Forum Shopping is an abuse of law – Apex Court

Apex court stated in the recent Judgement VIJAY KUMAR GHAI & ORS. Vs THE STATE OF WEST BENGAL & ORS. that Forum Shopping define in Indian Statute and as per the Merriam Websester Dictionary , “ The practice of choosing the court in which to bring an action from among those courts that could properly exercise jurisdiction based on determination of which court is likely to provide the most favorable outcome”

M/s. Priknit Apparel Pvt. Ltd company engaged in the manufacture and trade of apparels through chain of retail stores under the brand name and style of Priknit. Appellant 1 Managing Director while appellants no.2 and 3 Director of Company. An authorized representative of SMC Global Securities Ltd, Delhi desired to make an investment on its behalf with the appellants. It was mutually decided between the parties that Respondent No. 2 will invest an amount of Rs. 2.5 crore in lieu of which they will be issued 2,50,000 equity shares of Priknit Apparel Pvt. Ltd. Subsequently, an allotment letter dated 29.03.2008 was issued in favor of Respondent No. 2 whereby 2,50,000 shares were issued in lieu of the investment made by him. Having failed to bring the I.P.O as per memorandum of understanding dated 20.08.2009, Respondent No. 2 filed a complaint U/S 156(3) of Cr.P.C before the Tiz Hazari Court, New Delhi for registration of FIR against the Appellants and their company. On 01.09.2012 and same was dismissed on the grounds that the entire dispute was civil in nature and there was no criminality involved. The order of the MM attained finality as it was not put to further challenge.

On 28.03.2013, Respondent No. 2 filed a second complaint under Section 406, 409, 420, 468,120B and 34 IPC based on the same cause of action with the PS Bowbazar at Kolkata, West Bengal. A final closure report was filed by the concerned Police Station recommending closure of the case since the entire dispute was found to be civil in nature. Respondent 2 moved protest petition and same was allowed and directed for further investigation. Notice issued to Appellant no.1 U/s 41 (a) Cr.P.C . Appellant filed petition to quash the proceedings but same was dismissed by High Court stating that

“In the present case, the allegation in the FIR disclosed the offences alleged. Moreover, the allegations made in the FIR disclosed that the petitioner induced the complainant to purchase share or invest money by willful misrepresentation.

It is true that the complaint discloses that there was a commercial transaction between the parties but at the same time, it cannot be overlooked that the averments made in the complaint/FIR prima facie revel the commission of a cognizable offence.

Moreover, when the complaint discloses that the commercial transaction between involve criminal offences, then the question of quashing the complaint cannot be allowed.”

Grounds of Appeal - Appellants moved to Apex Court against the Judgement of High court on the ground that in this case, Respondent No.2 filing two complaints i.e., a complaint u/s 156(3) Cr.P.C before the Tis Hazari Court, New Delhi on 06.06.2012 and a complaint which was eventually registered as FIR No. 168 before PS Bow bazar, Calcutta on 28.03.2013. He cleverly suppressed the facts and the allegations contained in the FIR are purely contractual disputes of civil nature, but Respondent No. 2 has given a criminal color to it and that breach of contract does not come within the purview of cheating as defined in IPC and  also further submitted that the High Court failed to appreciate that the two allegations recorded in the complaint against the Appellants being belated allotment of shares to the complainant company and the Appellant No. 1’s failure to bring out an IPO are clearly commercial disputes with no element of criminality.

Respondent vehemently opposed the appeal on the ground that allegations contained in the complaint disclosed all the ingredients of the alleged offences and moreover, the criminal proceedings have not been initiated with mala fide intention and that the complaint case filed before the magistrate of Tis Hazari Court was not decided on merit and as such the complainant cannot be barred from making a fresh complaint.

Apex Court observed that Court has condemned the practice of forum shopping by litigants and termed it as an abuse of law and deciphered different categories of forum shopping. Forum shopping has been termed as disreputable practice by the courts and has no sanction and paramountcy in law.

Apex Court further observed that for cheating a fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating…...And observing the judgement of Apex Court Uma Shankar Gopalika Vs. State of Bihar & Anr. (2005) 10 SCC 336 upheld that It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases of breach of contract would amount to cheating where there was any deception played at the very inception.

Apex Court also observed that there can be no doubt that a mere breach of contract is not in itself a criminal offence and gives rise to the civil liability of damages

Apex court held that there is nothing to indicate that Appellants had any malefice intention against the Respondent which is clearly deductible from the MOU dated 20.08.2009 arrived between the parties. Even in a case where allegations are made regarding failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making promise being absent, no offence under Section 420 IPC can be said to have been made out.

Apex Court also held that the entire origin of the dispute emanates from an investment made by Respondent No. 2, amounting to Rs. 2.5 crores in lieu of which 2,50,000/equity shares were issued in the year 25.03.2008, finally culminating into the MOU dated 20.08.2009. That based on this MOU respondent No. 2 filed three complaints, two at Delhi and one at Kolkata. Thus, two simultaneous proceedings, arising from the same cause of action i.e., MOU dated 20.08.2009 were initiated by Respondent No. 2 amounting to an abuse of the process of the law which is barred. Criminal proceedings quashed and appeal allowed.

D.D:- 22  MARCH, 2022

VIJAY KUMAR GHAI & ORS.  VERSUS THE STATE OF WEST BENGAL & ORS.