Karnataka High Court
Mr Kola Thirumalaraju vs State Of Karnataka on 22 January, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 19.12.2024
Pronounced on : 22.01.2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 22ND DAY OF JANUARY, 2025
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.12307 OF 2024 (GM - RES)
BETWEEN:
1. MR.KOLA THIRUMALARAJU
AGED ABOUT 43 YEARS,
S/O LATE KOLA VEERA SWAMY,
R/O NO.70 18 12/3,
SAITCHUTHA GREEN MEDOWS,
VILLA NO.4, SOWJANYA NAGAR,
KAKINADA,
BESIDE VS LAKSHMI WOMENS COLLEGE,
KAKINADA (URBAN),
APSP CAMP, EAST GODAVARI,
ANDHRA PRADESH - 533 005.
2. M/S. VENKATESHWARA SEA FOODS
REGISTERED UNDER PARTNERSHIP ACT, 1932
HAVING ITS REGISTERED OFFICE AT
FLAT NO.D1,
NARAYANA GIRI HEIGHTS,
POSTAL EMPLOYEES COLONY,
SANTHI NAGAR,
KAKINADA - 533 003
2
REPRESENTED BY ITS MANAGING PARTNER.
... PETITIONERS
(BY SRI KRISHNA S.VYAS, ADVOCATE)
AND:
1. STATE OF KARNATAKA
DEPARTMENT OF HOME,
VIDHANA SOUDHA,
AMBEDKAR VEEDHI,
BENGALURU - 560 001
REPRESENTED BY HOME SECRETARY.
2. THE STATE BY
MARATHAHALLI POLICE STATION
BENGALURU,
REPRESENTED BY
HIGH COURT GOVERNMENT PLEADER,
HIGH COURT OF KARNATAKA,
BENGALURU - 560 001.
3. MR.CHAITANYA PUNDRU
AGED ABOUT 66 YEARS
S/O PUNDRU SOMESHWARA RAO
RESIDENT OF NO.63
IDEA INFO LABS PVT. LTD.,
HELIOUS BUSINESS PARK
TOWER E 2ND FLOOR
CHANDANA,
KADUBEESANAHALLI
BENGALURU - 560 103.
4. M/S. ICICI BANK LTD.,
NO.1, SHOBHA PEARL,
2ND FLOOR, M.G.ROAD,
COMMISSIARIAT ROAD,
BENGALURU - 560 025
3
REPRESENTED BY ITS CHIEF MANAGER.
... RESPONDENTS
(BY SRI B.N.JAGADEESHA, ADDL.SPP FOR R-1 AND R-2;
SMT.SANJANA RAO, ADVOCATE FOR R-3,
NOTICE TO R-4 IS DISPENSED V/C/O DT.4.7.2024)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA READ WITH SECTION 482 OF CR.P.C.,
PRAYING TO i. CALL FOR THE ENTIRE RECORDS IN MARATHAHALLI
PS, CR.NO. 152/2024 FOR THE OFFENCES PUNISHABLE UNDER
SEC 406, 420, 120B R/W 34 OF THE IPC, PENDING ON THE FILE OF
THE HON'BLE 3RD ACMM VIDE ANNEXURES-A AND B
RESPECTIVELY; ii. EXERCISE INHERENT POWERS UNDER SEC. 482
OF CR.P.C, TO QUASH THE COMPLAINT AND THE FIR BEARING
MARATHAHALLI PS CR.NO. 152/2024 FOR THE OFFENCES
PUNISHABLE UNDER SEC. 406, 420, 120-B R/W 34 OF THE IPC
PENDING ON THE FILE OF THE HON'BLE 3RD ACMM VIDE
ANNEXURES-A AND B IN SO FAR AS IT PERTAINS TO THE 1ST
PETITIONER.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 19.12.2024, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
The petitioners are before this Court calling in question
registration of a crime in Crime No.152 of 2024 registered for
offences punishable under Sections 406, 420, 120B and 34 of the
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IPC and pending before the 3rd Additional Chief Metropolitan
Magistrate, Bengaluru.
2. Heard Sri Krishna S. Vyas, learned counsel appearing for
the petitioner, Sri B.N. Jagadeesha, learned Additional State Public
Prosecutor appearing for respondents 1 and 2 and Smt. Sanjana
Rao, learned counsel appearing for respondent No.3.
3. Facts, in brief, germane are as follows:-
The 3rd respondent is the complainant. The complainant
works with M/s Ninjacart. Ninjacart operates under a "Bill to Ship"
model of business wherein Ninjacart purchases produces from
wholesale suppliers which are in turn sold to subsequent buyers. It
is averred in the petition that in the course of ordinary trade,
Ninjacart makes upfront and complete payment to its wholesale
suppliers. Thereafter, when the items are resold to subsequent
buyers, payment is accepted by Ninjacart which was given on a
credit of 65 - 70 days to the buyers to make good necessary
payment. The petitioners and Ninjacart have a business agreement.
The petitioners are a partnership firm. Ninjacart enters into an
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arrangement with Nekkanti for supply of shrimps. In furtherance of
the trade, Ninjacart communicated mails from January 2023 to June
2023 offering to supply different quantities of shrimp at the prices
mentioned therein. The complainant is said to have entered into
sale and purchase agreement dated 20-12-2022 with accused No.1
for availing supply of agricultural goods including shrimp. In terms
of the said arrangement or agreement, accused No.1 was required
to supply these goods as and when Ninjacart places purchase
orders for the same and accused No.1 was required to deliver goods
directly to Ninjacart's customers.
4. The complainant places various orders for supply of shrimp
which was required to be delivered to Nekkanti. In turn accused
No.2 issued Goods Received Note ('GRN') to Ninjacart confirming
receipt of shrimp on behalf of Nekkanti. Thereafter, Ninjacart
raised various invoices to Nekkanti and these were being cleared
from time to time. Likewise, between 23-05-2023 and 30-06-2023
the offers were made to Nekkanti. Accused No.2 accepted these
offers on behalf of Nekkanti and Ninjacart contacted accused No.1
for supply of shrimp. After a few days Nekkanti through accused
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No.2 issued GRN in the form of mail confirming quantity of shrimps.
Ninjacart from its coffers releases payment of ₹9,35,96,343/- to
accused No.1 after deducting TDS. The complainant thus fulfilled all
the obligations. But, accused No.1 refused to pay the amount that
was to be paid to the complainant. Projecting it to be a criminal
breach of trust or cheating, the complaint comes to be registered
by the complainant which becomes a crime in crime No.152 of 2024
pursuant to which, the accounts of the petitioners are frozen.
Aggrieved by registration of crime and freezement of accounts, the
petitioners are before the doors of this Court in the subject petition.
5. The learned counsel appearing for the petitioners would
vehemently contend that the issue in the lis is a pure breach of
agreement, if at all it is, and what is called in question is an alleged
loss caused on account of acts of the petitioners. Therefore, it is a
case of recovery of money. It is his further contention that the
incident happens between 23-05-2023 and 30-06-2023 but the
crime is registered on 02-04-2024, 9 months thereafter. He would
submit that there is gross delay in registering the crime which
would vitiate the entire crime and seeks quashment of entire crime.
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6. Per contra, the learned counsel Ms. Sanjana Rao
representing the 3rd respondent/complainant would vehemently
refute the submissions to contend that the case at hand would in
the first blush look like breach of agreement. But, the issue is
Nekkanti placed orders for delivery of shrimp. The amount is
credited to the account of accused No.1 who had to deliver shrimp.
Time passes by. Today there is neither the shrimp nor the amount
which the complainant has already paid to accused No.1. Therefore,
there is a clear case of cheating and criminal breach of trust in the
agreement, as the complainant do not know where the shrimp is
nor accused No.1 has returned the money. It is, therefore, a matter
of investigation in the least is what the learned counsel would
contend.
7. I have given my anxious consideration to the submissions
made by the respective learned counsel and have perused the
material on record.
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8. The afore-narrated facts are not in dispute. The
arrangement of supply of goods and payment of money has been
the business between Ninjacart and the petitioners. One such
consignment goes wrong. The consignment was delivery of shrimp.
Since the entire issue has now sprung from the complaint, I deem it
appropriate to notice the contents of the complaint insofar as they
are germane. They read as follows:
".... .... ....
2. As per Ninjacart's business model, the wholesale
supplier directly delivers the products to the subsequent buyer
without Ninjacart being involved in this process. On receiving
delivery of the products, the subsequent buyer confirms the
quality and quantity of the products over email in the form of a
"Goods Received Note" or "GRN". The GRN Establishes that the
products receded are in satisfaction of the contract between
Ninjacart and the subsequent buyer. On receiving the GRN from
the subsequent buyer, Ninjacart raises an invoice in favour of
the subsequent buyer for supply of products. The subsequent
buyer is then required to make payment for the products
supplied within the agreed credit period.
3. In furtherance of the Bill to Ship to business
model described above, Ninjacart entered into an
arrangement with Nekkanti for the supply of shrimps. In
furtherance of the trades, Ninjacart issued various emails
from January, 2023 to June, 2023 offering to supply
different quantities of shrimp at prices mentioned
therein. The offers made by Ninjacart in various emails
were accepted by Nekkanti in the form of emails. It is
pertinent to note that all emails were issued by Accused
No. 2 from his official ID.
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4. Ninjacart had also entered into a Sale and Purchase
Agreement dated 20.12.2022 with Accused No. 1 for availing
supply of agricultural goods, including shrimp. In terms of this
agreement, Accused No. 1 was required to supply these goods
as and when Ninjacart placed purchase orders for the same.
Accused No.1 was required to deliver the goods directly to
Ninjacart's customer.
5. To fulfill the contract with Nekkanti, Ninjacart placed
various orders for supply of shrimp on Accused No. 1, who was
required to deliver the same to Nekkanti. In turn, Accused No.2
issued GRNs to Ninjacart confirming receipt of the shrimp on
behalf of Nekkanti. Thereafter, Ninjacart raised its invoices to
Nekkanti and these invoices were cleared by Nekkanti from time
to time.
6. As has been the practice, Ninjacart made offers
to Nekkanti for supply of shrimp under emails dated
23.05.2023 and 30.06.2023 and the offers were accepted
by Nekkanti. It is pertinent to note that Accused No. 2
accepted these offers on behalf of Nekkanti. On
acceptance of the offers, Ninjacart contacted Accused No.
1 for supply of shrimp. Thereafter, on the same days,
Nekkanti through Accused No. 2 issued GRNs in the form
of emails on 23.05.2023 and 30.06.2023 confirming
receipt of the entire quantity of shrimps. Ninjacart
immediately released payment of Rs. 9,35,96,343/-
(Rupees Nine Crores Thirty Five Lakhs Ninety Six
Thousand Three Hundred and Forty Three) to Accused No.
1, after deducting the applicable TDS amounts.
7. As Ninjacart had fulfilled its obligations,
Ninjacart raised invoices against Nekkanti for the
successful supply of shrimp under emails of 23.05.2023
and 30.06. 2023. Nekkanti was thereafter obligated to
pay Ninjacart an amount of INR 10,00,51,200/- (Rupees
Ten Crores Fifty One Thousand and Two Hundred) by
15th September 2023. However, Nekkanti failed to make
any payment by the said date. Despite several follow-ups,
payment was not forthcoming. In these circumstances,
Ninjacart was constrained to issue a legal notice on
15.11.2023 calling upon Nekkanti to pay the amounts due
and outstanding. In response to the legal notice,
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Ninjacart received the following shocking
communications:
a) Email from Accused No.2 dated 16.11.2023 stating
that as an employee of Nekkanti and he issued GRNs to
Ninjacart despite the goods not being received by Nekkanti.
Further, he stated that he undertakes personal responsibility for
the same, and Nekkanti is not liable to make any payments.
b) Email response from Mr. N Nagesh, Director and CEO
of Nekkanti dated 17.11.2023 alleging that Ninjacart did not
deliver any products and Nekkanti is accordingly not liable to
make payments for which no products have been received.
8) Ninjacart has successfully fulfilled its obligations under
its contracts with Nekkanti and Accused No. 2. Shockingly,
based on the information provided by Nekkanti, it appears that
Accused No. 1 and Accused No. 2 have colluded with each other
and acted in cahoots to misappropriate vast sums of money
from Ninjacart. Nekkanti has repeatedly claimed that its
management has no involvement in this deception and fraud.
Ninjacart, as on date, has been deceived and lost INR
10,00,51,200/- (Rupees Ten Crores Fifty One Thousand and
Two Hundred), on account of the acts of Accused No. 1 and 2
and which was payable by Nekkanti.
9. Submission: The facts presented above reveal a
meticulously planned scheme executed by Accused No. 1 and
Accused No. 2 to defraud Ninjacart. Their actions demonstrate a
deliberate pattern of deception, aimed at exploiting Ninjacart's
standard business practices. The initial successful transactions
served a dual purpose: to establish a false sense of legitimacy
and to entice Ninjacart into larger, more profitable subsequent
transactions. The subsequent issuance of valid GRNs by Accused
No.2 underscores their criminal intent. The case strongly
suggests conspiracy, coercion and a willful disregard for the
agreed-upon contractual obligations.
10. Criminal Conspiracy and Intent to Defraud: The
actions of Accused 1 and Accused 2 as informed by
Nekkanti demonstrate a pattern of coordinated and
deceptive behavior, clearly establishing a criminal
conspiracy to defraud Ninjacart. The initially successful
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transactions between Ninjacart and Nekkanti, performed
by Accused No.2 on behalf of Nekkanti indicate a
calculated plan to establish a false sense of trust. This
was likely done to induce Ninjacart into larger
subsequent transactions. The issuance of false GRNs
point to a deliberate attempt to perpetrate fraud.
11 Collusion and Criminal Conspiracy Between
Accused Parties: The close timing of events, including the
issuance of orders and false GRNs by Accused No.2
suggests collusion between Accused No.1 and Accused
No.2.
12. Ninjacart has been running from pillar to post
between Nekkanti, and Accused No. 1 to recover amounts
due to it. Accused No.1 maintained that Nekkanti had
issued valid GRNs, thereby confirming successful delivery
of products, by virtue of which Accused No.1 is not liable
to return any amounts to Ninjacart. Nekkanti maintains
that it never received any products and the GRNs were
issued based on collusion between Accused No.1 and
Accused No.2 and hence are not valid. However, despite
repeated requests, Nekkanti has failed to produce any
credible evidence for non-receipt of goods. Further, while
Nekkanti claimed that it has confirmation from Accused
No.1 that it had not supplied goods, Nekkanti has not
shared any document in support thereof. In this entire
ordeal, Ninjacart is the only entity that has truly suffered
losses on account of malicious conduct of interested
parties.
13. We hope that a meticulous review of all
communication between Accused No.1 and Accused No. 2
could expose patterns of coordination, revealing their
orchestration of the fraudulent scheme. An in-depth
investigation of financial records, including bank
statements and payment histories, between the two
accused parties could unveil suspicious monetary
transactions. These may act as evidence of the movement
of defrauded funds.
We therefore respectfully request your good office to
recognize the seriousness of this complaint, initiate a full
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criminal investigation, and hold the accused parties
accountable. We hereby enclose the details of the
accused parties. Ninjacart and its officials pledge full
cooperation and will provide all necessary evidence in
support of the investigation.
The contact details of Accused No. 1 and Accused No. 2,
as available us with us are set out below:
Accused No.1 - M/S Sri Venkateshwara Sea Foods represented
by Mr. Kola Thirumalaraju Address: D. No 3-16B. 80/2, Flat No
D1, Narayana Giri Heights, Postal Employees Colony, Shanti
Nagar, Kakinada - 533 003
PAN: ACUFS2316K, Mobile: 9553384444
Accused No. 2- Mr. Bhogadi Satyanarayan
Mobile: 9848199739"
(Emphasis added)
The afore-quoted is the complaint by the 3rd respondent against the
petitioners. The complaint then becomes a crime in Crime No.152
of 2024 for offences punishable under Sections 406 and 420 of the
IPC. Pursuant to registration of crime a debit freeze of the account
of the petitioners is directed by the Investigating Officer. The
communication reads as follows:
"To:
The Manager,
ICICI BANK,
Bangaluru.
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Sir,
Sub: Request to Debit freeze A/c and furnish the
accounts details- reg.
Ref: Marathahalli Police Station Crime No.
152/2023 Under Section 120(B), 406, 420
R/w. 34 IPC...
*****
With respect to the above subject, I hereby requesting
you that, based on Mr. Chaitanya Pandru's complaint a case
was registered in Marathahalli Police Station Crime
No.152/2024 Under Section 120(B), 406, 420 R/w. 34 of IPC.
For the purpose of investigation of this case, you are hereby
requested to Debit freeze the below mentioned ICICI BANK
accounts and furnish the following particulars of the following
account No's at the earliest.
Sl. Account No Name of the Account holder
No.
1. 028005003331 Kola Thirumalaraju
2. 028005005545 -
1. Statement of account from Date: 01-05-2023 to till date.
2. Name of the Branch and contact E-mail id and phone No's of
the concerned branch.
3. Account opening form and identity proof and other relevant
documents submitted by the account holder at the time of
opening the account.
4. KYC form along with ID Proof's and other Enclosures.
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5. Send all the documents in hardcopies, copies should be
counter signed by the authorized signatory along with the
bank seal."
The issue now would be, whether the crime requires to be
obliterated on its registration. The learned counsel for the 3rd
respondent has taken this Court through the statement of
objections. The objections appended to it certain documents. A
communication from accused No.2 reads as follows:
"Dear sir,
I have actual in blind faith in Tirumalaraju due to my
relationship with him. I was under the impression that i was
helping him by approving invoices & GRN's of Ninjakart
which product was never supplied to Nekkanti. I take the
complete responsibility for this wrongdoing Nekkanti is not
liable for my wrong doing. Nekkanti is not liable for any
payments as the product was never supplied by Ninjacart.
The board of Nekkanti served a notice to which I have
replied. Attached is the reply to the chairman of Nekknati.
satya
On Wed. Nov 15, 2023 at 10:20 PM Legal compliance
<[email protected]> wrote:
Dear Sir/Madam,
On behalf of 63Ideas Infolabs Private Limited (Ninjacart),
having its registered office at WeWork Vaishnavi Signature,
78/9, Outer Ring Road, Bellandur Village, Varthur, Hobli,
Bengaluru, Karnataka 560103 (hereinafter referred to as
"Ninjacart"), we do hereby bring to your notice as Follows:
1. Ninjacart is a seller of fresh vegetables, fruits and
other products via mobile application platform under the
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name and style of 'Ninjacart' (hereinafter collectively referred
to as the "Platform"). Under its Bill to Ship to model of
business, Ninjacart procures fresh agricultural produce and
other raw materials from a wholesale supplier and sells such
products to suitable buyers, wherein the buyers are typically
required to make payments within a credit period of 60-75
days.
2. For the purpose of clarity, as per Ninjacart's
Standard Operating Procedure (SOP), once a Purchase
Order ("PO") is finalised and confirmed by the buyer
over mail, Ninjacart procures these products and
facilitates the delivery of the Goods as mentioned in
such furnished PO and issues the invoice for payment
for such Goods to the buyer. Once the Goods are
delivered to the buyer, the buyer confirms on the
quality and quantity of the Goods and the buyer
generates a Goods Received Note (GRN) Upon
generation of the GRN, the buyer needs to make
payment for the purchased Goods in favour of
Ninjacart within the stipulated time period.
3. Accordingly, further to the business model as
mentioned above, you wanted Ninjacart to supply shrimps to
you and we were engaged in the trade of shrimps (Goods)
since January 2023, as evidenced through the first Purchase
Order (PO) dated 4th January, 2023.
4. In furtherance of our business association and in
line with Ninjacart's internal SOP as mentioned in para 2,
pursuant to your POs dated 23 May 2023 and 30 June 2023,
Ninjacart supplied the Goode in multiple batches and the last
GRN was generated by you on 30th June, 2023, which was
duly executed by you. As per the said POs, you are obliged
to pay to Ninjacart for Goods purchased by you within 75
days from date of last generated GRN, which in your case
has expired on 15th September, 2023.
5. However despite repeated follow ups by a
dedicated team on Ninjacart, you have been
unresponsive and have failed to honour your payment
obligations. As on date of this Notice, an amount of
INR 10,00,00,000/ (Rupees Ten Crores Only) is
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outstanding from you, which amount needs to be paid
by you.
6. In light of the above, it is clear that you
always had the intention to dishonour our mutually
agreed terms of the trade, with an ulterior motive to
evade any payment related obligations. Relying on our
understanding, we diligently supplied the goods to
you, which are admittedly received by you, as
evidenced by the enclosed GRN furnished by you. Now,
by way of your conduct of refusing to pay the
outstanding amounts, you have not only violated your
promises and contravened applicable laws, but also
committed criminal breach of trust. It is now clear that
you do not have any intent to pay the outstanding
amount. We hereby call upon you to pay to Ninjacart,
within 15 (fifteen) days of receipt of this notice, an
amount of INR 10,00,00,000/- (Rupees Ten Crores
Only), failing which Ninjacart shall be constrained to
initiate appropriate legal proceedings against you,
including insolvency and winding up proceedings,
solely at your costs and consequences.
Enclosed Documents
1. Purchase Order (PO) dated 23rd May, 2023 and 30th
June, 2023.
2. Goods Receipt Note (GRN) dated 30th June, 2023."
(Emphasis added)
The communication is clear that accused No.2 has issued goods
received notes. Therefore, obligation for payment commences from
the date on which the goods are delivered to the complainant. It is
not a case of non-delivery of goods by the petitioners. Goods are
delivered. Now the goods appear to have vanished in thin air. The
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goods in the case at hand is the shrimp. Now the question would
where the shrimp has gone. It is neither delivered to the end
customer nor digested by anybody. But, the payment close to
₹10/- crores is already received by accused No.1. Therefore, it is
not a case where the crime can be obliterated at the outset.
9. Criminal breach of trust as obtaining under Section 406 of
the IPC has its ingredients in Section 405 of the IPC. The shrimp
has vanished. The money has left the coffers of the complainant.
Therefore, there is undoubtedly breach of trust as is obtaining
under Section 406 of the IPC. Insofar as cheating is concerned, its
ingredients are found in Section 415 of the IPC. There should be
luring of the victim by the accused with a dishonest intention right
from the inception. The breach, in the case at hand, is an
agreement. If it is an agreement, it is between two parties entered
into with eyes being wide open. Therefore, there can be no
question of cheating in the case at hand but, undoubtedly a case of
criminal breach of trust. In that light permitting further
investigation qua Section 420 of the IPC would become contrary to
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law. However, the petitioners shall be investigated into for the
offence under Sections 406 and 120B of the IPC.
10. Permitting both the offences under Sections 406 and 420
of the IPC would run foul of the judgment of the Apex Court in the
case of DELHI RACE CLUB (1940) LIMITED v. STATE OF
UTTAR PRADESH1, wherein it is held as follows:
".... .... ....
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.
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, 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
1
2024 SCC OnLine SC 2248
19
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."
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
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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 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.
... ... ...
42. When dealing with a private complaint, the law
enjoins upon the magistrate a duty to meticulously examine
the contents of the complaint so as to determine whether the
offence of cheating or criminal breach of trust as the case
may be is made out from the averments made in the
complaint. The magistrate must carefully apply its mind to
ascertain whether the allegations, as stated, genuinely
constitute these specific offences. In contrast, when a case
arises from a FIR, this responsibility is of the police - to
thoroughly ascertain whether the allegations levelled by the
informant indeed falls under the category of cheating or
criminal breach of trust. Unfortunately, it has become a
common practice for the police officers to routinely and
mechanically proceed to register an FIR for both the offences
i.e. criminal breach of trust and cheating on a mere
allegation of some dishonesty or fraud, without any proper
application of mind.
43. It is high time that the police officers across the
country are imparted proper training in law so as to
21
understand the fine distinction between the offence of
cheating viz-a-viz criminal breach of trust. Both offences are
independent and distinct. The two offences cannot coexist
simultaneously in the same set of facts. They are antithetical
to each other. The two provisions of the IPC (now BNS,
2023) are not twins that they cannot survive without each
other."
(Emphasis supplied)
In the light of the judgment of the Apex Court in the DELHI RACE
CLUB case supra, the offences under Sections 406 and 420 of the
IPC cannot co-exist. Section 406 of the IPC as elucidated by the
Apex Court clearly holds that a person entrusted with a property
has misappropriated the said property with a dishonest intention
which would become open for an allegation of criminal breach of
trust. It is exactly the issue in the case at hand. Therefore, while
obliterating the crime under Section 420 of the IPC, I deem it
appropriate to permit continuance of investigation for the offence
under Section 406 of the IPC.
11. For the aforesaid reasons, the following:
ORDER
(i) Writ Petition is partly allowed.
22(ii) The crime insofar as the offence under Section 420 of the IPC is quashed.
(iii) The crime registered for offence under Sections 406 and 120B of the IPC stands sustained. Investigation shall continue only for offences punishable under Sections 406 and 120B of the IPC.
Consequently, I.A.No.1 of 2024 also stands disposed.
Sd/-
______________________ JUSTICE M.NAGAPRASANNA bkp CT:MJ