Gujarat High Court
Faruk Gulam Patal vs State Of Gujarat on 4 February, 2025
NEUTRAL CITATION
R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025
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Reserved On : 16/01/2025
Pronounced On : 04/02/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION NO.5797 of 2016
(QUASHING)
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE DIVYESH A. JOSHI : Sd/-
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Approved for Reporting Yes No
√ -
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FARUK GULAM PATAL
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR ND NANAVATY with MR HARDIK B SHAH(3751) for the
Applicant(s) No. 1
MR CHIRAG B PATEL(3679) for the Respondent(s) No. 2
MR MANAN MEHTA APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE DIVYESH A. JOSHI
CAV JUDGMENT
1. Rule. Learned APP, Mr. Manan Mehta for respondent no.1 - State of Gujarat and learned advocate, Mr. Chirag Patel for respondent no.1 - original complainant waive service of notice of rule.
2. By way of preferring present application under Section 482 of the Code of Criminal Procedure, 1973 ("CrPC" for short"), the applicant - original accused no.2, seeks to invoke the inherent powers of this Court, inter alia, praying for quashing and setting aside First Information Report being Page 1 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined C.R. No. I-61 of 2016 registered with Vadodara Rural Police Station for the offence punishable under Sections 447, 406, 420, 506 and 114 of the Indian Penal Code ("IPC" for short") and subsequent proceeding being Criminal Case No.39464/2016 pending before the court of learned Chief Judicial Magistrate, Vadodara pursuant to filing of the chargesheet qua the applicant.
3. Heard learned Senior Counsel, Mr. Nirupam Nanavati assisted by learned advocate, Mr. Hardik B. Shah for the applicant, learned APP Mr. Manan Mehta for the respondent no.1 - State of Gujarat and learned advocate, Mr. Chirag B. Patel for the respondent no.2 - original complainant.
4. The gist of the FIR is as under, Because of the business transaction, the complainant has to pay Rs.5,32,00,000/- to the accused no.1 and as the complainant wanted to sale his factory, the accused no.1 introduced the accused no.2 (the applicant herein) as a purchaser of the said factory and accordingly, Memorandum of Understanding came to be entered into and as a part thereof, the accused no.2 had deposited Rs.5,47,00,000/- in the account of the complainant and the said amount has been taken by the accused no.1 and remaining amount of sale consideration was not paid to the complainant and the complainant was not allowed to enter into the factory premises and, thereafter, the accused have administered threats to the complainant and Page 2 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined thereby the accused have committed cheating and criminal breach of trust with the complainant.
5. Learned Senior Counsel, Mr. Nanavaty submitted that the impugned FIR is nothing but a gross abuse and misuse of the process of law and is filed with a sole intent to harass the applicant as also to extort more money from the applicant. He submitted that if the allegations leveled against the applicant are considered on its face value, in that event, none of the basic and/or essential ingredients of the alleged offences are made out against the applicant, therefore, the prosecution launched against the applicant is required to be quashed and set aside. He submitted that the respondent no.2 herein and the applicant had entered into one sale transaction of the factory owned by the respondent no.2 herein and as a part of said transaction, they have entered into one Memorandum of Understanding ("MoU" for short) and on the strength of the said MoU, the parties have to act accordingly and this is the sum and substance of the allegations leveled in the impugned FIR. He submitted that it is an admitted position of fact that the respondent no.2 is the Director of BM Infrastructure Pvt. Ltd. Co. and he had entered into MoU with the applicant for the sale of his factory along with land and machinery and out of said transaction, the applicant has already paid an amount of Rs.5,47,00,000/- through RTGS, copies of bank statements are placed on Page 3 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined record and the said fact is also admitted by the respondent no.2 in the impugned FIR itself, therefore, there is no dispute about the transaction took place between the applicant and the respondent no.2 and on the strength of the part payment made by the applicant, he was put in possession of the factory premises as the said factory was already shut-down and there was no manufacturing activity going on. He further submitted that as incidents of thefts of the goods lying in the factory were reported, just to maintain safety of the said machinery and other goods, the applicant had deputed two persons in the said factory premises to look after it. He submitted that if the Hon'ble Court would make a cursory glance upon the contents of the FIR, more particularly, the charges of accusation leveled against the accused persons on its face value, in that event, it can definitely be said that criminal colour is given to the civil dispute with a sole intent to extort money from the applicant and an arm twisting tactics had been adopted by the respondent no.2 to succumb the applicant under the guise of pressurize tactics.
6. Learned Senior Counsel has referred to the MoU produced on record at Page Nos.25 to 33 of the compilation and submitted that at the time of entering into MoU, specific condition was incorporated in the said MoU that in case of arising of the dispute between the parties, the Page 4 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined parties shall initiate arbitration proceedings but instead of filing civil suit and/or arbitration proceeding, straightway the impugned FIR has been lodged with absolute false and frivolous story. He submitted that if the allegations leveled in the impugned FIR are read together in its entirety then also, no offence much less than offences enumerated in the body of the FIR can be said to have been made out against the applicant nor it discloses any offence against the applicant, therefore, continuation of the proceeding pursuant to the impugned FIR would be nothing but a gross abuse and misuse of the process of law and ultimately leads to miscarriage of justice, therefore, the prosecution launched against the applicant is required to be quashed and set aside.
7. Learned Senior Counsel further submitted that it is an admitted position of fact that at the time of entering into MoU, it was agreed by and between the parties that as soon as the payment would be made by the applicant, in that event, the applicant has to obtain title clearance certificate of the factory premises from the advocate concerned and in that process, the applicant came to know about the fact that one litigation is pending before this Hon'ble Court and the representative of the respondent no.2 has made a statement before this Hon'ble Court that the property would not be transferred and/or alienated in favour of third party during the Page 5 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined pendency of the said proceeding. He further submitted that in fact, it is specifically stated in the MoU that the property is sold to the applicant "as it is where it is basis", therefore, the applicant is the bonafide purchaser and he was under the bonafide belief that there is no lien upon the said property and the respondent no.2 was also put to terms to that effect and the said fact is also incorporated in the MoU as one of the conditions. He submitted that however as soon as the applicant came to know about the pendency of the litigation before the Hon'ble Debt Recovery Tribunal as also Company Petition filed by one of the Company against the Company of the respondent no.2, wherein an order of stay has already been passed by this Hon'ble Court, the applicant has stopped to pay the said amount, therefore by no stretch of imagination, it can be said that the present applicant has committed any breach of trust and/or cheating with the respondent no.2 but on the contrary, it can be said that the applicant is being cheated by the respondent no.2 suppressing all above facts entered into transaction. He submitted that it is an admitted position of fact that for the purpose of recovery of the amount paid to the respondent no.2, the applicant herein has filed arbitration proceedings and after considering and appreciating the material available on record, learned Arbitrator concerned has passed an award in favour of the Page 6 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined applicant, wherein the respondent no.2 had filed counter-claim, which was rejected by the learned Arbitrator concerned. He submitted that in fact, after the execution petition filed by the applicant before the competent court for recovery of the decreetal amount from the respondent no.2, wherein proceedings are going on and uptill now, no stay is granted by this Hon'ble Court but uptil now, not a single penny had been paid by the respondent, whereas he has already filed appeal before this Hon'ble Court assailing the order of the learned Arbitrator and as there was delay in preferring the said appeal, separate application for condonation of delay is also filed but uptil now, delay has not been condoned by this Hon'ble Court. He submitted that in view of the above facts coupled with the documents produced on record, it is found out that instead of approaching civil court, with a sole intent to harass the applicant, adopted mode of arm twisting tactics.
8. Learned Senior Counsel submitted that after registration of the impugned FIR, the applicant has approached this Hon'ble Court by filing present quashing petition and, thereafter, the investigation was continued and ultimately at the end of day, the chargesheet has also been filed by the IO concerned despite the order of stay, therefore, petition as well as prayer clauses were amended by filing draft amendment, which was Page 7 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined allowed and, thereafter, the Coordinate Bench of this Court directed the court concerned not to proceed further with the case and since then, the said criminal case has not been proceeded further. He further submitted that not only that, even in the Company Petition filed by another Company, the interim relief granted earlier by the Coordinate Bench of this Court has been confirmed by an order dated 20.09.2016, copy of said order is also produced on record by filing separate affidavit. He submitted that in fact, the respondent no.2 has already obtained loan from IDBI Bank upon the said property, however, he could not be able to repay the said amount and/or installments in the bank, therefore, the said Bank had initiated legal proceedings against the respondent no.2 and as a part of the said proceedings, on the strength of the order passed by the Hon'ble Court, the custody of the said property had been taken by the Bank and subsequently the property had been sold and possession of the property was also handed over to one Panchratna Infrastructure Ltd. on the basis of the order pased by the Hon'ble Court, therefore since then, the custody of the said property is with Panchratna Infrastructure Pvt. Ltd. and the Bank had executed conveyance deed in favour of the said Company on 30.03.2018 and since then, the said Company is having possession of the said property, therefore, all those material available on record clearly goes on to show that the present Page 8 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined applicant has already paid huge volume of amount to the complainant through RTGS and there is no denial on the part of the respondent no.2, rather the said facts have been mentioned (admitted) by the respondent no.2 at the time of registration of the impugned FIR.
9. Learned Senior Counsel, at the cost of repetition, submitted that despite the award of the learned Arbitration, uptil now not a single penny has been paid by the respondent no.2 and execution petition is pending and cumulative effect of it clearly goes on to show that just to get out clutches from returning back the amount to the applicant, absolute false and frivolous FIR has been lodged concocting absolute false story with a sole intent to harass the applicant.
10. Learned advocate has placed reliance upon following decisions, (1) the judgment of the Hon'ble Supreme Court in case of Rajinder Kumar Vs. State of Haryana, reported in 2019 (3) Crimes 56 (SC);
(2) the judgment of the Hon'ble Supreme Court in case of State Through Central Bureau of Investigation Vs. Anup Kumar Srivastava, reported in (2017) 8 SCC 560;
(3) the judgment of the Hon'ble Supreme Court in case of Rajiv Thapar & Ors. Vs. Madan Lal Kapoor, reported in (2013) 3 SCC 330; (4) the judgment of the Hon'ble Supreme Court Page 9 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined in case of g. Sagar Suri & Ors. Vs. State OF U.P. & Ors., reported IN AIR 2000 SC 754;
(5) the judgment of the Hon'ble Supreme Court in case of Ashok Chaturvedi & Ors. Vs. Shitulh Chanchani & Ors., reported in AIR 1998 sc 2796;
11. Referring to the aforesaid decisions, learned advocate submitted that the case of the applicant and issue involved in the present matter is squarely covered by those decisions, therefore, discretion may be exercised in favour of the applicant. At this stage, learned advocate submitted that considering the principle of law laid down by the Hon'ble Apex Court in case of State of Haryana Vs. Bhajan Lal, reported in AIR 1992 SC 604 as well as in case of R.P. Kapur Vs. State of Punjab, reported in AIR 1960 SC 866 :
1960 Cri LJ 1239, the prosecution launched against the applicant is required to be quashed and set aside.
12. Learned APP Mr. Mehta has objected present application with a vehemence and submitted that it is the specific case of the respondent no.2 that the respondent no.2 and the accused persons have entered into MoU and agreed upon the act accordingly, however, the accused have turned down from their part of compliance of the conditions as mentioned in MoU, therefore, the respondent no.2 started making phone-calls to the applicant to pay Page 10 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined the amount within time framed schedule but despite the said fact, the accused gave evasive reply to the said phone-calls and killed valuable time of the respondent no.2. He further submitted that it is an admitted position of fact that they have entered into MoU and in the said MoU, there is no express terms of conveyance-deed and in absence of the same, the applicant has not got any valuable right to enter into premises and get back custody of the said premises. He submitted that in fact, it is alleged in the impugned FIR that the friend of the respondent no.2 had put goods in the said factory premises and he was in need of the said goods, therefore, he had gone to the factory premises to collect the said goods but the persons deployed by the applicant had not permitted them to get the custody of the said goods though the said fact was well within the knowledge of the applicant that the friend of the respondent no.2 is the owner of the said goods and with tacit consent of the applicant, it was brought to the notice of the applicant that the said goods are of the friend of the respondent no.2, despite the said fact, they were not permitted to enter into the premises and subsequently the said goods were destroyed. He submitted that not only that, at that relevant point of time, the respondent no.2 had made phone-calls to the applicant to intervene in the matter and give specific directions to his persons to give permission to enter into the Page 11 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined premises to collect the goods lying in the premises, despite the said fact, the applicant has not acted upon and, therefore, from the body of the complaint, basic and essential ingredients to constitute the offences enumerated in the body of the FIR are prima facie attracted. He further submitted that after registration of the FIR, the concerned Investigating Officer had carried out investigation and at the end of day, submitted chargesheet before the competent court and material and available available on record clearly goes on to show the involvement of the applicant in the commission of crime. It is, therefore, urged that the present application may be rejected.
13. Learned advocate, Mr. Patel appearing for the respondent no.2 has also opposed the present application and has adopted the arguments canvassed by learned APP for the respondent - State. He, however, submitted that from the allegations levelled in the impugned FIR as also from the investigation papers, prima facie involvement of the applicant is found out, therefore, no discretion may be exercised in favour of the applicant and the present application may be rejected.
14. I have given my thoughtful consideration to the submissions advanced by the learned advocates for the respective parties. After hearing the learned advocates for the respective parties and perusing Page 12 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined the contents of the FIR, this Court is of the considered opinion that the complainant has tried to misuse the machinery of criminal law. For ascertaining as to whether any offence as alleged in the FIR is established or not, this Court has very minutely gone through the allegations and the documents as pointed out by the respective parties.
15. Before evaluating the contentions advanced on behalf of the parties, it will be useful to briefly notice the scope and ambit of the inherent powers of the High Court under Section 482 of the IPC. The section itself envisages three circumstances, under which, the inherent jurisdiction may be exercised, namely, (i) to give effect to an order under the Code; (ii) to prevent an abuse of the process of court; and to otherwise secure the ends of justice. Nevertheless, it is neither possible nor discernible to lay down any inflexible rule which govern the exercise of inherent jurisdiction of the court. Undoubtedly, the power possessed by the High Court under the said provision is very wide, but is not unlimited. Therefore, it has to be exercised sparingly, carefully and cautiously, ex debito justitiae to do real and substantial justice for which alone the court exits. It needs little emphasis that the inherent jurisdiction does not confer any arbitrary power on the High Court to act according to whim or caprice. The power exists to prevent Page 13 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined abuse of authority and not to produce any justice.
16. In the case of R.P. Kumar (supra), the Supreme Court had summarized some of the categories of cases where the inherent power under Section 482 of the Code could be exercised by the High Court to quash criminal proceedings against the accused. These are; (i) where it manifestly appear that there is a legal bar against the institution or continuance of the proceedings e.g. want of sanction; (ii) where allegations in the first information report or complaint taken at its face value and accepted in their entirety do not constitute the offence alleged; (iii) where the allegations constitute an offence, but there is no legal evidence adduced or the evidence adduced clearly or manifestly fails to prove the charge.
17. In the case of G. Sagar vs. State of U.P., reported in (2000) 2 SCC 636, the Supreme Court had opined as follows;
"Jurisdiction under Section 482 of the Code has to be exercised with a great care. In exercise of its jurisdiction High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which High Court is to exercise its jurisdiction under Section 482 of the Code, Jurisdiction under this Section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice."Page 14 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025
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18. It is found out from the allegations leveled in the impugned FIR that there was business transaction between the complainant and the accused no.1 and in connection with the same, the complainant has to pay Rs.5,32,00,000/- to the accused no.1 and the complainant wanted to sell his factory, the accused no.2 (the applicant herein) was ready to purchase it on sale consideration of Rs.19,00,00,000/- and accordingly, MoU came to be entered into between the complainant and the accused no.2 and as a part of one of the conditions of the MoU, the accused no.2 had made the payment of Rs.5,47,00,000/- to the complainant through RTGS, which was taken by the accused no.1 and remaining amount of sale consideration was not paid by the accused no.2 and on the contrary, threats were administered to the complainant.
19. However as can be evident from the submissions canvassed by learned advocates for the parties as well as the documents produced on record, an MoU came to be entered into between the complainant and the applicant herein, wherein it was agreed by and between the parties on 23.04.2016 that the factory will be sold at the sale consideration of Rs.19,00,00,000/-, however as per Clause F(i), it is specifically mentioned therein that "This MOU is entered into between the parties to the MOU subject to positive outcome of the Due Diligence and for furtherance of final Sale Purchase Deed.".
Page 15 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined It is also evident that as per the mutual understanding between the parties as per MoU, initial payment of Rs.5,32,00,000/- was made by the applicant and, thereafter, sought title report from his advocate and while undertaking such exercise, it has come to the knowledge of the applicant about the litigation pending before this Court, wherein the representative of the respondent no.2 has made a statement before this Hon'ble Court that the property would not be transferred and/or alienated in favour of third party during the pendency of the said proceeding. Not only that, while making inquiry, it has also come to the notice of the applicant about the litigation pending before the Hon'ble Debt Recovery Tribunal as also Company Petition filed by one of the Company against the Company of the respondent no.2, wherein an order of stay has already been passed by this Hon'ble Court and that is why, the applicant stopped making payment. After having knowledge about the aforesaid fact, the applicant instituted recovery proceeding before the learned Arbitrator, wherein an order has already been passed and the respondent no.2 herein is directed to return the amount taken by him but till date, despite said order, not a single penny has been given by the respondent no.2 to the applicant. Further over and above, there is no denial on the part of the respondent no.2 herein about the said fact. It is also evident Page 16 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined from the material available on record, more particularly, MoU that specific condition is incorporated in the said MoU that in case of arising of the dispute between the parties, the parties shall initiate arbitration proceedings, however despite having specific clause of arbitration proceeding, the respondent no.2 herein has lodged impugned FIR with a sole intent to harass the applicant and to extort money from him.
20. At this juncture, I may quote with profit the observations made by the Hon'ble Supreme Court in case of Delhi Race Club (1940) Ltd. (supra), upon which reliance has been placed by learned advocate for the applicant, wherein the Hon'ble Supreme Court has very succinctly explained the difference between criminal breach of trust and cheating as also aspect of civil dispute in a very exhaustive manner, which was considered in criminal colour. Relevant observations made by the Hon'ble Supreme Court in Paragraph Nos.24 to 39 are reproduced hereunder,
24. This Court in its decision in S.W. Palanitkar & Ors. v. State of Bihar & Anr. reported in (2002) 1 SCC 241 expounded the difference in the ingredients required for constituting an of offence of criminal breach of trust (Section 406 IPC) viz-a-viz the offence of cheating (Section 420). The relevant observations read as under: -
"9. The ingredients in order to constitute a criminal breach of trust are: (i) entrusting a person with property or with any dominion over property, (ii) that person entrusted (a) dishonestly misappropriating or converting Page 17 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any legal contract made, touching the discharge of such trust.
10. The ingredients of an offence of cheating are: (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and
(iii) in cases covered by (ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property. "
25. What can be discerned from the above is that the offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients.
In order to constitute a criminal breach of trust (Section 406 IPC): -
1) There must be entrustment with person for property or dominion over the property, and
2) The person entrusted: -
a) dishonestly misappropriated or converted property to his own use, or
b) ishonestly used or disposed of the property or willfully suffers any other person so to do in violation of:
i. any direction of law prescribing the Page 18 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined method in which the trust is discharged; or ii. legal contract touching the discharge of trust (see: S.W.P. Palanitkar (supra).
Similarly, in respect of an offence under Section 420 IPC, the essential ingredients are: -
1) deception of any person, either by making a false or misleading representation or by other action or by omission;
2) fraudulently or dishonestly inducing any person to deliver any property, or
3) the consent that any persons shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit (see: Harmanpreet Singh Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009) Cr.L.J. 3462 (SC)
26. Further, in both the aforesaid sections, mens rea i.e. intention to defraud or the dishonest intention must be present, and in the case of cheating it must be there from the very beginning or inception.
27. In our view, the plain reading of the complaint fails to spell out any of the aforesaid ingredients noted above. We may only say, with a view to clear a serious misconception of law in the mind of the police as well as the courts below, that if it is a case of the complainant that offence of criminal breach of trust as defined under Section 405 of IPC, punishable under Section 406 of IPC, is committed by the accused, then in the same breath it cannot be said that the accused has also committed the offence of cheating as defined and explained in Section 415 of the IPC, punishable under Section 420 of the IPC.
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28. Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well. It has been held in Hari Prasad Chamaria v. Bishun Kumar Surekha & Ors., reported in (1973) 2 SCC 823 as under:
"4. We have heard Mr. Maheshwari on behalf of the appellant and are of the opinion that no case has been made out against the respondents under Section 420 Penal Code, 1860. For the purpose of the present appeal, we would assume that the various allegations of fact which have been made in the complaint by the appellant are correct. Even after making that allowance, we find that the complaint does not disclose the commission of any offence on the part of the respondents under Section 420 Penal Code, 1860. There is nothing in the complaint to show that the respondents had dishonest or fraudulent intention at the time the appellant parted with Rs. 35.000/- There is also nothing to indicate that the respondents induced the appellant to pay them Rs. 35,000/- by deceiving him. It is further not the case of the appellant that a representation was made, the respondents knew the same to be false. The fact that the respondents subsequently did not abide by their commitment that they would show the appellant to be the proprietor of Drang Transport Corporation and would also render accounts to him in the month of December might create civil liability on the respondents for the offence of cheating."Page 20 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025
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29. To put it in other words, the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case.
30. The distinction between mere breach of contract and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, it is this intention, which is the gist of the offence. Whereas, for the criminal breach of trust, the property must have been entrusted to the accused or he must have dominion over it. The property in respect of which the offence of breach of trust has been committed must be either the property of some person other than the accused or the beneficial interest in or ownership of it must be of some other person. The accused must hold that property on trust of such other person. Although the offence, i.e. the offence of breach of trust and cheating involve dishonest intention, yet they are mutually exclusive and different in basic concept. There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at Page 21 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously.
31. At the most, the court of the Additional Chief Judicial Magistrate could have issued process for the offence punishable under Section 420 of the IPC i.e. cheating but in any circumstances no case of criminal breach of trust is made out. The reason being that indisputably there is no entrustment of any property in the case at hand. It is not even the case of the complainant that any property was lawfully entrusted to the appellants and that the same has been dishonestly misappropriated. The case of the complainant is plain and simple. He says that the price of the goods sold by him has not been paid. Once there is a sale, Section 406 of the IPC goes out of picture. According to the complainant, the invoices raised by him were not cleared. No case worth the name of cheating is also made out.
32. Even if the Magistrate would have issued process for the offence punishable under Section 420 of the IPC, i.e., cheating the same would have been liable to be quashed and set aside, as none of the ingredients to constitute the offence of cheating are disclosed from the materials on record.
33. It has been held in State of Gujarat v.
Jaswantlal Nathalal reported in (1968) 2 SCR 408, "The term "entrusted" found in Section 405 IPC governs not only the words "with the property" immediately following it but also the words "or with any dominion over the Page 22 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined property" occurring thereafter-see Velji Raghvaji Patel v. State of Maharashtra [(1965) 2 SCR 429]. Before there can be any entrustment there must be a trust meaning thereby an obligation annexed to the ownership of property and a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. But that does not mean that such an entrustment need conform to all the technicalities of the law of trust - see Jaswantrai Manilal Akhaney v. State of Bombay [1956 SCR 483]. The expression "entrustment" carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them. A mere transaction of sale cannot amount to an "entrustment"".
34. Similarly, in Central Bureau of Investigation, SPE, SIU(X), New Delhi v. Duncans Agro Industries Ltd., Calcutta reported in (1996) 5 SCC 591, this Court held that the expression "entrusted with property"
used in Section 405 of the IPC connotes that the property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or that the beneficial interest in or ownership thereof must be in the other person and the offender must hold such property in trust for such other person or for his benefit. The relevant observations read as under: -
"27. In the instant case, a serious dispute has been raised by the learned counsel appearing for the respective parties as to whether on the face of the allegations, an offence of criminal breach of trust is constituted or not. In our view, the expression "entrusted Page 23 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined with property" or "with any dominion over property" has been used in a wide sense in Section 405 IPC. Such expression includes all cases in which goods are entrusted, that is, voluntarily handed over for a specific purpose and dishonestly disposed of in violation of law or in violation of contract. The expression entrusted appearing in Section 405 IPC is not necessarily a term of law. It has wide and different implications in different contexts. It is, however, necessary that the ownership or beneficial interest in the ownership of the property entrusted in respect of which offence is alleged to have been committed must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. The expression tuts in Section 405 IPC is a comprehensive expression and has been used to denote various kinds of relationships like the relationship of trustee and beneficiary, bailor and bailee, master and servant, pledger and pledgee. When some goods are hypothecated by a person to another person, the ownership of the goods still remains with the person who has hypothecated such goods. The property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or the beneficial interest in or ownership of it must be in the other person and the offender must hold such property in trust for such other person or for his benefit. In a case of pledge, the pledged article belongs to some other person but the same is kept in trust by the pledgee. [...]" (Emphasis supplied)
35. The aforesaid exposition of law makes it clear that there should be some entrustment of property to the accused wherein the Page 24 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined ownership is not transferred to the accused. In case of sale of movable property, although the payment may be deferred yet the property in the goods passes on delivery as per Sections 20 and 24 respectively of the Sale of Goods Act, 1930.
"20. Specific goods in a deliverable state.-
Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment of the price or the time of delivery of goods, or both, is postponed.
xxx xxx xxx
24. Goods sent on approval or "on sale or return". - When goods are delivered to the buyer on approval or "on sale or return" or other similar terms, the property therein passes to the buyer -
(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time."
36. From the aforesaid, there is no manner of any doubt whatsoever that in case of sale of goods, the property passes to the purchaser from the seller when the goods are delivered. Once the property in the goods passes to the purchaser, it cannot be said that the purchaser was entrusted with the property of the seller. Without entrustment of property, there cannot be any criminal breach of trust.
Page 25 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined Thus, prosecution of cases on charge of criminal breach of trust, for failure to pay the consideration amount in case of sale of goods is flawed to the core. There can be civil remedy for the non-payment of the consideration amount, but no criminal case will be maintainable for it. [See : Lalit Chaturvedi and Others v. State of Uttar Pradesh and Another : 2024 SCC OnLine SC 171 & Mideast Integrated Steels Ltd. (MESCO Steel Ltd.) and Others v. State of Jharkhand and Another : 2023 SCC OnLine Jhar 301]
37. The case at hand falls in category No. 1 as laid in Smt. Nagawwa (supra) referred to in para 7 of this judgment.
38. If it is the case of the complainant that a particular amount is due and payable to him then he should have filed a civil suit for recovery of the amount against the appellants herein. But he could not have gone to the court of Additional Chief Judicial Magistrate by filing a complaint of cheating and criminal breach of trust.
39. It appears that till this date, the complainant has not filed any civil suit for recovery of the amount which according to him is due and payable to him by the appellants. He seems to have prima facie lost the period of limitation for filing such a civil suit."
21. For the purpose of constituting the offence of criminal breach of trust, following ingredients are required to be established by the prosecuting agency from the police papers.
1) There must be entrustment with person for property or dominion over the property, and
2) The person entrusted: -
a) dishonestly misappropriated or converted property to his own use, or Page 26 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined
b) dishonestly used or disposed of the property or willfully suffers any other person so to do in violation of:
i. any direction of law prescribing the method in which the trust is discharged; or ii. legal contract touching the discharge of trust.
22. Similarly, for the offence under Section 420 IPC, the essential ingredients which are required to be established are:
1) deception of any person, either by making a false or misleading representation or by other action or by omission;
2) fraudulently or dishonestly inducing any person to deliver any property, or
3) the consent that any persons shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.
23. It is well settled that in both the aforesaid sections, mens rea i.e. intention to defraud or the dishonest intention must be present, and in the case of cheating it must be there from the very beginning or inception. As observed by the Hon'ble Apex Court in the aforesaid decision, 'with a view to clear a serious misconception of law in the mind of the police as well as the courts below, that if it is a case of the complainant that offence of criminal breach of trust as defined under Section 405 of IPC, punishable under Section 406 of IPC, is committed by the accused, then in the same breath it cannot Page 27 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined be said that the accused has also committed the offence of cheating as defined and explained in Section 415 of the IPC, punishable under Section 420 of the IPC'. It is settled proposition of law that every act of breach of trust may not be resulted in a penal offence of criminal breach of trust unless there is express evidence available on record which clearly goes on to show that there was manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well. In the present case, as discussed above, MoU came to be entered into between the parties with certain certain terms and conditions and accordingly, they have proceeded further but as soon as the applicant came to know about the litigation pending before the court concerned, he stopped making payment and also initiated proceedings for the recovery of the same, wherein an order has already been passed but till date, not a single penny has been given by the respondent no.2 to the applicant.
24. Revering back to the allegations leveled against the applicant, it is found out that the allegations leveled against the applicant is with regard to the offence of criminal trespass punishable under Section 447 and criminal Page 28 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined intimidation punishable under Section 506(2) of the IPC. Criminal trespass has been defined and explained under Section 441 of the IPC, which reads as under, "441. Criminal trespass. - Whoever enters into or upon property in the possession of another with intent to commit an offence or to intimidate, insult or annoy any person in possession of such property, or having lawfully entered into or upon such property, unlawfully remains there with intent thereby to intimidate, insult or annoy any such person, or with intent to commit an offence, is said to commit "criminal trespass".
25. Section 442 provides for "house trespass", which reads as under, "442. House trespass. - Whoever commits criminal trespass by entering into or remaining in any building, tent or vessel used as a human dwelling or any building used as a place for worship, or as a place for the custody of property, is said to commit "house-trespass".
Explanation. - The introduction of any part of the criminal trespasser's body is entering sufficient to constitute house- trespass."
26. Section 445 provides for "house breaking", which reads as under, "445. House breaking. - A person is said to commit "house-breaking" who commits house-trespass if he effects his entrance into the house or any part of it in any of the six ways hereinafter described; or if, being in the house or any part of it for Page 29 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined the purpose of committing an offence, or, having committed an offence therein, he quits the house or any part of it in any of such six ways, that is to say -
First. - If he enters or quits through a passage by himself, or by any abettor of the house-trespass, in order to the committing of the house-trespass.
Secondly. - If he enters or quits through any passage not intended by any person, other than himself or an abettor of the offence, for human entrance; or through any passage to which he has obtained access by scaling or climbing over any wall or building.
Thirdly. - If he enters or quits through any passage which he or any abettor of the house-trespass has opened, in order to the committing of the house-trespass by any means by which that passage was not intended by the occupier of the house to be opened.
Fourthly. - If he enters or quits by opening any lock in order to the committing of the house-trespass, or in order to the quitting of the house after a house-trespass.
Fifthly. - If he effects his entrance or departure by using criminal force or committing an assault or by threatening any person with assault.
Sixthly. - If he enters or quits by any passage which he knows to have been fastened against such entrance or departure, and to have been unfastened by himself or by an abettor of the house- trespass.
Explanation. - Any out-house or building occupied with a house, and between which and such house there is an immediate Page 30 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined internal communication, is part of the house within the meaning of this section."
27. Section 506(2) provides for "punishment for criminal intimidation", which reads as under, "506. Punishment for criminal intimidation. - Whoever commits, the offence of criminal intimidation shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both;
If threat be to cause death or grievous hurt, etc. - And if the threat be to cause death or grievous hurt, or to cause the destruction of any property by fire, or to cause an offence punishable with death or [imprisonment for life], or with imprisonment for a term which may extend to seven years, or to impute, unchastity to a woman, shall be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both."
28. Thus in view of the aforesaid provisions, this Court is of the considered view that even if the allegations levelled against the applicants in the impugned FIR are taken at their face value and accepted in their entirety, keeping in view the facts of the present case and the penal provisions, they do not prima facie constitute any offence or make out a case against the accused persons, as per the parameters set out by the Hon'ble Apex Court in the case of Bhajan Lal (supra) and in the case of R.P. Kapur (supra). If it is the case of the complainant that a particular amount is due and payable to him, in that event, he should have filed a civil suit for Page 31 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined recovery of the amount against the applicant herein but he could not have filed a complaint of cheating and criminal breach of trust. It is also found out from the record that till date the complainant has not filed any civil suit for recovery of the amount which according to him is due and payable to him by the applicant.
29. The scope and ambit of inherent powers of the Court under Section 482 CrPC or the extra-ordinary power under Article 226 of the Constitution of India, now stands well defined by series of judicial pronouncements. Undoubtedly, this Court has inherent power to do real and substantial justice, or to prevent abuse of the process of the Court. At the same time, the Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power vested in the Court should not be exercised to stifle a legitimate prosecution. However, this Court can exercise its inherent power or extra- ordinary power if it comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court, or the ends of justice require that the proceeding ought to be quashed.
30. Thus, if the facts of the present case are to be examined in the context of the aforesaid observations made by the Hon'ble Apex Court, I am of the opinion that the chances of an ultimate conviction of the applicant on the basis of the Page 32 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025 NEUTRAL CITATION R/SCR.A/5797/2016 CAV JUDGMENT DATED: 04/02/2025 undefined facts of the present case are bleak and therefore continuation of criminal prosecution against the applicant is nothing but sheer misuse of process of the Court. Thus, considering the ratio enunciated by the Hon'ble Apex Court in catena of decisions, I am of the opinion that the FIR in question deserves to be quashed qua the applicant.
31. In the result, the application succeeds and is hereby allowed. Accordingly, the impugned First Information Report being C.R. No. I-61 of 2016 registered with Vadodara Rural Police Station and subsequent proceeding being Criminal Case No.39464/2016 pending before the court of learned Chief Judicial Magistrate, Vadodara pursuant to filing of the chargesheet are hereby quashed and set qua the applicant.
32. Rule is made absolute to the aforesaid extent.
Direct service is permitted.
Sd/-
(DIVYESH A. JOSHI, J.) Gautam Page 33 of 33 Uploaded by PATIL GAUTAMBHAI GOPALBHAI(HC00190) on Tue Feb 04 2025 Downloaded on : Tue Feb 04 22:46:35 IST 2025