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Vibgyor Texotech Ltd. & Anr vs State Of Bihar & Anr on 26 July, 2017

IN THE HIGH COURT OF JUDICATURE AT PATNA

Criminal Miscellaneous No.50149 of 2013
Arising Out of COMPLAINT CASE NO. -1005 Year- 2012 Thana -PATNA District- PATNA

1. Vibgyor Texotech Ltd. through its Proprietor Unnikrishnan Nambiar @ U. K.
Nambiar, having its Office At 308, Navyung Industrial Estate, 167 T. J. Road,
P.S- Sewree, Mumbai.

2. Unnikrishnan Nambiar @ U. K. Nambiar S/O Sri Cherad Govindan Nair
resident of 308, Navyung Industrial Estate, 167 T. J. Road, P.S- Sewree,
District- Mumbai.

…. …. Petitioners
Versus

1. The State of Bihar

2. Dharmdeo Singh, proprietor of M/S Prashant Packing Industries, through Manoj
Kumar Sharma S/O Sri Kameshwar Singh, resident of Ghagha Ghat Lane (Near
Malaria Office), P.S- Sultanganj, District- Patna

…. …. Opposite Parties.

Appearance :

For the Petitioners : Mr. Manish Kumar No. 13, Advocate
Mr. Rohit Kumar, Advocate
For the State : Mr. Jharkhandi Upadhyay, APP
For Opposite Party No. 2 : Mr. Pushkar Narayan Shahi, Sr. Advocate
Mr. Aporv Harsh, Advocate

CORAM: HONOURABLE MR. JUSTICE ASHWANI KUMAR SINGH
ORAL JUDGMENT
Date: 26-07-2017

Heard Mr. Manish Kumar, learned Advocate for the

petitioners, Mr. Jharkhandi Upadhyay, learned Additional Public

Prosecutor for the State and Mr. Pushkar Narayan Shahi, learned

Senior Advocate for complainant/opposite party no. 2.

2. The petitioners have invoked the inherent power of

this Court under Section 482 of the Code of Criminal Procedure,

1973 (for short „Cr.P.C.‟) for quashing of the order dated
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 2

10.05.2013 passed in Complaint Case No. 1005 of 2012 by the

learned Judicial Magistrate, Patna City, Patna whereby finding a

prima facie case to be made out under Sections 406 and 420 of the

Indian Penal Code (for short „IPC‟) against the petitioners, they

have been summoned to face trial.

3. The complainant (opposite party no. 2) filed

Complaint Case No. 1005 of 2012 in the court of Additional Chief

Judicial Magistrate, Patna City alleging inter alia that he is the

proprietor of M/S Prashant Packaging Industries, which has its head

office at Patna. The petitioner no. 2 being familiar from before

approached him at his Head Office and after full satisfaction, he

had agreed to purchase the packaging materials from him. He

requested the complainant to supply goods on credit and assured

him that he will make payment of the goods supplied to him within

the financial year. The complainant, thereafter, supplied the goods

to the petitioner no. 1 on credit under different vouchers. Later on,

the petitioner no. 2 started irregular payment of the outstanding

dues. It is further alleged that in the financial year 2009-10, a total

sum of Rs.11,89,127.33/- was due against the petitioner no. 2 for

which the complainant requested him to make payment several

times and when he did not make payment, the complaint sent

various legal notices to him. It is alleged that the petitioner no. 2
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 3

paid only Rs.3,93,023.00/- in the financial year 2010-11 and an

amount of Rs.7,96,104.00/- is still lying due with the petitioners.

4. On the basis of the aforesaid complaint petition filed

by the complainant, the aforesaid complaint case was registered in

the court of learned Additional Chief Judicial Magistrate, Patna

City, Patna, who in exercise of power conferred under Section 192

of the Cr.P.C. made over the case to the learned Judicial

Magistrate, Patna City for inquiry and disposal.

5. After institution of the complaint, the complainant was

examined on solemn affirmation and in course of enquiry

conducted under Section 202 of the Cr.P.C., three witnesses were

examined in support of the complaint.

6. After conducting inquiry, the learned Judicial

Magistrate, vide impugned order dated 10.05.2013, summoned the

petitioners in exercise of powers conferred under Section 204 of the

Cr.P.C to face trial for the offences punishable under Sections 406

and 420 of the IPC.

7. Mr. Manish Kumar, learned Advocate for the

petitioners has submitted that the petitioners had never entered into

any business dealing with any Bihar based firm having its office at

Patna. He has submitted that a party doing business under the name

and style of Prashant Packaging having its office at Mumbai was
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 4

doing packaging work for the present petitioners. The said

company had its address at Mumbai and not at Patna. He has

further submitted that the petitioners have paid the entire dues of

the said Prashant Packaging and not a single paisa is due and

payable to the said Mumbai based Prashant Packaging. As far as

the payment to Patna based firm is concerned, it is stated that when

there is no dealing with Patna based firm, there is no question of

making any payment to them. He has contended that the entire

dispute with respect to settlement of accounts arising during

transaction of business with Prashant Packaging is purely a dispute

of civil nature. In the entire complaint, there is nothing to suggest

that the complainant has been induced or dishonestly deceived by

the petitioners.

8. In the counter-affidavit filed on behalf of the

complainant in the present case, it is stated that the petitioners had

every knowledge that the Head Office of the complainant firm is in

Patna and that the complainant had been filing his Income Tax

returns since long in Patna circle. It is further stated that the

petitioners had approached his Patna office and an oral agreement

was made between the petitioner and the complainant with a

condition that just after receiving the goods, the petitioners shall

make payment. The petitioner and the complainant live in different
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 5

floors in the same apartment at Goregaon (East), Mumbai and they

were good friends before entering into the agreement. It is also

stated that after filing of the complaint petition, the petitioners had

made payment of a total sum of Rs.5,00,000/- on different dates.

The detail of the payment is given in the counter-affidavit, which is

as under :-

” On 15.09.2014 Rs.1,00,000/- through Cheque
No. 000241
On 05.11.2014 Rs.1,00,000/- through Cheque
No. 000275
On 26.12.2014 Rs.1,00,000/- through Cheque
No. 000224
On 10.02.2015 Rs.1,00,000/- through Cheque
No. 000301
On 31.03.2015 Rs.1,00,000/- through Cheque
No.000316″

9. Mr. Pushkar Narayan Shahi, learned Senior Advocate

appearing for the complainant has submitted that after the aforesaid

payments made by the petitioners, an amount of Rs.2,96,104.33/- is

still outstanding in the name of the petitioners. He has contended

that it is true that the complainant has his Branch office at Mumbai

and certain payments were made by the petitioners to the Branch

office at Mumbai, but it is not true that the complainant has no base

at Patna. He has contended that the manner in which the payments
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 6

were made would clearly indicate that the petitioners had an

intention to cheat right from the beginning and, hence, the offences

punishable under Sections 406 and 420 of the IPC are clearly

attracted in the present case.

10. While adopting the submissions made by the learned

Senior Advocate appearing on behalf of the complainant, Mr.

Jharkhandi Upadhyay, learned Additional Public Prosecutor for the

State has submitted that the allegations made in the complaint do

attract the ingredients of the offence alleged. He has submitted that

the complainant has supported the allegations made in the

complaint and apart from the complainant, three other witnesses

have also supported the allegations made in the complaint and in

that view of the matter, no illegality can be found with the

impugned order passed by the learned Magistrate.

11. I have heard learned counsel for the parties and

perused the record.

12. As noted above, the offences alleged to have been

committed in the present case are of „cheating‟ punishable under

Section 420 of the IPC and of „criminal breach of trust‟ punishable

under Section 406 of the IPC.

13. In so far as, the offence punishable under Section 420

of the IPC is concerned, it reads as under :-
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 7

“420. Cheating and dishonestly inducing
delivery of property.-

Whoever cheats and thereby dishonestly induces
the person deceived to deliver any property to
any person, or to make, alter or destroy the
whole or any part of a valuable security, or
anything which is signed or sealed, and which is
capable of being converted into a valuable
security, shall be punished with imprisonment of
either description for a term which may extend to
seven years, and shall also be liable to fine.”

14. From a reading of Section 420 of the IPC, it would be

evident that it requires not only „cheating‟ but also dishonest

inducement to delivery of property.

15. The offence of cheating has been defined under

Section 415 of the IPC, which is reproduced as under :

“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”.”

Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 8

16. It is now a well established principle of law that every

breach of contract or civil dispute under a contract or an agreement

does not amount to the offence of „cheating‟. A breach of contract

would amount to „cheating‟ only in those cases where there was

any deception played at the very inception. The subsequent events

in this regard are not imparted.

17. In G. V. Rao vs. L. H. V. Prasad Ors. [(2000) 3

SCC 693], the Supreme Court held : “This part speaks of

intentional deception which must be intended not only to induce the

person deceived to do or omit to do something but also to cause

damage or harm to that person in body, mind, reputation or

property. The intentional deception presupposes the existence of a

dominant motive of the person making the inducement. Such

inducement should have led the person deceived or induced to do

or omit to do anything which he would not have done or omitted to

do if he were not deceived. The further requirement is that such act

or omission should have caused damage or harm to body, mind,

reputation or property”.

18. In Hridaya Ranjan Pd. Verma Ors. vs. State Of

Bihar Anr. [(2000) 4 SCC 168], the Supreme Court held : “In

determining the question it has to be kept in mind that the

distinction between mere breach of contract and the offence of
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 9

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”.

19. In Uma Shankar Gopalika vs. State of Bihar Anr.

[(2005) 10 SCC 336], the Supreme Court held : “… it is well settled

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 there was any deception played at the very

inception. If the intention to cheat has developed later on, the same

cannot amount to cheating. In the present case it has nowhere been

stated that at the very inception there was any intention on behalf

of the accused persons to cheat which is a condition precedent for
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 10

an offence under Section 420 IPC”.

20. In V. Y. Jose Anr. vs. State Of Gujarat Anr.

[(2009) 3 SCC 78] held as under :-

“14. An offence of cheating cannot be said
to have been made out unless the following
ingredients are satisfied:

i) deception of a person either by making a false
or misleading representation or by other action
or omission;

(ii) fraudulently or dishonestly inducing any
person to deliver any property; or 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.

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 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 Indian Penal Code can be said to have
been made out.”

21. In the said case, the Supreme Court further held as
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 11

under :

“21. There exists a distinction between pure
contractual dispute of a civil nature and an
offence of cheating. Although breach of contract
per se would not come in the way of initiation of a
criminal proceeding, there cannot be any doubt
whatsoever that in absence of the averments made
in the complaint petition wherefrom the
ingredients of an offence can be found out, the
court should not hesitate to exercise its
jurisdiction under Section 482 of the Code of
Criminal Procedure.

22. We may reiterate that one of the
ingredients of cheating as defined in Section 415
of the Penal Code is existence of an (sic
fraudulent or dishonest) intention of making
initial promise or existence thereof from the very
beginning of formation of contract.”

22. Recently, in Vesa Holdings Private Ltd. Anr. vs.

State of Kerala Ors. [(2015) 8 SCC 293], the Supreme Court has

held : “…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 there was any deception played at the very inception. If

the intention to cheat has developed later on, the same cannot
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 12

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 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”.

23. In view of the legal position enunciated in the above

judgments of the Supreme Court, it is obvious that merely because

the agreed amount was not paid by the petitioners to the

complainant, the ingredients of „cheating‟ punishable under Section

420 of the IPC would not be attracted. What was required to attract

the offence of „cheating‟ was existence of dishonest intention right

from the beginning and intentional inducement at the very

inception. Obviously, such ingredients are missing from the

complaint.

24. As far as Section 406 IPC is concerned, it prescribes

punishment for „criminal breach of trust‟. Section 405 IPC defines

the offence of „criminal breach of trust‟, which reads as under :

“405. Criminal breach of trust —

Whoever, being in any manner entrusted with
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 13

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 willfully
suffers any other person so to do, commits
“criminal breach of trust”.”

25. A careful reading of Section 405 IPC shows that a

criminal breach of trust involves the following ingredients:-

(a) a person should have been entrusted with
property, or entrusted with dominion over
property;

(b) that person dishonestly misappropriated or
converted to his own use that property, or
dishonestly used or disposed of that property or
willfully suffered any other person to do so;

(c) that such misappropriation, conversion, use or
disposal was in violation of any direction of law
prescribing the mode in which such trust was
discharged.

26. It would, thus, appear that for the offences punishable

under section 406 IPC, the prosecution must prove :-

(i) that the accused was entrusted with property or
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 14

with dominion over it; and

(ii) that he (a) dishonestly misappropriated it, or

(b) dishonestly converted it to his own use, or (c)
used it, or (d) disposed of it in violation of any
direction of law prescribing the mode in which
such trust was discharged.

27. It is well settled in law that in proceedings initiated on

criminal complaint exercise of inherent powers to quash the

proceedings is called for in a case where the complaint does not

disclose any offence or is frivolous. It is equally well settled that

power under Section 482 of the Cr.P.C. should be sparingly

invoked with circumspection. It should be exercised to see that the

process of law is not misused or abused.

28. In Smt. Nagawwa vs. Veeranna Shivallngappa

Konjalgi Ors. [(1976) 3 SCC 736], the Supreme Court

enumerated the cases where an order of Magistrate issuing process

against the accused can be quashed or set aside as under :-

“(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
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 15

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.”

29. While enumerating the cases, the Supreme Court

pointed out that the cases mentioned by us are purely illustrative

and provide sufficient guidelines to indicate contingencies where

the High Court can quash proceedings.

30. In Indian Oil Corporation vs. NEPC India Ltd.

Ors [(2006) 6 SCC 736], the Supreme Court has summarized the

principles relating to exercise of jurisdiction under Section 482 of

the Cr.P.C. to quash complaint and criminal proceedings as under :-

“(i) A complaint can be quashed where the
allegations made in the complaint, even if they are
taken at their face value and accepted in their
entirety, do not prima facie constitute any offence
or make out the case alleged against the accused.

Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 16

For this purpose, the complaint has to be
examined as a whole, but without examining the
merits of the allegations. Neither a detailed
inquiry nor a meticulous analysis of the material
nor an assessment of the reliability or genuineness
of the allegations in the complaint, is warranted
while examining prayer for quashing of a
complaint.

(ii) A complaint may also be quashed where
it is a clear abuse of the process of the court, as
when the criminal proceeding is found to have
been initiated with mala fides/malice for wreaking
vengeance or to cause harm, or where the
allegations are absurd and inherently improbable.

(iii) The power to quash shall not, however,
be used to stifle or scuttle a legitimate
prosecution. The power should be used sparingly
and with abundant caution.

(iv) The complaint is not required to
verbatim reproduce the legal ingredients of the
offence alleged. If the necessary factual
foundation is laid in the complaint, merely on the
ground that a few ingredients have not been stated
in detail, the proceedings should not be quashed.
Quashing of the complaint is warranted only
where the complaint is so bereft of even the basic
facts which are absolutely necessary for making
out the offence.

(v) A given set of facts may make out: (a)
purely a civil wrong; or (b) purely a criminal
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 17

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, 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.”

31. Highlighting the growing tendency in business circle

to convert purely civil dispute into criminal cases, the Supreme

Court in Indian Oil Corporation vs. NEPC India Ltd. (Supra) in

paragraphs 13 and 14 held as under :-

“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 break down of
marriages/families. There is also an impression
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 18

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 though
criminal prosecution should be deprecated and
discouraged. In G. Sagar Suri vs. State of UP
[2000 (2) SCC 636], this Court observed :

“It is to be seen if a matter, which is
essentially of 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
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
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 19

accountable, at the end of such 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 Cr.P.C. more
frequently, where they discern malice or
frivolousness or ulterior motives on the part of
the complainant. Be that as it may.”

32. Thus, it would be evident that a given set of facts may

make out purely a civil wrong or purely a criminal offence or a

civil wrong as also a criminal offence. However, a commercial

transaction or a contractual dispute apart from furnishing a cause of

action for seeking remedy in civil law may also involve a criminal

offence. However, simply because civil law remedies are time

consuming, a matter which is essentially of civil nature cannot be

allowed to be converted into a criminal offence, as criminal

proceedings are not short cut of other remedies available in law.

The Supreme Court has cast a duty upon the courts to deprecate and

discourage any effort to settle civil disputes and claims which do

not involve any criminal offence by applying pressure through

criminal prosecution.

33. In the present case, looking at the allegations made in

the complaint on the face of it, I find that no case is made out
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 20

attracting the ingredients of Section 406 and 420 of the IPC.

Excepting the bald allegation that the petitioners did not make full

payment to the complainant in time, there is no iota of allegation as

to the dishonest intention misappropriating the property. To make

out a criminal case, it is not sufficient to show that the money has

not been returned by the accused persons. It must also be shown

that the accused persons dishonestly disposed of the same in some

way or dishonestly retained the same. The mere fact that the

petitioners did not pay the money to the complainant does not

amount to „criminal breach of trust‟. Further, it is not a case of

dishonest inducement to delivery of property. It has no where been

stated that at very inception, there was intention on behalf of the

petitioners of „cheating‟ which is a condition precedent for the

offence of „cheating‟. Since no case of criminal breach of trust or

dishonest intention of inducement is made out and the essential

ingredients of the offence of „cheating‟ and „criminal breach of

trust‟ are missing, the prosecution of the petitioners under Sections

406 and 420 of the IPC is liable to be quashed.

34. Accordingly, the impugned order dated 10.05.2013

passed by the learned Judicial Magistrate, Patna City, Patna in

Complaint Case No. 1005 of 2012 and the entire criminal

proceedings, arising out of the aforesaid complaint, are hereby
Patna High Court Cr.Misc. No.50149 of 2013 dt.26-07-2017 21

quashed.

35. The application stands allowed.

(Ashwani Kumar Singh, J.)

Kanchan/-

AFR/NAFR NAFR
CAV DATE NA
Uploading Date 01.08.2017
Transmission 01.08.2017
Date

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