JUDGMENT
S.T. Kharche, J.
1. This application has been filed for quashing the Criminal Complaint No. 267 of 1993 instituted by respondent No. 2 against the applicants pending on the file of learned
J.M.F.C. Nagpur. Heard the learned Counsel for the parties,
2. Mr. Anjan De, learned Counsel for the applicants, contended that the applicants are the Directors of M/s. Sigma Search Lights Ltd. a Company registered under the Companies Act, 1956. This company is engaged in manufacture of electrical equipments, i.e. search lights. Respondent No. 2 is a company situated at Nagpur. It. is contended that respondent No. 2 approached the applicants for manufacture of 150 Nos. of 450 mm. search lights with 400 watts, tubelights or lamps and its control gear as it had received an order for the same. It was orally agreed between these two companies that the applicants-company would act as an agent for respondent No. 2 and would deliver the goods directly to the Inspector General of Prisons, Government of U.P., Lucknow. It was also agreed that the applicants would be authorised to sign the bills and challans and payment would be made simultaneously with the payments made by the Inspector General of Prisons and that respondent No. 2 would be entitled to discount of 5% on the price, and that the applicants would be fully responsible to execute the order. It is contended that the applicants supplied the entire quantity of goods as per the specification and the Indenting Officer duly acknowledged the same on the bills and accepted the bills and one copy of the bill was delivered by Sigma Search Lights to respondent No. 2,
2-A. Mr. De further contended that the applicants were entitled to receive Rs. 13,91,112.00 as the costs of the goods after deducting 5% discount which was to be paid to the respondent No. 2 on account of his commission. It is contended that on 31.3.1993 a Demand Draft for Rs. 12,87,607.67 was received by the applicants from the Inspector General of Prisons in the name of respondent No. 2 for the goods supplied on behalf of respondent No. 2 which was handed over to the applicants. The respondent No. 2 refused to pay the amount of goods supplied to the Inspector General of Prisons, Lucknow. Therefore, the applicants had instituted Civil Suit No. 240 of 1993 in the High Court at Calcutta wherein relief was sought that the Demand Draft for Rs. 12,87,607.67 be encashed.
3. Mr. De, learned Counsel, further contended that the High Court of Calcutta appointed Smt. Seema Sengupta Advocate as a Receiver on hearing the parties. The respondent No. 2 had appeared in that civil suit and prayed for vacation of the order of appointing the Receiver and for dismissal of the suit. On 24.9.1993 the Calcutta High Court modified the order, discharged Smt. Seema Sengupta Advocate and appointed joint Receiver who encashed the Draft and kept the said amount in a Fixed Deposit with ABN Amro Bank for 92 days. Mr. De further contended that the respondent No. 2 thereafter moved an application under Clause 12 of Letters Patent Act on, 1 9.9.1997 before the Calcutta High Court which came to be dismissed on 22.12.1997.
4. Mr. De, learned Counsel, further contended that on 2.8.1993 (he respondent No. 2 filed a Criminal Complaint No. 267 of 1993 in the Court of learned J.M.F.C. Nagpur, who directed to issue process against the applicants under Sections 406, 420, 468 and 471 of Indian Penal Code. The learned Counsel further contended that the order directing issuance of process is liable to be quashed.
5. Mr. De, learned Counsel, further contended that the dispute between the parties is purely of a civil nature and there was no dishonest intention to cheat the complainant nor there was any dishonest concealment of the fact of the Demand Draft of Rs. 12,87,607.67. The respondent No. 2 has not made out a case for proceedings against the applicants under Sections 406, 420, 468 and 471 read with Sections 120-B and 34 of Indian Penal Code and if the proceedings are allowed to be continued then that would amount to abuse of process of the Court.
6. Mr. De, learned Counsel, further contended that the transactions between the parties were to be settled and for that the applicants instituted civil suit in the High Court at Calcutta, whereas respondent No. 2 has instituted a civil suit in the Court of Civil Judge, Senior Division, Nagpur for the recovery of the balance amount due from each other on account of the transactions which took place in between them. Mr. De, therefore, contended that in the circumstances the criminal proceedings deserve to be quashed by invoking the inherent powers of this Court under Section 482 of the Criminal Procedure Code as also under Article 227 of the Constitution of India. In support of these submissions, the learned Counsel relied on catena of decisions of Supreme Court as well as of this Court.
7. Mr. Dara Singh, learned Counsel for respondent No. 2, on the other hand, contended that the respondent No. 2 received a letter dated 18.6.1993 from applicant No. 1 on 25.6.1993 wherein a demand of Rs. 13,91,112/- was raised against the supplies made by the company of the accused to the consignee. The applicants had made some frivolous and baseless charges against the respondent No. 2, who could realise that the applicants have with dishonest intention induced him to hand over a draft of Rs. 5 lacs under the garb of finalising the long pending accounts and giving him various false assurances. The learned Counsel further contending that the applicants had received Rs. 12,87,607.67 through one Mr. P. Sharma acting on the authority alleged to have been given to him by applicant No. 2 at Calcutta who signed as authorised signatory for respondent No. 2. He further submitted that the dishonest concealment of the fact of receipt, of demand draft by the applicants is a clear cut case of deception and criminal breach of trust and thus the applicants have committed the aforesaid offences, and since applicants No. 2 and 3 have acted in connivance with applicant No. 1 for defrauding the respondent No. 2 all are jointly and severally liable for their criminal act.
8. The learned Counsel for respondent No. 2 further contended that Criminal Complaint No. 267 of 1993 against the applicants was filed before the J.M.F.C., Nagpur on 2.8.1993 and the learned Magistrate on 24.4.1997 took cognizance of the offences and issued process against the applicants. He further submitted that civil proceedings and criminal proceedings can co-exist and the criminal proceedings could be quashed only in rarest of rare case by invoking the inherent powers of this Court under Section 482 of the Criminal Procedure Code. He contended that this Court is not supposed to consider the matter on merits and if the averments of the complaint are taken into consideration, prima facie case against the applicants for the offences with which they are charged has been made out. He contended that in the circumstances the petition is liable to be dismissed.
9. On careful consideration of the contentions canvassed by the learned Counsel for the respective parties and having regard to the position of law, I am of the considered view that in the present case the allegations mentioned in the complaint do not prima facie disclose that the offences punishable under Sections 406, 420, 468, 471 read with Sections 120-B and 34 of Indian Penal Code have been made out against the applicants.
10. Mr. De, learned Counsel, relied on the decision of Apex Court in Alpic Finance Ltd. v. P. Sadasivan and Anr. , wherein if is held that when somebody suffers injury to his person, property or reputation, he may have remedies both under civil and criminal law. The injury alleged may form the basis of civil claim and may also constitute the ingredients of some crime punishable under criminal law. When there is dispute between the parties arising out of a transaction involving passing of valuable properties between them, the aggrieved person may have a right to sue for damages or compensation and at the same time law permits the victim to proceed against the wrongdoer for having committed an offence of criminal breach of trust or cheating. Here, the main offence alleged by the appellant is that the respondents committed the offence under Section 420 of the I.P.C. and the case of the appellant is that respondents have cheated him and thereby dishonestly induced him to deliver property. To deceive is to induce a man to believe that a thing is true which is false and which the person practising 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. There is no allegation that the respondents made any wilful misrepresentation. Even according to the appellant, the parties entered into a valid lease agreement and the grievance of the appellant is that the respondent failed to discharge their contractual obligations. In the complaint, there is no allegation that there was fraud or dishonest inducement on the part of the respondents and thereby the respondents parted with the property. It is trite law and common sense that an honest man entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debt, he does not necessarily evade the debt by deception. Moreover, the appellant has no case that the respondents obtained the article by fraudulent inducement or by wilful misrepresentation. It has been informed that the respondents, though committed default in paying some instalments, have paid substantial amount towards the consideration. Having regard to the facts and circumstances, it is difficult to discern an element of deception in the whole transaction, whereas it is palpably evident that the respondent No. 2 had an oblique motive of causing harassment to the applicants through criminal proceedings and, therefore, I am of the considered view that this is a case wherein the inherent powers of this Court for quashing the criminal proceedings are required to be exercised.
11. Mr. De, learned Counsel for the applicants, relied on a decision of Apex Court in Hridaya Ranjan Prasad Verma
and Ors. v. State of Bihar wherein it was held that Section 415 of the I.P.C. which defines cheating requires –
(1) deception of any person;
(2) (a) fraudulently or dishonestly inducing that person;
(i) to deliver any property to any person; or
(ii) to consent that any person shall retain any property; or
(b) intentionally Inducing that person 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.
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 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.
12. The learned Counsel for respondent No. 2 relied on a decision of the Apex Court in Rajesh Bajaj v. State NCT of Delhi
and Ors. wherein it has been observed that it is not necessary that a complainant should verbatim reproduce in the body of his complainant all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. Splitting up of the definition into different, components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelled out in the complaint, is not the need at this stage. If factual foundation for the offence has been laid in the complaint the Court should not hasten to quash criminal proceedings during investigation stage merely on the premise that one or two ingredients have not been stated with details. For quashing an F.I.R. (a step which is permitted only in extremely rare case) the information in the complaint must be so bereft of even the basic facts which are absolutely necessary for making out the offence. The Supreme Court further observed in para No. 11 that the crux of the postulate is the intention of the person who induces the victim of his representation and not the nature of the transaction which would become decisive in discerning whether there was commission of offence or not. The complainant has stated in the body of the complaint that he was induced to believe that the respondent would honour payment on receipt of invoice, and that the complainant realised later that the intentions of the respondent were not clear. Me also mentioned that the respondent after receiving the goods had sold them to others and still he did not pay the money. Such averments would prima facie make out a case for investigation by the authorities. There cannot be any dispute about the ratio that has been laid down by the Apex Court. But that was a case wherein the first information report was lodged at the police station and the investigation was in progress. On considering the facts alleged in the F.I.R., the Apex Court was of the view that prima facie case for investigation by the authority was made out. Such is not the present case and, therefore, the case relied on is not of any help to the respondent No. 2.
13. The learned Counsel for respondent No. 2 pointed out that civil proceedings and criminal proceedings can coexist. In support of this submission, the learned Counsel relied on a decision of Apex Court in M. Krishnan v. Vijay Singh and Anr. . wherein it has been observed in paras 4 and 5 that the High Court appears to have been impressed by the fact that as the nature of the dispute was primarily of a civil nature, the appellant was not justified in resorting to the criminal proceedings. Accepting such a general proposition would be against the provisions of law in as much as in all cases of cheating and fraud, in the whole transaction, there is generally some element of civil nature. The proceedings could not be quashed only because the respondents had filed. If mere pendency of a suit is made a ground for quashing the criminal proceedings, the unscrupulous litigants, apprehending criminal action against them, would be encouraged to frustrate the course of justice and law by filing suits with respect to the documents intended to be used against them after the initiation of criminal proceedings or in anticipation of such proceedings. Such a course cannot be the mandate of law.
The Apex Court further observed in paragraph 15 of the judgment that 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.
It was further observed in paragraph 16 of the judgment that the averments in the complaint in entirety and accepting the allegations to be true, the ingredients of intentional deception on the part of the accused right at the beginning of the negotiations for the transaction has neither been expressly stated nor indirectly suggested in the complaint. All that respondent No. 2 alleged against the appellants is that they did not disclose to him that one of their brothers had filed a partition suit which was pending. The requirement that the information was not disclosed by the appellants intentionally in order to make respondent No. 2 part with the property is not alleged expressly or even impliedly in the complaint. Therefore, the core postulate of dishonest intention in order to deceive the complainant-respondent No. 2 is not made out even accepting all the averments in the complaint on their face value. Thus the ingredients of the offence of cheating punishable under Section 420 of the I.P.C. and its allied offences under Sections 418 and 423 has not been made out. So far as the offences under Sections 469, 504 and 120-B are concerned even the basic allegations making out a case thereunder are not contained in the complaint. In such a situation, continuing the criminal proceedings against the accused will be an abuse of the process of the Court. There cannot be any dispute about the ratio laid down by the Apex Court that the civil and criminal proceedings can co-exist but this authority is also not of any avail to the respondent No. 2 and the facts and circumstances of the present case can be very well distinguished with that case.
14. So far as the present case is concerned, now the crucial question that is involved is as to whether a prima facie case for the offences alleged against the applicants has been made out for continuation of the criminal prosecution. It is not disputed that the respondent No. 2 had addressed a letter dated 10.1.1993 to the applicants/company and from this letter one can ascertain as to what was the agreement between the parties so far as manufacturing, sale and supply of the electrical goods are concerned. The recitals of this letter would indicate that it was agreed by respondent No. 2 that he would be entitled to discount of 5% on the price and the applicants were fully responsible to execute the order on behalf of respondent No. 2 to the full satisfaction of the Indenting Officer. There was also an agreement in the said letter that payment shall be made to the applicants on receipt from the paying authority. To facilitate the work at site, the respondent No. 2 were supposed to arrange to open an account at Lucknow so that back to back payments could be released in favour of the applicants. The letter further indicate that the applicants were authorised to sign on behalf of respondent No. 2 on their challans. bills and documents connected with the order placed by the Inspector General of Prisons, Lucknow.
15. Perusal of the averments made in the complaint reveal that there were other transactions entered into between the parties and, therefore, efforts were also made to settle the accounts between them sometime on 5.6.1993 at Nagpur, but there was no outcome of the settlement. It appears that at the time of settlement of accounts, respondent No. 2 had issued a Draft of Rs. 5 lacs which was taken away by the applicants and this amount was to be paid to M/s. Kalinga Equipments Pvt. Ltd. (One of the company of the applicants). It appears that respondent No. 2 had some transactions with M/s. Kalinga Equipments Pvt. Ltd. It has been averred in para Nos. 12 and 13 of the complaint that the applicants-company was liable to pay a sum of Rs. 8.96 lacs to respondent No. 2 but the account could not be settled and when the applicants were informed about the same they had come to Nagpur for settlement of the account. In para No. 13 it has been specifically stated that the accused No. 1 on being conveyed of the aforesaid state of affairs, tentatively agreed that such payment would be made by the companies represented by the applicants/accused but further represented that since the company of the applicants/accused had already supplied to the Inspector General of Prisons material worth about Rs. 14.65 lacs out of which he was sending the bills to the complainant Respondent No. 2/company for about Rs. 14 lacs after adjustment of 5% fixed profit, and further represented that since the payment for the said supply will be received by the complainant directly, it had nothing to fear about the recovery and thus the complainant should pay a sum of Rs. 5 lacs by way of Demand Draft in favour of one of the companies of accused No. 1, viz. M/s. Kalinga Equipments Pvt. Ltd. The making of the Demand Draft and keeping the same ready was put as a condition precedent by the accused No. 1 for his coming down to Nagpur for settlement of the accounts.
16. What would reveal from the averments in the complaint in para 14 is that a Demand Draft for Rs. 5 lacs payable to M/s. Kalinga Equipments Pvt. Ltd. was prepared and was handed over to the applicants. It appears that the payment of Rs. 5 lacs was not directly connected with the transaction which took place between the Inspector General of Prisons and the applicants. When there was no outcome of the settlement of the accounts between the parties in the month of June, 1993, the applicants had instituted a Civil Suit in the High Court at Calcutta on 2.7.1993. It is not disputed that thereafter the respondent No. 2 had instituted the criminal prosecution against the applicants on 2.8.1993 in the Court of learned J.M.F.C., Nagpur. It is also not disputed that the respondent No. 2 had appeared before the High Court of Calcutta and also moved an application under Clause 12 of Letters Patent Act on 19.9.1997 which came to be dismissed on 22.12.1997. In the criminal complaint, an order directing issuance of process was passed on 24.4.1997. It is also not disputed that respondent No. 2 has also filed a Civil Suit in the Court of Civil Judge, Senior Division, Nagpur, on 2.8.1993.
17. It would clearly emerge from the material that is available on record in the nature of averments made in the complaint that both the parties are contending that they have committed breach of contract. It would clearly reveal that as per the agreement between the parties, the amount of 5% of the cost of goods was to be retained by respondent No. 2 on account of commission and remaining 95% was to be paid to the applicants for the supply of the goods to the consignee. In such circumstances, receiving the Demand Draft for Rs. 12,87,607.67 and retaining it by the applicants for a period of about two and half months, when the negotiations were going on between the parties, it cannot be said to be prima facie evidence of intention on the part of the applicants to practice deception.
18. It is a fact that the Calcutta High Court had appointed Smt. Seema Sengupta Advocate as a Receiver and thereafter respondent No. 2 filed reply in the civil suit and prayed for vacation of the order appointing the Receiver and also prayed for dismissal of the suit. Thereupon the Calcutta High Court modified the order and discharged Advocate Smt. Seema Sengupta and appointed a joint receiver to encash the draft and the amount has been invested in fixed deposit with ABN Amro Bank for 92 days. Therefore, it is obvious that by no stretch of imagination, it could be said that the amount of draft was misappropriated by the applicants or converted to their own dues or retained by them with dishonest intention for the said period of two and half months.
19. It is true that the civil suit between the parties cannot be a ground for quashing the criminal proceedings. In the present case, when there were commercial transactions between the parties and the accounts could not be settled, merely receipt of the amount of the draft by the applicants would not amount to practising deception. The conduct of the parties in resorting to file civil suits for recovery of the amount from each other would show that prima jacie there was no intention on the part of the applicants to commit an offence of cheating within the meaning of Section 415 of Indian Penal Code.
20. So far as the other offences are concerned, as per the agreement itself, the applicants were to receive 95% of the price of the goods sold and they were authorised to sign the bills, challans etc. In such circumstances, prima facie it cannot be said that the draft of Rs. 12,87,607.60 received directly from the Inspector General of Prisons was with a view to defraud the respondent No. 2. It appears that when the negotiations in respect of settlement of accounts had failed, the respondent No. 2 has resorted to the action of filing of criminal complaint. On considering the averments made in the complaint, together with the admitted facts, I am of the considered view that no case has been made out against the applicants for the offences which they are alleged to have committed. On comprehensive scrutiny of the material, I am of the considered view that the dispute between the parties is not only in respect of the said demand draft received from the Inspector General of Prisons but in respect of all commercial transactions and it is a question of settlement of their dispute through civil court. On thoughtful consideration of the allegations mentioned in the complaint, it would clearly reveal that the ingredients of the offences alleged have not been made out and, therefore, the question of criminal prosecution of the applicants does not arise. It appears that the criminal prosecution has been launched only with a view to bring pressure on the applicants to pay an amount of Rs. 8.96 lacs claimed in Reg. Civil Suit No. 760 of 1993 instituted in the Court of Civil Judge, Sr. Dn., Nagpur. No element of criminal liability has been shown on the part of the applicants and, therefore, it is obvious that if the criminal proceedings are allowed to be continued against them, that would amount to an abuse of process of the Court.
21. In the result, I am of the considered view that this is a fit case in which the inherent powers of this Court can be exercised under Section 482 of the Criminal Procedure Code. Consequently, the application deserves to be allowed. The application is accordingly allowed and the criminal proceedings are hereby quashed.