The High Court dismissed the petition filed under Section 482 Cr.P.C. by the impugned order placing reliance, in particular, on two decisions of this Court, one Trisuns Chemical Industry (supra) and Medchi Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. & Ors., [2000] 3 SCC 269. In the first case, this Court held that the exercise of inherent power should be limited to very extreme exceptions. Further it was held that referring the disputes to arbitration is not an effective substitute for a criminal prosecution when the disputed act is an offence. It may be noted that the said judgment gets attracted only when the disputed act is an offence, which the High Court has failed to notice. No doubt, exercise of inherent power under Section 482 Cr.P.C. by High Court should be limited to very extreme exceptions but in a case where ingredients of alleged offences are not satisfied even prima facie, it cannot be said that power under Section 482 Cr.P.C. should not be exercised to quash the process issued by a Magistrate. In the case of Smt. Nagawwa (supra), it is laid down that in such a case, power under section 482 Cr.P.C. can be exercised to quash the process issued by a Magistrate.
SUPREME COURT OF INDIA
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SUPREME COURT OF INDIA
CASE NO.:
Appeal (crl.) 1072 of 2001
S.W. PALANITKAR Vs STATE OF BIHAR AND ANR.
DATE OF JUDGMENT: 18/10/2001
BENCH:
D.P. MOHAPATRA & SHIVARAJ V. PATIL
Citation;2001 ( 4 ) Suppl. SCR 397
This appeal is by the accused in Complaint Case No. 1388 of 1997 in the
Court of Chief Judicial Magistrate, Patna, aggrieved by the order dated
20.12.2000 passed by the High Court of Patna in Criminal Misc. No. 6232 of
1998.
In brief the facts to the extent relevant and necessary for disposal of
this appeal are as under :-
There was an agreement dated 21.2.1995 between the appellant No. 1 (the
company) and the respondent no. 2 under which he was appointed as a
consignment stockist of the company subject to certain terms and
conditions.
The said agreement was valid till 20.2.1996. By a subsequent agreement
dated S.S.1997 the same arrangement was extended up to 31.3.1997 on the
same terms and conditions. On 3.10.1997 respondent No. 2 (complainant)
served a notice on the Manager Marketing and Regional Manager of the
company requesting them to make payment of Rs. 15.00 lacs to it within 15
days or in the alternative refer the disputes and differences to
arbitration as per clause 29 of the agreement. Thereafter the parties met
and the company offered to supply Ammonium Sulphate to the respondent for
the period 1997-98 on certain terms. The respondent rejected the offer
finding the terms unreasonable. It is thereafter the respondent filed a
complaint on 8.12.1997 alleging offences under sections 406 and 420 read
with Section 120B of the Indian Penal Code (IPC) inter alia stating "that
the accused persons in collusion and connivance of each other with wrongful
objects and motive to wrongfully squeeze money/ gratification from the
complainant and in their own benefit used the complain-ant wrongly and have
cheated the complainant by practising fraud and have acted fraudulently
against the complainant and by doing such acts they have committed criminal
breach of trust and put the complainant to wrongful loss and have gained
wrongfully. The accused persons have also cheated the com-plainant by using
the office and godown premises of the complainant on the basis of false
assurances given to the complainant and without making any farthing for
such costly and valuable premises and thus committed criminal breach of
trust, fraud and cheating which caused loss of rupees fifteen lacs".
The learned Chief Judicial Magistrate, Patna by his order dated 6.1.1998
issued summons against the appellants. The appellants approached the High
Court by filing a petition under Section 482 Cr.P.C. for quashing the
aforemen-tioned order of the learned Magistrate. The High Court by the
impugned order dismissed the said petition. In these circumstances the
appellants are before this Court in appeal.
Shri Dushyant Dave, learned Senior Counsel for the appellants urged that
the High Court failed to exercise its power under Section 482 Cr.P.C.
having regard to the facts and circumstances of the case in order to
prevent abuse of process of the court and/or to secure the ends of justice;
that the disputes between the appellants and respondent no. 2 were purely
of civil nature arising out of contractual relationship relating to
commercial transac-tion; even looking to the sworn statements, terms of the
agreement and the notice dated 3.10.1997, no case is made out to proceed
against the appellants on criminal side, that the essential ingredient of
the offence under Section 405 IPC is not made out as the appellants were
not entrusted with any property or with domain over property; similarly the
ingredients of the offence under Section 415 & 120-B IPC also were not
satisfied. According to him, the learned Magistrate committed a serious
error in issuing the process; unfortunately, the High Court, also failed to
correct the same, exercising jurisdiction under Section 482 of the Cr.P.C.
Alternatively and lastly, he submitted that at any rate no case is made out
against the appellants 1-6 and 8. Hence, issuing a process against them is
patently illegal and untenable. Shri L.K. Bajla, learned counsel for
respondent No. 2 made submissions supporting the impugned judgment of the
High Court and justifying the order passed by the learned Magistrate in
issuing the process. More or less, he reiterated the submissions that were
made before the High Court.
Before examining respective contentions on their relative merits, we think
it is appropriate to notice the legal position. Every breach of trust may
not result in a penal offence of criminal breach of trust unless there is
evidence of a mental act of fraudulent misappropriation. An act of breach
of trust involves a civil wrong in respect of which the person wronged may
seek his redress for damages in a civil court but a breach of trust with
mens rea gives rise to a criminal prosecution as well.
The ingredients in order to constitute a criminal breach of trust are: (1)
entrusting a person with property or with any dominion over property (ii)
that person entrusted (a) dishonestly misappropriating or converting that
property to his own use; or (b) dishonestly using or disposing of that
property or willfully suffering any other person so to do in violation (i)
of any direction of law prescribing the mode in which such trust is to be
discharged (ii) of any legal contract made touching the discharge of such
trust.
The ingredients of the offence of cheating are: (i) there should be
fraudulent or dishonest inducement of a person by deceiving him, (ii) (a)
the person so deceived should be induced to deliver any property to any
person, or to consent that any person shall retain any property; or (b) the
person so deceived should be intentionally induced to do or omit to do
anything which he would not do or omit if he were not so deceived; and
(iii) in cases covered by (ii) (b), the act of omission should be one which
causes or is likely to cause damage or harm .to the person induced in body,
mind, reputation or property.
One of us (D.P. Mohapatra J.) speaking for the Bench, in Hridaya Ranjan
Prasad Verma & Ors. v. State of Bihar & Anr, [2000] 4 SCC 168, on facts of
that case, has expressed thus :
"In determining the question it has to be kept in mind that the distinc-
tion 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 transac-tion, 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 fraudu-lent 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]
Finding that ingredients of the offence of cheating and its allied offences
had not been made out, this Court interfered with the order of the High
Court and quashed the criminal proceedings.
In G.V. Rao v. L.H.V. Prasad & Ors., [2000] 3 SCC 693, this Court in para 7
has stated thus :-
"As mentioned above, Section 415 has two parts. While in the first part,
the person must "dishonestly" or "fraudulently" induce the com-plainant to
deliver any property; in the second part; the person should intentionally
induce the complainant to do or omit to do a thing. That is to say, in the
first part, inducement must be dishonest or fraudulent. In the second part,
the inducement should be intentional. As observed by this Court in
Jaswantrai Manilal Akhaney v. State of Bombay, AIR (1956) SC 575 a guilty
intention is an essential ingredient of the offence of cheating. In order,
therefore, to secure conviction of a person for the offence of cheating,
"mens rea" on the part of that person, must be established. It was also
observed in Mahadeo Prasad v. State of W.B., AIR (1954) SC 724 that in
order to constitute the offence of cheating, the intention to deceive
should be in existence at the time when the inducement was offered"
[emphasis supplied]
In Irisuns Chemical Industry v. Rajesh Agarwal & Ors., [1999] 8 SCC 686
dealing with the effect of existence of arbitration clause in the agreement
on criminal prosecution on the ground that civil proceedings are also
maintainable, this Court has held that quashing of F.I.R. or a complaint
exercising power under Section 482 Cr.P.C. should be limited to a very
extreme exception; merely because an act has a civil profile is not enough
to stop action on the criminal side. It is further held that a provision
made in the agreement for referring the disputes to arbitration is not an
effective substitute for a criminal prosecution when the disputed act
constitutes a criminal offence.
In case of a complaint under Section 200 Cr.P.C. or IPC a Magistrate can
take cognizance of the offence made out and then has to examine the
complain-ant and his witnesses; if any, to ascertain whether a prima facie
case is made out against the accused to issue process so that the issue of
process is prevented on a complaint which is either false or vexatious or
intended only to harass. Such examination is provided in order to find out
whether there is or not sufficient ground for proceeding. The words
'sufficient ground', used under Section 203 have to be construed to mean
the satisfaction that a prima facie case is made out against the accused
and not sufficient ground for the purpose of conviction.
This Court in Nirmaljit Singh Hoon v. The State of West Bengal & Anr.,
[1973] 3 SCC 753, in para 22, referring to scheme of Sections 200-203 of
Cr. P.C. has explained that "The section does not say that a regular trial
of adjudging truth or otherwise of the person complained against should
take place at that stage, for, such a person can be called upon to answer
the accusation made against him only when a process has been issued and he
is on trial. Section 203 consists of two parts. The first part lays down
the materials which the Magistrate must consider, and the second part says
that if after considering those materials there is in his judgment no
sufficient ground for proceeding, he may dismiss the complaint. In Chandra
Deo Singh v. Prakash Chandra Base, [1964] 1 SCR 639, where dismissal of a
complaint by the Magistrate at the stage of Section 202 inquiry was set
aside, this Court laid down that the test was whether there was sufficient
ground for proceeding and not whether there was sufficient ground for
conviction, and observed (p. 653) that where there was prima facie
evidence, even though the person charged of an offence in the complaint
might have a defence, the matter had to be left to be decided by the
appropriate forum at the appropriate stage and issue of a process could not
be refused. Unless, therefore, the Magistrate finds that the evidence led
before him is self-contradictory, or intrinsically untrustworthy, process
cannot be refused if that evidence makes out a prima facie case" In Smt.
Nagawwa v. Veeranna Shivalingappa Konjalgi & Ors., [1976] 3 SCC 736 this
Court dealing with the scope of inquiry under Section 202 has stated that
it is extremely limited only to the ascertainment of the truth or falsehood
of the allegations made in the complaint (a) on the materials placed by the
complainant before the court; (b) for the limited purpose of finding out
whether a prima facie case for issue of process has been made out; (c) for
deciding the question purely from the point of view of the complainant
without at all adverting to any defence that the accused may have. It is
also indicated by way of illustration in which cases an order of the
Magistrate issuing process can be quashed on such case being "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".
Cautioning against issuing of process so that it should not be an instru-
ment in the hands of the private complainant as vendetta to harass the
person needlessly, this Court in Punjab National Bank & Ors. v. Surendra
Prasad Sinha, [1993] Supp. (1) SCC 499 has this to say in para 6 :-
"It is also salutary to note that judicial process should not be an
instrument of oppression or needless harassment. The complaint was laid
impleading the Chairman, the Managing Director of the Bank by name and a
host of officers. There lies responsibility and duty on the magistracy to
find whether the concerned accused should be legally responsible for the
offence charged for. Only on satisfying that the law casts liability or
creates offence against the juristic person or the persons impleaded then
only process would be issued. At that stage the court would be circumspect
and judicious in exercising discretion and should take all the relevant
facts and circumstances into consideration before issuing process lest it
would be an instrument in the hands of the private complaint as vendetta to
harass the persons needlessly. Vindication of majesty of justice and
maintenance of law and order in the society are the prime objects of
criminal justice but it would not be the means to wreak personal vengeance.
Considered from any angle we find that the respondent had abused the
process and laid complaint "against the appellants without any prima facie
case to harass them from vendetta." Similarly in Madhavrao Jiwajirao
Scindia & Ors. v. Sambhajirao
Chandrojirao Angre & Ors., [1988] 1 SCC 692, this Court has stated that
"The legal position is well settled that when a prosecution at the initial
stage is asked to be quashed, the test to be applied by the court is as to
whether the uncontroverted allegations as made prima facie establish the
offence. It is also for the court to take into consideration any special
features which appear in a particular case to consider whether it is
expedient and in the interest of justice to permit a prosecution to
continue. This is so on the basis that the court cannot be utilized for any
oblique purpose and where in the opinion of the court chances of an
ultimate conviction is bleak and, therefore, no useful purpose is
likely to be served by allowing a criminal prosecution to continue, the
court may while taking into consideration the special facts of a case also
quash the proceeding even though it may be at a preliminary stage."
Turning to the facts of the case, there is nothing either in the complaint
and/or in the sworn statements of the complainant and the three witnesses
that any property was entrusted to any of the appellants at all or the
appellants had domain over any of the properties of respondent no. 2 which
they dishonestly converted to their own use so as to satisfy the
ingredients of Section 405 IPC punishable under Section 406 IPC. Further
the agreement also did not require entrustment of any property to the
appellants. Taking the complaint and the statements of the witnesses as
they are, it cannot be said even prima facie, that the appellants committed
any offence punishable under Section 406 IPC, since the ingredients of that
offence were not satisfied. Hence the learned Magistrate committed a
serious error in issuing process against the appellants for the said
offence. Unfortunately, the High Court also failed to correct this manifest
error. It is clear from the allegations made in the complaint and the sworn
statements that the appellant no. 1 company entered into an agreement with
the respondent no. 2 on certain terms and conditions. It is alleged that
the appellant no. 7 went to Patna and contracted respondent no. 2 and
induced him to enter into an agreement assuring him of huge profit. At the
time of arriving at such an agreement, none of the other appellants either
met the respondent no. 2 or induced him to enter into any agreement with a
view to cheat him. The agreement was further renewed for a period of one
year. It is not the case that there was no supply of goods at all as it has
come on record that there was supply of 400 ton of fertilizer, may be it
was far less than the required quantity. The allegations made against the
appellants other than the appellant no. 7 are very vague and bald. From the
material that was placed before the Magistrate, even prima facie, it cannot
be said that there was conspiracy or connivance between the other
appellants and the appellant No. 7. If the appellants have committed breach
of agreement, it is open to respondent no. 2 to seek redressal in a
competent court or forum to recover damages, if permissible in law in case
he had sustained any loss. In order to constitute an offence of cheating,
the intention to deceive should be in existence at the time when the
inducement was made. It is necessary to show that a person had fraudulent
or dishonest intention at the time of making the promise, to say that he
committed an act of cheating. A mere failure to keep up promise
subsequently cannot be pre-sumed as an act leading to cheating.
Looking to the complaint and the grievances made by the complainant therein
and having regard to the agreement, it is clear that the dispute and
grievances arise out of the said agreement. Clause 29 of the agreement
provides for reference to arbitration in case of disputes or controversy
between the parties and the said clause is wide enough to cover almost all
sorts of disputes arising out of the agreement. As a matter of fact, it is
also brough to our notice that the complainant issued a notice dated
3.10.1997 to the appellants invoking this arbitration clause claiming Rs.
15. lacs. It is thereafter the present complaint was filed. For the alleged
breach of the agreement in relation to commercial transaction, it is open
to the respondent no. 2 to proceed against the appellants for his redressal
for recovery of money by way of damages for the loss caused, if any. Merely
because there is an arbitration clause in the agreement, that cannot
prevent criminal prosecution against the accused if an act constituting a
criminal offence is made out even prime facie.
Many a times, complaints are filed under Section 200 Cr.P.C. by the parties
with an oblique motive or for collateral purposes to harass, to wreck
vengeance, pressurize the accused to bring them to their own terms or to
enforce the obligations arising out of breach of contract touching
commercial transactions instead of approaching civil courts with a view to
realize money at the earliest. It is also to be kept in mind that when
parties commit a wrongful act constituting a criminal offence satisfying
necessary ingredients of an offence, they cannot be allowed to walk away
with an impression that no action could be taken against them on criminal
side. A wrongful or illegal act such as criminal breach of trust,
misappropriation, cheating or defamation may give rise to action both on
civil as well as on criminal side when it is clear from the complaint and
sworn statements that necessary ingredients of constituting an offence are
made out. May be parties are entitled to proceed on civil side only in a
given situation in the absence of an act constituting an offence but not to
proceed against the accused in a criminal prosecution. Hence before issuing
a process a Magistrate has to essentially keep in mind the scheme contained
in the provisions of Section 200-203 of Cr.P.C. keeping in mind the
position of law stated above and pass an order judiciously and not
mechanically or in routine manner.
The learned Magistrate, in our view, having regard to the facts stated and
the legal position explained above, committed a serious error in issuing
the process against the appellants 1 to 6 and 8 for offences under Sections
406,420 and 120-B IPC when the acts alleged against them did not constitute
these offences satisfying their ingredients even prima facie. In the light
of the material brought on record at that stage process could have been
issued only as against the appellant no. 7 that too for an offence under
Section 420 IPC only.
The High Court dismissed the petition filed under Section 482 Cr.P.C. by
the impugned order placing reliance, in particular, on two decisions of
this Court, one Trisuns Chemical Industry (supra) and Medchi Chemicals &
Pharma (P) Ltd. v. Biological E. Ltd. & Ors., [2000] 3 SCC 269. In the
first case, this Court held that the exercise of inherent power should be
limited to very extreme exceptions. Further it was held that referring the
disputes to arbitration is not an effective substitute for a criminal
prosecution when the disputed act is an offence. It may be noted that the
said judgment gets attracted only when the disputed act is an offence,
which the High Court has failed to notice. No doubt, exercise of inherent
power under Section 482 Cr.P.C. by High Court should be limited to very
extreme exceptions but in a case where ingredients of alleged offences are
not satisfied even prima facie, it cannot be said that power under Section
482 Cr.P.C. should not be exercised to quash the process issued by a
Magistrate. In the case of Smt. Nagawwa (supra), it is laid down that in
such a case, power under section 482 Cr.P.C. can be exercised to quash the
process issued by a Magistrate.
In the second case also, this Court has expressed that "exercise of
jurisdiction under the inherent power as envisaged under Section 482
Cr.P.C. to have the complaint or the charge-sheet quashed is an exception
rather than a rule and the case for quashing at the initial stage must have
to be treated as rarest of rare so as not to scuttle the
prosecution....................In the event, however, the court on perusal
of the complaint comes to a conclusion that the allegations leveled in the
complaint or charge-sheet on the face of it does not constitute or disclose
any offence as alleged, there ought not to be any hesi-tation to rise up to
the expectation of the people and deal with the situation as is required
under the law." Even from this case also, it is clear that if no offence is
made out from the allegations made in the complaint, there should be no
hesitation in exercising power under Section 482 Cr.P.C. to pass
appropriate order.
In the case on hand, we have already stated above that except against the
appellant no. 7, no offence was made out against the remaining appellants
as the ingredients of offences alleged against them were not satisfied.
Unfortu-nately, the High Court failed to exercise jurisdiction under
Section 482 Cr.P.C. to correct manifest error committed by the learned
Magistrate in issuing proc-ess against the appellants 1-6 and 8 when the
alleged acts against them did not constitute offences for want of
satisfying the ingredients of the offences. The approach and considerations
while exercising power and jurisdiction by a Magistrate at the time of
issuing process are to be in terms of Sections 200 to 203 under Chapter XV
of Cr.P.C., having due regard to the position of law explained in various
decisions of this Court, and whereas while exercising power under Section
482 of Cr.P.C. the High Court has to look at the object and purpose for
which such power is conferred on it under the said provision. Exercise of
inherent power is available to the High Court to give effect to any order
under the Cr.P.C., or to prevent about of the process of any court or
otherwise to secure the ends of justice. This being the position, exercise
of power under Section 482 Cr.P.C. should be consistent with the scope and
ambit of the same in the light of the decisions aforementioned. In
appropriate cases, to prevent judicial process from being an instrument of
oppression or harass-ment in the hands of frustrated or vindictive
litigants, exercise of inherent power is not only desirable but necessary
also, so that the judicial forum of court may not be allowed to be utilized
for any oblique motive. When a person approaches the High Court under
Section 482 Cr.P.C. to quash the very issue of process, the High Court on
the facts and circumstances of a case has to exercise the powers with
circumspection as stated above to really serve the purpose and object for
which they are conferred.
Thus having regard to facts and circumstances stated and discussion made
above, the issue of process against appellant nos. 1-6 and 8 is set aside
and the process issued against appellant no. 7 namely, Amrit Lal Desai @
A.B. Desai for offences under Sections 406 and 120-B is also set aside.
However, the issue of process against him under Section 420 IPC is
maintained. The order of the learned Magistrate and the impugned order are
modified to this extent. Thus, this appeal is partly allowed and stands
disposed of in the above terms.
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