Andhra HC (Pre-Telangana)
Narne Estates Private Ltd., Rep. By Its ... vs Dr. E. Surender Rao, Sridevi Hospital ... on 26 July, 2006
ORDER G. Yethirajulu, J.
1. This Criminal Petition is filed by the accused in F.I.R. No. 21 of 2005 on the file I Town Police Station, Nizamabad to quash the proceedings against him in the said crime.
2. The crime was registered for the offences under Sections 406 and 420 of I.P.C. against the petitioners. The first petitioner is Messers Narne Estates Private Limited, the second petitioner is the Managing Director and the third petitioner is the Vice President of the first petitioner company. The accused floated a scheme called Golden Heights Plots. Those who have subscribed Rs. 1,00,000/- became the members of the said scheme. Under the said scheme, plots will be allotted to the members to an extent of 500 square yards each for a total consideration of Rs. 4,80,000/-. Rs. 1,00,000/- has to be paid initially and thereafter Rs. 10,560/- has to be paid for 35 months and in the 36th month a sum of Rs. 10,000/- has to be paid.
3. The complainant alleged that the company agreed to sell plot No. 323 and represented that they would arrange a loan, but failed to arrange the same, therefore, he started paying installments @ Rs. 5,000/- per month from August, 2003. The accused through the letter dated 13-03-2004 cancelled the allotment of the plot on the ground of default in payment of instalments for more than six months. On further correspondence, the accused through the letter 17-06-2004 agreed to restore the plot on payment of Rs. 2,27,415/- by 25-06-2004. He paid Rs. 1,96,760/- on 19-06-2004 towards arrears of instalments. By a letter dated 05-07-2004, the company restored the plot with an understanding that arrears would be cleared by 25-07-2004. The company also reduced the interest to 15% per annum. The interest was paid by him on 24-07- 2004. However the company through its letter dated 21-08-2004 unilaterally changed the plot to GH-335 in the place of 323. The company sent a letter dated 09-09-2004 that the complainant accepted for change of plot. The company restored the allotment and thereafter altered the plot and as such the Managing Director, Vice President and the Directors have committed breach of trust and cheated him. Accordingly a report was given and a complaint was registered as F.I.R. No. 21 of 2005 of Nizamabad Town P.S.
4. The learned Counsel for the petitioners submitted that the complainant has become one of the members of the scheme and he was allotted a plot bearing No. 323, but he failed to pay the instalments for a period of 10 months and the arrears of instalments counted to Rs. 1,25,000/-. Under the above circumstances, the company has no option other than to get cancel the allotment and to return the amount as per the terms of Clause 17 of the agreement.
5. As the complainant brought recommendation, the company was willing to give a plot to him, but he again failed to pay the instalments regularly as stipulated by the company, therefore, the earlier allotment stood cancelled. The company changed the allotment of plot to GH-335 instead of 323. The company also raised a dispute with regard to the total amount of dues and sought for fresh settlement of account. By the letter dated 27-08-2004, the company stated that after cancellation of the plot, it was allotted to another person and he was given alternative plot. If he is not willing to take the alternative plot, he may take back his amount by intimating the same to the company. When the complainant got issued a legal notice, the company again issued a letter dated 03-11-2004 renewing the offer made by the letter dated 27-08-2004 failing which the allotment automatically gets cancelled in terms of Clause 17 of Membership conditions. The complainant came along with two persons to the office of the company on 01-01-2005 and used unparliamentary language and tried to assault the Chairman. The same was intimated to the P.S., Karkhana. On 03-01-2005, the entire amount paid by the complainant was sent to him by way of cheques along with a covering letter. The complainant accepted the amount on 28-04-2005 stating that the amount was received under protest.
6. The learned Counsel for the petitioners further stated that the reading of the F.I.R. would indicate that the dispute between the parties is of civil nature and as there was no mala fide intention to the accused to deceive the complainant, no offence of criminal breach of trust or cheating is made out. The police, without verifying any document and without conducting any preliminary enquiry, are acting vindictively. If the investigation is to be proceeded further without looking even into the entire record by the police, the petitioners will suffer great loss, therefore, they requested to quash the proceedings.
7. In the light of the circumstances, the point for consideration is: Whether the complainant is entitled to the plot inspite of the failure to pay the instalments and whether he is entitled to any relief by raising a civil dispute?
8. The learned Counsel for the petitioners in support of his contentions placed reliance on the following Judgments:
In S.W. Palanitkar and Ors v. State of Bihar and Ors. 2002 (1) ALD (Crl.) 108 (SC), the Supreme Court, while dealing with Sections 405 and 406 of I.P.C., observed as follows:
Every breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person wronged may seek his redress for damages in a civil Court but a breach of trust with mens rea gives to a criminal prosecution as well.
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 that property to his own use; or (b) dishonestly using or disposing of that property or willfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in with such trust is to be discharged (ii) of any legal contract made touching the discharge of such trust.
The Supreme Court, while referring to Section 420 of I.P.C., observed that:
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 promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.
9. In Alpic Finance Ltd. v. P. Sadasivan AIR 2002 SC 1226, the Supreme Court while placing reliance on Pratibha Rani v. Suraj Kumar , wherein the question arose that when the civil as well as criminal remedy is available to a party, can a criminal prosecution be completely barred and the Supreme Court held as follows:
...There are a large number of cases where criminal law and civil law can run side by side. The two remedies are not mutually exclusive but clearly co- extensive and essentially differ in their content and consequence. The object of the criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect the civil remedies at all for suing the wrongdoer in cases like arson, accidents, etc. It is an anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. The two types of actions are quite different in content, scope and import....
10. In Hridaya Ranjan Pd. Verma v. State of Bihar AIR 2000 SC 2341, the Supreme Court, while dealing with Section 415 of I.P.C., held as follows:
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 promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.
11. In C.B.I. v. Duncans Agro Industries Ltd., Calcutta , the Supreme court held as follows:
For the purpose of quashing the complaints, it is necessary to consider whether the allegations in the complaint prima facie make out an offence or not. It is not necessary to scrutinise the allegations for the purpose of deciding whether such allegations are likely to be upheld in the trial. Any action by way of quashing the complaint is an action to be taken at the threshold before evidence are led in support of the complaint. For quashing the complaint by way of action at the threshold, it is, therefore, necessary to consider whether on the facts of the allegations, a criminal offence is constituted or not.
12. The trend of the above decisions clearly indicates that unless there is fraudulent intention or breach of trust with mens rea, a criminal prosecution cannot be maintained though it may amount to civil wrong.
13. The learned Counsel for the first respondent complainant relied on the following Judgments in support of his contention that the prosecution can be maintained even if the civil remedy is also available.
14. In Trisuns Chemical Industry v. Rajesh Agarwal , the Supreme Court, while dealing with the scope of Section 482 of Cr.P.C., held as follows:
Quashing of FIR or a complaint in exercise of inherent powers of the High Court should be limited to very extreme exceptions. Provision incorporated in the agreement for referring the disputes to arbitration is not an effective substitute for a criminal prosecution when the disputed act is an offence of fraudulent representation and cheating. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement for supply of best quality commodity 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.
15. In Minu Kumari v. State of Bihar , the Supreme Court, while considering the scope of Section 482 of Cr.P.C., held as follows:
Section 482 of the Criminal Procedure Code does not confer any new power on the High Court. It only saves the inherent power which the Court possessed before the enactment of the Code. It 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 abuse of the process of Court, and (iii) to otherwise secure the ends of justice. It is neither possible nor desirable to lay down any inflexible rule which would govern the exercise of inherent jurisdiction.
16. There is no dispute about the legal position as indicated above. But, in the present case, from the inception the complainant does not plead that the accused had any fraudulent intention to defraud him to part with the money. Prima facie, it disclosed that the complainant himself failed to pay the instalments as per the agreement and the accused company was trying for an amicable solution to give an opportunity to the complainant to pay the entire money and when ultimately he failed to pay the entire money as agreed by him on different occasions, they alleged to have repaid the entire amount and he received it under protest, therefore, whether the complainant failed to pay the instalments as per the terms of agreement, whether the accused are entitled to cancel the allotment of the plot and allot to another person and even if the accused restored the membership of the complainant and agreed to allot the plot, whether he is entitled for allotment of the same plot when it was allotted to somebody else and when the Court considers these aspects to come to a conclusion whether it amounts to breach of trust, which entitled the complainant to get any damages etc., are matters to be decided by the Civil Court. As there is no prima facie material in the complaint given by the complainant to attract the ingredients of Section 406 or 420 of I.P.C., I am of the opinion that the continuation of the investigation would lead to unnecessary exercise and hardship to the accused. In the light of the above circumstances, I do not find any prima facie material to prosecute the petitioners for the offence under Section 406 or 420 of I.P.C., therefore, the F.I.R. registered against the petitioner is liable to be quashed.
17. In the result, the Criminal Petition is allowed by quashing F.I.R. No. 21 of 2005 on the file of I town P.S. Nizamabad registered against the petitioners.