Jharkhand High Court
Neeraj Sahay @ Niraj Sahay vs The State Of Jharkhand on 3 January, 2024
Author: Anil Kumar Choudhary
Bench: Anil Kumar Choudhary
1 Cr.M.P. No.2972 of 2023
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Cr.M.P. No. 2972 of 2023
Neeraj Sahay @ Niraj Sahay, aged about 45 years, son of late
Sachidanand Sahay, resident of Tara Niwas, Hinoo Chowk, P.O. &
P.S.- Doranda, Dist.- Ranchi, Jharkhand
.... Petitioner
Versus
1. The State of Jharkhand
2. Deepak Kumar Bharthuar, son of late Ramchandra Prasad, resident
of 100, New A.G. Co-operative Colony, Kadru, P.S.- Argora, P.O.-
Argora, Dist.- Ranchi, Jharkhand
.... Opp. Parties
PRESENT
HON'BLE MR. JUSTICE ANIL KUMAR CHOUDHARY
.....
For the Petitioner : Mr. B.M. Tripathi, Sr. Advocate : Mr. Naveen Kr. Jaiswal, Advocate For the State : Mr. Vineet Kr. Vashistha, Spl. P.P. For O.P. No.2 : Mr. Rahul Kumar, Advocate .....
By the Court:-
1. Heard the parties.
2. This criminal miscellaneous petition has been filed invoking the jurisdiction of this Court under Section 482 Cr.P.C. with a prayer for quashing the order dated 09.12.2022 passed by the learned Judicial Magistrate-XIII, Ranchi in Complaint Case No. 10035 of 2022 as also the entire criminal proceeding, now pending in the court of learned Judicial Magistrate-XIII, Ranchi.
3. The allegation against the petitioner is that the petitioner entered into a memorandum of understanding cum joint venture contract 2 Cr.M.P. No.2972 of 2023 agreement for initiation of business relationship between Urmila RCP Projects Private Limited and the petitioner inter alia in respect of the project titled 'Balabaux Empire' and decided a separate bank account shall be opened for the project of which the petitioner will be the authorized signatory and accordingly, a separate bank account was opened with the petitioner as the authorized signatory. The said memorandum of understanding has an arbitration clause which envisages that in case of any dispute or difference in connection with the said partnership between the parties, their heirs and legal representatives, such disputes shall be referred to arbitration by such arbitrator as may be appointed by mutual consent. It is further alleged that the petitioner has misappropriated the amount of the said business by transferring some of the amounts of the said project from the said exclusive bank account to his own personal account of course, the details of amount withdrawn and the exact magnitude of the amount withdrawn has not been mentioned and apparently not known even to the complainant.
4. The learned Magistrate vide order dated 09.12.2022 basing upon the complaint, statement of the complainant on solemn affirmation and the statement of the two inquiry witnesses have taken cognizance of the offences punishable under Section 406 and 420 of Indian Penal Code.
5. Learned Senior Advocate appearing for the petitioner relying upon the judgment of this Court in Cr.M.P. No. 568 of 2023 in the case of Shamsher Khan & Anr. vs. The State of Jharkhand & 3 Cr.M.P. No.2972 of 2023 Anr. wherein this Court, relied upon the judgment of Hon'ble Supreme Court of India in the case of Uma Shankar Gopalika vs. State of Bihar & Anr. reported in (2005) 10 SCC 336, paragraph no. 6 of which reads as under:-
6. Xxxx xxxx xxxx It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case it has nowhere been stated that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC." (Emphasis supplied) and reiterated the settled principle of law that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception and it is submitted that there is absolutely no allegation of any deception having been played by the petitioner and the undisputed facts remains that the petitioner is the cousin brother of the complainant.
6. It is next submitted by the learned Senior Advocate appearing for the petitioner that the complainant has not approached police and straightway filed the complaint case without complying the provision of Section 154 of Code of Criminal Procedure. It is then submitted by the learned Senior Advocate appearing for the petitioner that the allegation against the petitioner is totally false and vague and the initiation of memorandum of understanding dated 01.08.2016 was supplemented with supplementary joint 4 Cr.M.P. No.2972 of 2023 venture agreement on 10.08.2016. It is further submitted by the learned Senior Advocate appearing for the petitioner that the complainant has not honoured the terms of the joint venture agreement dated 01.08.2016 by not resorting to arbitration clause of the agreement to resolve the dispute. It is next submitted by the learned Senior Advocate appearing for the petitioner that there is no allegation as to on which date, how much amount was illegally withdrawn by the petitioner and from which account. It is next submitted that the petitioner got the valuation of the project done by the government approved valuer and it was found that the work done was of Rs.8,94,59,964/-, the copy of which report has been annexed. It is also submitted by the learned Senior Advocate appearing for the petitioner that the petitioner undisputedly invested huge amount of money which the complainant is trying to snatch away with the help of this criminal case and filing of the criminal case to resolve business dispute is an abuse of process of law. Hence, it is submitted that the order dated 09.12.2022 passed by the learned Judicial Magistrate-XIII, Ranchi in Complaint Case No. 10035 of 2022 as also the entire criminal proceeding is liable to be quashed.
7. Learned Special Public Prosecutor and the learned counsel for the opposite party no.2 on the other hand opposes the prayer for quashing the order dated 09.12.2022 passed by the learned Judicial Magistrate-XIII, Ranchi in Complaint Case No. 10035 of 2022 as also the entire criminal proceeding. Relying upon the judgment of Hon'ble Supreme Court of India in the case of Priti Saraf & Anr. 5 Cr.M.P. No.2972 of 2023
vs. State (NCT of Delhi) & Anr. reported in (2021) 16 SCC 142, paragraph no. 31 of which reads as under:-
"31. In the instant case, on a careful reading of the complaint/FIR/charge-sheet, in our view, it cannot be said that the complaint does not disclose the commission of an offence. The ingredients of the offences under Sections 406 and 420IPC cannot be said to be absent on the basis of the allegations in the complaint/FIR/charge- sheet. We would like to add that whether the allegations in the complaint are otherwise correct or not, has to be decided on the basis of the evidence to be led during the course of trial. Simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of the process of the court for exercising inherent powers of the High Court under Section 482CrPC for quashing such proceedings."
It is submitted by the learned counsel for the opposite party no.2 that it is a settled principle of law that simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the instance of the complainant that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of the criminal proceedings, in any manner, will be an abuse of process of the court for exercising inherent powers of the High Court under Section 482 Cr.P.C. for quashing such proceedings.
8. Learned counsel for the opposite party no.2 also relied upon the judgment of Hon'ble Supreme Court of India in the case of Trisuns Chemical Industry vs. Rajesh Agarwal reported in (1999) 8 SCC 686, paragraph no. 9 of which reads as under :-
"9. We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a 6 Cr.M.P. No.2972 of 2023 criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act which amounted to an offence albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases as indicated in State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] ."
9. Learned counsel for the opposite party no.2 also relied upon the judgment of this Court in the case of Sai Appliances & Ors. vs. State of Jharkhand & Anr. reported in 2023 SCC OnLine Jhar 1949, wherein, this Court has mentioned the ingredients of the offence punishable under Section 406 of Indian Penal Code in paragraph no.9 which reads as under:-
9. It is also a settled principle of law that in order to establish the offence punishable under Section 406 of Indian Penal Code the following ingredients are to be established :-
(i) Mens rea,
(ii) There must be dishonest misappropriation or conversion to one's own use, or use in violation of a legal direction or of any legal contract and
(iii) The accused dishonestly used or disposed of the property.
10. Learned counsel for the opposite party no.2 also draws the attention of this Court to the illustration 'c' of Section 405 of Indian Penal Code which reads as under:-
"405. Criminal breach of trust.
... ... ... ... ... ... ... ...
... ... ... ... ... ... ... ...
Illustrations:
... ... ... ... ... ... ... ...
... ... ... ... ... ... ... ...
7 Cr.M.P. No.2972 of 2023
(c) A, residing in Calcutta, is agent for Z,
residing at Delhi. There is an express or implied contract between A and Z, that all sums remitted by Z to A shall be invested by A, according to Z's direction. Z remits a lakh of rupees to A, with directions to A to invest the same in Company's paper. A dishonestly disobeys the directions and employs the money in his own business. A has committed criminal breach of trust."
And submits that the facts of this case is covered by the said illustration; therefore the allegations contained given rise to the offence punishable under section 406 of the Indian Penal Code.
11. Hence, it is submitted that this criminal miscellaneous petition being without any merit be dismissed.
12. Having heard the submissions made at the Bar and after going through the materials in the record, so far as the offence punishable under Section 420 of Indian Penal Code is concerned, as has been reiterated by this Court in the case of Shamsher Khan & Anr. vs. The State of Jharkhand & Anr. (supra), it is a settled principle of law that playing deception at the very inception is a sine-qua-non to constitute the offence punishable under Section 420 of Indian Penal Code.
13. Now coming to the facts of the case, there is absolutely no allegation against the petitioner of playing deception at the beginning of the transaction between the parties. Undisputedly, the petitioner has invested certain amount in terms of the memorandum of understanding and the supplementary joint venture agreement hence, this Court has no hesitation in holding that even if the entire allegation made in the complaint, statement of the complainant on solemn affirmation and the statement of the inquiry witnesses are treated to be true still, the offence 8 Cr.M.P. No.2972 of 2023 punishable under Section 420 of Indian Penal Code is not made out.
14. So far as the offence punishable under Section 406 of Indian Penal Code is concerned, it is a settled principle of law as has been held by the Hon'ble Supreme Court of India in the case of Satish Chandra Ratanlal Shah vs. State of Gujarat & Anr. reported in (2019) 9 SCC 148, paragraph nos. 11 to 13 of which reads as under:-
"11. Having observed the background principles applicable herein, we need to consider the individual charges against the appellant. Turning to Section 405 read with Section 406 IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that Respondent 2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognises a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.
12. In this context, we may note that there is nothing either in the complaint or in any material before us, pointing to the fact that any property was entrusted to the appellant at all which he dishonestly converted for his own use so as to satisfy the ingredients of Section 405 punishable under Section 406 IPC. Hence the learned Magistrate committed a serious error in issuing process against the appellant for the said offence. Unfortunately, the High Court also failed to correct this manifest error.
13. Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168: 2000 SCC (Cri) 786]) In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached Respondent 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere 9 Cr.M.P. No.2972 of 2023 inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all the facts in the complaint and material are taken on their face value, no such dishonest representation or inducement could be found or inferred." (Emphasis supplied) that a mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.
15. So far as the illustration 'c' of the Section 405 of Indian Penal Code is concerned, the same in no uncertain manner mentions of entrustment by 'Z' remitting a lakh of rupees to 'A'. Further qualifying the said entrustment with a specific direction to 'A' to invest the same in Company's paper and the additional allegation against 'A' is that 'A' dishonestly disobeys the directions of 'Z' and employs the money in his own business.
16. Now coming to the facts of the case, there is absolutely no allegation of entrustment of any specific money to the petitioner by the complainant or his company. All that it is alleged that there was a memorandum of understanding and joint venture agreement in which the petitioner also obviously invested certain money. The title of the property of the said partnership business is undisputedly not with the petitioner or even the complainant opposite party no. 2. There is no specific allegation against the petitioner as to how much money, on which date, from which account, he transferred to any other account. There is no allegation that the petitioner was directed by the complainant to 10 Cr.M.P. No.2972 of 2023 deal with the money in the account of the project in a specific manner which the petitioner has violated rather the spirit of the memorandum of understanding and the joint venture agreement as well as the supplementary joint venture agreement goes to show that the petitioner was the whole and sole person to deal with the project which has been termed as a partnership in clause 10 of the said supplementary joint venture agreement. So if there is any dispute regarding rendition of accounts of a partnership business, certainly, the same cannot be said to constitute the offence of criminal breach of trust in the absence of any specific allegation that the petitioner dishonestly misappropriated the property entrusted to him.
17. Thus, in the absence of any specific allegation of the two essential ingredients of the offence punishable under Section 406 of Indian Penal Code that is:
1. Entrustment or dominion over the property;
2. Dishonest misappropriation of the said property;
which has also been reiterated by the Hon'ble Supreme Court of India in the case of State of Punjab v. Pritam Chand reported in (2009) 16 SCC 769, paragraph no. 6 of which reads as under:-
"6. Section 406 IPC deals with punishment for criminal breach of trust. In a case under Section 406 the prosecution is required to prove that the accused was entrusted with property or he had dominion over the property and that the accused misappropriated or converted the property to his own use or used or disposed of the property or wilfully suffered any person to dispose of the property dishonestly or in violation of any direction of law prescribing the mode in which the entrusted property should be dealt with or any legal contract express or implied which he had entered into relating to carrying out of the trust."11 Cr.M.P. No.2972 of 2023
The offence punishable under section 406 of the Indian Penal Code, is not made out.
18. View of the discussions made above; this Court is of the considered view that the allegation made against the petitioner falls short of constituting the second essential ingredients as mentioned in paragraph no. 9 (ii) of the judgment rendered by this Court in the case of Sai Appliances & Ors. vs. State of Jharkhand & Anr. (supra); moreover as there is no legal direction or any legal contract having been violated by the petitioner.
19. Under such circumstances, this Court is of the considered view that even if the allegation made in the complaint, statement of the complainant on solemn affirmation and the statement of the inquiry witnesses are treated to be true in its entirety, still, the offence punishable under Section 406 of Indian Penal Code is not made out.
20. Considering the aforesaid facts, this Court has no hesitation in holding that thus continuation of the criminal proceeding against the petitioner in connection with Complaint Case No. 10035 of 2022 pending in the court of learned Judicial Magistrate -XIII, Ranchi will amount to abuse of process of law and this is a fit case where in the interest of justice the entire criminal proceeding including the order dated 09.12.2022 passed by the learned Judicial Magistrate-XIII, Ranchi in Complaint Case No. 10035 of 2022 be quashed and set aside.
21. Accordingly, the entire criminal proceeding including the order dated 09.12.2022 passed by the learned Judicial Magistrate-XIII, 12 Cr.M.P. No.2972 of 2023 Ranchi in Complaint Case No. 10035 of 2022 is quashed and set aside.
22. It is made clear that the judgment will not be a bar of the complainant seeking redressal of his grievance by way of any civil remedy.
23. In the result, this criminal miscellaneous petition is allowed.
(Anil Kumar Choudhary, J.) High Court of Jharkhand, Ranchi Dated the 3rd January, 2024 AFR/Sonu-Gunjan/-