IN THE HIGH COURT OF JUDICATURE AT PATNA
Cr.Misc. No.15413 of 2010
ARUN KUMAR SHARMA @ ARUN SHARMA
& ORS
Versus
STATE OF BIHAR & ANR
With
Cr.Misc. No.44542 of 2009
ARUN KUMAR SHARMA
Versus
THE STATE OF BIHAR & ANR
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For the Petitioners : Sarvashri Birendra Kumar Sinha,
Senior Advocate
Alok Kumar Sinha,
Advocate.
For the State : Shri Dashrath Mehta, APP
For the O.P. No.2 : Shri Baxi S.R.P. Sinha, Sr. Advocate
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ORDER
The two petitions have been heard together as facts of the two
cases from which they arise, in most of their parts, are common and most
of them are also admitted and the two are being disposed of by the
present common order.
The petitions relate to complaint petitions filed by a single
complainant, namely, Prakash Chandra Gupta who has claimed himself
to be the sole owner and proprietor of a firm named and styled as M/s
Hanuman Ram Mahavir Ram Traders, its registered office being in
Mirganj (Gopalganj). As regards the accused persons in the two
petitions, petitioner Arun Kumar Sharma (Cr. Misc. No. 44542 of 2009)
is an accused common in both the complaint petitions which were filed
by the complainant Prakash Chandra Gupta vide Complaint Case no.
1277 of 2009 and 2744 of 2009. In fact, all the petitioners in Cr. Misc.
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No. 15413 of 2010 also figured as accused in the earlier petition of
complaint bearing number 1277 of 2009, but none except petitioner
Arun Kumar Sharma was summoned by order of summoning passed in
the above noted complaint case on 8.9.2009. The remaining petitioners
of Cr. Misc. No. 15413 of 2010 have been summoned in Complaint
Petition no. 2744 of 2009 by order dated 19.9.2010. The two
summoning orders were also similar, as the accused persons of the two
cases who are the petitioners before this Court, prima facie, appeared to
the Magistrate who passed the two orders committing offence under
section 406 of the IPC.
The admitted fact is that the petitioners were Director or Members
of the Board of Directors of M/s Shri Baidyanath Ayurved Bhawan
Private Limited, Patna. The above noted firm was engaged in
manufacture of Ayurvedic drugs and was marketing it at the relevant
time in the undivided State of Bihar through the complainant‟s firm. It
appears that after separation of the State of Jharkhand from Bihar, the
manufacturer-company requested the complainant‟s firm to take up the
sales of its products within the territory of Jharkhand and, accordingly,
an agreement was reached (Annexure 2 to both the petitions) and that
was signed by the representatives of the two sides. Some terms of
business were settled down between the parties and those are stated in
various paragraphs of the written agreement. The grievance of the
complainant is confined to the terms which appeared in paragraph 19 of
Annexure 2.
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Complaint Case no. 1277 of 2009
It was alleged by the complainant in the aforesaid complaint that
as per the agreement reached between the parties, the complainant‟s firm
carried on the marketing of the products of the manufacturers within the
territory of the State of Jharkhand after its creation in the year 2000 and
invested a huge sum of money in it. All on a sudden, on 1.4.2009, the
manufacturing company closed down its business in the territory of
Jharkhand and as per the balance sheet of accounts paid Rs.32,51,885/-
to one of the agents of the complainant D.N. Shrivastava. But, while
settling the accounts in terms of the business, the firm of the accused
persons misappropriated the money which was to be paid to the
complainant for carrying out the business from his establishment at
Mirganj and wrongly incorporated the same with dishonest intention in
the balance sheet of accounts (Annexure 4 to the petitions) and thus,
misappropriated the amount which was due to be paid to the
complainant. It is stated by the complainant that the manufacturing
company stopped dealing with the complainant‟s firm at Mirganj since
1.4.2009 and the firm of the accused persons were obliged to pay him
Rs.16,45,824, for the payment of which, a notice through the Advocate
of the complainant was issued on 12.5.2009 and which was responded
by the firm of the accused persons on 15.5.2009 and in that reply, the
accused persons pointed out that the balance sheet of account by which
Rs.32,51,885 was paid to the complainant through its agent D.N.
Shrivastava, was the accumulated payment of all the dues to the
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complainant and there was nothing due to be paid to him. Thus, in the
facts of the above noted complaint case, the complainant claimed that
the accused persons had misappropriated a sum of Rs.16,45,824 and did
not pay it in spite of repeated correspondences and requests, as may
appear from the statements made at page 6 of the complaint petition.
Complaint Petition No. 2744 of 2009
While making statements of facts and allegations against the
accused persons, the complainant appears alleging that an amount of
Rs.10,09,935/- as charges were required to be paid by the
manufacturing firm of the accused persons on account of various charges
which were required to be paid as per the terms of agreement (Annexure
4) and in spite of request being personally made by the complainant on
16.11.2009, the accused persons refused to pay stating that the same had
already been paid by Annexure 4. The other facts regarding the
appointment of firm of the complainant and its sales agent for the State
of Jharkhand and for the State of Bihar through its office at Mirganj and
Ranchi remained the same as has just been pointed out while stating the
facts of the earlier complaint petition in the earlier paragraphs.
Shri Birendra Kumar Sinha, learned senior counsel appearing on
behalf of the petitioners in the two petitions, has advanced a common
argument for seeking the relief of quashing of the two orders summoning
the two petitioners in the two petitions and thereby the quashing of the
prosecution launched against them through the two petitions. It was
contended, while drawing the attention of the court towards some of the
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admitted facts, that the complainant‟s firm was appointed C & F Agent
originally for the whole of the State of Bihar and on creation of the State
of Jharkhand they were requested to carry on the business within the
territory of Jharkhand through their offices at Ranchi and accordingly, an
agreement in the form of Annexure 4, was entered into which, indeed,
set down certain terms of business. However, in due course of time, the
manufacturing company, M/s Shri Baidyanath Ayurved Bhawan Private
Limited, changed its policy of marketing of its products and started
marketing them through its own branches established in different cities
including Ranchi and Mirganj and sent a notice of termination of
agreement by Annexure 3 which is dated 31st December, 2008. It was
signed by petitioner Arun Kumar Sharma and another office bearer of
the manufacturer firm, namely, Bikram Sharma. It was indicated in the
agreement that the management has decided not to continue further the
agreement dated 25.7.2003 with effect from 1.4.2009 due to their own
distribution policy and as such the statutory obligation, after assessment
of sales tax, etc., be completed before the date of termination of
agreement which was to take effect, as stated above, on 1.4.2009. It was,
as such, submitted that on the 30th April, 2009 the letter, Annexure 4
along with the attached account sheet which indicated a total balance of
dues which was to be paid by the manufacturers to the agent, i.e., the
notice was sent to the complainant which was accompanied by a cheque
dated 28.4.2009 of the value of Rs.32,51,885 and accordingly, that
cheque was received by the appointed agent of the complainant, namely,
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Prakash Chandra Gupta namely Sri D.N. Shrivastava. The cheque was
received on 30th April, 2009 and accordingly, a receipt was granted by
Annexure 5. It was contended that the facts stated by the complainants in
the two complaint petitions on the same head of non payment of other
charges, as might have been admissible under the agreement between the
parties, also appeared varying. In the earlier complaint case bearing
number 1277 of 2009 the complainant claimed that the outstanding dues
which was required to be paid to him, was Rs.16,45,824 but in the next
complaint he was quantifying the amount at Rs.10,09,925 and was
making a false, inadmissible claim in spite of having received the total
settlement amount as per final accounts by Annexure 4, the balance
sheet of settlement of account. It was submitted that the facts, if taken on
their face value to be true, may not constitute an offence under section
406 of the IPC, as firstly, the payments were due to be made by the
manufacturers only when it could be covered by the terms of agreement
and if the same were not paid as alleged, then it could be giving rise to a
civil liability for which the complainant had already filed a suit before a
competent Civil Court. Secondly, it was submitted, that the offence of
section 406 IPC may not be constituted on the facts of the case as no
dishonest intention could be shown part of the petitioners specially when
the facts are to be tried by a competent Civil Court on account of the
same being asserted and denied. Shri Sinha submitted that the allegations
and statements of facts made in the two complaint petitions do not
constitute the necessary ingredients constituting the offence of section
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406 IPC as the facts do not indicate that there was any entrustment of
any property and secondly, that the property was dishonestly
misappropriated or brought into personal use of the petitioners by them
after being entrusted by the petitioners.
As against the above, Shri Baxi S.R.P. Sinha, learned senior
counsel appearing for the complainant took me to the two paragraphs of
Annexure 4, the written agreement admittedly entered into by the two
sides and, while admitting that for enforcing the terms of contract a suit
has been filed by the complainant before the competent court of civil
jurisdiction, submitted that the facts stated in the complaint petition do
constitute an offence of criminal breach of trust and misappropriation as
defined by section 405 of the IPC. He read out the contents of the
complaint petition to me in the above context. It was submitted that the
notice, Annexure 3, which was terminating the C & F agency of the
complainant, was confined to Jharkhand and it never spoke about
Mirganj and, as per paragraph 19 of the agreement, the expenditures
which were incurred by the complainant on those counts remained
unsettled. It was contended that without terminating the agreement the
balance sheet showing the settlement of account, Annexure 4, was
created in such a way as to indicating the settlement of admissible dues
of the complainant to the manufacturers and that showed the dishonest
intent of the accused persons. Shri Sinha placed before me a bench
decision of this Court reported in 2010(2) PLJR 1029 (Ram Sajjan Sah
Vs. State of Bihar) to submit that the powers of the court under section
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482 of the Code of Criminal Procedure are exceptional powers and those
could be used very sparingly in rare cases and the present were not the
petitions in which that special power was required to be used. Shri Sinha
also placed before me in the above context a decision of the Supreme
Court rendered in Zandu Pharmaceutical Works Limited Vs. Sharaful
Haque reported in 2005(1) PLJR 95 (SC) in which it has been held that
the inherent powers should not be exercised to stifle the legitimate
prosecution and that the High Court should normally refrain from giving
a prima facie decision in a case where the entire facts are incomplete and
hazy. Shri Sinha cited the third decision of the Supreme Court in M/s
Indian Oil Corporation Vs. NEPC India Limited 2006 AIR SCW 3830
where it has been held that where facts constituted both civil and
criminal liabilities, criminal proceedings could not be terminated by
virtue of section 482 of the Code of Criminal Procedure. Shri Sinha
further submitted that the prospective defence has never to be considered
and the documents which have been annexed as Annexures to the two
petitions fall in that category of materials and, as such, the orders must
not be quashed after perusing them.
There could not be any quarrel with the principle of law that the
powers of the High Court under section 482 of the Code of Criminal
Procedure were extraordinary, exceptional powers which have to be used
very sparingly in rare cases and further that it has never to be used where
the facts constitute an offence only because the accused might have
some very strong defence and further because the case may be of such a
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class as could be ending in acquittal. The decisions cited by the learned
counsel for the opposite party take a view, as indicated above and this
Court is very much aware, that the power is never to be utilized for
stifling a legitimate prosecution. But, this has also to be kept in mind that
if the facts admitted directly or obliquely or even the records which are
produced which are bilateral between the parties to a proceeding
containing admissions of parties, facts explained away the criminal
liabilities of the prospective accused who could have been summoned,
then it may not be a case of putting the accused on trial. In addition to
the above, it is also a well known legal position that after considering the
materials produced before it, the court may find it not expedient in the
interest of justice to allow the continuance of the prosecution, if it comes
to a conclusion that the very prospect of ultimate conviction of the
accused could be bleak. The forum of courts are sacrosanct and
established only for imparting justice. If such a sacrosanct forum is mis-
utilized or is allowed to be utilized for any oblique purpose, without any
real cause for setting the criminal law in motion, then it could simply
breed hardship to a person as his personal liberties and properties may be
put to jeopardy. This is the reason that the courts have to act, if it appears
to it, that it was in the interest of justice as also to prevent the abuse of
the process of the court that the prosecution should not be allowed to
continue.
It was rightly contended by Shri Baxi S.R.P. Sinha, learned
counsel for the opposite party that the prospective defence of the accused
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has never to be considered for quashing a proceeding in exercise of
court‟s power under section 482 of the Code of Criminal Procedure. But,
this has firstly to be found out as to whether the facts which are placed
on record by the accused, who has been summoned, were really his
prospective defence or were facts placed so as to explaining away the
allegations and making out a case as if there was no commission of any
offence. Such a situation may be available to a court if the accused
produced before the court the documents which could contain
admissions of the complainant or which could indicate as to what was
the real state of affairs as regards the allegations of commission of
offence. Such admitted facts, if give rise to an inference that the facts
alleged in the complaint petition in tandem with the facts brought on
record by the accused through some admitted statements or documents
specially in a case of commercial transaction, did not constitute an
offence and merely gave raise to a liability which could be adjudicated
upon by the Civil Court, then in that case, it could be utterly an abuse of
the process of the court if such a proceeding is allowed to continue. If
the facts appear like, what I have just pointed out, then the case
presented before the court through some admitted documents, ceases to
be the defence of an accused and becomes the bilateral statements of the
parties to the proceedings and that document must not be ignored as,
ultimately, the purpose of vesting the High Court with the inherent
powers under section 482 of the Code is to prevent the abuse of the
process of the court and also to ensure the delivery of justice.
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In the present set of petitions, there is a written agreement and that
agreement is admitted by the complainant also when he was making
such a statement in the complaint petition of Complaint Case no. 1277 of
2009 as also that of 2744 of 2009. The reference to agreement dated
25.7.2003 appears made in both the complaint petition at their respective
pages no. 3. Thus, it has always to be assumed that transactions between
the parties and the creation of fiduciary relationship on that account was
through mutually agreed terms which had been reduced into writing in
the form of agreement noted above. It is not denied that there was a
statement in the agreement indicating that the agreement was to
terminate automatically on 31st March, 2006 and it is also not denied that
the agreement was terminated by notice dated 31st December, 2008 on
account of the reason that the manufacturers had decided not to continue
with the agreement further with effect from 1.4.2009 due to the
formulation of their own distribution policy. The same notice which is
annexed to both the petitions as Annexures 3, indicates that the
complainant was „advised‟ to complete all statutory obligations and
assessment of sales tax before the above mentioned date of termination
of agreement. There is no denial of the fact that this notice dated
31.12.2008 was received by the complainant rather, it appears from
Annexure 4 which is a letter dated 30th April, 2009 addressed to the
complainant that he was requested by sending a statement of account
with the above letter to receive cheque bearing no. 344050 dated
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28.4.2009 drawn on HDFC Bank, Patna in favour of the firm of the
complainant and to return the unsold stock.
It appears that the above letter (Annexure 4) which was containing
the complete balance sheet of the accounts, which was to the tune of
Rs.31,51,885, was responded to by the complainant by Annexure 5
which is an authorisation dated 30th April, 2009 by which he had
authorised Shri D.N. Shrivastava, to hand over all the unsold goods lying
in the godown at Ranchi to one of the employees of the manufacturers
and, accordingly, he had attested the signatures of Shri D.N. Shrivastava.
It further appears that the said D.N. Shrivastava received full and final
payment of Rs.32,51,885 as per statement of accounts dated 30.3.2009
by the above cheque no. 344050 dated 28.4.2009. Annexure 6 is the
receipt under the signature of appointed agent of the complainant, Shri
D.N. Shrivastava, showing the receipt of the above account and thus, the
settlement of account between the parties.
The complainant does not deny that he did not receive the amount
of Rs.32,51,885 through the cheque noted above, rather he admits
receiving the cheque and the amount conveyed through it to him, when
he alleged that the petitioners dishonestly and fraudulently showed
through that cheque the payment of the dues for providing services to
them by the complainant from his Mirganj Establishment. Thus, what he
denies is that the balance sheet of account which was presented by the
manufacturer to the complainant was fabricated so as to containing the
accounts also of the transaction between parties from Mirganj office of
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the complainant. In the first complaint, i.e., Complaint Petition no. 1277
of 2009, the complainant stated that he was not paid an amount of
Rs.16,45,824.80 paise only which was due to be paid to him on account
of the activities which was carried out by his firm from Mirganj
establishment. It is admitted that agreement for carrying on the activities
as C & F Agent of the manufacturers had also been terminated from
1.4.2009. In the subsequent complaint, i.e. Complaint petition no. 2744
of 2009, the complainant did not make any such statement that the
amount of Rs.16,45,824.80 was due to be paid to him by the
complainant and instead alleged that the charges on different heads as
per paragraph 19 of the terms of contract amounting to Rs.10,09,935 had
not been paid to him. Thus, the complainant alleged that it was an act of
misappropriation by the accused persons.
What appears from the above facts is that the balance of amount
was transmitted and received by the complainant by Annexure 3 which
is a letter dated 30th April, 2009 which was accompanied by balance
sheet of accounting and that was in respect of full and final statement of
account of trades, both at Mirganj and Ranchi firms of the complainant.
On receipt of such balance of account, the complainant had appointed
out one of his agents to receive the cheque which was to be paid towards
all his dues and accordingly, the agent Shri D.N. Shrivastava, after
receipt of the cheque, granted receipt in the form of Annexure 6. This
receipt in the form of Annexure 6 is on the letter head of the
complainant‟s firm. As such, it could be very difficult for the court to
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accept that the final settlement of accounts which was of the value of
Rs.32,51,885 did not include the whole of the settlement of accounts on
all heads which was due to be paid by the manufacturers to the
complainant. This is in the above background that this court has to
consider whether an offence under section 406 of the IPC could be made
out.
Section 406 of the Indian Penal Code punishes the offence of
criminal breach of trust which has been defined by section 405 of the
IPC which reads as under:
“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 willfully suffers any other person so to do, commits “criminal
breach of trust”.”
From a perusal of the above provision, it may appear that for
constituting the offence of criminal breach of trust, the necessary
ingredients are that any property should either be entrusted to a person or
the person be put in dominion over that property. The person so being
entrusted with the property or having the dominion over it, must be
shown to have misappropriated it or to have converted that property to
his own used or has dishonestly used or disposed 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,
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which he has made touching the discharge of such trust, or willfully
suffers any other person so to do.
There is a large course of judgments of the Supreme Court itself
which have been reported in AIR 1953 SC 478, AIR 1956 SC 575, AIR
1968 SC 700 and AIR 1972 SC 1490, which indicate that in order to
creating the offence which has been defined by section 405 of the IPC, it
was necessary that the property should be entrusted to the person. What
is implied by entrustment was that the property should have been
transferred from its real owner to the accused so that he could have it in
his possession. The other alternative mode of putting the property in
possession of the accused might be that he had dominion over that
property. Here, in the present case, there was no entrustment of any
property as there was no transfer of any property from the complainant
to the accused persons or their firms in any form. In fact, the
complainant had not parted with a single paisa and thereby had not put
anything in trust for him in custody of the accused persons. But, still, if
the complainant could show that the accused persons had the dominion
over any property which could ultimately be belonging to him even by
virtue of the result of a trade agreement, then its non-payment might be
giving rise to one of the ingredients of the offence that the accused
persons could be having the dominion over the property which could be
ultimately belonging to the complainant. But then, for deciding this
ingredient of the offence, the court has to consider the terms of
agreement and the liability of paying any amount as a result thereof. At
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the same time, the court has also to remind itself that while considering
the dominion of the accused over any property whether in fact any
property had merely accrued to the accused persons as a result of non
payment, etc. to the complainant of any amount which might have been
due on account of some performance of the part of contract arising out of
the written terms of agreement. To illustrate, the very agreement in
question, vide paragraph 19, required the manufacturers, i.e., the
employers of the accused persons to pay certain charges on account of
some services being provided or being performed by the complainant
under different heads, as indicated by that paragraph 19 of the
agreement. The relevant part of the agreement i.e., paragraph 19,
required the manufactures to pay to the firms of the complainant
remuneration equivalent to 4% commission on sales value of the
produce in the financial year which was to be paid annually at the end of
the financial year and that payment was to be admissible after excluding
taxes which have been indicated in paragraph 19 (a) of the terms of
agreement. The manufacturers were also to pay certain service charges,
like, the reimbursement of actual cost incurred by the complainant‟s
firm on courier and postage, telephone and STD, cartage charges from
Hanuman Ram Mahavir Ram Trader‟s godown to transporter‟s godown
as also the cost of repacking. But, the above charges were to be
reimbursed to the complainant‟s firm by the manufacturers only when
the actual vouchers were to be produced for payment.
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As may appear from the above, the payments could be due only
when the vouchers were really produced before the manufacturers, i.e.,
before the accused persons. This goes to indicate that the entitlement of
the complainant to a property could accrue only when the real vouchers
had been presented by him or his firm to the manufacturers or the
officials who were responsible for handling such vouchers and further
responsible for making payment. If there was no production of any
vouchers, then there could not be any question of generating any
property and, as such, there could not be any further question of the
property being within the dominion of the accused. As I have just
pointed out, these facts have to be discerned after reading carefully the
admitted terms of agreement as is available in the present case.
The complainant stated that he was entitled to Rs.16,45,824.80
and Rs.10,09,935 only because the settlement of account which was
received by him and the payment accordingly in that behalf did not
contain payment for carrying out the activities of C & F agent from his
Mirganj office as also on account of non payment of admissible
authorised charges in the light of paragraph 19 of the written agreement.
He has not denied, as I have pointed out earlier also, that the balance of
account and the payment of Rs.32,51,885 was received by him. Thus,
the complainant admits the validity of the document which is Annexure
4 to the present petition and the receipt of the payment. What is alleged
by him does not appear supported by any material facts inasmuch as the
complainant, in his complaint, has not alleged that he presented the
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vouchers which were required under the agreement to be presented and
in spite of that he was not paid money which was to be paid to him. The
balance sheet settling the account indicates that payment of Rs.32,51,885
was in terms of payments on all heads and nothing was due to be paid.
Thus, from the admitted facts of the case, it could not be said that
the accused persons had any dominion over any property which could be
belonging to the complainant. Besides, there is a complete lack of
dishonest intention. Dishonest intention pre-supposes the intent to cause
wrongful loss to a person by wrongful gain by the accused. The terms of
contract are written. If there was any violation, it could be creating a
civil liability only because the complainant does not appear coming out
with any clean and clear statement as regards putting the accused
persons in dominion over any of the properties or part thereof, which
could be said belonging to him. It remains a matter which could be in the
realm of accounting and settlement of account. In commercial
transactions, there could not be any end of accounting unless the parties
are fully satisfied after settling the same. If there are admitted written
terms of contract, then the terms of contract may not be constituting any
criminal offence under the facts, as have been presented before this
Court. Besides, the complainant appears filing a civil suit for recovery of
whatever was due to him from the manufacturers who were responsible
as per the agreement existing between the parties.
In my considered view, the breach of contract in the present case,
even if it could be available – though there does not appear any element
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of such breach, – shall never give rise to an offence under section 405 of
the Code which could be punishable under section 406 of the IPC.
Thus, on discussion of the facts and the materials available on the
record what is found is that the facts alleged did not constitute any
offence for which the petitioners should have been summoned. The
continuance of the summoning orders passed in the two complaint
petitions and the continuance of the prosecution on that account, to me,
appears complete abuse of the process of the court and it appears
expedient in the interest of justice that the two petitions be allowed and
the two proceedings be quashed.
In the result, these petitions are allowed and the proceedings are
quashed.
(Dharnidhar Jha, J.)
Patna High Court
The 9th August, 2010,
A.F.R./Anil/