The court emphasized the need for trial to determine matters of knowledge of charges and fraudulent intention, highlighting the importance of resolving such issues in the appropriate legal forum.

1. By consent of both sides, the matter has been taken up for final hearing.

2. The petitioners, who are the accused in a private complaint initiated by the respondent before the learned Chief Metropolitan Magistrate, Egmore, Chennai, have filed the present petition seeking a direction to call for the records in C.C.No.4311 of 2009 pending on the file of the above and quash the same.

3. The respondent is a Finance Company, having its registered Office at Chennai. The business of the complainant Company is extending hire purchase, loan and leasing facility on vehicles, machinery, equipment to individuals and Corporate companies. Sri Rajeswari Mills Limited at Gudiyatham Taluk is a Company incorporated under Companies Act and the petitioners 1 to 3 are the Directors of the Company and the 4th petitioner is the Chartered Accountant. The said Company is having two units, one at Gudiyatham and another at Karaikal.

4. The sum and substance of the complaint is that the petitioners offered their machinery in their units to the complainant company for sale and sought financial assistance under Hire Purchase Scheme. On the basis of such representation, the complainant Company agreed to enter into hire purchase contract. The resolutions of the Company showed that there is no lien over the machinery and the Chartered Accountant also issued a certificate that there is no lien on this machinery to be sold to the complainant company. On which, Hire Purchase Agreement was executed. Accordingly, the complainant company entered into necessary agreement and finance was extended. There were default in payment and therefore, the complainant company invoked the Arbitration clause in the agreement and a consent award was passed by an Arbitrator.

5. However, during the course of execution proceedings, an application was filed by the Directors of the Company contending that the said Sree Rajeswari Mills is a sick Industry and the machinery cannot be brought for sale and it is also submitted that the machinery have been hypothecated with IDBI (Industrial Development Bank of India) and IDBI filed a suit before this court claiming that they are having the first charge on the machinery since 1987.

6. According to the complainant company, suppressing the hypothecation and a charge with IDBI as early as 1987, the petitioners 1 to 3, being the Directors, with the connivance and collusion of the 4th petitioner/Chartered Accountant, have created false documents, induced and deceived the complainant company to part with a huge sum. Therefore, the complaint has been filed for the alleged offence under Sec.420, 468 and 471 r/w 34 IPC. The same has been taken on file in C.C No.4311 of 2009 and aggrieved by the same, the petitioners are before this Court to quash the proceedings on various grounds.

7. Mr.G. Rajagopalan, the learned senior counsel, who appeared for Mr.A.S. Balaji, for the petitioners, would submit that the case of the complainant that they became aware of the first charge in favour of IDBI only during the course of execution of proceedings, is not true. The learned senior counsel submitted that under Secs.125 and 126 of the Companies Act, the complainant was presumed to have knowledge of the earlier charges duly registered with the Registrar of Companies. The learned senior counsel also submitted that the case of the complainant company can only be non payment of dues and the ingredients of the offence under Sec.420 IPC is not attracted.

8. The learned senior counsel also submitted that the petitioners have not created any false or fabricated document. He relied on a decision reported in 2009 Company Cases Vol 149 1 Bombay (Bank of Baroda vs Official Liquidator of Alpic Finance Ltd), wherein the Bombay High Court has held as follows:

"A purchaser is bound to make all reasonable enquiries as to the title of his vendor.

Once it is obvious that title to the property vested at some stage in a company and prudent purchaser must enquire whether