2008 (12) TMI 796 - SC - Indian Laws

Prayer to Quash the Proceedings - Cognizance of offence punishable under Sections 406 and 420 of the Indian Penal Code 1860 ( IPC ) - hire purchased finance - HELD THAT - The appellants have introduced a fabricated letter dated 24.6.1995. It is their stand that the entire amount was paid and therefore on receiving the full payment the appellants ought to have returned the cheques which were held only as a collateral security. It is not in dispute that the proceedings u/s 138 are pending. That being so the question of proceeding for alleged breach of trust does not arise. 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 IPC 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 IPC. In addition to this perusal of the complaint apparently shows the ulterior motive. It is clear that the proceeding initiated by the respondent clearly amounted to abuse of the process of law. In State of Haryana v. Bhajan Lal 1992 (12) TMI 234 - SUPREME COURT ; (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 case at hand falls under category (7). Therefore in view of what has been stated in Bhajan Lal s case (supra) the proceedings before learned SDJM stand quashed. The appeal is allowed.

Summary

Issues:
Challenge to judgment declining interference with order taking cognizance of offences under Sections 406 and 420 IPC - Abuse of process of law - Proceedings under Section 138 of the Negotiable Instruments Act - Fabricated letter - Clean hands doctrine - Quashing of proceedings under Section 482 of the Code.

Detailed Analysis:

1. Cognizance of Offences under Sections 406 and 420 IPC:
The appeal challenged the judgment declining interference with the order taking cognizance of offences under Sections 406 and 420 IPC. The complaint alleged that the accused appellants presented blank cheques for encashment despite full repayment, leading to charges of cheating and harassment. The court below, after perusing materials and recording the complainant's statement, took cognizance of the offences. The appellants argued that the complaint was an abuse of process, counter to proceedings under Section 138 of the Negotiable Instruments Act.

2. Tripartite Agreements and Outstanding Dues:
The appellants contended that tripartite agreements were in place for loan disbursals, with the respondent as a guarantor. Despite reminders, a significant outstanding amount of Rs. 2,39,73,795 remained unpaid. The appellants presented cheques that were returned due to insufficient funds, leading to the respondent filing a criminal complaint under Sections 406 and 420 IPC.

3. Allegations of Mala Fide and Fabricated Letter:
The respondent claimed that the appellants acted mala fide and introduced a fabricated letter to support their position that full payment was made. The appellants argued that the respondent's plea was mala fide, and the proceedings under Section 138 of the Act were pending, rendering the breach of trust allegations unnecessary.

4. Abuse of Process and Quashing of Proceedings:
The respondent's actions were deemed an abuse of the legal process, as the complaint did not establish the ingredients of the alleged offences. Referring to the principles laid down in State of Haryana v. Bhajan Lal, the Court categorized the case as falling under the scenario where proceedings were manifestly mala fide. Consequently, the proceedings in ICC 210 of 2000 were quashed under Section 482 of the Code, and the appeal was allowed.

This detailed analysis covers the various issues involved in the legal judgment, outlining the arguments presented by both parties and the Court's reasoning leading to the quashing of the proceedings.