IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 21ST DAY OF FEBRUARY, 2019 BEFORE THE HON'BLE MR. JUSTICE JOHN MICHAEL CUNHA CRIMINAL PETITION NO.8529/2016 BETWEEN:
Suresh Karattil @ Suresh Menon Age: Major, Occ:Business, R/o Kannur City, Kannur District, Kerala State – 670003. … Petitioner (Sri.K.Dhiraj Kumar, Advocate) AND:
1. The State Through Halasur Police Station, Represented by SPP High Court Building, Bengaluru – 560001.
2. P.J.Alex, S/o Late P.C.Johnson, Aged 51 years, Estate Building, 10th Floor, Dickenson Road, Bengaluru – 560001. ... Respondents (By Sri.I.S.Pramod Chandra, SPP II for R.1 and Sri.Ajesh Kumar S, Advocate for R.2) This Criminal petition is filed under Section 482 of Cr.P.C. praying to quash the entire initiation of proceedings in CR.No.164/2016 registered for the offence punishable under Sections 406 and 420 of IPC by the Halasur Police and etc.
This Criminal petition coming on for admission, this day, the Court made the following:
O R D E R The petitioner has sought to quash the FIR in Crime No.164/2016 registered for the offences punishable under Sections 406 and 420 of IPC.
2. The learned counsel for the petitioner has raised threefold contentions. Firstly, he contends that the allegations made in the complaint are purely civil in nature. The grievance of the complainant pertained to recovery of money, which is alleged to have been due to him under a Memorandum of Understanding (for short MOU). In support of his argument, the learned counsel has placed reliance on the decision of the Hon’ble Supreme Court in the case of Satishchandra Ratanlal Shah vs. State of Gujarat and another reported in Criminal Appeal No.9/2019 (Arising out of SLP (CRL). No.5223/2018) and with reference to para No.12 thereof has emphasized that law clearly recognizes a difference between simple payment /investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.
3. Secondly, disputing the records produced by the respondents along with his memo, learned counsel for the petitioner submits that even if the documents produced by the complainant are accepted, it discloses that the alleged offence has been committed by the company. The company is not made as an accused in the FIR. Therefore, without making the company as prime accused, prosecution against the petitioner is not maintainable.
4. Thirdly, he submits that the prosecution launched against the petitioner is barred by limitation. The alleged offence is said to have taken place in the year 2013. The prosecution ought to have been launched within three years in view of the provision contained in Section 468 of Cr.P.C. Further, he submits that the entire transaction has taken place at Dubai and no cause of action has arisen within the territorial limits of the respondent No.1/police. Hence, respondent No.1/police have no jurisdiction to investigate the alleged offences.
5. Refuting the above contentions, the learned counsel appearing for the respondents referring to the contents of the complaint has emphasized that the allegations made in the complaint do not pertain to the recovery of the money received by the accused rather the allegations against the petitioner are that the money invested by the complainant in terms of the MOU dated 29.03.2013 was diverted for some other business contrary to the terms of the said agreement, these allegations squarely fall within the definition of Section 405 of IPC.
6. Secondly, he contends that reliable material is produced by the respondent to substantiate the allegations made in the complaint. Therefore, at the stage of investigation, the said proceedings cannot be quashed, having regard to the enormity of the charges leveled against the petitioner.
7. Considered the rival submissions and perused the records.
8. Though at first blush, allegations made in the complaint appear to be relating to the financial transactions between the petitioner and the complainant/respondent No.2, but, a careful reading of the said complaint clearly reveals that the parties have entered into a MOU dated 29.03.2013. This MOU pertains to the establishment of diesel business. The terms of the said MOU which are relevant for the purpose of our discussion is extracted here below;
“WHEREAS, the Company hereby affirms and places on record that it has represented through its Managing Partners to the Investor during the personal discussions at Dubai that-
1) The Company is competent to and is in the process of acquiring all the necessary permissions and is in negotiations with several parties to get the licenses/sanctions to undertake and carry on diesel trade;
2) The Managing Partners, mainly the Managing Director, have necessary business acquaintances to get ADNOC diesel quota sanctioned to them immediately to an extent of 100,000 gallons per day (“Business”);
3) As a prerequisite to get the necessary sanctions for the Business, the Company has to depict its financial strength to the concerned authorities granting the quota;
4) The Managing Partners have already communicated about the Business to the other probable investors who are interested, keen and willing to invest some proportion of the total investment required for carrying out the Business;
5) The Managing Partners will run the Business with minimal administration cost, by taking the remuneration to only compensate their cost of living;
6) The cost of the project will be estimated after receiving the necessary Business sanctions/permits/ quota in part or in full, based upon which the necessary infrastructural facilities will be built in, encompassing, but not limited to, storage yard, transportation facilities, re-seller arrangements, cost of purchase, sales realizations expected, manpower cost, and other miscellaneous expenses;
7) Based on the above commitments, the funds will have to be deployed in the Company by the Investor, upon which the Managing Partners will set the project in right direction at the earliest, in any case not later than 5 months, after which the total investment this Agreement;
8) This deployment will be upon the explicit agreement of the Managing Partners that the funds deployed by the Investor will be strictly utilized only for furtherance of the Business mentioned hereinabove and for no other purpose;
9) The entire obligation to carry out the Business and to achieve the object of this Agreement shall vest on the Managing Partners, wherein the Managing Director will be responsible for Finance, Sourcing, Administration activities of the Business and the Company, while Mr.Paul Mathew Kunnath will be responsible for Operations and Sales;
10) The loan amounts of the Investor will be repaid from the Business collections on monthly repayment basis prior to profit sharing among the shareholders; and 11) The Investor has represented to the Company and its Managing Partners that he will be deploying the required funds from his own source and also from his close friends and family.”
9. In the light of the above terms, the allegations made in the complaint that the petitioner herein has cheated the complainant by siphoning of the money from the company, in my view, squarely attract the ingredients of Section 405 of IPC. This view gets fortified from the observations made by the Hon’ble Apex Court in paragraph No.12 of the judgment relied by the learned counsel for the petitioner in the case of Satishchandra Ratanlal Shah vs. State of Gujarat and another, which is extracted herein below;
“12. Having observed the background principles applicable herein, we need to consider the individual charges against the appellant. Turning to Section 405 read with 406 of IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that the respondent No.2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, the respondent No.2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognizes a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.”
10. The recital in the MOU and the communication between the parties clearly indicate that pursuant to the aforesaid MOU, around Rs.7,70,00,000/- has been entrusted to the petitioner for the purpose of the aforesaid business to be invested and expended in terms of the MOU. Therefore, prima-facie there is clear material to show the “entrustment” of property and hence, the allegations made in the complaint, in my view, squarely falls within the definition of Section 405 of IPC and require thorough investigation into the matter.
11. It is now well settled that the investigation cannot be stalled at the initial stage, as reported in 1988 Cri.L.J.853 (Madhavrao Jiwaji Rao Scindia and another v. Sambhajirao Chandroji rao Angre and others), wherein it is held that;
“The legal position is well-settled that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the Court is as to whether the uncontroverted allegations as made prima facie establish the offence. It is also for the Court to take into consideration any special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue.”
In the light of the above discussions, the first contention urged by the petitioner is rejected.
12. In so far as the second contention urged by the petitioner that the company is not made a party to the FIR is concerned the same is a matter for investigation and if the company is also found guilty of the alleged offences, it is always open to the Investigating Officer to make the said company also party to the proceedings. For the present, allegations made in the instant case indicate that the MOU is entered into by the petitioner and therefore, the contention urged by the petitioner cannot be accepted at this stage.
13. The third contention of the learned counsel for the respondent is equally fallacious, as the offences alleged against the petitioner is liable for imprisonment for 7 years and that apart, it is a continuing offence as is evidenced from communication reflected in the various documents produced by the respondents. As a result, this contention also does not merit acceptance.
14. However, in so far as the jurisdiction of the respondent No.1/police to investigate the alleged offence is concerned, the averments in the complaint and the recitals of the MOU indicate that the said agreement was entered into at Dubai. The place of establishment of the company is in Dubai. In the said circumstances, if the Investigating Officer is of the opinion that cause of action has not arisen within his territorial limits, Investigating Officer shall comply with the requirements of Section 188 of Cr.P.C and thereafter, proceed in the matter in accordance with law.
Petition is dismissed.
Sd/- JUDGE NBM