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Judgments of Supreme Court of India and High Courts

M/S. Capital First Limited And Ors vs M/S. Shree Shyam Pulses Private … on 22 August, 2019

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Form No.J(1)

IN THE HIGH COURT AT CALCUTTA
Criminal Revisional Jurisdiction

Present:

The Hon’ble Justice Madhumati Mitra

C.R.R. 3616 of 2017

M/s. Capital First Limited and Ors.

-Versus-

M/s. Shree Shyam Pulses Private Limited.

Advocate for the Petitioners : Mr. Sandipan Ganguly,Sr.Adv.
Mr. Navnil De
Mr. Sourav Ghosh
Mr. Soumen Ghosh
Ms. Farnaz Nasim

Advocate for the Opposite Party : Mr. Sabir Ahmed
Mrs. Baisali Basu

Heard on
: 26.07.2019

Judgment on : 22.08.2019

Madhumati Mitra, J. :

Petitioner no.1 is a company incorporated under the provision of

SectionCompanies Act and petitioner no.2 is the Regional Legal Manager,

Petitioner nos. 3,4,5,7 and 11 are the Independent Directors of the

petitioner no.1, petitioner no.6 is the Chairman and Managing Director of

petitioner no.1 and petitioner nos. 8 and 9 are the Executive Directors of
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petitioner no.1 and petitioner no.10 is the Executive Director of petitioner

no.1.

Petitioners have approached for quashing of the criminal

proceedings initiated on the basis of complaint filed by the opposite party

i.e. C.Case no.588 of 2017 under Section 406/Section465/Section468/Section469/Section471 read

with Section 34 and Section120B of the Indian Penal Code pending before the

Learned Metropolitan Magistrate, 19th Court, Calcutta.

Before dealing with the rival submissions of the parties, it would be

appropriate to set out the facts briefly.

Complainant took loan of Rs.10,00,000/- from petitioner no.1

company and agreed to repay the same along with interest by way of 24

equal monthly instalments of Rs.50,896/- each. Complainant executed

loan agreement and ECS debit mandate in favour of petitioner no.1 for the

amount of 24 EMI to be debited from HDFC Bank, Kolkata for repayment

of the said loan along with interest and on demand of the said company

also entrusted or parted 8 blank Banking Instruments being cheque nos.

688577 to 688584 of HDFC Bank duly signed as security deposit at the

time of execution of loan agreement with encashment of seven ECS, the

complainant made repayment of Rs.3,56,272/- to the petitioner no.1.

Complainant decided to foreclose the loan account after realizing that the

rate of interest was unjust. On 07.05.2014, the complainant expressed

the intention to foreclose the loan account. On 13.05.2014, the petitioner

company demanded a sum of Rs.8,38,333/- along with penal interest,
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overdue interest, pre-closure charges. Complainant protested and asked

to waive the interest of 17 months. Petitioner company refused to reduce

the amount. It has been alleged by the complainant that at the time of

execution of the loan agreement the opposite party/complainant had

protested regarding the rate of interest which was at the rate of 20% per

annum and also against the policy of Reserve Bank of India. It has been

claimed by the complainant that assurance was given to the complainant

that the rate of interest would be considered after payment of first 6

instalments on time. Complainant demanded 8 blank banking

instruments, but the complainant was threatened by the petitioners.

Complainant sent a notice dated 21.03.2014 to the petitioner company for

return of the blank banking instruments and also requested not to misuse

the same. On 23.05.2014, petitioner company gave a reply stating that

the said instruments were issued by the complainant voluntarily in

discharge of legal liabilities. Thereafter, the complainant received notices

dated 11.08.2014, 25.06.2015, 13.10.2015, 02.09.2016 under Section

138(b) of the Negotiable Instruments Act for Rs.3,05,376/- each as the

aforesaid cheques were returned unpaid to the petitioners with remark

‘payment stopped by the drawer’. Complainant gave reply to the aforesaid

notices. Thereafter, the petitioner company on the basis of the aforesaid

notices initiated four separate proceedings viz. complaint cases under

Section 138 of the Negotiable Instruments Act. It has been alleged by the

complainant that the accused company refused to return the blank

cheques with a view to make the complainant defaulter and ultimately

converted the same into valuable documents and used the same as
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genuine for illegal purpose knowing very well that the same were forged

and got the same dishonoured before initiating the aforesaid four criminal

proceedings against the complainant.

Complaint was registered as Complaint Case No.588 of 2017 by the

Learned Additional Chief Metropolitan Magistrate, Calcutta and thereafter

the complaint case was transferred to the Court of Metropolitan

Magistrate 19th Court for disposal. On 13.09.2017, Learned Metropolitan

Magistrate 19th Court after examining the complainant and his witness

under Section 200 of the Code of Criminal Procedure issued process

against the present petitioners to face trial for commission of alleged

offences punishable under Sections 406/Section465/Section468/Section469/Section471/Section34/Section120B of

the Indian Penal Code.

Before proceeding further in the matter, it would be better to

mention the admitted facts which have been reflected from the various

documents furnished by the parties as well as from the submissions

advanced by the Learned Counsel in the course of hearing. Those facts

are as under:-

(a) Complainant had approached for loan to the petitioner no.1 and

accordingly a loan agreement vide loan Agreement No.1295067,

dated 29.06.2013 was entered into and Rs.10,00,000/- was

disbursed to the complainant as loan on condition that the

complainant would repay the same along with interest by way of 24

monthly instalments as well as delayed payment charges and
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foreclosure charges, etc. Pursuant to the said loan agreement, the

complainant issued cheques in question towards repayment of the

said loan as well as security of the loan.

(b) Opposite party/complainant paid seven instalments i.e.

Rs.3,56,272/- in total towards repayment and thereafter, failed to

pay the instalments in terms of agreement. Complainant expressed

the intention to foreclose the loan and accordingly the petitioner

company furnished the statement of the said loan account to the

complainant.

(c) The complainant issued a letter dated 21.03.2014 to the petitioner

company not to present the cheques bearing nos.688577 to 688584

and complainant instructed its banker to ‘stop payment’. In the

meantime, the cheques in question were presented for encashment

by the petitioner company on different dates and all the cheques

were returned unpaid with remark ‘stop payment’ by the drawer.

Petitioner company sent separate four notices for dishonour of four

cheques under Section 138(b) of the Negotiable Instruments Act,

demanding the amount covered by the cheques.

(d) Complainant sent replies to the said notices under Section 138(b) of

the Negotiable Instruments Act and denied to make payment and

informed the petitioner company regarding institution of Title Suit

No.768 of 2014, before the City Civil Court, VIIIth Bench, Calcutta
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praying for a declaration that the said demand notice dated

13.05.2014 was not binding on the complainant/opposite party.

Ultimately that title suit was dismissed for default.

(e) Petitioner company started four complaint cases against the

complainant as it failed to make payment in terms of the demand

notices under Section 138(b) of the N.I.Act.

Mr. Sandipan Ganguly, Learned Senior Counsel appearing for

the petitioners in support of his contention for quashing of the criminal

proceeding has categorically contended that continuance of the

complaint Case No.588 of 2017 under Sections 406,Section465,Section468 and

Section469,Section471 read with Sections 34 and Section120B of the Indian Penal Code

pending before the Learned Metropolitan Magistrate 19th Court would

be an abuse of the process of the Court and the proceedings are liable

to be quashed.

He has vigorously argued that the cheques in questions were

duly signed by the authorized representative of the complainant and

the allegation of forgery does not arise at all. He has further submitted

that the factum of taking loan from the petitioner company by the

complainant is an admitted fact and it is also admitted that the

complainant executed a loan agreement and agreed to repay the loan

amount along with interest by way of instalments. During the course

of hearing Learned Counsel has invited the attention of the Court to
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the loan agreement at Annexure-B, i.e. pages 49 to 63 and contended

that the cheques in question were executed by the complainant in

favour of the petitioner company in terms of the loan agreement. He

has further drawn the attention of the Court to the several clauses of

the loan agreement particularly Clauses

4,6,6.1,8,10.7,10.8,10.9,10.10,11,21 and 27. According to his

contention, as per the terms of Clause 10.9 of the loan agreement the

borrower has given undertaking not to instruct his bankers to stop

payments of the cheques and not to instruct the depositing of the

cheques. He has also submitted that the borrower entered into the

loan transaction after knowing fully well the contents of the agreement

as reflected in Clause 27 of the agreement. He has forcefully

contended that the proceedings pending against the petitioners before

the Learned Magistrate has been initiated maliciously with ulterior

motive to avoid the payment of the loan amount along with interest.

In support of this contention, Learned Counsel has strongly placed

reliance on several documents annexed to the application and the

documents submitted by the petitioners by way of supplementary

affidavit.

Learned Counsel for the petitioner has cited the following decisions

to strengthen his contention for quashing of the criminal proceedings

pending against the petitioners.
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The decisions cited by the Learned Counsel for the petitioners as

under:-

1.

Sunil Kumar Vs. Escorts Yamaha Motors Ltd. Ors reported in

(1999) 8 SCC 468, (1999) SCC (Cri) 1466;

2. Mahindra Mahindra Financial Services Ltd. Anr. Vs. Rajiv

Dubey reported in (2009) 1 SCC 706, (2009) 1 SCC (Cri) 321;

3. Eicher Tractor Ltd. Ors. Vs. Harihar Singh Anr. reported

in (2008) 16 SCC 763, (2010) 4 SCC (Cri) 425;

4. Sunrise Sports India Pvt. Ltd. Anr. Vs. State of West Bengal

Anr. reported in (2008) SCC Online Cal 339, (2008) 4 CHN 400;

5. Nita Kanoi @ Bansal Vs. Paridhi Anr. reported in (2015) 2

CCr LR(Cal) 597;

5A. Sujit Kumar Pal Vs. State of West Bengal Anr. reported in

(2017)1 CCr LR (Cal) 97;

6. S.K. Alagh Vs. State of Uttar Pradesh Ors reported in (2008) 5

SCC 662, (2008) 2 SCC (Cri) 686;

7. Maharashtra State Electricity Distribution Company Ltd and

Anr. Vs. Datar Switchgear Ltd and Ors reported in (2010) 10 SCC

479, (2011) 1 SCC(Cri) 68;

8. Mohammed Ibrahim Ors Vs. State of Bihar Anr reported in

(2009) 3 SCC (Cri)929, (2009) 8 SCC 751.

The Learned Counsel for the opposite party/complainant, resisting

the submissions advanced by the Learned Counsel for the petitioner

has urged the following contentions:-

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(a) The petitioner company demanded unjustified rate of interest

over the principal amount which is against the policy of Reserve

Bank of India;

(b) Petitioner company demanded a sum of Rs.8,38,333/- along with

penal interest when the complainant intended to foreclose the

loan transaction and refused to waive the interest for rest 17

months and the penal interest etc;

(c) In spite of repeated requested the petitioner company did not

return the blank cheques to the complainant and converted the

same as valuable security and presented the same before the

Bank for encashment and got the same dishonoured by

committing forgery and practicing fraud;

(d) The petitioner no.1 being a legal entity, acts through its Directors

or other authorized officers and as such all the petitioners are

liable for the commission of alleged offences in respect of which

process was issued to face trial;

(e) Ingredients of the alleged offences are present in the complaint

petition against the present petitioner and as such no question of

quashing of the criminal proceeding arises in the present case.

In support of the above contention the Learned Counsel for the

opposite party has placed his reliance on the documents viz. letter issued

by the complainant regarding request of handing over the blank cheques to

the complainant and not to present the same for encashment. Learned
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Counsel has also laid stress on the proposal for forecloser of the loan

account and the high rate of interest on the loan amount.

Learned Counsel for the complainant has cited the following

decisions:-

1. State of Karnataka Vs. M. Devendrappa and Another reported in

(2002) 3 SCC 89;

2. Sonu Gupta Vs. Deepak Gupta and Others reported in (2015) 3 SCC

424;

3. State of Madhya Pradesh Vs. Surendra Kori reported in (2012) 10

SCC 155;

4. Sau. Kamal Shivaji Pokarnekar Vs. The State of Maharashtra and

Others reported in (2019) SCC Online SC 182.

The gravamen of the allegation in the complaint is that the

petitioners converted the blank banking instruments into valuable

documents and presented the same for encashment and got the same

dishonoured with male fide intention.

In the instant case, the factum of issuance of blank cheques by the

complainant is admitted. It is also admitted that cheques in question

were drawn on an account maintained by the complainant with the

banker. It is also an admitted fact that the complainant took loan of

Rs.10,00,000/- from the petitioner by executing a loan agreement on

several terms and conditions to repay the same by way of 24 monthly

instalment. It is also an admitted fact that the complainant made default
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in payment of loan i.e. there was existing debt or other liability to make

payment. From Clauses 10.07, 10.08, 10.09, 10.10 and Clause 27 of the

loan agreement and cheque submission form (CSF), it appears that

pursuant to the loan agreement cheques in question were drawn in favour

of Capital First Limited i.e. the petitioner no.1 and the authorized

representative Hemant Murarka signed on the cheques as authorized

representative of M/s. Shree Shyam Pulses Private Limited after knowing

the contents of the agreement.

In this connection, Learned Counsel appearing for the petitioners has

submitted that in view of Section 20 of the Negotiable Instruments Act the

person who has handed over a blank cheque to another person, gives him

authority to fill up the contents therein. It is his specific contention that

the allegations in the complaint that the petitioners converted the blank

cheques as valuable security, fraudulently has no basis at all.

In this connection, reliance may be placed on the decision of Sunil

Kumar Versus Escorts Yamaha Motors Ltd. and Others reported in

(1999) 8 Supreme Court Cases 468.

From paragraph 2 of the said judgment, it appears that the allegation

in the FIR was that certain cheques had been given to the respondents

“with the specific understanding that these cheques can be presented

against delivery of future vehicles and not for any past liability or dues, but

the respondents presented the same which of course could not be encashed
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in view of the directions given by the appellant drawer. However the

appellant had to sustain the loss of Rs 8982 as commission charges. The

respondents filed application in the Delhi High Court for quashing of the

FIR, inter alia, on the ground that the averments in the FIR do not make out

the offence of either Section 406 or Section 420 as the necessary ingredients

under Sections 405 and Section415 I.P.C. have not been indicated. The

respondents also took the ground that the criminal proceedings pursuant to

the FIR have been initiated with an ulterior motive and thereby there has

been a gross abuse of the process of law and as such FIR should be

quashed.”

Hon’ble Apex Court dismissed the appeal after observing that the High

Court was well within its power in quashing the FIR as otherwise, it would

tantamount to an abuse of the process of the Court.

Similar view was taken by the Hon’ble Apex Court in the decision of

Mahindra and Mahindra Financial Services Limited and Another Vs.

Rajib Dubey reported in (2009)1 Supreme Court Cases 706. Paragraph 18

of the said judgment runs as under:-

“18. 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 I.P.C. 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 I.P.C.

In addition to this, perusal of the complaint apparently shows the
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ulterior motive. It is clear that the proceeding initiated by the

respondent clearly amounted to abuse of process of law.”

In paragraph 19 of the said judgment Hon’ble Court made reference to

the decision of State of Haryana Vs. Bhajan Lal and observed that the

case at hand falls under category 7. Category seven of the judgment of

State of Haryana Vs. Bhajan Lal is as under:-

“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.”

The factual scenario of the case at hand clearly indicated that the

impugned criminal proceedings have been started as a counter blast to

the proceedings initiated by the petitioners for dishonor of cheques issued

by the complainant.

In this connection, another decision of the Hon’ble Apex Court in

Eicher Tractor Limited and Others Vs. Harihar Singh and Another

may be mentioned.

In paragraph 14 of the said judgment the Hon’ble Apex Court was

pleased to observe as under:-

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“14. The case at hand squarely falls within the

parameters indicated in Category (7) of Bhajan Lal case.

The factual scenario as noted above clearly shows that the

proceedings were initiated as a counterblast to the

proceedings initiated by the appellants. Continuance of

such proceedings will be nothing but an abuse of the

process of law. Proceedings are accordingly quashed.”

The above discussions lead me to observe that in the case at hand,

the uncorroborated allegations made in the complaint do not prima facie

constitute the commission of the alleged offences and the impugned

criminal proceedings are the counterblast of the proceedings initiated

against the complainant under the provisions of SectionNegotiable Instruments

Act.

In my opinion, the case at hand comes within parameters (7) of the

decision of Hon’ble Supreme Court in State of Haryana and Others Vs.

Ch. Bhajan lal and others reported in AIR 1992 SC 664 and in other

subsequent cases regarding exercise of inherent power under Section 482

of the criminal procedure. The impugned criminal proceeding being

complaint case no. 588 of 2017 requires to be quashed against the

petitioners.

I am of the view that continuance of the criminal proceedings

pending against the present petitioner would amount to an abuse of the
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process of the Court. Criminal proceedings being C.No. 588 of 2017 is

hereby quashed.

Interim order stands vacated.

Urgent photostat certified copy of this order, if applied for, shall be

supplied expeditiously after complying with all necessary legal formalities.

(Madhumati Mitra, J.)

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