The Calcutta High Court has held that where the dispute between the parties arises out of a continuing loan and repayment relationship, and the substance of the grievance is only that the finance company wrongly adjusted payments or demanded excess money, the matter remains essentially civil in nature and does not by itself attract offences such as cheating, criminal breach of trust, forgery or criminal intimidation. The Court made it clear that penal provisions cannot be stretched by implication merely because one party alleges unfair financial conduct in a commercial transaction.
The Court also reaffirmed that forgery cannot be alleged in the absence of a specific accusation regarding creation of a false document, particularly where the complainant admits signing the concerned agreement. It further held that summoning an accused is a serious judicial act and the Magistrate must show due application of mind; criminal proceedings should not be allowed to become a pressure tactic for settlement of civil claims.
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A Single Judge Bench of Dr. Justice Ajoy Kumar Mukherjee noted that the complainant herself had admitted in the complaint that she had signed the later loan agreement relating to the converted loan account of Rs. 63,830, though she said she had signed it on good faith without being allowed to read its contents. The Court also recorded that it was undisputed that the loan transactions between the parties had continued over a considerable period. This background, according to the Court, showed an ongoing financial relationship rather than a one-time fraudulent inducement.
The Court closely examined the Magistrate’s order issuing process and the police report referred to in that order. It noted that the report itself recorded that the complainant had requested conversion of the loan into a PLCS Growth Flexi Loan for Rs. 63,830 and that the transaction had been authenticated through her registered mobile number. The only real grievance emerging from the record, according to the High Court, was that while the complainant had already repaid around Rs. 49,979, that amount was allegedly not reflected properly in the documents produced by the company before the investigating officer. On that basis, the Court held that the allegation essentially concerned an excess monetary demand or incorrect adjustment of dues, not the commission of criminal offences.
The High Court further held that the ingredients of forgery were completely absent. It observed that the complaint did not specify what exact document had been forged, how it had been forged, or what precise role the petitioners had played in creating any false document. Referring to Section 464 IPC, the Court emphasized that forgery requires making a false document, and here the complainant had admitted her own signature on the later loan agreement. The Court also found no material showing common intention or conspiracy in the manner alleged. In its view, the controversy was fundamentally over loan accounting and adjustment, and therefore remained in the realm of civil law.
The Court also criticised the manner in which the criminal process had been set in motion. It observed that taking cognizance and issuing summons under Section 204 CrPC is not a mechanical exercise and that criminal law cannot be invoked routinely in business disputes. The Court found that the inquiry under Section 202 CrPC had not been properly carried out by a competent person in the right direction. It reiterated that a Magistrate must apply his mind to the complaint, supporting documents and preliminary material before summoning an accused, especially when the dispute on the face of the record appears to arise out of commercial dealings.
Briefly, the case arose from a criminal complaint filed against the Managing Director of Bajaj Finserv and another in relation to a loan transaction pending before the ACJM, Berhampore under Sections 420, 406, 468, 506 and 120B of the IPC. The complainant alleged that she had earlier purchased mobile phones on EMI from Bajaj Finance Limited, repaid those loans, and obtained no-dues certificates. Later, she availed a personal loan of Rs. 69,000, out of which Rs. 62,350 was disbursed. According to her, after paying substantial amounts towards that loan, she faced financial difficulty during the Covid-19 lockdown and sought extension of time for EMI payment. She alleged that instead of granting relief, the finance company closed the original loan account, created a fresh loan account for Rs. 63,830, ignored the amounts already paid by her, and made a wrongful fresh demand.
The Magistrate had initially taken cognizance of the complaint and called for a report under Section 202 CrPC. After receiving the police report, the trial court issued summons against the petitioners under Sections 420, 406, 468, 506 and 34 IPC. Challenging that proceeding, the petitioners argued before the High Court that the dispute arose out of a continuing commercial relationship extending over several years, that the complainant had accepted conversion of the earlier loan into another loan arrangement, and that the allegations, even if accepted in full, disclosed at best a civil dispute regarding loan adjustment and outstanding dues, not any criminal offence. They also contended that the Section 202 inquiry had not been properly conducted because the report was submitted by a Sub-Inspector though the direction had been issued to the Inspector-in-Charge.
On the other side, the complainant argued that although she had genuinely requested time to repay because of the pandemic, the company, without her informed consent, converted the earlier loan into a new personal loan account and did not properly account for the payments already made by her. She claimed she came to know of this through an automated message, received no cooperation from the finance company, approached the consumer forum for settlement, and later faced harassment after the disputed account was transferred to an asset reconstruction company. Her case was that the accused persons had misappropriated the money and the criminal proceeding should continue so that the truth could come out.
