High court powers in criminal cases clarified

By Vivek Vashi, Bharucha & Partners
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In MN Ojha & Ors v Alok Kumar Srivastav & Anr the Supreme Court recently considered the powers of a high court under Section 482 of the Code of Criminal Procedure, 1973 (CrPC).

In December 1998 Punjab National Bank (PNB) in Patna approved a loan of Rs500,000 (US$11,000) to a business owned by Jatinder Mohan. The borrower furnished five guarantors, including Alok Kumar Srivastav.

Vivek Vashi Bharucha & Partners
Vivek Vashi
Bharucha & Partners

Srivastav deposited fixed deposit receipts (FDRs) worth Rs50,000, authorizing PNB to appropriate the proceeds of the FDRs with interest if the borrower failed to make timely payments. The guarantors also executed an agreement of guarantee in favour of PNB. The guarantors agreed that PNB could enforce the guarantee without enforcing, selling or realizing any of the securities under lien, hypothecation, pledge or mortgage.

Subequently the borrower defaulted in payments to PNB. As recovery of the loan was impossible, on 26 March 2002 MN Ojha, a senior manager of PNB, adjusted some amounts from the FDRs. In a notice of 27 December 2002 PNB called upon the borrower and guarantors to regularize the loan account. On 2 February 2003 PNB also filed a First Information Report (FIR) against the borrower, Srivastav and other guarantors for cheating and misappropriation of the hypothecated goods.

The guarantors addressed an undated legal notice to PNB, alleging that they were put to serious inconvenience by what they said was the misconduct of Ojha, and that no proper steps had been taken against the borrower for realization of the loan amounts before proceeding to encash the FDRs. They further alleged that the borrower’s brother, who was an assistant at PNB, had colluded with Ohja to defraud PNB and put the blame on the guarantors.

Months after PNB’s FIR, Srivastav filed a criminal complaint against Ohja and others before the sub-divisional judicial magistrate (SDJM) in Patna under sections 409, 422, 426 and 120B of the Indian Penal Code. The SDJM issued a non-bailable warrant of arrest against the accused. Meanwhile PNB initiated proceedings under the Public Demand Recovery Act for recovery of the balance amounts payable by the borrower after adjustment of the FDRs.

Being aggrieved by the SDJM’s order, Ohja and the other appellants filed a petition under section 482 of the CrPC in the High Court of Patna to quash the criminal proceedings against them. The high court summarily dismissed the petition, and Ohja and the other appellants preferred a special leave petition before the Supreme Court.

The Supreme Court noted that the action initiated by PNB was in terms of the documents executed by the guarantors, as there was no dispute that the loan account had become irregular. The court observed that the complaint filed by Srivastav almost 10 months after PNB’s FIR was a clear abuse of judicial process to harass Ohja and other appellants. The court also took notice of the fact that neither the borrower nor his brother has been arrayed as accused. On the face of the complaint, no offence was apparent; the appellants had only taken steps to realize the amounts due from the borrower, and in the process of doing so had encashed the FDRs.

The court held that criminal law had been set in motion solely to harass the bank officers and put pressure on them not to further prosecute proceedings initiated by the appellants on PNB’s behalf. Referring to its judgment in Pepsi Foods Ltd and Anr v Special Judicial Magistrate and Ors, where it was held that a magistrate’s order summoning the accused must reflect that he or she has applied his or her mind to the facts of the case and applicable law, the court held that the SDJM had set criminal law in motion without scrutinizing the contents of the complaint.

The Supreme Court also rebuked the high court for disposing of the petition without considering the basic facts placed before it, and clarified the scope of powers of high courts under section 482 of the CrPC. Referring to its decision in Kurukshetra University v State of Haryana, in which it was held that inherent power under section 482 of the CrPC must be exercised sparingly, the court found that a high court acting under that section cannot go into the truth or otherwise of the allegations. Interference at a preliminary stage by a high court may obstruct the progress of an inquiry in a criminal case.

The Supreme Court further held that high courts cannot refuse to exercise jurisdiction if the interest of justice requires it, as in the case of an absurd and improbable complaint. Refusal to exercise jurisdiction may result in injustice, particularly in cases where criminal law is set in motion with a view to exert pressure and harass the persons arrayed as accused. The court referred to its decision in State of Karnataka v L Muniswamy, in which it was found that a court proceeding ought not to be permitted to be used as “a weapon of harassment or persecution”.

This decision aims to deter false criminal complaints, and should bring some respite to public sector officials who are often subject to needless harassment when criminal proceedings are primarily aimed at preventing them from discharging public functions.

Vivek Vashi is the mainstay of the litigation department at Bharucha & Partners.

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