Sunday, June 26, 2022

Onus lies on complainant to prove fraud was intentional: Supreme Court

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The Supreme Court in its order held that in order to attract the offence of cheating (420 IPC) and Criminal Breach of Trust, the complainant is required to prove that the prima facie had an intention on its part to cheat him or to do fraud with him right from inception. 

A Division Bench of Justice S. Abdul Nazeer and Justice Krishna Murari delivered the judgement in favour of Vijay Kumar Ghai, stating that it has to be prima facie established from the complainant side that such alleged act of cheating, the complainant had suffered a wrongful loss and same had resulted in wrongful gain for accused/Petitioner Vijay Kumar Ghai.

“In absence of these elements, no proceeding is permissible in the eyes of law with regard to the commission of the offence punishable u/s 420 IPC,” held by the Bench of the Apex court. 

The name of the complainant is K. Adil, who is Authorised Representative of SMC Global Securities Ltd.

The apex court reached to the conclusion while allowing the petition of Vijay Kumar Ghai, Managing Director of Priknit Retails Ltd and of other Directors Mohit Ghai and Balwant Rai Bhalla that the complaint was filed at a belated stage – after a delay of four years, with the objective of causing harassment to them.

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The apex court set aside the Calcutta High Court order dated 1.10.2019 wherein the High Court had dismissed the quashing petition of Vijay Kumar Ghai Managing Director of Priknit Retails Ltd., Mohit Ghai qua Whole Time Director and of Balwant Rai Bhalla,quaDirector, after holding the observations that ‘continuance of criminal proceedings against the present appellant/accused Vijay Kumar Ghai, MD and other directors would not be an abuse of the process of the court’.

The Operative portion of the High court judgment read as :

“In the present case, the allegation in the FIR disclosed the offences alleged. Moreover, the allegations made in the FIR disclosed that the petitioner induced the complainant to purchase share or invest money by wilful misrepresentation. It is true that the complaint discloses that there was a commercial transaction between the parties but at the same time, it cannot be overlooked that the averments made in the complaint/FIR prima facie revel the commission of a cognizable offence.”

The apex court referred the judgment of Krishna Lal Chawla v St. of U.P. and ANR ,passed by two judges bench ,which further held that multiple complaints by same party against same accused in relation to same incident is not impermissible. 


Sr. counsel, Menaka Guruswamy opposed the practise of forum shopping, which in this case was done by respondent no. 2 by filing 2 different complaints i.e. one at Delhi and one at Kolkata. The contentions were that allegations in FIR were purely of civil nature, but respondent no. 2 has given cloak of criminal colour. It was further submitted that there are no allegations in the complaint filed by the Respondent No. 2 about the Appellants having fraudulent or dishonest intentions at the time of making the representation.

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Reliance place upon judgment of the apex court i.e. K. Jagadish Vs. Udaya Kumar G.S. & Anr setting out the established proposition of law that two complaints can co existsimultaneously if the scope of two complaints are different.


Senior advocate appearing on behalf of the Respondents has vehemently submitted that the allegations contained in the complaint disclosed all the ingredients of the alleged offences and moreover, the criminal proceedings have not been initiated with mala fide intention and that the complaint case filed before the magistrate of Tis Hazari Court was not decided on merit and as such the complainant cannot be barred from making a fresh complaint.

Secondly, on fact, she argued that complainant made a specific allegation that on inducement of the accused persons, he had parted with 2.50 crore on a false promise that they would be allotted shares in the company. On 29.02.2008, a false statement was made by the accused persons that the complainant had been allotted the shares, whereas it transpired that the resolution about the allotment of shares was taken only on 23.03.2009 that is one year later.


The background of the case is that K. Adil, Authorised Representative of SMC Global Securities Ltd, Delhi shown interest in investment on behalf of Vijay Kumar Ghaiand other Directors. It was mutually decided that K. Adil will invest amount of Rs. 2.5 crores with the company in lieu of which they will be issued 2,50,000 equity shares of Priknit Apparel Pvt. Ltd.  K. Adil filed their share application form along with the cheque of Rs. 2.5 crore.

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Subsequently, an allotment letter dated 29.03.2008 was issued in favour of Respondent No. 2 whereby 2,50,000 shares were issued in lieu of the investment made by him. The proforma respondent no. 3 company and Respondent No. 2 arrived at an understanding, regarding the investment made by Respondent No. 2.

Having failed to bring the I.P.O as per memorandum of understanding dated 20.08.2009, Respondent No. 2 issued a legal notice dated 06.12.2011 to the Appellants.

K.Adil, respondent no. 2 filed a police complaint on 06.01.2012, with PS RajenderNagar, New Delhi therefore her received response from concerned PS that the complaint filed is out of their territorial jurisdiction and ought to be transferred. On 11.04.2012, K.Adil filed a complaint with the Economic Offences Wing (hereinafter referred to as “EOW”) and the said complaint was transferred to PS Darya Ganj, New Delhi. 

That on 06.06.2012, K. Adil filed a complaint being CC No. 306/1/12 under Section 156(3) of Cr.P.C before the TizHazari Court, New Delhi for registration of FIR against the Appellants and their company. On 01.09.2012, K. Adil also filed another Complaint No. 190 of 12 3 before Tis Hazari Court, New Delhi under Section 68 of the Companies Act read with Section 200 of Cr.P.C which is pending adjudication. 

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Moreover, MM of Tis Hazari Court vide order dated 28.02.2013 observed that the entire dispute raised by K.Adil, respondent no.2 was civil in nature and found no nature of criminality thus instead of registering FIR, posted case for pre-summoning evidence with regard to the application under Section 156(3) Cr.P.C filed by Respondent No.2.

Soon thereafter, K.Adil, preferred a second complaint under Section 406, 409, 420, 468,120B and 34 IPC on the basis of the same cause of action with the PS Bowbazarat Kolkata, West Bengal and the same was converted into an FIR bearing No. 168 under Section 406, 420, 120B IPC. 

Closure report was filed since entire dispute found to be civil in nature. Protest petition of K.Adil was allowed by CJM and directed for further investigation. 

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vide order dated 14.02.2017, the CMM, Calcutta took cognizance of the offence under Section 406, 420, 120B IPC against Managing Director, Whole time Director and director (Qua Petitioners). Against which, Petitioner preferred quashing petition under section 482 CrPC.

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