Delhi High Court
Anil Kohli vs State (Nct Of Delhi) on 19 October, 2001
Equivalent citations: 95(2002)DLT173, 2002(61)DRJ227
Author: C.K. Mahajan
Bench: C.K. Mahajan
JUDGMENT Usha Mehra, J.
1. Quashing of the charge sheet dated 20th January, 2000 in FIR No.103/99 under Section 406/420/120B Indian Penal Code (in short IPC) has been sought by Anil Kohili, the petitioner herein, inter alia, on the ground that the complainant lodged by the complainant does not show any cognizable offence. Reading of the complaint makes it a case of purely civil nature based on business transaction carried out for number of years.
2. On the other hand Mr. Inderjit Sharma, counsel for the complainant and Ms.Mukta Gupta, Standing counsel of the State contended that since the charge sheet has already been filed, therefore, this Court in its discretionary power under Article 226 of the Constitution of India, should not entertain this writ petition. All these objections raised in this petition can be looked into by the Trial Court where charge sheet is filed. Ms.Mukta Gupta, Standing Counsel for the State further contended that even if the complaint has a flavouring of civil nature, that by itself is no ground to quash the FIR. There was inducement to cheat, hence, case under Section 420 IPC is made out. Counsel for the complaint supporting the prosecution contended that the complainant was forced to sign blank papers. The petitioner thus committed forgery beside cheating the complainant. Hence case of forgery is also made out.
3. In order to appreciate the relevant contentions raised at the Bar we may have a quick glance to the facts of this case. Arun Kohli is the brother of the petitioner Anil Kohli. He was having his independent business in Germany under the name of M/s S.KLERE, Mode, Gmbh. Anoop Sabharwal and Ashish Srivastava approached Arun Kohli somewhere in the year 1991 when he visited India. Complainant sought held from Arun Kohli for setting up business of export of garments in Germany. Arun Kohli, brother of the petitioner was having well established business in Germany. Negotiations were held between Arun Kohli and complainants, thereupon Arun Kolhi entered into business transaction with Anoop Sabharwal and Ashish Srivastava for the export of garment and fabric. Anoop Sabharwal and Ashish Srivastave formed a partnership firm in the name and style of M/s Aman Creation having its registered office at Delhi. M/s Aman Creation started exporting garments to the firm of petitioner's brother pursuant to the order placed by the petitioner's brother for himself or for on behalf of various business houses at Germany. These business transactions of export of garment continued for a period of almost six years i.e. from 1991 to 1997. Goods worth Rs. 15 crores were exported during this period by M/s Aman Creation. In respect of the goods exported by M/s Aman Creation several complaints in respect of quality, delay and billing were raised by the firm petitioner's brother Arun Kohli. These complaints were lodged during the course of business by writing the debit notes. Those debit notes were duly accepted and confirmed by M/s Aman Creation. When Arun Kohli demanded adjustment of amount of debit notes in the payments which were being regularly made to M/s Amar Creation in respect of the exports, the partners of M/s Amar Creation i.e. Shri Anoop Sabharwal and Ashish Srivastava requested not to make deduction of the amount of the debit notes and other trade discounts on the plea that they were facing financial crises. They, however, assured that adjustment of the due amounts in future transactions would be made. Thus large amount became due from M/s Aman Creation to the firm of petitioner's brother which remained unpaid and for which M/s Aman Creation agreed and compromised to adjust in future transaction.
4. It is also the case of the petitioner that because of the bad quality of the exported goods his brother suffered financial losses in terms of money and reputation which fact was duly brought to the notice of M/s Aman Creation and its partners in the year 1997. Because of the defective and poor quality and delay of shipments by complainant, his brother had to discontinue business transactions with M/s Aman Creation. He stopped business transaction in the year 1997 and sought settlement and finalisation of accounts. The accounts were finalised on 10th August, 1997 and sought settlement and finalisation of accounts. The accounts were finalised on 10th August, 1997 and partners of M/s Amar Creation acknowledged that they owed a sum of DM 3,53,702.75 and also admitted that this amount was due to petitioner's brother's firm. Complainant also maintained their claim against petitioner's brother. Petitioner's brother realised that complainant had not reflected the discounts, debit notes and other deductions in their accounts hence he brought these facts to the notice of the complainant repeatedly.
5. Ashish Srivastava, partner of M/s Amar Creation had also borrowed a sum of Rs. 21,70,000/- from petitioner's brother for his other concern namely M/s Nouvel Bearing (P) Ltd. This was paid in respect of some disputed consignment which was of poor quality and were unsellable in the market. Petitioner's brother was not willing to accept the delivery of such consignment comprising of defective goods with the result it led to disruption of future business transactions between petitioner's brother and M/s Amar Creation. A dispute arose when petitioner's brother indicated that no amount was due in respect of any consignment much less the disputed consignment of defective goods. When the petitioner's brother did not yield to their pressure in making payment in respect of defective consignment, partners of M/s Aman Creation came forward with a proposal that they would approach their bank to seek permission for waiver of DM 2,68,13,542 which would be treated as part adjustment of their liability towards the aforesaid debit notes, trade discounts etc. After giving this assurance they asked the petitioner's brother to make payment so that bank liability to some extent could be eased out and bank would feel comfortable to sanction the waiver of the said amount. This was to be treated as an additional loan given to M/s Nouvel Bearing (P) Ltd. In spite of the account having been settled and accepted by the complainants they did not make the payment due to the petitioner's brother but insisted that Arun Kohli should resume giving of fresh orders and resume business with the complainant and pay more amount shows outstanding invoices in their bank account of defective goods. This they insisted because bank was not willing to sanction waiver of the said amount when the business had been discontinued. When the petitioner's brother refused to do any further business with them, the complainant started extending threats to his life and the life of his family members. He then filed a complaint with the Embassy of India, Bonn, Germany alleging that the petitioner's brother has refused to pay due amount of DM 70,000 to M/s Aman Creation in respect of export consignment made by them. Negotiations were still in progress between M/s Aman Creation and the firm of the petitioner's brother for resumption of business when Mr. Anoop Sabharwal lodged this complaint with Police Station Farash Bazar alleging cheating.
6. Before we deal with the question of cheating as alleged by the complainant, we would like to go through the FIR to find out as to whether the case of cheating at all is made out or not. The relevant extracts of the FIR are as under:-
"From 1991-97, we had business dealing with above mentioned persons. We sent goods worth approx.Rs.4.5 Cr., but in return got very small amount from Mr. Arun Kohli. He kept on delaying the payments on one pretext or the other and we were compelled to send more and more goods as we had no other option since huge amount was to be collected from him. We were totally dependent on Mr. Arun Kohli's payment as we had already life-long earning for exporting the goods and rather borrowed money from market and bank (Canara Bank, chandni chawk) also.
Mr. Arun Kohli also promised that he would make the entire balance payment on reaching Germany. But since then, Mr. Arun Kohli had made only one payment of D.M. 41112.00 only in the month of November, 1997. On 24th February, 1998, we received a fax letter from mr. Arun Kohli stating therein that a sum of M.M. 350000.00 is owed by us towards them as debt. This letter clearly shows that they had no intentions to pay the balance amount i.e. D.M. 703092.00 approx. Due to some malafide reasons, they are not making the balance payment since January 1998. We have not received a single penny from them. All the business transactions were made through proper bank documents and as there was export of goods, Reserve Bank of India who also informed of the transactions. The record of goods sent and money owed by us is also as per the documents and bank records. Now they have refused to make the payment of the balance amount due to illegal and malefic intentions. It is very clear that in order to cheat us Arun Kohli, Anil Kholi and Neeru Kholi with dis-honest intentions taken the goods from us and have refused to make the payments."
7. In order to understand what constitute cheating reference may be made to Section 415 of Indian Penal Code (in short IPC).
8. In order to attract Section 415 IPC one has to prove:-
1. Fraudulent or dishonest inducement;
2. Pursuance to dishonest inducement, delivery of property;
9. Unless complainant prima facie establishes the above ingredients, question of cheating does not arise.
10. Section 415 IPC presupposes dishonest inducement followed by delivery of property which is a pre-condition. but from the facts in hand as pleaded and perusal of FIR show that entire transaction was based on understanding the terms of the business. The complainant entered into a business transaction with Arun Kohli, brother of the petitioner in the year 1991. These business transactions continued till the year 1997. Goods were exported by the complainant to the brother of the petitioner at Germany, accounts were settled by them, some money was owed by the petitioner's brother to the complainant and some money was owed by the complainant to the petitioner's brother. These were business transactions of purely civil nature. There was no question of fraudulent inducement in the facts of this case.
11. Mr. K.T.S. Tulsi contended that from the facts narrated above and as admitted by the complainant in the complaint, it is apparent that export business between the petitioner's brother and complainant continued for almost seven years. Because of the serious complaints lodged by petitioner's brother in respect of quality, billing and delay in shipments, debit notes in respect of discounts, reduction of price commission etc. were raised. This was brought to the notice of the complainant in due course of business vide various communications addressed to the complainant. Mr. Tulsi dew our attention to the letter dated 20th november, 1996 written by Arun Kohli to complainant indicating that goods with DM 33,000 had been rejected by the customers, therefore, complainant should deduct DM 36,822.90 from his bill. He also drew our attention to another letter written by the complainant dated 4th January, 1996 to petitioner's brother whereby the complainant accepted debit note for DM 14200.00 and regretted the inconvenience and also assured that all shipments in future would reach Germany in time. But delay in shipment continued as a result of which petitioner's brother kept on complaining and in this regard Mr. Tulsi drew our attention to letters written by petitioner's brother to the complainant dated 12th June, 1997, 9th July, 1997. That vide letter dated 28th August, 1987 complainant confirmed that he owed DM 3,54,707.85 to petitioner's brother and expressed difficulty in making the payment because of financial losses. Mr. Tulsi also drew our attention to a letter written by the complainant dated 31st December, 1997 giving eh proposal through Canara Bank for 30 per cent discount on bill outstanding. Attention was also drawn to letters dated 19th August, 1998 and 3rd June, 1998 to show that petitioner's brother had been financing the complainant and its sister concern, this Mr. Tulsi contended clearly show that parties were having pure business transaction, the breach of which would not attract criminal action. No criminality can be attached to such transaction. To support his contention he placed reliance on the decision of Supreme Court in the case of Alpic Finance Limited V.P.Sadasivan and Anr. . In that case the appellant was a non-banking financial company. It was carrying on its business of leasing and hire-purchase. The respondents entered into a lease agreement with appellant whereby the appellant agreed to finance the respondents for purchase of hydraulically-operated dental chairs. As per agreement, the respondents were liable to pay rentals quarterly and till such time the entire hire-purchase amount is paid, the appellant would have sole and exclusive right, title and interest in the dental chairs supplied by the appellant. The respondents committed default in making regular payments of the Installments and even the cheques issued by them got dishonoured. The chairs supplied by the appellant were also found missing from the premises of the respondents. It was in this background that the case was registered under Section 420/406 and 423 IPC r/w Section 120B IPC on a private complaint. Pursuance to the order of the Magistrate, properties involved in the case were seized and taken into possession. Those proceedings were challenged and the learned Single Judge of the High Court quashed the same. Challenging the order of the learned Single Judge before the Apex Court, the appellant contended that the complaint made out a case punishable under Section 420/406/423/424 IPC r/w Section 120B IPC and, therefore, the order of the learned Single Judge be set aside. The respondent took the plea before the Apex Court that entire transaction was of civil nature and that default, if any, was not willful and there was no element of misappropriation or cheating. The question before the Apex Court was whether a criminal complaint was maintainable when a remedy under Civil Law was available. The Apex Court while dismissing the complaint of the appellant observed that the main offence alleged by the appellant therein was that the respondent committed the offence under Section 420 IPC and that the respondent had cheated him thereby dishonestly inducing him to deliver property. To deceive is to induce a man to believe that a thing is true which is false and which a person practicing the deceit knows or believes to be false. It must also be shown that there existed a fraudulent and dishonest intention at the time of commission of offence. Like in the above case, in the present case there is no allegation that the petitioner herein made any willful misrepresentation or entered into fake transaction. As per the complainant's own showing in the FIR, business transactions were entered into by their mutual consent and continued for seven years. It is not complainant's case that there was any fraud or dishonest inducement on the part of petitioner's brother Arun Kohli. In the words of the Supreme Court:-
"It is trite law and common sense that an honest man entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debut, he does not necessarily evade the debut but deception."
12. Simply because the amounts have not been paid or are outstanding, will not make ti a case of willful or dishonest inducement or deception.
13. Simply because the amounts have not been paid or are outstanding, will not make it a case of willful or dishonest inducement or deception.
14. Similar view has been expressed by the Apex Court in the case of Haridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Anr. (2000) 4 Supreme Court Cases 168. Like in the present case, in the Hridaya Ranjan Prasad Verma's case (Supra), there was no allegation in the complaint indicating, expressly or impliedly, any intentional deception on the part of the appellants right from the beginning of the transaction. The Apex Court drew distinction between cheating from mere breach of contract. According to the Apex Court, definition of cheating contemplates two separate classes of acts namely deception by fruadulent or dishonest inducement and deception by intention, but not fraudulent or dishonest inducement. Deception by fraudulent or dishonest inducement must be shown to exist right from the beginning of the transaction. It is not the case of the complainant in this case that he was deceived by fraudulent or dishonest inducement from the beginning of the transaction.
15. Reading of the FIR as a whole and the extracts which have been quoted above would show that there was no fraudulent or dishonest inducement or deception by intentional practiced by the brother of the petitioner right from the beginning of the transaction. If the payment has not been made, that will not tantamount to deception, fraudulent or dishonest inducement nor it would amount to deception by intentional means right from the beginning of the transaction. Therefore, the case under Section 420 IPC in the facts of this case has not been made out. The complainant was not decived nor induced to enter into the business transaction. That is not his case in the FIR nor there was any inducement dishonestly or fraudulently made to deliver the goods. He entered into a business transaction. The breach of contract or business transaction cannot be called cheating in the facts of this case. Similar view was expressed in the case of Hari Prasad Chamaria v. Bishun Kumar Surekha and Ors. , the Apex Court was dealing with a case of quashing of FIR under Section 420 IPC where that appellant had entered into a business transaction and in good faith paid large amount to respondents for starting the business. Respondents started the business in their own name and refused to render accounts nor money was refunded by that appellant. The question before the Apex Court arose whether in such circumstances respondents could be held criminally liable under Section 420 IPC. While negating the plea of the appellant, the Apex court observed that even assuming prima-facie all the allegations in the complaint to be true they merely amount to a breach of contract and could not give rise to criminal prosecution.
16. Similar view was observed in the case of The State of Kerala v. A. Pareed Pillai and Anr. 1972 Cri.L.J. 1243 (V 78 C 328) where the Apex Court held:-
"To hold a person guilty of the offence of cheating, it has to be shown that his intention was dishonest at the time of making the promise. Such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfill the promise."
17. Similarly in the case in hand, there is nothing to show that the respondents had dishonest or fraudulent intention at the time the agreement took place to supply goods. Business transaction continued for almost seven years. letters were exchanged admitted liabilities and dues by the complainant to Arun Kohli and vice-versa. These transactions by no stretch of imagination can be called dishonest inducements. It was purely business transactions of a civil nature.
18. We are of the view that in the facts of this case, the ingredients of cheating are missing, therefore, merely because payment has not been made or accounts have not been settled, it does not made an offence punishable under Section 420/406/34 IPC.
19. For the reasons stated above, the FIR No. 103/99 registered at police station Farsh Bazar u/s 420/406/120B IPC is ordered to be quashed and any proceedings emanating there from are ordered to be dropped. Order accordingly.