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2019 DIGILAW 795 (JHR)

Abhay Baheti v. State Of Jharkhand

2019-04-02

RAJESH SHANKAR

body2019
JUDGMENT Rajesh Shankar, J. - The present criminal miscellaneous petition has been filed for quashing the entire criminal proceeding arising out of C/1 Case No.860 of 2009 including the order dated 29.04.2009 passed by the Judicial Magistrate, 1st Class, Jamshedpur, whereby the cognizance of the offence under Section 420 of the Indian Penal Code has been taken against the petitioner. 2. One complaint case being C/1 Case No. 860 of 2009 has been filed by the opposite party No.2 stating that the complainant/opposite party No.2 is engaged in the business of manufacturing, sale and supply of various P.V.C pipes, plastic containers etc. It supplied various products to the petitioner for an amount of Rs.37,77,794/- and the petitioner paid a sum of Rs.34,41,156/- keeping Rs.3,36,638/- due. The petitioner assured that the said due amount shall be paid later on, however, he did not keep the said promise. The complainant issued legal notice to the petitioner which was replied on 14.08.2008 assuring payment of the dues on furnishing the statement of accounts. Thereafter, the opposite party No.2 through its lawyer, sent the statement of accounts to the accused/petitioner, but he failed to make payment of the said due amount. 3. The learned counsel for the petitioner submits that the petitioner being the Director of the Company-M/s. Arun Distributors Pvt. Ltd. cannot be made solely responsible for violation of the terms of the contract in a criminal proceeding as he is not responsible for the day to day affairs of the Company. It is further submitted that in view of the fact that the dispute is of civil nature, any proceeding arising out of the present complaint case is an abuse of the process of law. The petitioner had no intention to cheat the opposite party No.2 at any point of time and, therefore, the petitioner cannot be allowed to be prosecuted in the present criminal case. The learned court below while taking cognizance of the offence under Section 420 of the Indian Penal Code did not apply its judicial mind, rather cognizance has been taken against the petitioner in a mechanical manner. It is further submitted that the statement of accounts given by the opposite party No.2 is not correct and it requires further correction. 4. The learned court below while taking cognizance of the offence under Section 420 of the Indian Penal Code did not apply its judicial mind, rather cognizance has been taken against the petitioner in a mechanical manner. It is further submitted that the statement of accounts given by the opposite party No.2 is not correct and it requires further correction. 4. The learned counsel for the opposite party No.2 submits that the complaint specifically discloses the alleged offence which has not been denied by the petitioner and as such the present criminal proceeding need not be quashed. It is a settled position of law that the mere fact that a 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 allegation in the complaint discloses a criminal offence or not. 5. Heard the learned counsel for the parties and perused the materials available on record. The thrust of the argument of the learned counsel for the petitioner is that the present dispute is purely civil in nature for which no criminal culpability is attracted. 6. In support of the said contention, the learned counsel for the petitioner puts reliance on the judgment of the Hon''ble Supreme Court rendered in the case of Vir Prakash Sharma v. Anil Kumar Agarwal & Anr., (2007) 7 SCC 373 , in which it has been held as under:- "8. The dispute between the parties herein is essentially a civil dispute. Non-payment or underpayment of the price of the goods by itself does not amount to commission of an offence of cheating or criminal breach of trust. No offence, having regard to the definition of criminal breach of trust contained in Section 405 of the Penal Code can be said to have been made out in the instant case. Section 405 of the Penal Code reads, thus: "405. No offence, having regard to the definition of criminal breach of trust contained in Section 405 of the Penal Code can be said to have been made out in the instant case. Section 405 of the Penal Code reads, thus: "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"." Neither any allegation has been made to show existence of the ingredients of the aforementioned provision nor any statement in that behalf has been made. 10. We are, therefore, left only with the question as to whether in a situation of this nature any offence of cheating can be said to have been made out. 11. Section 415 of the Penal Code defines cheating to mean: "415. Cheating.- Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat"." 12. In Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786 : this Court held: (SCC pp. 176-77, paras 14-15) : (at p. 2345-46, paras 15,16 of AIR) "14. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest. 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." (See also Indian Oil Corpn. v. NEPC India Ltd, (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188) 13. The ingredients of Section 420 of the Penal Code are as follows: (i) Deception of any persons; (ii) Fraudulently or dishonestly inducing any person to deliver any property; or (iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit. No act of inducement on the part of the appellant has been alleged by the respondent. No allegation has been made that he had an intention to cheat the respondent from the very inception. 14. What has been alleged in the complaint petition as also the statement of the complainant and his witnesses relate to his subsequent conduct. No act of inducement on the part of the appellant has been alleged by the respondent. No allegation has been made that he had an intention to cheat the respondent from the very inception. 14. What has been alleged in the complaint petition as also the statement of the complainant and his witnesses relate to his subsequent conduct. The date when such statements were allegedly made by the appellant had not been disclosed by the witnesses of the complainant. It is really absurd to opine that any such statement would be made by the appellant before all of them at the same time and that too in his own district. They, thus, appear to be wholly unnatural." In the case of Thermax Ltd. & Ors. v. K.M. Johny & Ors., (2011) 13 SCC 412 , the Hon''ble Supreme Court has held as under:- "34. The principles enunciated from the abovequoted decisions clearly show that for proceeding under Section 156(3) of the Code, the complaint must disclose relevant material ingredients of Sections 405, 406, 420 read with Section 34, IPC. If there is a flavour of civil nature, the same cannot be agitated in the form of criminal proceeding. If there is huge delay and in order to avoid the period of limitation, it cannot be resorted to as a criminal proceeding." In the case of S.N. Palanitkar & Ors. v. State of Bihar & Ors., (2002) 1 SCC 241 the Hon''ble Supreme Court has held as under:- "11. One of us (D.P. Mohapatra, J.), speaking for the Bench, in Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786 on facts of that case, has expressed thus: (SCC p. 177, para 15) : (at.p. 2345-46, para 16 of AIR) "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. 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." (Emphasis supplied) 7. In the present case, admittedly there was a business transaction between the petitioner and the opposite party No.2 and during the course of business, the opposite party No.2 supplied products to the petitioner amounting to Rs.37,77,794/- out of which an amount of Rs.34,41,156/- was paid to it, however, Rs.3,36,638/- was kept due even after repeated demands of the opposite party No.2. Though the petitioner did not deny the liability, yet stated that the statement of account submitted by the opposite party No.2 was neither signed by any authorized person of the opposite party No.2 nor the same appeared to be correct. Under the aforesaid circumstance, the present dispute appears to be purely civil in nature. 8. In order to attract criminal culpability under Section 420 of the Indian Penal Code, the complainant has failed to show any dishonest intention of the petitioner since the very inception of the transaction. In the case of S.N. Palanitkar (supra) it has been held 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 i.e. the time when the offence is said to have been committed. It has been further held that to hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently, such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed. It has been further held that to hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently, such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed. It is not the case of the opposite party No.2 that the entire payment has been kept pending by the petitioner, rather it appears that only part payment is due against which statement of account has been disputed by the petitioner. It is settled position of law that criminal proceedings are not the shortcut of other remedies available in law. If there is a flavour of civil nature, the same cannot be agitated in the form of criminal proceeding. 9. This petition is, accordingly, allowed. The entire criminal proceeding arising out of C/1 Case No. 860 of 2009 including the impugned order taking cognizance dated 29.04.2009 passed by the Judicial Magistrate, 1st Class, Jamshedpur is hereby quashed. 10. The complainant/opposite party No.2 is, however, at liberty to take appropriate recourse as provided under law to recover the alleged dues, if so advised.