Sunil Malharrao Pande vs. The State Of Maharashtra

Held

The Court held that prosecution under both the MVAT Act and the IPC can proceed simultaneously. It found that the ratio of the Division Bench judgment in G.S.Oils Ltd. Vs. The State of Maharashtra, which followed Narayan Patodia's case, was squarely applicable. This ratio established that merely because an accused commits an offence under a special statute does not mean that offences under the IPC are displaced, especially when the IPC offences (like forgery and using forged documents) are not covered by the special statute. The Court also referred to a Single Judge's observation in Ashok Sable's case, which held that a dealer acts as an agent of the government for recovering and depositing tax, creating a principal-agent relationship and an ingredient of entrustment, thus making out offences under Sections 406 and 409 IPC. The Court concluded that the ingredients of Section 74(2) of the MVAT Act, as well as Sections 420 and 406 of the IPC, are clearly made out, considering the huge tax evasion and the lack of acceptable justification from the applicant. Custodial interrogation was deemed necessary. Therefore, no anticipatory bail could be granted.

Facts

The applicant, Sunil Malharrao Pande, owner of M/s. Malhar Shanti Enterprises, is seeking anticipatory bail. An FIR was lodged by the Assistant Sales Tax Commissioner alleging non-deposit of tax on goods sold between 2009 and 2017, amounting to Rs. 1,47,56,486/-. The applicant claims the non-payment was due to proceedings under the Insolvency & Bankruptcy Code, 2016, against M/s. CAN Enterprises Private Limited, a major debtor. The prosecution contends that the applicant collected tax from customers and other entities, which was then misappropriated, and that the IBC proceedings were filed malafidely in 2018, after the tax evasion period. The applicant's business dealt in construction goods, and the tax evasion involved transactions with four other entities besides CAN Enterprises.

Key Issues

1. Whether the prosecution under Sections 406 and 420 of the Indian Penal Code (IPC) is permissible alongside the prosecution under Section 74(2) of the Maharashtra Value Added Tax Act, 2002 (MVAT Act), given the special procedure prescribed by the MVAT Act? 2. Whether the ingredients of Sections 406 and 420 of the IPC are made out based on the allegations in the FIR, particularly concerning entrustment and cheating? Petitioner's arguments: The petitioner argued that the MVAT Act is a special code and the IPC provisions should not apply when the allegations are covered by the special Act, citing the principle of special law prevailing over general law. They relied on Gagan Harsh Sharma & Anr. Vs. The State of Maharashtra, where prosecution under IPC and IT Act for similar offences was held to be a violation of double jeopardy, a ratio upheld by the Supreme Court. They contended that no one was cheated or induced to part with property (Section 420 IPC) and there was no entrustment (Section 406 IPC). Respondent's arguments: The State argued that the IBC proceedings were not bonafide and were filed with malafide intention. They contended that the applicant collected tax from customers and other entities, inducing them to part with property and then misappropriated the funds, thus making out offences under Sections 420 and 406 IPC. They relied on State of Uttar Pradesh Versus Aman Mittal, State of Maharashtra and another Versus Sayyed Hassan Sayyed Subhan, and State of W. B. Versus Narayan K. Patodia, arguing that prosecution under different enactments can go on simultaneously and that the MVAT Act does not cover offences like cheating.