While pronouncing its decision on a very significant legal point, the Supreme Court in a most learned, laudable, landmark and latest judgment titled Shiv Jatia vs Gian Chand Malick & Ors in Criminal Appeal No. 776 of 2024 with Criminal Appeal No.777 of 2024 and cited in Neutral Citation No.: 2024 INSC 142 that was pronounced as recently as on February 23, 2024 in the exercise of its criminal appellate jurisdiction has minced just no words to hold that the order issuing process has drastic consequences and such orders require application of mind which cannot be passed casually.

It must be noted that the Apex Court had quashed a complaint that was lodged against the accused in a cheating case on the premise that very general allegations were made in the complaint. It must be also noted that the accused had filed an appeal by which quashing of complaint was sought and it was alleged that there was commission of offences under Sections 420, 406, 467, 468 and 472 read with Section 120-B of the Indian Penal Code (IPC) and Section 13 of the Essential Commodities Act, 1955. The Apex Court made it absolutely clear that the entire dispute is of a civil nature arising out of a commercial transaction. In the fitness of things, we thus find that the Apex Court partly allowed the appeal and so also quashed the complaint against the accused-appellant.

Factual Aspects
At the very outset, this remarkable, robust and recent judgment authored by Hon’ble Mr Justice Abhay S Oka for a Bench of the Apex Court comprising of himself and Hon’ble Mr Justice Ujjal Bhuyan sets the ball in motion in para 1 by putting forth in para 1 that:
The appellant in Criminal Appeal no. 776 of 2024 is the accused no.2 in the complaint filed by the 1st respondent-complainant under Section 200 of the Code of Criminal Procedure, 1973 (for short, ‘the Cr.PC’) alleging the commission of offences under Sections 420, 406, 467, 468 and 472 read with Section 120B of the Indian Penal Code, 1860 (for short, ‘the IPC’) and Section 13 of the Essential Commodities Act, 1955.

The appellants in Criminal Appeal no.777 of 2024 are the accused nos.1, 4 and 5 in the same complaint. The appellant in these two appeals filed a petition under Section 482 of the Cr.PC before the High Court of Punjab and Haryana at Chandigarh for quashing the said complaint and for quashing the summoning order dated 16th July 2013 passed on the said complaint. The High Court, by the impugned judgment dated 25th August 2014, dismissed the said petition.

To put things in perspective, the Bench envisages in para 2 that:
On 23rd September 2002, under the Liquefied Petroleum Gas (LPG) Distributorship Agreement (for short, ‘the Distributorship Agreement’), the accused no.1 – M/s. Energy Infrastructure (India) Limited (for short, ‘the accused company’) appointed the 2nd respondent-accused no.7 (Arun Sharma, Proprietor of M/S.Arshya Max Agencies) as a distributor for distribution of LPG cylinders in the areas of Panchkula and Chandigarh.

The 2nd respondent, on behalf of the accused company, purported to execute a Point of Sale agreement on 7th March 2003 (for short, ‘the POS agreement’) by which he purported to appoint the 1st Respondent-complainant as a sales outlet (Point of Sale) in the town of Dhanas to sell MaxGas to the consumers. By the POS agreement, the 2nd respondent agreed to pay a flat rate commission per cylinder sold by the 1st respondent-complainant. A demand draft in the sum of Rs.74,900/ was issued in favour of the accused company by the 1st respondent-complainant.

As we see, the Bench then discloses in para 3 that:
The accused company addressed a letter dated 3rd March 2004 to the 2nd respondent alleging serious lapses in customer services rendered by the 2nd respondent, which allegedly caused a big dent in the reputation of the accused company. Various instances of lapses in service were set out in the said letter. The accused company also stated that the 2nd respondent had illegally supplied the cylinders to the 1st respondent-complainant beyond the assigned territory in Punjab.

It was specifically stated in the said letter that the name of the 1st respondent-complainant was not reflected in the records of the accused company as a Point of Sale. The accused company alleged that, thus, the 2nd respondent had committed a breach of the Distributorship Agreement. Another allegation in the said letter was that a cheque issued by the 2nd respondent had been dishonoured.

As it turned out, the Bench then enunciates in para 4 that:
A private complaint was filed by the 1st respondent-complainant on 17th July 2004 before the Illaqa Magistrate, Chandigarh. The allegation in the said complaint is that the 2nd respondent, along with accused nos.5 and 6 approached the 1st respondent-complainant and disclosed that they were involved in the business of manufacturing and selling LPG. The 1st respondent-complainant has relied upon the alleged information furnished by the three accused and their representations.

There is an allegation that the accused allured the 1st respondent-complainant to join hands with them and relinquish his old venture of supplying LPG in the market. The 1st respondent-complainant alleged in the complaint that while the POS agreement was executed on 7th March 2004, he paid a sum of Rs.74,900/- to the accused company by way of demand draft. It is alleged that the accused company encashed the said demand draft. Further allegation in the complaint is that the 1st respondent-complainant paid the security deposit for 360 empty cylinders at the rate of Rs.700/ per cylinder to the accused and received the cylinders/refills.

Based on the assurance that the accused company will supply at least 600 refills against 300 empty cylinders in a month, the 1st respondent-complainant made investments to purchase trucks, engage staff, take telephone connections, etc. The allegation is that apart from the sum of Rs.74,900/, the 1st respondent-complainant paid a sum of Rs.2,10,000/ to the accused company. It is alleged that the accused company supplied only 250 to 300 refills to the 1st respondent-complainant against the assurance of 600 refills.

It is further alleged that from 5th March 2004, the accused company stopped supplying LPG refills to the 1st respondent-complainant. It is alleged that the accused company did not take delivery of the empty cylinders and failed to refund the security deposit. Notwithstanding the letter dated 17th May 2004 sent by the 1st respondent-complainant, no action was taken by the accused company.

Therefore, the allegation is that the accused company committed a breach of trust by not refunding the security deposit and not accepting the empty cylinders from the 1st respondent-complainant. It is alleged 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 is alleged that due to the non-supply of refills by the accused company, the reputation of the 1st respondent-complainant has been adversely affected.

The appellant in the Criminal Appeal no.776 of 2024 was arraigned as an accused in the capacity of the Managing Director of the accused company. The 1st appellant in the Criminal Appeal no.777 of 2024 is the accused company. The 2nd and 3rd appellants have been described in the complaint as liable officers of the accused company as per the averments made in the complaint. They are the accused nos.4 and 5.

Further, the Bench then brings out in para 5 that:
The learned Judicial Magistrate, First Class, Chandigarh, from 17th November 2004 onwards, recorded the statements of the 1st respondent-complainant and other witnesses. After examining the witnesses on 15th December 2011, the learned Magistrate held that for proper adjudication of the case, it was necessary to send the complaint to the jurisdictional police station for investigation in accordance with Section 202 of the Cr.PC.

According to the case made out by the appellant, a report under Section 202 of the Cr.PC was never submitted by the Police, and without waiting for the said report, the learned Magistrate passed the summoning order on 16th July 2013 for the offences punishable under Sections 420, 406, 467, 468 and 472 read with Section 120B of the IPC and Section 13 of the Essential Commodities Act, 1955. By the impugned judgment and order dated 25th August 2014, the High Court dismissed the quashing petition by holding that disputed questions of fact were involved in the petition, which can be dealt with only after recording evidence.

Most significantly, the Bench mandates in para 11 propounding that:
After recording the evidence of the three witnesses and perusing the documents on record, the learned Magistrate passed the order calling for the report under Section 202 of the Cr.PC. He postponed the issue of the process. The learned 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 is not the case of the 1st respondent-complainant that when the learned Magistrate passed the order dated 16th July 2013, there was some additional material on record. At least, the order of the learned Magistrate does not say so. The order does not even consider the earlier order dated 15th December 2011 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.

Most forthrightly, the Bench holds in para 15 that:
Infact, 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 evidence of CW3 (Rajiv Kumar) shows that he has stated that the 2nd, 5th and 6th 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. There is no allegation that the accused company was involved, in any manner, with the transaction between the 2nd accused and the 1st respondent-complainant. 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.

Finally, the Bench then concludes by holding in para 16 that:
Hence, the Appeals must succeed. The impugned judgment dated 25th August 2014 is set aside insofar as the appellants are concerned. The complaint bearing Criminal Complaint no.128 dated 17th July 2004 pending in the Court of Judicial Magistrate, 1st Class, Chandigarh is hereby quashed only insofar as the appellants are concerned. The complaint will proceed against the rest of the accused. The other accused can raise appropriate defences at the time of framing charge or Trial. The Appeals are partly allowed on the above terms with no order as to costs.

All told, we thus see that the Apex Court has made it indubitably clear that order issuing process under Section 204 of the CrPC has drastic consequences as dwelt exhaustively in para 11 of this notable judgment. The Apex Court has also made it crystal clear that such an order issuing process also requires application of mind and cannot be passed casually. There can be just no denying or disputing it!

Sanjeev Sirohi, Advocate,
s/o Col (Retd) BPS Sirohi, A 82, Defence Enclave,
Sardhana Road, Kankerkhera, Meerut - 250001, Uttar Pradesh