S. Dhanraj and others v. State of Kerala and M. Ravindran

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE C.S.DIAS** **WEDNESDAY, THE 13[TH] DAY OF MARCH 2024 / 23RD PHALGUNA, 1945** **BAIL APPL. NO. 11536 OF 2023** **CRIME NO.2639/2023 OF Ernakulam Central Police Station, Ernakulam PETITIONER/S:** - **1 MR. S.DHANRAJ, AGED 54 YEARS** **S/O MR. A. SRINIVASAN, DIRECTOR OF M/S ASR PAPER INDUSTRIES PVT LTD,RESIDING AT NO: 11, KANDANSTREET, PERAMBUR,CHENNAI, TAMIL NADU, PIN - 660001** - **2 MR. S. VARADARAJ, AGED 42 YEARS** **S/O MR. A.SRINIVASAN,DIRECTOR OF M/S ASR PAPER INDUSTRIES PVT LTD,RESIDING AT NO: 11, KANDANSTREET, PERAMBUR, CHENNAI, TAMIL NADU, PIN - 600001** - **3 MR. VIJAYAKUMAR , AGED 36 YEARS** **S/O MR. G.VEERACHAMY,DIRECTOR OF M/S ASR PAPER INDUSTRIES PVT LTD,RESIDING AT NO: 1/766, NORTH STREET, PADANTHAL POST,SATTUR,VIRUDU NAGAR DISTRICT, TAMIL NADU, PIN - 626203** - **4 MRS. D. SHANTHI, AGED 53 YEARS** **D/O MUNI RATHINAM,SHAREHOLDER OF M/S ASR PAPER INDUSTRIES PVT LTD,RESIDING AT NO: 11, KANDANSTREET, PERAMBUR,CHENNAI, TAMIL NADU, PIN - 600001** - **5 MR. S. PUNITHAVEL, AGED 51 YEARS** **S/O MR. A.SRINIVASAN,SHAREHOLDER OF M/S ASR PAPER INDUSTRIES PVT LTD, RESIDING AT NO: 11, KANDANSTREET, PERAMBUR, CHENNAI, TAMIL NADU, PIN - 600001** **6 MRS. P. VENKATAPRIYA, AGED 48 YEARS W/O MR. S. PUNITHAVEL,SHAREHOLDER M/S ASR PAPER INDUSTRIES PVT LTD,RESIDING AT NO: 11, KANDANSTREET, PERAMBUR, CHENNAI, TAMIL NADU, PIN - 600001** - **7 MRS. V. VASANTHA, AGED 44 YEARS W/O MR. S. VARADARAJ,SHAREHOLDER M/S ASR PAPER** BAIL APPL. NO. 11536 OF 2023 2 **INDUSTRIES PVT LTD,RESIDING AT NO: 11, KANDANSTREET, PERAMBUR, CHENNAI, TAMIL NADU, PIN - 600001** **BY ADVS. VIJAI MATHEWS JOSEPH THEKKEKURUVANAL** ## **RESPONDENT/S:** - **1 STATE OF KERALA, REPRESENTED BY PUBLIC PROSECUTOR,HIGH COURT OF KERALA, PIN - 682031** - **2 M. RAVINDRAN,** **5A KADAVIL COURT FLAT, PULLEPADY ARANGATH CROSS ROAD ERNAKUALAM ( SOUGHT TO BE IMPLEADED )** ## **BY ADV MILLU DANDAPANI** ## **OTHER PRESENT:** **SR PP SMT NEEMA T V , SRI MILLU DANDAPANI FOR RESPONDENT** **THIS BAIL APPLICATION HAVING COME UP FOR ADMISSION ON** **13.03.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** BAIL APPL. NO. 11536 OF 2023 3 ## **O R D E R** Dated this the 13[th] day of March, 2024 The application is filed under Section 438 of the Code of Criminal Procedure, 1973, (‘Code’ for short) for an order of pre-arrest bail. 2. The petitioners are the accused 2 to 8 in Crime No.2639/2023 of the Ernakulam Central Police Station, Ernakulam, registered against the accused (eight in number) for allegedly committing the offences punishable under Sections 406, 420 and 506 r/w Section 34 of the Indian Penal Code, 1860 (‘IPC’, for short). 3. The crux of the prosecution case is that: the accused 2 to 8, who are the Directors of the 1[st] accused company, had entered into Annexure A3 Memorandum of Understanding (in short ‘MOU’) with the defacto complainant and his sister (for brevity referred to as ‘Investors’) agreeing to transfer 100% of the shares of the 1[st] accused company for a total consideration of Rs.15/- BAIL APPL. NO. 11536 OF 2023 4 Crore, out of which Rs.4/- Crore was to be paid to the accused 2 to 8 and the balance amount was to be directly paid to the bank towards the liability of the 1[st] accused. Pursuant to the MOU, the accused received Rs.3,51,00,000/- (Rupees Three crore fifty one lakh only) from the Investors on various dates. However, the accused committed criminal breach of trust and cheated the Investors. Thus, the accused have committed the above offences. 4. Heard; Sri.Vijai Mathews, the learned counsel appearing for the petitioners, Smt. Neema. T.V, the learned Senior Public Prosecutor and Sri.Millu Dandapani, the learned counsel for the 2[nd] respondent/intervenor/defacto complainant. 5. The learned counsel for the petitioners submitted that the petitioners are totally innocent of the accusations levelled against them. A reading of Annexure A1 FIR would undoubtedly substantiate that the transaction between the parties is civil in nature. The parties are BAIL APPL. NO. 11536 OF 2023 5 governed by Annexure A3 MOU, which is a self contained contract. As per clause 35 of the MOU, the parties have agreed in unequivocal terms to resolve their disputes through Mediation and Arbitration. Invoking Clause 35, the Investors have already approached the Commercial Court, Ernakulam and filed CMA (Arb) No.137/2023 under Section 9 of the Arbitration and Conciliation Act, and Annexure 6 order has been passed in their favour restraining the accused from transferring the property. The present crime is only an arm twisting tactic adopted by the Investors to bye-pass a concluded contract and get back their money. At any given case the petitioners' custodial interrogation is not necessary and no recovery is to be effected. Moreover, the Investigating Officer does not have the jurisdiction to entertain the complaint, since the property ,which is the subject of the crime, is situated in the State of Tamil Nadu. Therefore, the Investigating Officer ought not have registered the crime, instead was legally obliged to have transferred the matter to the BAIL APPL. NO. 11536 OF 2023 6 jurisdictional Police. Furthermore, the Investigating Officer has issued Annexure A-2 Section 41A notice under the Code to the 1[st] petitioner, which proves that the petitioners custodial interrogation is not required. The petitioners are willing to abide by any condition that may be imposed by this Court and co-operate with the investigation. The learned counsel relied on the decisions of the Hon'ble Supreme Court in **Kunti and Anr. v. State** **of Uttar Pradesh and Anr.** [C.A. No.1380/2023], **Commissioner of Police and others v. Devender Anand and others** [2019 KHC 6776] and **Sri.Gulam Mustafa v. State of Karnataka and Anr.** [2023 Livelaw (SC) 42] to fortify his contentions. He prayed that the application be allowed. 6. The learned Public Prosecutor opposed the application. She submitted that the Investigating Officer has the jurisdiction to register the crime since part of the cause of action has arisen within his territorial jurisdiction. The crime is under investigation. Despite BAIL APPL. NO. 11536 OF 2023 7 issuing Annexure A2 notice to the 1[st] petitioner under Section 41(A) of the Code, the petitioners have not appeared before the Investigating Officer. Instead, their Counsel appeared and sought time for production of documents and for appearing for interrogation. The petitioners' interrogation is necessary for the proper and full investigation of the crime. Hence, the application may be dismissed. 7. The learned counsel appearing for the 2[nd] respondent seriously opposed the application. The 2[nd] respondent has filed an objection, inter alia, contending that the petitioners have cheated the Investors by receiving Rs.3.21/- Crore and failing to perform their part of the contract under the MOU, which establishes the petitioners' mens rea to commit the above offences. Even though, the Investors approached the civil court and a restraint order was passed, the petitioners have in collusion with the bank alienated the property covered by the MOU, which again proves their mens rea. If the BAIL APPL. NO. 11536 OF 2023 8 petitioners are granted an order of pre-arrest bail, they would not co-operate with the investigating agency and would sabotage the entire investigation. Hence, the application may be dismissed. 8. The gravamen of the prosecution allegation is that, the petitioners, acting as the Directors of the 1[st] accused company, had entered into Annexure A3 MOU with the Investors, and had agreed to transfer and convey the business of ASR Paper Industries Ltd. together with the , office, fixtures and fittings along with 41.82 acres of immovable property situated in Thirunelveli District in the State of Tamil Nadu, for a total consideration of Rs.15/Crore. Out of the amount, Rs.4/- Crore was to be paid in cash to the petitioners and by Clause 6 of the MOU, the Investors had agreed to take over the bank loan of Rs.11/Crore or pay the actual outstanding as on the date of signing the MOU with the City Union Bank, Virudhunagar and start repayments as and when they get authorisation to run the paper mill owned by the petitioners. Likewise, BAIL APPL. NO. 11536 OF 2023 9 by Clause 35 of MOU the parties have in unambiguous terms agreed, in case of any case or dispute arising between them, they would resort to mediation, and if the matter is not settled, the parties have to resort to arbitration. 9. The investors' case is that even though they paid Rs.3.21/- Crore to the petitioners, they did not transfer the shares or the company to their names. On the contrary, the petitioners' case is that it was for the Investors to have paid the entire loan amount to the City Union Bank and closed the loan account and, thereafter, proceeded with the further transactions as per the MOU. 10. In **Indian Oil Corporation v. NEPC India Ltd.** [(2006) 6 SCC 736], the Honourable Supreme Court observed in the following lines: “13. ……. Any effort to settle civil disputes and claims, which do not involve any criminal offence by applying pressure through criminal prosecution should be deprecated and discouraged”. ## 11. Similarly in **Sarabjit Kaur v. State of Punjab** BAIL APPL. NO. 11536 OF 2023 10 **and Another** [2023 SCC Online 210] the Honourable Supreme Court held that, a mere breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up a promise will not be enough to initiate criminal proceedings. 12. Again in **ARCI v. Nimra Cerglass Technics (P) Ltd.** [(2016) 1 SCC 348] the Honourable Supreme Court while considering the difference between breach of contract and the offence of cheating held that the distinction depends upon the intention of the accused at the time of the alleged incident. Only if the the dishonest intention of the accused can be established at the time of entering the transaction the criminal liability can be attracted. 13. Recently, in **Sachin Garg V. State of U.P** [(2024) KHC Online 6046], the Honourable Supreme Court has again reitrated that a mere breach of contract BAIL APPL. NO. 11536 OF 2023 11 will not constitute the offence of cheating. 14. The parameters to grant an order of pre-arrest bail have been succinctly laid down by the Hon’ble Supreme Court in **Siddharam Satlingappa Mhetre v. State of Maharashtra** [(2011) 1 SCC 694] in the following lines: “111. No inflexible guidelines or straitjacket formula can be provided for grant or refusal of anticipatory bail. We are clearly of the view that no attempt should be made to provide rigid and inflexible guidelines in this respect because all circumstances and situations of future cannot be clearly visualised for the grant or refusal of anticipatory bail. In consonance with the legislative intention the grant or refusal of anticipatory bail should necessarily depend on the facts and circumstances of each case. As aptly observed in Satishchandra Ratanlal the Constitution Bench decision in Sibbia case [(1980) 2 SCC 565 : 1980 SCC (Cri) 465] that the High Court or the Court of Session has to exercise their jurisdiction under Section 438 CrPC by a wise and careful use of their discretion which by their long training and experience they are ideally suited to do. In any event, this is the legislative mandate which we are bound to respect and honour. 112. The following factors and parameters can be taken into consideration while dealing with the anticipatory bail: (i) The nature and gravity of the accusation and the exact role of the accused must be properly comprehended before arrest is made; (ii) The antecedents of the applicant including the fact as to whether the accused has previously undergone imprisonment on conviction by a court in respect of any cognizable offence; (iii) The possibility of the applicant to flee from BAIL APPL. NO. 11536 OF 2023 12 justice; (iv) The possibility of the accused's likelihood to repeat similar or other offences; (v) Where the accusations have been made only with the object of injuring or humiliating the applicant by arresting him or her; (vi) Impact of grant of anticipatory bail particularly in cases of large magnitude affecting a very large number of people; (vii) The courts must evaluate the entire available material against the accused very carefully. The court must also clearly comprehend the exact role of the accused in the case. The cases in which the accused is implicated with the help of Sections 34 and 149 of the Penal Code, 1860 the court should consider with even greater care and caution because overimplication in the cases is a matter of common knowledge and concern; (viii) While considering the prayer for grant of anticipatory bail, a balance has to be struck between two factors, namely, no prejudice should be caused to the free, fair and full investigation and there should be prevention of harassment, humiliation and unjustified detention of the accused; (ix) The court to consider reasonable apprehension of tampering of the witness or apprehension of threat to the complainant; (x) Frivolity in prosecution should always be considered and it is only the element of genuineness that shall have to be considered in the matter of grant of bail and in the event of there being some doubt as to the genuineness of the prosecution, in the normal course of events, the accused is entitled to an order of bail”. On an overall consideration of the facts, the rival submissions made across the Bar, the materials placed on record and the law referred to in the afore cited decisions, BAIL APPL. NO. 11536 OF 2023 13 I am prima facie satisfied that the offences alleged against the petitioners are civil in nature. The said finding stands fortified by the fact that the Investors have already invoked Clause 35 of MOU by moving the Commercial Court, Ernakulam. Moreover, as the Investigating Officer has already issued Annexure A2 notice to the 1[st] petitioner to submit certain documents and co-operate with the interrogation, it establishes that the petitioners' custodial interrogation is not necessary. Consequently, I am of the firm view that the petitioners have made out exceptional grounds to invoke the extra ordinary jurisdiction of this Court under Section 438 of the Code. In the result, the application is allowed subject to the following conditions: - (i) The petitioners are directed to surrender before the Investigating Officer within ten days from today. - (ii) In the event of the petitioners’ arrest, the Investigating Officer shall produce them before the jurisdictional court on the date of surrender itself. BAIL APPL. NO. 11536 OF 2023 14 (iii) On such production, the jurisdictional court shall release the petitioners on bail on them executing a bond for Rs.1,00,000/- (Rupees One Lakh only) each with two solvent sureties for the like amount each, to the satisfaction of the jurisdictional court; - (iv) The petitioners shall co-operate with the investigation and make themselves available for interrogation and for the purpose of investigation as and when directed by the Investigating Officer; - (v) The petitioners shall not intimidate the witnesses or interfere with the investigation in any manner; - (vi) The petitioners shall not get involved in any other offence while on bail. - (vii) In case of violation of any of the conditions mentioned above, the jurisdictional court shall be empowered to consider the application for cancellation of bail, if any filed, and pass orders on the same, in accordance with law. - (viii) Applications for deletion/modification of the bail BAIL APPL. NO. 11536 OF 2023 15 conditions shall also be filed before the court below. (ix) Needless to mention, it would be well within the powers of the Investigating Officer to investigate the matter and, if necessary, to effect recoveries on the information, if any, given by the petitioners even while the petitioners are on bail as laid down by the Hon'ble Supreme Court in **Sushila Aggarwal v. State (NCT of Delhi) and another** [2020 (1) KHC 663]. - (x) The observations made in this order are only for the purpose of considering the application and the same shall not be construed as an expression on the merits of the case to be decided by competent Courts. Sd/- **C.S.DIAS, JUDGE** rkc/13.03.24 BAIL APPL. NO. 11536 OF 2023 16 ## **APPENDIX OF BAIL APPL. 11536/2023** ## **PETITIONER ANNEXURES** **Annexure -A1 TRUE COPY OF THE FIR IN CRIME NO. 2639 OF 2023 OF CENTRAL POLICE STATION, ERNAKULAM, DATED 23-8-2023** **Annexure -A2 TRUE COPY OF THE NOTICE ISSUED TO THE PETITIONERS UNDER SECTION 41(A) CRPC, DATED 13-12-2023** **Annexure -A3 TRUE COPY OF THE MEMORANDUM OF UNDERSTANDING (MOU) EXECUTED BETWEEN THE PETITIONERS AND THE DEFACTO COMPLAINANTS, DATED 30-03-2022** - **Annexure -A4 TRUE COPY OF THEPOSSESSION NOTICE ISSUED BY THE CITY UNION BANK LTD., KUMBAKONAM, DATED 2-5-2023** - **Annexure -A5 TRUE COPY OF THE APPLICATION FILED BY THE DEFACTO COMPLAINANTS UNDER SECTION 9 OF THE ARBITRATION AND CONCILIATION ACT, ALONG WITH THE ATTACHMENT NOTICE ISSUED FROM THE COURT, DATED 30-9-2023** - **Annexure- A6 TRUE COPY OF THE ORDER PASSED BY THE COMMERCIAL COURT ERNAKULAM IN IA NO. 1 OF 2023 IN CMA (ARB.) NO. 137 OF 2023 , DATED 27-09-2023** - **Annexure- A7 TRUE COPY OF THE NOTICE ISSUED TO THE PETITIONERS FROM THE CITY UNION BANK LTD UNDER SECTION 13 (2) OF THE SARFAESI ACT., DATED 9-2-2023** ## **RESPONDENT ANNEXURES** - **Annexure R2 (A) The true copy of the complainant submitted by the petitioner before the Assistant Police Commissioner Ernakulam** - **Annexure R2 (b) The true copy of the order passed in I.A 1/ 2023 in CMA (Arb) 137/ 2023 passed by** BAIL APPL. NO. 11536 OF 2023 17 ## **the III Additional Sub Judge Ernakulam** **Annexure R2 (c)** **The true copy of the Sale Certificate executed by the authorised officer of City Union Bank in favour of Fibri Mantra Speciality Pvt Ltd dated 30.11.2023** ## **PETITIONER ANNEXURES** **Annexure- A8** **TRUE COPY OF THE LETTER OF REQUEST FOR THE FIRST ACCUSED COMPANY GIVEN TO THE MANAGER CITY UNION BANK, VIRUDHUNAGAR BRANCH TO ISSUE THE PLEDGED SHARE CERTIFICATE OF THE SHAREHOLDERS, DATED 29-11-2022** **Annexure -A9 TRUE COPY OF THE COMPLAINT OF THE DEFACTO COMPLAINANT GIVEN TO THE ASSISTANT COMMISSIONER OF POLICE, ERNAKULAM, DATED 3-8-2023**