2009 (4) TMI 910 - SC - Indian Laws

Whether the insurance stamps must be purchased from the State of U. P. only? Whether the stamps are fake or genuine?

Issues Involved:
1. Legality of purchasing insurance stamps from outside the State of Uttar Pradesh.
2. Applicability of Sections 420 and 409 of the Indian Penal Code (IPC) and Sections 64 and 69 of the Indian Stamp Act, 1899.
3. Scope and power of the High Court under Section 482 of the Criminal Procedure Code (CrPC) to quash the FIR.

Detailed Analysis:

1. Legality of Purchasing Insurance Stamps from Outside the State of Uttar Pradesh:
The appellants, former officers of the Life Insurance Corporation (LIC) of India, were accused of purchasing insurance stamps from outside the State of Uttar Pradesh, which allegedly caused a loss of Rs. 1,67,21,520.00 to the state exchequer. The appellants contended that there is no legal prohibition under the Stamp Act or any other law mandating that insurance stamps must be purchased only from a specific state. The Supreme Court examined the relevant entries in the Constitution and the Stamp Act, concluding that the power to prescribe the rate of stamp duty for insurance policies lies with the Parliament under Entry 91 of List I of the 7th Schedule. The State of Uttar Pradesh's rule-making power under Sections 74 and 75 of the Stamp Act cannot override this central legislation. Therefore, the appellants' actions were not inconsistent with any provisions of the Stamp Act or any other rules, making the allegations in the FIR legally untenable.

2. Applicability of Sections 420 and 409 of the IPC and Sections 64 and 69 of the Indian Stamp Act:
The FIR charged the appellants under Sections 420 (cheating) and 409 (criminal breach of trust) of the IPC, and Sections 64 and 69 of the Stamp Act. The Supreme Court noted that Section 64 of the Stamp Act pertains to penalties for failing to comply with Section 27, which requires all facts affecting duty to be set forth in the instrument. Section 69 deals with penalties for unauthorized sale of stamps. The Court found that the appellants were neither stamp vendors nor engaged in unauthorized sales. Furthermore, the appellants were paying the required duties and were not depriving the government of any duty or penalty. Thus, the charges under these sections were not applicable to the appellants' actions.

3. Scope and Power of the High Court under Section 482 CrPC to Quash the FIR:
The Supreme Court revisited the principles governing the exercise of power under Section 482 CrPC to quash FIRs, citing precedents such as Nagawwa v. Veeranna Shivalingappa Konjalgi and State of Haryana v. Bhajan Lal. The Court emphasized that FIRs can be quashed if the allegations do not prima facie constitute any offence, are absurd, or are inherently improbable. In this case, the FIR's allegations, even if taken at face value, did not constitute any offence under the IPC or the Stamp Act. The registration of the FIR showed a complete non-application of mind and appeared to be a mala fide attempt to harass the appellants. The Supreme Court concluded that the High Court should have quashed the criminal proceedings against the appellants, as the FIR did not disclose any cognizable offence.

Conclusion:
The Supreme Court set aside the decision of the High Court, which had dismissed the writ petitions challenging the FIR. The Court allowed the appeal, quashing the criminal proceedings against the appellants, and held that the purchase of insurance stamps from outside the State of Uttar Pradesh did not violate any provisions of the Stamp Act or any other applicable laws. The FIR, therefore, was legally untenable and a clear case of mala fide intention to harass the appellants.

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