SALIMBHAI HAMIDBHAI MEMON versus NITESHKUMAR MAGANBHAI PATEL & ANR. on 31 August 2021

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DR DHANANJAYA Y CHANDRACHUD, J.

1. This appeal arises from a judgment dated 31 March 2021of aSingle Judge of the High Court of Gujarat.

2. On 10 October 2010, the appellant and the first respondententered into a deed of partnership under which a firm by the name ofCalla Associates was constituted. The share of the first respondent inthe profit / loss is alleged to be 55 per cent while the share of the appellant,45 percent. On 21 June2017, a document styled as ‘’sammati-lekh’’wasallegedly entered into by the appellant consenting to the execution of asale deed in favour of a third party and the appellant agreed not to makeany claim in the amount of Rs 3.89 crores from his capital investment.

3. On 23 August 2017, an addendum to the “sammati-lekh” isalleged to have been executed in terms of which certain amounts wereto be adjusted and an amount of Rs 5.03 crores was to be paid by thefirst respondent to the appellant. It has been alleged that under the termsof the addendum, a sale deed of certain land situated at Mouje Samiyalawas to be executed in favour of the appellant.

4. It has been alleged that on 4 September 2017, a document wasprepared and notarised on 8 September 2017 pertaining to record therelinquishment of rights by the appellant from a parcel of land belongingto the firm. The allegation of the appellant is that under the terms of theoriginal document, the appellant agreed to relinquish rights only in certainland situated at Akota, Vadodara. However, it is alleged that the firstrespondent forged the internal pages of the document and added additional

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Asurvey numbers of land, over and above what was agreed to berelinquished.

5. On 1 November 2017, an advocate’s notice was issued by theappellant to the first respondent which was followed by a public noticeon 2 January 2018 alleging misappropriation of the amount invested byBthe appellant. In a reply dated 5 January 2018, the respondent suggestedthat partnership had been mutually dissolved and documents had beenexecuted to that effect.

6. On 25 January 2018, a legal notice was issued by the appellantcomplaining of the dishonour of a cheque of Rs 1.47 crores and onC7 January 2018, of another cheque in the amount of Rs 81.31 lacs.

7. On 31 January 2018, the appellant addressed a communicationto the bankers to cease all transactions in the account of the partnershipfirm due to disputes between the parties.

8. On 22 February 2018, the appellant received a communicationDfrom HDFC Bank recording that the bank had received a documentallegedly executed on 8 September 2017 by which the appellant hadrelinquished all his rights in the firm in favour of the first respondent.The appellant alleges that it was then that he came to know that the firstrespondent has fabricated the deed of dissolution of partnership datedE10 February 2018. This forged deed allegedly contained a reference toanother forged document dated 8 September 2017. According to theappellant, his signature on the deed of dissolution of partnership is forgedand another copy of the document without his signature was notarisedon 23 February 2018.

F9. On 25 February 2018, the investigating officer at JP Road PoliceStation conducted a preliminary enquiry into a complaint lodged by theappellant, which is stated to have been disposed of on the ground thatthe first respondent was ready to settle the accounts in the presence ofa mediator and that the allegations were of a civil nature.

10. On 12 March 2018, a settlement was arrived at between theGappellant and the first respondent in terms of which it was agreed thatthe partnership be dissolved and a sum of Rs 26.03 crores be paid to theappellant. Post-dated cheques were issued to the appellant. One of Rs50 lacs was honoured while the remaining cheques were dishonoured,leading to the initiation of proceedings under the Negotiable InstrumentsHAct 1881.

11. On 20 June 2018, the appellant instituted a complaint beforethe Gotri Police Station against the first respondent making allegationsof forgery and cheating.

12. On 24 December 2018, a fresh MoU was entered betweenthe appellant and the first respondent which acknowledged that an amountof Rs 50 lacs was paid, while a balance of Rs 25.52 crores remaineddue. The terms of the MoU envisaged that certain lands would betransferred to the appellant in lieu of the outstanding amount. The appellanthas alleged that fresh cheques issued to him also returned unpaid on 6March 2020 and the sale deeds which were executed by the firstrespondent were in respect of lands whose title was not marketable.The complaint filed by the appellant was disposed of by the Gotri PoliceStation on 25 August 2019 in view of the settlement dated 24 December2018 on the ground that despite repeated requests, the appellant had notcome forth to record his statement and it appeared that the matter involvedmonetary transactions for which the appellant would have to seekredressal before the appropriate court.

13. On 9 July 2020, the first respondent got an FIR registeredbefore the Vadodara City Police Station alleging an act of forgery on thepart of the appellant. On 9 October 2020, the investigating officer filed a‘B’ summary report recording that the alleged document dated 8September 2017 had not been forged by the appellant but by the firstrespondent.

14. On 6 December 2020, the FIR which forms the basis of thepresent proceedings was registered, alleging the commission of offencespunishable under Sections 405, 420, 465, 467, 468 and 471 of the PenalCode. The gravamen of the allegations in the FIR is that:

a. The deed of relinquishment which was prepared in relation tocertain lands situated at Akota had been interpolated and forgedby the first respondent;

b. The deed of dissolution of partnership has been fabricated;and

c. Despite the settlement dated 24 December 2018, the amountdue to the appellant had not been paid and the title to the landswhich were purported to be transferred in favour of theappellantis in dispute.

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A15. The first respondent instituted proceedings under Section 482of the Code of Criminal Procedure 1973 (“CrPC”) for quashing theFIR, being Criminal Misc. Application No 19358 of 2020.

16. On 23 December 2020, when the proceedings were initiallymoved before the High Court, an order was passed by the Single JudgeBrecording that :

“The matter is between the partners and there appears allegationthat some of the partners have taken advantage and siphonedaway amount as well as also made falsification of documents.’’

Counsel appearing on behalf of the first respondent urged that heCwas willing to offer a settlement. Since Counsel for the parties soughttime to explore the possibility of a settlement, the proceedings wereadjourned to 10 February 2021. On 8 March 2021, the first respondentwas arrested. When the proceedings were taken up by the Single Judgeon 9 March 2021, the Court recorded the submission of the firstDrespondent that on 23 December 2020, an oral direction had been issuedby the Court restraining the arrest of the first respondent. Recordingthat this statement was not disputed on behalf of the appellant, the SingleJudge directed that the first respondent should forthwith be released bythe Vadodara Police Station if he was arrested in connection with theFIR which was the subject matter of the petition for quashing. TheEproceedings were adjourned to 15 March 2021. On 15 March 2021, theproceedings were adjourned to 22 March 2021 with a direction that nosteps should be taken against the first respondent till 23 March 2021.Eventually, on 31 March 2021, the Single Judge recorded that:

“5. … prima facie it appears that the complaints are with respectFto business transactions between both the parties. It furtherappears that there are some dues which are payable by the presentapplicant and FIR came to be filed against applicant. On 6.12.2020by the respondent No.2 which is subject matter of present petition.It is alleged that the documents dated 8.09.2017 and 10.02.2018Gare forged documents. There was one complaint filed by thepresent application against respondent No.2 on 9.07.2020 whereinB Summary report was filed which is at pages 38 to 57. The saidreport has culminated in a proceedings before the learnedMagistrate Court, Vadodara. Those proceedings are also pending.”

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The Single Judge noted that previously the appellant had filed asimilar complaint which was disposed of by the investigating officer andit was then that a new settlement was arrived at which, formed the basisof the FIR in question. After extracting the earlier orders dated 23December 2020 and 9 March 2021, the Single Judge issued the followingdirections in paragraph 9 of the impugned order:

“9. At this juncture when the proceedings are clearly pendingbetween the parties and both of them have set the criminalmachinery in action, to strike a balance between both the partiesthe investigation is required to be proceeded, however the presentapplicant be not arrested till next date of hearing, S.O. to28.4.2021.”

17. This order has given rise to the appeal before this Court.

18. We have heard Mr Anshin H Desai, Senior Counsel appearingon behalf of the appellant, Mr Manoj Swarup, Senior Counsel for thefirst respondent and Mr Kanu Agrawal, Counsel for the State of Gujarat.

19. Mr Desai, Senior Counsel appearing on behalf of the appellantsubmits that:

(i) An FIR was lodged on 6 December 2020 containing seriousallegations involving:

a.Interpolation of the deed of relinquishment executedby the appellant with the consequence that whereasthe interest in only one property at Akota wasrelinquished, several additional properties have beenincluded and the nature of the interpolation would beobvious on a bare perusal of the documents which havebeen annexed to the paper book;and b.The deed of dissolution of partnership is purported tohave been executed on a day when the appellant wasnot present in India but was traveling to Dubai;

(ii) The FIR has been registered on the basis of the aboveallegations implicating the commission of offencespunishable under Sections 405, 420, 465, 467, 468 and 471of the Penal Code; A

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A(iii)On the representation made by the first respondent,successive Memorandum of Understandings (“MoU” or“MoUs”) were entered into between the appellant and thefirst respondent; and

(iv) Pursuant to the settlement, the cheques which were issuedBby the first respondent have been dishonoured and the titleto the lands which were purported to be transferred to theappellant is under a cloud and is not marketable.

In this backdrop, it was urged that in view of the consistent positionin law laid down by this Court, the High Court was not justified in issuingCa direction restraining the arrest of the first respondent till the next dateof listing without reasons .

20. On the other hand, Mr Manoj Swarup, learned Senior Counselappearing on behalf of the first respondent submitted that:

(i) In terms of the MoU several parcels of land have beenDtransferred to the appellant, details of which have beentabulated as followed in the Counter Affidavit:

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(ii) These parcels of land have been transferred to the appellantin terms of the MoUs executed on 12 March 2018 and 24December 2018 in addition to which a payment of Rs 50lacs has been made by cheque. As a result, out of the agreedpayment of Rs 26.02 crores to be made to the appellant,25.52 crores have been paid or value has been received; A

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(iii) The appellant has received the benefit of the settlementswhich have been arrived at between the parties and landshave been transferred to him;

(iv) On the earlier complaint lodged by the appellant, a ‘B’summary was filed by the Gotri Police Station recordingthat the appellant had not come forth to record his statementand the transaction between the parties appeared to be ofa monetary nature; C

(v) By August 2019, these parcels of land were transferred tothe appellant in pursuance of the settlements dated 12 MarchD2018 and 24 December 2018; and

(vi) The order of the High Court dated 31 March 2021 continuedto remain in operation due to the general orders operatingduring the second wave of the pandemic.

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21. Mr Kanu Agrawal, learned Counsel appearing on behalf ofthe State of Gujarat has submitted that the impugned order of the HighCourt refers to the submission of the police report by the APP whichwas taken on the record and that the police report has adverted to theforgery of two valuable documents namely, the deeds of relinquishmentand dissolution of partnership.

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22. After the High Court was moved in proceedings under Section482 of the CrPC for quashing the FIR, an order was initially passed on23 December 2020, recording the statement of Counsel for the firstrespondent that he was ready and willing to offer a settlement. SinceCounsel for the parties desired to explore the possibility of a settlement,the proceedings were adjourned to 10 February 2021. The text of theorder of the High Court did not contain any direction restraining thearrest of the first respondent. But it appears from the subsequent orderdated 9 March 2021 that an oral direction was issued by the SingleJudge not to arrest the first respondent. In its order dated 9 March 2021,the High Court adverted to the submission of Counsel for the first G

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Arespondent that such a direction was previously issued, which was notdisputed by the appellant. Since the first respondent was arrested on 8March 2021, he was directed to be released forthwith.

23. The procedure followed by the High Court of issuing an oraldirection restraining the arrest of the first respondent was irregular. IfBafter hearing the parties on 23 December 2020, the High Court was ofthe view that an opportunity should be granted to Counsel for the appellantand the first respondent to explore the possibility of a settlement and, onthat ground, an interim protection against arrest ought to be granted, aspecific judicial order to that effect was necessary. Oral observations incourt are in the course of a judicial discourse. The text of a written orderCis what is binding and enforceable. Issuing oral directions (presumablyto the APP) restraining arrest, does not form a part of the judicial recordand must be eschewed. Absent a judicial order, the investigating officerwould have no official record emanating from the High Court on thebasis of which a stay of arrest is enforced. The administration of criminalDjustice is not a private matter between the complainant and the accusedbut implicates wider interests of the State in preserving law and order aswell as a societal interest in the sanctity of the criminal justiceadministration. Though in a different context, the principle was set downby this Court in Zahira Habibulla H. Sheikh v State of Gujarat[1] :

E“35. This Court has often emphasized that in a criminal case thefate of the proceedings cannot always be left entirely in the handsof the parties, crimes being public wrongs in breach and violationof public rights and duties, which affect the whole community asa community and are harmful to the society in general. The conceptof fair trial entails familiar triangulation of interests of the accused,Fthe victim and the society and it is the community that acts throughthe State and prosecuting agencies. Interests of society are not tobe treated completely with disdain and as persona non grata. Courtshave always been considered to have an overriding duty to maintainpublic confidence in the administration of justice — often referredGto as the duty to vindicate and uphold the “majesty of the law”…..”24. Oral directions of this nature by the High Court are liable tocause serious misgivings. Such a procedure is open to grave abuse.Most High Courts deal with high volumes of cases. Judicial assessments H1 (2004) 4 SCC 158

change with the roster. Absent a written record of what has transpiredin the course of a judicial proceeding, it would set a dangerous precedentif the parties and the investigating officer were expected to rely onunrecorded oral observations.

25. We are conscious of the fact that in civil proceedings, Counselappearing on behalf of the contesting parties do in certain cases mutuallyagree before the court to an ad interim arrangement and agree amongthemselves to record the terms of the arrangement by an exchange ofcorrespondence between the advocates. This can typically happen whencivil disputants are attempting an amicable settlement. Civil cases involvedisputes between two private contestants. In criminal proceedings, apartfrom the accused and the complainant, there is a vital interest of theState and of society in the prosecution of crime. The procedure whichwas followed by the Single Judge must therefore be eschewed in thefuture. Judges speak through their judgments and orders. The writtentext is capable of being assailed. The element of judicial accountability islost where oral regimes prevail. This would set a dangerous precedentand is unacceptable. Judges, as much as public officials over whoseconduct they preside, are accountable for their actions.

26. The Single Judge, by the impugned order dated 31 March2021 issued an ad interim protection against arrest till the next date oflisting. The only reasons which are to be found in the order of the Courtare that:

(i) Proceedings are pending between the parties; and

(ii) Both of them have set the criminal machinery in action.

27. Having recorded this, the Single Judge has granted a stay ofarrest “to strike” a balance between both the parties while observingthat the investigation may proceed. How this would strike a balancebetween both the parties is unclear from the reasons which have beenadduced. The FIR contains grave allegations involving:

(i) The interpolation of a deed of relinquishment so as to cover asignificantly larger number of properties than the sole property whichwas agreed to be relinquished; and

(ii) The fabrication of a deed of dissolution of partnership.

28. The offences which are alleged to be involved are punishableunder the provisions of Sections 405, 420, 465, 467, 468 and 471 of the A

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APenal Code. These offences are of a serious nature. The APP hadevidently apprised the Single Judge of the police report dated 31 March2020, to which a reference has been made by the Counsel of the Stateof Gujarat, as noted earlier. While an order granting a stay of arrest in aproceeding under Section 482 of the CrPC lies within the jurisdiction ofthe High Court, the grant of such relief must be after a judiciousBapplication of mind, which must emerge from the reasons which arerecorded by the Judge. The formulation of reasons in a judicial orderprovides the backbone of public confidence in the sanctity of the judicialprocess. While directing that the proceedings are to be listed on a futuredate, the High Court is undoubtedly not expected to deliver a detailedCjudgment elaborating upon reasons why a stay of arrest has been granted.But the reasons recorded by the Court must reflect an application ofmind to relevant facts and circumstances, including:

(i) The nature and gravity of the allegations;

(ii) The seriousness of the alleged offence(s); D

(iii) The position of the accused and the likelihood of theiravailability for investigation; and

(iv) The basis on which a stay of arrest has been granted till thenext date.

E29. The High Court has not alluded to the allegations made in theFIR. This constitutes a serious deficiency. The petition before the HighCourt is for quashing the FIR under section 482. While determiningwhether to grant ad-interim relief in such a case, involving a stay ofarrest, the High Court must bear in mind the parameters for the exerciseFof the jurisdiction for quashing, which has been invoked. The interimorder of a stay of arrest is in aid of the final relief which is sought in thepetition. Hence, the considerations germane to the exercise of thejurisdiction to quash an FIR must be present to the mind while decidingwhether an interim stay of arrest is warranted. What is present to themind must emerge from the text of the order. In the recent judgment inGNeeharika Infrastructure Pvt Ltd. v. State of Maharashtra[2], thisCourt through one of us (Justice MR Shah) formulated the principleswhich have to be borne in mind by the High Court, when its interventionis sought under Section 482 of the CrPC to quash an FIR. After settingout the principles, the Court observed:H2 2021 SCC OnLine SC 315

“59. Before passing an interim order of staying further investigationpending the quashing petition under Section 482 Cr.P.C. and/orArticle 226 of the Constitution of India, the High Court has toapply the very parameters which are required to be consideredwhile quashing the proceedings in exercise of powers under Section482 Cr.P.C. in exercise of its inherent jurisdiction, referred tohereinabove.”

30. Expressing a caution, which requires the High Courts to becircumspect in interfering with investigation, the Court noted:

“60. In a given case, there may be allegations of abuse of processof law by converting a civil dispute into a criminal dispute, onlywith a view to pressurize the accused. Similarly, in a given casethe complaint itself on the face of it can be said to be barred bylaw. The allegations in the FIR/complaint may not at all disclosethe commission of a cognizable offence. In such cases and inexceptional cases with circumspection, the High Court may staythe further investigation. However, at the same time, there maybe genuine complaints/FIRs and the police/investigating agencyhas a statutory obligation/right/duty to enquire into the cognizableoffences. Therefore, a balance has to be struck between the rightsof the genuine complainants and the FIRs disclosing commissionof a cognizable offence and the statutory obligation/duty of theinvestigating agency to investigate into the cognizable offenceson the one hand and those innocent persons against whom thecriminal proceedings are initiated which may be in a given caseabuse of process of law and the process. However, if the factsare hazy and the investigation has just begun, the High Court wouldbe circumspect in exercising such powers and the High Courtmust permit the investigating agency to proceed further with theinvestigation in exercise of its statutory duty under the provisionsof the Code. Even in such a case the High Court has togive/assign brief reasons why at this stage the further investigationis required to be stayed. The High Court must appreciate thatspeedy investigation is the requirement in the criminaladministration of justice.”

This Court observed that while there may be some cases wherethe initiation of the criminal proceedings may be an abuse of law,it is incases of an exceptional nature, where it is found that absence of AB

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Ainterference would result in a miscarriage of justice, that the Court mayexercise its jurisdiction under Section 482 of the CrPC and Article 226of the Constitution. This Court has disapproved of interim orders of HighCourts which grant stay of arrest or which direct that no coercive stepsmust be taken against the accused, without assigning reasons. Theimpugned order of the High Court cannot be sustained on the touchstoneBof the principles which have been consistently laid down by this Courtand reiterated in the above decision.

31. In Parbatbhai Aahir alias Parbatbhai BhimsinhbhaiKarmur v. State of Gujarat[3], this Court formulated the governingprinciples to guide the exercise of powers under Section 482 of the CrPC.CSpeaking for the three judge Bench, one of us (Dr DY Chandrachud)observed:

“(1) Section 482 CrPC preserves the inherent powers of the HighCourt to prevent an abuse of the process of any court or to securethe ends of justice. The provision does not confer new powers. ItDonly recognise and preserves powers which inhere in the HighCourt.

(2) The invocation of the jurisdiction of the High Court to quash afirst information report or a criminal proceeding on the groundthat a settlement has been arrived at between the offender andEthe victim is not het same as the invocation of the jurisdiction forthe purpose of compounding an offence. While compounding anoffence, the power of the court is governed by the provisions ofSection 320 CrPC. The power to quash under Section 482 isattracted even if the offence is non-compoundable.

F(3) In forming an opinion whether a criminal proceeding or complainshould be quashed in exercise of its jurisdiction under Section482, the High Court must evaluate whether the ends of justicewould justify the exercise of the inherent power.

(4) While the inherent power of the High Court has a wide ambitGand plenitude it has to be exercised (i) to secure the ends of justice,or (ii) to prevent an abuse of the process of any court.

(5) The decision as to whether a complaint or first informationreport should be quashed on the ground that the offender and H3 (2017) 9 SCC 641

victim have settled the dispute, revolves ultimately on the factsand circumstances of each case and no exhaustive elaboration ofprinciples can be formulated.

(6) In the exercise of the power under Section 482 and whiledealing with a plea that the dispute has been settled, the HighCourt must have due regard to the nature and gravity of theoffence. Heinous and serious offences involving mental depravityor offences such as murder, rape and deceit cannot appropriatelybe quashed though the victim or the family of the victim havesettled the dispute. Such offences are, truly speaking, not privatein nature but have a serious impact upon society. The decision tocontinue with the trial in such cases is founded on the overridingelement of public interest in punishing persons for serious offences.

(7) As distinguished from serious offences, there may be criminalcases which have an overwhelming or predominant element of acivil dispute. They stand on a distinct footing insofar as the exerciseof the inherent power to quash is concerned.

(8) Criminal cases involving offences which arise from commercial,financial, mercantile, partnership or similar transactions with anessentially civil flavour may in appropriate situations fall forquashing where parties have settled the dispute.

(9) In such a case, the High Court may quash the criminalproceeding if in view of the compromise between the disputants,the possibility of a conviction is remote and the continuation of acriminal proceeding would cause oppression and prejudice; and

(10) There is yet an exception to the principle set out in Propositions(8) and (9) above. Economic offences involving the financial andeconomic well-being of the State have implications which liebeyond the domain of a mere dispute between private disputants.The High Court would be justified in declining to quash where theoffender is involved in an activity akin to a financial or economicfraud or misdemeanour. The consequences of the act complainedof upon the financial or economic system will weigh in the balance.”

32. We are conscious of the fact that in the present case thepetition for quashing is still pending before the High Court. At the sametime, the High Court was moved for the grant of ad interim relief in apetition for quashing the FIR. The considerations which ought to weigh AB

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Ain whether or not to exercise the jurisdiction to quash must be present inthe mind of the Judge while determining whether an interim order shouldbe made.That these considerations have been borne in mind can only beevident from the reasons, however brief, which have been indicated inthe order of the High Court. This does not emerge from the impugnedorder of the High Court.B

33. We accordingly allow the appeal and set aside the impugnedorder of the High Court dated 31 March 2021. The High Court, it isclarified would be at liberty to proceed to deal with the petition underSection 482 of the CrPC which is pending consideration. The appeal isdisposed of in the above terms.C

34. Pending application(s), if any, stand disposed of.

Ankit Gyan

Appeal disposed of.

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