Judicial Analysis Court Copy Headnote Facts Arguments Court observation

Dipak Misra, J
Priyanka Srivastava – Appellant
Versus
Prakash Kumar Bajaj – Respondent
CRIMINAL APPEAL NO. 781 OF 2012

Advocates:
For the Appellants/Petitioners: Ajay Kumar
For the Respondents: Manish Trivedi, Vivek Kumar Srivastava, AGA

A Magistrate must exercise judicial discretion before invoking Section 156(3) CrPC. To prevent frivolous litigation, applications under this section must be supported by an affidavit and demonstrate compliance with prior police procedures, ensuring the process is not abused to harass statutory authorities or bypass specialized debt recovery forums.

Headnote:(A) Code of Criminal Procedure, 1973 - Section 156(3) - Power of Magistrate to direct investigation - Requirement of application of mind - Magistrate must remain vigilant to allegations, nature of case, and date of incident before issuing directions - Mere mechanical order quoting an application is improper and encourages abuse of process of law. (Paras 17, 24, 25 and 26)

(B) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 32 - Protection of action taken in good faith - Statutory protection provided to secured creditors and officers acting in good faith under the Act - Magistrate must consider the scope of such immunity before ordering registration of FIR. (Paras 24, 29 and 30)

(C) Criminal Procedure - Application under Section 156(3) - Mandatory requirement - Applications must be supported by a duly sworn affidavit to ensure responsibility and deter filing of false claims - Prior adherence to Sections 154(1) and 154(3) is mandatory and must be documented. (Paras 27)

Facts of the case:
A financial institution initiated recovery proceedings against a borrower due to default in loan repayment. Subsequently, the borrower filed multiple criminal complaints against the officers of the institution, alleging criminal misconduct, primarily to create pressure for a one-time settlement. Despite an inter-party settlement on loan repayment, the criminal proceedings were not withdrawn by the borrower and new complaints were filed under Section 156(3) of the Code, leading to the registration of an FIR against the officers. The officers approached the court seeking quashing of the criminal proceedings.

Findings of Court:
The court observed that the Magistrate acted with total non-application of mind by directing the registration of an FIR without verifying the veracity of allegations, the status of the accused as statutory officers, or the motive of the complainant. The institution of criminal proceedings was found to be an abuse of the court's process intended to harass statutory authorities and thwart recovery proceedings under special legislation.

Issues: Whether a Magistrate is duty-bound to apply his judicial mind before directing investigation under Section 156(3) of the Code of Criminal Procedure and whether such applications require additional procedural safeguards like supporting affidavits.

Ratio Decidendi: Invocation of Section 156(3) requires judicial application of mind to determine if a cognizable offence is disclosed; it is not a routine procedure. To prevent abuse of the process for personal vengeance or harassment, all applications under this provision must be supported by a sworn affidavit, and the Magistrate must verify, inter alia, the prior exhaustion of remedies under Section 154 and the potential application of statutory protections like those found in the securitization laws before ordering an investigation.

Result: Appeal allowed; registration of FIR quashed.

Table of Content
1. factual history regarding abuse of legal processes by defaulting borrowers. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15)
2. magistrate's duty to apply judicial mind under section 156(3) crpc before ordering police investigation. (Para 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24)
3. mandatory requirement of supporting affidavits and verification for section 156(3) crpc applications to prevent frivolous litigation. (Para 25 , 26 , 27)
4. statutory protection under section 32 of sarfaesi act for officers acting in good faith. (Para 28 , 29 , 30)
5. quashing of fir and directions for judicial vigil in invoking powers under section 156(3) crpc. (Para 31 , 32)

The present appeal projects and frescoes a scenario which is not only disturbing but also has the potentiality to create a stir compelling one to ponder in a perturbed state how some unscrupulous, unprincipled and deviant litigants can ingeniously and innovatively design in a nonchalant manner to knock at the doors of the Court, as if, it is a laboratory where multifarious experiments can take place and such skillful persons can adroitly abuse the process of the Court at their own will and desire by painting a canvas of agony by assiduous assertions made in the application though the real intention is to harass the statutory authorities, without any remote remorse, with the inventive design primarily to create a mental pressure on the said officials as individuals, for they would not like to be dragged to a court of law to face in criminal cases, and further pressurize in such a fashion so that financial institution which they represent would ultimately be constrained to accept the request for “one-time settlement” with the fond hope that the obstinate defaulters who had borrowed money from it would withdraw the cases instituted against them. The facts, as we proceed to adumbrate, would graphically reveal how such persons, pretentiously aggrieved but potentially dangerous, adopt the self-convincing mastery methods to achieve so. That is the sad and unfortunate factual score forming the fulcrum of the case at hand, and, we painfully recount.

2. The facts which need to be stated are that the respondent No.3, namely, Prakash Kumar Bajaj, son of Pradeep Kumar Bajaj, had availed a housing loan from the financial institution, namely, Punjab National Bank Housing Finance Limited (PNBHFL) on 21st January, 2001, vide housing loan account No.IHL-583. The loan was taken in the name of the respondent No.3 and his wife, namely, Jyotsana Bajaj. As there was default in consecutive payment of the installments, the loan account was treated as a Non-Performing Asset (NPA) in accordance with the guidelines framed by the Reserve Bank of India. The authorities of the financial institution issued notice to the borrowers under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (for short, 'the SARFAESI Act') and in pursuance of the proceedings undertaken in the said Act, the PNBHFL, on 5th June, 2007, submitted an application before the District Magistrate, Varanasi, U.P. for taking appropriate action under Section 13(4) of the SARFAESI Act.

3. At this juncture, the respondent No.3 preferred W.P. No.44482 of 2007, which was dismissed by the High Court on 14th September, 2007, with the observation that it was open to the petitioner therein to file requisite objection and, thereafter, to take appropriate action as envisaged under Section 17 of the SARFAESI Act. After the dismissal of the writ petition with the aforesaid observation, the respondent No.3, possibly nurturing the idea of self-centric Solomon’s wisdom, filed a Criminal Complaint Case No.1058 of 2008, under Section 200 Cr.P.C. against V.N. Sahay, Sandesh Tiwari and V.K. Khanna, the then Vice-President, Assistant President and the Managing Director respectively for offences punishable under Sections 163, 193 and 506 of the Indian Pe

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Dipak Misra, JPriyanka Srivastava – AppellantVersusPrakash Kumar Bajaj – RespondentCRIMINAL APPEAL NO. 781 OF 2012

Cases Referred (5)

Dipak Misra, J
Priyanka Srivastava – Appellant
Versus
Prakash Kumar Bajaj – Respondent
CRIMINAL APPEAL NO. 781 OF 2012