2024 (1) TMI 1319 - SC - Indian Laws

Initiation of criminal proceedings before a forum which had no territorial jurisdiction by submitting incorrect facts - cheating the complainant for crores of rupees by making false promise of higher returns - HELD THAT - It would be relevant to note that in the application filed for recall of the merger order by the complainant, it was nowhere mentioned that initially the complainant had advanced loan, which was later on converted into debt equity. It only mentioned that the complainant was a shareholder of the transferor company and as a result of merger their percentage of shareholding and value of shares decreased. It was also nowhere pleaded in the application that the shares held by the company were mortgaged to Sushil Gupta by forging the documents. The new story of forging documents was built up in the complaint filed with the police only to give a criminal colour which actually was commercial in nature. Most importantly, it needs to be noticed that it was a plain and simple transaction between the corporates. Even as per the complainant s case, the short-term loan was advanced in the year 2010 for a period of one year. However, when the same was not returned, no steps were taken by the complainant to recover the same until the FIR in question was registered on 29.07.2018 i.e. 8 years 7 months later. The entire factual matrix and the time lines clearly reflects that the complainant deliberately and unnecessarily has caused substantial delay and had been waiting for opportune moment for initiating false and frivolous litigation. The FIR in question, if proceeded further, will result in absolute abuse of process of court. It is a clear case of malicious prosecution. Hence, the same is required to be quashed - the impugned order passed by the High Court is set aside - appeal allowed.

Summary

Issues Involved:
1. Jurisdictional Misuse
2. Nature of the Dispute (Civil vs. Criminal)
3. Allegations of Cheating and Forgery
4. Forum Shopping and Concealment of Facts
5. Application of Mind by Lower Courts
6. Malicious Prosecution and Abuse of Process

Detailed Analysis:

Jurisdictional Misuse
The court found that the complainant falsely created jurisdiction in Gautam Budh Nagar by providing misleading addresses. The registered office of the complainant's company, DD Global, was in New Delhi, and there was no business or rental connection to the address in Noida. The addresses of the accused were also manipulated to show jurisdiction in Gautam Budh Nagar, which was not actually applicable.

Nature of the Dispute (Civil vs. Criminal)
The core issue involved financial transactions and agreements, placing it within the realm of civil and commercial law. The complainant, however, pursued criminal charges, which the court found to be an abuse of the criminal justice system. The court emphasized that the dispute was a simple business transaction and should not have been given a criminal color.

Allegations of Cheating and Forgery
The complainant alleged that his company was induced to extend short-term loans, which were later converted into equity shares. However, the court found that the complainant's company had passed resolutions to invest in the equity shares of Gulab Buildtech and Verma Buildtech, contradicting the claim of being misled. The court noted that the allegations of forging documents were brought up only to give a criminal color to what was essentially a commercial dispute.

Forum Shopping and Concealment of Facts
The court observed that the complainant had concealed material facts about the merger of Gulab Buildtech and Verma Buildtech with BDR, which was approved by the Delhi High Court. The complainant did not raise any objections during the merger process and later filed a complaint with the police without disclosing the dismissal of his application for recall of the merger order. This non-disclosure was deemed a deliberate and mischievous attempt to initiate criminal proceedings for ulterior motives.

Application of Mind by Lower Courts
The Chief Judicial Magistrate, Gautam Budh Nagar, took cognizance and issued summons without applying his mind, as no reasons were assigned, and the addresses of the complainant and the accused were not considered. The High Court also failed to consider the arguments raised by the appellants, leading to a finding of non-application of mind by both courts.

Malicious Prosecution and Abuse of Process
The court concluded that the FIR, if proceeded further, would result in an absolute abuse of the process of the court. The case was deemed a clear instance of malicious prosecution. The court emphasized that unscrupulous litigants should not be allowed to misuse the legal system, and imposed costs on the complainant to curb such acts.

Conclusion:
The appeals were allowed, and the FIR and all subsequent proceedings were quashed. The court imposed costs of Rs. 25 lakhs on the respondent to be deposited within four weeks, to be utilized for the development and benefit of SCBA and SCAORA members. The judgment highlighted the importance of maintaining the integrity of the legal system and preventing its abuse through false and frivolous litigation.