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IN THE HIGH COURT OF JUDICATURE AT MADRAS
P.N.PRAKASH, J.
T. Kannan - Petitioner
vs.
Piramal Diagnostics Services Private Limited – Respondent
Crl.O.P. Nos.9414 of 2016, 23056 of 2012 and Crl.M.P. No.4857 of 2016
Decided On : 29-06-2016
Negotiable Instruments Act - Business Acquisition Dispute - Section 138 of the Negotiable Instruments Act, 1881 - Section 406 and 420, IPC - Indian Oil Corporation vs. NEPC India Ltd. and others [(2006) 6 SCC 736]
Fact of the Case:
Piramal Diagnostics and Kannan entered into various agreements for the sale of a diagnostics center and a consultancy agreement. Disputes arose regarding the payment of the deferred consideration and a loan agreement, leading to criminal complaints and warrants of arrest.
Finding of the Court:
The court found that the entire transaction was a civil dispute being given a criminal color by Kannan. It emphasized that failure to keep up contractual promise cannot attract Section 420 IPC and referred to the judgment of the Supreme Court in Indian Oil Corporation vs. NEPC India Ltd. and others.
Issues: The main issue was whether the private complaint filed by Kannan attracted the provisions of Section 406 and 420, IPC.
Ratio Decidendi: The court held that the transaction was a civil dispute and mere failure to keep up contractual promise cannot attract Section 420 IPC. It emphasized the growing tendency to convert civil disputes into criminal cases and referred to the judgment of the Supreme Court in Indian Oil Corporation vs. NEPC India Ltd. and others.
Final Decision: Crl.O.P. No.23056 of 2012 was allowed and the prosecution in C.C. No.373 of 2012 on the file of the V Metropolitan Magistrate, Egmore, Chennai, was quashed. Crl.O.P. No.9414 of 2016 was dismissed as infructuous.
For the sake of convenience, the parties will be referred to as Piramal Diagnostics and Kannan.
2. While Crl.O.P. No.9414 of 2016 is filed seeking to call for the records and set aside the order passed in Crl.M.P. No.660/2016 in C.C. No.373/2012 passed by the V Metropolitan Magistrate, Egmore, Chennai, Crl.O.P. No.23056 of 2012 is filed to call for the records relating to C.C. No.373 of 2012 on the file of the V Metropolitan Magistrate Court and quash the same.
3. Kannan was the Sole Proprietor of a Diagnotics Centre by name Isotope Diagnostics in Chennai, which, Piramal Diagnostics, wanted to acquire and so, they entered into an agreement of purchase dated 01.06.2007, under which, Kannan agreed to sell Isotope Diagnostics for a total sale consideration of Rs.4.20 crores out of which Rs.2.52 crores was paid by Piramal Diagnostics to Kannan on 01.06.2007 under the said agreement and the balance amount of Rs.1.68 crores is due to Kannan. Contemporaneously, Piramal Diagnostics and Kannan entered into a consultancy agreement dated 01.06.2007 under which Kannan was appointed as Consultant for Piramal Diagnostics on payment of Rs.12 lakhs per annum and other perks. Thereafter, on 06.11.2007, Piramal Diagnostics and Kannan entered into a loan agreement, under which, Kannan was granted a personal loan of Rs.50 lakhs towards which liability, he appears to have given a cheque to Piramal Diagnostics for Rs.50 lakhs which was dishonoured. Therefore, Piramal Diagnostics has launched a prosecution against Kannan for an offence under Section 138 of the Negotiable Instruments Act, 1881, before the VII Metropolitan Magistrate, Dadar, Mumbai, which Kannan is facing.
4. While so, Kannan has lodged a private complaint against Piramal Diagnostics and its Directors in C.C. No.373 of 2012 before the V Metropolitan Magistrate, Egmore, Chennai, for offences under Section 406 and 420, IPC challenging which Piramal Diagnostics have filed Crl.O.P. No.23056 of 2012 to quash the prosecution.
5. In the meantime, Kannan has obtained a warrant of arrest against the Directors of Piramal Diagnostics for their non appearance before the V Metropolitan Magistrate, Egmore, Chennai, after receipt of summons. During the pendency of the warrant, the Directors surrendered before the Court and the warrant was recalled by the V Metropolitan Magistrate, Egmore, Chennai by order dated 31.03.2016, challenging which, Kannan has filed Crl.O.P. No.9414 of 2016.
6. Heard Mr. S.S. Kumar, learned counsel for Kannan and Mr.S.Balasubramanian, learned counsel for Piramal Diagnostics.
7. In the private complaint filed by Kannan in C.C. No.373 of 2012 before the V Metropolitan Magistrate Court, Egmore, Chennai against Piramal Diagnostics, he has enclosed the copy of agreements dated 01.06.2007, loan agreement and also, Section 138 prosecution against him pending before the VII Metropolitan Magistrate Court in Mumbai. It appears that Kannan lodged a police complaint against Piramal Diagnostics alleging that they have cheated him by not paying a sum of Rs.1.68 crores that is due under the agreement dated 01.06.2007 and the FIR was closed by the Central Crime Branch as mistake of fact.
8. The question that falls for consideration of this Court is does the private complaint in C.C. No.373/2012 filed by Kannan attract the provisions of Section 406 and 420, IPC.
9. A thorough reading of the private complaint lodged by Kannan shows that the entire transaction is a civil dispute, which Kannan is attempting to give a criminal colour. Even according to Kannan, he entered into business acquisition agreement on 01.06.2007 to sell his laboratory to Piramal Diagnostics for a sum of Rs.4.20 crores and he received a sum of Rs.2.52 crores and the balance of Rs.1.68 crores was treated as deferred consideration.
10. It may be apposite to extract the relevant paragraph from the agreement dated 01.06.2007 that is relied on by Kannan himself, which is as under:
3.1.2 The remaining amount of Rs.1,68,00,00
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