RAMA KANT SHARMA v. STATE OF BIHAR & Ors.

The petitioners who are Directors are aggrieved by the order of cognizance dated 8.5.2007 in Complaint Case No. 1820(C) /2003 passed by the Judicial Magistrate, Ist Class, Patna. Learned counsel for the petitioners submits that from a bare perusal of the allegations made in the complaint, it is apparent that there was a distributorship agreement between the petitioner’s company and the opposite party no. 2 for the territories of Bihar and Nepal for a product known as “Baidyanath Dantmanjan Lal”. Earlier, the petitioners were selling the product through persons appointed by stockists in the two territories. The petitioners persuaded the complainant to take up the distributionship on the representation that their product had gained more market acceptability. An agreement dated 16.6.1997 was signed between the parties and the complainant - 2 - was appointed as “Vishishta Adhikrit Vikreta” (sole selling agent). The complainant was to get 16 ½ % discount on every bill as commission and in the said commission the complainant had to give 6% trade discount and 2% cash discount, aggregating 8% discount to stockist of Bihar and Nepal. The petitioners allegedly breached the terms of the agreement and gave 8% commission instead of 16 ½ % for the month of June and July, 1997. While in terms of the agreement the complainant gave 8% commission to the stockiest. The complainant, therefore, specifically says in Paragraph 7 of the complaint that this act “was a serious breach of trust/agreement”. When the complainant objected 16 ½ % commission from August, 1997 was given by the petitioners. The credit note dues of the commission amount were not issued for the month of June and July

1997. The complainant had issued debit note for commission dues but the petitioners neither issued any credit notes amount nor any cheque for payment. The petitioners, therefore, induced the complainant to sign an agreement with imaginary terms and conditions and to invest huge money in the business and cheated him by not paying the agreed amount and therefore they have committed criminal breach of trust. Despite an assurance to settle the dues of commission, they have not done so. The complainant had asked for verification of accounts and on verification of accounts it was found that a sum of Rs. 1,58,810.12/- were lying as the complainant’s credit balance acknowledged by the petitioners which has not been paid despite reminders. The petitioners started to give the product to other stockist - 3 - on a higher commission than that given to the opposite party no. 2 because of which opposite party no.

2 suffered business loss. The submission, therefore, was that the allegations in the complaint basically constitute a civil dispute arising out of an alleged breach of the contract, denial of commission allegedly acknowledged monetary dues payable which were not being paid. Whether it be a dispute of quantum of interest or a claim for money dues after verification of accounts arising out of a contractual relationship, the claim was essentially civil in nature and no criminal prosecution was maintainable. Learned counsel for the opposite party no. 2 submitted that though the origin of the relationship may have been in contract, the opposite party no. 2 acted in a dishonest manner to cause loss to the opposite party no. 2. The petitioners were required to protect his business interest. Contrary to the terms of the agreement with opposite party no. 2, the petitioners during the subsistence of the agreement sold their product to the others at a lesser price.

The submission, therefore, was that the opposite party no. 2 had suffered business loss due to breach of the distributorship agreement by the petitioners which they were liable to make good. It was lastly submitted that the opposite party no. 2 was not averse to the settlement of the dispute. The sole issue for consideration before this Court is whether on the allegation made out, a criminal prosecution would be sustainable or does the allegation make out a purely civil case. - 4 - The allegation arises out of a dealership agreement. The petitioners are alleged to have agreed for a commission rate and paid lesser than that in violation of the agreed terms. Despite appointing the petitioner as sole selling agent, they have gone to the market and sold their products at a higher commission to other agents causing business loss to the opposite party no. 2. On verification of accounts certain money has been found payable as per the allegations to the opposite party no.

2 by the petitioners which they were not paying. This makes out a money claim on part of the opposite party no. 2. This Court holds that the entire allegations in the complaint constitute primarily a civil dispute with regard to a breach of an agreement causing business loss to the opposite party no. 2 and loss of profit that expected by him along with a money claim for certain payments on what is alleged to be a legitimate due on verification of accounts. This Court cannot loose sight of the last submission made on behalf of the opposite party no. 2. They are agreeable for the settlement of the dispute. This Court finds no justification to allow the criminal prosecution of the petitioners to continue. The entire proceedings in complaint case are hereby quashed. The application stands allowed. P. Kumar (Navin Sinha, J.)