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Puran Chand & Ors v. The State of Punjab & Anr - CRM-17139-M-2006 [2006] RD-P&H 11086 (22 November 2006)


Criminal Misc.No.17139-M of 2006

Date of Decision: November 20, 2006

Puran Chand & others



The State of Punjab and another


PRESENT:Mr.Deepak Manchanda, Advocate,

for the petitioners.

Mr.B.S.Sewak, DAG, Punjab,

for respondent No.1.

Ms.Deepali Puri, Advocate,

for the PUNSUP.


This order will dispose of Criminal Misc.Nos.17139-M of 2006 (Puran Chand and others v. State of Punjab and another), 17137-M of 2006 (Puran Chand and others v. The State of Punjab and another), 17141-M of 2006 (Ashok Kumar and another v. The State of Punjab and another) and 17143-M of 2006 (Nand Lal and another v. The State of Punjab and another).

These four petitions have been filed for quashing of FIR No.232 dated 18.9.2002 under Sections 406/420 IPC and the order framing the charge and also the order dismissing the application for discharge filed by the petitioners.

The facts are being taken from Criminal Misc.No.17139-M of 2006.

Criminal Misc.No.17139-M of 2006 { 2 }

The petitioners are the partners of M/s R.K.Rice Mills, Bhaglan Road, Rajpura. This Mill had been allotted paddy for husking for the years 1998-99 as well as 1999-2000. An agreement was also executed between the Mill and the PUNSUP and as per the same, the Mill was to supply rice after milling paddy and it was a custom milling. FIR was got registered against the Mill with the allegation that the quantity of paddy, which was in the joint custody of parties, was not supplied and even the required quantity of rice was also not supplied to the PUNSUP. It is on this basis that the FIR under Sections 406/420 IPC was registered. In the proceedings pending before the Magistrate, the petitioners had moved an application for their discharge, which had been dismissed. Claiming that the dispute between the parties is of a civil nature and no offence under Section 406 IPC is revealed, specially in view of the arbitration clause, the quashing of the FIR and discharge of the petitioners has been sought. Reliance has been placed on the case of Kailash Chand Verma v. Punjab State of Civil Supply Corporation, 2005(1) RCR (Crl.) 727. Since the application moved by the petitioners for their discharge was dismissed by the Magistrate, the same has also been challenged in the present petitions.

Since the issue involved in the present cases is purely legal, the other facts need not be noticed in detail.

Reply in this case has been filed revealing that the witnesses have already been examined in this case and case was fixed for 27.5.2006 for further proceedings at the time of filing reply. It has been revealed that the petitioner concern was entrusted with 52533+805 bags of paddy weighing 34146-45 Qtls.+ 454-85 Qtls. for Criminal Misc.No.17139-M of 2006 { 3 }

custom milling and that the accused-petitioner concern was yet to deliver 5607-55 Qtls. of rice to the Food Corporation of India in the account of PUNSUP. Accordingly, this quantity of rice has been embezzled, causing a corresponding loss to the said tune.

Criminal Misc.No.17137-M of 2006 has again been filed on behalf of the partners of M/s R.K.Rice Mills, Bhaglan Road, Rajpura. The facts in this case have already been noticed above.

Criminal Misc.No.17143-M of 2006 is filed by partners of M/s Sachdeva Traders, Rajpura. This concern was also allotted paddy for the year 1998-99 and 1999-2000 for custom milling of rice. Allegation is that they had also not returned the required quantity of rice out of the paddy so supplied. They have also sought quashing of the order on identical grounds as in the case of M/s R.K.Rice Mills. Criminal Misc.No.17141-M of 2006 is of M/s Karuna Exports Ltd., Saidkheri Road, Rajpura. This concern was again allotted paddy for the year 1998-99 for custom milling of rice. Identical allegations are made in the FIR registered against the Directors of this concern and they have also sought quashing of the same on identical grounds as raised in the other Criminal Misc. Petitions.

In view of the submissions made in the petitions, it is required to be seen if the ratio of the decision in Kailash Verma's case (supra) would be attracted in the facts and circumstances of this case or not. For that, it would be essential to understand the system of entrusting paddy for milling purposes. There are two types of rice which are milled by the millers and these are known as levy rice and custom milled rice. A difference between these two types of milling is required to be understood. Custom milling rice is Criminal Misc.No.17139-M of 2006 { 4 }

the rice delivered by the millers to the Govt. of the paddy purchased by Govt. or its agencies and given to the millers for milling. Levy rice is a rice delivered by the millers to the Govt. out of the paddy purchased by them directly from the market in which they are required to give 75 % of the rice to the Government out of the paddy milled and purchased by them. It is thus clear that the paddy, which is supplied to the mills for custom milling of rice is a property of the agency, which had supplied paddy and it is only entrusted to the mill for the purpose of milling. The mill is required to account for the rice and in case it is unable to do so, certainly it would expose itself to criminal liability, besides the civil liability that it may incur. In the State of Punjab, a scam known as "Rice Scam" received very wide publicity. The millers had apparently benefited to a huge extent by short supplying rice in return for the paddy that was entrusted to the Mills. This, of course, could not have been without the connivance of employees of agency. The rice scam was of multi facet in nature.

The facts in the present case clearly reveal that the petitioner concern was entrusted with certain quantity of paddy and it was bound to return rice after shelling the same. Once it has been found that huge quantity of rice has not been returned by the petitioner concern, it obviously means that the same has been mis- appropriated. It would be a matter of evidence to prove that the value of rice, which was required to be returned to the account of complainant-PUNSUP, was much more valuable and it would be very easy for the petitioners to compensate the complainant- PUNSUP and still be at advantage, having sold the high quality of rice in the open market at much higher rate. The civil liability would Criminal Misc.No.17139-M of 2006 { 5 }

go into the aspect of loss, which the PUNSUP would suffer whereas the petitioners cannot be allowed to escape the criminal liability and responsibility for having breached the trust reposed in it by PUNSUP.

These are distinguishable facts from Kailash Verma's case (supra) and thus, it can be said that the ratio of this decision would not apply to the facts and circumstances of this case. Rather, this case seems to be covered by the ratio of decision in the case of Trisuns Chemical Industry v. Rajesh Agarwal and others, JT 1999(6) S.C.

618. In this case, the allegation of the complainant was that the Director-respondent had approached the appellant -Company for supply 5450 metric tones of "Toasted Soyabean Extractions" for a price of nearly four and a half crores of rupees. The appellant Company paid the amount through cheques. The commodity, which was supplied, was found to be most inferior and sub-standard quality.

The complainant had suffered a loss of Rs.17 lacs from this consignment. After obtaining report in regard to the inferior quality of the consignment, the complaint was filed for initiating the criminal prosecution against the accused. The High Court had quashed this complaint on the ground that the dispute is purely of a civil nature and hence no prosecution should have been permitted. The same was taken in appeal before the Hon'ble Supreme Court. Noticing the judgment in the cases of State of Haryana v. Bhajan Lal, JT 1990 (4) SC 650 and Rajesh Bajaj v. State NCT of Delhi JT 1999 (2) SC 112, the Hon'ble Supreme Court observed that "time and again this Court has been pointing out that quashment of FIR or a complaint in exercise of inherent powers of the High Court should be limited to very extreme exceptions." In the case of Rajesh Bajaj (supra), the Criminal Misc.No.17139-M of 2006 { 6 }

Hon'ble Supreme Court had observed that "merely because an act has a civil profile is not sufficient to denude it of its criminal outfit." It would be a benefit to quote observations of Hon'ble Supreme Court in this regard:-

"It may be that the facts narrated in the present complaint would as well reveal a commercial transaction or money transaction. But that is hardly a reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the course of commercial and also money transactions." In Trisuns Chemical Industry'case (supra), the Hon'ble Supreme Court specifically dealt with the filing of a criminal complaint in cases where there is an arbitration clause. In this regard, the Hon'ble Supreme Court observed as under:- "We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a Criminal Misc.No.17139-M of 2006 { 7 }

conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in Bhajan Lal v. State of Haryana (Supra)." It can thus be said that criminal prosecution and remedy by way of arbitration are two separate and distinct courses available to an aggrieved party. As noticed by the Hon'ble Supreme Court, arbitration is a remedy affording relief for breach of agreement and this cannot be a substitute for a criminal trial where the facts reveal commission of an offence, which may be arising out of the same sets of facts. As already noticed above, the arbitration clause in itself cannot lead to quashing of all the proceedings and it would depend on facts and circumstances of the case. It has to be resorted to in an exceptional case as may have been done in the case of Kailash Verma (supra). The present case, in my considered opinion, would not fall under such extreme or exceptional case. Accordingly, the contention raised by the petitioners deserves to be rejected and it is so ordered.

The present petitions as such are lacking in merit and are accordingly dismissed.

November 20, 2006 ( RANJIT SINGH )

ramesh JUDGE


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