Criminal Miscellaneous Cases Nos. 7257/2014 & 7381/2014, High Court of Kerala at Ernakulam (Against the Order in CC 2359/2010)

## **`IN THE HIGH COURT OF KERALA AT ERNAKULAM`** ## **`PRESENT`** ## **`THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN`** ``` WEDNESDAY, THE 19[TH] DAY OF SEPTEMBER 2023 / 28TH BHADRA, 1945 CRL.MC NO. 7381 OF 2014 ``` ## **`AGAINST THE ORDER IN CC 2359/2010 OF JUDL.M.F.C.-I, ERNAKULAM`** ## **`PETITIONERS/ACCUSED:`** - `1 ESHA AGARWAL ARORA W/O.HIMANSHU ARORA, B86, OKHALA INDUSTRIAL AREA, PASE II, NEW DELHI 110 020.` - `2 SANTHOSH AGARWAL W/O.SATISH AGARWAL, B86, OKHALA INDUSTRIAL AREA, PASE II, NEW DELHI 110 020. BY ADV SRI.S.SACHITHANANDA PAI` ## **`RESPONDENTS:`** - `1 STATE OF KERALA REPRESENTED BY THE PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM 682 031.` ``` 2JOSSY RAJU KURUVILA W/O.RAJU KURUVILA, PROPRIETRIX, M/S. K.T.KURUVILA SON, KURUVILA TOWERS, 35/319D1, PEREPARAMBU ROAD, MAMANGALAM, PALARIVATTOM, KOCHI 682 022. BY ADVS. SRI.ANWIN GOPAKUMAR SRI.ARJUN RADHAKRISHNAN NAIR SMT.KALA G.NAMBIAR ADV.SREEJA V, PP ``` ``` THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION ON 19.09.2023, ALONG WITH Crl.MC.7257/2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ``` 2 Crl.M.C.Nos.7257/14 & 7381/2014 # **`IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT`** ``` THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN WEDNESDAY, THE 19[TH] DAY OF SEPTEMBER 2023/28TH BHADRA, 1945 CRL.MC NO. 7257 OF 2014 ``` ``` AGAINST THE ORDER IN CC 2359/2010 OF JUDL.M.F.C.-I, ``` ## **`ERNAKULAM`** ## **`PETITIONERS/ACCUSED:`** ``` M/S. LIFE LINE BIOTECH LTD B-86, OKHALA INDUSTRIAL AREA, PHASE-11, NEW DELHI.110 020. MR.SATTISH AGGARWAL, DIRECTOR, M/S. LIFE LINE BIOTECH LTD., B-86, OKHALA INDUSTRIAL AREA, PHASE-11, NEW DELHI.110 020. BY ADV SRI.S.SACHITHANANDA PAI ``` ## **`RESPONDENTS:`** - `1 STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.` - `2 MRS.JOSSY RAJU KURUVILA W/O.RAJU KLURUVILA, PROPRIETRIX, M/S K T KURUVILA SON, KURUVILA TOWERS, 35/319 D1, PEREPARAMBU ROAD, MAMANGALAM, PALARIVATTOM, KOCHI-682022. ADV.SREEJA V, PP` ``` THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION ON 19.09.2023, ALONG WITH Crl.MC.7381/2014, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ``` 3 Crl.M.C.Nos.7257/14 & 7381/2014 ## **P.V.KUNHIKRISHNAN, J.** **-------------------------------Crl.M.C. Nos.7381 & 7257 of 2014 ---------------------------------------------Dated this the 19[th] day of September, 2023** ## **ORDER** These Criminal Miscellaneous Cases are connected and therefore, I am disposing these cases by a common order. 2. Petitioners in these cases are the accused in C.C.No.2359/2010 on the file of the Judicial First Class Magistrate Court-I, Ernakulam. The petitioners in Crl.M.C.No.7257/2014 are accused Nos.1 and 3 and the petitioners in Crl.M.C. No.7381/2014 are accused Nos.2 and 4. (Parties are hereinafter referred to as their rank in the complaint). The 3[rd] accused is the Director of the 1[st] accused Company. Annexure-2 produced in Crl.M.C. No.7257/2014 is the relevant form showing the list of directors of the 1[st] accused Company during the period from 2007-2009. Some of the accused are not even directors of the Comany. 3. Annexure-1 complaint was filed by the 2[nd] respondent in these cases (hereinafter referred to as ‘the complainant’), alleging offences punishable under Sections 406 and 420 read with Section 34 of the Indian Penal Code. The case is that, in the month of May to 4 Crl.M.C.Nos.7257/14 & 7381/2014 July, 2007, the 1[st] accused Company, which has been involved in the business of manufacturing and marketing of various drugs and drugs formulations, was approached by the complainant who stated that she had vast experience in selling/distribution of such drugs and has been running her business through her proprietorship firm namely M/s K.T. Kuruvila Son. It is also stated that the complainant offered to be appointed as a Consignee Agent of the accused No.1 Company in the State of Kerala for the sale/distribution of the drugs manufactured by the 1[st] accused Company. It was agreed between the 1[st] accused Company and the complainant that the 1[st] accused Company would send its manufactured drugs/stock to the complainant at Kerala who would sell/distribute the same in the market and collect money from the purchasers and send it to the 1[st] accused Company and in the process, take commission out of it. Accordingly, a Consignee Agent Agreement dated 01.05.2007 was entered into between the 1[st] accused Company and the complainant, whereby the complainant was appointed as a Consignee Agent of the 1[st] accused Company for the distribution and sale of drugs manufactured by the 1[st] accused Company in the State of Kerala. It is also submitted that, as per Clause 17 of the said agreement, it was 5 Crl.M.C.Nos.7257/14 & 7381/2014 valid only for the financial year 2007- 2008 and after that, it was to be self-terminated without any notice unless renewed mutually by the parties. It is further stated that, as per Clause 16 of the said agreement, all the disputes were under the jurisdiction of competent courts at New Delhi only and there was an arbitration clause also as per Clause 13 in the said agreement, as per which, in case of any dispute, the same was to be decided by way of arbitration to be held at New Delhi. Annexure-3 is the Consignee Agent Agreement. After the lapse of time, the business could not make such profits as was represented and stated by the complainant and as such, the parties stopped transacting with each other from January, 2008 and the said agreement terminated is the submission of the accused. Subsequently the complainant filed the complaint alleging false statement. Annexure-4 is the complaint. Annexure-5 is the certified copy of the evidence of witness of the complainant before the trial court. Based on the same, the Magistrate issued process to the accused. Aggrieved by the same, these Crl.M.Cs are filed. 4. Heard learned counsel for the petitioner and the learned Public Prosecutor. There was no appearance for the 2[nd] respondent. 6 Crl.M.C.Nos.7257/14 & 7381/2014 5. This Court perused the complaint filed by the 2[nd] respondent which is produced as Annexure-4. A perusal of Annexure-4 would not show that an offence under Section 406, 420 r/w 34 IPC is made out. The complaint is to be read along with Annexure-3 Consignee Agent Agreement. Clauses 13, 16 and 17 of Annexure-3 is relevant and the same is extracted here below: ## '13. ARBITRATION CLAUSE Any dispute, difference or question which may arise at any time hereafter between the Company and the Consignee Agent touching the true construction of this agreement or the rights and liabilities of the parties hereto shall be referred to the decision of a single arbitrator to be agreed upon between the parties or in default of agreement for fourteen days, to be appointed at the request of either party by Director of the Company in accordance with and subject to the provision of the Arbitration and Conciliation Act 1996, or any statutory modification or re-enactment thereof for the time being in force Such arbitration shall be held at New Delhi and the Courts at Delhi alone shall have the jurisdiction to deal with the arbitration proceedings and the awards in accordance with law. 16. All disputes between the parties which may or may not form part of this agreement are subject to jurisdiction of competent courts at New Delhi only 7 Crl.M.C.Nos.7257/14 & 7381/2014 17. This agreement will be valid for the financial year 20072008 and until renewed by the same self stand terminated without notice to the Consignee.' 6. There is no dispute regarding Annexure-3 Consignee Agent Agreement. As per clause 13, there is an arbitration clause. As per clause 16, all disputes between the parties which may or may not form part of this agreement are subject to jurisdiction of competent courts at New Delhi only. Clause 17, the agreement will be valid for the financial year 2007-2008 and until renewed by the same self stand terminated without notice to the Consignee. From the above, the 2[nd] respondent stated that, there is violation of the clauses in Annexure-3 Consignee Agent Agreement. I am of the considered opinion that, that will not attract criminal offences. While taking cognizance, the learned Magistrate ought to have considered the matter in detail. In **Mehmood Ul Rehman v. Khazir Mohammad Tunda and Others [2015 KHC 2763]** , the Apex Court observed that the Magistrate is not to act as a post office in taking cognizance in each and every complaint filed before him and issue process as a matter of course. There must be sufficient indication in the order passed by the Magistrate that he is satisfied 8 Crl.M.C.Nos.7257/14 & 7381/2014 that the allegations in the complaint constitute an offence. In **GHCL Employees Stock Option Trust (M/s.) v. M/s. India Infoline Ltd. And Others [2013 KHC 4229]** , the Apex Court again considered that in order to issue summons, the learned Magistrate has to be satisfied about the prima facie case. In **Hridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Another [2000** **KHC 1121],** the Apex Court considered the ingredients of the offence under section 420 IPC. It would be better to extract the relevant portion of paragraphs 14 and 15: '14. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest. 15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the 9 Crl.M.C.Nos.7257/14 & 7381/2014 intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.' In **Vijay Dhanuka and Others v. Najima Mamtaj and Others [2014 KHC 426],** the Apex Court observed that the inquiry under Section 202 Cr.P.C is mandatory before issuing summons against the accused living beyond the territorial jurisdiction of the Magistrate. Admittedly, the petitioners were residing beyond the territorial jurisdiction of the Magistrate. No enquiry under Section 202 Cr.P.C is conducted in this case. The same principle is followed by the Apex Court in recent judgment of the Apex Court in **Deepak Gaba v. State of Uttar Pradesh [2023 KHC Online 6000]** . The relevant portion is extracted hereunder: 10 Crl.M.C.Nos.7257/14 & 7381/2014 'Only upon being satisfied that there is sufficient ground for summoning the accused to stand the trial, summons should be issued (Birla Corporation Limited v. Adventz Investments and Holdings Limited and Others, 2019 (16) SCC 610; Pepsi Foods Ltd. (Supra); and Mehmood UI Rehman v. Khazir Mohammad Tunda, 2015 (12) SCC 420.). Summoning order is to be passed when the complainant discloses the offence, and when there is material that supports and constitutes essential ingredients of the offence. It should not be passed lightly or as a matter of course. When the violation of law alleged is clearly debatable and doubtful, either on account of paucity and lack of clarity of facts, or on application of law to the facts, the Magistrate must ensure clarification of the ambiguities. Summoning without appreciation of the legal provisions and their application to the facts may result in an innocent being summoned to stand the prosecution trial. Initiation of prosecution and summoning of the accused to stand trial, apart from monetary loss, sacrifice of time, and effort to prepare a defence, also causes humiliation and disrepute in the society. It results in anxiety of uncertain times. 22. While summoning an accused who resides outside the jurisdiction of court, terms of the insertion made to S.202 of the Code by Act No. 25 of 2005, it obligatory upon the Magistrate to inquire into the case himself or direct investigation be made by a police officer or such other officer for finding whether or not there is sufficient ground for proceeding against the accused (Vijay Dhanuka v. Najima 11 Crl.M.C.Nos.7257/14 & 7381/2014 Mamtaj, 2014 (14) SCC 638; Abhijit Pawar v. Hem Madhukar Nimalkar, 2017 (3) SCC 528; and Birla Corporation Limited (Supra) the present case, the said exercise has not been undertaken.' The same principle was considered by the Apex Court in **Birla Corporation Ltd. And Another v. Adventz Investments and Holdings Ltd. And Others [2019 KHC 6559]** . 7. In the light of the above discussion, I am of the considered opinion that no offence is made out against the petitioners in the complaint filed by the 2[nd] respondent. Taking cognizance of the offene by the learned Magistrate is unsustainable. Therefore this Crl.M.Cs are allowed in the following manner: Crl.M.C.Nos.7257/2014 and 7381/2023 are allowed. All further proceeding in C.C.No.2359/2010 on the file of the Judicial First Class Magistrate Court-I, Ernakulam are quashed as against the petitioners. Sd/- ## **P. V. KUNHIKRISHNAN JUDGE** Sbna/ 12 Crl.M.C.Nos.7257/14 & 7381/2014 ## **`APPENDIX OF CRL.MC 7257/2014`** ``` PETITIONER ANNEXURES ``` ``` ANNEXURE 1- CERTIFIED COPY OF THE SUMMONING ORDER DATED 15.09.2010 OF J F C M COURT I, ERNAKULAM. ``` ``` ANNEXURE 2- CERTIFIED COPY OF THE RELEVANT FORM SHOWING THE LIST OF DIRECTORS OF PETITIONERS COMPANY. ``` ``` ANNEXURE 3- COPY OF THE CONSIGNEE AGENT AGREEMENT DATED 01.05.2007 ENTERED IN TO BETWEEN PETITIONER COMPANY AND RESPONDENT NO.2. ``` ``` ANNEXURE 4- CERTIFIED COPY OF THE COMPLAINT IN C C 2359/2010 OF THE JFCM COURT.1, ERNAKULAM. ``` ``` ANNEXURE 5- CERTIFIED COPY OF THE SWORN STATEMENT OF THE WITNESS OF THE DEFACTO COMPLAINANT IN C C 2359/2010 OF JFCM COURT 1, ERNAKULAM. ``` 13 Crl.M.C.Nos.7257/14 & 7381/2014 ## **`APPENDIX OF CRL.MC 7381/2014`** ``` PETITIONER ANNEXURES ANNEXURE 1. COPY OF THE SUMMONING ORDER DATED 15.09.10 OF JFCM COURT 1, ERNAKULAM. ANNEXURE 2. COPY OF THE RELEVANT FORM SHOWING THE LIST OF DIRECTORS OF PETITIONER COMPANY. ANNEXURE 3. COPY OF THE CONSIGNEE AGENT AGREEMENT DATED 01.05.07 ENTEED IN TO BETWEEN PETITIONER COMPANY AND RESPONDENT NO.2. ANNEXURE 4. COPY OF THE COMPLAINT IN CC 2359/10 OF THE JFCM COURT 1, ERNAKULAM. ANNEXURE 4.ANNEXURE 4. COPY OF THE SWORN STATEMENT OF THE WITNESS OF THE DEFACTO COMPLAINANT IN CC 2359/10 OF JFCM 1, ERNAKULAM. ```