Gauhati High Court
M/S. Bawa Masala Company And 2 Ors vs M/S. P.A. Associates on 14 October, 2020
Equivalent citations: AIRONLINE 2020 GAU 599
Author: Manish Choudhury
Bench: Manish Choudhury
Page No. 1/19
GAHC010043532019
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Crl. Pet. 284/2019
1:M/S. BAWA MASALA COMPANY AND 2 ORS.
A PARTNERSHIP FIRM DULY REGISTERED UNDER THE PROVISIONS OF
THE PARTNERSHIP ACT, 1932 HAVING ITS REGISTERED OFFICE AT B-11,
LAWRENCE ROAD INDUSTRIAL AREA, NEW DELHI-110035 AND IS
REPRESENTED BY ITS DULY AUTHORIZED PARTNER, SHRI TEJBIR SINGH
2: SRI TEJBIR SINGH
S/O SRI INDERPAL SINGH
R/O D-6
RAJOURI GARDEN
NEW DELHI-110027
3: INDERPAL SINGH
S/O LT. BAWA SARDAR SINGH
R/O D-6
RAJOURI GARDEN
NEW DELHI-11002
VERSUS
1:M/S. P.A. ASSOCIATES
REPRESENTED BY ITS SOLE PROPRIETOR, SRI PANKAKJ BAID, S/O SRI
UMED SINGH BAID, HAVING ITS PLACE OF BUSINESS AT R.K. TOWER,
BASEMENT, A.K. AZAD ROAD, REHABARI, P.O.-GUWAHATI-781008, DIST-
KAMRUP(M), ASSAM
Advocate for the Petitioner : MR G N SAHEWALLA
Advocate for the Respondent : MR J C GAUR
Page No. 2/19
BEFORE
HONOURABLE MR. JUSTICE MANISH CHOUDHURY
JUDGMENT
Date : 14-10-2020 This criminal petition is preferred under Section 482 of the Code of Criminal Procedure, 1973 ('the Code' and/or 'CrPC', for short) by the petitioners seeking quashing and setting aside of the criminal proceeding of Complaint Case no. C.R. 5870 C/2018, presently pending before the Court of learned Sub-Divisional Judicial Magistrate No. 1, Kamrup (Metro), Guwahati ('the trial court', for short), and the order dated 28.11.2018 whereby the learned trial court had taken cognizance on the complaint for the offences under Sections 409/420/34, Indian Penal Code (IPC) and issued process against the petitioners as the accused to appear before the learned trial court and to stand trial.
2. The respondent as the complainant who has filed the complaint, is a proprietorship concern which carries on its business as dealers and distributors of various products and its place of business is at Guwahati, District - Kamrup (Metro), Assam. In the complaint, the petitioner no. 1 has been arraigned as accused no. 1 and it is a registered partnership firm having its office at New Delhi. The petitioner no. 2 and the petitioner no. 3 are the partners of the petitioner no. 1 firm and they have been arraigned as accused no. 2 and accused no. 3 respectively in the complaint. That apart, one Sri H.D. Ganguly has been arraigned as accused no. 4 describing him as the Area Sales Manager of the petitioner no. 1 firm.
3. The background facts, as narrated in the complaint, which led the respondent- complainant to file the complaint at issue before the learned trial court may be stated, in brief, as follows :-
3.1. The accused no. 1 is stated to have been carrying on business of spices from its head office in New Delhi and also through its branch offices / carrying & forwarding (C&F) agents at various places in the country including in the State of Assam. During May, 2013, the accused no. 2 and the accused no. 4 approached the complainant at Guwahati and Page No. 3/19 represented the accused no. 1 firm as a renowned manufacturer of spices. It was represented that they were satisfied with the infrastructure of the complainant and, thus, the complainant was offered C&F agency of its products for Assam and other North Eastern States except for the areas in which the accused no. 1 firm had already appointed its dealers / agents. At the time of the offer, it was promised that the accused no. 1 firm would supply good quality products, offer competitive prices, provide full-fledged team of sales representatives for procuring orders from dealers from the entire North Eastern Region etc. which would be beneficial for both the parties.
3.2. Based on such offer, the complainant agreed to work as C&F agent of the accused no. 1 firm and after due deliberation, it was verbally agreed by both the parties that the complainant would deposit an amount of Rs. 1,00,000/- as security deposit with the accused and would also keep sufficient stocks of goods in his godown for sale in the areas allotted to him as per the instructions of sales representatives to be appointed by the accused. The accused stated to have also promised to take back the unsold goods like damaged ones or where dates of the products had expired, etc. for which freight and packing charges would be borne by the complainant. For being such C&F agent, the accused would pay the complainant remuneration at the rates of (i) 3% towards C&F commission, (ii) 2% towards allied expenses and (iii) 1% towards stationary charges respectively i.e. 6% in total of the turnover.
3.3. On being so assured, the complainant deposited an amount of Rs. 1,00,000/- by NEFT on 22.05.2013 as security deposit with the accused for finalization of the C&F agreement.
After deposit of the security deposit, the accused had asked the complainant to place its orders and to pay in advance the prices of the goods for sales in the areas allotted to him with the promise to execute the formal agreement and to appoint sales representatives within a short period of time. Believing bonafide on such assurance, the complainant stated to have placed its orders for supply of goods and made a further payment of Rs. 8,00,000/- on 08.06.2013 by cheque as advance payment towards prices of the goods to be supplied to the complainant by the accused.
3.4. On receipt of the said amount, the accused supplied goods worth Rs. 7,96,836/- vide Page No. 4/19 two invoices dated 13.06.2013 to the complainant. However, the accused had neither come forward to execute the formal agreement for C&F agency nor appointed any team of sales representatives for obtaining orders from dealers for sale of supplied goods as promised, ignoring the repeated requests made in those regards by the complainant. In the absence of sales representatives, the complainant was unable to sell the goods supplied to it by the accused and consequently, a huge amount of the complainant remained blocked.
3.5. It was by a communication dated 16.10.2013 the accused no. 1 firm forwarded two sets of draft agreement, prepared at New Delhi, asking the complainant to sign the same and thereafter, to return both the sets so that the accused could sign them and return one copy of the agreement to the complainant. The complainant had, accordingly, sent both the sets of the agreement after signing, to the accused no. 1 firm vide his letter dated 06.11.2013 with the request to send back one copy of the said agreement to it.
3.6. Thereafter, the accused asked the complainant to place further orders for goods with the assurance to appoint sales representatives within a short time. The complainant paid a further amount of Rs. 1,60,000/- through bank transfer while placing its orders. On receipt of the amount, the accused sent goods worth Rs. 1,88,134/- vide three Invoices dated 09.11.2013. On 18.11.2013, the accused returned one copy of the signed agreements to the complainant. But the accused till that date, did not appoint sales representatives for sale of the goods for the areas despite repeated requests of the complainant. It is alleged that the accused delayed the appointment of sales representatives on one pretext or another. The complainant has alleged that as a result, the goods supplied to it could not be sold as expected though the complainant had managed to sell a part of it purely on its own efforts. As a consequence, a huge amount of the complainant remained blocked.
3.7. To the surprise of the complainant, the accused terminated the agency by a letter dated 24.01.2014 falsely blaming the complainant for lack of sales of the products of the accused in the areas. On receipt of the said termination letter, the complainant by refuting the blame cast upon it, had asked the accused to settle its accounts by making payment of its dues including the value of the unsold goods lying at its end. In reply, the accused had asked Page No. 5/19 the complainant to send the unsold goods to Delhi by transport with the assurance that the accused would make the payment immediately after receipt of the goods. Accordingly, the complainant stated to have sent the unsold goods worth Rs. 4,86,956.56 on 21.05.2014 through a transporter by paying an amount of Rs. 23,650/- towards transportation charges, despite the agreement dated 16.10.2013 providing that in case of return of goods after expiry or being damaged, the freight and packing charges would be paid by the accused.
3.8. The complainant had alleged that the accused did not perform its part of the agreement and delayed the payment of its outstanding dues falsely blaming the complainant for lack of sales of its products resulting in termination of the agency. Situated thus, the complainant sent a legal notice through its advocate on 04.07.2015 asking the accused to pay an amount of Rs. 6,81,796.10 towards value of the goods returned, refund of security deposit amount and interest @ 18% thereon. In reply, the accused sent a reply through its advocate on 28.07.2015 making false allegations of faults on the part of the complainant, thereby, refusing to make payment of the demanded amount on the ground that it would release only the security deposit on receipt of pending C forms from the complainant.
3.9. It was in the aforesaid backdrop of events, the complainant instituted a civil suit being Money Suit no. 2/2016, before the Court of learned Civil Judge No. 2, Kamrup (Metro), Guwahati ('the civil court', for short) against the accused no. 1 firm for realization of its dues. On receipt of notice for appearance from the learned civil court, the accused appeared before it and after taking a number of adjournments, filed an application challenging the jurisdiction of the learned civil court to try the suit on the basis of the agreement dated 16.10.2013. It is stated in the complaint that the learned civil court after hearing the parties, had held that it did not have jurisdiction to try the suit i.e. Money Suit no. 2/2016.
3.10. Alleging commission of offences punishable under Sections 405/406/409/418/420/34, IPC, the complainant has instituted the complaint before the learned Chief Judicial Magistrate, Kamrup (Metro), Guwahati.
4. The complaint has been registered and numbered as Complaint Case no. C.R. Page No. 6/19 5870C/2018 and it was transferred to the Court of learned Sub-Divisional Judicial Magistrate No. 1, Kamrup (Metro), Guwahati ('the trial court') for disposal. On receipt of the complaint, the learned trial court took cognizance on the complaint and recorded initial deposition of the complainant by examining him under Section 200, CrPC. After recording statements of other witnesses of the complainant under Section 202, CrPC the learned trial court finding a prima facie case against the accused for committing offences punishable under Sections 409/420/34, IPC, issued process against them.
5. Heard Mr. G.N. Sahewalla, learned Senior Counsel for the petitioners and Mr. J.C. Gaur, learned counsel for the respondent-complainant.
6. Learned Senior Counsel for the petitioners has submitted the present complaint has been instituted as an afterthought by the respondent-complainant after it faltered in its attempt to institute a civil suit in Guwahati due to patent lack of jurisdiction of the Court in Guwahati to try such a suit. In this connection, he has referred to the events that occurred prior to the institution of the complaint in the year 2018 by referring to the documents annexed to the present criminal petition. While strongly refuting the allegations of criminal intent on the part of the petitioners, as alleged by the complainant, he has, in substance, admitted the events pertaining to execution of the agreement dated 16.10.2013. He has further submitted that as the complainant himself referred to the said agreement dated 16.10.2013 it is permissible to look into the terms and conditions incorporated in the agreement, which has been annexed to the petition as Annexure-I. Upon receipt of notice from the learned civil court, the petitioner no. 1 as the sole defendant in Money Suit no. 2/2016, had raised a preliminary issue about maintainability of the suit on the ground that any dispute arising out of the agreement dated 16.10.2013 would be subject to the jurisdiction of the Court in Delhi, as laid out in the agreement. After rounds of litigation on that aspect, the learned civil court by an order dated 25.10.2017 passed in Misc.(J) Case no. 20/2017, preferred by the petitioner no. 1, was pleased to return the plaint to the plaintiff in Money Suit no. 2/2016 i.e. the respondent-complainant to be filed in the appropriate court in Delhi. When the said order dated 25.10.2017 was assailed by the complainant before this Court in CRP no. 18/2018, the same was dismissed by an order dated 17.08.2018. It was Page No. 7/19 after such dismissal on 17.08.2018 the respondent-complainant has instituted the present complaint on 05.10.2018. It is further submitted by him that a bare perusal of the complaint would make it clear that the dispute between the parties is predominantly civil in nature arising out of an agreement and the respondent-complainant has maliciously sought to give a criminal colour to the same. He, thus, submits the criminal proceeding arising out of the complaint and the order taking cognizance are liable to be quashed as the continuance of the same would amount to abuse of the process of the court.
7. Learned counsel for the respondent-complainant has submitted that the intention of the accused persons from the very beginning was to cheat the complainant as in their first visit on 22.05.2013 itself they had induced the complainant to part with the security deposit of Rs. 1,00,000/- on the assurance to appoint him as C&F agent for the entire North Eastern region and then delayed the execution of the agreement till 16.10.2013. But in the meantime, the accused asked the complainant to place orders with them which he had placed by making payment of Rs. 8,00,000/- on 08.06.2013. It was only in October, 2013 the accused had forwarded the draft agreement to him whereas the complainant had parted with an amount of Rs. 9,00,000/- by that time. The accused did not appoint sales representatives as promised to the complainant which resulted in blockage of an amount of Rs. 9,00,000/- from him. Thus, the complainant had little choice when the draft agreement was forwarded to him in October, 2013 but to sign it. Thereafter also, the complainant had to part with an amount of Rs. 1,60,000/- on 07.11.2013 towards placing order for supply of goods with the accused without appointment of sales representatives to boost the sales of the products. It was after such extraction of huge amount from the complainant, the accused had suddenly terminated the agency on 24.01.2014 by falsely putting the whole blame on him. If he had not been induced by such false promises of C&F agency for the entire North Eastern Region with the promise of sales representatives to procure orders for the products and with good margin of profit verbally during their visit in May, 2013 the complainant would not have parted with his money as the same had caused wrongful loss to him. Learned counsel for the respondent has submitted that it is a case of cheating and criminal breach of trust on the part of the accused. The fact that the plaint in the suit had been returned cannot be a ground, he submits, to quash the criminal proceedings when facts averred in the complaint disclose ingredients of Page No. 8/19 the offences of cheating, criminal breach of trust, etc.
8. I have given due consideration to the submissions made by the learned counsel for the parties and also perused the materials available on record. I have also considered the decisions relied on by the learned counsel for the parties in support of their submissions which would be referred to at appropriate places in the discussion hereinbelow.
9. In the complaint, the respondent-complainant has referred to the agreement dated 16.10.2013 executed between the parties and also about the institution of Money Suit no. 2/2016. The respondent-complainant has also mentioned that in the proceeding arising out of Money Suit no. 2/2016, it was ultimately held that the civil court at Guwahati did not have the jurisdiction to try the suit. In such view of the matter, the relevant documents in relation to the aforesaid events can be looked into and taken into consideration. In Sharon Michael and others vs. State of Tamil Nadu and another, reported in (2009) 3 SCC 375, it has been observed by the Hon'ble Supreme Court of India that as the First Information Report (FIR) itself has referred to some documents those documents can, therefore, be taken into consideration for the purpose of ascertaining as to whether the allegations made in the complaint petition read as a whole, even if taken to be correct in its entirety, disclose commission of any cognizable offence or not.
10. The agreement dated 16.10.2013 was executed between the accused no. 1 firm (as first party) and the respondent-complainant firm as the C&F agent (as second party) wherein it was mentioned that the first party was a manufacture of all kinds of grinded spices and was willing to appoint the second party as a C&F agent. The relevant parts of the said agreement are extracted herein below for ready reference :
"1. That the First Party will appoint to the Second Party as a C&F Agent for Lower Assam & some parts of N.E. Region (except Tezpur, Tinsukia, Dibrugarh, Sibsagar, Dumdama, Dhola, Dhulia, Jan Narkatia, Namru, Namsai, Roing, Tezu, Margeta, Digboi, Meghalaya, Manipur, Nagaland, & Arunachal Pradesh (except Naharlagun & Ita Nagar)).
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8. This agreement shall be remain valid for the period of one year from the date of its commencement and it may further be extended with or without modifications with mutual consent of the parties.
9. This agreement may be revoked by either of the party giving one month notice to other party thereof.
10. The C&F Agent will/has keep the deposited Rs. 1,00,000/- (Rupees One Lac only) as Security Deposit against 'F' Form.
11. All disputes are subject to Delhi Jurisdiction.
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13. Goods once sold will not be taken back. Only damaged goods may be returned to the company. In case goods have been returned on the ground of 'Date of expiry' freight and packing charges will be borne by the Sole Distributor. The value of returned goods would be paid through credit note adjustable under the invoices. The first party will borne returned Goods freight Guwahati to Delhi.
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16. The First Party shall pay 3% C&F commission 2% for Allied Expenses and 1% Stationery Charges to the second in the end of month on presentation on C&F supplies copy of Bills to their respective areas.
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20. The Company shall appoint necessary sales team for marketing their product in the territory of the second party."
11. It is seen that when differences and disputes started arising between the parties after termination of the agency in an allegedly unilateral manner by accused, the respondent- complainant served a pleader's notice dated 04.07.2015 upon the accused and in response, the accused also sent a reply through its advocate on 28.07.2015. The respondent- complainant had, thereafter, instituted a suit i.e. Money Suit no. 2/2016 in the year 2016 for realization of Rs. 7,45,434.50 and other reliefs against the accused no. 1 firm as the sole defendant. The facts averred in the plaint in Money Suit no. 2/2016, made available in the records of the instant case, are similar to what have been narrated in the Complaint Case no.
C.R. 5870C/2018, as delineated in paragraph 3 hereinabove.
Page No. 10/1912. The present petitioner no. 1 upon receipt of notice as defendant in Money Suit no. 2/2016, appeared before learned civil court. An application under Section 21 r/w Section 151, Code of Civil Procedure, 1908 (CPC) was filed by them on 05.01.2017 which was registered as Misc. (J) Case no. 20/2017. Based on Clause no. 11 of the agreement dated 16.10.2013, a plea was raised that all disputes arising out of the agreement shall be subject to the jurisdiction of the court at Delhi and as the court at Guwahati did not have jurisdiction, the suit be dismissed. Along with the said application, the defendant i.e. the petitioner no. 1 also made a prayer to keep the filing of the written statement in abeyance till a decision was arrived at on the issue of jurisdiction. The learned civil court rejected the prayer made on behalf of the defendant by an order dated 04.02.2017, thereby, closing the opportunity to file a written statement. Aggrieved by the orders dated 05.01.2017 and 04.02.2017 passed by the learned civil court, the defendant preferred an application under Article 227 of the Constitution of India r/w Section 151, CPC before this Court and the same was registered as CRP no. 88/2017. By order dated 26.07.2018 passed in CRP no. 88/2017, the order dated 04.02.2017 passed by the learned civil court was set aside. It was further directed to the learned civil court to dispose of Misc. (J) Case no. 20/2017 with regard to the issue of territorial jurisdiction first and thereafter, to proceed accordingly. The learned civil court after hearing the parties, had vide its order dated 25.10.2017 passed in Misc. (J) Case no. 20/2017, returned the plaint to the plaintiff i.e. the respondent-complainant herein with a liberty to file the same before the appropriate court at Delhi. The plaintiff therein i.e. the respondent-complainant herein had challenged the said order dated 25.10.2017 before this Court in CRP no. 18/2018. By judgment and order dated 17.08.2018 passed in CRP no. 18/2018, it was held that the court at Delhi would have jurisdiction to entertain the dispute between the parties and consequently, the revision petition was dismissed, leaving the plaintiff to pursue its remedy in Delhi.
13. It is noted that the complaint petition in Complaint Case no. C.R. 5870 C/2018 was filed on 05.10.2018, which was after dismissal of CRP 18/2018 on 17.08.2018.
14. Learned trial court had taken cognizance on the complaint for commission of offences punishable under Sections 409/420/34, IPC. Section 405, IPC defines criminal breach of trust Page No. 11/19 and Section 406, IPC has provided for punishment for committing criminal breach of trust. Section 415, IPC defines cheating and Section 417, IPC provides for punishment for cheating. Section 420, IPC is in respect of cheating and dishonestly inducing delivery of property and the punishment thereof.
15. The ingredients in order to constitute criminal breach of trust, as defined under Section 405, IPC, 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 wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any legal contract made, touching the discharge of such trust. On the other hand, the ingredients of offence of cheating are : (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he was not so deceived; and (iii) in cases covered by (ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property [ S.W. Palanitkar and others vs. State of Bihar and another, (2002) 1 SCC 241].
16. The case of the respondent-complainant is, as it appears from the averments and allegations made in the complaint, that the accused with an intention to cheat him had dishonestly deceived him to enter into an agreement for C&F agency with the accused. To deceive is to induce a man to believe that a thing is true which is false and which the 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 the offence. On a reading of the complaint, it is clearly evident that the respondent-complainant in order to bring home the allegation, has alleged that the accused after unilaterally terminating the agreement on 23.01.2014, had retained the security deposit and also did not return the value of the unsold goods which the respondent-complainant had already returned to the accused. The further accusation is to the effect that the accused did not appoint sales representatives to procure Page No. 12/19 orders from the areas in respect of which the respondent-complainant was made a C&F agent for the products of the accused.
17. In the complaint, the complainant has averred that the terms and conditions of the agreement were finalized by the parties after due deliberation. Thus, it is not the case of the complainant that the terms and conditions were not those what were agreed upon, meaning thereby, the complainant was aware of the terms and conditions of the business relationship from the very inception. It is not the case of the complainant that on deposit of Rs. 8,00,000/- on 08.06.2013 by him the accused did not send him any goods. Rather, the complainant had admitted that the accused supplied him goods worth Rs. 7,96,836/- on 13.06.2013. Similarly, the accused had supplied the complainant with goods worth Rs. 1,88,134/- on 09.11.2013 after receipt of a sum of Rs. 1,60,000/- from the complainant. It is also not the case of the complainant that accused no. 1 firm is not a manufacturer of grinded spices, as represented in the agreement dated 16.10.2013.
18. It was a condition of the agreement dated 16.10.2013 that the accused no. 1 firm shall appoint necessary sales team for marketing their products in the territory of the complainant. It was also a condition in the said agreement that only damaged goods could be returned to the accused and in case goods had been returned on the ground of expiry of date, freight and packing charges would be borne by the sole distributor. The sole distributor was not defined in the agreement. It was, however, provided that the accused no. 1 firm would borne the freight charges of returned goods from Guwahati to Delhi. The agreement had also mentioned about security deposit of Rs. 1,00,000/-. Option was available to either of the two parties to revoke the agreement by giving one month's notice to the other party. Thus, it is discernible that in the event of unilateral termination of the agreement by one party without notice may give a cause of action to the other party to seek civil remedy and to seek damages.
19. It is true that a given set of facts may make out : (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, Page No. 13/19 may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. To determine such a question, it is of the essence to bear in mind that the distinction between breach of contract and the offence of cheating is a fine one. It is settled that it depends upon the intention of the accused at the time of alleged inducement which may be judged by his subsequent conduct but subsequent conduct is not the sole test. Similarly, it is to be borne in mind that to attract the offence of criminal breach of trust there has to be a relationship whereby the owner of property makes the property over to another person to be retained by him until a certain contingency arises or to be disposed of by him on the happening of a certain event.
20. It has been observed in Hridaya Ranjan Prasad Verma vs. State of Bihar, (2000) 4 SCC 168 that 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 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.
21. In Vesa Holdings Private Limited and another vs. State of Kerala and others , reported in (2015) 8 SCC 293, the Hon'ble Supreme Court has observed as under :
"12...................the settled proposition of law is that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In other words for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making Page No. 14/19 promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Penal Code, 1860 can be said to have been made out."
22. It has been observed by the Hon'ble Supreme Court of India in Medchl Chemicals & Pharma (P) Ltd. vs. Biological E. Ltd. and others, (2000) 3 SCC 269 , heavily relied upon on behalf of the respondent-complainant, as under :
"2. Exercise of jurisdiction under the inherent power as envisaged in Section 482 of the Code to have the complaint or the charge-sheet quashed is an exception rather than a rule and the case for quashing at the initial stage must have to be treated as rarest of rare so as not to scuttle the prosecution. With the lodgement of first information report the ball is set to roll and thenceforth the law takes its own course and the investigation ensues in accordance with the provisions of law. The jurisdiction as such is rather limited and restricted and its undue expansion is neither practicable nor warranted. In the event, however, the court on a perusal of the complaint comes to a conclusion that the allegations levelled in the complaint or charge-sheet on the face of it does not constitute or disclose any offence as alleged, there ought not to be any hesitation to rise up to the expectation of the people and deal with the situation as is required under the law. Frustrated litigants ought not to be indulged to give vent to their vindictiveness through a legal process and such an investigation ought not to be allowed to be continued since the same is opposed to the concept of justice, which is paramount.
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11. While Section 415 is an offence of cheating, Section 418 deals with cheating with knowledge that wrongful loss may ensue to a person whose interest the offender is bound to protect and Section 420 is cheating and dishonestly inducing delivery of property. In order to attract the provisions of Sections 418 and 420 the guilty intent, at the time of making the promise is a requirement and an essential ingredient thereto and subsequent failure to fulfil the promise by itself would not attract the provisions of Section 418 or Section 420. Mens rea is one of the essential ingredients of the offence of cheating under Section 420. As a matter of fact Illustration (g) to Section 415 makes the position clear Page No. 15/19 enough to indicate that mere failure to deliver in breach of an agreement would not amount to cheating but is liable only to a civil action for breach of contract...........................
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14. Needless to record however and it being a settled principle of law that to exercise powers under Section 482 of the Code, the complaint in its entirely shall have to be examined on the basis of the allegation made in the complaint and the High Court at that stage has no authority or jurisdiction to go into the matter or examine its correctness. Whatever appears on the face of the complaint shall be taken into consideration without any critical examination of the same. But the offence ought to appear ex facie on the complaint. The observations in Nagawwa v. Veeranna Shivalingappa Konjalgi lend support to the above statement of law :
"(1) where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused; (2) where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused; (3) where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and (4) where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of a complaint by legally competent authority and the like.
The cases mentioned by us are purely illustrative and provide sufficient guidelines to indicate contingencies where the High Court can quash proceedings."
It has been noted that in the matter of exercise of the High Court's inherent power, the only requirement is to see whether continuance of the proceeding would be a total abuse of the process of court.
Page No. 16/1923. At this stage, it is also apt to refer to the decision in Rajib Ranjan and others vs. R. Vijaykumar, reported in (2015) 1 SCC 513, relied on behalf of the petitioners, wherein the following observations are made :
"24. Having regard to the circumstances narrated and explained above, we are also of the view that attempt is made by the respondent to convert a case with civil nature into criminal prosecution. In a case like this, High Court would have been justified in quashing the proceedings in exercise of its inherent powers under Section 482 of the Code. It would be of benefit to refer to the judgment in Indian Oil Corpn. v. NEPC India Ltd., wherein the Court adversely commented upon this very tendency of filing criminal complaints even in cases relating to commercial transaction for which civil remedy is available or has been availed. The Court held that the following observations of the Court in this behalf are taken note of:
"13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. Such a tendency is seen in several family disputes also, leading to irretrievable breakdown of marriages/families. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged. In G. Sagar Suri v. State of U.P., this Court observed :
'8.......... It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.'
14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such Page No. 17/19 misconceived criminal proceedings, in accordance with law. One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power under Section 250 CrPC more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may."
24. The decision in Chirag M. Pathak and others vs. Dollyben Kantilal Patel and others, (2018) 1 SCC 330, referred to on behalf of the respondent, is found to be of no assistance to the cause of the respondent. In the said case, the accused persons felt aggrieved by registration of 6 (six) nos. of First Information Reports (FIRs) instituted against them in different police stations implicating them for commission of several offences, filed criminal applications under Section 482, CrPC before the High Court seeking quashing of subsequent 5 (five) FIRs. The High Court allowed the criminal applications and while quashing 5 (five) FIRs, observed that the investigations carried out in respect of those FIRs were to be treated as part of the investigation carried out in respect of the FIR which was first in point of time. The short question which arose for consideration before the Hon'ble Supreme Court was whether it was justified in quashing the 5 (five) FIRs. The Hon'ble Supreme Court has found that all the 5 (five) cooperative societies against whom those 5 (five) FIRs were registered were different, their members were different, their areas of operation were different, the concerned lands were sold/transferred to different parties on different dates for different sums, the accounting books were different, the persons involved in falsification of the accounts of every society were different, etc. The accused who approached the High Court as petitioners, were members of one family and were implicated in those FIRs. The Hon'ble Supreme Court has also observed that the High Court, in exercise of its powers under Section 482 of the Code, cannot undertake a detailed examination of the facts contained in the FIRs by acting as an appellate court and draw its own conclusion, more so, when investigation in respect of those others societies were not till then were complete. This Court is of the considered view that the fact situation involved in the case in hand is not confronted with such a situation. The decision in Chirag M. Pathak (supra) is, thus, not found applicable in the facts and circumstances of the case.
Page No. 18/1925. In view of the above fact situation obtaining in the case in hand, as has been discussed hereinabove, and in the light of the principles laid down in the decisions referred above, the breach of contract on the part of the accused, alleged by the respondent- complainant, does not appear to have given rise to an offence of cheating. On a reading of the complaint along with the documents referred by the respondent-complainant in the said complaint, this Court is of the unhesitant view that the present case does not fall within those cases of breach of contract which amount to cheating having presence of element of deception at the very inception. There is nothing in the complaint to indicate that the respondent-complainant had entrusted any property to the accused, which they had dishonestly converted to their own use so as to satisfy the ingredients of Section 405, IPC punishable under Section 406, IPC. Thus, even after considering the averments and allegations made in the complaint and the case projected on behalf of the respondent- complainant, it is not possible to arrive at a view that the ingredients of Section 406, IPC and Section 420, IPC are found to be prima-facie satisfied. The disputes and differences between the parties at the most can be termed to be civil in character arising out of the agreement dated 16.10.2013. Merely because the accused did not fulfill some of the terms and conditions of the said agreement before terminating the agreement allegedly unilaterally it cannot be said to be a case of cheating and/or criminal breach of trust to attract the offences under Section 420, IPC and/or Section 406, IPC as alleged. Apart from the above aspects, it is noticeable that the respondent had instituted litigation before the learned civil court seeking realization of his alleged outstanding dues from the accused in the year 2016 and thereafter, the parties were contesting the said litigation till passing of the order dated 17.08.2018 in CRP no. 18/2018. Till that point of time, the respondent-complainant was under
the realization that the disputes and differences alleged were civil in nature but it was only after dismissal of CRP no. 18/2018, preferred by him, on 17.08.2018 realization dawned on him suddenly that the disputes and differences might have a criminal facet and the respondent-complainant decided to put on a criminal outfit over the whole episode. In view of the findings already arrived at, this Court is also of the clear view that continuance of the criminal proceedings against the accused will be an abuse of process of the Court. Interest of justice will be best subserved if such criminal prosecution is stopped at this stage.Page No. 19/19
26. Accordingly, Complaint Case no. C.R. 5870C/2018 and the consequential criminal proceeding, presently pending in the Court of learned Sub-Divisional Judicial Magistrate, Kamrup (Metro), Guwahati, Assam and the order dated 28.11.2018 are quashed and set aside. In the result, this criminal petition stands allowed. There shall be no order as to cost.
JUDGE Comparing Assistant