Karnataka High Court
Sri Muniyappa vs State Of Karnataka on 10 January, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 10.12.2024
Pronounced on : 10.01.2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 10TH DAY OF JANUARY, 2025
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.4255 OF 2024
BETWEEN:
1 . SRI MUNIYAPPA
S/O ANNAYAPPA
AGED ABOUT 71 YEARS
RESIDING AT 80/1,
1ST MAIN, 7TH CROSS
NEAR GANESH TEMPLE
YAMALUR
BENGALURU - 560 037.
2 . SRI RAJKOTI
S/O ANNAYAPPA
AGED ABOUT 54 YEARS
Digitally signed
RESIDING AT 21-13, 7TH CROSS,
by VISHAL
NINGAPPA NEAR MADDURAMMA TEMPLE
PATTIHAL
Location: High YEMALUR
Court of
Karnataka BENGALURU - 560 037.
... PETITIONERS
(BY SRI P.P.HEGDE, SR.ADVOCATE FOR
SRI MOHAMMED MOIN ULLA, ADVOCATE)
2
AND:
1 . STATE OF KARNATAKA
MARATHAHALLI POLICE STATION,
REPRESENTED BY SPP
HIGH COURT OF KARNATAKA
BENGALURU - 560 001.
2 . SRI DR. MOHAN S. MANGHNANI
S/O S.B.MANGHNANI
AGED ABOUT 62 YEARS
NEW HORIZON COLLEGE OF ORR,
KADUBEESANAHALLI
BENGALURU - 560 103.
... RESPONDENTS
(BY SRI B.N.JAGADEESHA, ADDL.SPP FOR R-1;
SRI PRABHULING K.NAVADGI, SR.ADVOCATE A/W
SRI SMT.NAYANATARA B.G., ADVCOATE FOR R-2 )
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO QUASH THE FIR IN CR.NO.158/2024 FOR THE
OFFENCE P/U/Ss 406, 418, 420, 464, 465, 468, 120-B AND 34 OF
IPC, REGISTERED BY MARATHALLI P.S., PENDING BEFORE 3RD
ADDL. CMM COURT, NRUPATUNGA ROAD, BENGALURU CITY, AS
PER ANNEXURE A.
THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 10.12.2024, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
3
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
Petitioners/accused Nos. 1 and 2 are knocking at the doors of
this Court in the subject petition calling in question registration of a
crime in Crime No.158 of 2024 registered for offences punishable
under Sections 406, 418, 420, 464, 465, 468, 120B and 34 of the
IPC and pending before the 3rd Additional Chief Metropolitan
Magistrate, Bengaluru.
2. Heard Sri P.P. Hegde, learned senior counsel appearing for
the petitioners, Sri B.N. Jagadeesha, learned Additional State Public
Prosecutor appearing for respondent No.1 and
Sri Prabhuling K. Navadgi, learned senior counsel appearing for
respondent No.2.
3. Facts, in brief, germane are as follows:-
2nd respondent is the complainant. The complainant is said to
be running several educational institutions under the name and
4
style of New Horizon Engineering College and other educational
institutions in and around the City of Bengaluru. The crux of the
complaint is that the petitioners/accused had represented that they
were the sole and absolute owners of property sold to the
complainant. The complainant is said to have conducted due
diligence based upon the documents furnished and believed that
the petitioners/accused are the only children of their father. The
petitioners and their father also entered into a registered
agreement of sale with M/s Epsilon Ventures Private Limited,
pursuant to which, by virtue of a gift deed the petitioners were
granted 8 guntas of land each in Sy.No.93/3. Thereafter, a sale
deed dated 16-10-2023 comes to be executed in favour of the
complainant and the complainant is also said to have taken
possession of the property.
4. Such being the case, two persons - one Sri Ganesh and
Sri Muniyappa said to be the sons of accused father's sister
registered claim over the property by filing an application before the
Revenue Authorities. When the complainant comes to know of this
claim, it is alleged, that the petitioners have falsely represented to
5
the complainant that they are the sole and absolute owners and
have hatched a plan to cheat the complainant and since money had
been transferred, they have made illegal gain and caused wrongful
loss to the complainant. Based upon the aforesaid facts, several
offences have emerged against the petitioners as afore-quoted. The
registration of crime has driven these petitioners to this Court in the
subject petition.
5. The learned senior counsel Sri P.P. Hegde appearing for the
petitioners would vehemently contend that the petitioners are the
children of the grantee. The grant was way back in the year 2005 to
the father of the petitioners. The claimants who have sought to
register a case before the Revenue Authorities in the year 2023
have nothing to do with the petitioners or the property. They are
the heirs of the sister of the original grantee, the father of the
petitioners. After the grant, a registered partition deed comes about
in which certain portions are given to the petitioners and it is those
portions that are sold now to the complainant. Merely registering a
claim before the Revenue Authorities will not take away crystallized
right of these petitioners. He would, above all, contend that the
6
issue is purely civil in nature, as there is neither cheating nor
breach of trust nor criminal conspiracy or forgery as is alleged. The
complainant has deliberately sought to register the crime on an
issue which is purely civil in nature to achieve or arm-twist the
petitioners into agreeing to whatever they would say. He would
seek quashment of the crime.
6. Per contra, Sri Prabhuling K. Navadgi, learned senior
counsel representing the 2nd respondent/complainant would
vehemently refute the submissions to contend that the petitioners
were very well aware of two children who staked a claim over the
property. The petitioners have deliberately suppressed the said fact
to the complainant. If only the complainant was made known by the
petitioners about this fact, the complainant would not have entered
into the transaction with the petitioners alone. The learned senior
counsel would submit that Sri Muniyappa son of Muniyamma and
Sri Ganesh, grandson of Muniyamma have instituted proceedings
before the Assistant Commissioner under Section 136(2) of the
Land Revenue Act. It is instituted prior to the execution of sale
deed. The petitioners have deliberately suppressed the said
7
litigation. On such suppression, close to a sum of ₹17/- crores has
been transferred to the petitioners. Sri Muniyappa and Sri Ganesh
stake their claim to the property after the complainant took
possession and make it known to the complainant that proceedings
were pending before the Assistant Commissioner. This dishonest
suppression would amount to criminal breach of trust and cheating
is the submission of the learned senior counsel. He would contend
that it is a matter of investigation and investigation in such cases is
a must. The Court should not interdict investigation in such cases
as huge amount of ₹17 crores has been transferred to the
petitioners.
7. The learned senior counsel for the petitioners would join
issue to contend that though proceedings before the Assistant
Commissioner were filed before the sale deed could take place, the
notice to the petitioners comes only after registration of sale deed.
They were not aware of the proceedings. He would contend that the
entire amount received are lying in the Bank and the Bank account
has been frozen on account of registration of crime. In all, he would
reiterate quashment of the crime.
8
8. I have given my anxious consideration to the submissions
made by the respective learned senior counsel and have perused
the material on record.
9. The afore-narrated facts, link in the chain of events are not
in dispute. On 19-03-2005 24 guntas of land in Sy.No.93 is granted
to one Annaiappa, the father of the petitioners. The said land after
Phodi was renumbered as Sy.No.93/3. The grant order is appended
to a memo filed before the Court by the petitioners and the re-grant
order dividing it to Sy.No.93/3 is also produced along with the
memo. The grant order reads as follows:
"DzÉñÀ
¨ÉAUÀ¼ÀÆgÀÄ ¥ÀƪÀð vÁ®ÆèPÀÄ, ªÀvÀÆðgÀÄ ºÉÆç½, CªÀiÁ¤¨É¼îÀAqÀÀÆgÀÄ SÁ£É
¸À.£ÀA.93gÀ°è MlÄÖ 2-16 J.UÀÄ. RgÁ¨ï 0-06 UÀÄAmÉ eÁvÁ «¹ÛÃtð d«ÄäzÀÄÝ, PÀAzÁAiÀÄ
zÁR¯ÉUÀ¼ÀAvÉ, SÁvÉAiÀÄÄ ¤ÃgÀUÀAn £ËPÀj E£ÁA d«ÄãÉAzÀÄ ªÀVÃðPÀgÀtUÉÆArgÀÄvÀÛzÉ.
ªÉÄîÌAqÀ ¤ÃgÀUÀAn £ËPÀj E£ÁA d«ÄãÀ£ÀÄß ªÀÄÆ® ªÀA±À¸ÀÜgÀÄUÀ¼ÀÄ C£ÀĨsÀ«¹PÉÆAqÀÄ
§A¢gÀÄvÁÛgÉ. ¸ÀzÀj ªÀÄÆ® ªÀA±¸ÀÜgÀÄUÀ½UÉ 4 d£À ªÀÄPÀ̽zÀÄÝ, 1£Éà aPÀ̪ÀÄzÀÆÝgÀ¥Àà, ©£ï
PÀļÀîUÀ 0-24 UÀÄAmÉ, 2£Éà CtÚAiÀÄå¥Àà ©£ï vÁ£À¥Àà 0-24 UÀÄAmÉ, 3£Éà ªÀÄÆUÀ¥Àà ©£ï
ºÀĸÉãÀ¥Àà 0-24 UÀÄAmÉ, ªÀÄvÀÄÛ 4£Éà ªÀÄĤAiÀÄ®è¥Àà ©£ï ªÀÄzÀÆÝgÀ 0-24 UÀÄAmÉ AiÀÄAvÉ «¨sÁUÀ
ªÀiÁrPÉÆAqÀÄ d«ÄãÀ£ÀÄß ¸ÁUÀĪÀ½ ªÀiÁqÀÄwÛzÀÄÝ, ªÀÄgÀĪÀÄAdÆgÁw ªÀiÁr SÁvÉ ªÀÄvÀÄÛ ¥ÀºÀtÂ
ªÀiÁqÀ®Ä DzÉò¹zÉ. ¸ÀzÀj ªÀÄÆ® ªÀA±À¸ÀÜgÀÄUÀ¼ÀÄ ¥ËwAiÀiÁVzÀÄÝ, ¸ÀzÀjAiÀĪÀjUÉ ¥Ëw
ªÁgÀ¸ÀÄ ªÉÄÃgÉUÉ CªÀgÀ ªÀÄPÀ̽ÃUÉ CªÀgÀÄ «¨sÁUÀ ªÀiÁrPÉÆArgÀĪÀAvÉ, ¥ËwªÁgÀ¸ÀÄ SÁvÉ
ªÀiÁqÀ®Ä ¸ÀºÀ DzÉñÀ¹zÉ.
£À£Àß GvÀÛ¯ÉÃR£ÀªÀ£ÀÄß ¨ÉgÀ¼ÀZÀÄÑ ªÀiÁr¹, w¢Ý §»gÀAUÀ £ÁåAiÀiÁ®AiÀÄzÀ°è
¢:19-3-05 gÀAzÀÄ WÉÆö¹zÉ."
(Emphasis added)
9
A perusal at the grant order would indicate that it was granted only
to Annaiappa and the grant was to the extent of 24 guntas of land.
On 06-11-2012 the petitioners along with their father enter into an
agreement of sale with one M/s Epsilon Ventures. After the
agreement of sale, it appears that Annaiappa, father of the
petitioners gifts the property to the petitioners under a registered
gift deed dated 20-08-2015. After execution of the gift deed,
Annaiappa, the original grantee dies on 29-07-2019. The petitioners
along with other family members enter into a partition on
04-02-2021. The partition deed partitions the property into four
schedules and is divided between the petitioners. Nobody questions
the partition deed. The complainant then began talks with the
petitioners about buying the property from the hands of the
petitioners. In furtherance thereof, the complainant rolls out a
public notice, both in English and Kannada daily, inviting objections
or claims over the property which was to be purchased by the
complainant. Nobody files objections.
10
10. On 13-09-2023 Sri Muniyappa and Sri Ganesh filed
application before the Assistant Commissioner in R.A.No.307 of
2023 claiming to have share in the property that is to be sold to the
complainant since they belonged to the family of the petitioners. A
month thereafter the sale deed is executed by the petitioners in
favour of the complainant and the complainant is handed over
possession of the property. On the same day, an assignment deed
comes to be executed between the complainant and M/s Epsilon
Ventures Private Limited by which all the rights of the property
purchased by the complainant are transferred to the assignee.
After the sale deed and assignment deed, the petitioners received
notice from the office of the Assistant Commissioner in the
aforesaid revenue appeal proceedings instituted by Sri Muniyappa
and Sri Ganesh. The complainant comes to know of it and walks to
the jurisdictional Police Station to register the complaint. The
complaint becomes a crime in Crime No.158 of 2024 for the afore-
quoted offences. Since the entire issue has now triggered from the
complaint, I deem it appropriate to notice the complaint. It reads
as follows:
To Dt: 05.04.2024
11
The Inspector of Police,
Marathahalli Police Station,
Bangalore.
Sub: Complaint against Muniyappa and others for
cheating, forgery and other offences.
Sir.
1. I am running several educational institutions under the
name of New Horizon School, New Horizon
Engineering College and other educational institutions.
I commenced the educational institutions in
Indiranagar and later expanded in several parts of
Bangalore.
2. I was on the lookout for purchasing a suitable
property, where in the process one Muniyappa and
Rajkoti met me stating that they have a converted
property situated near Belandor, Bangalore. After
inspection of the property I found the said location
very conducive for my need and hence I showed
interest in the same.
3. Said Muniyappa and Rajkoti informed me that each of
them own 08 guntas of land and further informed that
they are in extreme financial difficulty and to meet
their financial needs, they are selling their property.
They also informed me that they are the sole and
absolute owners of their respective portion of the
property with absolute right to sell and dispose of the
same. Pursuant to negotiations they offered to sell
both their properties measuring 08 guntas each ie in
all 16 guntas for a total sale consideration of Rs.
16,88,35,200/- which was more than the market
price. They also furnished the title documents and
assured that they are the sole and absolute owners of
the said 16 guntas with no other person having any
rights to the said property.
4. Due diligence was conducted based on the documents
furnished and believing the documents so furnished by
them as true and the representation and assurance
given. In the process of the due diligence they
12
furnished the family tree. I believed the family tree
and also that said Muniyappa and Rajkoti are the only
two children of their father late Anniyappa and I
agreed to proceed with the sale.
5. Muniyappa and Rajkoti and their late father Anniappa
had entered into a registered agreement for sale with
one Epsilon Ventures Private Limited and had received
the advance amount promising to sell the land in Sy.
No. 93/3, situated at EPSILON, Yamalur Village,
VarthurHobli, Amani Belandur Khane Village,
measuring 24 guntas. This agreement was confirmed
by Muniyappa and Rajkoti Post the said agreement for
sale there was a partition and by virtue of gift deed.
Muniyappa and Rajkoti were gifted 08 guntas each in
said Sy. No. 93/3 which is the present property where
new katha numbers are assigned. Thereafter,
Muniyappa, his wife Sandhya Vani along with their
children and family members and Rajkoti along with
his wife Shashikala and children and others executed
the sale deed on 16-10-2023 registered as Document
No.INR-1-09877-2023-24, Book I dated 17-10-2023
making representation and assurances that they are
the absolute owners having absolute right title and
interest in the said property and based on such
assurances and representation, I paid the entire sale
consideration amount of Rs. 16,88,35,200/- (rupees
sixteen crore eighty-eight lakhs thirty-five thousand
and rupees two hundred) through Demand Draft, Vide
Indian Bank, A/c No-484682106 NHCE Branch to
Muniyappa and his family members and Rajkoti and
his family members as per their instruction. All of
them acknowledged the receipt of the entire sale
consideration. Epsilon Ventures Private Limited
consented the sale in my favour and have attested
their signature as consenting witness.
6. After the purchase, I took possession of the said
property and was in the process of proceeding further
in my project. When that being the case, to my shock
and dismay, one Ganesh and Muniyappa staked their
claim over the said property stating that they are the
legal heirs of late Muniyamma who was the sister of
13
said Anniyappa and claimed 50% of the share in the
property purchased by me. Thereafter we also
conducted further inquiry and found that the above
said persons Ganesh and Muniyappa had filed a
petition before the land revenue authority in R.A (BE)
3072023 claiming that they are the legal heirs and
have a share in the said property. When I confronted
Muniyappa and Rajkoti, they said that she has expired
in 1990 itself and that the said Muniyappa and Ganesh
do not have any rights.
7. As seen from the records in RA (BE) 307 of 2023
where Ganesh and Muniyappa have initiated
proceedings against the Tahsildar and Muniyappa and
Rajkoti, it appears that it was initiated during the
month of August 2023. It appears that both
Muniyappa and Rajkoti were aware of this proceeding
and the claim made by Ganesh and another since both
of them are the respondents in the said case. Despite
the said fact, they dishonestly suppressed the said
ownership and had falsely represented and assured
that they are the only owners of the said property and
no one else is the owner of the same. They also
suppressed the proceedings initiated by said Ganesh
and Muniyappa however making false representations,
they have made me pay them over 16 crores and
cheated me.
8. I believed and relied on the representation and
assurance given by Muniyappa and Rajkoti that they
are the sole and absolute owners of the said property
and apart from them there are no other owners paid
valuable consideration under the above sale deed. By
their assurance and representation they induced me to
part with monies to purchase the said property by
paying huge amount of sale consideration.
9. It now comes to light that both Muniyappa and Rajkoti
had falsely represented and assured in the sale deed
that they are the only sole and absolute owners of the
said property and also presented the same for
registration before the Sub-Registrar.
14
10. Thus it is very clear that both Muniyappa and Rajkoti
had hatched a plan and conspired to sell the said
property to me despite being in full knowledge that
they are not the sole and absolute owners of the same
and making false representation, and assurance made
me to believe that they are the sole and absolute
owners and collected the sale consideration of sixteen
crore plus.
11. Thus they have made illegal gains for themselves
while causing wrongful loss to me breaching the trust I
had placed in them. Further they have also forged the
sale deed by way of making false representation
assurances and knowing the same as false they have
presented it for registration.
12. Thus said Muniyappa, Rajkoti and others have cheated
me and are guilty breach of trust by making false
assurance and representation of their ownership to the
said property and have committed the crime under the
provisions of cheating, criminal breach of trust among
other offences
Hence I request you to take action against Muniyappa,
Rajkoti and others.
Thanking you,
Yours faithfully.
Sd/-
Dr. Mohan Manghnani,
Chairman,
New Horizon College of Engineering.
Ring Road, Bellandur Post,
Near Marathahalli,
Bangalore - 560103.
Mobile No. 9845064444"
15
In the entire complaint it is the case of the complainant that the
petitioners have suppressed that there are other claimants also
over the property and the property is not free from all
encumbrances. The petitioners are alleged to have lured the
complainant into the transaction and thereby broken the trust
reposed upon them by the complainant. Therefore, the afore-
quoted offences have sprung.
11. The grant order is quoted hereinabove. The grant order
does not make a mention of any other person except Annaiappa.
Annaiappa is the father of the petitioners. Therefore, every right
from the State fell into the kitty of Annaiappa and nobody else. This
was in the year 2005. Sri Muniyappa and Sri Ganesh who have
now registered their claim have kept quiet for 18 years and now
coming to know of the talks of sale have registered the claim. On
what motive, it is for the Assistant Commissioner to decide, as for
the first time in the year 2023 i.e., on 13-09-2023 an application
under Section 136(2) of the Land Revenue Act is filed before the
Assistant Commissioner. By then, Annaiappa had perfected his title
on the grant made by the State Government. Annaiappa had gifted
16
the property to the petitioners and on the death of Annaiappa, the
petitioners by way of registered partition deed divided the property
among themselves. With all these factors, it is ununderstandable as
to how the petitioners have indulged in criminal breach of trust,
cheating, forgery or criminal conspiracy. For an offence under
Section 406 of the IPC it is necessary that ingredients of Section
405 should be present. Sections 405 and 406 of the IPC read as
follows:
"405. Criminal breach of trust.--Whoever, being in
any manner entrusted with property, or with any dominion
over property, dishonestly misappropriates or converts to his
own use that property, or dishonestly uses or disposes of
that property in violation of any direction of law prescribing
the mode in which such trust is to be discharged, or of any
legal contract, express or implied, which he has made
touching the discharge of such trust, or wilfully suffers any
other person so to do, commits "criminal breach of trust".
Explanation 1.--A person, being an employer of an
establishment whether exempted under Section 17 of
the Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 (19 of 1952), or not] who deducts the employee's
contribution from the wages payable to the employee for
credit to a Provident Fund or Family Pension Fund
established by any law for the time being in force, shall be
deemed to have been entrusted with the amount of the
contribution so deducted by him and if he makes default in
the payment of such contribution to the said fund in violation
of the said law, shall be deemed to have dishonestly used
the amount of the said contribution in violation of a direction
of law as aforesaid.
17
Explanation 2.--A person, being an employer, who
deducts the employees' contribution from the wages payable
to the employee for credit to the Employees' State Insurance
Fund held and administered by the Employees' State
Insurance Corporation established under the Employees'
State Insurance Act, 1948 (34 of 1948), shall be deemed to
have been entrusted with the amount of the contribution so
deducted by him and if he makes default in the payment of
such contribution to the said Fund in violation of the said Act,
shall be deemed to have dishonestly used the amount of the
said contribution in violation of a direction of law as
aforesaid.
Illustrations
(a) A, being executor to the will of a deceased person,
dishonestly disobeys the law which directs him to divide the
effects according to the will, and appropriates them to his
own use. A has committed criminal breach of trust.
(b) A is a warehouse-keeper. Z, going on a journey,
entrusts his furniture to A, under a contract that it shall be
returned on payment of a stipulated sum for warehouse
room. A dishonestly sells the goods. A has committed
criminal breach of trust.
(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.
(d) But if A, in the last illustration, not dishonestly but
in good faith, believing that it will be more for Z's advantage
to hold shares in the Bank of Bengal, disobeys Z's directions,
and buys shares in the Bank of Bengal, for Z, instead of
buying Company's paper, here, though Z should suffer loss,
and should be entitled to bring a civil action against A, on
account of that loss, yet A, not having acted dishonestly, has
not committed criminal breach of trust.
18
(e) A, a revenue officer, is entrusted with public
money and is either directed by law, or bound by a contract,
express or implied, with the Government, to pay into a
certain treasury all the public money which he
holds. A dishonestly appropriates the money. A has
committed criminal breach of trust.
(f) A, a carrier, is entrusted by Z with property to be
carried by land or by water. A dishonestly misappropriates
the property. A has committed criminal breach of trust."
"406. Punishment for criminal breach of trust.--
Whoever commits criminal breach of trust shall be punished
with imprisonment of either description for a term which may
extend to three years, or with fine, or with both."
Section 405 of the IPC makes it mandatory that there must be
entrustment of property and such entrustment must be misused or
misappropriated with a dishonest intention, it is only then, it
becomes an offence under Section 406 of the IPC. In the case at
hand, the petitioners are the owners of the property. There is no
entrustment of property. It is an agreement of sale between the
petitioners and the complainant on complete payment and
possession. It is the breach of agreement now that is alleged or
the suppression of facts. Where from criminal breach of trust could
emerge is a mystery. Therefore, the offence under Section 406 is
loosely laid against the petitioners.
19
12. The next is the offence under Section 420 for which the
ingredients under Section 415 are to be present. The offence
alleged against these petitioners is suppression of a particular claim
that is made, about which the petitioners themselves did not know.
The claimants have registered their claim after a gross delay of 18
years. Even then, there can be no offence of cheating, as the
petitioners have not lured the complainant into any transaction with
any dishonest intention right from the inception of the transaction.
Therefore, there is no question of cheating in the case at hand. It
thus becomes apposite to refer to the judgment of the Apex Court
in the case of DELHI RACE CLUB (1940) LIMITED v. STATE OF
UTTAR PRADESH1, wherein the Apex Court holds that Sections
406 and 420 cannot co-exist. It reads 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
1
2024 SCC OnLine SC 2248
20
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
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
21
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 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.
... ... ...
22
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
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)
The Apex Court, a little earlier, in the case of NARESH KUMAR v.
STATE OF KARNATAKA2, has held as follows:
".... .... ....
5. Under these circumstances, we are of the
considered view that this is a case where the inherent
powers should have been exercised by the High Court under
Section 482 of the Criminal Procedure Code as the powers
2
2024 SCC OnLine SC 268
23
are there to stop the abuse of the process and to secure the
ends of justice.
6. In the case of Paramjeet Batra v. State of
Uttarakhand, (2013) 11 SCC 673, this Court recognized that
although the inherent powers of a High Court under
Section 482 of the Code of Criminal Procedure should be
exercised sparingly, yet the High Court must not hesitate
in quashing such criminal proceedings which are
essentially of a civil nature. This is what was held:
"12. While exercising its jurisdiction under
Section 482 of the Code the High Court has to be
cautious. This power is to be used sparingly and only for
the purpose of preventing abuse of the process of any
court or otherwise to secure ends of justice. Whether a
complaint discloses a criminal offence or not depends
upon the nature of facts alleged therein. Whether
essential ingredients of criminal offence are present or
not has to be judged by the High Court. A complaint
disclosing civil transactions may also have a
criminal texture. But the High Court must see
whether a dispute which is essentially of a civil
nature is given a cloak of criminal offence. In such
a situation, if a civil remedy is available and is, in
fact, adopted as has happened in this case, the
High Court should not hesitate to quash the
criminal proceedings to prevent abuse of process
of the court."
(emphasis supplied)
7. Relying upon the decision in Paramjeet
Batra (supra), this Court in Randheer Singh v. State of
U.P., (2021) 14 SCC 626, observed that criminal proceedings
cannot be taken recourse to as a weapon of harassment.
In Usha Chakraborty v. State of West Bengal, 2023 SCC
OnLine SC 90, relying upon Paramjeet Batra (supra) it was
again held that where a dispute which is essentially of a civil
nature, is given a cloak of a criminal offence, then such
disputes can be quashed, by exercising the inherent powers
under Section 482 of the Code of Criminal Procedure.
8. Essentially, the present dispute between the
parties relates to a breach of contract. A mere breach
24
of contract, by one of the parties, would not attract
prosecution for criminal offence in every case, as held
by this Court in Sarabjit Kaur v. State of
Punjab, (2023) 5 SCC 360. Similarly, dealing with the
distinction between the offence of cheating and a mere
breach of contractual obligations, this Court, in Vesa
Holdings (P) Ltd. v. State of Kerala, (2015) 8 SCC 293,
has held that every breach of contract would not give
rise to the offence of cheating, and it is required to be
shown that the accused had fraudulent or dishonest
intention at the time of making the promise."
(Emphasis supplied)
The Apex Court directs that the Court exercising its jurisdiction
under Section 482 of the Cr.P.C., must see whether the dispute
which is essentially civil in nature is dressed with a colour of crime.
If civil remedy is available, the Court should step in and quash
criminal proceedings. The issue in the case at hand, as observed
hereinabove, is undoubtedly civil in nature, as every strand of the
allegation made by the complainant, in the complaint cannot but be
civil in nature. Setting the criminal law into motion would be arm-
twisting the petitioners to return the money or recovery of money.
The transaction which is civil in nature must be nipped in bud, is
what the Apex Court holds in the case of LALIT CHATURVEDI v.
25
STATE OF UTTAR PRADESH3 wherein the Apex Court has held as
follows:
".... .... ....
5. This Court, in a number of judgments, has
pointed out the clear distinction between a civil wrong
in the form of breach of contract, non-payment of
money or disregard to and violation of the contractual
terms; and a criminal offence under
Sections 420 and 406 of the IPC. Repeated judgments
of this Court, however, are somehow overlooked, and
are not being applied and enforced. We will be
referring to these judgments. The impugned judgment
dismisses the application filed by the appellants under
Section 482 of the Cr. P.C. on the ground of delay/laches and
also the factum that the chargesheet had been filed on
12.12.2019. This ground and reason is also not valid.
6. In "Mohammed Ibrahim v. State of Bihar", this
Court had referred to Section 420 of the IPC, to observe that
in order to constitute an offence under the said section, the
following ingredients are to be satisfied:--
"18. Let us now examine whether the ingredients
of an offence of cheating are made out. The essential
ingredients of the offence of "cheating" are as follows:
(i) deception of a person either by making a false or
misleading representation or by dishonest
concealment or by any other act or omission;
(ii) fraudulent or dishonest inducement of that
person to either deliver any property or to
consent to the retention thereof by any person or
to intentionally induce that person so deceived to
do or omit to do anything which he would not do
or omit if he were not so deceived; and
3
2024 SCC OnLine SC 171
26
(iii) such act or omission causing or is likely to cause
damage or harm to that person in body, mind,
reputation or property.
19. To constitute an offence under section 420,
there should not only be cheating, but as a consequence
of such cheating, the accused should have dishonestly
induced the person deceived
(i) to deliver any property to any person, or
(ii) to make, alter or destroy wholly or in part a
valuable security (or anything signed or sealed
and which is capable of being converted into a
valuable security)."
7. Similar elucidation by this Court in "V.Y.
Jose v. State of Gujarat", explicitly states that a contractual
dispute or breach of contract per se should not lead to
initiation of a criminal proceeding. The ingredient of
'cheating', as defined under Section 415 of the IPC, is
existence of a fraudulent or dishonest intention of making
initial promise or representation thereof, from the very
beginning of the formation of contract. Further, in the
absence of the averments made in the complaint petition
wherefrom the ingredients of the offence can be found out,
the High Court should not hesitate to exercise its jurisdiction
under Section 482 of the Cr.P.C. Section 482 of the Cr.
P.C. saves the inherent power of the High Court, as it serves
a salutary purpose viz. a person should not undergo
harassment of litigation for a number of years, when no
criminal offence is made out. It is one thing to say that a
case has been made out for trial and criminal proceedings
should not be quashed, but another thing to say that a
person must undergo a criminal trial despite the fact that no
offence has been made out in the complaint. This Court
in V.Y. Jose (supra) placed reliance on several earlier
decisions in "Hira Lal Hari Lal Bhagwati v. CBI", "Indian Oil
Corporation v. NEPC India Ltd.", "Vir Prakash Sharma v. Anil
Kumar Agarwal" and "All Cargo Movers (I) (P)
Ltd. v. Dhanesh Badarmal Jain".
8. Having gone through the complaint, which was
registered as a FIR and the assertions made therein, it is
27
quite clear that respondent no. 2/complainant - Sanjay
Garg's grievance is regarding failure of the appellants to pay
the outstanding amount, in spite of the respondent no.
2/complainant - Sanjay Garg's repeated demands. The
respondent no. 2/complainant - Sanjay Garg states that the
supplies were made between the period 01.12.2015 and
06.08.2017. The appellants had made the payments from
time to time of Rs. 3,76,40,553/- leaving a balance of Rs.
1,92,91,358/-.
9. We will assume that the assertions made in
the complaint are correct, but even then, a criminal
offence under Section 420 read with Section 415 of
the IPC is not established in the absence of deception
by making false and misleading representation,
dishonest concealment or any other act or omission, or
inducement of the complainant to deliver any property
at the time of the contract(s) being entered. The
ingredients to allege the offence are neither stated nor
can be inferred from the averments. A prayer is made
to the police for recovery of money from the
appellants. The police is to investigate the allegations
which discloses a criminal act. Police does not have
the power and authority to recover money or act as a
civil court for recovery of money.
10. The chargesheet also refers to Section 406 of
the IPC, but without pointing out how the ingredients
of said section are satisfied. No details and particulars
are mentioned. There are decisions which hold that the
same act or transaction cannot result in an offence of
cheating and criminal breach of trust
simultaneously. For the offence of cheating, dishonest
intention must exist at the inception of the
transaction, whereas, in case of criminal breach of
trust there must exist a relationship between the
parties whereby one party entrusts another with the
property as per law, albeit dishonest intention comes
later. In this case entrustment is missing, in fact it is
not even alleged. It is a case of sale of goods. The
chargesheet does refer to Section 506 of
the IPC relying upon the averments in the complaint.
However, no details and particulars are given, when
28
and on which date and place the threats were given.
Without the said details and particulars, it is apparent
to us, that these allegations of threats etc. have been
made only with an intent to activate police machinery
for recovery of money."
(Emphasis supplied)
13. In the light of the afore-quoted judgments of the Apex
Court what would unmistakably emerge is that the allegations are
loosely laid against these petitioners, for afore-quoted offence,
which is an issue purely civil in nature and the criminal law being
set into motion for the purpose of recovery of money. There is
neither forgery, nor criminal breach of trust, nor cheating in the
case at hand.
14. What remains is Section 120B of the IPC which would also
get subsumed on the reasons so rendered on the afore-quoted
offences. In that light, permitting further investigation in the case
at hand would run foul of what the Apex Court has observed in
NARESH KUMAR supra, that the High Court should not hesitate to
quash criminal proceedings to prevent abuse of the process of law.
If the facts narrated hereinabove are considered on the touchstone
of what the Apex Court has held in the afore-quoted judgments,
29
permitting investigation would become an abuse of the process of
law and ultimately result in patent injustice.
15. For the aforesaid reasons, the following:
ORDER
(i) Criminal Petition is allowed.
(ii) FIR in Crime No.158 of 2024 registered by Marathahalli Police Station and pending before the 3rd Additional Chief Metropolitan Magistrate, Bengaluru stands quashed.
(iii) It is made clear that the observations made in the course of the order are only for the purpose of consideration of the case of petitioners under Section 482 of Cr.P.C. and the same shall not bind or influence the proceedings pending before any other fora.
SD/-
(M. NAGAPRASANNA) JUDGE Bkp CT:MJ