2024 (11) TMI 373 - HC - GST

Seeking quashing of FIR - maintainability of second SCN - forgery and fraudulent acts - clandestine manufacture and supply of cement clinker and cement without issue of invoices and without accounting for the same - HELD THAT - In the considered opinion of this Court the contention of the learned Counsel for the Petitioner that the present FIR could not have been registered as GST Act itself provides for penalties for offences under Sections 122, 132 of the GST Act cannot be accepted because the offence under GST Act would not include misappropriation of funds and conversation of those funds for the personal use of the Petitioners herein which resulted in wrongful loss to the Company and its shareholders. It, therefore, cannot be said that both the FIRs arise out of the same cause of action or that the issue raised in the second FIR, i.e. FIR No.47/2024 can be dealt with under the provisions of the GST Act. There are specific allegations in the Show Cause Notice that the sale proceeds of such clandestine supply/sale of goods were collected in cash that has been utilized for purchase of unaccounted raw material like lime stone, packing material (PP bags), jewellery, paintings and other articles and also used for meeting travel expenses etc. It is pertinent to mention that FIR No. 24/2024 is primarily regarding fabrication of documents for ousting the Complainant and other class-I heir of Late KJS Ahluwalia from the Company by forging and fabricating the documents. Whereas the present FIR pertains to misappropriation of funds of the Company for personal use - The allegation in the present FIR is regarding misappropriation of funds of the Company and any person who has interest in the company can give the information to the Police and since these allegations constitute a cognizable offence, the Police has to investigate into the allegations. Material on record also indicates that there are several proceedings pending before the NCLT regarding transfer of shares of the Company and, therefore, it cannot be said that the Complainant does not have any locus standi to initiate the proceedings under IPC. It is well settled that High Court should be slow in interfering with the criminal proceedings at the initial stage. The Apex Court in SANAPAREDDY MAHEEDHAR AND ANOTHER VERSUS STATE OF ANDHRA PRADESH AND ANOTHER 2007 (12) TMI 497 - SUPREME COURT , has observed ' The High Court should not go into the merits and demerits of the allegations simply because the petitioner alleges malus animus against the author of FIR or the complainant. The High Court must also refrain from making imaginary journey in the realm of possible harassment which may be caused to the petitioner on account of investigation of FIR or complaint. Such a course will result in miscarriage of justice and would encourage those accused of committing crimes to repeat the same. However, if the High Court is satisfied that the complaint does not disclose commission of any offence or prosecution is barred by limitation or that the proceedings of criminal case would result in failure of justice, then it may exercise inherent power under Section 482 CrPC.' Thus, the powers possessed by the High Court under Section 482 of the Code are very wide and the very plenitude of the power requires great caution in its exercise. Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a prima facie decision in a case where the entire facts are incomplete and hazy, more so when the evidence has not been collected and produced before the court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient material. Of course, no hard-and-fast rule can be laid down in regard to cases in which the High Court will exercise its extraordinary jurisdiction of quashing the proceeding at any stage. The investigation is at a nascent stage. This Court is of the opinion that the second FIR, i.e. FIR No.47/2024, which is sought to be quashed is based on different set of facts and facts which have come to light after filing of FIR No. 24/2024, which are not covered in the earlier FIR. This Court is of the opinion that the scope of both the FIRs are different and only background facts in the two FIRs, which trace the history of the dispute, are common. The fact that there is some over-lap between the two FIRs does not mean that they arise out of same cause of action and, therefore, the second FIR would not be maintainable. The Petition is dismissed along with the pending application.

Summary

Issues Involved:
1. Quashing of FIR No. 47/2024.
2. Allegations of forgery and fraudulent acts.
3. Misappropriation of company funds and assets.
4. Overlap between FIR No. 24/2024 and FIR No. 47/2024.
5. Locus standi of the complainant.
6. Applicability of GST Act provisions.
7. Judicial intervention in criminal proceedings.

Detailed Analysis:

1. Quashing of FIR No. 47/2024:
The petitioner sought the quashing of FIR No. 47/2024, arguing that it was improperly registered as it overlapped with the allegations in FIR No. 24/2024 and was based on a Show Cause Notice under the GST Act. The court found that the FIR was validly registered as it contained distinct allegations of misappropriation and clandestine activities not covered in the earlier FIR.

2. Allegations of Forgery and Fraudulent Acts:
The complainant alleged that the petitioners engaged in fraudulent acts, including forging documents to dilute the shareholding of the deceased and misappropriating company assets. These allegations were supported by forensic evidence and were considered serious enough to warrant investigation.

3. Misappropriation of Company Funds and Assets:
FIR No. 47/2024 primarily focused on the alleged misappropriation of company funds and assets, including the clandestine sale of cement and clinker without proper accounting. The court noted that these allegations were supported by the Show Cause Notice from the GST department, which highlighted significant tax evasion and misuse of company funds for personal expenses.

4. Overlap Between FIR No. 24/2024 and FIR No. 47/2024:
While there was some overlap in the background of the two FIRs, the court determined that FIR No. 47/2024 addressed new and distinct issues, particularly concerning misappropriation and tax evasion. The court emphasized that the existence of some common facts did not render the second FIR invalid.

5. Locus Standi of the Complainant:
The petitioner argued that the complainant lacked locus standi as she was not a shareholder of the company. The court rejected this argument, stating that any person with an interest in the company could report cognizable offences, and the complainant, as a legal heir, had a legitimate interest in the company's affairs.

6. Applicability of GST Act Provisions:
The petitioner contended that the GST Act provided penalties for the alleged offences, and thus, a separate FIR was unnecessary. The court clarified that the GST Act did not cover the misappropriation of funds or conversion of those funds for personal use, which were criminal offences requiring police investigation.

7. Judicial Intervention in Criminal Proceedings:
The court reiterated that it should be cautious in interfering with criminal proceedings at an early stage. The investigation into FIR No. 47/2024 was in its nascent stages, and the court found no grounds to quash the FIR, as it disclosed cognizable offences that warranted investigation.

Conclusion:
The petition to quash FIR No. 47/2024 was dismissed. The court emphasized the distinct nature of the allegations in the FIR and the necessity for a thorough investigation to address the serious claims of misappropriation and fraudulent activities. The court also upheld the complainant's right to initiate proceedings, given her interest in the company's affairs.