The State Of Tamil Nadu vs Goldquest International Pvt.

Ltd on 7 March, 2008

In the High Court of Judicature at Madras

Dated: 7.03.2008

Coram:

The Honourable Mr.Justice ELIPE DHARMA RAO

and

The Honourable Mr.Justice S.R.SINGHARAVELU

Writ Appeal No.1178 of 2005

and WAMP.No.2155 of 2005

1. The State of Tamil Nadu,

rep.by its Secretary to Government,

Home Department,

Fort St.George, Chennai-9.

2. The Director General of Police,

Crime Branch, Egmore, Chennai.

3. The Commissioner of police,

Office of the Police Station,

Chennai-600 008.

4. The Inspector of Police,

Central Crime Branch,

Egmore, Chennai. .. Appellants

..vs..

1. GoldQuest International Pvt.Ltd.,

rep.by its Authorised Signatory

Wilfred Royce Lane,

having its Office at

Rain Tree Place,

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 The State Of Tamil Nadu vs Goldquest International Pvt.Ltd on 7 March, 2008

9th Floor,

No.7, McNicholas Road,

Chetpet, Chennai-600 031.

2. The Secretary,

Union of India,

Ministry of Finance,

North Block, New Delhi-110 001.

3. The Secretary,

Union of India,

Ministry of Home Affairs,

Food and Distribution,

New Delhi.

4. Sarumathy Chandrasekaran .. Respondents

Writ Appeal filed under Clause 15 of the Letters Patent, against the Order dated 19.04.2005 made in
W.P.No.26874 of 2003 by the learned single Judge of this Court.

For Appellants : Mr.P.Subramaniam, Govt.Advocate

For Respondent : Mr.K.M.Vijayan, Senior Counsel

for Ms.Gladys Daniel for R1

Mr.P.Wilson, ASG., for R2 and R3

JUDGMENT

S.R.SINGHARAVELU, J.,

The writ appeal is directed against the order dated 19.04.2005 of the learned single Judge in W.P.No.26874 of
2003, allowing the writ petition and quashing the F.I.R. No.307/2003 lodged against the first respondent/writ
petitioner.

2. The first respondent/writ petitioner is an International numismatic company dealing in numismatic gold
products having its operations in over 60 countries. It is a registered company under the Indian Companies
Act 1956. The first respondent is conducting its business in India particularly in all products imported into
India, through the Government of India owned State Trading Corporation and all its receipts and remittances
were made only through the Bank/RBI. It was also assessed to Sales tax and Income tax.

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3. There was a complaint made on 23.4.2003 against the first respondent/writ petitioner by
Mr.N.Chandrasekaran, Advocate, Chennai, alleging non compliance of issuance of gold coin on earlier receipt
of Rs.16,800/- from his wife viz., Mrs.Sarumathy Chandrasekaran, under such promise. It was alleged that
apart from the claim of the wife of the above complainant there were such claims running to 172 in number
from among the public. Upon this allegation of fraudulent and dishonest inducement on the part of the first
respondent/writ petitioner huge sum was collected and therefore, the Inspector of Police, Central Crime
Branch, Egmore, Chennai, had registered a case in F.I.R.No.307 of 2003 dated 23.04.2003 against the 1st
respondent/writ petitioner for offence punishable under Section 420 IPC read with sections 4,5 and 6 of Prize
Chits and Money Circulation (Banning) Act, 1978.

4. As a matter of fact, there was also a similar complaint as against the first respondent/writ petitioner in
which a case was registered in Crime No.68/2002 by the Inspector of Police, CCB, Madurai City, that was
found as a mistake of fact by the Judicial Magistrate No.I, Madurai in its RCS No.381/2002, dated 30.7.2002.

5. Even after lodging the FIR No.307/2003 dated 23.4.2003, the first respondent had moved
W.P.M.P.No.15355 of 2003 in W.P.No.12231 of 2003 for an interim order to restrain the Deputy
Commissioner of Police, Crime Branch, Egmore, Chennai and other Police Authorities from treating Multi
Level Marketing as money circulation scheme; whereupon in the above W.P.M.P. an order of injunction was
passed on 22.4.2003 with a clarification that the said order would not stand in the way of the officials from
investigating the matter as directed in Crl.O.P.No.2347 of 2003 dated 9.4.2003. Alleging that despite the
above order dated 22.4.2003 the office premises of the first respondent/writ petitioner were sealed and the
bank account of the first respondent/writ petitioner was frozen under the guise of investigation, in view of the
ex-facie mala fide act on the part of the the police officials, this writ petition was filed.

6. After having gone into the facts and circumstances of the case and referring the judgment of case reported
in KANWAR DEEP SINGH ..vs.. STATE OF WEST BENGAL (2004 CRL.L.J.1116), where a Special
Officer was appointed, to settle all the claims, the learned single Judge has passed an order appointing two
Advocates as Commissioners to settle all the claims as per the terms and conditions of the agreement.
Following directions were also made by the learned single Judge by his order dated 19.4.2005: "(a) ... are
appointed as Advocate Commissioners to settle all the claims as on date as per the terms and conditions of the
agreement within a period of two months from 04.05.2005. (underline now made) ... (c) Learned Additional
Chief Metropolitan Magistrate, Chennai is directed to hand over the gold products to the Advocate
Commissioners so as to enable them to settle the claims as per the terms and conditions of the agreement
between the (underline now made) petitioner and the claimants immediately on production of a copy of this
order. (d) Learned Additional Chief Metropolitan Magistrate is also directed to pass orders to release the
deposit of Rs.30 lakhs which was made at the time of the grant of ball to the petitioner as well as to release the
bank guarantee to the extent of Rs.25 lakhs which was offered already by the petitioner. ... (g) The impugned
order, namely the F.I.R. pertaining to F.I.R. No.307 of 2003 stands quashed. If the above directions are not
complied with, the order passed herein stands automatically cancelled and the said F.I.R. will become
operative in law. (underline now made)...

7. The writ petition is disposed of in the above terms. No costs. W.P.M.P. is closed."

7. Subsequent thereto, the learned single Judge has passed an order on 4.8.2005 upon the Memo SR.No.26874
of 2005 filed in this writ petition, wherein the period of commission was extended to a further period of one
month by finding that out of 172 claims 170 claims were settled and in respect of two other claims
whereabouts of the individuals were not traceable.

8. At the outset it is to be mentioned that even as per the impugned order dated 19.4.2005 of the learned single
Judge if the directions are not complied with, the FIR otherwise quashed will become operative in law. The
first direction made by the learned single Judge while appointing two Advocate Commissioners was to settle
all the claims as on date as per the terms and conditions of the agreement, within a period of two months from
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4.5.2005. Inasmuch as two claims have not been settled among the 172 claims the condition or direction is not
fulfilled making the FIR to become operative in law.

9. Mr.Vijayan, learned Senior Counsel appearing for the 1st respondent/writ petitioner company submitted
that out of 172 claims, 170 have been settled and in respect of two claims, the whereabouts of the individuals
were not traceable. Further, the learned senior counsel submitted that all the creditors in 170 claims have
compounded the matter and therefore the order of the learned single Judge in quashing the FIR may be
confirmed. This cannot be countenanced in view of the fact that even by virtue of the impugned order dated
19.04.2005 if there is non-compliance of any of the directions issued including the direction that there should
be settlement to all claims as on date as per the terms and conditions of the agreement within two months
from 4.5.2005, the FIR which was otherwise quashed would become operative in law. It is a matter of fact
that two claims out of 172 remain unsettled and in such a manner the directions issued by the learned single
Judge has not been fully complied. On this ground itself the FIR would become alive.

10. The learned Government Advocate appearing for the appellants submitted that there could not be
compounding of an offence of Section 420 IPC read with 4 to 6 of the Prize Chits and Money Circulation
(Banning) Act, 1978 under the provisions of which the impugned FIR in Crime No.307 of 2003 was
registered. The learned Government Advocate further submitted that even though Section 320 Cr.P.C.
contemplates upon compounding of offences, Section 420 IPC could be compounded by the affected creditors
only with the permission of the Court and that power of permission should be exercised in a Judicial manner.
It was also brought to our notice that according to Sub-Clause (7) of Section 320 Cr.PC, No offence shall be
compounded if the accused is, by reason of a previous conviction, liable either to enhanced punishment or to a
punishment of a different kind for such offence.

11. We do not know as to whether the first respondent/writ petitioner has got previous conviction or not. No
material is available in that regard. Suppose the Magistrate before whom the FIR was pending could see
previous conviction against the first respondent/writ petitioner at a later stage when the prosecuting agency
could file a charge sheet, then the Magistrate may not be inclined to give permission for compounding.

12. However, in a grave nature of offence against the public, where hundreds of families are deprived of their
deposits and when the first respondent/writ petitioner had flouted their own promises, thereby committing the
offence of not only cheating but also offence under the Prize Chits and Money Circulation (Banning) Act,
1978, burying the case by preventing further investigation in a matter where public interest is greatly involved
and that too under the guise of compounding which could not be made lawfully for the reasons mentioned
supra, we are not inclined to record the settlement. Compounding is also a process to be done only in
accordance with law, especially in criminal cases, and strict adherence to Section 320 Cr.PC is required. Any
power including the inherent power is to be exercised only in the interest of justice and flouting the process
under Section 320 Cr.PC against the interest of justice may not be desirable even in exercise of inherent
power.

13. We have already said the impugned FIR becomes alive due to non-compliance of the directions made by
the learned singe Judge in the writ petition. Therefore, the Inspector of Police, Crime Branch, Egmore,
Chennai would proceed with the investigation and file charge sheet in which event the learned Magistrate
would exercise the power of either permitting the compounding or otherwise.

14. In a case reported in (2008)1 SCC page 474 cited (supra) it has been held as follows:-

"It is well-established principle that inherent power conferred on the High Courts under Section 482 Cr.PC
has to be exercised sparingly with circumspection and in rare cases and that too to correct patent illegalities or
when some miscarriage of justice is done. The content and scope of power under Section 482 Cr.PC were
examined in considerable details in Madhu Limaye v. State of Maharashtra and it was held as under: (SCC
p.555, para 8) The following principles may be stated in relation to the exercise of the inherent power of the
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High Court:

(1) that the power is not to be restored if there is a specific provision in the Code for the redress of the
grievance of the aggrieved party;

(2) that it should be exercised very sparingly to prevent abuse of process of any court or otherwise to secure
the ends of justice;

(3) that it should not be exercised as against the express bar of law engrafted in any other provision of the
Code.

8. In State v. Navjot Sandhu after a review of large number of earlier decisions, it was held as under:(SCC
p.657, para 29)

"29.... The inherent power is to be used only in cases where there is an abuse of the process of the court or
where interference is absolutely necessary for securing the ends of justice. The inherent power must be
exercised very sparingly as cases which require interference would be few and far between. The most
common case where inherent jurisdiction is generally exercised is where criminal proceedings are required to
be quashed because they are initiated illegally, vexatiously or without jurisdiction."

15. In the above circumstances, we are of the considered view that both on law and on facts, it is not a fit case
to record compromise and quash the FIR on the ground of settlement of the money-claim. Apart from and
more than money-claim, it is the element of public offence that is involved. Therefore, the order of the learned
single Judge is set aside and FIR.No.307/2003 is restored to the file of the 4th appellant and we direct the 4th
appellant/the Inspector of Police, Crime Branch, Egmore, Chennai to proceed with the investigation and file
final report for consideration of the concerned Magistrate and appropriate action in accordance with law.
However, the first respondent/writ petitioner is at liberty to put forth his case before the Judicial Magistrate
concerned about the settlement and compounding of offence and the Magistrate will act in accordance with
law. With the above observations the writ appeal is allowed. The order of the learned single Judge dated
19.4.2005 made in W.P.No.26874 of 2003 is set aside. No order as to costs. Consequently, W.A.M.P.No.2155
of 2005 is closed.

Index: Yes (E.D.R,J.,) (S.R.S,J.,)

Internet: Yes 7.03.2008

gr.

To

1. The Secretary, Union of India, Ministry of Finance,

North Block, New Delhi-110 001.

2. The Secretary, Union of India, Ministry of Home Affairs,

Food and Distribution, New Delhi.

ELIPE DHARMA RAO, J.

While agreeing with the views expressed and the decision arrived at by my learned brother Judge, Justice
S.R.Singharavelu, I add the following to the judgment:
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2. In UNION OF INDIA vs. BAJANLAL [AIR 1992 SC 604], the Honourable Apex Court has categorised
the cases, wherein the High Court may exercise powers under Article 226 of the Constitution of India or under
Section 482 of the Code of Criminal Procedure. The said judgment reads as follows: "In following categories
of cases, the High Court may in exercise of powers under Art.226 or under S.482 Cr.P.C. may interfere in
proceedings relating to cognizable offences to prevent abuse of the process of any Court or otherwise to
secure the ends of justice. However, power should be exercised sparingly and that too in the rarest of rare
cases. 1) Where the allegations made in the First Information Report or the complaint, even if they are taken
at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case
against the accused. 2) Where the allegations in the First Information Report and other materials, if any,
accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers
under S.156(1) of the Code except under an order of a Magistrate within the purview of S.155(2) of the Code.
3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support
of the same do not disclose the commission of any offence and make out a case against the accused. 4) Where,
the allegations in the F.I.R. do not constitute a cognizable offence but constitute only a non-cognizable
offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated
under S.155(2) of the code. 5) Where the allegations made in the FIR or complaint are so absurd and
inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is
sufficient ground for proceeding against the accused. 6) Where there is an express legal bar engrafted in any
of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the
institution and continuance of the proceedings and/or where there is a specific provision in the code or the
concerned Act, providing efficacious redress for the grievance of the aggrieved party. 7) Where a criminal
proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an
ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and
personal grudge." "Where allegations in the complaint did constitute a cognizable offence justifying
registration of a case and investigation thereon and did not fall in any of the categories of cases enumerated
above, calling for exercise of extraordinary powers or inherent powers, quashing of FIR was not justified."

3. A close scrutiny of the entire materials placed on record, would reveal, that the case of the accused in the
case on hand does not fall within any one of the categories mentioned by the Honourable Supreme Court, thus
disentitling him to claim quashing of the FIR.

4. Further, in MOHD.MALEK MONDAL vs. PRANJAL BARDALAI AND ANOTHER [(2005) 10 SCC
608, the Honourable Apex Court has held that: "... wide extraordinary power of quashing vested in the High
Court is to be exercised sparingly and with caution and not to stifle legitimate prosecution. Such a power is
required to be exercised in a case where the complaint does not disclose any offence and it is frivolous,
vexatious or oppressive. At that stage, there cannot be meticulous analysis of the case...."

5. The law on this point is well settled by the Honourable Apex Court and time and again it has been held by
the Honourable Apex Court that though power of the High Court to quash the lower court proceedings is
wide, the same has to be exercised sparingly and cautiously. The judicial pronouncements further reveal that
while exercising the powers of quashing the lower court proceedings, the High Court does not function as a
court of appeal or revision and the authority of the court exists for advancement of justice and if any attempt is
made to abuse that authority so as to produce injustice, the court has the power to prevent abuse.

6. The extraordinary power of quashing vested in the High Court is to be exercised sparingly and with caution
and not to stifle legitimate prosecution. Such a power is required to be exercised in a case where the complaint
does not disclose any offence and it is frivolous, vexatious or oppressive. It would be an abuse of process of
the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of
the powers, the court would be justified in quashing any proceeding if it finds that initiation/continuance of it
amounts to abuse of the process of court or quashing of the proceedings would otherwise serve the ends of
justice. The power of the High Court in matters of quashing the criminal complaints would not ordinarily
embark upon an enquiry whether the evidence in question is reliable or not or whether on a reasonable
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appreciation of it, accusation would not be sustained, which is the function of the trial Court and judicial
process should not be an instrument of oppression or needless harassment. Such an inherent power conferred
on the High Court should not be exercised to stifle a legitimate prosecution and such a relief provided for
under the legislature to the accused is not an instrument for him to short-circuit a prosecution and bring about
its sudden death. The High court being the highest court of a State should normally refrain from giving a
prima facie decision in a case where facts are incomplete and hazy, more so when 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.

7. In the case on hand, though it is stated that the accused has settled the claims of several complainants and
most of them have given necessary letters withdrawing the complaints given as against him, the element of
criminality attached to the acts perpetrated by the accused on the date of complaints is not erased. It is also to
be remembered that even the offences alleged against the accused are non-compoundable ones, except the one
under Section 420 IPC. It is evident from the facts of the case that 172 persons were cheated by the accused,
as against the terms and conditions entered into by them with the customers. Thus, when serious allegations of
cheating general public of their hard-earned moneys, by giving false hopes and making use of such amounts
collected from the public for self and gained at the public expense, are made against the accused, the learned
single Judge is not right in quashing the FIR, merely on the ground that some of the complainants have
withdrawn their complaints, forgetting the fact that the criminality attributed to the accused is not erased.

8. To quash the proceedings and to appoint the Advocate-commissioners, the learned single Judge has relied
on a judgment in KANWAR DEEP SINGH vs. STATE OF WEST BENGAL [2004 CRL.L.J. 1116],
mentioning it as a judgment of the Hon'ble Apex Court. However, it is not so. It is a judgment delivered by a
learned single Judge of the Calcutta High Court, wherein the learned Judge has quashed the FIR since the
investigating agency has circumvented the expressed bar provided under Section 624 of the Companies Act,
however, the complainants were permitted to take recourse under the provisions of the Companies Act.

9. When the Hon'ble Supreme Court has held, in no uncertain terms, that quashing of the FIR should be done
sparingly and when no such exceptional circumstances are found in the case on hand to quash the
proceedings, the order of the learned single Judge quashing the FIR, nipping the investigation at the budding
stage itself, cannot be appreciated. Further more, on the date of FIR, the accused has not discharged his
obligation, which fact has not been considered by the learned single Judge. Therefore, the order of the learned
single Judge is liable to be set aside giving free hands to the investigating agency to conduct investigation and
file the final report before the court concerned. Therefore, the order of the learned single Judge is set aside and
FIR.No.307/2003 is restored to the file of the 4th appellant and we direct the 4th appellant/the Inspector of
Police, Crime Branch, Egmore, Chennai to proceed with the investigation and file final report for
consideration of the concerned Magistrate and appropriate action in accordance with law. However, the first
respondent/writ petitioner is at liberty to put forth his case before the Judicial Magistrate concerned about the
settlement and compounding of offence and the Magistrate will act in accordance with law. With the above
observations the writ appeal is allowed. The order of the learned single Judge dated 19.4.2005 made in
W.P.No.26874 of 2003 is set aside. No order as to costs. Consequently, W.A.M.P.No.2155 of 2005 is closed.
Index:Yes

Internet: Yes

Rao (E.D.R., J.) (S.R.S., J.)

7.3.2008

ELIPE DHARMA RAO, J.,

and
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S.R.SINGHARAVELU, J.,

gr/Rao

Pre-deliverty judgment in Writ Appeal No.1178 of 2005

7.03.2008

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