# Sharad Arora & Anr v. State of U.P. & Ors

- **Citation:** (2022) 5 ILRA 1248
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-04-12
- **Case number:** Criminal Misc. Writ Petition No. 2672 of 2022
- **Bench:** Ashwani Kumar Mishra, Rajnish Kumar
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/sharad-arora-anr-v-state-of-u-p-ors-48472
- **Pages:** 14

## Headnote

Law
-
Constitution
of
India,1950
-
Article
226
-
Criminal
Procedure Code, 1973 - Sections 156 (3),
438 & 439 - Indian Penal Code, 1860 -
Sections 24, 25, 120-B, 406, 409, 420,
467, 468, 471 & 477-A - Arbitration and
Conciliation Act, 1996 - Sections 9 & 11 -
Companies Act, 2013 - Sections 206 & 224
- Writ Petitions - for quashing the FIR on the
ground of non-holding preliminary enquiry as
well as alleged offence is comes under
commercial dispute thus ought to be resolved
under Arbitration proceeding - both proceeding
arising out of Civil & Criminal offences can be
tried simultaneously - holding of preliminary
inquiry in every case of alleged commercial
offence would not be mandatory - FIR contains
ex-facie disclosure of cognizable offence such
information would have to be verified during
investigation - hence writ petition fails to
challenge the FIR.(Para - 17, 28, 29)

(B) Criminal Law - Constitution of India,
1950 - Article 226 - Criminal Procedure
Code, 1973 - Sections 156 (3), 438 & 439 -
Indian Penal Code, 1860 - Sections 24, 25,
120-B, 406, 409, 420, 467, 468, 471 &
477-A - Arbitration and Conciliation Act,
1996- Sections 9 & 11 - Companies Act,
2013 - Sections 206 & 224 - Writ Petitions -
for quashing the order/direction to register the
FIR - on the ground that alleged offence is
being a commercial dispute ought to be resolved
under Arbitration proceeding - preliminary
objection about maintainability of writ petition -
5 All. Sharad Arora & Anr. Vs. State of U.P. & Ors.
1249
court held that - impugned direction to
registered FIR is interlocutory in nature - against
which Revision would be maintainable - not a
writ petition under Article 226
- order
accordingly. (Para - 22, 28, 33, 37, 39)

Writ Petition Dismissed. (E-11)

List of Cases cited:-

## Text

_Characters 0–39,958 of 47,011. This is a partial read: ask again with offset=39958 for what follows._

1248 INDIAN LAW REPORTS ALLAHABAD SERIES
the trial court suffers from perversity or the
conclusions drawn by it were impossible if
there was a correct reading and analysis of
the evidence on record. To say it
differently, unless the High Court finds that
there is complete misreading of the
material evidence which has led to
miscarriage of justice, the view taken by
the trial court which can also possibly be a
correct view, need not be interfered with.
This self-restraint doctrine, of course, does
not denude the High Court of its powers to
reappreciate the evidence, including in an
appeal against acquittal and arrive at a
different firm finding of fact."

23. A perusal of the grounds taken in
the memo of appeal indicates that the order
of the learned Court below has not been
assailed on the ground that it is perverse.
During
the
submission
also,
learned
Amicus Curiae could not demonstrate that
the findings of the learned Court below are
perverse.

24. In these circumstances, in view of
the law laid down by Hon'ble Supreme
Court in the case of Jayamma (supra), we
find that the appellant has failed to make
out any ground for admission of the appeal.
The appeal is accordingly dismissed at the
stage of admission itself.
----------
(2022)05ILR A1248
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 12.04.2022

BEFORE

THE HON'BLE ASHWANI KUMAR MISHRA, J.
THE HON'BLE RAJNISH KUMAR, J.

Criminal Misc. Writ Petition No. 2672 of 2022
AND
Criminal Misc. Writ Petition No. 3000 of 2022
AND
Criminal Misc. Writ Petition No. 3001 of 2022
AND
Criminal Misc. Writ Petition No. 3051 of 2022

Sharad Arora & Anr. ...Petitioners
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioners:
Sri Sudhanshu Kumar, Sri Rajrshi Gupta, Sri
Dileep Kumar (Sr. Adv.)

Counsel for the Respondents:
A.G.A., Ms. Katyayini, Sri Krishnarjun, Sri
Aman Lekhi (Sr.Adv.)

(A)
Criminal
Law
-
Constitution
of
India,1950
-
Article
226
-
Criminal
Procedure Code, 1973 - Sections 156 (3),
438 & 439 - Indian Penal Code, 1860 -
Sections 24, 25, 120-B, 406, 409, 420,
467, 468, 471 & 477-A - Arbitration and
Conciliation Act, 1996 - Sections 9 & 11 -
Companies Act, 2013 - Sections 206 & 224
- Writ Petitions - for quashing the FIR on the
ground of non-holding preliminary enquiry as
well as alleged offence is comes under
commercial dispute thus ought to be resolved
under Arbitration proceeding - both proceeding
arising out of Civil & Criminal offences can be
tried simultaneously - holding of preliminary
inquiry in every case of alleged commercial
offence would not be mandatory - FIR contains
ex-facie disclosure of cognizable offence such
information would have to be verified during
investigation - hence writ petition fails to
challenge the FIR.(Para - 17, 28, 29)

(B) Criminal Law - Constitution of India,
1950 - Article 226 - Criminal Procedure
Code, 1973 - Sections 156 (3), 438 & 439 -
Indian Penal Code, 1860 - Sections 24, 25,
120-B, 406, 409, 420, 467, 468, 471 &
477-A - Arbitration and Conciliation Act,
1996- Sections 9 & 11 - Companies Act,
2013 - Sections 206 & 224 - Writ Petitions -
for quashing the order/direction to register the
FIR - on the ground that alleged offence is
being a commercial dispute ought to be resolved
under Arbitration proceeding - preliminary
objection about maintainability of writ petition -
5 All. Sharad Arora & Anr. Vs. State of U.P. & Ors.
1249
court held that - impugned direction to
registered FIR is interlocutory in nature - against
which Revision would be maintainable - not a
writ petition under Article 226
- order
accordingly. (Para - 22, 28, 33, 37, 39)

Writ Petition Dismissed. (E-11)

List of Cases cited:-

1. Lalita Kumari Vs Govt. of U.P. & ors. (2014 (2)
SCC 1),

2. Priyanka Srivastava & anr. Vs St. of U.P. & anr.
(2015 (6) SCC 287),

3. Father Thomas Vs St. of U.O.I. & ors. (2011
Criminal Law Journal 2278),

4. Ajay Malviya Vs St. of U.P. & ors. (2000 Vol.
14 ACC 435),

5. HDFC Securities Ltd. & ors. Vs St. of
Maharashtra & anr. (2017 vol. 1 SCC 640),

6. St. of Har.Vs Bhajan Lal (1992 Suppl. (1) SCC
335),

7. Priti Saraf & anr. Vs St. of NCT of Delhi & anr.
(2021 SCC online SC 206),

8. St. Vs Navjot Sandhu (2005 (11) SCC 600),

9. Sangeetaben Mahendrabhai Patel Vs St. of
Guj. (2017 (7) SCC 621),

10. Monika Kumar (Dr.) Vs St. of U.P. (2008) (8)
SCC 781),

11. R. Kalyani Vs Janak C Mehta (2009) (1) SCC
516.

(Delivered by Hon'ble Ashwani Kumar
Mishra, J.)

1. Jurisdiction of this Court under
Article 226 of the Constitution of India is
invoked in the present bunch of writ
petitions, filed with the prayer to quash the
First Information Report in Case Crime
No.47 of 2022, under Sections 406, 409,
420, 467, 468, 471, 477-A and 120-B IPC,
Police
Station
Phase-I,
District
Commissionerate Gautam Buddh Nagar, as
also the order dated 18.2.2022 passed by
the Chief Judicial Magistrate, Gautam
Buddh Nagar directing lodging of aforesaid
FIR, primarily on the ground that offences
alleged therein are essentially in the nature
of commercial dispute, which ought to have
been resolved by way of arbitration and
lodgement of first information report is an
abuse of the process of law.

2. The informant company and its
authorized signatory i.e. respondent no. 3 & 4
have appeared on a caveat and have objected
to the maintainability of the writ petition, at
this
stage,
urging
that
prima
facie
commissioning of cognizable offence is
disclosed in the F.I.R. and the investigating
agencies be allowed to proceed with the
investigation and the rights and contentions
advanced, on behalf of the petitioners, be left
open for its examination upon conclusion of
investigation. It is stressed that extent of
offence since is yet to be determined,
therefore, investigation into allegations are
necessary
before
embarking
upon
adjudication of questions raised in these writ
petitions. Arguments accordingly have been
concluded by the respective counsel for the
parties
on
the
aspect
relating
to
entertainability of the present writ petition, at
this stage, and the need to interfere with the
impugned First Information Report, as of
now. The writ petitions, accordingly, are
being disposed off by this common judgment
with Writ Petition No.2672 of 2022 (Sharad
Arora and another Vs. State of U.P. through
Principal Secretary, Home, Lucknow and
others) treated as the leading case.

3. We have heard Sri Dileep Kumar,
learned Senior Counsel assisted by Sri
Sudhanshu Kumar, Sri Manish Singh, Mr.
1250 INDIAN LAW REPORTS ALLAHABAD SERIES
Rajrshi Gupta & Sri Ramesh Chandra
Yadav for the petitioners, Sri Arunendra
Singh, learned AGA for the State and Sri
Aman Lekhi learned Senior Counsel
assisted by Sri Krishnarjun, Ms. Katyayini,
Ms. Ranjana Roy Gaurai, Sri Ujjwal Jain,
Ms. Niharika Behl and Smt. Diksha Mishra
for the respondents.

4. Brief facts giving rise to the filing of
instant writ petitions are that the petitioners in
leading writ petition are the founder promoters
and directors of a company named ''Sensorise
Digital Services Private Limited (hereinafter
referred to as ''SDSPL'), which is engaged in
the business of providing ''mission critical
connectivity services' for Machine-to-Machine
(M2M)/Internet of Things (IoT) by utilizing a
technology, which is claimed to be open and
fully standardized as per available global
standards
and
registered
as
trademark
''QoSim'. This technology is claimed to have
existed since late 1990s and was commonly
used for ''plastic roaming'. SDSPL QoSim is
stated to be a product based on the said
solution concept and according to petitioners
the product being standard based product has
no confidential technology attached to it.
SDSPL's Intellectual Property (IP) is restricted
to ''QoSim' trademark. When used in the
AIS140 compliance use cases, the SDSPL
QoSim is certified alongwith the device that it
is embedded in and the certification belongs to
the Device partner. SDSPL buys SIM cards
from IIIrd Party manufacturers who own the
IP and all the software on the card apart from
the
pre-requisite
certifications
for
the
manufacturing process are purchased from
outside. SDSPL's customers allegedly are
governmental or non-governmental agencies
and the services are provided under well
defined service level agreements.

5. SDSPL is otherwise a start-up
company. It appears that the company
needed infusion of funds to grow further
and came in contact with the informant,
which also is a company in the name of
''KKH Finvest Private Limited' (hereinafter
referred to as the ''investor company'). It is
claimed that after due diligence the
officials of informant company entered into
a memorandum of understanding (MoU)
with the petitioner company in April, 2016,
which was followed with execution of
Shareholding
and
Share
Subscription
Agreement (hereinafter referred to as
''SSSHA') between the SDSPL and the
informant company.

6. The informant company agreed to
infuse funds to the extent of Rs. 9 crore in
return for 50% share in SDSPL and 49%
voting rights. It is admitted that the amount
of Rs. 9 crore has been invested by the
informant company, although it is alleged
that the deposit was somewhat delayed. It
is also alleged that the petitioners were
forced to sign a revenue sharing agreement
with M/s Rosmerta Technologies Limited
and by now approximately Rs. 8 crores
have been paid to the company for and on
behalf of informant company.

7. The management and control of
SDSPL apparently was split between
two factions i.e. the petitioners, who are
the
promoter
directors,
and
the
informant
company
and
their
relationship was being regulated by the
terms of SSSHA. SDSPL continued to
function in such manner for the last 5-6
years and various decisions came to be
taken in respect of its affairs. It emerges
that growth and projections disclosed to
informant company, on the basis of
which it infused funds in SDSPL, fell
well short and differences have arisen
between the two groups leading to the
lodging of the impugned FIR.
5 All. Sharad Arora & Anr. Vs. State of U.P. & Ors.
1251

8. SSSHA is on record of the writ
petition as Annexure 7. Clause 20.2 of it
provides for arbitration and Clause 20.2.1
contains an agreement between the parties
that all disputes or differences between
them in respect of or concerning or
connected
with
the
interpretation
or
implementation of SSSHA including its
breach and termination shall at first
instance be resolved through negotiation
failing which the dispute be referred to
arbitration
in
accordance
with
the
Arbitration and Conciliation Act, 1996
(hereinafter referred to as the Act of 1996).
The investor company instituted a petition
under Section 9 of the Act of 1996 before
the Delhi High Court on 13.8.2021
levelling various allegations against the
SDSPL and sought various reliefs including
deferment of meetings till the disputes are
resolved by the arbitral tribunal; restraining
the respondents (petitioners herein) from
deciding any of the agenda items outlined
in the notice of adjournment dated
10.8.2021 etc. The prayer clause is
exhaustive and included a direction to
conduct an immediate audit of intellectual
property of SDSPL; a direction that records
of SDSPL including minutes of meetings of
the Board of Directors and general
meetings be corrected to reflect the true and
correct
proceedings;
a
direction
for
investigation for breach of Clause 15 of
SSSHA and not to take any managerial
decision in respect of the subsidiary of
SDSPL i.e. Sensorise Smart Solutions
Private Limited (hereinafter referred to as
the ''Subsidiary Company').

9. Aforesaid application filed under
Section 9 of the Act of 1996 was registered
as OMP (I)(COMM) 276 of 2021 before
the Delhi High Court and the proceedings
were deferred on 6.9.2021 on the statement
of the parties that they are in conciliation
proceedings and in all likelihood the matter
would be settled. On 27th September, 2021
the Court was informed by the investor
company that a communication is received
from Managing Director of SDSPL about
proposed Board meeting having been
cancelled. The informant company got the
petition under Section 9 of the Act of 1996
withdrawn and all pending applications
stood disposed off, accordingly.

10. It is on record that no steps were
taken thereafter by the informant company
to invoke the arbitration clause and no
application
was
otherwise
filed
for
appointment of arbitrator under Section 11
of the Act of 1996.

11. Instead, an application came to be
filed on 24.1.2022 under Section 156(3)
Cr.P.C.
before
the
Chief
Judicial
Magistrate, Gautam Buddh Nagar by the
informant company against the promoter
directors of SDSPL and its Chief Strategic
Officer and other members of its Key
Managerial Team and M/s Sim. Things
Private Limited and its founders/directors
and another company named M/s Iotivity
Communications Private Limited and its
directors Debdip Saha and Shirsanka Saha,
who was earlier a member of Key
Managerial Team of SDSPL and had
opened a new venture, alleging that the
opposite parties in the application have
committed cognizable offences in the
manner disclosed in the application and the
concerned police officials be directed to
register FIR against the opposite parties
under various sections of IPC.

12. Chief Judicial Magistrate after
hearing the applicant called for comments
from the concerned Police Station on the
question as to whether any FIR has been
lodged in the matter, and upon being
1252 INDIAN LAW REPORTS ALLAHABAD SERIES
informed in the negative, proceeded to
direct lodging of the FIR vide his order
dated 18.2.2022. This order of Chief
Judicial Magistrate is also challenged in the
present writ petition.

13. Before proceeding to record the
submissions advanced in the matter and
dealing with it, on merits, it would be
appropriate to note the FIR allegations, for
proper appreciation of issues raised in this
bunch of writ petitions.

14. Informant has alleged in the FIR
that founders, promoters and other officers
and persons associated with the SDSPL
have committed corporate fraud in a well
calculated and pre meditated manner
against the informant company. The
informant company was invited to join as
strategic partner with the clear assurance
that the SDSPL and its key management
team would continue to operate for the
benefit of SDSPL and shall ensure
confidentiality and would not engage in
any competing business for a reasonable
period after their termination with the
business activity of SDSPL and based upon
such representation succeeded in ensuring
investment of Rs.9 crores from the
informant company. It has later transpired
that false representations were made to
induce
the
informant
company
into
investing funds inasmuch as from the very
beginning the intention of petitioners was
to cheat and not to act for the benefit of
SDSPL. Having succeeded in their efforts
to cheat the informant company by such
inducement, the accused persons have
conspired and connived to cheat the
informant company by breaching the
fiduciary duties owed as per SSSHA and
misappropriated the know how and assets
of SDSPL to make wrongful gain for
themselves, jointly and severally. The IP
(Intellectual Property) and its exclusive
technology were diverted to another
company formed with the active assistance
and collaboration of accused and denied
access to it, including its source code to the
informant company. It is asserted that
accused
were
never
interested
in
developing the business of SDSPL and
from the very beginning acted in a planned
way to conspire for undue gain for
themselves while causing losses for the
informant company. For such purposes the
minutes of meetings of SDSPL were also
forged and fabricated and the business
transacted
in
such
meetings
were
misreported. The wife of first petitioner and
father of second petitioner in the leading
petition have set up a rival business in the
name of M/s SIM Things Private Limited
to engage in identical business activities.
Business of SDSPL has been allegedly
diverted to ''SIM Things' thereby duping
the informant company. It is further alleged
that the extent of conspiracy and entirety of
wrongful gains by accused persons is
beyond the means of informant company to
ascertain and can be determined only in a
thorough police investigation. Dishonest
inducement,
cheating,
falsification
of
company records to make wrongful gains
etc. is thus sought to be inquired into in the
FIR so as to punish the accused persons.

15. It is also mentioned in the FIR
that despite such facts having been
highlighted in the company meetings
nothing was done and rather forged
minutes were prepared showing presence of
representative of informant company while
he was hospitalized. It is further alleged
that instead of rectifying the mistake the
accused misled the informant company to
enter into conciliation and utilized this time
to perpetrate such fraud. The complaint
further alleges that scale of fraud can be
5 All. Sharad Arora & Anr. Vs. State of U.P. & Ors.
1253
determined
only
during
course
of
investigation and as the corporate office of
SDSPL situates in NOIDA, as such the FIR
needs to be registered at the concerned
police station at NOIDA, Gautam Buddh
Nagar and investigations be made to punish
the accused for offences under Sections
406, 409, 420, 467, 468, 471, 477-A, 34
and 120-B IPC.

16. Learned Senior Counsel for the
petitioner contends that allegations made in
the FIR at best discloses existence of a
commercial dispute between two factions
of the company i.e. SDSPL and criminal
investigation is not warranted for its
resolution. It is urged that a preliminary
enquiry ought to have been conducted in
the matter by the magistrate before
ordering registration of FIR in this case.
Submission is that the order of magistrate
under Section 156(3) Cr.P.C. is a judicial
order and preliminary enquiry warranted in
a commercial dispute having not been
conducted in view of the law laid down by
the Supreme Court in Lalita Kumari Vs.
Government of U.P. and others, (2014) 2
SCC 1, and Priyanka Srivastava and
another Vs. State of U.P. and another,
(2015) 6 SCC 287, as such the order of the
magistrate directing lodgement of FIR is
liable to be quashed. It is further urged that
none of the ingredients of various sections
of IPC, referred to in the FIR, are disclosed
from its bare perusal, inasmuch as there is
no entrustment of any property so as to
attract sections 406 and 409 IPC; no
specific allegation of making false account
to attract section 477A; ingredients of
''dishonestly' and ''fraudulently' defined in
section 24 and 25 are not made out as
neither any specific allegation of wrongful
gain nor making of any forged signature is
substantiated; ingredients of section 467
regarding making of false document also is
not substantiated. Learned Senior Counsel
lastly submitted that the informant is
attempting to give a colour of criminal
offence to civil dispute and allegations
since at best makes out a case of breach of
contract and non-maintenance of correct
records of company for which adequate
adjudicatory process is provided under
Chapter XIV of the Companies Act, 2013
from sections 206 to 224 as such the FIR
deserves to be quashed.

17. Sri Aman Lekhi, learned Senior
Counsel for the respondents, per contra,
submits that holding of preliminary enquiry is
not mandatory where allegations are specific
with regard to commissioning of cognizable
offence and the argument to the contrary
proceeds on misreading of the referred
judgments; same set of facts may give rise to
a civil dispute and also criminal offence, both
of which can be tried simultaneously,
provided ingredients of an offence are
disclosed. It is further submitted that specific
allegations with regard to commissioning of
cognizable offence are made in the FIR and
defence of petitioners need not be examined
at the threshold, in petition under Article 226
of the Constitution of India, and the
investigation be allowed to be held as per
Criminal Procedure Code. Argument also is
that petitioners have indulged in forum
shopping, inasmuch as, after having served
notices for grant of anticipatory bail, they
have chosen not to file such application and
have instead filed the present petition.

18. Sri Arunendra Singh, learned
A.G.A. has adopted the arguments of Sri
Lekhi and submits that investigation is
progressing in the matter and no occasion
arises for this Court to interfere in the matter.

19. Learned Senior Counsels for the
parties have elaborately addressed the
1254 INDIAN LAW REPORTS ALLAHABAD SERIES
Court
on
the
aspect
relating
to
maintainability of the present petition for
challenging the order of Magistrate, passed
under section 156(3) Cr.P.C. It has been
urged that order of Magistrate is a judicial
order and a writ petition would lie against it
on the ground that a preliminary enquiry
was not conducted in the matter and the
offence alleged falls beyond the territorial
jurisdiction of the Magistrate concerned.

20. In reply, it is urged that even if
the order of Magistrate is a judicial order
yet the petitioners get no right to
challenge it, at this stage, particularly
after FIR is registered and the challenge
would be limited to the FIR on the
grounds permissible in law. Submission
also is that corporate office of SDSPL is
at Gautam Buddh Nagar and major part
of the offences are committed there and
thus,
the
territorial
jurisdiction
of
Magistrate to pass an order under Section
156(3) Cr.P.C. cannot be questioned.

21. Nature of an order passed by
Magistrate under section 156(3) Cr.P.C.
and the remedies available against it are
no
longer
res-integra
and
fell
for
consideration earlier before a Full Bench
of this Court in Father Thomas vs. State
of U.P. and others, 2011 Criminal Law
Journal 2278. The issue that arose before
the Full Bench was whether the order of
Magistrate under section 156(3) Cr.P.C.
to direct the police to register FIR and
conduct investigation is open to challenge
in a revision? Nature of such order i.e.
whether it is interlocutory in nature or
final also fell for adjudication before the
Full Bench. Correctness of the Division
Bench judgement in Ajay Malviya vs.
State of U.P. and others, 2000 (41) ACC
435 insofar as the revision was held
maintainable
and,
therefore,
a
writ
directed
against
consequential
registration of FIR would not lie, was
also questioned.

22. The Full Bench elaborately
examined the scheme contained in the
Code of Criminal Procedure and the
applicable judgments on the issue to hold
that right of hearing to a prospective
accused at pre-cognizance stage is not
conceived and, therefore, no revision
would lie against such order which is
purely
interlocutory
in
nature,
and
involves no substantial rights of the
parties. After referring to the judgement
in Ajay Malviya (supra) the Full Bench
observed as under in paragraph 64:-

"64. However it is made clear
that the initial order for investigation under
section 156(3) is also not open to challenge
in a writ petition, as it is now beyond the
pale of controversy that the province of
investigation by the police and the
judiciary
are
not
overlapping
but
complementary. As observed by the Privy
Council in paragraph 37 in Emperor v.
Khwaja Nazir Ahmad, [AIR 1945 PC 18.]
when considering the scope of the statutory
powers of the police to investigate a
cognizable case under sections 154 and
156 of the Code, that it would be an
unfortunate result if the Courts in exercise
of their inherent powers could interfere in
this function of the police. The roles of the
Court and police are "complementary not
overlapping
and
the
combination
of
individual liberty with a due observance of
law and order is only to be obtained by
leaving each to exercise its own function."

The Full Bench, therefore, clearly
held that the view taken by the Division
Bench in Ajay Malviya (supra) that
Magistrate's order is revisable is not correct
and that the direction to register FIR is
5 All. Sharad Arora & Anr. Vs. State of U.P. & Ors.
1255
interlocutory in nature. The judgment in
Father Thomas (supra) holds the field even
as of now.

23. The above position in law has
been reiterated by the Supreme Court in
HDFC Securities Limited and others vs.
State of Maharashtra and another, (2017) 1
SCC 640. In para 27 the Court has
observed as under:-

"27. It appears to us that the
appellants approached the High Court even
before the stage of issuance of process. In
particular, the appellants challenged the
order dated 4-1-2011 passed by the learned
Magistrate under Section 156(3) CrPC. The
learned counsel appearing on behalf of the
appellants
after
summarising
their
arguments in the matter have emphasised
also in the context of the fundamental
rights
of
the
appellants
under
the
Constitution, that the order impugned has
caused grave inequities to the appellants. In
the circumstances, it was submitted that the
order is illegal and is an abuse of the
process of law. However, it appears to us
that this order under Section 156(3) CrPC
requiring investigation by the police,
cannot be said to have caused an injury of
irreparable nature which, at this stage,
requires quashing of the investigation. We
must keep in our mind that the stage of
cognizance would arise only after the
investigation report is filed before the
Magistrate. Therefore, in our opinion, at
this stage the High Court has correctly
assessed the facts and the law in this
situation and held that filing of the petitions
under Article 227 of the Constitution of
India or under Section 482 CrPC, at this
stage are nothing but premature. Further, in
our opinion, the High Court correctly came
to the conclusion that the inherent powers
of the Court under Section 482 CrPC
should be sparingly used."
 (emphasis supplied)

24. We are, therefore, not inclined to
entertain the present bunch of writ petitions
in so far as the order of Magistrate
directing
the
registration
of
FIR
is
challenged. Even otherwise, the order of
Magistrate has been given effect to and the
consequential FIR has been registered.
Challenge to the FIR is permissible on the
limited grounds enumerated in State of
Haryana Vs. Bhajan Lal, [1992 Suppl (1)
SCC 335], and such remedy having been
availed the challenge to the order of
Magistrate under Section 156(3) Cr.P.C. is
declined.

25. So far as the plea of non holding
of preliminary enquiry in the matter is
concerned, the argument on behalf of the
petitioners proceeds on the judgement of
the Supreme Court in Lalita Kumari and
Priyanka
Srivastava
(supra).
The
Constitution Bench in Lalita Kumar (supra)
observed as under in para 120.6 of the
report:-

"120.6. As to what type and in
which cases preliminary inquiry is to be
conducted will depend on the facts and
circumstances of each case. The category
of cases in which preliminary inquiry may
be made are as under:

(a) Matrimonial disputes/family
disputes

(b) Commercial offences

(c) Medical negligence cases

(d) Corruption cases
1256 INDIAN LAW REPORTS ALLAHABAD SERIES

(e) Cases where there is abnormal
delay/laches
in
initiating
criminal
prosecution, for example, over 3 months'
delay in reporting the matter without
satisfactorily explaining the reasons for
delay.

The
aforesaid
are
only
illustrations and not exhaustive of all
conditions which may warrant preliminary
inquiry."

It is urged with reference to the
above judgment that the present case falls
in second category, at best, and a
preliminary inquiry was mandatory.

26. The conclusions expressed in para
120 of the judgment in Lalita Kumari
(supra) can be better understood if it is
examined in light of observations made in
para 119 of the report, which is reproduced
hereinafter:-

"119. Therefore, in view of
various
counterclaims
regarding
registration or non-registration, what is
necessary is only that the information given
to the police must disclose the commission
of a cognizable offence. In such a situation,
registration of an FIR is mandatory.
However, if no cognizable offence is made
out in the information given, then the FIR
need not be registered immediately and
perhaps the police can conduct a sort of
preliminary verification or inquiry for the
limited purpose of ascertaining as to
whether a cognizable offence has been
committed. But, if the information given
clearly mentions the commission of a
cognizable offence, there is no other option
but to register an FIR forthwith. Other
considerations are not relevant at the stage
of registration of FIR, such as, whether the
information is falsely given, whether the
information
is
genuine,
whether
the
information is credible, etc. These are the
issues that have to be verified during the
investigation of the FIR. At the stage of
registration of FIR, what is to be seen is
merely whether the information given ex
facie discloses the commission of a
cognizable offence. If, after investigation,
the information given is found to be false,
there is always an option to prosecute the
complainant for filing a false FIR."

 (emphasis supplied)

The above principle has been
reiterated in Priyanka Srivastava (supra)
and subsequent judgments on the point.

27. The ratio culled out from
paragraph 119 and 120 of the judgment in
Lalita Kumari (supra) is that where
information
given
to police
ex-facie
discloses commissioning of cognizable
offence, its registration is mandatory. It is
only where information given does not
disclose cognizable offence that the FIR
may not be registered immediately and
some sort of a preliminary verification or
enquiry could be held. The use of word
'may' in the judgment is suggestive that
such preliminary inquiry is not mandatory
in all cases of alleged commercial offences
and that such inquiry would be desirable
only in a case where information furnished
ipso facto does not disclose commissioning
of a cognizable offence so as to ascertain
whether a cognizable offence has been
committed or not?

28. Discretion is, therefore, left with
the Magistrate in the matter of holding or
otherwise of preliminary inquiry in cases of
alleged commercial offence depending
upon the facts of a case and it cannot be
said that in every case of alleged
5 All. Sharad Arora & Anr. Vs. State of U.P. & Ors.
1257
commercial offence holding of preliminary
inquiry would be mandatory. An order of
Magistrate, therefore, cannot be challenged
on
the
ground
of
non-holding
of
preliminary inquiry if the information given
to
Magistrate
ex-facie
discloses
commissioning of cognizable offence.

29. In the facts of the present case we
find that the FIR contains ex-facie
disclosure of cognizable offence in the
matter and whether such information is
falsely given or is credible or genuine
would have to be verified only during the
investigation
pursuant
to
FIR.
The
challenge to the FIR on the ground of nonholding of preliminary enquiry thus fails.

30. Sri Dileep Kumar, learned Senior
Counsel for the petitioners then took us
through the contents of application filed
before the Delhi High Court by the
informant company in application under
section 9 of the Act of 1996, in order to
submit that same set of facts form the basis
of relief therein, as are mentioned in the
impugned FIR and, therefore, lodgement of
FIR is bad in law.

31. Though the argument of Sri
Kumar appears attractive at the first blush,
but a deeper examination of the matter
persuades us not to accept it for the reasons
enumerated hereinafter.

32. Same set of facts may constitute
an offence under the Indian Penal Code
while constituting breach of agreement on
part of one of the parties and parallel
proceedings can always proceed on both
counts. What is of importance is to
ascertain whether ingredients of an offence
are made out in the facts of the case or not?
In Priti Saraf and another vs. State of NCT
of Delhi and another, (2021) SCC Online
SC 206 the Court has observed as under in
paragraph 32 to 34 of the judgment:-

"32. In the instant case, on a
careful
reading
of
the
complaint/FIR/charge-sheet, in our view, it
cannot be said that the complaint does not
disclose the commission of an offence. The
ingredients of the offences under Sections
406 and 420 IPC cannot be said to be
absent on the basis of the allegations in the
complaint/FIR/charge-sheet. We would like
to add that whether the allegations in the
complaint are otherwise correct or not, has
to be decided on the basis of the evidence
to be led during the course of trial. Simply
because there is a remedy provided for
breach of contract or arbitral proceedings
initiated at the instance of the appellants,
that does not by itself clothe the court to
come to a conclusion that civil remedy is
the only remedy, and the initiation of
criminal proceedings, in any manner, will
be an abuse of the process of the court for
exercising inherent powers of the High
Court under Section 482 CrPC for quashing
such proceedings.

33.
We
have
perused
the
pleadings
of
the
parties,
the
complaint/FIR/charge-sheet and orders of
the Courts below and have taken into
consideration the material on record. After
hearing learned counsel for the parties, we
are satisfied that the issue involved in the
matter under consideration is not a case in
which the criminal trial should have been
short-circuited. The High Court was not
justified
in
quashing
the
criminal
proceedings in exercise of its inherent
jurisdiction. The High Court has primarily
adverted on two circumstances, (i) that it
was a case of termination of agreement to
sell on account of an alleged breach of the
contract and (ii) the fact that the arbitral
1258 INDIAN LAW REPORTS ALLAHABAD SERIES
proceedings have been initiated at the
instance of the appellants. Both the alleged
circumstances noticed by the High Court,
in our view, are unsustainable in law. The
facts
narrated
in
the
present
complaint/FIR/charge-sheet indeed reveal
the commercial transaction but that is
hardly a reason for holding that the offence
of cheating would elude from such
transaction. In fact, many a times, offence
of cheating is committed in the course of
commercial
transactions
and
the
illustrations have been set out under
Sections 415, 418 and 420 IPC. Similar
observations have been made by this Court
in Trisuns Chemical Industry v. Rajesh
Agarwal (supra):--

"9. We are unable to appreciate
the
reasoning
that
the
provision
incorporated in the agreement for referring
the disputes to arbitration is an effective
substitute for a criminal prosecution when
the disputed act is an offence. Arbitration is
a remedy for affording reliefs to the party
affected by breach of the agreement but the
arbitrator cannot conduct a trial of any act
which amounted to an offence albeit the
same act may be connected with the
discharge of any function under the
agreement. Hence, those are not good
reasons for the High Court to axe down the
complaint at the threshold itself. The
investigating agency should have had the
freedom to go into the whole gamut of the
allegations and to reach a conclusion of its
own. Pre-emption of such investigation
would be justified only in very extreme
cases as indicated in State of Haryana v.
Bhajan Lal [1992 Supp (1) SCC 335]"

34. So far as initiation of arbitral
proceedings is concerned, there is no
correlation with the criminal proceedings.
That apart, the High Court has not even
looked into the charge-sheet filed against
2nd respondent which was on record to
reach at the conclusion that any criminal
offence as stated is prima facie being made
out and veracity of it indeed be examined
in the course of criminal trial."

33. Merely because on similar facts
an application under section 9 of the Act of
1996 is instituted or arbitration for
resolution of contractual dispute can be
availed of, in terms of the agreement, it
would not mean that criminal action cannot
be set in motion even though prima facie
ingredients of offence are disclosed in the
FIR. The fact that even after filing
application under section 9 of the Act of
1996 the dispute has not yet been referred
to the arbitrator, or the court approached
under section 11 of the Act of 1996, also
cannot be a ground to challenge the FIR if
it otherwise discloses cognizable offence.

34. Whether allegations made in the
FIR are correct or not is not required to be
examined by this Court, under Article 226
of the Constitution of India, at this stage,
since the facts are to be ascertained by the
concerned investigating agency at the first
instance.

35. Law is otherwise well settled that
same set of acts or omissions may
constitute
offences
under
different
enactments and where there are two distinct
offences disclosed, made up of different
ingredients, the punishment in both would
be permissible even if the offences have
some overlapping features. In State vs.
Navjot Sandhu, (2005) 11 SCC 600 the
Court has observed as under in paragraph
255:-

"255. The learned counsel, apart
from placing reliance on Section 56 of
5 All. Sharad Arora & Anr. Vs. State of U.P. & Ors.
1259
POTA, has also drawn our attention to
Section 26 of the General Clauses Act and
Section 71 IPC. His contention, though
plausible it is, has no legal basis. We do not
think that there is anything in Section 56 of
POTA which supports his contention. That
provision only ensures that the conspiracy
to commit the terrorist act shall be
punishable under POTA. As the appellant
is being punished under that section,
irrespective of the liability to be punished
under the other laws, Section 56 ceases to
play its role. Then, we shall turn to Section
26 of the General Clauses Act, which lays
down:

"26. Where an act or omission
constitutes an offence under two or more
enactments, then the offender shall be
liable to be prosecuted and punished under
either or any of those enactments, but shall
not be liable to be punished twice for the
same offence."

It becomes at once clear that the
emphasis is on the words "same offence". It
is now well settled that where there are two
distinct offences made up of different
ingredients, the bar under Section 26 of the
General Clauses Act or for that matter, the
embargo
under
Article
20
of
the
Constitution, has no application, though the
offences may have some overlapping
features. The crucial requirement of either
Article 20 of the Constitution or Section 26
of the General Clauses Act is that the
offences are the same or identical in all
respects. It was clarified in State of Bihar v.
Murad Ali Khan [(1988) 4 SCC 655 : 1989
SCC (Cri) 27] : (SCC p. 668, paras 30-31)

"''Though Section 26 in its
opening words refers to "the act or
omission constituting an offence under two
or more enactments", the emphasis is not
on the facts alleged in the two complaints
but rather on the ingredients which
constitute the two offences with which a
person is charged. This is made clear by the
concluding portion of the section which
refers to "shall not be liable to be punished
twice for the same offence". If the offences
are not the same but are distinct, the ban
imposed by this provision also cannot be
invoked.'

The same set of
facts, in
conceivable cases, can constitute offences
under two different laws. An act or an
omission can amount to and constitute an
offence under IPC and at the same time
constitute an offence under any other law."
(emphasis in original)

We accept the argument of the
learned counsel for the State Mr Gopal
Subramanium that offences under Section
302 IPC, Sections 3(2) and 3(3) of POTA
are all distinct offences and a person can be
charged, tried, convicted and punished for
each of them severally.