Case Note & Summary
The petitioners, Nirmal Bang Securities Private Limited (a stockbroking company) and its directors, filed a writ petition under Article 226 of the Constitution read with Section 482 CrPC seeking quashing of an order dated 23 December 2013 passed by the Additional Metropolitan Magistrate, Esplanade, Mumbai, directing action under Section 156(3) CrPC, and the consequent FIR registered at MRA Marg Police Station for offences under Section 409 read with Section 34 IPC. The second respondent, Ashok Chaudhry, a client of the petitioner company, had filed a complaint alleging that the petitioners dishonestly misappropriated shares and funds belonging to him. The dispute arose out of share transactions between the parties, where the respondent claimed that the petitioners failed to deliver shares or pay proceeds as agreed. The petitioners contended that the dispute was purely civil in nature, arising from a contractual relationship, and that the criminal complaint was an abuse of process. The court examined the complaint and the FIR and found that the allegations did not disclose any criminal offence. The court held that the essential ingredients of criminal breach of trust under Section 409 IPC, namely entrustment and dishonest misappropriation, were absent. The relationship between the parties was that of a stockbroker and client, governed by contractual obligations, and any dispute regarding non-delivery of shares or non-payment of money was a civil matter. The court also noted that the magistrate had passed the order under Section 156(3) CrPC mechanically without applying his mind to the nature of the dispute. Consequently, the court quashed the FIR and the impugned order, allowing the petition.
Headnote
A) Criminal Law - Quashing of FIR - Section 482 CrPC - Abuse of Process - Dispute between stockbroker and client regarding share transactions - Held that the dispute is purely contractual and civil in nature, and criminal proceedings under Section 409 IPC are not maintainable as there is no entrustment or dishonest misappropriation - FIR and order under Section 156(3) CrPC quashed (Paras 1-30).
B) Criminal Law - Section 156(3) CrPC - Order for Investigation - Validity - Magistrate's order directing investigation under Section 156(3) CrPC without application of mind - Held that the order was passed mechanically without considering the civil nature of the dispute - Order set aside (Paras 1-30).
Issue of Consideration
Whether the dispute between the parties is purely of a civil nature and whether the criminal proceedings initiated under Section 409 IPC read with Section 34 IPC are an abuse of the process of law, warranting quashing of the FIR and the order under Section 156(3) CrPC.
Final Decision
The petition is allowed. The order dated 23 December 2013 passed by the learned Additional Metropolitan Magistrate, 47th Court, Esplanade, Mumbai and the FIR registered with MRA Marg Police Station for the offence punishable under Section 409 read with Section 34 of the Indian Penal Code are quashed and set aside. Criminal Application No. 178 of 2016 is disposed of accordingly.
Law Points
- Criminal breach of trust
- Section 409 IPC
- Section 156(3) CrPC
- Quashing of FIR
- Civil dispute
- Abuse of process of law
- Contractual obligation
- Criminal proceedings
Case Details
2017 LawText (BOM) (05) 50
WRIT PETITION NO.3123 OF 2014 WITH CRIMINAL APPLICATION NO. 178 OF 2016
A.S. Oka, Smt. Anuja Prabhudessai
Mr. Satish ManeShinde a/w Mr. Ravichandra Hegde and Ms. Aashni Dalal i/by J. Sagar Associates for the Petitioners, Mr. K.V. Saste, APP for the Respondent No.1, Mr. Subhash Jha a/w Ms. Sanjana Pardeshi i/by Law Global Advocate for the Respondent No.2 and for Applicant in APPW/178/2016
Nirmal Bang Securities Private Limited, Kishore Bang, Dilip Bang
State of Maharashtra, Ashok Chaudhry
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Nature of Litigation
Writ petition under Article 226 of the Constitution read with Section 482 CrPC for quashing of an order under Section 156(3) CrPC and the consequent FIR.
Remedy Sought
Quashing of the order dated 23 December 2013 passed by the Additional Metropolitan Magistrate directing action under Section 156(3) CrPC and quashing of the FIR registered at MRA Marg Police Station for offences under Section 409 read with Section 34 IPC.
Filing Reason
The petitioners alleged that the dispute with the second respondent was purely civil in nature and that the criminal proceedings were an abuse of the process of law.
Previous Decisions
On 5 February 2015, Rule was issued and an interim order was passed directing that charge sheet shall not be filed without leave of the court and that no coercive action shall be taken against the petitioners, but investigation was allowed to continue.
Issues
Whether the dispute between the parties is purely civil in nature?
Whether the criminal proceedings under Section 409 IPC are maintainable?
Whether the order under Section 156(3) CrPC was passed mechanically?
Submissions/Arguments
The petitioners argued that the dispute arises out of a contractual relationship between a stockbroker and client and is purely civil in nature, lacking the ingredients of criminal breach of trust.
The second respondent argued that the petitioners dishonestly misappropriated shares and funds, constituting criminal breach of trust.
Ratio Decidendi
The dispute between a stockbroker and client regarding share transactions is purely contractual and civil in nature. The essential ingredients of criminal breach of trust under Section 409 IPC, namely entrustment and dishonest misappropriation, are not made out. Initiating criminal proceedings in such a civil dispute amounts to an abuse of the process of law, warranting quashing under Section 482 CrPC.
Judgment Excerpts
By this Petition under Article 226 of the Constitution of India read with Section 482 of the Code of Criminal Procedure, 1973, a prayer is made for quashing the order dated 23rd December, 2013 passed by the learned Additional Metropolitan Magistrate, 47th Court, Esplanade, Mumbai on a complaint filed by the second respondent.
An interim order was passed directing that charge sheet shall not be filed without leave of this Court and that no coercive action shall be taken against the petitioners.
Procedural History
The second respondent filed a complaint before the Additional Metropolitan Magistrate, who passed an order under Section 156(3) CrPC on 23 December 2013 directing investigation. Based on that order, an FIR was registered at MRA Marg Police Station for offences under Section 409 read with Section 34 IPC. The petitioners filed the present writ petition on 5 February 2015, when Rule was issued and an interim order was passed protecting the petitioners from coercive action and filing of charge sheet. The petition was heard on 16 March 2017 and judgment pronounced on 5 May 2017.
Acts & Sections
- Code of Criminal Procedure, 1973 (CrPC): 156(3), 482
- Indian Penal Code, 1860 (IPC): 409, 34
- Constitution of India: Article 226
