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M/S.Muthoot Finance Limited vs Davidson Tharmaraj on 11 September, 2018

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT

DATED: 11.09.2018

CORAM

THE HONOURABLE MR. JUSTICE G.K.ILANTHIRAIYAN

Crl.O.P.(MD).No.7147 of 2011

1.M/s.Muthoot Finance Limited
2nd Floor, Muthoot Chambers,
Opp. Saritha Theatre Complex,
Banerjee Road, Ernakulam,
Cochin ? 18.

2.M.G.George Muthoot, Chriamn,
Muthoot Finance Limited,
Opp. Saritha Theatre Complex,
Banerjee Road, Ernakulam,
Cochin ? 18.

3.George Alexander Muthoot,
Managing Director,
Muthoot Finance Limited,
Opp. Saritha Theatre Complex,
Banerjee Road, Ernakulam,
Cochin ? 18.

4.George Thomas Muthoot,
Joint Managing Director,
Muthoot Finance Limited,
Opp. Saritha Theatre Complex,
Banerjee Road, Ernakulam,
Cochin ? 18.

5.George Jacob Muthoot,
Joint Managing Director,
Muthoot Finance Limited,
Opp. Saritha Theatre Complex,
Banerjee Road, Ernakulam,
Cochin ? 18. ..Petitioners

Vs.

Davidson Tharmaraj … Respondent
PRAYER: This Criminal Original Petition has been filed under Section 482 of
Criminal Procedure Code, to call for the entire records pertaining to the
proceedings in C.C.No.110 of 2011 on the file of the Judicial Magistrate,
Tenkasi and quash the same insofar as the petitioners concerned.

!For Petitioner : Mr.N.Mohideen Basha

^For Respondent : Mr.Muthalraj

:ORDER

This quash petition is filed to quash the criminal proceedings in
C.C.No.110 of 2011 on the file of the Judicial Magistrate, Tenkasi, having
been taken cognizance for the offences under Sections 410, 419, 406, 409 and
120-(B) of I.P.C. as against the petitioners and others on the private
complaint filed by the respondent.

2.The case of the complainant/respondent is that on 12.01.2004, he
pledged few articles of gold weighing about 78 grams for a sum of Rs.48,000/-
. Again, on 27.01.2004, he pledged gold jewels and other golden articles
weighing about 118 grams for a sum of Rs.52,000/-. Further, on 03.01.2004,
he pledged gold jewels along with other articles weighing 44 grams for a sum
of Rs.18,000/- and also on 09.02.2004, again he pledged his gold jewels
weighing about 55 grams for a sum of Rs.24,000/-. For all the pledges, the
accused issued pawn tickets. Thereafter, the complainant approached the
accused for redemption of jewels. However, he was informed that the jewels,
which he pledged with the accused, were auctioned for non payment of the
interest as well as the principal within a time stipulated by the accused.
The complainant also came to understand that without following the Rule 12(6)
of the Tamil Nadu Pawn Brokers Act, 1943, without giving sufficient time and
without any prior notice to the complainant, the accused auctioned the
jewels. Therefore, it is violation of Section 12(3) and 14(D)(2) of the
Tamil Nadu Pawn Brokers Act and Section 12(13) of the Tamil Nadu Pawn Brokers
Rules, 1943. Hence, the complaint.

3.After receipt of the private complaint filed by the respondent, the
learned Judicial Magistrate, Tenkasi had taken cognizance for the offence
under Sections 410, 419, 406, 409 and 120-(B) of I.P.C. totally as against
seven persons. The petitioners in this quash petition are arraigned as A1 to
A5. The said complaint is under challenge in the present quash petition
filed by the petitioners/A1 to A5.

4.The learned counsel appearing for the petitioners would raise the
following grounds to quash the complaint filed against them:

(i)The offences having been taken cognizance by the learned Judicial
Magistrate had not prima facie made out any offence to attract as against the
petitioners. The respondent already lodged so many complaints before all the
officials such as Reserve Bank of India, District Collector, Tahsildar and
police personnels for the very same allegations and all the complaints were
turned down. Therefore, the present complaint is nothing but forum shopping.

(ii)The materials on record do not disclose any of the offence as
alleged by the complainant. It is also seen that the complainant availed
loan by pledging all the jewels on four occasions and since, he did not
redeem the pledged jewels with the stipulated time, the auction notices were
duly sent and the same were duly received by the respondent. Even after the
receipt of notice, the respondent did not redeem the jewels and hence, all
the jewels were auctioned to realise the loan amount. Therefore, there are
no offences made out as against the petitioners.

(iii)The petitioners 2 to 5 are the Chairman, Managing Director and
Joint Managing Directors respectively of the Financial Company and they
cannot be made vicariously liable to be prosecuted for the offences as
alleged by the respondents. The first accused is a Company and the 6th
accused is the Manager of the Principal Branch and the 7th accused is the
auctioneer. There is no dishonest intention to induce the respondent to
receive anything. Further, the act of pledge cannot amount to any
entrustment. This is nothing but commercial transaction between the
respondent and the petitioners. Therefore, no offences as alleged by the
complainant are made out as against the petitioners.

(iv)The present complaint has been lodged after a period of 5 years.
The jewels were pledged in the year 2004 and thereafter, auction sale notices
were issued in November 2005 and February 2006 and thereafter, the auction
were conducted on two days viz., 02.12.2005 and 10.03.2006, whereas, the
present complaint has been lodged only in the month of February 2011 and
therefore, absolutely there is no explanation for the delay in lodgment of
the complaint.

Thus, the learned counsel appearing for the petitioners prayed for quashment
of the criminal proceedings in C.C.No.110 of 2011 on the file of the Judicial
Magistrate, Tenkasi.

5.Per contra, the learned counsel appearing for the respondent would
submit that according to the complainant, the auctioneer is not the agent of
Pawnbroker and he would be appointed as auctioneer under the Tamil Nadu Pawn
Broker Rules 1943 and therefore, he is not the authenticated person to
auction the jewels and it is violation of the provisions and Rules of the
Tamil Nadu Pawn Broker Act and Rules, 1943. The non following of the
mandatory provisions and Rules of the Tamil Nadu Pawn Broker Act and Rules,
1943 amounts to committal of offence of misappropriation and cheating.
Therefore, without holding a valid licence and without following the
procedures laid down under the Tamil Nadu Pawn Brokers Act and Rules, 1943,
the petitioners sold out the respondent’s jewels. Further the auction
notices are bereft of particulars such as the date of notice, place of
auction and time. Further, the petitioners have no licence to conduct
auction all the jewels pledged by the respondents. Further, he would submit
that the complaint is in the preliminary stage and the question of facts
cannot be quashed under the quash petition filed under Section 482 of Cr.P.C
and prayed for dismissal of the quash petition.

6.Heard the learned counsel appearing for the petitioner and the
learned counsel appearing for the respondent and perused the materials
produced before this Court.

7.It is not in dispute that the respondent pledged jewels weighing 78
grams, 118 grams, 44 grams and 55 grams on 12.01.2004, 27.01.2004, 31.01.2004
and 09.02.2004 for a sum of Rs.48,000/-, Rs.52,000/-, Rs.18,000/- and
Rs.24,000/- respectively with the petitioners’ finance company. Thereafter,
neither he paid the interest nor paid any principal amount as agreed vide
pledged receipts. Therefore, the auction sale notices were sent to the
respondent on 15.11.2005 through the Government Auctioneer viz., the 7th
accused. Thereafter, the auction were conducted on 02.12.2005 and 10.03.2006
and through the auction, the pledged amount with the interest were realised
by the petitioners. Though there is balance amount to be recovered from the
respondent, the petitioners did not take any steps to recover the balance
amount from the complainant.

8.The crux of the complaint is that while the petitioners were issuing
pawn tickets, they did not mention the rate of interest to be paid by the
complainant/respondent. Even before auction, the petitioners did not inform
the date of auction and did not give sufficient time to redeem the jewels,
which were mortgaged by the respondent as contemplated under section 12(6) of
the Tamil Nadu Pawn Brokers Rules, 1943.

9.It is seen from the records that the jewels were mortgaged by the
respondent on 12.01.2004, 27.01.2004, 31.01.2004 and 09.02.2004. Thereafter,
the respondent/complainant did not pay the interest as well as the principal
and did not take any steps to redeem the jewels mortgaged by them.
Admittedly, the petitioners auctioned the jewels on 02.12.2005 and
10.03.2006. After a period of one year, the petitioners auctioned the
jewels.

10.Section 12(3) of Tamil Nadu Pawn Brokers Act reads as follows:
?12.Sale of pledge and inspection of sale book.-

1. ………

2. ………

3.At any time within three years after the public auction, the holder
of pawn ticket may inspect the entry relating to the sale either in the
pawnbroker’s book or in such catalogue of the auction as may be prescribed.?

Section 14-D (2) of the Act reads as follows:

?14-D.Auctioneers to maintain certain registers. –

1. ……….

2.At any time within three years after the public auction, any police
officer not below the rank of Sub-Inspector may inspect the registers
preferred to in sub-section (1) at all reasonable times and at such place as
may be prescribed.?

Rule 12(13) of the Rules read as follows:

?12.Procedures in auction of pledges.-

1. to 12. …………

13.The pawnbroker shall preserve every such catalogue for at least
three years after the auction.?

11.The time for lodging any complaint as against the auction is three
years viz., the maximum time limit is three years from the date of auction.
Admittedly, the present complaint has been lodged by the respondent in the
year 2011 i.e. after six years from the date of auction. The delay caused in
lodgment of complaint has not been explained by the respondent, which shows
that the present complaint is nothing but clear abuse of process of law.

12.It is seen from the jewel auction notices dated 15.11.2005 and
20.02.2006, the petitioners duly sent the auction notices to the respondent
stating that the respondent did not pay any interest and did not redeem the
jewels within a period of one year and 7 days as contemplated in the pawn
tickets. Therefore, as per the rules, all the amount can be realised by way
public auction of all the jewels. Even after receipt of notices, the
respondent did not take any steps to redeem the jewels before the auction.
Further, the respondent had sent complaint to the District Collector,
Tirunelveli and also lodged a complaint before the District Legal Services
Authority at Tirunelveli with regard to the auction conducted by the
petitioners. The said complaints were forwarded to the Inspector of Police,
Tenkasi Police Station. The said Inspector of Police duly conducted an
enquiry, after receipt of the explanation as well as the documents from the
petitioners as well as the respondent. After due perusal of the statements
and material evidence, he found that any of the offences as alleged by the
respondent are not made out as against the petitioners herein. Therefore,
entire action was dropped as per the report of the Inspector of Police,
Tenkasi Police Station by all the officials. Further, they found that after
due notice and sufficient time given to the respondent, the auction was
conducted by the petitioners to realise the sum borrowed by the respondent
herein. Further, they concluded that the respondent approached the officials
only after four years from the date of auction. Therefore, the present
complaint is lapsed and it is nothing but an abuse of process of Court and it
is liable to be quashed.

13.The entire crux of the allegations contained in the complaint
pertain to redemption of pledged jewels. The petitioners have exercised
their rights and powers that are vested with them by law and rules. They
acted in accordance with law and rules and as per the clauses contained in
the pawn tickets, which were issued at the time of pledging the jewels.
There is no dispute about the loan availed by the respondent by pledging his
jewels. Further admittedly, the respondent neither paid the interest nor
paid the principal amount. An act of pledge is not amount to entrustment of
any property. Therefore, the offence under Section 409 of I.P.C. is not made
out against the petitioners. Insofar as the other offences are concerned,
the main ingredients of the said offences are wholly absent in the complaint.

14.Section 405 of I.P.C. reads as follows:

?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 wilfully suffers any other
person so to do, commits “criminal breach of trust”.

Section 409 of I.P.C. reads as follows:

?409. Criminal breach of trust by public servant, or by banker, merchant or
agent.?

Whoever, being in any manner entrusted with property, or with any
dominion over property in his capacity of a public servant or in the way of
his business as a banker, merchant, factor, broker, attorney or agent,
commits criminal breach of trust in respect of that property, shall be
punished with imprisonment for life, or with imprisonment of either
description for a term which may extend to ten years, and shall also be
liable to fine.

Section 415 of I.P.C. reads as follows:

?415. Cheating ?

Whoever, by deceiving any person, fraudulently or dishonestly induces
the person so deceived to deliver any property to any person, or to consent
that any person shall retain any property, or intentionally induces the
person so deceived to do or omit to do anything which he would not do or omit
if he were not so deceived, and which act or omission causes or is likely to
cause damage or harm to that person in body, mind, reputation or property, is
said to “cheat”.

15.In this regard, it is very relevant to cite the decision of Hon’ble
Supreme Court of India reported in (2011) 2 MLJ (Crl.) 365 (SC) ?
V.P.Shrivastava V. Indian Explosives Ltd., wherein, the Apex Court has held
as follows:

?34.In the instant case, there is nothing in the complaint which may
even suggest remotely that the IEL had entrusted any property to the
appellants or that the appellants had dominion over any of the properties of
the IEL, which they dishonestly converted to their own use so as to satisfy
the ingredients of Section 405 of the IPC, punishable under Section 406 IPC.

35.Having come to the conclusion that no prima facie case had been made
out against the appellants in respect of the alleged offences under Sections
420 and 406 IPC, the question of alleged conspiracy between the appellants
does not arise. Nevertheless, in order to bring home the charge of conspiracy
within the ambit of Section 120B of the IPC, it is necessary to establish
that there was an agreement between the appellants for doing an unlawful act.
The complaint lacks any such substance.?

In another decision, the Hon’ble Supreme Court reported in (2010) 1 MLJ
(Crl.) 1095 (SC) ? Devendra V. State of U.P., wherein, the Hon’ble Apex Court
has held as follows:

?15.`Cheating’ has been defined in Section 415 of the Indian Penal Code
to mean:

“Cheating– Whoever, by deceiving any person, fraudulently or dishonestly
induces the person so deceived to deliver any property to any person, or to
consent that any person shall retain any property, or intentionally induces
the person so 9 deceived to do or omit to do anything which he would not do
or omit if he were not so deceived, and which act or omission causes or is
likely to cause damage or harm to that person in body, mind, reputation or
property, is said to `cheat’.”

16.In V.Y. Jose v. State of Gujarat and Anr. [(2009) 3 SCC 78], this
Court opined:

“14.An offence of cheating cannot be said to have been made out unless the
following ingredients are satisfied:

i) deception of a person either by making a false or misleading
representation or by other action or omission;

(ii) fraudulently or dishonestly inducing any person to deliver any property;
or to consent that any person shall retain any property and finally
intentionally inducing that person to do or omit to do anything which he
would not do or omit.

For the purpose of constituting an offence of cheating, the complainant is
required to show that the accused had fraudulent or dishonest intention at
the time of making promise or representation. Even in a case where
allegations are made in regard to failure on the part of the accused to keep
his promise, in absence of a culpable intention at the time of making initial
promise being absent, no offence under Section 420 of the Indian Penal Code
can be said to have been made out.”

10 It is, therefore, evident that a misrepresentation from the very beginning
is a sine qua non for constitution of an offence of cheating, although in
some cases, an intention to cheat may develop at a later stage of formation
of the contract.

17.In Hridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Anr.[(2000)
4 SCC 168], this Court held:

“14. On a reading of the section it is manifest that in the definition there
are set forth two separate classes of acts which the person deceived may be
induced to do. In the first place he may be induced fraudulently or
dishonestly to deliver any property to any person. The second class of acts
set forth in the section is the doing or omitting to do anything which the
person deceived would not do or omit to do if he were not so deceived. In the
first class of cases the inducing must be fraudulent or dishonest. In the
second class of acts, the inducing must be intentional but not fraudulent or
dishonest.

15. In determining the question it has to be kept in mind that the
distinction between mere breach of contract and the offence of cheating is a
fine one. It depends upon the intention of the accused at the time to
inducement which may be judged by his subsequent conduct but for this
subsequent conduct is not the sole test. Mere breach of contract cannot give
rise to criminal prosecution for cheating unless fraudulent or dishonest
intention is shown right at the beginning of the transaction, that is the
time when the offence is said to have been committed. Therefore it is the
intention which is the gist of the offence. To hold a person guilty of
cheating it is necessary to show 11 that he had fraudulent or dishonest
intention at the time of making the promise. From his mere failure to keep up
promise subsequently such a culpable intention right at the beginning, that
is, when he made the promise cannot be presumed.”

[See also Indian Oil Corporation v. NEPC India Ltd. and Ors. (2006) 6 SCC
736, Veer Prakash Sharma v. Anil Kumar Agarwal and Anr. 2007 (9) SCALE 502,
V.Y. Jose (supra) and Ravindra Kumar Madhanlal Goenka Anr. v. M/s. Rugmini
Ram Raghav Spinners Anr. 2009 (6) SCALE 162] 23.

18.Section 463 of the Indian Penal Code reads as under:
“463. Forgery – Whoever makes any false documents or false electronic
record or part of a document or electronic record with intent to cause damage
or injury, to the public or to any person, or to support any claim or title,
or to cause any person to part with property, or to enter into any express or
implied contract, or with intent to commit fraud or that fraud may be
committed, commits forgery.”

According to Mr. Das, making of a false document so as to support any claim
over title would constitute forgery within the meaning of the said provision
and as a document was created for the purpose of showing one- third share in
the joint property by the appellants although they were not entitled to
therefor, they must be held to have committed an offence.

19.Making of any false document, in view of the definition of `forgery’ is
the sine qua non therefor. What would amount to making of a false document is
specified in Section 464 thereof. What is, therefore, necessary is to
execute a document with the intention of causing it to be believed that such
document inter alia was made by the authority of a person by whom or by whose
authority he knows that it was not made.

20. to 26. …………….

27. Mr. Das submits that a wrong committed on the part of a person may be a
civil wrong or a criminal wrong although an act of omission or commission on
the part of a person may give rise to both civil action and criminal action.
A distinction must be made between a civil wrong and a criminal wrong. When
dispute between the parties constitute only a civil wrong and not a criminal
wrong, the courts would not permit a person to be harassed although no case
for taking cognizance of the offence has been made out.

28.Furthermore, in a case of this nature where even, according to Mr. Das, no
case has been made out for taking cognizance of an offence under Section 420
of the Indian Penal Code, it was obligatory on the part of the learned Chief
Judicial Magistrate to apply his mind to the contents of the chargesheet.
Such application of mind on his part should have been reflected from the
order. [See State of Karnataka and Anr. v. Pastor P. Raju (2006) 6 SCC 728
and Pawan Kumar Sharma v. State of Uttaranchal, Criminal Appeal No. 1692 of
2007 decided on 10th December, 2007].

29.We, however, must place on record that we have not entered into the merit
of the dispute as the civil suit is pending. The same has to be determined in
accordance with law. We would request the court concerned to consider the
desirability of the disposing of civil suit as expeditiously as possible.
The appeal is allowed with the aforementioned directions.?

16.In the present case on hand, the ingredients of any offences as
alleged by the respondent are not at all attracted to prosecute them for the
offence under Sections 410, 419, 406, 409 and 120-(B) of I.P.C. To
constitute an offence of cheating, the complainant is required to show that
the accused had fraudulent or dishonest intention at the time of making
promise or representation. In the absence of such culpable intention, no
offence under Section 420 of the Indian Penal Code been made out against the
petitioners. Further, all the competent authorities enquired the complaints
lodged by the respondent including the Inspector of Police, Tenkasi Police
Station and rejected the complaints lodged by the respondent as no offence
made out as against the petitioners. Therefore, the present complaint is
only an abuse of process of law.

17.In view of the above discussion, the complaint is liable to be
quashed. Accordingly, this criminal original petition is allowed and the
complaint in C.C.No.110 of 2011 on the file of the Judicial Magistrate,
Tenkasi is quashed as against the petitioners alone.

To

1.The Judicial Magistrate,
Tenkasi.

.

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