Gujarat High Court
Jitendrabhai @ Rajubhai Samratsinh ... vs State Of Gujarat & on 15 February, 2017
Author: J.B.Pardiwala
Bench: J.B.Pardiwala
R/CR.MA/11423/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 11423 of 2014
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JITENDRABHAI @ RAJUBHAI SAMRATSINH SOLANKI....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)
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Appearance:
MR TANMAY B KARIA, ADVOCATE for the Applicant(s) No. 1
MR P P MAJMUDAR, ADVOCATE for the Respondent(s) No. 2
MS SHRUTI PATHAK, APP for the Respondent(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 15/02/2017
ORAL ORDER
1 Rule returnable forthwith. Ms. Pathak, the learned Additional Public Prosecutor waives service of notice of rule for and on behalf of the respondent No.1 - State of Gujarat and Mr. Majmudar, the learned counsel waives service of notice of rule for and on behalf of the respondent No.2.
2 By this application under Section 482 of the Code of Criminal Procedure, 1973, the applicant - original accused seeks to invoke the inherent powers of this Court, praying for quashing of the Criminal Case No.1022 of 2014 pending in the Court of the learned Judicial Magistrate First Class, Kotda Sangani, District: Rajkot arising from the First Information Report bearing C.R. No.I50 of 2013 registered with the Kotda Sangani Police Station, District: Rajkot Rural for the offence Page 1 of 13 HC-NIC Page 1 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER punishable under Sections 406 and 420 of the Indian Penal Code.
3 The case of the respondent No.2 may be summarised as under:
3.1 The respondent No.2 is engaged in the business of manufacturing of cement. He is carrying on business in the name of Nidhi Cement. In the year 2011, the respondent No.2 appointed the applicant as his distributor. It is stated in the F.I.R. that the bags of cement used to be regularly supplied to the applicant and the applicant used to make the payment in time. Later on, the applicant became irregular in making the payment, and ultimately, by the end of September - October 2013, an amount of Rs.25 Lac (Rupees Twenty Five Lac only) fell due and payable to the respondent No.2 by the applicant herein towards the supply of the cement bags. It is the case of the respondent No.2 that although the amount was demanded, yet the applicant failed to make the payment. In such circumstances, he lodged the F.I.R.
4 At the end of the investigation, chargesheet was filed for the offence punishable under Sections 406 and 420 of the Indian Penal Code. The filing of the chargesheet culminated in the Criminal Case No.1022 of 2014, which is pending, as on date, in the Court of the learned Judicial Magistrate First Class, Kotda Sangani, District: Rajkot.
5 I take notice of the fact that immediately within one month from the date of the F.I.R., the respondent No.2 also filed a civil suit being the Regular Civil Suit No.147 of 2013 in the Court of the learned Senior Civil Judge, Rajkot for recovery of the amount.
6 Mr. Karia, the learned counsel appearing for the applicant submits that none of the ingredients to constitute the offence of cheating or criminal breach of trust are spelt out. The dispute arose out of a commercial transaction and it cannot be said that the entire intention of Page 2 of 13 HC-NIC Page 2 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER his client was to cheat the respondent No.2 from the inception. He pointed out the averments made in the F.I.R. and submitted that on the showing of the first informant himself, initially for a period of two years, there was no problem and the payment was being made regular, but later on, the applicant became irregular in making the payment. He submitted that in the civil suit also, there are no allegations of cheating or criminal breach of trust. In such circumstances, he prays that there being merits in this application, the same be allowed and the proceedings be quashed.
7 On the other hand, this application has been vehemently opposed by Mr. Majmudar, the learned counsel appearing for the first informant and Ms. Pathak, the learned A.P.P. appearing for the State. Both the learned counsel would submit that since chargesheet has been filed, the same would indicate that there is a prima facie case against the applicant to put him to trial. It is submitted that whether the intention of the accused was to cheat the first informant from the inception or not, is a question of fact, and such a question of fact can be decided only by the trial Court on the basis of the evidence that may be led by the parties. In such circumstances, it is prayed that there being no merits in this application, the same be rejected.
8 Having heard the learned counsel appearing for the parties and having considered the materials on record, the only question that falls for my consideration is whether the proceedings of the criminal case should be quashed.
9 The offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients. In order to constitute a criminal breach of trust (Section 406 IPC).
1) There must be entrustment with person for property or Page 3 of 13 HC-NIC Page 3 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER dominion over the property, and
2) The person entrusted :
a) dishonestly misappropriated or converted property to his own use, or
b) dishonestly used or disposed of the property or willfully suffers any other person so to do in violation
i) any direction of law prescribing the method in which the trust is discharged and
ii) of legal contract touching the discharge of trust (see:
S.W.P. Palanitkar v. State of Bihar, (2002)1 SCC 241) : (AIR 2001 SC 2960).
Similarly, in respect of an offence under section 420 IPC, the essential ingredients are :
1) deception of any person, either by making a false or misleading representation or by other action or by omission;
2) fraudulently or dishonestly inducing any person to deliver any property, or
3) the consent that any persons shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit (see: Harmanpeet Singh Ahluwalia v. State of Punjab, (2009)7 SCC 712 : (2009) Cr.L.J. 3462 (SC) ) 10 Further, in both the sections, mens rea i.e. intention to defraud or the dishonest intention must be present from the very beginning or inception without which either of these sections cannot be invoked.
11 In my view, the plain reading of the First Information Report fails to spell out any of the aforesaid ingredients noted above. I may only say Page 4 of 13 HC-NIC Page 4 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER 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 could not 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.
12 Every act of breach of trust may not be resulted 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 Hart Prasad Chamaria v. B.K. Surekha and others, reported in 1973(2) SCC 823 as under :
We have heard Mr. Maheshwarit on behalf of the appellant and are of the opinion that no case has been made out against the respondents under Section 420 Indian Penal Code. 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 riot disclose the commission of any offence on the part of the respondents under Section 420 Indian Penal Code. 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.
13 To put it in other words, in case of cheating the dishonest intention starts with the very inception of the transaction. But in the case Page 5 of 13 HC-NIC Page 5 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER of criminal breach of trust, the person who comes into possession of the movable property 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.
14 The distinction between mere breach of contract and the offence of criminal breach of trust and cheating are fine one. In case of cheating, it depends upon the intention of the accused at the time of inducement, which may be judged by a subsequent conduct but for this the subsequent conduct is not the sole test but mere breach of contract which 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 his 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 after 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. But the offence, i.e. the offence of breach of trust and cheating involve dishonest intention but 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 entrustment. 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 practices fraudulent Page 6 of 13 HC-NIC Page 6 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER or dishonest to induce with another person to deliver the property. In such situation, both the offences cannot coexist simultaneously.
15 I may quote with profit a decision of the Supreme Court in the case of Nageshwar Prasad Singh alias Sinha v. Narayan Singh, AIR 1999 SC 1480. In the said case, the allegation of the prosecution was that an agreement was signed between the complainant respondent and the appellant whereby some land was agreed to be sold by the appellant to the complainants on a consideration, and allegedly a part thereof was paid as earnest money, the balance being payable in the manner indicated in the deed. The most important term in the deed was that possession of the plot would stand transferred to the complainants and possession in fact was delivered to the complainants over which they made certain constructions. The complaint was laid on the basis that the appellant had cheated the complainants of the sum of money they had paid as earnest money as his subsequent conduct reflected that he was not willing to complete the bargain for which the complainants had to file a suit for specific performance which was pending in the civil court. Held, that latter part of illustration (g) to Section 415, I.P.C. illustrates that at the time when agreement for sell was executed, it could have, in no event, been termed dishonestly so as to hold that the complainants were cheated of the earnest money, which they passed to the appellant as part consideration and possession of the total amount involved in the bargain was passed over to the complainant/respondent and which remained in their possession. Now it is left to imagine who would be interested for dealing the matter for completing the bargain when admittedly the complainants have not performed their part in making full payment. The matter was, therefore, before the civil court in this respect. The liability, if any, arising out by breaching thereof was civil in nature and not criminal. Accordingly, the appeal was allowed and Page 7 of 13 HC-NIC Page 7 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER complaint proceedings were quashed.
16 It was further held by the Supreme Court in the case of Hridaya Ranjan Prasad Verma v. State of Bihar, AIR 2000 SC 2341 at Pp. 234546 of para 16) as below :
"15. In determining the question it has to be kept in mind that 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."
17 In All Cargo Movers (I) Pvt. Ltd. & others v. Dhanesh Badarmal Jain & another, JT 2007 (12) SC 345, the Apex Court quashed a criminal proceeding on the premise that the allegations contained in complaint were wholly inconsistent with the pleadings in a collateral civil proceeding. It held as follows :
"17. We are of the opinion that the allegations made in the complaint petition, even if given face value and taken to be correct in its entirety, do not disclose an offence. For the said purpose, This Court may not only take into consideration the admitted facts but it is also permissible to look into the pleadings of the plaintiffrespondent No.1 in the suit. No allegation whatsoever was made against the appellants herein in the notice. What was contended was negligence and/or breach of contract on the part of the carriers and their agent. Breach of contract simplicitor does not constitute an offence. For the said purpose, allegations in the complaint petition must disclose the necessary ingredients therefor. Where a civil suit is pending and the complaint petition has been filed one year after filing of the civil suit, we may for the purpose of finding out as to whether the said allegations are prima facie cannot notice the correspondences exchanged by the parties and other admitted documents. It is one thing to say that Page 8 of 13 HC-NIC Page 8 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER the Court at this juncture would not consider the defence of the accused but it is another thing to say that for exercising the inherent jurisdiction of this Court, it is impermissible also to look to the admitted documents. Criminal proceedings should not be encouraged, when it is found to be mala fide or otherwise an abuse of the process of the Court. Superior Courts while exercising this power should also strive to serve the ends of justice."
18 In K.L.E. Society & others v. Siddalingesh, (2008) 4 SCC 541, on a similar issue, the Supreme Court quashed a criminal proceeding labeling it to be an abuse of process of Court as the allegations contained in the complaint ran contrary to the averments made in the petition filed under the Industrial Disputes Act. The Apex Court held as follows :
"7. One thing is clear on reading of High Court's reasoning that the High Court came to the conclusion that deductions were made without any rhyme and reason and without any basis. That was not the case of the complainant. On the other hand, it tried to make out a case that the deduction was made with an object. That obviously, was the foundation to substantiate claim of entrustment. On a close reading of the complaint it is clear that the ingredients of Sections 403, 405 and 415 do not exist. The statement made in the complaint runs contrary to the averments made in the petition in terms of Section 33(C) (2)."
19 In State of Orissa v. Debendra Nath Padhi, (2005) SCC (Cri.) 415, the Supreme Court held that the High Court could take into account materials of "unimpeachable character of sterling quality" while exercising its inherent powers to quash a criminal proceeding and observed as follows : "29. Regarding the argument of accused having to face the trial despite being in a position to produce material of unimpeachable character of sterling quality, the width of the powers of the High Court under Section 482 of the Code and Article 226 of Constitution is unlimited whereunder in the interests of justice the High Court can make such orders as may be necessary to prevent abuse of the process of any Court or otherwise to Page 9 of 13 HC-NIC Page 9 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER secure the ends of justice within the parameters laid down in Bhajan Lals case.
20 In Vijaya Rao v. State of Rajasthan & another (2005) SCC (Cri.) 1600, the Supreme Court held that merely using expressions like "fraudulent representation" and "malafide intention" does not give rise to an inference that the complaint discloses the ingredients of the offence of cheating.
21 In Hridaya Ranjan Prasad Verma & others v. State of Bihar & another (2000) SCC (Cri.) 786, the Supreme Court succinctly laid down the distinction between breach of contract in one hand and the offence of cheating in the other.
"15. In determining the question it has to be kept in mind that 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 to 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."
22 In Anil Kumar Bose v. State of Bihar, (1974) SCC (Cri.) 652, the Supreme Court held that mere failure to perform a duty or observe rules of procedure may be an administrative lapse or any error of judgement but cannot be equated with dishonest intention or cheating.
23 Criticizing the institution of malicious and frivolous criminal
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R/CR.MA/11423/2014 ORDER
proceeding against individuals, the Supreme Court in PEPSI Foods Ltd. & another v. Special Judicial Magistrate & Ors., (1998) SCC (Cri.) 1400, held as follows :
"28. Summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. it is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused."
24 In B. Suresh Yadav v. Sharifa Bee & another, JT (2007) 12 SC 341, the Supreme Court again highlighted the distinction between a mere breach of contract and the offence of cheating.
25 In Inder Mohan Goswami & another v. State of Uttaranchal & others, (2007)12 SCC 1, the Supreme Court analysed inherent powers of the High Court under Section 482 as follows :
"23. This court in a number of cases has laid down the scope and ambit of courts' powers under section 482 Cr.P.C. Every High Court has inherent power to act ex debito justitiae to do real and substantial justice, for the administration of which alone it exists, or to prevent abuse of the process of the court. Inherent power under section 482 Cr.P.C. can be exercised:
(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.Page 11 of 13
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24. Inherent powers under section 482 Cr.P.C. though wide have to be exercised sparingly, carefully and with great caution and only when such exercise is justified by the tests specifically laid down in this section itself. Authority of the court exists for the advancement of justice. If any abuse of the process leading to injustice is brought to the notice of the court, then the Court would be justified in preventing injustice by invoking inherent powers in absence of specific provisions in the Statute."
26 Thus, having regard to the materials on record and the nature of the allegations, it is clear that no case of criminal breach of trust punishable under Section 406 of the Indian Penal Code could be said to have been made out. So far as the offence punishable under Section 420 of the Indian Penal Code is concerned, a bare perusal of Section 415 of the Indian Penal Code would clearly lead to the conclusion that fraudulent or dishonest inducement on the part of the accused must be at the inception and not at a subsequent stage. In the course of the business, after almost a period of two years, problems cropped up and the payment could not be made by the applicant. A regular civil suit for recovery of the requisite amount due and payable to the complainant has already been filed. The matter is going on before the Civil Court. It is difficult for me to take the view that the dishonest intention or the fraudulent inducement on the part of the applicant accused was right from the inception. Mere recovery of a particular amount in the course of business transaction, without in any manner by itself, is not sufficient to attract the provisions of Section 415 of the Indian Penal Code so as to put the accused to trial.
27 In view of the above, this application is allowed. The proceedings of the Criminal Case No.1022 of 2014 pending in the Court of the learned Judicial Magistrate First Class, Kotda Sangani, District: Rajkot arising from the First Information Report bearing C.R. No.I50 of 2013 registered with the Kotda Sangani Police Station, District: Rajkot Rural Page 12 of 13 HC-NIC Page 12 of 13 Created On Sun Aug 13 16:10:35 IST 2017 R/CR.MA/11423/2014 ORDER for the offence punishable under Sections 406 and 420 of the Indian Penal Code are quashed.
28 It is needless to clarify that the civil suit filed by the complainant shall proceed further in accordance with law and this order shall have no bearing so far as the civil proceedings are concerned. The civil rights shall be determined by the Civil Court strictly on the basis of the evidence that may be led by the parties without being influenced by the fact that this Court has quashed the criminal proceedings. Rule is made absolute. Direct service is permitted.
(J.B.PARDIWALA, J.) chandresh Page 13 of 13 HC-NIC Page 13 of 13 Created On Sun Aug 13 16:10:35 IST 2017