The Bombay High Court recently allowed a batch of applications seeking quashing of an FIR registered for offences under sections 418, 420, 465, 467, 468, 471, 477(a), 506(2) read with 120(b) of the Indian Penal Code.
The division bench of Justice Ranjit More and Justice Shalini Phansalkar Joshi held that when dispute is of civil nature, giving the proceedings a criminal colour is abuse of the process of law.
The said FIR was registered against the applicants at the instance of respondent Tushar Thakkar, who alleged that he invested Rs. 49.83 crores in applicant Ramesh Shah’s ETCO Denim Pvt Ltd under a share holding agreement with him. But Shah failed to honour the terms of the agreement and cheated him.
According to Thakkar’s complaint, Shah and his company owe him a total of Rs. 94.13 crores, including interest on the unsecured loan of Rs. 49.83 crores, and another Rs. 35.40 crores for failing to give the distributorship of denim fabrics to Thakkar, thereby, causing him a loss of the said amount.
Submissions and judgment
Senior advocate Vikram Chaudhary, Ram Upadhyay and Deepali Thakkar appeared for the applicants in the case while Girish Godbole appeared for respondent (original complainant) Tushar Thakkar.
It was argued on behalf of the applicants that the entire dispute is arising out of the share holding agreement entered into between the parties and therefore, this dispute is predominantly of a civil nature and hence, availing of criminal remedy to settle the same is abuse and misuse of the law.
It was further submitted that Thakkar has also filed suits for recovery of pending amount, which are pending in the high court, and also initiated proceedings before the Company Law Board.
Only after he failed to get the reliefs in other forums, in order to recover the amount, which he could not do in civil proceeding, Respondent No. 3 has resorted to criminal process, said counsel for the applicants.
After examining the terms of the share holding agreement, the court noted that it was complainant Thakkar who had expressed interest in Ramesh Shah’s company and wanted to invest in it.
Thereafter, the court cited judgment of the Supreme Court in the case of Hridaya Ranjan Prasad Verma & Ors vs State of Bihar and Anr to draw a distinction between the mere offence of breach of contract and that of cheating. The court said: “It is nowhere alleged in the complaint, even for the sake of it, that since beginning the applicant Ramesh Shah had dishonest or fraudulent intention of cheating the respondent No.3. Conversely, both the parties are having their respective rival contentions for not fulfilling the terms of the Share Holding Agreement. Hence, it is apparent that the grievance is against subsequent non-fulfilment of terms and conditions of the Agreement and not of applicant Ramesh Shah having such intention of cheating since beginning.”
Thus, after arriving at the conclusion that dispute was entirely civil in nature, the court observed that allowing criminal proceedings to continue would lead to the abuse of the process of law and quashed the said FIR.
Read the Judgment Here