Point of Law: Cheating - Quash of FIR and Proceeding - Complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available, is not by itself a ground to quash criminal proceedings.

JUDGMENT :

1) CRM(M) No.375/2020:

(I) The petitioners, in this petition, have challenged FIR No.RC/ DST/2019/A/0004 dated 26.08.2019 for offence under Section 420 read with Section 120-B RPC registered with Central Bureau of Investigation (CBI) as also the proceedings/investigation being conducted by the CBI pursuant to aforesaid FIR.

(II) The impugned FIR has been registered by respondent No.3-CBI on the basis of a complaint lodged by respondent No.4 – Bank of India, vide its complaint dated 9th of August, 2019. As per the said complaint, M/S Jhelum Industries and its Directors, petitioner No.1 and 2 along with other corporate guarantors and individual guarantors indulged in commission of acts of cheating, fraud, diversion/siphoning of funds.

(III) It is alleged that M/S Jhelum Industries had represented that it was managing projects of over Rs.100.00 crores and having business of approximately Rs.400.00 crore in pipeline but it earned a revenue of Rs.5.34 crore and Rs.11.18 crore against the estimates of Rs.117.78 crore and Rs.174.78 crore for the financial years 2012-13 and 2013-14 respectively. It is further alleged that the contracts obtained by M/S Jhelum Industries were as a sub-contractor from the main contractor and company‘s management/execution of the contracts was not up to the mark which eventually resulted in cancellation of high value Dhanbad Coal Extraction Contract and other contracts as well as revocation of bank guarantee of Rs.6.29 crore by two beneficiaries. The complainant goes on to allege that the company went out of order from September, 2014 due to non-servicing of interest and revocation of bank guarantee vis-à-vis low turnover in the cash credit account and despite repeated reminders and vigorous follow up, the conduct of the company remained unsatisfactory and ultimately the account was classified as NPA on 31.12.2014 with outstanding amount of Rs.36.50 crore plus bank guarantee of Rs.2.57 crore. It is alleged that the aforesaid company had opened current account with two other banks without permission of respondent No.4 and routed the transactions through these banks. Subsequently, the company again opened a current account with Canara Bank routing the transactions through the said branch thereby avoiding recovery of bank interest deliberately.

(IV) As per the complaint, the petitioner No.3 had also extended guarantee to secure the limit availed by the company from the respondent No.4. The complaint gives the details of fraud which, are reproduced hereunder:

1. Funds were diverted from A/C No.791230110000017 of M/S JIPIPL to following groups accounts having credit facilities with Banks then MCB, Jammu, aggregating Rs.5.00 crore in CC A/C No.791230110000012 of M/S Jhelum Industries, Rs.3.75 crore in CC A/C No.791230110000013 of M/S I. D. Sood Ispat Pvt. Ltd. and Rs.2.70 crore in CC A/C No.791230110000016 of M/S New Jammu Flour Mills Pvt. Ltd. In the above manner, M/SD JIPIPL diverted Bank‘s funds for other than sanctioned purposes. For recovery of Bank‘s dues, the Bank has already filed suit in the borrowing account of M/S JIPIPL with court, Jammu & Kashmir, on 14.03.2016.

2. In the light of extant guidelines of RBI, the forensic audit was assigned to M/S Satya Prakash Mangal & Company and the forensic auditors submitted their report dated 06.09.2016 to the following:

a) On comparison of bank statement with Consolidated Financial Statement (CFS) count of the observed that in the month of March, 2014, share capital has increased to Rs.8.00 crore from Rs.50 lakhs but only Rs.4 crore was received in the bank account of the company and the remaining Rs.3.50 crore was not received in books. Further, a clarification was submitted by the borrower to Bank that Rs.3.50 crore towards share application money pending for allotment was shown under creditors in financial statement of FY 2012-13. However, noted that total trade payable shown in balance sheet was only Rs.0.20 crore. Further, it may be noted that total cur