“Issuance of Summons Is A Serious Matter, Requires Reasoning”: Delhi HC Quashes Unreasoned Summons In Indiabulls Cheating Case

The Single Bench of Justice Amit Mahajan made these remarks while setting aside summons issued to a petitioner accused of cheating Indiabulls Securities by allegedly availing margin facilities with fraudulent intent.

The High Court found that the summoning order was unreasoned and arbitrary.

“Merely taking note of the facts of the case and recording prima facie satisfaction, without giving any reasons for the same, is insufficient,” the Court remarked, stressing that issuance of summons is a “serious issue” and must be backed by an appreciation of the facts and evidence on record.

The petitioner had moved the High Court seeking quashing of the summons issued by the Trial Court in a case registered under Section 420 of the Indian Penal Code. He contended that the dispute was purely civil in nature and had been wrongly given a criminal colour by Indiabulls to coerce him.

As per the FIR, the petitioner allegedly induced the company to open a trading account and availed margin facilities with a dishonest intention, eventually causing financial loss to the company. The Trial Court found a prima facie case and issued a summons.

However, the High Court noted serious procedural lapses in the summoning order. While acknowledging that the Trial Court correctly noted the allegations of inducement for availing margin facilities, the Court found that the order did not reflect an assessment of the actual material on record.

“Although the learned Magistrate has recorded its satisfaction about the existence of a prima facie case… on a bare perusal of the complaint as well as the pre-summoning evidence, the said observation seems to be without any application of mind,” the Court noted.

It further observed that the complaint failed to mention the dates or details of the alleged margin calls, a critical aspect of the cheating allegation, and that the complainant witnesses did not specify these particulars during their pre-summoning testimonies.

Crucially, the Court accepted the petitioner’s argument that failure to honour a financial obligation arising out of a contractual arrangement does not, by itself, amount to cheating under Section 420 IPC unless dishonest intention at the inception of the transaction is demonstrated.

“Merely because the petitioner failed to pay the margin money in response to the legal notice, the same would not prove that the petitioner's intention was to cheat the complainant company from the very inception,” the Court observed.

Consequently, the High Court quashed the summons issued against the petitioner, holding that the dispute was essentially contractual and did not disclose the necessary elements of a criminal offence. "Prima facie, the allegations taken at their face value, do not disclose an element of criminality and commission of a cognizable offence. In such circumstances, continuation of proceedings against the petitioner, who is a senior citizen, would be an abuse of the process of law and merit the exercise of the jurisdiction of this Court under Section 482 of the CrPC," the Court said.