1. Heard Shri Anil Kumar Bajpai, learned counsel for the petitioners, learned A.G.A. for the State and Shri Gaurav Pundir, learned counsel for respondent no. 4.
2. The batch of writ petitions arise from the same cause and incident, accordingly, are being heard and decided together on the consent of the parties.
3. The facts of Writ Petition No. 10571 of 2021 is being referred to for the sake of convenience.
4. The writ petitioners before the Court are bank officials of the rank of Assistant General Manager, Field General Manager, Chief Manager and Branch Manager.
5. By the instant petition, petitioners seek quashing of the impugned First Information Report dated 16.10.2021, registered as Case Crime No. 0412/2021, under Sections 420 and 406 I.P.C., Police Station Fatehpur, District Saharanpur.
6. Union Bank of India is a body corporate duly constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970 (Act No. V of 1970) having its Head Office at Mumbai [Bank]. The petitioner was posted as Branch Manager at Saharanpur Main Branch, Saharanpur.
7. M/s Shyamvi Steels Private Limited, incorporated under the Companies Act, 1956, having its Head Office, at Ghaziabad, and Registered Office at New Delhi, and Unit/Works at Village Rehdi, Post Office Chuttmalpur, District Saharanpur [Company]. The first-informant/ respondent no. 4 is one of the Directors of the Company.
8. The Bank sanctioned loan to the Company on 01.03.2013. Fund Based Loan at Rs. 175.00 Lakh and Term Loan at Rs. 400.00 Lakh i.e. total loan amount at Rs. 575.00 Lakh was sanctioned to the Company. Collateral security was furnished and hypothecated to the Bank at Rs. 4,41,780.00.
9. A Hypothecation Agreement of goods and debts for Rs. 1.75 crores was executed by the Company through its directors. The Company also hypothecated stock of raw material, office equipments, furniture and fixtures, air conditioners, stock in process, finished goods, consumables, plant and machinery, receivables, all present and future goods, book debts, all other movable assets of the company, plant and machinery, both present and future and bills etc. in favour of the Bank.
10. Further, to secure the credit facility Company mortgaged its immovable property with the Bank as an equitable mortgage or primary /collateral security, for the amount due to the Bank by depositing original title deed and also confirmed the creation of mortgage in favour of the Bank.
11. The Company through fourth respondent again requested to enhance the cash credit limit to Rs. 2.75 crores and on the said request Bank sanctioned/modified credit facilities to the Company on 01.03.2014. Thereafter, the credit facilities aggregating at Rs. 5,91,28,000.00 was sanctioned and disbursed by the Bank to the Company.
12. Fund Based Loan i.e. Rs. 175.00 Lakh was enhanced to Rs. 275.00 Lakh and on review the Term Loan was also enhanced at Rs. 316.28 Lakh on 25.02.2014.
13. The Company availed various credit facilities from the Bank aggregating at Rs. 575.00 Lakhs. The directors of the Company have also executed letter of personal guarantee securing the credit facility granted by the Bank to the Company.
14. The Company defaulted, consequently, the debt was classified Non-Performing Asset [NPA] on 01.02.2015.
15. The Bank issued notice dated 12.03.2015, under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [SARFAESI Act] duly served/ delivered to the Company, whereby, the Company was called upon to discharge its liability in full with future interest and incidental expenses costs, within a period of 60 days from the date of notice, failing which Bank would proceed under Sub-Section (4) of Section 13 of the SARFAESI Act. The Bank on 02.06.2015 issued and delivered possession notice to the mortgagors.
16. The fourth respondent challenged the aforesaid notice before the Debts Recovery Tribunal, Lucknow [DRT] by filing S.A. No. 444 of 2015 (M/s Shyamvi Steel Private Limited & two others Vs Union Bank of India).
17. The aforesaid application was allowed by the DRT, on technical ground directing the Bank to hand over the possession of the seized assets.
18. The Bank filed an application being Original Application No. 852 of 2016 (Union Bank of India Vs M/s Shyamvi Steels Private Limited) before the DRT, against the directors of the Company for recovery of the amount due under Section 19 of the Debt Recovery Tribunal Act, 1993 [DRT Act].
19. A stay application was also filed by the Bank in the aforesaid application praying for setting aside the recovery citation dated 11.11.2016, issued by the Collector, Saharanpur, under Sections 284 and 286 of the U.P. Zamindari Abolition & Land Reforms Act, 1950, for recovery of the electricity dues at Rs. 2,11,55,523/- against the Company. The Presiding Officer passed an interim order on 09.12.2016, in favour of Bank.
20. The Bank handed over the possession of the Factory to the Company on 29.07.2017.
21. Thereafter, Bank again issued a corrected notice dated 05.06.2018, under Section 13(4) of the SARFAESI Act and took possession of the Factory.
22. The Bank made a complaint before the Station House Officer, Police Station Sadar, Saharanpur, alleging therein that some persons, who are hand-men of the fourth respondent, have broken the lock of the factory, but no action was taken by the police.
23. The Bank came to know from the customers that there was certain dues of the Electricity Department against the Company, consequently, Additional District Magistrate (City), Saharanpur, forcibly had taken possession of the premises of the Company from the Bank on 08.12.2018.
24. In the meantime the S.A. No. 444 of 2015, filed by the fourth respondent before the DRT, came to be dismissed for non-prosecution.
25. The fourth respondent moved an application for One Time Settlement [OTS] before the Bank on 12.07.2019.
26. The police arrested a person on 11.09.2019, who was carrying iron materials, which were the theft items, at about 2.00 P.M. near Kali Temple of Redi Village; on query he disclosed his name as Haseen, son of Naseem, resident of Muslim Colony, Chhutmalpur, Police Station Fatehpur, Saharanpur. The aforesaid person was caught by one Ravindra, son of Manmohan, resident of Redi, Police Station Fatehpur, District Saharanpur. Subsequently, a First Information Report [F.I.R.] was also lodged by Ravindra on 11.09.2019; being Case Crime No. 0306/2019, under Sections 379 & 411 I.P.C., Police Station Fatehpur, District Saharanpur.
27. The fourth respondent in his letter dated 15.09.2019, made allegations against the Electricity Department and the persons involved with the Electricity Department. But subsequently, fourth respondent taking somersault, moved an application under Section 156(3) Code of Criminal Procedure, 1973 [Cr.P.C.], before the Chief Judicial Magistrate, Saharanpur, deviating from his earlier allegations levelled in the letter dated 15.09.2019, and the entire allegations of theft was fastened against the Bank officers, including, the petitioner.
28. The Bank received letter dated 14.07.2020, issued by the Ministry of Finance, Government of India, New Delhi, directing the Managing Director/Chief Executive Officer, Union Bank of India, to take action, strictly, in accordance with the representation of the Company.
29. Pursuant thereof, Bank sent a letter dated 18.03.2020, to the fourth respondent, accepting the offer for OTS submitted by the fourth respondent at Rs. 4,46,07,745.00.
30. The Bank, however, was compelled to send letters dated 04.09.2020 and 17.12.2020, to the fourth respondent informing that since the fourth respondent did not comply with the terms and conditions of the OTS offered by the Bank, therefore, the Bank proceeded to reject the OTS and sought recovery of the dues.
31. The fourth respondent moved an application on 03.02.2021, under Section 156(3) Cr.P.C., before the Chief Judicial Magistrate, Saharanpur, praying for registering criminal case against the officers of the Bank.
32. The Bank officially informed the fourth respondent vide letter dated 18.02.2021, that OTS has finally been cancelled as he had not complied with the terms and conditions of the OTS. Bank informed that the outstanding dues of the Company on date stands at Rs. 12,49,15,622.83, plus legal charges.
33. The Chief Judicial Magistrate, Saharanpur, directed Bank to submit inventory prepared at the time of taking possession of the Company under the SARFAESI Act. Pursuant thereto, petitioner supplied the inventory prepared by the Bank on 05.06.2018.
34. The fourth respondent further attempted to create obstacles, accordingly, entered into a registered rent agreement letting out the premises of the Company in favour of one Ashok Gupta, son of, Late Ram Nath Gupta, Proprietor of M/s Ram Prem Stocky Yard, resident of Roorkie Road, Chhutmalpur, District Saharanpur, the possession of which was taken by the Bank on 05.06.2018.
35. The Chief Judicial Magistrate, Saharanpur, passed an order dated 30.09.2021, in Misc. Application No. 245 of 2021 (Sanjay Tomar Vs Rajpal Singh and others), filed by respondent no. 4 under Section 156(3) Cr.P.C., wherein, Station House Officer, Police Station Fatehpur, District Saharanpur, was directed to register F.I.R. and investigate the matter. The impugned First Information Report in compliance was lodged on 16.10.2021, which is under challenge by the petitioner.
36. In the counter affidavit filed by the fourth respondent, the facts are not being disputed. It is, however, submitted that F.I.R. should have also been lodged under Section 409 I.P.C. against the accused petitioners being public servant and having committed breach of trust as some of the materials and articles, as per the inventory, was stolen while it was in the custody and possession of the Bank. It is further submitted that the possession of the premises (secured assets) was taken by the Bank with the assistance of the District Magistrate and police personnal in the absence of the fourth respondent.
37. In this backdrop, it is urged that it was the bounden duty of the Bank officials to have protected the assets. It is further urged that the bank officials were not only negligent with regard to the security and safety of the assets, but, attempted to grab the articles, as well as, the machinery of the Company out of malafide intention. The petition being devoid of merit is liable to be dismissed.
38. Rival submissions fall for consideration .
39. The sole question that arises for consideration is as to whether it is a case of malicious prosecution against the Bank and whether ingredients of the offence under Section 420, 406 I.P.C. is made out from the impugned F.I.R.
40. The petitioners herein are officials of the Bank, the malafide intent of the complainant is reflected from the fact that the fourth respondent has lodged F.I.R. in retaliation to counter the recovery proceedings, and to coerce the officers of the Bank from not taking possession of the Company under Section 13 of the SARFAESI Act.
41. It is not being disputed by learned counsel for the fourth respondent that the Company is borrower and the complainant happens to be the Director. Company defaulted and further failed to accept the OTS scheme offered by the Bank, consequently, Bank proceeded to exercise its statutory and contractual right as per the SARFAESI Act to take possession of the secured assets of the Company and ensure recovery of the amount due to the Bank. Proceedings of recovery is pending before the DRT, wherein, Company and the Revenue authorities i.e. the Collector are parties. The SARFAESI Act and DRT Act is a complete code for redressal of the grievance of the debtor company and at the same time it is always open for the debtor company to raise counter claim against the Bank for the loss of inventory/assets for any reason, including, theft.
42. The allegations made in the F.I.R. taken on face value alleges that the assets seized by the Bank in proceedings under SARFAESI Act was stolen due to the negligence of the officials of the Bank, consequently, on an application under Section 156(3) Cr.P.C. the impugned F.I.R. came to be lodged. The allegations taken as it is, would not make out a case of cheating (Section 415 I.P.C.) as there is no deception of any person, fraudulently or dishonestly inducing such a person to deceive to deliver any property. Further, it is also not the case of cheating and dishonestly inducing the delivery of property to any person or to make alter or destroy the whole or any part of a valuable security or anything which is signed or sealed, and which is capable of being converted into a valuable security.
43. Criminal breach of trust (Section 405 I.P.C.) mandates that for whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use of property, or dishonestly uses or disposes of that property in violation of any direction of law or of any legal contract which he has made touching the discharge of such trust commits "criminal breach of trust".
44. To constitute an offence of criminal breach of trust, it is essential that the prosecution must prove first of all that the accused was entrusted with some property or with any dominion or power. It has to be established further that in respect of the property so entrusted, there was dishonest, misappropriation or dishonest conversion or dishonest use or disposal in violation of a property or law of legal contract by the accused himself or some one else which he willingly suffered to do. It follows automatically from the defence that the ownership or beneficial interest in property in respect of which criminal breach of trust alleged to have been committed must be in some person other than the accused and the later must hold it on account of misappropriation and some ways for his benefit.
45. In this backdrop, admittedly, the Company, of which complainant is one of the Director, had obtained loan from the bank, on default, the Bank was within its statutory/contractual right to recover the assets mortgaged/hypothecated to the Bank as per law. The Bank taking recourse as per law had taken possession of the property with the intervention of the District Collector and the police officials, which the Bank was entitled in proceedings under Section 13/14 of the SARFAESI Act. It is also not in dispute that the Company had outstanding electricity dues, for recovery thereof, it is alleged that the Revenue authorities attempted to take possession of the property, which was in the custody of the Bank. The Bank while taking possession had drawn an inventory of the assets, which as per the complainant is alleged to have been stolen while in custody of the Bank, therefore, the officials of the Bank are liable to face criminal prosecution.
46. The proceedings initiated and the action taken by the Bank under SARFAESI Act are assailable under the said Act before the higher forum and if, borrower is allowed to take recourse to criminal law in the manner, as it has been taken, it needs no special emphasis to state, has an inherent potential to affect the financial health of the Bank. It is noticeable by the conduct of the fourth respondent that the statutory remedies have cleverly been pypassed and prosecution route has been undertaken for instilling fear amongst the officials of the Bank compelling them to concede to the request of the Company for settlement.
47. It needs to be reiterated that the learned Magistrate has to remain vigilant with regard to the allegations made and the nature of allegations in an application filed under Section 156(3) Cr.P.C. and not to issue directions without proper application of mind. The petitioners herein are officers of the Bank and the complainant is the Director of the defaulted Company. The bank has statutory right of effecting recovery of the security interest, which if allowed to be given criminal colour by the defaulting Company would be fatal to the Banking System.
48. Learned Magistrate should take note of the allegations in entirety, the date of incident and whether any cognizable case is remotely made out. It is to be noted that when a borrower of the financial institution covered under the SARFAESI Act, invokes the jurisdiction under Section 156(3) Cr.P.C. and also there is separate procedure under the DRT Act/SARFAESI Act, an attitude of more care, caution and circumspection had to be adhered to by the Magistrate.
49. The evil design of the complainant is writ large while lodging the complaint, was to harass the petitioners with the sole intent to avoid payment of loan and to pressurize Bank for settlement as per the terms of the Company. When a person avails a loan from a financial institution, it is his obligation to pay back the loan, in the event of default the financial institution is at liberty to proceed in accordance with law to enforce the contractual obligation at the statutory forum prescribed by the law.
50. Taking a case that the assets seized and taken possession by the Bank to secure its dues, some of it may have been stolen, as is being alleged by the complainant, that would not give rise to criminal prosecution as it is always open to the aggrieved defaulter Company to raise the issue before the DRT and plead counter claim for the value of the stolen inventory. In the event, it is found that the inventory, in any manner is deficit, while it was in possession of the Bank, at the most the Bank would have to adjust the deficit amount against the dues sought to be recovered by the Bank against the Company. Taking recourse to criminal prosecution against the Bank is unwarranted.
51. In Indian Overseas Bank Versus Ashok Saw Mill (2009) 8 SCC 366, Supreme Court held as follows:
"34. The provisions of Section 13 enable the secured creditors, such as banks and financial institutions, not only to take possession of the secured assets of the borrower, but also to take over the management of the business of the borrower, including the right to transfer by way of lease, assignment or sale for realising secured assets, subject to the conditions indicated in the two provisos to clause (b) of sub-section (4) of Section 13.
35. In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub-section (3) thereof.
36. The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee."
52. In the facts and circumstances of the case, the issue as per the allegations in the F.I.R. relates to the exercise of remedy relating to a secured asset as defined under the SARFAESI Act, cannot be in dispute. The fact that the account of the complainant Company was classified NPA is also admitted position. The OTS was also not acted upon. In that regard when a right accrues to the secured creditor to enforce the security interest, the procedure as contemplated under Sections 13 and 14 of the SARFAESI Act is to be resorted to by the Bank. If the complainant, as a borrower had any grievance with regard to any of the measures taken by the secured creditor invoking the provisions of Section 13 of the SARFAESI Act, the remedy is provided under Section 17/19 of the SARFAESI Act, and certainly not to take recourse of criminal proceedings. The SARFAESI Act is a complete Code in itself which provides the procedure to be followed by the secured creditor and also the remedy to the aggrieved parties including the borrower.
53. In the given admitted facts, the complaint filed by the complainant was an intimidatory tactic and afterthought which is an abuse of process of law. Further, the officials of the financial institution/bank are provided with immunity from prosecution under Section 32 of SARFAESI Act. The act or action of the Bank officials having not taken in good faith, that aspect of the matter is also an aspect which can be examined in the proceedings under the SARFAESI Act before the prescribed forum. In such circumstances, criminal proceedings would not be sustainable in a matter of the present nature, exposing the petitioners to proceeding before the investigating officer or the criminal court, would not be justified.
54. In Priyanka Srivastava and another Vs. State of U.P. and others 2015 6 SCC 287, Supreme Court while allowing the appeal filed by an officer of the financial institution set aside the order passed by the High Court and quashed the registration of F.I.R. lodged through an application under Section 156 (3) Cr.P.C. The Court in the opening paragraph observed as follows:
"The present appeal projects and frescoes a scenario which is not only disturbing but also has the potentiality to create a stir compelling one to ponder in a perturbed state how some unscrupulous, unprincipled and deviant litigants can ingeniously and innovatively design in a nonchalant manner to knock at the doors of the Court, as if, it is a laboratory where multifarious experiments can take place and such skillful persons can adroitly abuse the process of the Court at their own will and desire by painting a canvas of agony by assiduous assertions made in the application though the real intention is to harass the statutory authorities, without any remote remorse, with the inventive design primarily to create a mental pressure on the said officials as individuals, for they would not like to be dragged to a court of law to face in criminal cases, and further pressurize in such a fashion so that financial institution which they represent would ultimately be constrained to accept the request for "one- time settlement" with the fond hope that the obstinate defaulters who had borrowed money from it would withdraw the cases instituted against them."
55. The Court further reiterated that the learned Magistrate while exercising jurisdiction under Section 156 (3) Cr.P.C. has to remain vigilant with regard to the allegations made and the nature of allegations and not to issue directions without proper application of mind. The Court in Para-27 observed as follows:
"..........But, the learned Magistrate should take note of the allegations in entirety, the date of incident and whether any cognizable case is remotely made out. It is also to be noted that when a borrower of the financial institution covered under the SARFAESI Act, invokes the jurisdiction under Section 156(3) Cr.P.C. and also there is a separate procedure under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, an attitude of more care, caution and circumspection has to be adhered to."
56. Recently, in K. Virupaksha and another Versus State of Karnataka and another12, Supreme Court in an appeal filed by Deputy General Manager, Canara Bank, quashed the complaint and the order passed therein, as also the F.I.R. insofar as the appellants are concerned. The financial institution had initiated recovery proceeding against the defaulting party but in retaliation and counterblast, the officials were exposed to criminal prosecution. The Court in paragraph 16 observed as follows:
"We reiterate, the action taken by the Banks under the SARFAESI Act is neither unquestionable nor treated as sacrosanct under all circumstances but if there is discrepancy in the manner the Bank has proceeded it will always be open to assail it in the forum provided."
57. In State of Haryana & Ors. Vs. Bhajan Lal & Ors. 1992 Supp (1) SCC 335 Supreme Court considered in detail the scope of the High Court powers under Section 482 Cr.P.C. and/or Article 226 of the Constitution of India to quash the FIR and referred to several judicial precedents and held that the High Court should not embark upon an inquiry into the merits and demerits of the allegations and quash the proceedings without allowing the investigating agency to complete its task. The Court, inter alia, identified the following cases in which FIR/complaint can be quashed:
"102. (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) ..... .... ....
(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."
58. Having regard to the facts and circumstances of the case, the order of the Magistrate directing lodging of the F.I.R. against the officers of the Bank, mechanically and without application of mind cannot be appreciated. The writ petitions are liable to succeed and is ordered accordingly.
59. The writ petitions are allowed. The complaint, the order of the Magistrate passed therein and also the impugned F.I.R., insofar, it relates to the petitioners is set aside and quashed.
60. The cost assessed at Rs. 50,000/- to be paid by the fourth respondent to the Bank, at the Branch, within, six weeks from the date of order.
