Orders issuing process require application of mind, cannot be passed casually, says Supreme Court
Justices Abhay S. Oka & Ujjal Bhuyan [23-02-2024]

Read Order: Shiv Jatia v. Gian Chand Malick & Ors [SC- CRIMINAL APPEAL NO. 776 OF 2024]

Tulip Kanth

New Delhi, February 26, 2024: The Supreme Court has quashed a criminal complaint after considering the fact that the entire dispute was of a civil nature arising out of a commercial transaction.

The facts of the case were such that in the year 2002, under the Liquified Petroleum Gas (LPG) Distributorship Agreement, the accused no.1 – M/s.Energy Infrastructure (India) Limited (accused company) appointed the 2^nd respondent-accused no.7 (Proprietor of M/s.Arshya Max Agencies) as a distributor for distribution of LPG cylinders in the areas of Panchkula and Chandigarh. The 2^nd respondent, on behalf of the accused company, purported to execute a Point of Sale agreement by which he purported to appoint the 1^st Respondent- complainant as a sales outlet (Point of Sale) in the town of Dhanas to sell Max Gas to the consumers. By the POS agreement, the 2^nd respondent agreed to pay a flat rate commission per cylinder sold by the 1^st respondent- complainant. A demand draft in the sum of Rs.74,900 was issued in favour of the accused company by the 1^st respondent-complainant.

The accused company addressed a letter to the 2^nd respondent alleging serious lapses in customer services rendered by the 2^nd respondent, which allegedly caused a big dent in the reputation of the accused company. The accused company alleged that the 2^nd respondent had committed a breach of the Distributorship Agreement and a cheque issued by the 2nd respondent had been dishonoured.

A private complaint was filed by the 1st respondent- complainant alleging that there was a common intention on the part of the accused company and other accused to play fraud upon the 1st respondent- complainant. It was alleged that due to the non-supply of refills by the accused company, the reputation of the 1st respondent- complainant had been adversely affected. The appellant in the Criminal Appeal was arraigned as an accused in the capacity of the Managing Director of the 1st appellant-accused company, the 2nd and 3rd appellants had been described in the complaint as liable officers of the accused company.

The appellant was accused of committing offence under Sections 420, 406, 467, 468 and 472 read with Section 120-B of the Indian Penal Code, 1860 and Section 13 of the Essential Commodities Act, 1955. The appellants filed a petition under Section 482 of the Cr.PC before the High Court of Punjab and Haryana for quashing the said complaint and for quashing the summoning order The High Court, by the impugned judgment had dismissed the said petition.

It was the appellant’s case that that sub-section (1) of Section 202 of Cr.PC provides that if an accused resides at a place beyond the area where the learned Magistrate exercises his jurisdiction, the issue of process shall be postponed by directing that a police officer or any other person should make an investigation. It was also submitted that the report under Section 202 of the Cr.PC was not received by the Court before passing the order of summoning.

The respondent contended that that though the Police report under Section 202 of the Cr.PC may not have been on record, but it couldn’t be said that the Police had not prepared any such report. It was submitted that the recording of the evidence of three witnesses and consideration of the documents by the Magistrate constituted an inquiry under sub-section (1) of Section 202 of the Cr.PC.

Taking note of the fact that Sub-section (1) of Section 202 of the Cr.PC was amended with effect from June 23, 2006, the Division Bench of Justice Abhay S. Oka & Justice Ujjal Bhuyan opined that the requirement of postponing the issue of the process was introduced on June 23, 2006 which is applicable only when one of the accused stays outside the jurisdiction of the court. “The said requirement is held to be mandatory. The mandatory requirement of postponing the issue of the process because the accused was residing at a place beyond the area where the learned Magistrate exercises his jurisdiction was not applicable when the complaint was filed in 2004. The mandate introduced with effect from 23rd June 2006 was not applicable on the date of filing of the complaint”, the Bench added.

After recording the evidence of the three witnesses and perusing the documents on record, the Magistrate passed the order calling for the report under Section 202 of the Cr.PC. He postponed the issue of the process. On this fact, the Bench opined that the Magistrate ought to have waited until the report was received. He had an option of conducting an inquiry contemplated by sub-section (1) of Section 202 of the Cr.PC himself due to the delay on the part of the Police in submitting the report. But, he did not exercise the said option.

“For issuing the order of summoning, the learned Magistrate could not have relied upon the same material which was before him on 15th December 2011 when he passed the order calling for the report under Section 202 of the Cr.PC. The reason is that, obviously, he was not satisfied that the material was sufficient to pass the summoning order”, it said while further adding that the order did not even consider the earlier order calling for the report under sub-section (1) of Section 202 of the Cr.PC.

“The order issuing process has drastic consequences. Such orders require the application of mind. Such orders cannot be passed casually. Therefore, in our view, the learned Magistrate was not justified in passing the order to issue a summons”, the Bench held.

As per the Top Court, there was no clause in the agreement which allowed the 2nd respondent to appoint anyone as a sales outlet (Point of Sale) on behalf of the accused company. It was also observed that the deposit of the demand draft in the account of the accused company would give rise to civil liability. Even the empty cylinders were provided to the 1st respondent- complainant by the 2nd respondent against the deposit. The accused company had no role in this. There was no contractual relationship between the accused company and the 1st respondent-complainant, it observed.

“In fact, the entire dispute is of a civil nature arising out of a commercial transaction. Therefore, in our considered view, taking the complaint and documents relied upon by the 1st respondent–complainant as correct, no case was made in the complaint or in the evidence of the 1st respondent to proceed against the appellants”, the Bench affirmed.

It was also opined by the Bench that the evidence of CW-3 (Rajiv Kumar) showed that he had stated that the 2^nd, 5^th and 6^th respondents in the Criminal Appeal of accused no.2 had approached the 1st respondent–complainant and had represented that the accused company is a limited company and accused nos.2 to 4 are its Directors. Noticing that there was no allegation that the accused company was involved, in any manner, with the transaction between the 2nd accused and the 1st respondent–complainant. The Bench said, “Hence, continuing the complaint against the appellants will amount to an abuse of the process of law. Therefore, a case is made out for quashing the complaint as against the appellants.”

Thus, allowing the appeal, the Bench quashed the criminal complaint.