HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
Court No. – 16
Case :- MISC. SINGLE No. – 2571 of 2016
Petitioner :- Bid Hammer Fine Art Auctioners (P) Ltd. through Chairman another.
Respondent :- State Of U.P through its Home Secretary and another.
Counsel for Petitioner :- Chandra Shekhar Sinha
Counsel for Respondent :- G.A,Vikas Mishra,Vilas Misra
Hon’ble Pankaj Bhatia, J.
The present petition has been filed seeking the quashing of the Complaint Case No.59 of 2011 (Venkateshwar Singh, Venkat Vs. Bid Hammer Fine Art Auctioners (P) Ltd. its Chairman/M.D. and another) under Section 406 IPC, Police Station Aliganj, Lucknow, pending in the Court Additional Chief Judicial Magistrate/J.M. (J.D.) Court no.35, Lucknow and also the order dated 8.1.2016 passed by Additional District Judge, Court No.10, Lucknow in Criminal Revision No.47 of 2015 (Annexure No.1 to the writ petition) as well as the summoning order dated 29.4.2011 summoning the petitioners under Section 406 IPC in Complaint Case No.59 of 2011 (Annexure No.3 to the writ petition).
The facts leading to the filing of the present petition are as under:-
The respondent no.2 filed a complaint purporting to be under Section 200 Cr.P.C. alleging that the respondent no.2 and his wife Madhavi Singh were appointed as consultant by the petitioners on 18.2.2010 and in the agreement all the conditions were detailed. The order/agreement appointing the respondent no.2 as consultant with effect from 26.2.2010 is on record which shows that the petitioners appointed the respondent no.2 as a consultant for a period of two years with effect form 18.2.2010. The functions to be performed by the respondent no.2 were as under:-
“Your Role and Function in B H are:-
I) Providing expertise and experience in Indian art for due diligence and valuations of ail types on art objects especially contemporary art,
II) Giving your views on the Provenance Provided by clients,
III) Advice and input on status of paintings and works of art etc.,
IV) Provide assistance and inputs for sourcing art including travel to other cities etc. on a case to case basis subject to your availability and mutual consent,
V) You would offer maximum of 15 days per auction spread over 2-3 visits, wherein you would either visit Bangalore or travel to other cities to meet customers to view their art objects for valuation and discussions with them. Tentative travel schedule would be intimated one week in advance;
VI) Provided your expertise as and when required on other days over email, telephone.”
In lieu of the services to be provided by the Consultant the respondent no.2 was to be compensated by the following benefits arising out of the said agreement:-
“Your Compensation Package would be as follows:
i) You will be provided with return fare by Air or AC II Tire by B H.
ii) You would be provided boarding and lodging by B H in Company Guest House, appropriate first class clubs or any Star Hotels.
iii) You would be reimbursed Rs. 15,000/- per day or part of day towards professional charges. With a minimum of 0.2% of the average value of total lot per auction.
iv) Travel time compensation would be Rs. 15,000/- per day or part of day (excluding 8.00 p.m. – 8.00 a.m.). In addition all other boarding and lodging expenses would be met by us as mentioned under items 3 4 of terms.
v) You will be paid Rs. 750/- per query through phone or email.
vi) Based upon the performance of the Company and on appraisal of your contributions during the first year of engagement, your compensation package could be structured suitably.
vii) An appropriate incentive structure which will enable you to buy enquiry of the Company at favourable prices or ESOPS will be formulated and implemented during the second year in order to enable a long term relationship between you and the Company.
viii) You would also be eligible to an incentive varying between 1.5% to 3% on value of concluded transactions for introducing vendors or buyers.”
In the complaint filed by the respondent no.2 it was stated that in terms of the said agreement the respondents performed their functions, however, the said agreement was terminated vide letter dated 28.9.2010 in exercise of the option available to the petitioners under clause 4(xi) which is as under:-
“Both Bid and Hammer and you can terminate this engagement by providing one month’s notice.”
It was further alleged in the complaint that demands for payment of the consideration of Rs. 56,524/- and Rs. 36,202/- were made, however, out of the said amount only Rs. 56,524/- was paid and the balance amount of Rs. 1,29,134/- has not been paid till date despite requests and reminders. It was further alleged that for the payment of the balance amount a legal notice dated 18.12.2010 was got served through the respondent no.2’s Advocate, however, despite the time given in the notice having elapsed no payments have been made as demanded and as payable to the respondent no.2, as such it was alleged that an offence under Section 406 IPC has been committed by the petitioners.
The petitioner no.1 is a company duly incorporated under the Companies Act having its registered office at Bangalore and the petitioner no.2 is the Chairman and Managing Director of the petitioner no.1-Company. The Additional Chief Judicial Magistrate took cognizance of the complaint and passed an order summoning the petitioners under Section 406 IPC vide his order dated 29.4.2011 (Annexure No.3 to the writ petition).
The petitioners challenged the said summoning order by filing a Criminal Revision before the Additional District Judge (Court No.10) Lucknow wherein it was argued that the summoning order under Section 406 IPC was without any authority of law and wholly illegal, it was further argued that the civil dispute has been converted into a criminal proceedings and as such the summoning order deserves to be quashed. The said criminal revision was dismissed by merely observing that no error was committed by the Magistrate in taking cognizance and summoning the petitioners and, thus, the revision was dismissed.
Sri Chandra Shekhar Sinha, learned counsel for the petitioners has strenuously argued that from the plain reading of the allegations levelled in the complaint, it is a simple case of non payment of agreed amounts under a contract and no ingredients of Section 406, IPC are made out even if the entire allegations levelled in the complaint are accepted to be a gospel truth. He has further argued that for summoning an accused under Section 406 IPC it has to be alleged that there was criminal breach of trust and it was essential to establish that a person was entrusted with property who has dishonestly misappropriated the same and without their being these material allegations in the complaint the summoning order is without any application of mind and is bad in law. He further argues that a simple civil dispute has been given colour of a criminal petition and is nothing but an abuse of process of law.
No one has appeared on behalf of the complainant even in the revised call to assist the Court although the counter affidavit filed by the complainant is on record.
On the basis of the material on record and the arguments advanced at the bar, what is to be considered is whether the complaint discloses any offence cognizable under Section 406 IPC accepting all the allegations in the complaint to be correct and whether the quashing of the complaint would be necessary to secure the ends of justice.
Sri Sinha has relied upon the judgment of the Apex Court in the case of Binod Kumar and others Vs. State of Bihar and another, 2014(8) Supreme 112. He has also relied upon the judgment of this Court in the case of Sajal Garg another Vs. State of U.P. another, 2012(7) ADJ 529. He has further relied upon the Judgment of the Apex Court in the case of Prof. R.K. Vijayasarathy another Vs. Sudha Seetharam another decided on 15.2.2019 in Criminal Appeal No.238 of 2019 (Special Leave Petition (Crl.) No.1434 of 2018) to contend that to establish a charge under Section 406 IPC, it is essential that a criminal breach of trust as provided under Section 405 IPC should be made out.
A bare perusal of Section 405 IPC makes it clear that to bring a charge of Section 405 IPC, it is essential to plead that the person accused was entrusted with the property and has dishonestly misappropriated the said property in violation of any direction of law or any legal contract which has been made touching the discharge of such trust.
There is no allegation in the complaint that the petitioners were entrusted with any property or dominion over any property, nor is there any allegation that the said property has been misappropriated by the petitioners, the simple allegation in the complaint is that the petitioners have failed to repay the amounts as agreed in between the parties in terms of the appointment letter dated 26.2.2010. A bare reading of the appointment order dated 26.2.2010 and the complaint makes it clear that the genesis of the dispute is non-payment of the agreed amounts under the agreement and nothing more. It is a clear case of a civil dispute for recovery of money being given the colour of a criminal proceeding for affecting the recovery by misusing the provisions of Indian Penal Code.
The Hon’ble Apex Court in the case of Binod Kumar and others (Supra) while dealing with the scope of Section 482 Cr.P.C. for quashing of the proceedings has laid down as under:-
“9. In proceedings instituted on criminal complaint, exercise of the inherent powers to quash the proceedings is called for only in case where the complaint does not disclose any offence or is frivolous. It is well settled that the power under Section 482 Cr.P.C. should be sparingly invoked with circumspection, it should be exercised to see that the process of law is not abused or misused. The settled principle of law is that at the stage of quashing the complaint/FIR, the High Court is not to embark upon an enquiry as to the probability, reliability or the genuineness of the allegations made therein. In Smt. Nagawwa vs. Veeranna Shivalingappa Konjalgi, (1976) 3 SCC 736, this Court enumerated the cases where an order of the Magistrate issuing process against the accused can be quashed or set aside as under:
“(1) where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complainant does not disclose the essential ingredients of an offence which is alleged against the accused;
(2) where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is a sufficient ground for proceeding against the accused;
(3) where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and
(4) where the complaint suffers from fundamental legal defects such as, want of sanction, or absence of a complaint by legally competent authority and the like.”
The Supreme Court pointed out that the cases mentioned are purely illustrative and provide sufficient guidelines to indicate contingencies where the High Court can quash the proceedings.
10. In Indian Oil Corporation vs. NEPC India Ltd. And Ors., (2006) 6 SCC 736, this Court has summarized the principles relating to exercise of jurisdiction under Section 482 Cr.P.C. to quash complaints and criminal proceedings as under:-
“The principles relating to exercise of jurisdiction under Section 482 of the Code of Criminal Procedure to quash complaints and criminal proceedings have been stated and reiterated by this Court in several decisions. To mention a few–Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre (1988) 1 SCC 692,State of Haryana vs. Bhajan Lal, 1992 Supp (1) SCC 335; Rupan Deol Bajaj v. Kanwar Pal Singh Gill (1995) 6 SCC 194, Central Bureau of Investigation v. Duncans Agro Industries Ltd (1996) 5 SCC 591; State of Bihar v. Rajendra Agrawalla (1996) 8 SCC 164, Rajesh Bajaj v. State NCT of Delhi,(1999) 3 SCC 259; Medchl Chemicals Pharma (P) Ltd. v. Biological E. Ltd(2000) 3 SCC 269 [pic]Hridaya Ranjan Prasad Verma v. State of Bihar (2000) 4 SCC 168, M. Krishnan v. Vijay Singh (2001) 8 SCC 645 and Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque( 2005) 1 SCC 122. The principles, relevant to our purpose are:
(i) A complaint can be quashed where the allegations made in 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 the case alleged against the accused.
For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint.
(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.
(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.
(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.
(v) A given set of facts may make out: (a) purely a civil wrong; or
(b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not.”
11. Referring to the growing tendency in business circles to convert purely civil disputes into criminal cases, in paragraphs (13) and (14) of the Indian Oil Corporation’s case (supra), it was held as under:-
“13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. Such a tendency is seen in several family disputes also, [pic]leading to irretrievable breakdown of marriages/families. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged. In G. Sagar Suri v. State of U.P., (2000) 2 SCC 636 this Court observed: (SCC p. 643, para 8)
“It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.”
The Apex Court while dealing with the scope of Section 406 IPC held as under:-
“16. Section 406 IPC prescribes punishment for criminal breach of trust as defined in Section 405 IPC. For the offence punishable under Section 406 IPC, prosecution must prove:
(i) that the accused was entrusted with property or with dominion over it and
(ii) that he (a) misappropriated it, or (b) converted it to his own use, or (c) used it, or (d) disposed of it.
The gist of the offence is misappropriation done in a dishonest manner. There are two distinct parts of the said offence. The first involves the fact of entrustment, wherein an obligation arises in relation to the property over which dominion or control is acquired. The second part deals with misappropriation which should be contrary to the terms of the obligation which is created.
18. In the present case, looking at the allegations in the complaint on the face of it, we find no allegations are made attracting the ingredients of Section 405 IPC. Likewise, there are no allegations as to cheating or the dishonest intention of the appellants in retaining the money in order to have wrongful gain to themselves or causing wrongful loss to the complainant. Excepting the bald allegations that the appellants did not make payment to the second respondent and that the appellants utilized the amounts either by themselves or for some other work, there is no iota of allegation as to the dishonest intention in misappropriating the property. To make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the appellants. It must also be shown that the appellants dishonestly disposed of the same in some way or dishonestly retained the same. The mere fact that the appellants did not pay the money to the complainant does not amount to criminal breach of trust.”
The Apex Court once again in its judgment dated 15.2.2019 in the case of Prof. R. K. Vijayasarathy another (Supra) extensively considered the scope of Section 405 IPC as well as the scope of Section 482 Cr.P.C. while dealing with the exercise of jurisdiction for quashing of a complaint, the Hon’ble Court held as under:-
“11 The High Court, in the exercise of its jurisdiction under Section 482 of the Code of Criminal Procedure, is required to examine whether the averments in the complaint constitute the ingredients necessary for an offence alleged under the Penal Code. If the averments taken on their face do not constitute the ingredients necessary for the offence, the criminal proceedings may be quashed under Section 482. A criminal proceeding can be quashed where the allegations made in the complaint do not disclose the commission of an offence under the Penal Code. The complaint must be examined as a whole, without evaluating the merits of the allegations. Though the law does not require that the complaint reproduce the legal ingredients of the offence verbatim, the complaint must contain the basic facts necessary for making out an offence under the Penal Code.”
The Apex Court while dealing with the scope of Section 405 IPC recorded as under:-
“13. Section 405 of the Penal Code reads thus:
Section 405.- Criminal breach of trust.- Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits “criminal breach of trust”.
A careful reading of Section 405 shows that the ingredients of a criminal breach of trust are as follows:
i) A person should have been entrusted with property, or entrusted with dominion over property;
ii) That person should dishonestly misappropriate or convert to their own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; and
iii) That such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.
Entrustment is an essential ingredient of the offence. A person who dishonestly misappropriates property entrusted to them contrary to the terms of an obligation imposed is liable for a criminal breach of trust and is punished under Section 406 of the Penal Code.”
Thus, in view of the law laid down by the Apex Court and as quoted above, what is to be seen is whether there was any allegation of entrustment of property or dominion over the property and whether there was any allegation of dishonest, misappropriation of the said property. A bare perusal of the complaint, treating the same to be a gospel truth does not even allege any entrustment of property or any misappropriation of the said property and, thus, no ingredients which are required to attract the rigours of Section 405 IPC are present in the complaint and consequently the order passed by the Magistrate summoning the petitioners for being tried of any offence under Section 406 IPC was wholly unjustified and perverse. Similarly, the revisional Court also erred in dismissing the revision challenging the summoning order without any application of mind and without even adverting to the scope of Section 405 IPC.
In view of the findings recorded above and the law as laid down by the Apex Court, extracted above, the proceedings of Complaint Case No.59 of 2011 (Venkateshwar Singh, Venkat Vs. Bid Hammer Fine Art Auctioners (P) Ltd. its Chairman/M.D. and another) under Section 406 IPC, Police Station Aliganj, Lucknow, pending in the Court Additional Chief Judicial Magistrate/J.M. (J.D.) Court no.35, Lucknow are quashed and also the order dated 8.1.2016 passed by Additional District Judge, Court No.10, Lucknow in Criminal Revision No.47 of 2015 (Annexure No.1 to the writ petition) as well as the summoning order dated 29.4.2011, under Section 406 IPC in the said Complaint are also quashed.
The writ petition is allowed in terms of the order passed above. There will be no order as to costs.
Let a copy of this order be transmitted to the concerned trial Court where the Complaint Case No.59 of 2011 is pending for being taken on record.
Order Date :- 15.11.2019