TMI Blog2004 (11) TMI 605X X X X Extracts X X X X X X X X Extracts X X X X ..... Managing Director and/or the livewiare of accused No. 3 that is the Dinjoyee Tea Estate Pvt. Ltd. and he was in complete control of the day-to-day business and/or affairs of the accused No. 3. Accused No. 4 that is Mrigendra Jalan being the Managing Director of accused No. 1 that is Maikaal Fibres Ltd. was in complete control of the day-to-day business and/or affairs of the accused No. 1 that is Maikaal Fibres Ltd. 5. Now, these accused persons had approached the petitioner-Bank (ICICI Bank) for providing Corporate Rupee Loan facility for the purpose margin money for working capital and normal capital expenditure for not exceeding ₹ 50 millions. A Corporate Rupee Loan agreement was entered into on 29th September, 2000 between the accused No. 1 and the ICICI Bank Ltd. The said money of 50 millions (5 crores) was advanced by the ICICI Bank as a result of false representation made by the accused persons. Necessary documents including a deed of guarantee whereby Dinjoyee Tea Estate Pvt. Ltd., that is accused No. 3, guaranteed repayment, were executed. The terms of repayment was mentioned in the agreement between the parties. When repayment became due the accused opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Let me first summarise the arguments placed by the learned senior Advocate appearing on behalf of opposite parties numbers 1 and 4, Sri Sekhar Basu. 11. The opposite party No. 1 that the company is a juristic person and cannot be charged with an offence wherein imprisonment is a mandatory form of punishment as held by the Apex Court in the case of Assistant Commissioner of Income Tax v. Velliappa Textiles Ltd. . It is, therefore, submitted that the opposite party No. 1, by no stretch of imagination can be prosecuted for the offence under Section 420 of the Indian Penal Code inasmuch as the said offence provides for imprisonment as a mandatory from of punishment. 12. With regard to the offence under Section 406 of the Indian Penal Code, it is submitted that the instant case relates to a loan transaction where the ownership of the money loaned shifts from the hand of the creditor to the debtor. There is no element of entrustment in a loan transaction inasmuch as the creditor loses his right of ownership in the loaned amount and the same stands transferred in the hand of the debtor. However, to disclose the ingredients of the offence of criminal breach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made to a judgment of the Supreme Court in G. Sagar Suri and Anr. v. State of U.P. . In view of such finding of the Apex Court it is submitted that to set aside the order of dismissal of the complaint and direct further enquiry would only be a resurrection of a lame prosecution which is an abuse of the process of Court. Documents have been submitted on behalf of opposite party Nos. 1 and 4 to show that substantial assets have been mortgaged to the complainant bank as security to the aforesaid loan. The assessment of the value of such assets far exceeds the liability of the opposite party Nos. 1 and 4 towards the complainant bank. In the backdrop of such fact, it cannot be stated that the opposite party Nos. 1 and 4 acted dishonestly in obtaining the said loan. The complainant bank was otherwise secured by substantial collateral securities and has the right to proceed against the opposite party No. 1 with regard thereto. However, for reasons best known to itself, the complainant bank has chosen not to do so and has so ought to harass and humiliate the opposite parties by instituting the impugned criminal case as a short-cut method/substitute for civil litigation. 17. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for reconsideration to a larger Bench. In view of such decision it has been submitted that the ratio in Velliappa Textile is no longer good law. It is settled law that a co-ordinate Bench of the Apex Court cannot overrule the law declared by another co-ordinate Bench and the same must be referred to a larger Bench for decision. This is exactly what has been done by the Apex Court in ANZ Grindlays Bank case. In doing so the Apex Court cannot be said to have overruled to its earlier decision till the issue is decided by the Constitution Bench to which it has been referred. In this regard it will be apposite to refer to the decision of the Apex Court in the case of Md. Anis v. Union of India reported in 1994 Supplementary (1) SCC 145, wherein the Apex Court has observed as follows: In our view, merely because the issue is referred to a larger Bench everything does not grind to a halt (para 6). In view of such observation of the Apex Court it is submitted that ratio in Velliappa Textile is good law and is binding in our Courts till the same is set aside by a larger Bench of the Apex Court. 22. In view of the fact, the issue is presently res integra and is pending ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions. 27. It is further submitted that the annexures on which ICICI Bank intends relying upon gives a clear picture that Mahadeo Jalan had neither signed the corporate guarantee nor had anything to do with Maikaal Fibres which had taken loan of ₹ 50 millions (Annexure 'B' of the revisional application at page 34). Moreover, it has to be brought to the notice of the Court that in paragraph 3 of the revisional application the petitioner Bank has stated that the opposite party No. 2 was the live wire of opposite party No. 3 and in spite of the documents proving otherwise have sought to state in paragraph 11 of the revisional application that the said corporate guarantee on behalf of the opposite party No. 3 was executed by the opposite party No. 2 even though the documents annexed to the revisional application being Annexure 'B' show that in respect of the opposite party No. 3, the opposite party No. 4 signed the corporate guarantee. 28. In the complaint also they have agreed that they accepted the corporate guarantee being signed by the opposite party No. 4 on behalf of the opposite party No. 3 even though they have specifically stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instead of attempting to satisfy its dues from the properties and securities provided by the opposite party No. 3 initiated the instant proceedings. Thus criminal intent cannot be ascribed to any of the opposite parties in view of the failure on the part of the Bank to satisfy its dues through the securities provided by the opposite party No. 1 company. The security provided by the opposite party No. 3 was much higher than the value of the loan amount which further goes to disprove the presence of criminal intent on the part of the opposite parties. 34. The accused No. 3 is a juristic personality being a company incorporated under the Companies Act. The Hon'ble Supreme Court in its much celebrated judgment of Kalpanath Rai v. State reported in 1998 Criminal Law Journal, 369 held that in case of offences which require mens rea as its ingredient, or where the statute does not provide for prosecution of companies and its officers like the Essential Commodities Act, Prevention of Food Adulteration Act etc., proceedings against companies, which is a juristic body, would not be maintainable. In view of the said pronouncement of the Hon'ble Supreme Court, it becomes clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against the guarantor irrespective of other securities the borrower might offer. Necessary documents including the deed of guarantee whereby Dinjoyee Tea Estate guaranteed repayment were executed. The terms of repayment was mentioned in the agreement between the parties. When payment became due the accused opposite party No. 1 Maikaal Fibres (P) Ltd. and its Managing Director, the accused No. 2 Mahadeo Jalan refused to make any payment. In terms of the agreement of guarantee the complainant was free to proceed against the guarantor and as such the complainant made a demand for payment from the guarantor the accused No. 3 Dinoy Tea Estate (P) Ltd. and its Managing Director, the accused No. 4 Mrigendra Jalan. On receipt of a notice of demand, Mrigendra denied that he ever executed such a guarantee. The accused persons had entered into criminal conspiracy to cheat the complainant of the entire sum of money obtained as advance from the bank on false inducement. More important averment in the complaint are as under: (i) All the four accused men connived and conspired to procure by-cheating margin money amounting to 50 million rupees (5 crores) from the complainant. (Paras 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of accused No. 4 Mrigendra Jalan duly authorised by the Board of Directors in execution thereof is conclusive proof that such guarantee was duly executed. The following submissions in this regard have been made: (i) Under Section 34 of the Companies Act every company on incorporation must have a common seal. (ii) Under Section 48 of the Companies Act deeds are executed by the use of common seal by any person duly authorised. (iii) Under Section 147(i)(b) of the Companies Act common seal contains the name of the company engraved in legible character on its seal. (iv) Section 48(2) of the Companies Act binds the company when such a seal has been affixed. 46. Hence neither Dinjoyee Tea Estate (P) Ltd. nor its Managing Director accused No. 4 could successfully deny execution of such a guarantee. 47. It is further submitted that it is significant that simultaneously on the same day namely 29th September, 2000 the loan agreement as also the corporate guarantee using the common seal of each company were issued. The representation about procuring the guarantee is at page 22 Clause 3.3. Common seal was authenticated by accused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nial is false. 52. It is further submitted that it is settled law that if a prima facie case is made out at the stage of issue of process no further enquiry is necessary. Reliance may be placed on the decision of Chandra Deo v. Prakash Chandra . 53. What is meant by prima facie case came up for consideration, in the case of Martin Burn Ltd v. R.N. Banerjee . The Court held that a prima facie case does not mean a case proved to the hilt but a case which can be said to be established if the evidence which is led in support of the same were believed, While determining whether a prima facie case had been made out the relevant consideration is whether on the evidence led it was possible to arrive at the conclusion in question and not whether that was the only conclusion which could be arrived at on that evidence . This view was approved in the case of Management of the Bangalore Woollen Cotton and Silk Co. Ltd. Appellant v. B. Dasappa, M.T. Respondent . 54. It is further argued by Sri Roy that on behalf of the opposite party it has been submitted that in view of the decision of the Supreme Court in Assistant Commissioner v. Velliappa Textiles Ltd. (Three-J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arantee of Dinjoyee has been denied by accused No. 4 Mrigendra clearly makes out deception on initial misrepresentation. 61. Hence, he concludes, the order of the learned Magistrate ought to be set aside. 62. I have carefully gone through the submissions made on behalf of both parties and also the case-laws cited. 63. The limited point for determination in this criminal revision is whether by the impugned order dt. 2.9.2003, the learned Metropolitan Magistrate was justified in dismissing the complaint made by the ICICI Bank Ltd. under Section 406/420/120B of the IPC against the four accused on the grounds stated in his order. 64. Plainly, the only reasons he virtually nipped the complaint in the bud were--that the dispute between the parties were civil in nature and that he did not find any element of offence under Section 406/420/120B IPC in connection with the case. 65. Now, the learned Magistrate broadly outlined in gist the allegations of the complaint and prima facie considered the evidence of the two witnesses for the complainant. So, his finding that the dispute was of civil nature is at least backed by some reasons. But so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order of dismissal of a complaint under Section 203 Cr.P.C. and absence of the reasons would make the order a nullity. Even assuming, however, that the rule laid down in (s) AIR 1956 SC 116 applies to such a case, prejudice is writ large on the fact of the order. The complainant is entitled to know why his complaint has been dismissed with a view to consider an approach to a Revisional Court. Being kept in ignorance of the reasons clearly prejudices his right to move the Revisional Court and where he takes a matter to the Revisional Court, renders his task before that Court difficult, particularly in view of the limited scope of the provisions of Sections 438 and 439, Code of Criminal Procedure. 70. Thus, in view of what has been stated above and in the light of the judgment of the Apex Court, the order of the learned Magistrate in question which virtually results in quashment of the entire criminal complaint cannot be sustained. In this connection, I might add that Court should be abundantly cautious and circumspect before drastically doing away with a criminal case at its very inception except for adequate and sound reasoning. After all, a criminal offence affects t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : In terms of such agreement the corporate guarantee was executed by the accused No. 3 through the accused No. 4 by using the common seal of the company whereby and wherein the said accused No. 3 agreed to be treated as a principal borrower in case of default on the part of accused No. 1 and to pay off the entire dues with all interest whatsoever. The said and/or other terms will appear from the said corporate guarantee dated 29th September, 2000 is annexed hereto and marked with the letter 'B' as part of this application. In the said Deed of Guarantee the accused No. 3 categorically undertaken to indemnify your petitioner against all losses, damages, costs, claims and expenses whatsoever which your petitioner may suffer, pay or incur by reason of or in connection with such default on the part of the borrower including legal proceedings taken against the accused No. 1 and/or accused No. 3 for recovery of loan, interest, liquidated damages or other monies to your petitioner. The said guarantee is a continuing, irrevocable, unconditional guarantee. Inasmuch as the accused No. 1 company filed to pay off the dues of your petitioner, your petitioner duly invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initial testimony of the witnesses that at least the foundation of the offences complained of is firmly laid--it is just not all frivolous and fanciful. There appears to be prima facie materials for the complainant for the satisfaction of the Court to set the wheel of criminal justice moving by issuing of the process and see to the end of the dispute by means of the trial on the basis of material evidence both parties may adduce. Conversely, to my mind, it cannot be said that, the allegations even taken on their 'face value' do not at all constitute the offence so as to nip the process in the bud. One wonders, if justice itself then becomes the casualty. 75. Indeed, the fact of the matter is, there may be more than what meets the eyes, such as, conduct of the parties and attending circumstances entwined with the transactions in question which only the material evidence at the trial can really elicit. This is not the stage for such a probe. After all, call it conspiracy, inducement, fraud, 'mens rea' or misrepresentation and so on, they are all basically the working of the inner mind which comprehensive evidence at the full trial, such as in a case like thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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