ASHIM KUMAR ROY Vs. BIPINBHAI VADILAL MEHTA

JUDGEMENT

(1.) THE Judgment of the court was delivered by

(2.) THESE appeals arise out of a complaint filed by the appellant which was subsequently registered as Criminal Case No. 262 of 1989. Brief facts leading to the filing of these appeals are given below: The appellant who was a General secretary of Hind Mazdoor Kisan Panchayat to which Gujarat Mazdoor Panchayat, a recognised trade union of a limited company, originally known as M/s Sayaji Mills Ltd., now known as Sayaji Industries Ltd., is affiliated. According to the appellant/ complainant. Respondents 1 and 2 (hereinafter called the "contesting respondents") have committed offences under S. 120-B and 409 Indian Penal Code read with Section 77 of the Companies Act. The contesting respondents are father and son. One Vadilal Lalbhai Mehta was the father of the first respondent Bipinbhai Vadilal Mehta. One Suhasbhai Vadilal Mehta was the brother of the first respondent. They entered into a memorandum of understanding on 30/1/1982 for dividing their properties. As per the said memorandum of understanding, the first respondent's family will be given management and control of M/s Sayaji Industries Ltd. and M/s C.V. Mehta Pvt. Ltd. On the other hand, the management and control of other companies, namely, M/s Industrial Machinery Manufacturers Pvt. Ltd., M/s C. Doctor and Co. Pvt. Ltd. shall remain with Suhasbhai Mehta, brother of the first respondent. As per the terms of the memorandum, the liabilities of M/s C.V. Mehta Pvt. Ltd. towards other concerns amounting to Rs 39 lakhs and odd was to be discharged by the first respondent and his family and only after the clearance of the said liability, the first respondent and his family could take over the management and control of the companies allotted to them. It was alleged by the appellant in the complaint that the contesting respondents had no funds with them to discharge the liability allotted to them and they could not also raise funds to be deposited with M/s C.V. Mehta Pvt. Ltd. within the stipulated period, namely, February to November 1982. Therefore, a modification to the memorandum of understanding was entered into between the same parties on 13/11/1982. As per the modified memorandum of understanding, it was agreed that the contesting respondents will deposit Rs 20 lakhs immediately with M/s C.V. Mehta Pvt. Ltd. in order to acquire the shares of M/s Sayaji Industries Ltd. and thereby gain management and control of M/s Sayaji Industries Ltd. (hereinafter referred to as "the Company"). In order to discharge the liability as per the modified memorandum of understanding, it is the specific case of the appellant that the contesting respondents entered into a conspiracy to commit criminal breach in relation to the funds of the company and thereby dishonestly siphoned the public funds to the detriment of the shareholders and the employees of the company. The appellant explaining the act of alleged conspiracy has stated in the complaint that the contesting respondents diverted the funds of the company in a clandestine manner by manipulating and tampering with the records and accounts and caused the wrongful gain in so transferring the funds of the company by making <PG>135</PG> advances to a supplier M/s Santosh Starch Products Ltd. by three different cheques drawn on Punjab National Bank. It was further alleged that the accused persons in furtherance of the conspiracy made it to appear that M/s Santosh Starch Products advanced a loan of Rs 20 lakhs on 13/11/1982 by three cheques in favour of Bipin Mehta who in turn ploughed the amount in M/s C.V. Mehta Pvt. Ltd. to discharge the liability undertaken by him as per the modified memo of understanding. In this process, the contesting respondents acquired the control and management of M/s Sayaji Industries Ltd. Inasmuch as the funds of the company were utilised in the manner aforesaid, according to the appellant, the contesting respondents have violated Section 77 of the Companies Act. In addition, it was the case of the complainant that the contesting respondents have also committed offences punishable under S. 120-B and 409 of Indian Penal Code.

(3.) BEFORE the learned Single Judge, it was conceded by the learned counsel appearing for the complainant that the warrant issued against the contesting respondent for the offence punishable under Section 77 of the Companies Act was uncalled for and that the order of committing criminal case to the Sessions court was also not proper. In view of these concessions, the High court confined the dispute as to whether the warrant issued against the contesting respondents for the offences punishable under S. 120-B and 409 was justified. The learned Judge by his detailed and considered order dated 2/12/1994 held that the order passed by the learned Magistrate was without application of mind and that on the day on which the offence was said to have been committed by the contesting respondents, they were not even ordinary directors much less managing directors of the company having control and management of the affairs of the company. On the other <PG>136</PG> hand, the learned Judge held on facts that it was established, it was the father of respondent 1 who was the chairman and managing director of the company on the relevant date and he was not impleaded as a party. The company also was not impleaded as a party accused. The learned Judge further found that the complaint was at the instance of somebody to settle his score with the contesting respondents and it was a clear case of deliberate attempt on the part of the complainant to use the machinery of the court for an oblique purpose. The learned Judge also found that the chances of ultimate conviction are bleak and therefore, no useful purpose will be served by allowing the criminal prosecution to continue. In coming to this conclusion, the learned Judge placed reliance on a judgment of this court in Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre. In the result, the learned Judge allowed the applications and quashed the complaint and charge against the contesting respondents.