Vijay Kumar Ghai V. State of West Bengal & Ors.

(2022) CRA 463

Facts of the case

Appellant No. 1 holds the position of Managing Director in M/s Priknit Retails Limited (the said company), with Appellant Nos. 2 and 3 serving as Directors. Respondent No. 2, an authorized representative of SMC Global Securities Ltd. in Delhi, entered into an agreement where Respondent No. 2 would invest INR 2.5 crore in the said company, in return for which they were promised 2,50,000 equity shares. Respondent No. 2 duly submitted the share application form and a cheque of INR 2.5 crore, and an allotment letter dated March 29, 2009, confirmed the issuance of the 2,50,000 shares. However, the company failed to carry out the Initial Public Offering (IPO) as agreed upon, leading to Respondent No. 2 issuing a legal notice.

Following a series of complaints to various law enforcement agencies, Respondent No. 2 filed a complaint under sections 406, 409, 420, 468, 120B, and 34 of the Indian Penal Code (IPC) with the PS Bowbazar in Kolkata, West Bengal, on March 28, 2013. This complaint was later converted into FIR No. 168 under sections 406, 420, and 120B of the IPC. A final closure report dated March 4, 2014, recommended closing the case on the grounds that the entire dispute was of a civil nature.

Respondent No. 2 submitted a protest petition to the Chief Metropolitan Magistrate (CMM) in Kolkata against the closure report. The CMM allowed the protest petition on March 8, 2016, issuing notices to Appellant Nos. 1 and 2 to appear before the Investigation officer.

The CMM in Kolkata took cognizance of the offenses under sections 406, 420, and 120B of the IPC related to the case dated March 28, 2013. In response, the Appellants filed a petition to quash the FIR under section 482 of the Criminal Procedure Code (CrPC) before the Calcutta High Court.

The Calcutta High Court issued notices to the Respondents and temporarily stayed further proceedings in the criminal case. Respondent No. 2 attempted to have the stay order lifted but was unsuccessful.

However, in its judgment and order dated October 1, 2019, the High Court dismissed the Appellants’ petitions for quashing and revision. The High Court held that the only requirement for exercising the power under Section 482 CrPC is to assess whether the continuation of the criminal proceedings amounts to a total abuse of the court’s process. In this case, the High Court determined that the ongoing criminal proceedings against the Appellants did not constitute an abuse of the court’s process. Consequently, the Appellants filed a Criminal Appeal before the Supreme Court of India.

Issues

The issue raised in the Supreme Court of India was, whether it is permissible to initiate or continue criminal prosecutions against individuals for alleged violations of the Customs Act, 1962, even after the concerned adjudication proceedings have been concluded in their favor.

Arguments

Appellant’s argument: The appellants’ counsel argued that Respondent No. 2 engaged in forum shopping by filing two complaints—one under Section 156(3) Cr.P.C in Tis Hazari Court, New Delhi, and another leading to FIR No. 168 under IPC sections in PS Bowbazar, Calcutta—without disclosing the pendency of the Delhi complaint. They contended that the FIR essentially replicated the Delhi complaint but changed the location, emphasizing that the allegations pertained to civil contractual disputes rather than criminal actions. Additionally, they highlighted that the complaints lacked sufficient evidence of fraudulent or dishonest intent, and failure to fulfill a promise did not inherently constitute a criminal breach of trust or cheating, citing various legal precedents.

Respondent’s argument: The respondents’ counsel argued that the complaints contained all the essential elements of the alleged offenses and were not initiated with malicious intent. They emphasized that the Calcutta complaint was filed after the Delhi court rejected the Section 156(3) Cr.P.C prayer, and the withdrawal of the Delhi complaint was done to avoid redundant proceedings. They cited legal precedents to support the coexistence of civil and criminal remedies and highlighted that at the stage of cognizance, the court’s role is to determine if a prima facie offense is established, allowing the legal process to proceed. They referred to various court decisions in support of their arguments.

Judgement

The appeal was initially filed in the Tis Hazari Court, Delhi. The Metropolitan Magistrate at Tis Hazari concluded that the entire dispute raised by Respondent No. 2 was of a civil nature and lacked any criminal elements. As a result, the MM rejected Respondent No. 2’s request to register an FIR and scheduled the case for pre-summoning evidence regarding the application filed under Section 156(3) Cr.P.C. by him. The Magistrate’s order at Tis Hazari Court in New Delhi became final as it was not further contested.

Respondent No. 2 again initiated a complaint under various sections of the Indian Penal Code, including 406, 409, 420, 468, 120B, and 34, based on the same underlying cause of action. This complaint was filed with the Police Station at Bowbazar in Kolkata, West Bengal, and subsequently converted into an FIR under the same sections of IPC. Following an investigation, a final closure report was submitted by the concerned Police Station, recommending the case’s closure on the grounds that it pertained to a civil dispute.

The Appellants filed a petition in the High Court. The Court dismissed both the quashing and revision petitions by the Appellants and explained that the power under Section 482 of the Cr.P.C can only be exercised if the continuation of criminal proceedings amounts to an abuse of the court’s process. The High Court concluded that continuing the criminal proceedings against the Appellants was not an abuse of the court’s process. The judgment pointed out that the allegations in the FIR disclosed the alleged offenses and that the complaint indicated that the Appellants had induced the complainant to purchase shares or invest money through willful misrepresentation. Despite involving a commercial transaction, the complaint’s averments prima facie revealed the commission of a cognizable offense. Therefore, the complaint could not be quashed.

The Supreme Court held that, after carefully examining the complaint, FIR, and chargesheet, it is evident that the allegations against the appellant do not constitute offenses under Sections 405 and 420 of the IPC, 1860. Without a culpable intention at the time of making the promise, Section 420 IPC cannot be invoked even if there is a failure to fulfill the promise. In this case, there is no evidence of malicious intent on the part of the appellants.

The dispute originated from Respondent No. 2’s investment, resulting in an MOU. Respondent No. 2 filed three complaints based on this MOU – two in Delhi and one in Kolkata – which amounts to an abuse of the legal process. Respondent No. 2’s deliberate omission of information about the two Delhi complaints and the timing of filing these complaints demonstrate a malicious intent to pressure the appellants into returning the investment.

Therefore, this judgment sets aside the High Court’s order and quashes FIR and proceedings in the file of CMM, Kolkata, West Bengal, against the appellants for the offenses under Section 406, 420, 120B IPC. The appeal stands allowed.

Conclusion

In conclusion, this legal case revolved around allegations of criminal offenses stemming from a commercial dispute. The Supreme Court of India found that the allegations against the appellants did not constitute the stated criminal offenses and lacked evidence of malicious intent. Furthermore, the Court noted that the complainant had filed multiple complaints based on the same cause of action, which amounted to an abuse of the legal process.

The Court ultimately set aside the High Court’s order and quashed the FIR and related proceedings in Kolkata, thereby allowing the appeal. This case underscores the importance of carefully examining the legal elements of alleged offenses and the potential abuse of legal processes in matters involving commercial disputes.

References

https://indiankanoon.org/doc/60158808/

https://www.advocatekhoj.com/library/judgments/announcement.php?WID=16384#:~:text=2022%20passed%20by%20this%20Court,abuse%20of%20process%20of%20law.

This Article is written by Sangini Singh of Bangalore Institute of Legal Studies, Intern at Legal Vidhiya.

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