Maharshtra Vs. Sayed Mohammed Masood & ANR.  INSC 1389 (4 August
SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO.
_________OF 2009 [Arising out of Special Leave Petition (Criminal) No. 3176 of
2008] STATE OF MAHARASHTRA ... APPELLANT Versus
The State of Maharashtra is before us aggrieved by and
dissatisfied with a judgment and order dated 3rd March, 2008 passed by a
Division Bench of the High Court of Judicature at Bombay in Criminal Writ
Petition No. 2333 of 2007 quashing a First Information Report ("FIR")
lodged by the respondent No.2 herein at the Cuff Parade Police Station, Mumbai.
The first respondent is the Chairman-cum-Managing Director of M/s
City Limouzines (India) Ltd. (hereinafter called and referred for the sake of
brevity as, "the said Company"). He established the said Company. A
scheme known as "Go/Vehicle on rental basis and earning by sitting at
home" was floated. In terms of the said Scheme, assurances were given to
the people for earning money in easy way. A public advertisement was also
issued in a newspaper. They also issued pamphlets and thereby attracted huge
investments. In terms of the said Scheme, Rs.97,907/- was to be invested in
`rent a car' scheme wherein agreement was executed inter alia providing that
the car would be purchased in the name of investor but would be used by the
Company on rent to others wherefor the investor would receive a sum of
Rs.4,000/- per month for a period of five years. After 60 months, i.e., at the
end of the agreement, the investor may take back his car in proper working
condition. It was equally provided that an investor was entitled to inspect the
vehicle given on lease/rent once in three months upon giving 15 days prior
Clauses 4, 8, 10 and 15 of the said agreement read as under:
Inspection: The Lessor is entitled to inspect the Vehicle given on Lease/rent
once in 3 months by giving 15 days prior notice to the above stated 3 address
and inspect the vehicle at any of the offices of the Lessee in India.
8. Buy Back:
The Lessee will have the option at the discretion of the Lessor/registered
owner to purchase the vehicle at a fair market value upon mutual consent after
the expiry of the agreement.
this buyback clause is not to be construed to be conferring any enforceable
right on the Lessee but the first option to buy the car shall be that of the
Completion of contract: Upon successful completion of the terms of this
agreement, the Lessor shall receive the leased Vehicle in proper working
condition including the tyres and battery in good condition with normal wear
and tear acceptable depending on the period of use.
of Preference Shares: The Lessee undertakes to issue redeemable Preference
shares to the Lessor towards the margin money paid (excluding Insurance &
RTO Charges) which will be held by the Lessor as security for the entire period
of the validity of the agreement being 60 months from the date of issue to
ensure smooth installment payments to the bank and the lease/hire charges to
The complainant - respondent No.2, pursuant to the said
advertisement, invested a sum of Rs.97,907/-. Indisputably, he was paid 4
Rs.4,000/- per month for a period of five years. However, despite demand, he
was not given the car. He was, however, given three post-dated cheques of ABN
Amro Bank amount to Rs. 25,000/-, Rs.20,000/- and Rs.10,000/- although he had
asked for the said amount in cash.
In the said FIR, it was inter alia alleged:
mentioned above, Directors of the said Company in their office without
listening anything from me, as per their own wishes making changes on the
document of agreement, when I noticed that then I enquired about the same in
more detail. It is transpired that the said company by showing false inducement
about big return in various financial schemes and transferring the motor
vehicle in the name of investor, till date has accepted deposits of crores of
rupees under various schemes from 25000 investors. But I came to know that said
company has purchased motor car only in the name of 500 investors.
aspect of above mentioned schemes are in existence only on paper but in reality
not even a single scheme is in force as per the scheme shown on the document. I
also came to know that apart from the above mentioned office of the company at
Bombay, and other places said company has office on rental basis and Sayyed
Masood Jamadar, in collusion with other directors of the Company, induces
people for making investment and amount invested by people is being utilized
for other purpose, other than the original purpose and is being utilized
personally or for some other purposes. The said company on the internet at its
5 website namely www.citylimouzines.com &
has projected the said company as bearing ISO-9001-2000 certification and
inducing common poor people to invest money in the said company and thereby
cheating the people. If immediate legal action is not taken against the said
company then there will be huge financial loss to ordinary investors. Since
Directors of the said company threatened investors whenever investors go to ask
back money therefore, rein of fear against them is created.
mentioned persons namely Sayyed Mohammad Masood Jamadar and Geeta Razzaki and
other persons have collusively established City Limouzines Ltd. Company and
through that company several other companies are established and through them
false inducement is given and financial investments is accepted from the people
and misappropriation of the same on large scale is done and defrauded citizens
The respondent No.1 filed a writ petition before the Bombay High
Court praying for quashing the said FIR.
Division Bench of the High Court keeping in view the various clauses in the
agreement entered into by and between the complainant and the said Company
opined that although the investor might have been entitled to the car at the
end of the period of five years, but as there has been no intention to defraud
him at the time of inception of execution of the 6 agreement and the dispute
between the parties revolved on interpretation of the clauses of the agreement,
no offence under Sections 406, 420 and 120B of the Indian Penal Code has been
made out, stating:
At the cost of repetition we may mention that the facts in the present case are
not at dispute at all that the investment made by each of the consumers to the
tune of Rs.97,907/- and in return they received Rs.2,40,000/-. The only
question which remained was whether the investors were entitled to the car at
the end of the period of five years or not. There has been no intention to
defraud at the time of inception of execution of the agreement. There can be
made several interpretations of the clauses in the agreement if the agreement
is taken as a whole. It is a well accepted principle of interpretation that
while interpreting clause of agreement, whole of the agreement has to be taken
the principles laid down by the various judgments of the Supreme Court
hereinabove referred, we do not think that in the facts and circumstances of
the case an offence of cheating is made out."
Court, however, in its judgment only considered the case from the point of view
of Section 420 of the Indian Penal Code and not Sections 406 and 120B thereof.
Mr. T.K. Viswanathan, learned Senior Counsel appearing on behalf
of the State would contend that having regard to the well settled principle of
7 law that the High Court does not quash an FIR save and except sparingly and
in rarest of rare cases, the impugned judgment is not sustainable.
Our attention in this behalf has been drawn to various grounds
taken in this Appeal to contend that the investigation so far conducted reveals
that a large number of illegalities have been committed by the said Company
including the violation of the provisions of Section 45(1A) of the Reserve Bank
of India Act.
Ms. Bindu K. Nair, learned counsel appearing on behalf of the
respondent, on the other hand, would take us through the FIR, agreement entered
into by and between the parties, Lessee's covenants therein as also other
documents to contend that no offence can be said to have been made out either
under Section 406 of the Indian Penal Code or Section 420 thereof. It was urged
that as no car was purchased in the name of the respondent No.2, there was no
property and, thus, there was neither any question of any entrustment thereof
nor any misappropriation. The complainant himself having redeemed the merging
money in terms of the provisions of the agreement, the ingredients of the
offence of Section 406 of the Indian Penal Code cannot be said to have been
made out. Drawing our attention to the definition of `cheating' as contained in
Section 415 of the 8 Indian Penal Code, the learned counsel would contend that
neither there was any inducement nor deception having been made and pursuant to
the agreement no property having been delivered in favour of the accused by the
complainant nor there was any act of omission on his part which caused or
likely to cause any damage to the property, the question of commission of any
offence under Section 420 of the Indian Penal Code does not arise.
The legal position in regard to exercise of jurisdiction by the High
court for quashing of an FIR is now well settled. It is not necessary for us to
delve deep thereinto as the propositions of law have recently been stated by
this Court in R. Kalyani v. Janak C. Mehta [(2009) 1 SCC 516] in the following
Propositions of law which emerge from the said decisions are:
High Court ordinarily would not exercise its inherent jurisdiction to quash a
criminal proceeding and, in particular, a first information report unless the
allegations contained therein, even if given face value and taken to be correct
in their entirety, disclosed no cognizable offence.
the said purpose the Court, save and except in very exceptional circumstances,
would not look to any document relied upon by the defence.
a power should be exercised very sparingly. If the allegations made in the FIR
disclose commission of an offence, the Court shall not go beyond the same and
pass an order 9 in favour of the accused to hold absence of any mens rea or
(4) If the
allegation discloses a civil dispute, the same by itself may not be a ground to
hold that the criminal proceedings should not be allowed to continue."
in Mahesh Choudhary vs. State of Rajasthan & Anr. [2009 (4) SCALE 66], this
Court stated the law thus:
The principle providing for exercise of the power by a High Court under Section
482 of the Code of Criminal Procedure to quash a criminal proceeding is well
known. The court shall ordinarily exercise the said jurisdiction, inter alia,
in the event the allegations contained in the FIR or the Complaint Petition
even if on face value are taken to be correct in their entirety, does not
disclose commission of an offence."
also notice that in State of Maharashtra v. Mohd. Sajid Husain Mohd. S. Husain
[(2008) 1 SCC 213], this Court laid down the law in the following terms:
The learned counsel would submit that prima facie the girl was above 16 years
and she being a consenting party and having been getting consideration, no case
under Section 376 IPC has been made out and, thus, this Court should not
interfere with the impugned judgment."
There cannot be any doubt or dispute whatsoever that a simple
breach of contract or a case involving pure civil dispute would not attract the
penal provisions contained in the Indian Penal Code either under Section 406 or
Section 420 thereof.
Had the dispute between the parties rested in the aforementioned
premise, probably we would not have interfered with the judgment of the High
Court; but then, our attention has been drawn to certain evidences which have
surfaced during investigation and disclosed before us by the State in the
grounds stated in this Memo of Appeal.
notice a few of them:
Because preliminary findings shows that public at large especially middle class
and lower class people have invested their hard earned money and or money
received at the time of their VRS or amount received from insurance companies
after casualty of their legal heirs, are likely to be cheated by the inducement
of "Rosy picture" shown by the company with respect to motor vehicle
scheme. Because as soon as influx of investors stops the company will stop
payment to the old investors, as the company does not have any type of business
which generates fair legal income/profit.
xxx 11 ff) Because another witness has stated in his statement dated 03/10/07
that he has invested Rs.1,07,000 for Maruti Omni in the month of January 2005
immediately after the agreement he has received three post dated cheques of
Rs.4000/- each from CLIL.
has taken Rs.25,630/- for RTO & Insurance Charges but has not purchased a
vehicle in his name.
xxx ii) Because another witness in his statement dated 17/11/07 that he is
running Travelling Business in the name as "Amey Tourist."
Maruti Esteem Car No. MH-01- JA-6710 and the same is being used for his
business purpose. Neither he has given his said m/v to CLIL nor has invested
money in C.L.I.L. An enquiry has been made with Shri Arun Potade because CLIL
data on first mirror image shows this car as one which is from their scheme as
Indica and registered in the name of Smt. Jayshree Devgude (File no. 15971 of
Because another witness has stated in his statement dated 19/11/07 that he had
Kinetic Honda Scooter No. MH-01-E-6343 in his name but due to rusting/damage he
had scraped the said m/v. He does not know anything about CLIL. An enquiry has
been made with Shri Deepak R. Kalwar because CLIL data on first mirror image
shows that Maruti Omni Car No. MH-01-E-6343 has been registered in the name of
Thakur (file no.- 1738 of CLIL) and enquiry with RTO revealed that the vehicle
No. MH-01-E-6343 is Kinetic Honda 12 Scooter and registered in the name of
The allegation made in the FIR and the materials collected during
investigation, in our considered opinion, should be allowed to be taken to its
We must, however, acknowledge that Ms. Nair has cited the
following decisions for our consideration.
Finance Ltd. vs. P. Sadasivan & Anr. [(2001) 3 SCC 513] ii. Radha Ballav
Pal & Anr. vs. Emperor [AIR 1939 Calcutta 327] iii. Velji Raghavji Patel
vs. The State of Maharashtra [AIR 1965 SC 1433] iv. Vir Prakash Sharma vs. Anil
Kumar Agarwal & Anr. [(2007) 7 SCC 373] v. All Cargo Movers (India) Private
Limited & Ors. vs. Dhanesh Badarmal Jain & Anr. [(2007) 14 SCC 776] vi.
New India Insurance Co. Ltd. vs. Sadanand Mukhi & Ors. [(2009) 1 SCALE 252]
13 vii. U. Dhar & Anr. vs. State of Jharkhand & Anr. [(2003) 2 SCC 219]
viii. Uma Shankar Gopalika vs. State of Bihar & Anr. [(2005) 10 SCC 336] In
Alpic Finance Ltd. (supra) the dispute was found to be of pure civil nature.
Ballav Pal & Anr (supra), the Calcutta High Court looked to the policies
and schemes floated by the Company to opine that in the fact of the said case
no case has been made out for convicting the appellant therein.
matter having reached the High court after a judgment of conviction was
recorded, all the materials were brought on record by the parties by that time.
Raghavji Patel (supra), it involved a question of dealing with the assets of a
partnership firm by a partner.
Prakash Sharma (supra), this case primarily revolved around bouncing of a
Dhanesh Badarmal Jain (supra), the court found only a civil liability on the
part of the accused and opined that it was at best a case of interpretation of
agreement, stating "16. We are of the opinion that the allegations made in
the complaint petition, even if given face value and taken to be correct in its
entirety, do not disclose an offence. For the said purpose, this Court may not
only take into consideration the admitted facts but it is also permissible to
look into the pleadings of Respondent 1-plaintiff in the suit.
allegation whatsoever was made against the appellants herein in the notice.
What was contended was negligence and/or breach of contract on the part of the
carriers and their agent.
contract simpliciter does not constitute an offence. For the said purpose,
allegations in the complaint petition must disclose the necessary ingredients
therefor. Where a civil suit is pending and the complaint petition has been
filed one year after filing of the civil suit, we may for the purpose of
finding out as to whether the said allegations are prima facie correct, take
into consideration the correspondences exchanged by the parties and other
admitted documents. It is one thing to say that the Court at this juncture would
not consider the defence of the accused but it is another thing to say that for
exercising the inherent jurisdiction of this Court, it is impermissible also to
look to the admitted documents. Criminal proceedings should not be encouraged,
when it is found to be mala fide or otherwise an abuse of the process of the
court. Superior courts while exercising this power should also strive to serve
the ends of justice."
Sadanand Mukhi & Ors. (supra) involved a pure civil dispute dealing with
the compensation and insurance policies in the Motor Vehicle Claims
was the position in Uma Shankar Gopalika (supra) wherein it was stated:
is well settled that every breach of contract would not give rise to an offence
of cheating and only in those cases breach of contract would amount to cheating
where there was any deception played at the very inception. If the intention to
cheat has developed later on, the same cannot amount to cheating. In the
present case it has nowhere been stated that at the very inception there was
any intention on behalf of the accused persons to cheat which is a condition
precedent for an offence under Section 420 IPC."
petition of complainant did not disclose any criminal offence at all much less
any offence either under Section 420 or Section 120B of the Indian Penal Code.
It was purely civil in nature.
We have, however, no doubt in our mind that the Investigating
Officer shall conduct the investigation fairly and impartially and shall allow
the company to carry on its business without any hindrance whatsoever. If any
16 books of account or other documents are required, the Investigating Officer
subject to just exceptions may take the xerox copies thereof duly certified by
the accused as also an undertaking that, as and when called upon, they would
produce the said books of account in a court of law.
to the aforementioned directions, the Investigating Officer shall carry out the
investigation in accordance with law.
We, therefore, are of the opinion that in the peculiar facts and
circumstances of this case and particularly in view of the materials which have
surfaced during investigation, the impugned judgment cannot be sustained. It is
set aside accordingly. The appeal is allowed with the aforementioned
.....................................J. [S.B. Sinha]
.....................................J. [Deepak Verma]