V.R. DALAL & ORS.versusYOUGENDRA NARANJI THAKKAR & ANR.

                           [2008) 9 S.C.R. 107

y                         V.R. DALAL & ORS.                           A
                                    v.
              YOUGENDRA NARANJI THAKKAR & ANR.
                  (Crl. Appeal No. 925 of 2008)
                             MAY 16, 2008
                                                                      B
            (S.B. SINHA AND HARJIT SINGH BEDI, JJ.)

           Penal Code, 1860; Ss.405 & 420/Partnership Act, 1932:
            Criminal complaint by a partner against other partners
      of dissolved firm for committing the offence of criminal breach c
      of trust - Justification of - Held: Not justified - Once the part-
      nership deed was cancelled, question of any wrongful act on
      the part of partners did not arise - When the firm has been
      cancelled from its very inception, the question of depriving
...   the claimant, partner from any benefit therefrom does not arise D
      - Moreover, ingredients of criminal breach of trust and also of
      s.420 were absent in the instant case - Under the circum-
      stances, continuance of the criminal proceedings against ac-
      cused partners amounts to abuse of process of law and should
      not be allowed to continue - Hence, impugned judgment dis- E
      missing the writ petition of accused-partners of the firm can-
      not be sustained and set aside.
           The question which arose for determination in this
      appeal before this Court was as to whether the dissolu-
      tion of a firm by accused partners allegedly in collusion       F
      and behind the back of respondent-partner without fol-
      lowing proper procedure of dissolution of firm with the
      sole aim to deprive him the benefit of the firm, constitutes
      an offence.
                                                                      G
           Appellants contended that the dispute between the
..,   parties being a civil dispute, if the criminal proceeding is
      allowed to continue, it would amount to an abuse of pro-
      cess of law.
                                   107                                H
    108       SUPREME COURT REPORTS                 (2008] 9 S.C.R.

                                                                       y
A        Respondents submitted that as allegations made in
    the complaint petition constitute an offence, this Court
    should not interfere with the impugned judgment.
          Allowing the appeal, the Court

B      HELD: 1.1 Once the partnership did not take off and
  the partnership deed was cancelled as it had never been
  acted upon, the question of any wrongful act on the part             ..
  of the appellants did not arise. It is one thing to say that
  there exists a dispute amongst the partners inter se but it
c is another thing to say that by constituting another firm
  wherein two firms would be represented by their respec-
  tive nominees together with an outsider would itself indi-
  cate an act of conspiracy. Once it has been accepted as
  of fact that the said partnership has been cancelled, the
  question of relying thereupon for any purpose would not
D
  arise. (Para 9) [112-F & G]
       1.2 It may be true that in the event the court finds that
  the dispute between the parties is civil in nature, it may
  not allow the criminal proceedings to go on. But, no law,
E as such can be laid down as in a given case both civil suit
  and criminal complaint would be maintainable although
  the cause of action for both the proceedings is the same.
  (Para 12) [113-E & F]
        1.3 This Court is satisfied that the appellants by no
F stretch of imagination can be said to have committed an              ...
  offence particularly when admittedly the new firm has been
  cancelled from its very inception. If the new firm has not
  derived any income, the question of depriving the claim-
  ant therefrom does not arise. Whether the constitution of
G the said firm was illegal or mala fide, thus, need not be gone
  into as by reason thereof the respondent No. 1 cannot be
  said to have suffered any loss. (Para 13) [113-G & H; 114-A]
          2.1 The first ingredient of criminal breach of trust, that
    is, entrustment is missing, the same would not constitute
H
               V.R. DALAL & ORS. v. YOUGENDRA NARANJI               109
                     THAKKAR & ANR. [S.B. SINHA, J]
 )'
       a criminal breach of trust. The ingredients of Section 420          A
       of Indian Penal Code are also absent in the instant case.
       (Paras 14 & 15) [114-8 & E]
            Indian Oil Corpn. vs. NEPC India Ltd. and Others (2006)
       6 SCC 736 and Suryalakshmi Cotton Mills Ltd. vs. Rajvir In-
       dustries Ltd. and Ors. 2008 (1) SCALE 331 - referred to.            B

.,.         2.2 When a proceeding is found to be an abuse of
       the process of court, this Court in exercise of is jurisdic-
       tion under Article 142 of the Constitution of India may not
       allow it to continue. (Para -16) [114-F]                            c
           Sanapareddy Maheedhar and Another vs. State of
       Andhra Pradesh andAnother2007 (14) SCALE 321- referred
       to.
            CRIMINALAPPELLATE JURISDICTION: Criminal Appeal
 ..,                                                                       D
       No. 925 of 2008
            From the Judgment and final Order dated 13.10.2006 of
       the High Court of Judicature at Bombay in Crl. Writ Petition N-o.
       315/2004
                                                                           E
          Suresh Kumar J. Panicker, Pravin Satale and Naresh
       Kumar for the Appellants.
            Jatin Zaveri for the Respondents.
            The Judgment of the Court was delivered by
                                                                           F
            S.B. SINHA, J : 1. Leave granted.
             2. A complaint petition was filed by the respondent No. 1
       herein in the Court of Metropolitan Magistrate, 301h Court at
       Kurla. It was registered as Case No. 271/M of 2002; Accused
       Nos. 1 to 6 thereof were partners of M/s. N.M. Raiji and Com- G
       pany and Accused No. 7 was its employee. Appellants herein
.,,    who were arrayed as the Accused Nos. 8 to 13 were partners
       of another firm known as M/s. Gandhi Dalal and Shah. The said
       firm was earlier known as Dalal and Shah. Out of the said ac-
       cused, Accused No. 8 Mr. Y.C. Amin has expired. In the afore- H
    110       SUPREME COURT REPORTS                       [2008] 9 S.C.R.


A mentioned complaint petition, allegations were made that all                'I°
  the accused persons conspired with each other so as to de-
  prive the complainant from deriving the benefits of a firm by
  dissolving the firm N.M. Raiji and Company behind his back.
        3. It appears that the firm 'M/s. Gandhi Dalal and Shah'
B which was constituted with effect from 1.02.2000 was cancelled.
  from the very inception as the same is said to have not been
  acted upon. The name M/s. Gandhi Dalal and Shah was sur-
  rendered to the Chartered Accountants of India. Indisputably, in
  the complaint petition itself, it has been accepted that the said
c M/s. Gandhi Dalal and Shah is no longer in existence. It has
  further not been disputed that one Mahendra Thakkar also
  signed in the original deed of partnership dated 10.02.2001. In
  relation to the cancellation of the said partnership, it is alleged:
          "The Complainant states that they have with some dishonest
D
          intention have not prepared any Deed of dissolution which           ,.
          is mandatory for cancellation of any Deed of partnership.
          Merely by canceling Deed on piece of paper has no
          meaning in the eyes of law and it is misguiding but in law
          the Deed of partnership will remain in force till it is dissolved
E         by deed of dissolution. The Accused have again played
          fraud upon the complainant by misrepresenting him that
          they have cancelled the Deed of partnership. They have
          also filed false documents with Institute of Chartered
          Accountants in order to commit fraud."
F                                                                             ..
        4. The role of the appellants herein are said to be that of
    conspirators The complainant stated:
          "The Accused persons in criminal conspiracy with each
          other intending to kicked out the complainant from the
G         said firm by adopting intellectual tactics, which is evident
          from the conduct and act of the accused. The complainant
          is putting his full time for the prosperity of the said firm and
          he has contributed Lion Share in creating good reputation           ""
          and goodwill of the said Firm among the Corporate Sector
H         and other business communities. The Complainant is not
              V.R DALAL & ORS. v. YOUGENDRA NARANJI                111
                  . THAKKAR & ANR. [S.B. SINHA, J]

           having control over the income of the firm. In spite of the A
           demand of the Complainant for giving him accounts of the
           firm the accused have failed and neglected to do so as
           such the complainant is not aware at present exact amount
           misappropriated by the Accused persons. The complainant
           states that it is not only misappropriates but it amounts to B
           theft of the valuable property of the complainant."
+

            5. The firm M/s. N.M. Raiji and Company is a firm of char-
      tered accountants. Some business allegedly had been trans-
      ferred. It is stated that the accused have committed criminal
      breach of trust in respect of income and goodwill of the firm.     c
      According to the complainant, his income from the said firm
      would have been 5% from the profit of the said firm which was
      estimated at 30% wherefrom he has allegedly been deprived,
      as he was not made a partner in the new firm.
.._                                                                      D
           6. Appellants filed a writ petition before the Bombay High
      Court which was marked as Criminal Writ Petition No. 315 of
      2004. A separate writ application was also filed by Accused
      Nos. 1 to 7 which was marked as Writ Petition No. 542 of 2003.
      The said writ petition was dismissed. The High Court, by rea-
      son of the impugned judgment, dismissed the writ petition filed    E
      by the appellants also stating:
           "5 Mr. Panikar appearing for the petitioners, does not
           dispute that such an order is passed. However, he submits
           that the case of the present petitioners stand ~n a slightly F
           different footing, although they are accused in the same
           criminal case, as far as they are concerned, they are not
           the partners of M/s. N.M. Raiji & Company. This N.M. Raiji
           and Company was a partnership firm in which all accused
           1 to 7 and the complainant were partners. The petitioners
                                                                        G
           are partners of distinct firm which is known as "Dalal &
           Shah" and later on "M/s Gandhi Dalal & Shah". In such
           circumstances, it would not be ~roper to rely upon the
           order passed in the other writ petition. These are disputes
           between persons, who are partners, during the course of
                                                                        H
    112       SUPREME COURT REPORTS                      (2008] 9 S.C.R


A         administration and management of the business of the
          firm. It is a purely civil dispute. Allowing criminal proceeding
          according to Shri Panikar would be abuse of process of
          the court."

         7. Mr. Sureshkumar J. Panicker, learned counsel appear-
s   ing on behalf of the appellants, would submit that the dispute
    between the parties being a civil dispute, if the proceeding is
    allowed to continue, it would amount to an abuse of process of
    law.

c         8. Mr. Jatin Zaveri,. learned counsel appearing on behalf
    of the respondents, on the other hand, would contend that as
    allegations made in the complaint petition constitute an offence,
    this Court should not interfere with the impugned judgment.

          9. The short question which arises for consideration is as
D   to whether the complaint petition given its face value and taken
                                                                             ,.   I
    to be correct in its entirety constitutes an offence.

        Mis. Gandhi Dalal and Shah admittedly was constituted
  as a partnership firm on 1.12.2000. The said partnership firm
  was constituted on the premise that four partners of M/s. N.M.
E Raiji and Company were representing the firm Dalal and Shah.
  As indicated hereinbefore, an outsider was also included
  therein. Once the said partnership did not take off and the part-
  nership deed was cancelled as it had never been acted upon,
  the question of any wrongful act on the part of the appellants did
F not arise. It is one thing to say that there exists a dispute amongst
  the partners inter se but it is another thing to say that by consti-
  tuting another firm wherein two firms would be represented by
  their respective nominees together with an outsider would itself
  indicate an act of conspiracy. Once it has been accepted as of
G fact that the said partnership has been cancelled, the question
  of relying thereupon for any purpose would not arise.
                                                                             ~
         10. The learned counsel appearing on behalf of the re-
    spondents, however, has drawn our attention to a letter dated
    28.02.2001 addressed by Arnn R. Gandhi, Mahendra N. Thakkar,
H
             V.R. DALAL & ORS. v. YOUGENDRA NARANJI                 113
                   THAKKAR & ANR. [S.B. SINHA, J]
~
     Jayesh M. Gandhi, Vinay D. Baise and Sujal A. Shah to                 A
     Yogendra N. Thakkar wherein one of the sequence of events
     was stated to be as under:

          "(3) On getting you letter dated February 7, 2001, Mr. Arun
          Gandhi had discussed the matter with Mr. Mahendra
          Thakkar on gth and 1oth February, 2001 who had informed          B
          that Mr. Arun Gandhi that he need not worry about it and
          that everything would be sorted out by meeting with you,
          and that we should go ahead with the signing of the
          partnership deed (of Gandhi Dalal & Shah). On that basis,
          the said partnership deed was signed on 1oth February,           c
          2001, by five signatories. Mr. Mahendra Thakker could
          not sign on that day as he had some urgent work to attend."

           This letter does not take us anywhere. It merely shows that
     internal dispute leading to abandonment of the concept of start-
._                                                                         D
     ing a new firm.
          11. Mr. Panicker has relied upon a decision of this Court
     in Uma Shankar Gopalika v. State of Bihar and Another[(2005)
     10 sec 336] wherein it has been held that where the dispute is
     pure civil in nature an offence under Section 420 or Section          E
     1208 of Indian Penal Code cannot be said to have been made
     out

           12. It may be true that in the event the court finds that the
     dispute between the parties is civil in nature, it may not allow
'    the criminal proceedings to go on. But, no law, in our opinion,       F
     as such can be laid down as in a given case both civil suit and
     criminal complaint would be maintainable although the cause
     of action for both the proceedings is the same.
           13. We, however, in this case are satisfied that the appel-
                                                                       G
     !ants by no stretch of imagination can be said to have commit-
     ted an offence particularly when admittedly the new firm has
     been cancelled from its very inception. If the new firm has not
     derived any income, the question of depriving the claimant there-
     from does not arise. Whether the constitution of the said firm
                                                                       H
    114       SUPREME COURT REPORTS                    [2008] 9 S.C.R


A   was illegal or mala fide, thus, need not be gone into as by rea-
    son thereof the respondent No. 1 cannot be said to have suf-
    fered any loss.

          14. We may notice that as regards commission of an of-
    fence in terms of Section 405 of Indian Penal Code, this Court
8   in Indian Oil Corpn. v NEPC India Ltd. and Others ((2006) 6
    sec 736] held that where the first ingredient of criminal breach
    of trust, that is, entrustment is missing, the same would not con-
    stitute a criminal breach of trust.

c          As regards essential ingredients of the offence of cheat-
    ing, it was stated:

          "(i) deception of a µ0rson either by making a false or
          misleading representation or by other action or omission             """
          (ii) fraudulent or dishonest inducement of that person to
D         either deliver any property or to consent to the retention
          thereof by any person or to intentionally induce that person         ....
          to do or omit to do anything which he would not do or omit
          if he were not so deceived and which act or omission
          causes or is likely to cause damage or harm to that person
E         in body, mind, reputation or property."

         15. The aforementioned ingredients of Section 420 of In-
    dian Penal Code are also absent in the instant case. [See also
    Suryalakshmi Cotton Mills Ltd. v. Rajvir Industries Ltd. and               j

    Ors. 2008 (1) SCALE 331]                                               •   I
F                                                                              ~;',


          16. When a proceeding is found to be an abuse of the
    process of court, this Court in exercise of is jurisdiction under          ,I..
    Article 142 of the Constitution of India may not allow it to con-

G
    tinue. For the said purpose, the fact of the matter can be looked
    into. It was so done recently in Sanapareddy Maheedhar and
                                                                               J
    Another v. State of Andhra Pradesh and Another [2007 (14)
    SCALE 321] wherein upon noticing a large number of deci-
    sions of this Court, it was held:
          "We are further of the view that in the peculiar facts of this
H         case, continuation of proceedings of CC No.240/2002
         V.R. DALAL & ORS. v. YOUGENDRA NARANJI               115 .
               THAKKAR & ANR. [S.B. SINHA, J]

     will amount to abuse of the process of the Court. It is not A
     in dispute that after marriage, Shireesha Bhavani lived
     with appellant No.1 for less than one and a half months
     (eight days at Hyderabad and about thirty days at New
     Jersey). It is also not in dispute that their marriage was
     dissolved by the Superior Court at New Jersey vide decree B
     dated 15.12.1999. Shireesha Bhavani is not shown to
     have challenged the decree of divorce. As a mater of fact,
     she married Sri Venkat Puskar in 2000 and has two
     children from the second marriage. She also received all
     the articles of dowry (including jewellery) by filing affidavit c
     dated 28.12.1999 in the Superior Court at New Jersey.
     As on today a period of almost nine years has elapsed of
     the marriage of appellant No.1 and Shireesha Bhavani
     and seven years from her second marriage. Therefore,
     Page 0086 at this belated stage, there does not appear D
     to be any justification for continuation of the proceedings
     in CC No.240/2002. Rather, it would amount to sheer
     harassment to the appellant and Shireesha Bhavani who
     are settled in USA, if they are required to come to India for
     giving evidence in relation to an offence allegedly
     committed in 1998-99. It is also extremely doubtful whether E
     the Government of India will, after lapse of such a long
     time, give sanction in terms of Section 188 Cr.P.C."
     17. For the reasons aforementioned, the impugned judg-
ment cannot be sustained. It is set aside accordingly. The sum-       F
mons issued by the learned Magistrate against the appellants
is quashed. The appeal is allowed.
S.K.S.                                         Appeal allowed.