The High Court of Kerala, in a petition seeking to quash criminal proceedings, held that offering a property as security for a business investment while failing to disclose existing encumbrances on it prima facie reveals an intention to deceive from the very inception.
Justice G. Girish, while adjudicating a petition filed under Section 482 Cr.P.C, allowed the plea in part, quashing the charges against the second accused (Jaison Thomas) but dismissing the plea of the first accused (Biju Balakrishnan).
The petitioners had sought to quash the proceedings in C.C No.811/2019 pending before the Judicial First Class Magistrate Court-III, Neyyattinkara, where they stand accused of offences under Sections 406 (Criminal Breach of Trust) and 420 (Cheating) read with Section 34 of the I.P.C.
Background of the Case
The prosecution case, originating from Crime No.1348/2018 of Balaramapuram Police Station, alleges that the petitioners fraudulently and dishonestly induced the de facto complainant (Anil Marangoli Thomas) to finance a business involving the transportation of sand, rocks, and boulders from Thoothukkudy to Chennai.
The petitioners allegedly assured the complainant a profit share of Rs. 1.5 Lakhs per month. Based on this assurance, the complainant advanced a total of Rs. 79,63,000/- for the business.
According to the prosecution, the petitioners failed to honour the assurance regarding the profit share. Furthermore, it was discovered that a landed property in the name of the first petitioner, which was offered as security for the advanced amount, was already subject to encumbrance with the KSFE Kudappanakkunnu Branch in connection with chitty transactions and loans availed by the first petitioner.
The final report also alleged that the petitioners obtained four cheque leaves for Rs. 5,00,000/- each from the complainant, undertaking to supply metals of the equivalent value, but failed to abide by this undertaking.
Petitioners’ Arguments
The petitioners contended that the transaction with the second respondent (de facto complainant) was “purely of civil nature.” They argued that, based on the facts and circumstances, none of the alleged offences are attracted and they are not liable to be proceeded against criminally.
Court’s Analysis and Observations
The Court, after hearing counsel for the petitioners, the de facto complainant, and the Public Prosecutor, examined the Annexure-III partnership deed dated 10.08.2017 executed between the first petitioner and the second respondent.
The Court noted that the deed clarified the second respondent’s role was “only as a financier” and the first petitioner’s role was “to carry out the business operations.” The deed also contained provisions for the Rs. 1,50,000/- remuneration and stated that the first petitioner’s landed property was “pledged to enable the second respondent to recover the unpaid dues and make good the breach of agreement.”
Justice Girish observed that while the agreement and business transactions “partake the character of contractual obligations of civil nature,” the “situation here is different.”
The Court highlighted that the property offered as security by the first petitioner was “found to have been encumbered with the KSFE… making it impossible for the second respondent to proceed against the said property for the realisation of the unpaid dues.”
This aspect, “Coupled with” the failure to provide the profit share and the failure to supply metals after receiving cheques worth Rs. 20,00,000/-, made the transaction “one of dubious nature.”
Analyzing the culpability of the first petitioner, the Court made a key observation: “It is pertinent to note that the conduct of the first petitioner offering as security his landed property which was subjected to encumbrance and liability, without disclosing the aforesaid liability, itself reveal that from the very inception the first petitioner intended to deceive the second respondent.”
The Court concluded that the first petitioner “has dishonestly misappropriated the huge amount which he obtained from the second respondent” and that the offences under Sections 420 and 406 I.P.C “are clearly made out as against the first petitioner.”
However, the Court found no case against the second petitioner (Jaison Thomas). The judgment stated, “Apart from the mere fact that the second petitioner is a signatory as a witness to Annexure-III partnership agreement, there is absolutely nothing on record to show his involvement in the alleged acts of cheating and criminal breach of trust.”
The Court further held: “It is not possible to say that the act of the second petitioner signing Annexure-III partnership agreement as a witness would disclose his complicity in the offences alleged in this case.” It dismissed the “mere statements” of the complainant against the second petitioner as insufficient to fasten criminal liability.
Final Decision
The High Court allowed the petition in part. The proceedings against the second petitioner (Jaison Thomas) in C.C No.811/2019 were quashed.
The prayer of the first petitioner (Biju Balakrishnan) to quash the proceedings against him was disallowed. The Court directed the learned Magistrate to “proceed with the case as against the first petitioner/first accused.”
