Sudhirkumar Chandulal Thakkar Vs State of Gujarat & Anr. (Gujarat High Court)
The Gujarat High Court considered an application under Section 482 of the Code of Criminal Procedure, 1973 seeking quashing of FIR C.R. No.11192011210067 of 2021 registered with Bopal Police Station, Ahmedabad, for alleged offences under Sections 406 and 420 of the IPC, Sections 23(e), 23(f), 23(h) and 23(l) of the Securities Contracts (Regulation) Act, 1956, Section 45(H)(A) of the Securities and Exchange Board of India Act, 1995, and Sections 4 and 5 of the Gujarat Prevention of Gambling Act.
The FIR was registered on 21.01.2021 on the basis of information that Ashishbhai Sureshbhai Davra was allegedly carrying out illegal stock-market trading by way of Dabba trading from a residential premises. During the police raid, he was allegedly found working on a laptop and informed the police that he was engaged in illegal stock-market trading. The applicant contended that he had been falsely implicated and that the proceedings were legally unsustainable, particularly because Section 26 of the Securities Contracts (Regulation) Act imposed a specific bar against cognizance of offences under that Act except upon a complaint by the specified authorities or persons.
The applicant further submitted that the allegations did not disclose criminal breach of trust and that the lower court could not have taken cognizance of offences under the Securities Contracts (Regulation) Act on the basis of a police report. The learned APP opposed the application, submitting that the accused persons were trading in securities without the requisite licence or permission and without entering into a contract with SEBI, and that materials including a laptop, mobile phone and pen drive had been found during the raid.
On the allegation of criminal breach of trust, the Court found that there was no direct evidence or material showing entrustment of property. Although the allegations accused the petitioner of fraud and misconduct, there was no allegation that he had pocketed money by causing loss to anyone or had obtained wrongful gain. The Court reproduced the definition of criminal breach of trust under Section 405 of the IPC and held that the material did not establish the ingredients necessary for an offence under Section 406. The investigating agency had also failed to produce concrete documents showing financial loss to anyone. Accordingly, the Court held that Section 406 of the IPC was not applicable.
With respect to the Securities Contracts (Regulation) Act, the Court considered Section 26, which provides that cognizance of an offence punishable under the Act or rules, regulations or bye-laws made thereunder cannot be taken except upon a complaint by the Central Government, State Government, Securities and Exchange Board of India, a recognised stock exchange or an authorised person. The Court held that, on a plain reading of Section 26, the lower court ought not to have taken cognizance of the offences on the basis of a police report. The Court therefore held that no case was made out under the provisions of the Securities Contracts (Regulation) Act.
On Section 420 of the IPC, the Court referred to Rekha Jain vs. The State of Karnataka & Anr., reported in 2022 LiveLaw (SC) 468, for the requirement of dishonest inducement to deceive a person into delivering property. It also referred to Sarabjit Kaur vs. State of Punjab & Anr., reported in (2023) 5 SCC 360, concerning the principle that a breach of contract does not ordinarily constitute criminal cheating unless fraudulent or dishonest intention existed at the beginning of the transaction.
The Court further considered State of Haryana v. Bhajan Lal, reported in 1992 Supp (1) SCC 335, particularly the categories of cases in which the inherent jurisdiction under Section 482 Cr.P.C. may be exercised to prevent abuse of process or secure the ends of justice. The Court relied upon the categories concerning allegations which do not prima facie constitute an offence and proceedings which are subject to an express legal bar under the Code or the concerned Act.
Consequently, the Court allowed the application and quashed and set aside FIR C.R. No.11192011210067 of 2021 registered with Bopal Police Station, Ahmedabad, together with all consequential proceedings, insofar as the applicant/s were concerned. In relation to the offence under the Gujarat Prevention of Gambling Act, the Investigating Agency was permitted to carry out further proceedings in accordance with law, if permissible. Rule was made absolute and direct service was permitted.
Cases Discussed
- Rekha Jain vs. The State of Karnataka & Anr., 2022 LiveLaw (SC) 468 — referred to for the requirement of dishonest inducement to deceive a person into delivering property for an offence under Section 420 of the IPC.
- Sarabjit Kaur vs. State of Punjab & Anr., (2023) 5 SCC 360 — referred to for the proposition concerning fraudulent or dishonest intention at the beginning of a transaction and the distinction between breach of contract and criminal cheating.
- State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335 — considered for the illustrative categories governing exercise of inherent jurisdiction under Section 482 Cr.P.C., including cases where the allegations do not constitute an offence or where an express legal bar exists.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1.Considering the facts and circumstances of the case and with consent of learned advocate for the respective parties, matter is taken up for final disposal forthwith.
2. By way of this application under Section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as “Cr.P.C.”), the applicant has prayed to quash and set aside the complaint being FIR C.R. No.11192011210067 of 2021 with Bopal Police Station, Ahmedabad, for the offences punishable under Sections 406 & 420 of IPC as well as Sections 23(e), 23(f), 23(h), 23(l) of The Securities Contract (Regulation) Act, 1956, Sections 45(H)(A) of the Security Exchange Board of India, 1995 and Sections 4 and 5 of the Gujarat Prevention of Gambling Act and all the consequential proceedings arising therefrom.
3. Heard learned advocates for the respective parties.
4. At the instance of first informant, FIR came to be filed on 21.01.2021 inter alia alleging that, he received a secret information that a person namely Ashishbhai Sureshbhai Davra, residing at Flat No.I-803 of Orchid Elegance was doing illegal trading in the stock market by doing Dabba trading. Therefore, on the basis of said information, officers of Bopal Police station, called two panchas and informed them about the said information and prepared for raid. During the raid, one person named Ashishbhai Davra was present in the house, who was doing some work in his laptop and upon further interrogation of said person, he informed that, he was doing illegal trading in stock market. In this regard, FIR came to be filed.
5. Learned advocate for the applicant submits that the applicant has nothing to do with the offence and he is falsely implicated in it. It is submitted that there is a specific bar contained in Section 26 of the Act, and the Court could not have taken cognizance based on a police report in view of this bar. In the present case, in the absence of a complaint in writing filed before the appropriate court, the lower court took cognizance of the alleged offenses based on a police report, which is clearly in contravention of the provisions of Section 26. Therefore, the entire proceedings are illegal and liable to be quashed. It is further submitted that the allegations leveled against the present petitioner are far from the truth and do not constitute criminal breach of trust. In light of Section 26 of the Act, the lower court ought not to have taken cognizance of the offenses based on a police report. Therefore, the application may be allowed.
6. Learned APP has strongly opposed the present application and submits that the accused persons were engaging in trading in securities without a license or permission and without entering into a contract with SEBI, in violation of the provisions of the Act. During the raid, the police found accused person at the scene of the offense, along with materials such as laptop, mobile, pen drive etc., as stated in the FIR. As a result, the petitioner has committed criminal breach of trust and other offences under the Securities Contract (Regulation) Act. He therefore, requested to dismiss the present application.
7. Having heard learned advocates on both the sides and considering the fact, it appears from the complainant that on 21.01.2021, respondent No.2, Police Constable based on information raided the house of the accused. The accused was trading in securities without a license or permission and without entering into a contract with SEBI, in violation of the provisions of the Act. It is further alleged that during the raid, the police found accused at the scene of the offense, along with materials such as laptop, mobile, pendrive etc., as stated in the FIR.
8. In view of the above, there is no direct evidence or material to suggest that there was any entrustment of property. The allegations in the complaint accused the petitioner of engaging in fraud and misconduct, but nowhere it is alleged that he pocketed money by causing a loss to anyone or obtaining wrongful gain. Even if this fact is accepted, it constitutes merely a breach of the Securities Contract (Regulation) Act, which has been wrongly characterized as criminal breach of trust. Criminal breach of trust, as defined in Section 405 of the IPC, is as follows:
“Whoever, being entrusted with property, or having dominion over property, dishonestly misappropriates or converts that property to their own use, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which they have made concerning the discharge of such trust, or willfully allows any other person to do so, commits ‘criminal breach of trust.”
9. In view of the above, it is clear that the petitioner has neither caused any financial loss to anyone nor obtained any wrongful gain. The investigating agency has also failed to produce any concrete documents showing financial loss to anyone in support of his argument. Even when asked on what grounds the criminal breach of trust is alleged to have been committed by the petitioner, the respondent remained silent. Merely based on the complaint, a case under the provisions of criminal breach of trust was registered, but the investigating agency has not produced any evidence to support this assertion. Therefore, this does not constitute criminal breach of trust, and Section 406 of the IPC is not applicable.
10. Regarding the provisions under the Securities Contract (Regulation) Act, upon considering Section 26 of the Act, it is clear that the lower court ought not to have taken cognizance of the offenses based on a police report. Section 26 of the Act states: (1) No court shall take cognizance of any offense punishable under this Act, or any rules, regulations, or bye-laws made thereunder, except on a complaint made by the Central Government, the State Government, the Securities and Exchange Board of India, a recognized stock exchange, or any other authorized person. (2) No court inferior to that of a Court of Session shall try any offense punishable under this Act.
11. In view of the above, a plain reading of Section 26 of the Act suggests that no court can take cognizance of any offense punishable under the Act except on a complaint made by the Central Government, the State Government, the Securities and Exchange Board of India, a recognized stock exchange, or any authorized person. Therefore, no case is made out under the provisions of the Securities Contract (Regulation) Act.
12. So far as offence under Section 420 of the IPC is concerned, it is appropriate to refer to the decision of the Hon’ble Apex Court in the case of Rekha Jain vs. The State of Karnataka & Anr. reported in 2022 LiveLaw (SC) 468, wherein the Hon’ble Supreme Court held that, to make out a case against a person for the offence under Section 420 of IPC, there must be a dishonest inducement to deceive a person to deliver any property to any other person. Further, in the case of Sarabjit Kaur vs. State of Punjab & Anr. reported in (2023)5 SCC 360 has held in paragraph No.13 as follows:
“13. A 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 promise will not be enough to initiate criminal proceedings. From the facts available on record, it is evident that the respondent No.2 had improved his case ever since the first complaint was filed in which there were no allegations against the appellant rather it was only against the property dealers which was in subsequent complaints that the name of the appellant was mentioned. On the first complaint, the only request was for return of the amount paid by the respondent No.2. When the offence was made out on the basis of the first complaint, the second complaint was filed with improved version making allegations against the appellant as well which was not there in the earlier complaint. The entire idea seems to be to convert a civil dispute into criminal and put pressure on the appellant for return of the amount allegedly paid. The criminal Courts are not meant to be used for settling scores or pressurise parties to settle civil disputes. Wherever ingredients of criminal offences are made out, criminal courts have to take cognizance. The complaint in question on the basis of which F.I.R. was registered was filed nearly three years after the last date fixed for registration of the sale deed. Allowing the proceedings to continue would be an abuse of process of the Court.”
13. In the case of State of Haryana v. Bhajan Lal, reported in 1992 Supp (1) SCC 335, the Apex Court has set out the categories of cases in which the inherent power under Section 482 CrPC can be exercised and held in para 102 as under:
“102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Art. 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised:
(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a noncognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under sec.155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”
14. In the result, the application is allowed. The impugned FIR C.R. No.11192011210067 of 2021 with Bopal Police Station, Ahmedabad as well as all consequential proceedings initiated in pursuance thereof are hereby quashed and set aside qua the applicant/s herein.
15.So far offence under the provisions of The Gujarat Prevention of Gambling Act is concerned, Investigating Agency may carry out further proceedings, in accordance with law, if permissible. Rule is made absolute. Direct service is permitted.
