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REPORTABLE

IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1875/2013 (Arising out of Special Leave Petition (Crl.) No. 2509/2012)

M/s. Shree Mahavir Carbon Ltd.                      ...Appellant(s)

Versus

Om Prakash Jalan (Financer) & Anr.                …Respondent(s)

J U D G M E N T

A.K.SIKRI,J.    

1. Leave granted.

2. The  appellant-company  has  filed  a  complaint  registered  as  ICC  

No.62/2008 under Sections 420/406/468/471, Indian Penal Code against the  

respondent herein and two others.  After recording preliminary evidence, the  

learned  Judicial  Magistrate  First  Class  (JMFC),  Salipur,  Orissa  took  

cognizance  of  the  aforesaid  offence  and  issued  summons  to  the  accused  

persons  including  the  respondents.   On   receiving  the  summons,  the  

respondents filed applications under Section 482 of the Code of Criminal -

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Procedure with a prayer that orders dated 9.6.2008 by the learned JMFC  

taking cognizance of  the complaint  be quashed.   It  was pleaded that  the  

complaint  was  with  regard  to  rendition  of  accounts  maintained  by  the  

accused persons  in  respect  of  business  between the  complainant  and the  

accused persons and therefore the dispute was of civil  nature.  The High  

Court has allowed the said application thereby setting aside orders taking  

cognizance  of  the  offence.   It  is  this  order  which  is  challenged  by  the  

appellant-complainant in these proceedings.

3. The impugned order is two page order. After taking note of facts in  

one paragraph, the High Court has allowed the application and quashed the  

order taking cognizance of the offence and the discussion leading to this  

judgment is contained in the following paragraph:

“On perusal of the nature of allegations made in the complaint  petition and the statements given by the complainant and the  witnesses,  it  is  clearly  disclosed  that  the  dispute  is  civil  in  nature relating to settlement of the accounts between the parties  and no offence is made out.”

4. Questioning the rationality  of  the aforesaid order,  Mr.  Ganguli,  the  

learned  senior  counsel  appearing  for  the  appellant,  took  us  through  the  

various  paragraphs  of  the  complaint  on  the  basis  of  which  he  made  an  

attempt to demonstrate that it was not simply a civil dispute pertaining to -

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settlement of accounts between the parties.  He also argued that the High  

Court had allowed petition filed by the respondent under Section 482,Cr.P.C.  

without  giving  any  reason  inasmuch  as  the  impugned  judgment  hardly  

contained any discussion for arriving at the conclusion that the dispute in  

question was civil in nature.  Learned senior counsel, who appeared for the  

respondent,  though tried to  argue that  conclusion of  the High Court  that  

dispute  was  of  civil  nature,  he  candidly  concededly  that  the  impugned  

judgment does not disclose as to how this finding was arrived at and that it  

was a non-speaking order.  He, thus, submitted that instead of this Court  

examining the issue,  the matter  be relegated  back to  the High Court  for  

hearing  afresh.   Mr.  Ganguly  also  accepted  this  suggestion  of  Mr.  Giri.  

Accordingly, we set aside the impugned judgment and remand the case back  

to  the  High  Court  to  decide  the  same  with  direction  to  hear  afresh  the  

petition filed by the respondent under Section 482 of the Cr.P.C. and decide  

it  on  merits  without  being  influenced  by  the  earlier  view  taken  in  the  

impugned order dated 16.1.2012.

5. Before  we  part  with,  we  would  like  to  observe  that  this  case  

necessitates making certain comments on the importance of rationale legal  

reasoning in support of judicial orders.  From the extracted portion, which is  

the only discussion on the merits of the matter, it can clearly be discerned -

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that what is stated is the conclusion and no reasons are given by the High  

Court for holding that dispute between the parties is civil in nature.  The  

complainant  in  its  complaint  had  made  various  specific  allegations  of  

cheating,  siphoning  of  funds  and  falsification  of  accounts  etc.   In  the  

complaint filed by the appellant, the appellant averred that it is engaged in  

the business of manufacturing and sale of low ash phos metallurgical coke.  

The appellant entered into a tripartite agreement dated 08.04.2003 with Om  

Prakash  Jalan  respondent  No.1  herein  and  Mr.  Rajeev  Maheshwari-

Respondent No.3 herein. In this agreement Respondent Nos.1 and 3 agreed  

to provide sufficient funds for expansion of the coke oven plant owned by  

the appellant and in consideration thereof the respondents were to be allotted  

70% of the existing shares of the appellant company while 30% of its shares  

were to be retained by the existing shareholders. It was also agreed that the  

Board of Directors of the appellant Company would be reconstituted with  

three directors consisting of one nominee of the appellant company, and one  

nominee  each  from the  respondent  companies.  Respondent  No.1  was  to  

become  the  Managing  Director  of  the  Company.   It  was  further  agreed  

between the parties that while the respondent would bring in the additional  

working capital for operation and expansion of the plant but one of the -

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contracting parties shall be entitled to withdraw any profits till such time  

there is enough working capital in the company.

6. It was further agreed that the profit and loss as earned for the new  

expansion  would  be  shared  in  the  same  ratio  till  31st March  2004  and  

thereafter on the total plant would also be shared in the same ratio.  Pursuant  

to the said agreement the control and management of the appellant company  

and its Coke Oven Plant was virtually taken over by the respondents while  

they remained responsible to both the Company and its existing shareholders  

who have been running the business since the inception of the company till  

the execution of the tripartite agreement.

7. As  per  the  allegation  in  the  complaint,  no  sooner  the  respondents  

assumed control over the business of the appellant company, the respondents  

started indulging in large scale fraudulent transactions for and on behalf of  

the  company,  subjecting  the  appellant  company  to  great  loss  and  

consequences and also foisted civil and criminal liabilities on the company  

as well as its Directors and shareholders. Large amount of money from the  

appellant company’s account was allegedly siphoned out in favour of third  

parties  without  the appellant  company having any transaction with them.  

Large amounts were also  allegedly  deposited  in  the appellant  company’s  

account in cash purportedly received by them from third parties, thus -

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making  the  appellant  company,  its  directors  and  shareholders  liable  for  

violation of laws and commission of crime. It was also alleged that large  

sums of money was also siphoned out from bank accounts of the appellant  

company and paid to third parties without the company entering into any  

transaction with them.

8. In the complaint instances of siphoning of the funds by the accused  

persons  to  its  own  company  have  been  given.   On  this  basis,  the  

appellant/complainant sought to make a complaint that the aforesaid acts of  

the accused persons amounted to offence since punishable under Sections  

419,420,406,486,471 of the IPC.

9. The JMFC after going through the preliminary evidence recorded by  

him had chosen to  take cognizance  of  the matter.  Challenge against  this  

order has been accepted by the High Court it becomes the bounden duty of  

the High Court to give appropriate and sufficient reasons on the basis of  

which it  arrived at a conclusion, the dispute was merely that of accounts  

with no elements of criminality.  We are conscious of the legal position that  

Ingredients of each of the provisions of IPC, which is sought to be foisted  

upon the respondents are to be prima facie established before cognizance of  

the  complaint  is  taken  by  the  Judicial  Magistrate.  However,  when  the  

summoning order is quashed holding that it is a civil dispute, various -

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allegations and averments made in the complaint and preliminary evidence  

led in support thereof has to be appropriately dealt with by the High Court.  

We are not commenting upon the merits of these allegations. However, there  

is no discussion worth the name, in the impugned judgment, as to how and  

on what basis the High Court accepted such a plea of the respondents herein,  

in  recording  its  conclusion  that  it  was  a  case  of  rendition  of  accounts  

simplicitor.

10. After all the High Court was setting aside the order of the Subordinate  

Court by which Subordinate Court had taken cognizance in the matter. This  

could be done after appropriately dealing with the contentions of both the  

parties, more specially when it was first judicial review of the orders of the  

Court below. In  Hindustan Times Ltd. Vs. Union of India;  (1998) 2 SCC  

242, this Court made pertinent observation in the context:

“In  an  article  on  Writing  Judgments,  Justice  Michael  Kirby  (1990)  64 Austr L.J p.691) of Australia, has approached the  problem from the point of the litigant, the legal profession, the  subordinate Courts/tribunals, the brother Judges and the Judge’s  own conscience.  To the  litigant,  the  duty  of  the  Judge  is  to  uphold his own integrity and let the losing party know why he  lost  the  case.  The  legal  profession  is  entitled  to  have  it  demonstrated that the Judge had the correct principles in mind,  had properly applied them and is entitled to examine the body  of the judgment for the learning and precedent that they provide  and for the reassurance of the quality of the judiciary which is  still the centre-piece of our administration of justice. It does not  

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take long for the profession to come to know, including through  - the written pages of published judgments, the lazy Judge, the  Judge  prone  to  errors  of  fact,  etc.   The  reputational  considerations are important for the exercise of appellate rights,  for the Judge’s own self discipline, for attempts at improvement  and  the  maintenance  of  the  integrity  and  quality  of  our  judiciary. From the point of view of other Judges, the benefit  that accrues to the lower hierarchy of Judges and tribunals is of  utmost importance. Justice Asprey of Australia has even said in  Petit v. Dankley (1971) (1) NSWLR 376 (CA) that the failure of  a Court to give reasons is an encroachment upon the right of  appeal given to a litigant.

It was finally stated:

“In our view, the satisfaction which a reasoned judgment  gives to  the losing party or  his  lawyer  is  the test  of  a  good  judgment. Disposal of cases is no doubt important but quality of  the  judgment  is  equally,  if  not  more,  important.  There  is  no  point in shifting the burden to the higher Court either to support  the judgment by reasons or to consider the evidence or law for  the first time to see if the judgment needs a reversal.

In that case, the order of dismissal of the writ petition by  the  High  Court  was  affirmed  by  us  but  the  task  fell  on  the  Supreme Court, to inform the appellant why it had lost the case  in the High Court.”

11. In the present case, we have avoided to do this exercise and have not  

gone into the merits of the case to find out whether the conclusion of the  

High Court is correct or not, as the counsel for both the parties have agreed  

for remand of the matter.

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12. It  is  no  where  suggested  by  us  that  the  judgment  should  be  too  

lengthy or prolix and disproportionate to the issue involved.  However, it is  

to be borne in mind that the principal objective in giving judgment is to  

make  an  effective,  practical  and  workable  decision.  The  court  resolves  

conflict by determining the merits of conflicting cases,  and by choosing  

between notions of justice, convenience, public policy, morality, analogy,  

and takes into account the opinions of other courts or writers (Precedents).  

Since  the  Court  is  to  come  to  a  workable  decision,  its  reasoning  and  

conclusion  must  be  practical,  suit  the  facts  as  found  and  provide  and  

effective, workable remedy to the winner.

13. We are of the opinion that while recording the decision with clarity,  

the Court is also supposed to record sufficient reasons in taking a particular  

decision or arriving at a particular conclusion.  The reasons should be such  

that they demonstrate that the decision has been arrived at on a objective  

consideration.

14. When we talk of giving “reasons” in support of a judgment, what is  

meant by “reasons”?  In the context of legal decision making, the focus is to  

what makes something a legal valid reason.  Thus, “reason would mean a  

justifying  reason, or  more  simply  a  justification  for  a  decision  is  a  

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consideration, in a non-arbitrary ways in favour of making or accepting that  

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decision.  If there is no justification in support of a decision, such a decision  

is without any reason or justifying reason.

15. We are not entering into a jurisprudential debate on the appropriate  

theory  of  legal  reasoning.  It  is  not  even  a  discourse  on  how  to  write  

judgments. Our intention is to simply demonstrate the importance of legal  

reasoning in support of a particular decision. What we have highlighted is  

that instant is a case or arriving at a conclusion, in complete absence of  

reasons,  what  to  talk  of  adequate  or  good  reasons  that  justifying  that  

conclusion.

16. In the given case, it was required by the High Court to take note of  

the arguments of the complainant on the basis of which complainant insist  

that ingredients of the particular offences alleged are prime facie established  

justifying  the  cognizance  of  the  complaint  and  the  arguments  of  the  

respondents herein on the basis of which respondents made an endeavour to  

demonstrate that it was a pure civil dispute with no elements of criminality  

attached.  Thereafter, the conclusion should have been backed by reasons as  

to why the arguments of the complainant are merit  less and what is the  

rationale basis for accepting the case of accused persons. We hope that this  

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aspect would be kept in mind by the High Court while deciding the case  

afresh.   

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17. Accordingly,  this  appeal  is  allowed and the impugned order is set  

aside with direction as aforesaid.  No costs.

.…………………………..J.       [K.S.Radhakrishnan]

…………………………..J.       [A.K.Sikri]

New Delhi, October 28, 2013   

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