Punjab & Haryana High Court Refuses to Quash FIR in Corporate Fraud Case, Holds Allegations of Forgery and Cheating Warrant Trial
Case Name: Ms. Sonica Malhotra and Others v. State of Punjab and Others; Balwant Sharma and Another v. State of Punjab and Others
Date of Judgment: January 6, 2015
Citation: CRM-M No. 34793 of 2011 & CRM-M No. 37911 of 2011
Bench: Hon’ble Mrs. Justice Daya Chaudhary
Held: The Punjab & Haryana High Court dismissed petitions filed under Section 482 CrPC seeking quashing of FIR No. 180 dated November 4, 2011, registered under Sections 420, 467, 468, 471, and 120-B IPC at Police Station Division No. 4, Jalandhar. Justice Daya Chaudhary held that the allegations of forgery, fabrication of corporate records, and fraudulent manipulation of minutes of meetings of a private company disclosed prima facie offences under the Indian Penal Code and could not be treated as mere civil disputes. The Court ruled that criminal proceedings could proceed simultaneously with civil remedies and that the FIR could not be quashed merely because the case involved corporate and commercial transactions.
Summary: The petitioners, members of the Malhotra Group, sought quashing of the FIR lodged by Gurcharan Singh Syal of the Syal Group concerning alleged manipulation of board resolutions and minutes of meetings of Krishna Real Estate Enterprises Pvt. Ltd., a company jointly owned by both groups. The complainant alleged that the accused fabricated minutes of meetings allegedly held between September 1 and September 30, 2011, without notifying the Syal Group and that some signatories were not even present at the meetings. It was alleged that false records were filed with the Registrar of Companies to give effect to the manipulated resolutions. The petitioners contended that no offence was made out under the IPC, that the matter was purely civil in nature, and that only proceedings under Section 628 of the Companies Act could apply. They argued that the FIR was an abuse of process and relied on R.P. Kapur v. State of Punjab and State of Haryana v. Bhajan Lal to seek quashing.
The Court, however, noted that earlier petitions challenging the same FIR had already been dismissed, with liberty granted to raise objections before the trial court at the stage of framing of charge. The Supreme Court had also declined to interfere. Justice Chaudhary observed that the plea that only the Companies Act applied was untenable, as the alleged offences under the IPC involved distinct ingredients — including forgery and cheating — which could be tried separately. The Court also rejected the contention that the absence of a preliminary inquiry rendered the FIR invalid, finding that the delay in filing was explained and that the nature of allegations required judicial scrutiny during trial.
Emphasizing that criminal intent could not be ruled out merely because the dispute arose in a corporate setting, the Court cited precedents recognizing that civil and criminal proceedings can proceed simultaneously when distinct offences are disclosed. Justice Chaudhary further held that issues regarding the validity or authenticity of the documents would be decided by the trial court, not in a quashing petition.
Decision: Dismissing the petitions, the High Court held that the FIR disclosed cognizable offences and that interference under Section 482 CrPC was unwarranted. The Court concluded that the petitioners were free to raise all defences before the trial court during consideration of the charge but that the criminal proceedings could not be terminated at the threshold.