant could have withdrawn the prosecution or not, is another
matter. Fact remains, no efforts were made.

17. The learned Magistrate, as we find, while exercising the power under Section
156(3) Cr.P.C. has narrated the allegations and, thereafter, without any application
of mind, has passed an order to register an FIR for the offences mentioned in the
application. The duty cast on the learned Magistrate, while exercising power under
Section 156(3) Cr.P.C., cannot be marginalized. To understand the real purport of
the same, we think it apt to reproduce the said provision:

"156. Police officer's power to investigate congnizable case. - (1) Any officer
in charge of a police station may, without the order of a Magistrate,
investigate any cognizable case which a Court having jurisdiction over the
local area within the limits of such station would have power to inquire into or
try under the provisions of Chapter XIII.

(2) No proceeding of a police officer in any such case shall at any stage be
called in question on the ground that the case was one which such officer was
no empowered under this section to investigate.

(3) Any Magistrate empowered under section 190 may order such an
investigation as above-mentioned."

18. Dealing with the nature of power exercised by the Magistrate under Section
156(3) of the Cr.P.C., a three-Judge Bench in Devarapalli Lakshminarayana
Reddy and others v. V. Narayana Reddy and others, (1976) 3 SCC 252, had to
express thus:

"It may be noted further that an order made under sub-section (3) of Section
156, is in the nature of a peremptory reminder or intimation to the police to
exercise their plenary powers of investigation under Section 156(1). Such an
investigation embraces the entire continuous process which begins with the
collection of evidence under Section 156 and ends with a report or
chargesheet under Section 173."

19. In Anil Kumar v. M.K. Aiyappa, 2013(4) R.C.R.(Criminal) 586 : 2013(5)

Recent Apex Judgments (R.A.J.) 479 : (2013) 10 SCC 705, the two-Judge
Bench had to say this:

"The scope of Section 156(3) Cr.P.C. came up for consideration before this
Court in several cases. This Court in Maksud Saiyed [(2008) 5 SCC 668]
examined the requirement of the application of mind by the Magistrate before
exercising jurisdiction under Section 156(3) and held that where jurisdiction is
exercised on a complaint filed in terms of Section 156(3) or Section 200
Cr.P.C., the Magistrate is required to apply his mind, in such a case, the
Special Judge/Magistrate cannot refer the matter under Section 156(3)
against a public servant without a valid sanction order. The application of
mind by the Magistrate should be reflected in the order. The mere statement
that he has gone through the complaint, documents and heard the
 complainant, as such, as reflected in the order, will not be sufficient. After
going through the complaint, documents and hearing the complainant, what
weighed with the Magistrate to order investigation under Section 156(3)
Cr.P.C., should be reflected in the order, though a detailed expression of his
views is neither required nor warranted. We have already extracted the order
passed by the learned Special Judge which, in our view, has stated no
reasons for ordering investigation."

20. In Dilawar Singh v. State of Delhi, 2007(4) R.C.R.(Criminal) 115 :

2007(5) Recent Apex Judgments (R.A.J.) 37 : (2007) 12 SCC 496, this Court
ruled thus:

"18. ...11. The clear position therefore is that any Judicial Magistrate, before
taking cognizance of the offence, can order investigation under Section
156(3) of the Code. If he does so, he is not to examine the complainant on
oath because he was not taking cognizance of any offence therein. For the
purpose of enabling the police to start investigation it is open to the
Magistrate to direct the police to register an FIR. There is nothing illegal in
doing so. After all registration of an FIR involves only the process of entering
the substance of the information relating to the commission of the cognizable
offence in a book kept by the officer in charge of the police station as
indicated in Section 154 of the Code. Even if a Magistrate does not say in so
many words while directing investigation under Section 156(3) of the Code
that an FIR should be registered, it is the duty of the officer in charge of the
police station to register the FIR regarding the cognizable offence disclosed by
the complainant because that police officer could take further steps
contemplated in Chapter XII of the Code only thereafter."

21. In CREF Finance Ltd. v. Shree Shanthi Homes (P) Ltd., 2005(4) R.C.R.
(Criminal) 26 : (2005) 7 SCC 467, the Court while dealing with the power of
Magistrate taking cognizance of the offences, has opined that having considered the
complaint, the Magistrate may consider it appropriate to send the complaint to the
police for investigation under section 156(3) of the Code of Criminal Procedure.

And again:

"When a Magistrate receives a complaint he is not bound to take cognizance if

the facts alleged in the complaint disclose the commission of an offence. The
Magistrate has discretion in the matter. If on a reading of the complaint, he
finds that the allegations therein disclose a cognizable offence and the
forwarding of the complaint to the police for investigation under Section
156(3) will be conducive to justice and save the valuable time of the
Magistrate from being wasted in enquiring into a matter which was primarily
the duty of the police to investigate, he will be justified in adopting that
course as an alternative to taking cognizance of the offence itself. As said
earlier, in the case of a complaint regarding the commission of cognizable
offence, the power under Section 156(3) can be invoked by the Magistrate
 before he takes cognizance of the offence under Section 190(1)(a). However,
if he once takes such cognizance and embarks upon the procedure embodied
in Chapter XV, he is not competent to revert back to the pre-cognizance stage
and avail of Section 156(3)."

22. Recently, in Ramdev Food Products Private Limited v. State of Gujarat,

2015(2) R.C.R.(Criminal) 372 : 2015(2) Recent Apex Judgments (R.A.J.)
303 : Criminal Appeal No. 600 of 2007 decided on 16.03.2015, while dealing
with the exercise of power under Section 156(3) Cr.P.C. by the learned Magistrate, a
three-Judge Bench has held that:

".... the direction under Section 156(3) is to be issued, only after application
of mind by the Magistrate. When the Magistrate does not take cognizance and
does not find it necessary to postpone instance of process and finds a case
made out to proceed forthwith, direction under the said provision is issued. In
other words, where on account of credibility of information available, or
weighing the interest of justice it is considered appropriate to straightaway
direct investigation, such a direction is issued. Cases where Magistrate takes
cognizance and postpones issuance of process are cases where the Magistrate
has yet to determine "existence of sufficient ground to proceed."

23. At this stage, we may usefully refer to what the Constitution Bench has to say in
Lalita Kumari v. Govt. of U.P., 2013(4) R.C.R.(Criminal) 979 : 2013(6)
Recent Apex Judgments (R.A.J.) 389 : (2014) 2 SCC 1 in this regard. The larger
Bench had posed the following two questions:-

"(i) Whether the immediate non-registration of FIR leads to scope for

manipulation by the police which affects the right of the victim/complainant to
have a complaint immediately investigated upon allegations being made; and

(ii) Whether in cases where the complaint/information does not clearly

disclose the commission of a cognizable offence but the FIR is compulsorily
registered then does it infringe the rights of an accused."

Answering the questions posed, the larger Bench opined thus:

"49. Consequently, the condition that is sine qua non for recording an FIR
under Section 154 of the Code is that there must be information and that
information must disclose a cognizable offence. If any information disclosing a
cognizable offence is led before an officer in charge of the police station
satisfying the requirement of Section 154(1), the said police officer has no
other option except to enter the substance thereof in the prescribed form,
that is to say, to register a case on the basis of such information. The
provision of Section 154 of the Code is mandatory and the officer concerned
is duty-bound to register the case on the basis of information disclosing a
cognizable offence. Thus, the plain words of Section 154(1) of the Code have
to be given their literal meaning.
 "Shall"

xxx xxx xxx xxx

72. It is thus unequivocally clear that registration of FIR is mandatory and

also that it is to be recorded in the FIR book by giving a unique annual
number to each FIR to enable strict tracking of each and every registered FIR
by the superior police officers as well as by the competent court to which
copies of each FIR are required to be sent.

"Information"

xxx xxx xxx xxx

111. The Code gives power to the police to close a matter both before and
after investigation. A police officer can foreclose an FIR before an
investigation under Section 157 of the Code, if it appears to him that there is
no sufficient ground to investigate the same. The section itself states that a
police officer can start investigation when he has "reason to suspect the
commission of an offence". Therefore, the requirements of launching an
investigation under Section 157 of the Code are higher than the requirement
under Section 154 of the Code. The police officer can also, in a given case,
investigate the matter and then file a final report under Section 173 of the
Code seeking closure of the matter. Therefore, the police is not liable to
launch an investigation in every FIR which is mandatorily registered on
receiving information relating to commission of a cognizable offence.

xxx xxx xxx xxx

115. Although, we, in unequivocal terms, hold that Section 154 of the Code
postulates the mandatory registration of FIRs on receipt of all cognizable
offences, yet, there may be instances where preliminary inquiry may be
required owing to the change in genesis and novelty of crimes with the
passage of time. One such instance is in the case of allegations relating to
medical negligence on the part of doctors. It will be unfair and inequitable to
prosecute a medical professional only on the basis of the allegations in the
complaint."

After so stating the constitution Bench proceeded to state that where a preliminary
enquiry is necessary, it is not for the purpose for verification or otherwise of the
information received but only to ascertain whether the information reveals any
cognizable offence. After laying down so, the larger Bench proceeded to state:-

"120.6. As to what type and in which cases preliminary inquiry is to be

conducted will depend on the facts and circumstances of each case. The
category of cases in which preliminary inquiry may be made are as under:

(a) Matrimonial disputes/family disputes

 (b) Commercial offences

(c) Medical negligence cases

(d) Corruption cases

(e) Cases where there is abnormal delay/laches in initiating criminal

prosecution, for example, over 3 months' delay in reporting the matter
without satisfactorily explaining the reasons for delay. The aforesaid are only
illustrations and not exhaustive of all conditions which may warrant
preliminary inquiry.

120.7. While ensuring and protecting the rights of the accused and the
complainant, a preliminary inquiry should be made time-bound and in any
case it should not exceed 7 days. The fact of such delay and the causes of it
must be reflected in the General Diary entry."

We have referred to the aforesaid pronouncement for the purpose that on certain
circumstances the police is also required to hold a preliminary enquiry whether any
cognizable offence is made out or not.

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 of
Vice-President, neither 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 avoid 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.

26. At this stage it is seemly to state that power under Section 156(3) warrants
application of judicial mind. A court of law is involved. It is not the police taking
steps at the stage of Section 154 of the code. A litigant at his own whim cannot
invoke the authority of the Magistrate. A principled and really grieved citizen with
clean hands must have free access to invoke the said power. It protects the citizens
but when pervert litigations takes this route to harass their fellows citizens, efforts
are to be made to scuttle and curb the same.

27. In our considered opinion, a stage has come in this country where Section
156(3) Cr.P.C. applications are to be supported by an affidavit duly sworn by the
applicant who seeks the invocation of the jurisdiction of the Magistrate. That apart,
in an appropriate case, the learned Magistrate would be well advised to verify the
truth and also can verify the veracity of the allegations. This affidavit can make the
applicant more responsible. We are compelled to say so as such kind of applications
are being filed in a routine manner without taking any responsibility whatsoever only
to harass certain persons. That apart, it becomes more disturbing and alarming when
one tries to pick up people who are passing orders under a statutory provision which
can be challenged under the framework of said Act or under Article 226 of the
Constitution of India. But it cannot be done to take undue advantage in a criminal
court as if somebody is determined to settle the scores. We have already indicated
that there has to be prior applications under Section 154(1) and 154(3) while filing a
petition under Section 156(3). Both the aspects should be clearly spelt out in the
application and necessary documents to that effect shall be filed. The warrant for
giving a direction that an the application under Section 156(3) be supported by an
affidavit so that the person making the application should be conscious and also
endeavour to see that no false affidavit is made. It is because once an affidavit is
found to be false, he will be liable for prosecution in accordance with law. This will
deter him to casually invoke the authority of the Magistrate under Section 156(3).
That apart, we have already stated that the veracity of the same can also be verified
by the learned Magistrate, regard being had to the nature of allegations of the case.
We are compelled to say so as a number of cases pertaining to fiscal sphere,
matrimonial dispute/family disputes, commercial offences, medical negligence cases,
corruption cases and the cases where there is abnormal delay/laches in initiating
criminal prosecution, as are illustrated in Lalita Kumari are being filed. That apart,
the learned Magistrate would also be aware of the delay in lodging of the FIR.

28. The present lis can be perceived from another angle. We are slightly surprised
that the financial institution has been compelled to settle the dispute and we are also
disposed to think that it has so happened because the complaint cases were filed.
Such a situation should not happen.

29. At this juncture, we may fruitfully refer to section 32 of the SRFAESI Act, which
reads as follows :
 "32. Protection of action taken in good faith.-

No suit, prosecution or other legal proceedings shall lie against any secured
creditor or any of his officers or manager exercising any of the rights of the
secured creditor or borrower for anything done or omitted to be done in good
faith under this Act."

30. In the present case, we are obligated to say that learned Magistrate should have
kept himself alive to the aforesaid provision before venturing into directing
registration of the FIR under Section 156(3) Cr.P.C. It is because the Parliament in
its wisdom has made such a provision to protect the secured creditors or any of its
officers, and needles to emphasize, the legislative mandate, has to be kept in mind.

31. In view of the aforesaid analysis, we allow the appeal, set aside the order passed
by the High Court and quash the registration of the FIR in case Crime No.298 of
2011, registered with Police Station, Bhelupur, District Varanasi, U.P.

32. A copy of the order passed by us be sent to the learned Chief Justices of all the
High Courts by the Registry of this Court so that the High Courts would circulate the
same amongst the learned Sessions Judges who, in turn, shall circulate it among the
learned Magistrates so that they can remain more vigilant and diligent while
exercising the power under Section 156(3) Cr.P.C.

.
VI. VICARIOUS LIABILITY OF MANAGING DIRECTOR IN CRIMINAL
OFFENCES:

Sharad Kumar Sanghi v. Sangita Rane (SC) : Law Finder Doc Id # 653165

2015 ALL MR(Cri) 2405 : 2015(2) Recent Apex Judgments (R.A.J.) 54 :

2015(2) R.C.R.(Criminal) 120 : 2015(2) Law Herald (SC) 1289 : 2015(89)
ACrC 702 : 2015(149) AIC 134 : 2015(2) JCC 1277 : 2015(3) Law Herald
1924 : 2015 AIR (SCW) 4202 : 2015(2) AICLR 862 : 2016(1) SCC(Cri) 159 :
2015(12) SCC 781 : 2015(3) Scale 126 : 2016(1) AIR Bom.R (Cri) 501 :
2015(1) Apex Court Judgments (SC) 613 : 2015(2) MadWN (Cri) 39 :
2015(61) Orrisa Cri. R. 551 : 2015(2) All. Crl. Rulings 1457

SUPREME COURT OF INDIA

Before :- Dipak Misra and Adarsh Kumar Goel, JJ.

Criminal Appeal No. 1584 of 2007. D/d. 10.02.2015.

Sharad Kumar Sanghi - Appellant

Versus

Sangita Rane - Respondent

For the Appellant :- Mr. A.V. Rangam, Advocate.

For the Respondent :- Ms. Manjeet Kirpal, Advocate.

NUTSHELL

Offence of cheating by a company - Company not arrayed as accused -

Complaint against Managing Director of company without any specific
allegation of cheating - Complaint quashed.

Indian Penal Code, 1860 Section 420 Criminal Procedure Code, 1973
Sections 200 and 202 Vicarious liability - Complaint against a company that
it sold old car to complainant - Criminal complaint filed against Managing
Director of the Company and not against the Company - There is no specific
allegation against the Managing Director - Complaint quashed - Held :-

(i) When a complainant intends to rope in a Managing Director or any

officer of a company, it is essential to make requisite allegation to
constitute the vicarious liability. 2007(4) RCR (Crl.) 406 : 2007(5)
Recent Apex Judgment (RAJ) 229, relied.

[Paras 9, 10, 11 and 13]

Cases Referred :

GHCL Employees Stock Option Trust v. India Infoline Ltd., 2013(2) R.C.R.(Criminal)
519 : 2013(2) Recent Apex Judgments (R.A.J.) 561 : (2013) 4 SCC 505.

Maharashtra State Electricity Distribution Company Ltd. v. Datar Switchgear Ltd.,

2010(4) R.C.R.(Criminal) 848 : 2010(6) Recent Apex Judgments (R.A.J.) 291 :
(2010) 10 SCC 479.

Maksud Saiyad v. State of Gujarat, 2007(4) R.C.R. (Criminal) 406 : 2007(5) Recent
Apex Judgments (R.A.J.) 229 : (2008) 5 SCC 668.

S.K. Alagh v. State of UP, 2008(2) R.C.R.(Criminal) 79 : 2008(2) Recent Apex

Judgments (R.A.J.) 97 : (2008) 5 SCC 662.

JUDGMENT

Dipak Misra, J. - Calling in question the legal validity of the order dated 30.11.2006
passed by the learned Single Judge of the High Court of Madhya Pradesh at Jabalpur
in M.Cr.C.No. 1922 of 2002 whereby the learned Judge had declined to exercise the
power under section 482 of the Code of Criminal Procedure (Cr.P.C.) for quashing of
the proceedings in Criminal Case No. 895 of 2001 pending in the court of Judicial
Magistrate First Class, Betul which has been registered under Section 420 of the
Indian Penal Code against the appellant, the present appeal has been preferred by
special leave.

2. Bereft of unnecessary details, the facts which are necessary to be stated are that
the appellant who is the Managing Director M/s. Sanghi Brothers (Indore) Ltd.,
Indore which is a registered company duly incorporated and registered under the
Companies Act, 1956 and is engaged in the business of automobile sale, finance and
shipping etc. having branches at various places including the city of Bhopal. The
respondent-complainant obtained a quotation from the Bhopal Branch for purchase
of a TATA Diesel vehicle model SFC 709/38 LB in the month of April 1998 and the
vehicle was delivered to the respondent on 01.05.1998 on payment of the price
deposited at Bhopal vide Bank Draft issued from the State Bank of India, Sarni,
Betul. The respondent faced difficulty with the vehicle and eventually he came to
know in the month of August 2000 that there was a discrepancy in the engine
number of the invoice issued to him. On further enquiry, he found that there is a
letter issued by Tata Engineering and Locomotive Company (TELCO) on 7.11.2000
that in the course of transit from the company to Bhopal, the said vehicle had met
with an accident as a result of which the engine was replaced by another engine.
Coming to know of this, the respondent filed a complaint under Section 200 of the
Cr.P.C. alleging that M/s Sanghi Brothers (Indore) Ltd., Indore being represented by
the Managing Director, Sharad Kumar Sanghi, had suppressed the information and
deliberately cheated the respondent.

3. The learned Magistrate, after following the procedure as contemplated under

Section 202 of the Cr.P.C., took cognizance of the offence to which we shall advert to
at a later stage.
4. After cognizance was taken and summons were issued, the appellant filed a
revision before the learned Sessions Judge, Betul which was dismissed on
27.02.2002.

5. Being aggrieved by the aforesaid order, he preferred an application under Section

482 of the Cr.P.C. before the High Court. It was contended before the High Court
that the learned Magistrate had no territorial jurisdiction; that there was no deceit by
the respondent; that the company was not made an accused in the complaint and,
therefore, the complaint was not maintainable; and that there was no mens rea. The
High Court, as is manifest from the order impugned repelled all the submissions and
dismissed the application for quashment.

6. We have heard Mr. Sidharth Luthra, learned senior counsel for the appellant and
Mr. Akshat Shrivastava, learned counsel for the respondent.

7. It is not in dispute that the vehicle was purchased by the respondent on

01.05.1998. The invoice contained a different engine number than the engine that
was fitted into the vehicle. The respondent lodged the complaint on 08.05.2001. To
satisfy ourselves whether there has been specific allegation against the appellant, we
have carefully perused the complaint filed under Section 200 of the Cr.P.C. English
translation of the complaint has been brought on record. The original complaint
which is in Hindi has also been filed. The allegations made against the appellant read
as follows :

"That the proprietor of M/s Sanghi Brothers Indore accused Sharad S/o Sohan
Sanghi negligently prepare the accidental vehicle No. 709 L.M. & projected
the same as new to deliver the complainant causing gain to self and loss to
the complainant which is punishable under Section 420 of the I.P.C."

8. Barring the aforesaid allegation in the initial statement made under Section 200 of
the Cr.P.C., the complainant after inheriting the fact, has stated thus :

"Sanghi Brothers Limited run by Mr. Sharad Sanghi committed cheating with
the Applicant by delivering accidented vehicle in place of a new one and
caused gross financial loss. Applicant is operating the vehicle after borrowing
loan from Bank and the vehicle is not worth operating at present due to said
defects. I have filed the Photostat copies of the concerning documents in the
case."

9. The allegations which find place against the Managing Director in his personal
capacity seem to be absolutely vague. When a complainant intends to rope in a
Managing Director or any officer of a company, it is essential to make requisite
allegation to constitute the vicarious liability. In Maksud Saiyad v. State of
Gujarat 2007(4) R.C.R.(Criminal) 406 : 2007(5) Recent Apex Judgments
(R.A.J.) 229 : (2008) 5 SCC 668, it has been held, thus:

"Where a jurisdiction is exercised on a complaint petition filed in terms of

Section 156(3) or section 200 of the Code of Criminal Procedure, the
Magistrate is required to apply his mind. The Penal Code does not contain any
provision for attaching vicarious liability on the part of the Managing Director
 or the Directors of the Company when the accused is the Company. The
learned Magistrate failed to pose unto himself the correct question viz. as to
whether the complaint petition, even if given face value and taken to be
correct in its entirety, would lead to the conclusion that the respondents
herein were personally liable for any offence. The Bank is a body corporate.
Vicarious liability of the Managing Director and Director would arise provided
any provision exists in that behalf in the statute. Statutes indisputably must
contain provision fixing such vicarious liabilities. Even for the said purpose, it
is obligator on the part of the complainant to make requisite allegations which
would attract the provisions constituting vicarious liability."

10. The same principle has been reiterated in S.K. Alagh v. State of UP, 2008(2)
R.C.R. (Criminal) 79 : 2008(2) Recent Apex Judgments (R.A.J.) 97 : (2008)
5 SCC 662; Maharashtra State Electricity Distribution Company Ltd. v. Datar
Switchgear Ltd. 2010(4) R.C.R.(Criminal) 848 : 2010(6) Recent Apex
Judgments (R.A.J.) 291 : (2010) 10 SCC 479; and GHCL Employees Stock
Option Trust v. India Infoline Ltd., 2013(2) R.C.R.(Criminal) 519 : 2013(2)
Recent Apex Judgments (R.A.J.) 561 : (2013) 4 SCC 505.

11. In the case at hand as the complainant's initial statement would reflect, the
allegations are against the company, the company has not been made a party and,
therefore, the allegations are restricted to the Managing Director. As we have noted
earlier, allegations are vague and in fact, principally the allegations are against the
company. There is no specific allegation against the Managing Director.

12. At this juncture, it is interesting to note, as we have stated earlier, the learned
Magistrate while passing the order dated 22.10.2001, had opined, thus :

"It appears prima-facie from the complaint filed by the complainant,

documents, evidence and arguments that accused company has committed
cheating with the complaint by delivering old and accidented vehicle to her at
the cost of a new truck. Accordingly, prima-facie sufficient grounds exist for
registration of a complaint against the accused under Section 420 of I.P.C.
and is accordingly registered."

13. When the company has not been arraigned as an accused, such an order could
not have been passed. We have said so for the sake of completeness. In the ultimate
analysis, we are of the considered opinion that the High Court should have been well
advised to quash the criminal proceedings initiated against the appellant and that
having not been done, the order is sensitively vulnerable and accordingly we set
aside the same and quash the criminal proceedings initiated by the respondent
against the appellant.

14. The appeal stands allowed accordingly.

.
Maksud Saiyed v. State of Gujarat, (SC) : Law Finder Doc Id # 132377

2007(4) R.C.R.(Criminal) 406 : 2007(5) Recent Apex Judgments (R.A.J.)

229 : 2007(11) JT 276 : 2008(5) SCC 668 : 2007(11) Scale 318 : 2007(9)
SCR 1113 : 2008(2) SCC(Cri) 692 : 2007(4) Cri.CC 654 : 2008(5) GLR 3951 :
2007(4) BC 568 : 2008(4) Mh.LJ (Crl.) 254 : 2008(1) W.L.C. 119 : 2008(1)
DCR 298 : 2008(1) ECrC 226 : 2008 Cri. L.R. (SC) 433 : 2007(140) Comp Cas
590 : 2007(59) AIC 139 : 2008(1) CTC 259 : 2007(3) Apex Court Judgments
(SC) 538 : 2008(1) L.R.C. 401 : 2008(sup) CutLT (Criminal) 715 : 2008(39)
Orrisa Cri. R. 326

SUPREME COURT OF INDIA

Before :- S.B. Sinha & Harjit Singh Bedi, JJ.

Criminal Appeal No. 1248 of 2007 [Arising out of SLP(Crl.) No. 923 of 2006]. D/d.
18.9.2007

Maksud Saiyed - Appellant

Versus

State of Gujarat & Ors. - Respondents

For the Appellant :- Bishwajit Bhattacharyya, Senior Advocate with Sudarshan Rajan,
Debashish Mukherjee and Narasimhan, Advocates.

For the Respondents :- P.P. Rao, Senior Advocate with Ms. Hemantika Wahi and Ms.
Meena Mathur, Advocates.

IMPORTANT

Criminal complaint against a company under sections 120B, 425 and 500
Indian Penal Code - Not stated who acted on behalf of company -
Directors/Managing Directors cannot be prosecuted without specie
allegations against them - They were not vicariously liable.

A. Indian Penal Code, Sections 500, 425 and 120B - Vicarious liability -
Criminal complaint against a company or Bank under sections 500, 425 and
120B Indian Penal Code - Not stated in complaint who acted on behalf of
company/Bank - Directors/Managing Directors of the Company cannot be
prosecuted on the ground that they were vicariously liable - Bank is a
corporate body :-

(1) Indian Penal Code does not contain any provision for attaching
vicarious liability on the part of the Managing Director or the
Directors of the Company when the accused is the company.
 (2) Vicarious liability of the Managing Director and Director would
arise provided any provision exists in that behalf in the statute.

[Para 13]

B. Criminal Procedure Code, Section 482 - Quashing of criminal proceedings

by High Court in exercise of power under Section 482 Criminal Procedure
Code - The court may not enter into determination of a disputed question of
fact at that stage - It may, however, take note of the allegations made in
the complaint petition vis-a-vis the conduct of the parties.

[Para 6]

Cases referred :

Saroj Kumar Poddar v. State (NCT of Delhi), 2007(1) RCR(Criminal) 741 : 2007(1)
R.A.J. 205 : [2007(2) SCALE 36].

Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of Delhi, 2007(2) RCR(Criminal)
575 : 2007(2) RCR(Civil) 738 : 2007(2) R.A.J. 412 : JT 2007(5) SC 529.

S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, 2007(2) RCR(Criminal) 126 : 2007(1)

R.A.J. 871 : 2007(3) SCALE 245.

Pepsi Foods Ltd. v. Special Judicial Magistrate, 1997(4) RCR(Criminal) 761 : (1998)5
SCC 749.

JUDGMENT

S.B. Sinha, J. - Leave granted.

2. Respondent No. 2 is a former Chairman-cum-Managing Director of Dena Bank. He

is presently the Chairman and Managing Director of Bank of Baroda, Mumbai.
Respondent Nos. 3 to 11 are Directors of Dena Bank. Appellant is a Director of
Nagami Nicotine Pvt. Ltd. (hereinafter referred to as "the Company"). He had
transactions with the said Company. He had taken loan from Dena Bank. As loans
were not paid, admittedly, an original application was filed against him before the
Debts Recovery Tribunal, Ahmedabad for recovery of a sum of Rs. 120.13 lakhs from
the Company.

3. The Bank floated a public issue of 8 crores equity shares of Rs. 10/- each for cash
at a premium of Rs. 17/- i.e. at a price of Rs. 27/- each. Prospectus was published
for the purpose of public issue and therein some false and misleading information
had been given with regard to sanction limits, the dues and export bills of the
Company. It was alleged that the Company had committed an offence punishable
under Sections 120B, 425, 191, 192, 177, 181 as also 500 of the Indian Penal Code.
A criminal complaint was filed before the Chief Judicial Magistrate, Vadodara by the
appellant on or about 28.02.2005 alleging :
 "(A) Following false, fabricated and fraudulent documents illegally and
dishonestly misused by Shri G.C. Garg in the absence of the sanction letters
of the Bank along with its stipulated sanctioned terms and conditions for the
sanctioned so called credit facilities, evidently acceptance of Complainant's
Company for the stipulated sanctioned terms and conditions does not exist.
Hence following false, fabricated and fraudulent dishonestly and purposefully
misused documents with mala fide intention are illegal, invalid and not
maintainable. Thus, Shri G.C. Garg solemnly affirmed and signed the
verification of the aforesaid Original Application by dishonestly making false
claim under Section 209 by giving false and fabricated statements,
information and evidences under Sections 177, 181, 191, 192, 196, 199, 200,
470 and 471 of Indian Penal Code."

4. An order under Sub-section (3) of Section 156 of the Code of Criminal Procedure
was passed by the learned Chief Judicial Magistrate relying on or on the basis of
allegations made in the said complaint petition. The learned Chief Judicial Magistrate
by an order dated 28.02.2005 directed the police authorities to investigate the
complaint. Respondent filed an application under Section 482 of the Code of Criminal
Procedure for quashing the complaint and the investigation on 10.05.2005. By
reason of the impugned judgment dated 9.01.2006, the said application has been
allowed.

5. Mr. Bishwajit Bhattacharyya, learned counsel appearing on behalf of the appellant

would submit that the High Court committed a serious error in passing the impugned
order insofar as it failed to take into consideration that it had no jurisdiction to quash
the police investigation at that stage. According to the learned counsel, the acts of
omission and commission on the part of the bank in causing loss of reputation of the
appellant is evident on its face. Such an action on the part of the officers of the
appellant's bank was wholly irresponsible.

6. The jurisdiction of the High Court to quash a FIR in exercise of its jurisdiction
under Section 482 of the Code of Criminal Procedure is well known. The court may
not enter into determination of a disputed question of fact at that stage. It may,
however, take note of the allegations made in the complaint petition vis-a-vis the
conduct of the parties. It is not disputed that the bank had filed an original
application before the Debts Recovery Tribunal, Ahmedabad. A civil suit was filed at
Vadodara in the year 2003. In the prospectus issued, it was stated :

Name
"Sr. Suit Date of
of the Branch Amount claimed (Rs. in lacs)
No. details Filing
party

4 DRT, A M/s. A.R.B. 993.74 The case is filed against the Bank for
'bad Nagami A'bad non-submission of export bills and
28.3.03 Nicotine non-releasing of the sanctioned
Pvt. Ltd. limits. We have taken plea that since
the borrower is not clearing the dues
 of the Bank, Bank has not released
the export bills as per procedure of
UCPDC rules."

7. It is not in dispute that in the year 2003, the matter was pending before the City
Civil Court, Ahmedabad. Other relevant facts stated in the said prospectus were not
incorrect. The stand taken by the respondents therein as contained in Column under
the Head "Nature of claim made against the Bank" is also not incorrect as the same
was subject matter of a civil suit. Appellant in its notice addressed to Respondent No.
2 herein through his advocate dated 25.01.2005 stated :

"My client says and submits that the litigation you are mentioning does not
exist at DRT, Ahmedabad. On the contrary my client has filed Special Civil
Suit No. 178/2003 on 28.3.2003 and the same is pending for adjudication in
the Civil Court Vadodara before the Hon'ble Civil Judge (SD) Vadodara.
Besides my client does not know ARB, Ahmedabad and also not aware of its
place of existence and its whereabouts in Ahmedabad and ARB, Ahmedabad
has nothing to do with the suit."

8. A case of defamation was found only on that basis. It is not in dispute that
Respondent No. 2 in reply to the said notice dated 5.02.2005 through his advocate
stated :

"5. The averments made in para 3 of your legal notice are not true and
correct and are not admitted. The export bills were sent to Bank of Fujirah
and the same were returned unpaid due to discrepancy in the documents, and
again, the said export bills were sent to HSBC Bank but, the same were
returned unpaid by HSBC bank without payment on account of discrepancy in
the Export bills L/C. There is no negligence on the part of Bank in respect of
Export bills under L/C. Thus, to pressurise the Bank, your client has filed the
Special Civil Suit No. 178/2003 in the Civil Court at Vadodara. In fact, in para
51 of your client's plaint, it is claimed that the branch did not release the CC
hypothecation limit.

*** *** ***

7. The contents of para 5 of your notice are not true and correct and the
same are denied by my client and there is no question of concealing any facts
in the prospectus as alleged by you.

There is no question of any concealment or suppression of facts in the

prospectus. Had the notice been given in time the bank could have taken
corrective steps in time to include the fact which was omitted unintentionally.
The public issue was closed on 29.01.2005 (Saturday) as mentioned in the
prospectus.
 Draft prosecectus of public issue was filed by the Bank with SEBI on
3.12.2004 and was kept on the Website of the bank, SEBI and Lead Manager
M/s. SBI Caps and a press note was released. Final prospectus of the issue
was filed with SEBI on 10.1.2005 and was kept on Website of the Bank, SEBI
and lead Manager M/s. SBI Caps, and a press note was released. Statutory
advertisement was published in the newspaper on 12.1.2005. The public issue
opened on 24.1.2005 and closed on 29.1.2005.

My client received your notice on 27.1.2005, but it was not readable and
hence my client informed on fax to send the same again. However, the notice
was not refaxed and instead my client received the notice on 28.1.2005 by
post. The fact that the notice was served belatedly, suggests that the
intention of your client is to pressurise and put the bank into uncomfortable
position. Thus, there is no bonafide intention on the part of your client except
to harass my client and to avoid your client's liability towards the repayment
of the Bank's dues.

*** *** ***

9. In view of the above, my client has not acted with mala fide intention and
has not concealed or suppressed any material facts against the interest of the
public at large and investors in particulars. The error is by inadvertence and
was not intentional.

We hope that wiser counsel shall prevail upon your client and advise your
client to withdraw the notice forthwith. We request you that you will desist
from taking unwarranted actions against the bank.

In spite of the above if your client takes any action against my client, my
client will defend the same at the cost of your client and your client will be
held liable and responsible for the costs and consequences thereof."

9. An inadvertent mistake committed by the bank in referring to the case being

pending before DRT instead of City Civil Court cannot, in our opinion, give rise to a
cause of action for filing a complaint petition far less under Section 500 of the Indian
Penal Code particularly when the other particulars contained therein were not found
to be incorrect.

10. It is pertinent to notice that the learned Chief Judicial Magistrate in its order
dated 28.02.2005 proceeded on the basis that the respondents are Managers and
Branch Managers of Dena Bank. There has, thus, been a total non-application of
mind on the part of the learned Chief Judicial Magistrate. The learned Chief Judicial
Magistrate noticed :

"....As per the say of the Complainant, Dena Bank has come out with public
issue and on page no. 87 of its Prospectus, the published false information
damages the Complainant's Company and endangers credit of the Company.
This apart, the Bank fabricated false documents in spite of Complainant has
not taken amount under loan and in violation of the rules and regulations of
 banking law and practice, the Bank deceived the company by filing false suit
before DRT, by false submissions and producing false affidavit are the
allegations of the Complainant. This apart, the Bank withheld export bills of
the Complainant's Company under its custody under the pretext of the false
excuses by cheating and committed criminal offence, despite no amount of
demand loan taken by the Complainant, the Bank fabricated false reasons
and committed offence against the Complainant's Company are the subject
matter of the Complaint and looking to this, if the Police investigates the
present complaint, more and better investigation is possible. Hence the
present complaint is necessitated for the investigation by the Police, therefore
following order is given."

11. Allegations contained in the complaint petition, as noticed by the learned

Magistrate, may give rise to tortuous liability on the part of Dena Bank. Principal
allegations were made against the bank. Who had acted on behalf of the bank was
not disclosed. The acts of omission and commission on the part of the bank, if any,
by withholding export bills of the bank may give rise to a statutory violation on its
part but the respondents were not personally liable therefor.

12. In Saroj Kumar Poddar v. State (NCT of Delhi) and Anr., 2007(1)
RCR(Criminal) 741 : 2007(1) R.A.J. 205 : [2007(2) SCALE 36], this Court held
:

"Apart from the Company and the appellant, as noticed hereinbefore, the
Managing Director and all other Directors were also made accused. The
appellant did not issue any cheque. He, as noticed hereinbefore, had resigned
from the Directorship of the Company. It may be true that as to exactly on
what date the said resignation was accepted by the Company is not known,
but, even otherwise, there is no averment in the complaint petitions as to
how and in what manner the appellant was responsible for the conduct of the
business of the Company or otherwise responsible to it in regard to its
functioning. He had not issued any cheque. How he is responsible for
dishonour of the cheque has not been stated. The allegations made in
paragraph 3, thus, in our opinion do not satisfy the requirements of Section
141 of the Act."

[See also Everest Advertising Pvt. Ltd. v. State, Govt. of NCT of Delhi and
Ors., 2007(2) RCR(Criminal) 575 : 2007(2) RCR(Civil) 738 : 2007(2) R.A.J.
412 : JT 2007(5) SC 529 and S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla and
Anr., 2007(2) RCR(Criminal) 126 : 2007(1) R.A.J. 871 : 2007(3) SCALE 245]

13. Where a jurisdiction is exercised on a complaint petition filed in terms of Section

156(3) or Section 200 of the Code of Criminal Procedure, the Magistrate is required
to apply his mind. Indian Penal Code does not contain any provision for attaching
vicarious liability on the part of the Managing Director or the Directors of the
Company when the accused is the Company. The learned Magistrate failed to pose
unto himself the correct question viz. as to whether the complaint petition, even if
given face value and taken to be correct in its entirety, would lead to the conclusion
that the respondents herein were personally liable for any offence. The Bank is a
body corporate. Vicarious liability of the Managing Director and Director would arise
provided any provision exists in that behalf in the statute. Statutes indisputably must
contain provision fixing such vicarious liabilities. Even for the said purpose, it is
obligatory on the part of the complainant to make requisite allegations which would
attract the provisions constituting vicarious liability.

14. It will bear repetition to state that throughout the complaint petition, no
allegation had been made as against any of the respondents herein that they had
any thing to deal with personally either in discharge of their statutory or official duty.
As indicated hereinbefore, in the prospectus, a bonafide mistake had been
committed. The fact that such a mistake had been committed stands accepted. In
any event, the statement that the matter was pending before the DRT in stead and
place of the City Civil Court, Ahmedabad, per se, cannot be said to be defamatory as
the fact that a suit was pending for recovery of the huge amount is neither denied
nor disputed.

Whether such a suit was maintainable and/or is ultimately to be decreed or disposed

of is a question which has to be gone into in the suit itself. A criminal court cannot
even take that factor into consideration. The High Court considered the matter at
some great details. Having analysed the materials placed before it, it was held :

"....It was, therefore, stated that there was no suppression or concealment of

any facts and it did not amount to criminal breach of trust and cheating on
the part of the Bank as alleged by the complainant. The said export bills
under L/C were negotiated by the Bank under the provisions of UCPDC 500
1995 Revision. The Bank has also informed vide its letter dated 8.2.2005 to
M/s. SBI Capital Markets Ltd. It was stated therein that the Bank has not
concealed or suppressed any material fact against the interest of the public at
large and investors in particular. The bonafide mis-description in setting out
the nature of claim was unintentional. It was further stated that the material
particulars like the amount of claim, date of filing and name of the company
was correctly mentioned. The mis-description did not materially
influence/affect the decision of the investors/public...."

It was furthermore opined :

"It appears to the Court that the learned Chief Judicial Magistrate has not
applied his mind while passing the order under Section 156(3) of the Criminal
Procedure Code directing the police to investigate in the matter. The
impugned order, on the face of it, reveals that he has not gone through the
complaint. He has stated in the order that the accused Nos. 1 to 10 are
Manager and Branch Manager of Dena Bank. As a matter of fact, the accused
No. 1 was the Ex-Chairman and Managing Director of Dena Bank, and the
accused No. 2 was the Executive Director. The accused Nos. 3 to 10 are
Directors of Dena Bank. None of these persons are Managers or Branch
Manager. Despite this, the learned Chief Judicial Magistrate has mentioned in
his order that they are Managers or Branch Managers. With regard to the
prospectus he has simply stated that the Bank has issued prospectus for its
public issue and at page No. 87 false informations were given so as to cause
 damage to the Company and to jeopardise the reputation of the Company.
Despite the fact that the litigations are pending before the Civil Court he has
mentioned about non-returning of export bills etc. On these facts he has
passed order under Section 156(3) of the Criminal Procedure Code, directing
the PSI, Sayajiganj Police Station to make inquiry in the matter."

The approach of the High Court, with respect, is entirely correct.

15. This Court in Pepsi Foods Ltd. and Another v. Special Judicial Magistrate
and Others, 1997(4) RCR(Criminal) 761 : [(1998)5 SCC 749], held as under :

"28. Summoning of an accused in a criminal case is a serious matter. Criminal

law cannot be set into motion as a matter of course. It is not that the
complainant has to bring only two witnesses to support his allegations in the
complaint to have the criminal law set into motion. The order of the
Magistrate summoning the accused must reflect that he has applied his mind
to the facts of the case and the law applicable thereto. He has to examine the
nature of allegations made in the complaint and the evidence both oral and
documentary in support thereof and would that be sufficient for the
complainant to succeed in bringing charge home to the accused. It is not that
the Magistrate is a silent spectator at the time of recording of preliminary
evidence before summoning of the accused. The Magistrate has to carefully
scrutinise the evidence brought on record and may even himself put
questions to the complainant and his witnesses to elicit answers to find out
the truthfulness of the allegations or otherwise and then examine if any
offence is prima facie committed by all or any of the accused."

The learned Magistrate, in our opinion, shall have kept the said principle in mind.

16. For the reasons aforementioned, there is no merit in this appeal which is
dismissed accordingly with costs. Counsel's fee assessed at Rs. 25,000/-.

Appeal dismissed.