Companies Act Case Law Suneet Gupta Vs Anil Triloknath Sharma & Ors

CASE NO.:
Appeal (crl.) 742 of 2008

PETITIONER:
SUNEET GUPTA

RESPONDENT:
ANIL TRILOKNATH SHARMA & ORS

DATE OF JUDGMENT: 28/04/2008

BENCH:
C.K. THAKKER & AFTAB ALAM

JUDGMENT:
J U D G M E N T
REPORTABLE

CRIMINAL APPEAL NO. 742 OF 2008
ARISING OUT OF
SPECIAL LEAVE PETITION (Crl) No. 2671 OF 2007
WITH
CRIMINAL APPEAL NO. 743 OF 2008
ARISING OUT OF
SPECIAL LEAVE PETITION (Crl) No. 3844 OF 2007
SUNEET GUPTA . . . Appellant

Versus

SWAMI RAOTE & ANR. . . . Respondents

C.K Thakker, J.

1. Leave granted.
2. The present appeals are directed
against common judgment and order passed by the
High Court of Punjab and Haryana at Chandigarh
in Criminal Miscellaneous Nos. 49200-M of 2003
and 30393-M OF 2004. Both the above petitions
were filed by the respondents-accused under
Section 482 of the Code of Criminal Procedure,
1973 (hereinafter referred to as ‘the Code’)
for quashing First Information Report (FIR)
lodged by the appellant herein for offences
punishable under Sections 468, 406 read with
120B of the Indian Penal Code (IPC).
3. Short facts giving rise to the present
proceedings are that in 1998, appellant Suneet
Gupta entered into a registered Partnership
Firm with one Shashi Kant Mangla in the name
and style of M/s K.M. Agencies. The said Firm
was the stockist and distributor of consumer
goods of M/s Johnson & Johnson, a Limited
Multinational Company (‘M/s Johnson & Johnson
Ltd.’ for short). According to the appellant,
partnership of M/s K.M. Agencies had certain
claims over M/s Johnson & Johnson Ltd. on
account of freight, octroi paid for goods
returned, display of goods of the company, etc.
It is the case of the appellant that the above
claims were duly verified by the officials of
M/s Johnson & Johnson Ltd.
4. In or about March, 2001, differences
arose between the two partners of M/s K.M.
Agencies, i.e. between the appellant herein and
Shashi Kant Mangla, the other partner. The
latter, therefore, joined another partnership
firm of M/s Mangla Agencies with Ravi Kant
Mangla, Atul Gupta and two others. It is the
allegation of the appellant that Shashi Kant
Mangla who was a partner along with the
appellant of M/s K.M. Agencies falsely,
dishonestly and with a view to cheat and
defraud the appellant-complainant, mis-
represented before M/s Johnson & Johnson Ltd.
that the name of partnership firm of M/s K.M.
Agencies was changed to M/s Mangla Agencies.
On the basis of such representation Shashi Kant
Mangla informed M/s Johnson & Johnson Ltd. that
payment which was required to be made by the
Company (M/s Johnson & Johnson Ltd.) to M/s
K.M. Agencies should now be made to M/s Mangla
Agencies. According to the appellant, M/s
Johnson & Johnson Ltd. was aware of the fact
that M/s K.M. Agencies and M/s Mangla Agencies
were different; M/s K.M. Agencies, a
partnership firm was never dissolved; Suneet
Gupta who was one of the partners of M/s K.M.
Agencies continued to remain partner of the
said firm and Mr. Shashi Kant Mangla, one of
the partners of M/s K.M. Agencies had joined
another partnership firm of M/s Mangla Agencies
and as such payment which was required to be
made by M/s Johnson & Johnson Ltd. to M/s K.M.
Agencies could not be made to M/s Mangla
Agencies and yet such payment was made with a
view to deprive M/s K.M. Agencies and
particularly appellant-Suneet Gupta. The
appellant-complainant, in the circumstances,
was constrained to issue legal notice on March
4, 2003 to the respondents herein which was
received by them on March 10, 2003. In the
said notice, the complainant stated that M/s
Johnson & Johnson Ltd. was required to pay
Rs.2,73,189.70 to M/s K.M. Agencies but no such
payment was made to M/s K.M. Agencies. It also
came to the notice of the complainant that the
amount has been misappropriated by partners of
M/s Mangla Agencies and officials of M/s
Johnson & Johnson Ltd. colluded with the
partners of M/s Mangla Agencies and all of them
had thus played fraud upon the complainant.
The appellant also filed a complaint before the
Director General of Police, Chandigarh on May
2, 2003 and requested him to direct the police
authorities to enquire into the matter. It
appears that necessary inquiry was made, the
respondents submitted their replies, but
nothing further was done in the matter. The
appellant, therefore, was constrained to lodge
First Information Report (FIR) No. 266 of 2003
on September 16, 2003, against all the accused
for offences punishable under Sections 468, 406
read with 120B, IPC at Police Station, Sarabha
Nagar, Ludhiana. Police arrested respondent
No. 3 Devinder Sabharwal, Anil Triloki Nath
Sharma and Vivek Bhatnagar. Respondent Nos. 1
and 2 herein as also Surrinder Mohan,
proprietor of M/s Key Ess Associates obtained
anticipatory bail from the Sessions Court.
Other three accused persons, namely, Shashi
Kant Mangla, Ravi Kant Mangla and Atul Gupta,
all partners of M/s Mangla Agencies were denied
anticipatory bail by the learned Additional
Sessions Judge. During the pendency of their
bail applications before the High Court,
however, the prosecution made a statement that
the presence of those three accused was not
required in the case and consequently their
bail petitions became infructuous. Meanwhile,
the respondents herein filed Criminal
Miscellaneous Nos. 49200/2003 and 30393/2004 in
the High Court of Punjab & Haryana under
Section 482 of the Code for quashing FIR
registered against them.
5. The appellant also stated that a
detailed inquiry was made by the Police. It
collected the entire evidence and found that
prima facie case was made out against the
accused persons and accordingly charge-sheet
was submitted on May 13, 2004 against accused
persons, namely, Devinder Sabharwal, Vivek
Bhatnagar, Anil Triloki Nath Sharma and Swami
Raote. Swami Raote evaded arrest and hence
proceedings under Section 82 of the Code were
initiated against him. The prosecution put
Shashi Kant Mangla, Ravi Kant Mangla and Atul
Gupta, partners of M/s Mangla Agencies in
Column No.2 while Surrinder Mohan was made a
prosecution witness. The prosecution then moved
an application under Section 190 read with
Sections 239 and 240 of the Code for summoning
Shashi Kant Mangla, Ravi Kant Mangla and Atul
Gupta as accused persons for trial.
6. The High Court vide the impugned order
dated August 1, 2006, allowed both the
petitions and quashed FIR lodged by the
appellant. It is this order which is
challenged by the appellant in the present
appeals.
7. Notice was issued by this Court on
April 27, 2007, counter-affidavit and
affidavit-in-rejoinder were thereafter filed
and the matters were ordered to be posted for
final disposal. That is how the matters are
before us.
8. We have heard the learned counsel for
the parties.
9. The learned counsel for the appellant
contended that the High Court was wholly in
error in quashing FIR lodged by the appellant.
It was submitted that from the allegations
levelled in the FIR prima facie case for
offences punishable under Sections 468, 406
read with 120B, IPC had been made out.
According to the learned counsel, what is seen
at this stage is whether on the basis of the
allegations made in the complaint, prima facie
case has been made out against the accused and
not whether trial against them would ultimately
result in conviction of the accused. It was
the case of the appellant in the complaint that
two partnership firms of M/s K.M. Agencies and
M/s Mangla Agencies were distinct, different
and independent of each other. So far as M/s
K.M. Agencies is concerned, there were only two
partners, the appellant and Shashi Kant Mangla.
Shashi Kant Mangla became one of the partners
of other partnership firm as well, i.e. of M/s
Mangla Agencies. But the appellant-complainant
had nothing to do with the other partnership
firm, (M/s Mangla Agencies). Dues of M/s K.M.
Agencies which were to be paid by M/s Johnson &
Johnson Ltd. could not, in the circumstances,
be diverted to the other partnership firm with
which the appellant-complainant had no
connection whatsoever. All the partners of M/s
Mangla Agencies and all the officials of M/s
Johnson & Johnson Ltd. were aware of this fact
and yet in collusion with each other and with a
view to deprive M/s K.M. Agencies in general
and the appellant-complainant in particular,
payment was made by M/s Johnson & Johnson Ltd.
to M/s Mangla Agencies. Thus prima facie all
the accused had committed offences mentioned in
the FIR and the High Court should not have
quashed it. The High Court was also not right,
submitted the counsel, in holding that it was a
civil dispute and there was abuse of process of
law on the part of the complainant in
initiating criminal proceedings. It was
submitted that apart from civil liability, the
accused persons had committed crimes and on the
basis of allegations in the FIR, and on
investigation being made, the police
authorities found substance in the allegations
of the complainant and charge-sheet was
submitted. It was, therefore, submitted that
the appeal deserves to be allowed by setting
aside the order passed by the High Court by
directing the respondents to face criminal
proceedings.
10. Learned counsel for the contesting
respondents supported the order passed by the
High Court. It was submitted that the dispute
is of a civil nature. It was a dispute between
two partnership firms and initiation of
criminal proceedings was only with a view to
use pressure against the accused so that they
will be constrained to enter into some
settlement with the complainant. As per settled
law, a court of law cannot be used as a means
to pressurize the opposite party so that he may
accede to the demand of the complainant. The
High Court was convinced that on the facts and
in the circumstances of the case, no criminal
proceedings could have been initiated and
hence, quashed the proceedings which cannot be
said to be illegal or contrary to law. It was,
therefore, submitted that the appeals deserve
to be dismissed.
11. On behalf of respondent No. 4, an
affidavit is filed by PPS, Dy. Superintendent
of Police, Sarabha Nagar, Ludhiana stating
therein that the matter involved determination
of complicated points of facts and law which
could not have been gone into by the High Court
in a writ petition. It was stated that
detailed inquiry by PPS, Dy. Superintendent of
Police, Sarabha Nagar, Ludhiana revealed that
there was prima facie case of commission of
offences punishable under Sections 468, 406
read with 120B, IPC. Some accused were
arrested also. In the circumstances, the High
Court could not have aborted the proceedings as
has been done.
12. Having heard the learned counsel for
the parties and having considered the rival
contentions, in our opinion, it cannot be said
that the High Court was wrong in quashing
criminal proceedings. It is clear from the case
put forward by the appellant himself that
virtually the proceedings were ‘civil’ in
nature. There were two partnership firms, one
M/s K.M. Agencies, consisting of appellant and
Shashi Kant Mangla and the other of M/s Mangla
Agencies wherein Ravi Kant Mangla (one of the
partners of M/s K.M. Agencies) was a partner.
It was the case of Shashi Kant Mangla that M/s
K.M. Agencies was no more in existence and it
had changed its name from M/s K.M. Agencies to
M/s Mangla Agencies and all the transactions of
M/s K.M. Agencies would thereafter be dealt
with by M/s Mangla Agencies. Obviously,
therefore, payments which were to be made to
M/s K.M. Agencies should be made to M/s Mangla
Agencies. It also appears that M/s Johnson &
Johnson Ltd. was informed which changed the
Code from M/s K.M. Agencies to M/s Mangla
Agencies. It is further clear that though
payments were made in June-July, 2001 by M/s
Johnson & Johnson Ltd. to M/s Mangla Agencies,
a notice through an advocate was issued by the
complainant only on March 4, 2003, i.e. after
substantial period about two years. A
complaint was made to Director General of
Police, Chandigarh by the complainant in May,
2003. The record further reveals, as stated by
respondent Nos. 1, 2 and 3 in the counter-
affidavit, that it was contended by the accused
that the matter was civil in nature and based
on commercial transactions and there was a
dispute between the parties and as such there
was no element of mens rea. It was also
submitted by the accused that the complainant,
with an ulterior motive and mala fide
intention, used pressure tactics and was
harassing them in connivance with local police
and filed a complaint on May 2, 2003. The
police authorities were convinced about the
nature of dispute and after seeking legal
opinion from District Attorney closed the
proceedings. Subsequently, however, the
complainant ‘after making cosmetic changes in
the earlier complaint’ and using undue
influence filed FIR No. 266 of 2003 on
September 16, 2003 for commission of offences
punishable under Sections 468, 406 read with
120B, IPC. According to the accused, it was
motivated and the police authorities obliged
the complainant by helping him.
13. The High Court, in our opinion,
rightly considered the facts in their proper
perspective and observed that the dispute
related to settlement of accounts between
principal and its agent; the principal being
M/s Johnson & Johnson Ltd. and the agent being
M/s K.M. Agencies (earlier) and M/s Mangla
Agencies (later). The High Court also noted
that it was M/s K.M. Agencies which informed
the principal i.e. M/s Johnson & Johnson Ltd.
that M/s K.M. Agencies had closed its business
and the business was thereafter continued by
M/s Mangla Agencies and all drafts be issued in
favour of M/s Mangla Agencies. The High Court
took note of the fact that even the complainant
had informed the principal that there was
dispute between the partners of M/s K.M.
Agencies and hence no payment should be made to
M/s Mangla Agencies till the dispute was
finally resolved between the parties. That,
however, does not give rise to criminal
liability and entitle the complainant to
initiate criminal proceedings, particularly
when M/s Johnson & Johnson Ltd. substituted in
the Company record name of M/s Mangla Agencies
in place of M/s K.M. Agencies. The resultant
effect of substitution of name was that
whatever sums were due to M/s K.M. Agencies
were considered to be due to M/s Mangla
Agencies.
14. The High Court, in the circumstances,
observed as under;
“This is really a case of one partner
trying to drag the principal company
into a criminal litigation to recover
dues which the principal had paid to
the other partner. The dispute and the
relationship inter se has become a
tripartite one. Suneet Gupta had a
dispute with Shashi Kant Mangla but
instead of tackling him he got lodged
F.I.R. No. 266 dated September 16,
2003 registered at Police Station
Sarabha Nagar, Ludhiana, under
Sections 468/406/120-BIPC to
pressurize the petitioners to settle
the matter. It is not a clear cut and
direct case in which any contractual
relationship between Suneet Gupta with
the company has been breached. Indeed
Suneet Gupta had no direct
relationship with the company. It was
M/s K.M. Aencies of which he was one
of the partners which had developed
contractual relationship and later in
June/July, 2001, M/s Mangla Agencies
got substituted in place of M/s K.M.
Agencies. Suneet Gupta either ignored
this development or remained oblivious
of it for nearly 2 years. The first
notice was issued after passage of
long time on March 4, 2003. This
notice was clearly to drag the company
into the inter se dispute between two
partners.”

15. The Court proceeded to state;
“The complaint of Suneet Gupta and the
steps taken by the police have clearly
converted a tri-partite civil dispute
into a criminal one and have involved
the managers of the principals in a
dispute between the partners of the
firm.”

16. The High Court, therefore, concluded
that the steps taken by the complainant Suneet
Gupta were in clear abuse of process of law and
accordingly allowed both the petitions.
17. By passing the impugned order and
quashing criminal proceedings, in our opinion,
the High Court has neither committed any error
of law nor of jurisdiction which deserves
interference in exercise of power under Article
136 of the Constitution.
18. Our attention has been invited by the
learned counsel for the accused to several
decisions of this Court. In our opinion,
however, it is not necessary to refer to those
decisions since we are of the view that the
High Court was right in quashing criminal
proceedings.
19. We may, however, refer to one aspect.
Learned Counsel for the appellant strenuously
relied upon an order of this Court in State of
Punjab v. Dharam Vir Singh Jethi, 1994 SCC
(Cri) 500. In that case, charge-sheet was
submitted by Police and thereafter FIR was
quashed by the High Court.
20. In the light of the said fact, this
Court observed;
“Heard learned counsel for the State
as well as the contesting respondent.
We are afraid that the High Court was
not right in quashing the First
Information Report on the plea that
the said respondent had no role to
play and was never the custodian of
the paddy in question. In fact it was
averred in the counter-affidavit filed
in the High Court that the said
respondent had acted in collusion with
Kashmira Singh resulting in the latter
misappropriating the paddy in
question. At the relevant point of
time the respondent concerned, it is
alleged, was in overall charge of the
Government Seed Farm, Trehan. This
allegation forms the basis of the
involvement of the respondent
concerned. The High Court was,
therefore, wrong in saying that the
respondent concerned had no role to
play. A specific role is assigned to
him, it may be proved or may fail. In
any case, pursuant to the First
Information Report the investigation
was undertaken and a charge-sheet or a
police report under Section 173(2) of
the Code of Criminal Procedure was
filed in the court. If the
investigation papers annexed to the
charge-sheet do not disclose the
commission of any crime by the
respondent concerned, it would be open
to the court to refuse to frame a
charge, but quashing of the First
Information Report was not
permissible.”

21. In our opinion, however, the ratio
laid down in the above case will not apply to
the facts of the case. As already indicated in
the earlier part of the judgment, FIR was
lodged by the complainant on September 16, 2003
and immediately within less than a month, the
accused invoked the jurisdiction of the High
Court under Section 482 of the Code by filing
petitions on October 12, 2003. At that time,
challan was not filed in the Court. It was
after a substantial period of about seven
months that on May 13, 2004, charge-sheet was
filed by the police authorities. Moreover, in
Dharam Vir Singh, the accused was shown to be
in possession of property and later on
misappropriated it. The High Court, however,
quashed the proceedings inter alia observing
that the accused was never the custodian of
paddy and was not in charge of the Government
Seed Farm which was factually incorrect. In the
light of factual scenario, this Court set aside
the order of the High Court quashing criminal
proceedings.
22. In the case on hand, the High Court
was right in coming to the conclusion that a
civil dispute  pure and simple – between the
parties was sought to be converted into a
criminal offence only by resorting to pressure
tactics and by taking police help which was
indeed abuse of process of law and has been
rightly prevented by the High Court.
23. For the foregoing reasons, in our
view, the order passed by the High Court is in
consonance with law and requires no
interference. The appeals deserve to be
dismissed and are, accordingly, dismissed.

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