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Salimbhai Hamidbhai Menon Vs Niteshkumar Maganbhai Patel & Anr (2021): Issuing Oral Directions Restraining Arrest Does Not Form A Part Of The Judicial Record And Must Be Eschewed

Umamageswari Maruthappan ,
  02 September 2021       Share Bookmark

Court :
The Supreme Court of India
Brief :
A dispute arose between the two partners of a partnership firm named Calla Associates. The main allegations of the Appellant are that the First Respondent had forged relevant documents and had misappropriated the amount invested by him. The Respondent agreed for a settlement, however, the amount accepted to be paid to the Appellant, by virtue of the settlement, was not paid. The Appellant approached the Gujarat High Court, and again the Respondents requested for a settlement and the matter was adjourned. However, before the second hearing, the First Respondent was arrested. The Single-Judge Bench directed to release the Respondent on the ground that he had previously issued an oral direction restraining his arrest.
Citation :
LL 2021 SC 406


Date of Judgement:
31st August 2021

Coram:
Justices D. Y. Chandrachud and M. R. Shah

Parties:
Petitioner: Salimbhai Hamidbhai Menon
Respondents: Niteshkumar Maganbhai Patel & Anr.

Subject

The judgement analysed the validity of oral directions issued by the Gujarat High Court.

Overview

  • A partnership deed was signed between the first Respondent and the Appellant, under which a firm, named Calla Associates, was established in 2010.
  • The share of the first Respondent and Appellant in the profit/loss of the firm was decided to be 55% and 45% respectively.
  • In 2017, a dispute had arisen between both the parties, and Appellant contended that the Respondent had misappropriated the amount invested by him. In his reply, the Respondent stated that the partnership had been mutually dissolved and relevant documents had been executed to that effect.
  • In January 2018, the Appellant issued a legal notice complaining dishonor of two cheques of Rs. 1. 47 crores and Rs. 81. 31 Lakhs respectively. In the same month, he also communicated to the bankers requesting them to cease all the transactions in the account of the partnership firm.
  • Thereafter, the Appellant received a communication from HDFC Bank that the bank had received a document, alleged to be executed on 8th September 2017, by which the Appellant had relinquished all his rights in the partnership firm in favour of the First Respondent.
  • The Appellant filed a complaint and a preliminary enquiry was conducted by the Investigating Officer at JP Road Police Station. The matter was disposed of when the Respondent agreed to make the necessary settlements in the presence of a mediator.
  • Accordingly, it was agreed that the Respondent should pay Rs. 26.03 Crores to the Appellant and that the partnership too has to be dissolved. However, except for one of Rs.50 Lakhs, all other cheques were dishonoured.
  • Aggrieved by this, the Appellant registered a complaint under the Negotiable Instruments Act. Another MoU was signed for payment of the remaining sum, however, it failed again. The land which was alleged to have been transferred to the Appellant was non-marketable.
  • Meanwhile, the Investigating Officer confirmed that the First Respondent had forged the document dated 8th September 2017.
  • The Appellant registered an FIR, before the Gujarat High Court, under Sections 405, 420, 465, 467, 468 and 471 of the Indian Penal Code. The First Respondent filed a petition under Section 482 of the Code of Criminal Procedure, seeking the High Court’s direction to quash the said FIR.
  • When the matter was heard by a Single Judge, the Respondents submitted their wish to go for a settlement, and the Court accordingly, adjourned the matter to 10th February 2021.
  • However, the Respondent was arrested on 8th March. When the matter was again heard on 9th March, the Counsel for the Respondent submitted that the Court had made an oral direction restraining the arrest of the Respondent, and therefore, it is expedient to release the First Respondent.
  • The submission was not denied by the Appellant, and consequently, the Single Judge ordered the release of the First Respondent. The Court cited two reasons for the same. One, that the proceedings were still pending before it, and two, that both the parties have set the criminal machinery in action.
  • The Appellant preferred an appeal challenging this impugned order.

Issues Involved

  • Whether the High Court can pass oral directions, restraining the arrest of the accused, without recording any reasons?

Important Provisions

  • Section 482 of Cr. P. C.: Section 482 gives the High Courts an inherent power to release an accused who becomes an approver on bail in exceptional circumstances to give effect to any order under this Code, or to prevent the abuse of the court process, or to secure the ends of justice. This inherent power, however, must be exercised with due care and caution, and only when such exercise is justified by the tests specifically laid down in the Section itself: Talab Haji Hussain v. Madhukar Purshottam Mondkar (1958).

In Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmur v. State of Gujarat (2017), the Supreme Court observed that the provision does not confer new powers but only recognises and preserves powers which are inherent in the High Court.

Judgement Analysis

  1. The Supreme Court termed the oral directions issued by the Gujarat High Court as "irregular" which has the possibility to cause serious misgivings. It observed that it is the text of a written order that is binding and enforceable. Oral directions cannot be a part of the judicial record, and in absence of a judicial order, the Investigating Officer would not be obligated to stay the arrest. If accepted otherwise, then that would set a dangerous precedent and would voluntarily open doors to grave abuse. (Paragraph Nos. 23 and 24)
  2. The Court also made its observations with respect to the criteria for restraining a person's arrest. It was stated that the High Court's direction preventing the arrest of the First Respondent constitutes serious deficiency as it failed to refer to the allegations made in the FIR. (Paragraph Nos. 28 and 29)
  3. The Court disapproved the interim orders of the High Court granting the stay of arrest without assigning reasons and held that the impugned order of the High Court could not sustain on the touchstone of the principles which have been consistently laid down by it. (Paragraph No. 30)
  4. In Para. 31, the Court adduced its observations in Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmur v. State of Gujarat (2017) wherein the Court formulated ten governing principles to guide the High Courts in their exercise of powers under Section 482 of the CrPC.
  5. With these observations, the Supreme Court set aside the impugned order of the High Court and granted liberty to the Court to proceed with the petition under Section 482 of the CrPC, which is pending before it for consideration.

Conclusion

The power conferred on the High Courts under Section 482 of the CrPC is inherent and has no limits. But with more power, there comes a need for the exercise of more care and caution while invoking this power. This inherent jurisdiction can be exercised to quash proceedings instituted against the accused in a proper case, and only on the three grounds mentioned above. It is also important for the courts to analyse on whether it can entertain a suit under this Section depending on the circumstances of the case. This should be mandatorily considered before it grants any interim order. In all, a petition under this Section needs careful perusal for admission. However, the Single Judge, in the present case, failed to adhere to all the guidelines prescribed by the Top Court at various instances. The Supreme Court had rightly quashed the order and observed that while directing that the proceedings are to be listed on a future date, the High Court is undoubtedly not expected to deliver a detailed judgment elaborating upon reasons as to why a stay of arrest has been granted.

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