Jaswant Singh And Ors vs. State Of Rajasthan And Anr

Facts

The petitioners sought to quash an FIR registered for offences under Sections 406, 420, 463, 464, 465, 468, 471, 471-A, 120-B, 506, and 34 of the IPC. The FIR was lodged by respondent No. 2, Vishal Yadav, against the petitioners. The dispute arose from a Memorandum of Understanding (MOU) dated 7.10.2017, where the petitioners, who were directors and shareholders of Tiruputi Balaji Furnaces Pvt. Ltd., sold their shares to the new management, including respondent No. 2. A key condition of the MOU was that the buyers would arrange to release the personal guarantees and mortgaged property of the petitioners within 45 working days. The petitioners claim this condition was not met, leading them to send a legal notice on 14.12.2017 terminating the MOU and subsequently filing an appeal before the National Company Law Tribunal on 13.01.2018. The impugned FIR was lodged on 18.01.2018.

Held

The Court held that the FIR did not disclose the commission of any cognizable offence. Regarding the offence of cheating, the Court found that a fraudulent and dishonest intention must exist at the inception of the understanding. The non-payment of dues, particularly taxes, could not, in itself, establish such an intention, especially when the informant was allegedly responsible for the non-release of the petitioners' mortgaged property, a condition precedent in the MOU. The Court noted that the petitioners had already cancelled the MOU due to the informant's non-performance before the FIR was lodged, which would revive the old management and their liabilities. Furthermore, the Court found no evidence of the petitioners making false documents as defined under Section 464 of the Penal Code, nor any allegations of impersonation or interpolation in cheques. Consequently, the offences of forgery and other consequential offences under the IPC were not attracted. The attending circumstances indicated frivolous and vexatious criminal proceedings. Therefore, the continuation of the criminal proceedings was deemed an abuse of the process of law.

Key Issues

1. Whether the FIR discloses the commission of a cognizable offence, particularly cheating and forgery, warranting its continuation? (Section 420, 463, 464 IPC) Petitioner's Contention: The petitioners argued that the FIR was lodged to exert undue pressure in a pending civil dispute. They contended that the allegations were bald and that a pure civil dispute was being given a criminal colour. They highlighted that the MOU contained disputed facts regarding performance and non-performance by both parties, and that arbitration proceedings were also pending. They further argued that the allegations regarding tax dues and the cheque withdrawal did not establish dishonest intention from the inception or constitute forgery. Respondent's Contention: The respondent contended that the FIR disclosed the commission of a cognizable offence, and therefore, the High Court should not delve into a roving inquiry into the correctness of the allegations, especially since the investigation was complete.