HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
Court No. – 13
Case :- U/S 482/378/407 No. – 4494 of 2011
Applicant :- S.N Kuppuswamy and another
Opposite Party :- The State of U.P Thru Secy., Home., Lucknow And Ors.
Counsel for Applicant :- Pankaj Khare, Ram Prakash Singh
Counsel for Opposite Party :- Govt. Advocate, Digvijay Singh
Hon’ble Dinesh Kumar Singh, J.
1. The present petition under Section 482 Cr.P.C has been filed for quashing of the summoning order dated 11.7.2011 passed by Additional Chief Judicial Magistrate, Court No.28, District Lucknow as well as entire proceedings of Case No.7084 of 2010, under Sections 420, 406, 506, 120B IPC, Police Station Gomti Nagar, District Lucknow, pending before the same court.
2. M/s Sai Abacus Education System Pvt. Ltd. is said to be imparting education and training of mental mathematics under the banner of Abacus Mental Mathematics Academy (hereinafter referred to as ‘the Company’).
3. The Company decided to appoint franchises in several places in the Country including Lucknow. For Lucknow, interested parties were invited. It is stated that respondent No. 3 has visited the office of the Company and after being satisfied, he paid the amount. He issued cheque of Rs. 50,000/- in favor of the Company for taking franchises of the Academy in Lucknow.
4. It is further stated that respondent No. 3 showed interest for franchises for Lucknow and Kanpur. It appears that an educational fair was organized in October, 2007 at Taj Hotel, Gomti Nagar, Lucknow. A stall by M/s. Abacus Mental Mathematics Academy was also put up there. The petitioners herein along with their staff persuaded respondent Nos. 2 and 3 to invest in educational technology of the said Academy. The petitioners represented themselves to be directors of the Company. Respondent Nos.2 and 3 having got satisfied with the presentation and bona fide of the petitioners, issued cheque for Rs.50,000/- in favor of the Company for unit franchise in Lucknow. It is alleged that thereafter, the petitioners approached respondent Nos.2 and 3 and persuaded them to provide master franchises for Lucknow and Kanpur.
5. A Master Franchise Agreement was entered on 28th November, 2007 with respondent No. 2, Madhu Rawther. It is alleged that respondent Nos2 and 3 paid Rs.5,00,000/- through cash and cheque for entering into Master Franchise Agreement with the petitioners. The various receipts issued by the petitioners and bank statements showing payment of Rs.5,00,000/- have been placed on record.
6. It is further alleged that the petitioners’ Academy did not provide desired support as contemplated in the agreement in marketing / consultancy, faculty training, assistance in enrolling unit franchises. Live demo was also not conducted by the Academy. The respondents trusting in the words of the petitioners allotted 5 to 6 unit franchises and deposited the receipts received with the Academy. However, it became evident from the conduct of the petitioners that they had intentions from the very beginning to cheat the respondents as well as unit franchise holders, they had intentions to deceive the respondents from the very beginning to usurp their money and cheat them of their hard earned money which the respondents have deposited with the petitioners and as well as money received from unit franchises.
7. When the petitioners were not cooperating and honoring the commitments made in the Master Franchise Agreement, the respondents made it known to them that they wanted to come out of the agreement. With great difficulty after prolonged negotiations an Agreement/ Memorandum of Understanding was entered between the petitioners and respondents on 29th August, 2008.
8. The important clauses and recitals of Memorandum of Understanding dated 29th August, 2008 are extracted herein:
“Whereas the second party is no more interested to continue as the franchise of the first party due to non cooperation from first party and also no business activity held in the market to such an extent to as to sustain and be viable and wanted to quit the franchise agreement of UP region.
Now therefore, not withstanding the claims and counter claims, all disputes have been amicably settled and declared the intervention of Prabhat Kumar, R/o D-3/626, Vineet Khand-3, Gomti Nagar, Lucknow and Mr. Rajeev Sachdeva, R/o C/65, LIG Flat, Pocket- 2, Phase- 1, Sector- 7, New Delhi-75 from the side of the first and second party as follows.
In consideration of the First Party promising to pay to the Second Party and other local franchisee. agreement made by Second Party on behalf of First Party(Abacus Mental Mathematical Academy), Lucknow Kanpur etc. within 12 months time starting from Sept. 2008.
1) First Party lo return the master franchisee fee paid by Second Party Rs.5,00.000/- (Rupees Five Lakhs only) in Five installments as elaborated hereinafter, the second party agrees.
2) First Party to return the local franchise fee paid by all local franchisee at Lucknow, Kanpur, Varanasi and Shahjahanpur etc.
i. To surrender and subrogate all the contracts entered by the second party and other local franchises.
ii. Not to interfere or disturb the market of the first party in Lucknow and Kanpur or other cities in U.P.
iii To return the entire material and catalogues etc. to first party by Second Party.
iv. The aforesaid sum of Rs. 5.00 Lac [Rupees Five Lakhs only) shall be payable to the Second Party in five installments to the first party and five installments to the local franchisee at Lucknow, Kanpur, Varanasi and Shahjahanpur etc.
a) First installment of Rs. 50.000/- (Rupees Fifty thousand only) on before 31st, January 2009 to the Second Party.
b) Second installment of Rs. 1.00,000/- (Rupees One Lakh Only) on before 31st March 2009.
c) Third installment of Rs. 1.50,000/- (Rupees One Lac Fifty Thousand Only) on before 31st May 2009.
d) Forth installment of Rs. l.50.000/- (Rupees One Lac Fifly Thousand ) on or before 31st July 2009.
e) Fifth installments of Rs. 50,000/- (Rupees Fifty thousand only) on or before 31st August 2009.
Also to return the local franchisee one by one with in 12 months’ time starting from September 2008 onwards.
After signing this agreement none of the parties to this agreement shall be entitled to claim anything else from each other, save and except, as provided hereinabove in this agreement.
This mutual understanding shall be constricted in accordance with law of India, in case the first party showing inability to pay the installments in time the second party has full right to contact the law and the jurisdiction will be at Lucknow only.”
9. Thus, from the perusal of the aforesaid Agreement/ Memorandum of Understanding entered between the parties, the petitioners admitted non cooperation in the execution of Master Franchise Agreement and for that reason the agreement between the parties failed. The petitioners undertook to pay 5 lakhs in 5 equal installments which was received by them while entering into Master Franchise Agreement. The petitioners also agreed to return the money received from unit franchises.
10. It is also clear that in pursuance of Memorandum of Understanding dated 29th August 2008, the entire amount of Rs.5,00,000/- in five installments was to be paid on or before 31st August, 2009.
It is alleged that no money as promised vide Memorandum of Understanding dated 29th August, 2008 was paid by the petitioners to the respondents. The respondents approached the petitioners and went to their office at New Delhi. Instead of making payment, the respondents were threatened, abused in the filthiest language and rebuked.
11. The respondents feeling deceived and cheated by the petitioners filed a complaint in the Court of Additional Chief Judicial Magistrate, Court No.28, Lucknow alleging that the petitioners had deceived and cheated them of Rs.8,45,000/-. The learned Additional Chief Judicial Magistrate after considering the complaint and statements of complainant and witnesses recorded under Sections 200 and 202 Cr.P.C vide impugned order dated 11th July, 2011 had summoned the petitioners under Sections 420, 406, 506, 120-B I.P.C.
12. It is alleged that petitioners have not approached this Court with clean hands inasmuch as they have not disclosed true and correct facts and they have canceled the Memorandum of Understanding dated 29th August, 2008 whereby they agreed to return the amount taken from the respondents. Not a sentence of whisper has been mentioned in the entire petition regarding Memorandum of Understanding dated 29th August, 2008.
13. This court vide interim order dated 14.10. 2011 stayed the further proceeding of Case No.7084 of 2010 under Sections 420, 406, 506, 120-B I.P.C.
14. Learned counsel for the petitioners have submitted that the dispute between the parties is of civil nature and the impugned criminal proceedings have been initiated as a cloak to put pressure on the petitioners. He further submits that the proceedings are nothing but an abuse of the process of the law and the court and, therefore, the same may be quashed. It is also submitted that if the facts of the case are considered in their proper perspective, the dispute is nothing but it relates to settlement of accounts between the petitioners and the respondents. The dispute doesn’t give rise to criminal liability which would have entitled the complainant to initiate criminal proceedings. The dispute between the parties is a civil dispute pure and simple and therefore, the criminal proceedings which have been initiated as a tactic by the respondents to put pressure on the petitioners are liable to be quashed.
15. On the other hand, learned counsels for the private respondents and the A.G.A. appearing for the State have submitted that the petitioners have admitted in the Memorandum of Understanding /Agreement dated 29th August 2008 and they did not cooperate and provide the desired assistance to the petitioners and, therefore, the Master Franchise Agreement could not be implemented by the respondents as no business activities could be carried out by them despite making payment of Rs.10,00,000/- or so.
In the view of non performance of their part of the obligations under the Master Franchise Agreement, the petitioners agreed to make payment to the respondents of the agreed amount but despite having undertaken to make payment, they did not make the payment and therefore, the offence of cheating and criminal breach of trust are well established.
16. They have further submitted that the learned Additional Chief Judicial Magistrate after considering the complaint and statements of the complainant and the witnesses recorded under Sections 200 and 202 Cr.P.C respectively had summoned the accused for the offenses under Sections 420, 406, 506 I.P.C. The impugned order passed by the learned Magistrate is neither illegal nor improper. In view thereof, they have submitted that the present petition is liable to be dismissed. They have also submitted that the petitioners have not approached this court with clean hands inasmuch as they have not disclosed the facts of entering into the Memorandum of Understanding dated 29th August, 2008.
17. I have considered the facts and circumstances record and the submissions advanced by the parties carefully.
18. The Supreme Court in the case of State of Haryana and others v. Ch. Bhajan Lal and others, 1992 Supp (1) SCC 335: AIR 1992 SC 604 while delineating the powers of High Court under Section 482 Cr.P.C. for quashing the criminal proceedings has illustratively enumerated the circumstances where the High Court should exercise the power to quash the proceedings in paragraph 102 of the judgement as under :-
“102. 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 channelized 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 a cognizable 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.”
19. The Supreme Court in the case of Rajiv Thappar and others vs. Madan Lal Kapoor (2013) 3 SCC 330 while dealing with the powers of the High Court to quash the criminal proceedings under Section 482 of Cr.P.C. has held in paragraphs 29 and 30 as under:
“29. The issue being examined in the instant case is the jurisdiction of the High Court under Section 482 CrPC, if it chooses to quash the initiation of the prosecution against an accused at the stage of issuing process, or at the stage of committal, or even at the stage of framing of charges. These are all stages before the commencement of the actual trial. The same parameters would naturally be available for later stages as well. The power vested in the High Court under Section 482 C.r.P.C., at the stages referred to hereinabove, would have far-reaching consequences inasmuch as it would negate the prosecution’s/complainant’s case without allowing the prosecution/complainant to lead evidence. Such a determination must always be rendered with caution, care and circumspection. To invoke its inherent jurisdiction under Section 482 C.r.P.C. the High Court has to be fully satisfied that the material produced by the accused is such that would lead to the conclusion that his/their defense is based on sound, reasonable, and indubitable facts; the material produced is such as would rule out and displace the assertions contained in the charges levelled against the accused; and the material produced is such as would clearly reject and overrule the veracity of the allegations contained in the accusations levelled by the prosecution/complainant. It should be sufficient to rule out, reject and discard the accusations levelled by the prosecution/complainant, without the necessity of recording any evidence. For this the material relied upon by the defense should not have been refuted, or alternatively, cannot be justifiably refuted, being material of sterling and impeccable quality. The material relied upon by the accused should be such as would persuade a reasonable person to dismiss and condemn the actual basis of the accusations as false. In such a situation, the judicial conscience of the High Court would persuade it to exercise its power under Section 482 C.r.P.C. to quash such criminal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice.
30. Based on the factors canvassed in the foregoing paragraphs, we would delineate the following steps to determine the veracity of a prayer for quashment raised by an accused by invoking the power vested in the High Court under Section 482 Cr.P.C.:
30.1. Step one: whether the material relied upon by the accused is sound, reasonable, and indubitable i.e. the material is of sterling and impeccable quality?
30.2. Step two: whether the material relied upon by the accused would rule out the assertions contained in the charges levelled against the accused i.e. the material is sufficient to reject and overrule the factual assertions contained in the complaint i.e. the material is such as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false?
30.3. Step three: whether the material relied upon by the accused has not been refuted by the prosecution/complainant; and/or the material is such that it cannot be justifiably refuted by the prosecution/complainant?
30.4. Step four: whether proceeding with the trial would result in an abuse of process of the court, and would not serve the ends of justice?
30.5. If the answer to all the steps is in the affirmative, the judicial conscience of the High Court should persuade it to quash such criminal proceedings in exercise of power vested in it under Section 482 CrPC. Such exercise of power, besides doing justice to the accused, would save precious court time, which would otherwise be wasted in holding such a trial (as well as proceedings arising therefrom) specially when it is clear that the same would not conclude in the conviction of the accused.”
20. When a petition for quashing of criminal proceedings filed under Section 482 Cr.P.C. is considered, the High court is required to examine whether the allegations on the face value disclose commission of an offence by the accused or not. It is only when the allegations do not disclose commission of an offence, the High Court should exercise its power under Section 482 Cr.P.C. to quash the proceedings. The Supreme Court in the case of Binod Kumar v. State of Bihar, (2014) 10 SCC 663 has held in paragraphs 14 to 17 as under:-
“14. At this stage, we are only concerned with the question whether the averments in the complaint taken at their face value make out the ingredients of criminal offence or not. Let us now examine whether the allegations made in the complaint when taken on their face value, are true and constitute the offence as defined under Section 406.
15. Section 405 IPC deals with criminal breach of trust. A careful reading of Section 405 IPC shows that a criminal breach of trust involves the following ingredients:
(a) a person should have been entrusted with property, or entrusted with dominion over property;
(b) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so;
(c) 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.
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.
17. Section 420 IPC deals with cheating. The essential ingredients of Section 420 IPC are:
(ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security, and
(iii) mens rea of the accused at the time of making the inducement.”
21. The civil and criminal consequences may coexist and, therefore, the criminal as well as civil proceedings may be initiated as there is no bar. If a transaction is having civil consequences, criminal proceedings also be initiated, if the allegations disclose commission of an offence. The Supreme Court in the case of Pratibha Rani vs. Suraj Kumar 1985(2) SCC 370 has held in paragraph 21 as under :-
“21. … There are a large number of cases where criminal law and civil law can run side by side. The two remedies are not mutually exclusive but clearly coextensive and essentially differ in their content and consequence. The object of the criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect the civil remedies at all for suing the wrongdoer in cases like arson, accidents, etc. It is an anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. The two types of actions are quite different in content, scope and import…”
22. Somewhat similar observation in regard to the civil and criminal aspects in the proceedings has been made and held that such consequences are not exhaustive, but coextensive in Alpic Finance Ltd. Vs. P. Sadasivam others, 2001 (3) SCC 513. Paragraphs 10 to 12 of the said judgement are extracted hereunder :-
“10. The facts in the present case have to be appreciated in the light of the various decisions of this Court. When somebody suffers injury to his person, property or reputation, he may have remedies both under civil and criminal law. The injury alleged may form basis of civil claim and may also constitute the ingredients of some crime punishable under criminal law. When there is dispute between the parties arising out of a transaction involving passing of valuable properties between them, the aggrieved person may have right to sue for damages or compensation and at the same time, law permits the victim to proceed against the wrongdoer for having committed an offence of criminal breach of trust or cheating. Here the main offence alleged by the appellant is that respondents committed the offence under section and the case of the appellant is that respondents have cheated him and thereby dishonestly induced him to deliver property. To deceive is to induce a man to believe that a thing is true which is false and which the person practicing the deceit knows or believes to be false. It must also be shown that thee existed a fraudulent and dishonest intention at the time of commission of the offence. There is no allegation that the respondents made any willful misrepresentation. Even according to the appellant, parties entered into a valid lease agreement and the grievance of the appellant is that the respondents failed to discharge their contractual obligations. In the complaint, there is no allegation that there was fraud or dishonest inducement on the part of the respondents and thereby the respondents parted with the property. It is trite law and common sense that an honest may entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debt, he does not necessarily evade the debt by deception.
11. Moreover, the appellant has no case that the respondents obtained the articles by any fraudulent inducement or by willful misrepresentation. We are told that respondents, though committed default in paying some installments, have paid substantial amount towards the consideration.
12. Having regard to the facts and circumstances, it is difficult to discern an element of deception in the whole transaction, whereas it is palpably evident that the appellant had an oblique motive of causing harassment to the respondents by seizing the entire articles through magisterial proceedings. We are of the view that the learned judge was perfectly justified in quashing the proceedings and we are disinclined to interfere in such matters.”
23. In the present case, the specific allegations in complaint filed by the respondents is that the petitioners from the very beginning did not have intentions to honor Master Franchise Agreement which they promised. This fact is admitted by them in Memorandum of Understanding/Agreement dated 29th August, 2008. They undertook to pay the amount of Rs.5,00,000/- to respondents in 5 equal installments and pay back the amount collected from unit franchises but despite having specifically undertaken to pay back to respondents and unit franchises, the petitioners failed. Thus, the allegations that the petitioners had no intentions to follow Master Franchise Agreement and deceive the respondents from the very beginning cannot be unfounded.
24. The second submission of learned counsel for the petitioners that the dispute between the petitioners and complainant is of civil nature and criminal proceedings have been initiated as a ruse to put pressure on the petitioners to pay the respondents and therefore, the impugned proceedings are liable to be quashed is not correct on the face of the facts of the case.
25. Further, it is well settled that if the allegations disclose a civil dispute, same by itself is not a ground to hold that the criminal proceedings are not well out to continue.
26. A transaction may involve civil as well as criminal consequences. The Supreme Court in the case of R. Kalyani v. Janak C. Mehta, (2009) 1 SCC 516 while dealing with inherent powers of the High court under Section 482 Cr.P.C as well as dealing with the nature of civil and criminal liabilities in the same proceedings has held in paragraph 15 as under :-
“15. Propositions of law which emerge from the said decisions are : (1) The High Court ordinarily would not exercise its inherent jurisdiction to quash a criminal proceeding and, in particular, a first information report unless the allegations contained therein, even if given face value and taken to be correct in their entirety, disclosed no cognizable offence.
(2) For the said purpose the Court, save and except in very exceptional circumstances, would not look to any document relied upon by the defence.
(3) Such a power should be exercised very sparingly. If the allegations made in the FIR disclose commission of an offence, the Court shall not go beyond the same and pass an order in favour of the accused to hold absence of any mens rea or actus reus.
(4) If the allegation discloses a civil dispute, the same by itself may not be a ground to hold that the criminal proceedings should not be allowed to continue.”
27. The petitioners did not disclose Memorandum of Understanding/Agreement dated 29th August, 2008 in their petition. It is relevant to mention here that from the terms and conditions of the Memorandum of Understanding extracted hereinabove, it is evident that they had undertaken to make payment of the entire amount which was paid to them by the respondents and on behalf of unit franchises. The petitioners have admitted that the Master Franchise Agreement failed because of their non cooperation. The dispute may have civil consequences but if the criminal offence is made out from the conduct of the accused, the proceedings cannot be quashed merely on this ground. In the present petition, the petitioners had specifically undertaken to make payment to the respondents in term of the Memorandum of Understanding dated 29th August, 2008. They have admitted that they did not provide requisite assistance for carrying out the Master Franchise Agreement and for that reason the agreement failed. Despite admitting their failure and undertaken to pay the respondents, they failed to make the payment.
28. Thus, from the very beginning the petitioners did not have intention to implement the Master Franchise Agreement and they had intention to deceive the respondents of their money. Despite, the petitioners having undertaking to make the payment as per the Memorandum of Understanding dated 29th August, 2008, they have failed to make the payment, therefore, the offence under 420, 406, 506, 120-B IPC is clearly made out. It is also relevant to mention that the respondents were threatened, abused and intimidated when they approached the petitioners for making payment as per the Memorandum of Understanding dated 29th August, 2008.
In view thereof, it cannot be said that the no offence is made out against the petitioners for which they have been summoned by the learned Chief Judicial Magistrate.
29. Considering the entirety of the facts of the case and the law laid down by the Supreme Court, I do not find any ground to interferer with impugned summon order dated.
30. Thus, the petition is dismissed.
31. Let a copy of this order be communicated to the trial court concerned for necessary compliance.
( Dinesh Kumar Singh, J.)
Order Date :14.1.2020