Kiran Raj

The Calcutta High Court has quashed the criminal proceedings against a former nominee director of ABG Shipyard Limited, ruling that the allegations against him did not constitute the essential ingredients of criminal breach of trust or cheating. The case involved accusations under Sections 406, 420, 506, and 120B of the Indian Penal Code, 1860.

The petitioner, formerly a Senior Executive of ICICI Bank Limited, was also the Chief of SOT at ICICI Lombard General Insurance Company Limited. By virtue of his position at ICICI Bank, he was nominated as a Nominee Director on the Board of ABG Shipyard Limited, a company that had availed loan facilities from ICICI Bank under a loan agreement. The nomination was strictly for the purpose of safeguarding the bank's interests, and the petitioner had no involvement in the day-to-day operations of the company.

On April 18, 2013, ICICI Bank Limited withdrew the petitioner from his role as a Nominee Director, replacing him with another official. A Form 32 was filed with the Registrar of Companies, West Bengal, confirming this withdrawal effective from May 30, 2013.

The dispute originated from an Inter Corporate Deposit sanctioned by the complainant to ABG Shipyard Limited amounting to Rs. 50,00,000 for a period of 62 days, bearing an interest rate of 18% per annum. To secure the repayment, the company issued post-dated cheques. However, the cheques were dishonoured upon presentation, and the complainant initiated legal proceedings. The petitioner, despite having no active role in the company's financial management, was named as an accused in the complaint filed in 2016.

The complaint alleged that the accused persons, including the petitioner, had overall control over the financial affairs of ABG Shipyard Limited and were responsible for the default in repayment. The complainant contended that the petitioner had conspired with the company and other directors to deliberately withhold payments, constituting criminal breach of trust and cheating under the IPC.

The High Court examined whether the allegations in the complaint satisfied the legal criteria required for establishing criminal breach of trust and cheating. The court noted that the complaint did not contain any allegations suggesting that the petitioner had control over ABG Shipyard Limited’s financial transactions beyond his nominal position as a nominee director representing ICICI Bank.

The court held that: "In the present case, it has not been stated anywhere that from the very inception there was any intention on behalf of the petitioner to cheat, which is a necessary condition for an offence under Section 420 of the Indian Penal Code, 1860."

The court further observed that there was no evidence to suggest that the petitioner had a fraudulent or dishonest intention at the time of the financial transaction. The absence of such intent negates the charge of cheating. The court held that the mere dishonour of a cheque does not automatically establish criminal liability unless it is accompanied by deceitful conduct at the inception of the transaction.

Citing precedents, the court referred to the Supreme Court’s ruling in Delhi Race Club (1940) Ltd. & Ors vs. State of Uttar Pradesh & Another, which distinguishes between civil disputes and criminal liability. The High Court stated that disputes arising out of financial transactions must be adjudicated in civil courts unless there is concrete evidence of fraudulent inducement at the outset of the transaction.

Additionally, the court referred to Hari Prasad Chamaria v. Bishun Kumar Surekha & Ors, where the Supreme Court ruled that a criminal case under Section 420 IPC must be supported by allegations of dishonest or fraudulent inducement at the time of transaction. In the present case, the petitioner had no role in the approval or disbursement of the Inter Corporate Deposit and was not involved in the execution of cheques. The court concluded that the petitioner’s inclusion in the case was unwarranted and amounted to an abuse of process.

The High Court invoked its inherent powers under Section 482 of the Code of Criminal Procedure, 1973, to quash the criminal proceedings against the petitioner. It observed: "Continuation of the criminal proceeding against the petitioner will be an abuse of the process of the Court."

Accordingly, the criminal case pending before the 19th Metropolitan Magistrate, Calcutta, was quashed insofar as the petitioner was concerned. The court directed that a copy of the judgment be sent to the trial court for compliance.

Case Title: Girish Kishore Nayak v. The State of West Bengal & Another
Case Number: C.R.R. 1935 of 2017
Bench: Justice Ajay Kumar Gupta

[Read/Download order]