Calcutta High Court (Appellete Side)
E Zone Strips Private Limited & Ors vs The State Of West Bengal & Anr on 17 May, 2023
Author: Tirthankar Ghosh
Bench: Tirthankar Ghosh
IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE
PRESENT:
THE HON'BLE JUSTICE TIRTHANKAR GHOSH
CRR 633 of 2021
E Zone Strips Private Limited & Ors.
-vs.-
The State of West Bengal & Anr.
Mr. Sabyasachi Banerjee,
Mr. Lokesh Sharma,
Mr. Ramakant Sharma,
Ms. Aakansha Sharma
...For the Petitioners
Mr. Sudip Ghosh,
Mr. Bitasok Banerjee.
...For the State
Mr. Sandipan Ganguly, Sr. Adv.
Mr. Karan Dudhwewala.
...For the Opposite Party No.2
Reserved on : 17.05.2023
Judgment on : 17.05.2023
Tirthankar Ghosh, J:-
The present revisional application has been preferred challenging the
proceedings/FIR of Hare Street Police Station Case No.16/2019 dated
17.01.2019 (corresponding to G.R. Case No.77 of 2019) under Section
406/420/506 read with Section 120B of the Indian Penal Code including the
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order dated 11.01.2019 wherein the learned Chief Metropolitan Magistrate,
Calcutta was pleased to allow the application under Section 156(3) of the Code
of Criminal Procedure directing investigation.
The case was initiated by the order of the learned Chief Metropolitan
Magistrate, Calcutta dated 11.01.2019. The relevant part of the order is set out
as follows:
"The material allegations considered in the light of the annexed
documents tend to spell out certain probable offences, the nature
and attendant circumstances of which necessitate an investigation
by police.
In this view of the matter, the application u/s 156(3) Cr.PC is
allowed.
The O.C, Hare Street Police Station is directed to start an
investigation upon receipt a copy of the application with the
accompanying documents."
The relevant paragraphs relating to the allegations, made in the
application under Section 156(3) of Cr.P.C. being C/03/19, is set out as
follows:
"1. That the complainant is a Limited Company, incorporated under
the provisions of Companies Act, 1956, having its registered office,
as mentioned in the cause title of this application, duly represented
by its authorized Legal Officer Mr. Sourav Ketan Sahu, by virtue of a
Resolution Passed by the Board of Directors.
2. That the complainant company deals with a business of
manufacturing of engineering procurement and construction of
power and infrastructure assets for power transmission and power
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distribution to throughout India as well as abroad. The complainant
company has also a trading unit by which a trading business deals
with various types of iron and steel materials. The company used to
received from the different purchasers and to supply iron and steel
materials of various types against the said orders on cash and
credit basis.
3. That the accused company is a private limited company, having
their corporate office as mentioned in the cause title of this
application, which is within the area of Hare Street Police Station
and under jurisdiction of this Ld. Court. The accused nos. 2 and 3
are the directors of the accused no.1, who used to run the business
by taking all material decisions in business and day-to-day affairs
of the company and responsible for every decisions, steps and acts
of the company.
4. That the complainant doing its business since long with good
reputation and fame. The accused no.2 come to the earlier office of
the complainant at 11, Dr. U.N. Brahmachari Street, Kolkata 700017
and exposed for a business as he stated that accused no.1 i.e. their
company is a trader and supplier of steel materials, deals with to
supply material to large scale promoters work in different parts of
India and their company needed a huge iron and steel materials as
they have some contracts to supply materials to the promoters for
development and construction of different infraprojects for which
they require iron material and if the complainant company was
ready to deal business, then the directors of the company shall talk
with the complainant company. Eventually the proposal of good
business impressed the complainant company and they were ready
to talk with the directors of the accused no.1.
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5. That the accused nos. 2 and 3 thereafter talked with the
management staff of the complainant company and they made some
proposals which became impressive to the complainant company.
The accused persons also proposed that they needed huge amount
of materials as their supply of materials to infraprojects work was
going on large scale basis. The complainant company proposed the
mode of payment on cash, then the accused persons requested for
one month credit otherwise this huge transaction would not be
possible. The accused persons also assured that the said payment
would be made accordingly the terms and conditions and they had
a good business reputation in the market.
6. That the complainant company thereafter decided to supply the
materials as the accused persons made assurance of payment time
to time and also the impressive proposal of huge business and
supply of materials. Thereafter the complainant started to supply of
iron and steel materials to the accused no. 1 by proper bills and
challans. On first few occasions the accused persons made payment
of consignment amount as per the agreement and after that they
started to make payment irregularly. Whenever the complainant
requested the irregularities of payment then the accused assured
the complainant that due to some unavoidable circumstances, the
payment could not be made. But very soon the payment will be
made and also requested the complainant company to keep supply
of materials, otherwise, the entire transaction and business will be
held up. The complainant believed the accused persons and supply
the materials on assurance of the accused persons to receive the
payment. In this matter the accused company received the materials
from the complainant company worth of Rs.12,36,69,392.48
(Rupees twelve crore thirty six lakh sixty nine thousand three
hundred ninety two and paise forty eight) only. After this huge
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amount of supplied materials and dues amount, the complainant
company suffered a huge inconvenience of business due to lack of
recovery of huge outstanding amount and requested the accused
person to make payment, otherwise their business will be ruined-up.
The accused persons assured that the payment would be made very
soon. That one R.K. Sharma, the Officials of the complainant
company visited numerous time to collect payment from the accused
company and on the end of October, 2018, the complainant
company came to know that the accused persons in this manner
cheated various companies, vendors, persons, who had business
with the accused company.
7. That on 04.11.2018, the complainant went to the office of the
accused persons for recovery of money, but the accused persons
within a minutes became furious and arrogant and started to use
abusive languages to the officials of the complainant company and
also threatened with dire consequences, if any person of the
complainant company would make attempt to came and try realize
the money with the accused company, there is a chance if gravies
hard and loss of lives.
8. That it is to be noted that on 17th December, 2018, the
complainant company once again met with the accused persons to
resolve the matter and requested them to repay the dues but no
fruitful result has come out till date from the side of the accused
persons and as such the complainant company realized that they
have been cheated by the accused persons.
9. That the complainant company state that it is clear that from the
entire actions of the said accused persons, in collusion and in
conspiracy with each other, have dishonestly induced the
complainant company to supply the materials with false and
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frivolous statements with a malafide intention from the inception to
misappropriate and/or convert the valuable goods to their own
wrongful use of the materials which were supplied by the accused
company and now threatening with dire consequences, as such their
malafide act and/or omission in criminal conspiracy with each other
only to have wrongful gain and to cause a wrongful loss to the
complainant company, are individually liable for the offence
committed by the accused persons. The accused persons are guilty
of criminal breach of trust, having deliberately, mislead the
complainant company into believing them with false promises while
all the time they were hiding their malafide intention to cheat and
fraud.
10. That the accused persons from very inception, had intention to
cheat the complainant company for which they made a rosy picture
of huge transaction and business to allure the complainant company
and in this matter induced to supply iron and steel materials of
Rs.12,36,69,392.48 (Rupees twelve crore thirty six lakh sixty nine
thousand three hundred ninety two and paise forty eight) only and
neither they made payment of this amount nor the materials they
received were returned and till they retain it or misappropriated."
Mr. Sabyasachi Banerjee, learned Advocate appearing for the petitioners
submitted that the allegations in the complaint even if accepted to be true fails
to make out any offence in view of the continuous transaction taking place
between the parties for a considerable period of time. According to the learned
Advocate the present case was initiated by suppressing earlier transaction and
was a mode for recovery of outstanding dues. Additionally it has been
submitted that the huge quantity of transaction which have taken place in
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regular course of business do not attract the provisions of Section 420 and 406
of the Indian Penal Code, as such the proceedings should be quashed.
Mr. Sandipan Ganguly, learned Senior Advocate appearing for the
Opposite Party No.2/complainant submitted that the investigation is in
progress and it is settled proposition of law that only in the rarest of rare cases
this Court should exercise its authority to interfere under Section 482 of the
Code of Criminal Procedure to quash the proceeding at the inception. The
petitioners should be asked to approach after the charge-sheet is filed as prima
facie the opposite party no.2/complainant satisfied the learned Magistrate that
investigation in respect of a cognizable offence was warranted in the
background of the facts of the case. Further it has been submitted that the
documents which have been enclosed by the petitioner at this stage cannot be
looked into by this Court and having regard to the facts of the case no
exceptional circumstances have been made out for quashing of the proceedings
at this stage, the revisional application as such should be dismissed.
Mr. Sudip Ghosh, learned Advocate appearing for the State adopted the
submissions of the complainant/opposite party no.2. and relied upon the Case
Diary as also the report prepared by the Investigating Officer.
In view of the contention advanced before the Court and the averments
made in paragraph 6 of the application under Section 156(3) Cr.P.C., report
was called for from the Investigating Authorities along with the Case Diary to
ascertain the period and quantity/volume of transactions which has taken
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place. The Investigating Officer placed on record that in course of investigation
he could unearth the following:
Transaction details of EMC Ltd and Ezone Stripes Pvt Ltd-
Year Ezone purchased Ezone Paid to Due during Cumulative
materials from EMC in Rs. the year due in Rs.
EMC in Rs.
01/04/2013 1,91,638,242 995,266,246 196,371,996 196,371,996
to
31/03/2014
01/04/2014 2,202,838,513 1,937,926,599 264,911,914 461,283,910
to
31/03/2015
01/04/2015 35,735,482 679,350,000 - 133,669,392
to 327,614,518
31/03/2016
01/04/2016 0 10,000,000 -10,000,000 123,669,392
to
31/3/2017
Total 3,746,212,237 3,622,542,845 123,669,392
In a business transactions if the finding of the investigating agency is
that the purchase or supply of materials were to the tune of Rs.374 crores
(approximately) out of which Rs.362 crores (approximately) have been paid and
the dues are to the extent of Rs.12 crores (approximately), I am unable to
satisfy how the provisions of Section 420/406 of the Indian Penal Code would
apply.
In M N G Bharateesh Reddy -Vs. - Ramesh Ranganathan & Anr.
reported in 2022 SCC OnLine SC 1061, while dealing with offences under
Section 420 and Section 406 of the Indian Penal Code it has been observed by
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the Hon'ble Apex Court in paragraphs 16, 17, 18, 21, 22 and 23 are required to
be relied upon in this case. It was held in the aforesaid paragraphs as follows:
"16. In Hridaya Ranjan Prasad Verma v. State of Bihar, a two-
judge bench of this Court interpreted sections 415 and 420 of IPC to
hold that fraudulent or dishonest intention is a precondition to
constitute the offence of cheating. The relevant extract from the
judgment reads thus:
"14. On a reading of the section it is manifest that in the
definition there are set forth two separate classes of acts which the
person deceived may be induced to do. In the first place he may be
induced fraudulently or dishonestly to deliver any property to any
person. The second class of acts set forth in the section is the doing
or omitting to do anything which the person deceived would not do
or omit to do if he were not so deceived. In the first class of cases the
inducing must be fraudulent or dishonest. In the second class of
acts, the inducing must be intentional but not fraudulent or
dishonest.
15. In determining the question it has to be kept in mind that the
distinction between mere breach of contract and the offence of
cheating is a fine one. It depends upon the intention of the accused
at the time of inducement which may be judged by his subsequent
conduct but for this subsequent conduct is not the sole test. Mere
breach of contract cannot give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is shown right at
the beginning of the transaction, that is the time when the offence is
said to have been committed. Therefore it is the intention which is
the gist of the offence. To hold a person guilty of cheating it is
necessary to show that he had fraudulent or dishonest intention at
the time of making the promise. From his mere failure to keep up
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promise subsequently such a culpable intention right at the
beginning, that is, when he made the promise cannot be presumed."
(emphasis supplied)
17. In Dalip Kaur v. Jagnar Singh a two-judge bench of this
Court held that a dispute arising out of a breach of contract would
not amount to an offence of cheating under section 415 and 420. The
relevant extract is as follows:
"9. The ingredients of Section 420 of the Penal Code are:
"(i) Deception of any persons;
(ii) Fraudulently or dishonestly inducing any person to deliver
any property; or
(iii) To consent that any person shall retain any property and
finally intentionally inducing that person to do or omit to do anything
which he would not do or omit."
10. The High Court, therefore, should have posed a question as to
whether any act of inducement on the part of the appellant has been
raised by the second respondent and whether the appellant had an
intention to cheat him from the very inception. If the dispute between the parties was essentially a civil dispute resulting from a breach of contract on the part of the appellants by non-refunding the amount of advance the same would not constitute an offence of cheating. Similar is the legal position in respect of an offence of criminal breach of trust having regard to its definition contained in Section 405 of the Penal Code. (See Ajay Mitra v. State of M.P. [(2003) 3 SCC 11 : 2003 SCC (Cri) 703])"
(emphasis supplied)
18. Applying the above principles, the ingredients of Sections 415 and 420 are not made out in the present case. The grievance of the 11 first respondent arises from the termination of his services at the hospital. The allegations indicate that there was an improper billing in respect of the surgical services which were rendered by the complainant at the hospital. At the most, the allegations allude to a breach of terms of the Consultancy Agreement by the Appellant, which is essentially in the nature of a civil dispute.
21. The offence of criminal breach of trust contains two ingredients : (i) entrusting any person with property, or with any dominion over property; and (ii) the person entrusted dishonestly misappropriates or converts to his own use that property to the detriment of the person who entrusted it.
22. In Anwar Chand Sab Nanadikar v. State of Karnataka a two-judge bench restated the essential ingredients of the offence of criminal breach of trust in the following words:
"7. The basic requirement to bring home the accusations under Section 405 are the requirements to prove conjointly (1) entrustment, and (2) whether the accused was actuated by the dishonest intention or not misappropriated it or converted it to his own use to the detriment of the persons who entrusted it. As the question of intention is not a matter of direct proof, certain broad tests are envisaged which would generally afford useful guidance in deciding whether in a particular case the accused had mens rea for the crime."
23. In Vijay Kumar Ghai v. State of West Bengal another two- judge bench held that entrustment of property is pivotal to constitute an offence under section 405 of the IPC. The relevant extract reads as follows:
"28. "Entrustment" of property under Section 405 of the Penal Code, 1860 is pivotal to constitute an offence under this. The words 12 used are, "in any manner entrusted with property". So, it extends to entrustments of all kinds whether to clerks, servants, business partners or other persons, provided they are holding a position of "trust". A person who dishonestly misappropriates property entrusted to them contrary to the terms of an obligation imposed is liable for a criminal breach of trust and is punished under Section 406 of the Penal Code.""
Taking into account the documents of the present case which has already surfaced in the investigation and a summary of which has been placed on record on the basis of some of the vague narrations made in the application under Section 156(3) of Cr.P.C., I am of the view that the present case has failed to make out any offence either under Section 420 or Section 406 of the Indian Penal Code for the purpose of which any investigation is required.
Thus, the continuance of the proceedings being Hare Street Police Station Case No.16/2019 dated 17.01.2019 (corresponding to G.R. Case No.77 of 2019) as also the order dated 11.01.2019 passed by the learned Chief Metropolitan Magistrate, Calcutta would result in an abuse of the process of law and as such the same is quashed.
Accordingly, CRR 633 of 2021 is allowed.
Pending applications, if any, are consequently disposed of. All parties shall act on the server copy of this judgment duly downloaded from the official website of this Court.
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Urgent Xerox certified photocopy of this judgment, if applied for, be given to the parties upon compliance of the requisite formalities.
(Tirthankar Ghosh, J.)