Criminal Petition No. 11127 of 2022 · The High Court · 2025

02. Heard Sri Duvva Pavan Kumar, learned counsel for the petitioner^accused and Smt. S.l\/adhavi, learned Assistant Public Prosecutor for the State respondent No.1 as well as Sri Dishit Bhattacharjee, Iearned counsel for the unofficial respondent No.2. Perused the record 03(a). Brief facts of the case are that on 21 .02.2022 aI 19:00 hours the complainant lodged a complaint alleging that the petitioner-accused is the Founder of the company I,E IVI/s.Super Surfaces, which deals with the high end luxury paints. During July, 2019, the friend of the petitioner-accused by name [Vlr Ravi Varma.P, introduced ? the complainant to the petitioner,accused, as a contractor to execute the painting works. After having an oral agreement regarding works and payments, the complainiant commenced the work. The cornplainant executed works in Telangana, Andhra Pradr:sh and Chennai. The payments were regular for a period of two months. Therefore, the said Ravi Varma was exrted out of the company by the petitioner-accused due to some lunknown reasons. After few days of his friend e;ctrng the company the complainant started facing problerns with the accur;ed company with regard to payments. The complainzrnt asked the petitioner-accused for payments and som,:how he used to give the complainant some reasonless excuses 03(b) t)uring March 2020, total lockdovrrn was announced by the Central Government due to C)ovid-19. Once the lockdown got relaxed during the montir of lVlay 2020, the, complainant got a call from the pr:titioner- accused asking him to commence the work. The complainant rejected his offer to resume work as he faced problems with the petitioner-accused before lockdown 3 regarding payments and as his pending bills are not cleared. The petitioner-accused called the complainant to his office and discussed the matter and the accounts were settled and the petitioner-accused was found to be due to the tune of Rs.'16,00,0001 and odd. For which, the complainant asked the petitioner-accused to settle down his balance amount immediately 03(c). Again the petitioner-accused stated that the company was in losses during the financial year 2019' 2020 and promised {o pay the amount after completion of work and requested the complainant to continue the work. The complainant had agreed for the said request of the petitioner-accused, on condition i.e. the complainant should be given a proper work order for each work before commencement of work and that his previous payments have to be made after work. For which, the petitioner- accused agreed and the complainant started executing the works. Once again, the petitioner-accused committed default in payments. 03(d). During December, 2020 and January, 2021 the complainant got exhausted with all his financial resources 4 and he /as not in a position to even pay salaries to his -! applicators. After Sankranti festival in January 2021 , the complairrant accounted hrs total pending amount from the petitioner-accused company which is nearing tc Rs 85 to 90 Iakhr; The complainant demanded the petitioner_ accused to clear his payment. The petitioner--accused asked frr a GST bill on date. The co.nplainant immedialely registered his GST from his home state Andhra rradesh, Palakollu town, as that is the place where h€r could get his GST registered immediately, as it takes 2 to 3 weeks to get GST registered in Hy,derabad During February, 2021 the complainant submitted the company all his GST rnvoices and got acknowledgement for the same from [Vlr. Srikanth in the accounts department for a total sum of Rs.1,05,86,640.28 inclusive GST, out of which the complainant received an am{lunt of Rs.16 60.467l- and the balance to be recerved is Rs.BB 26 '1 73 28/- incluslve GST. 03(e) l,fter submitting his invoices with GSI- to the accounts department, the complainant deman,led the petitioner-accused for his payment but the petitioner_ 5 accused started avoiding him, for which, he stopped execution of works and stated that he would re-commence the works only if his payment is ileared. At this stage, the petitioner-accused started threatening the complainant with dire consequences stating that he will not do the payment and would file a criminal case against the complainant. During lVlarch, 2021 the petitioner-accused has uploaded some GST bills to his GST account stating that they sold some painting material which comes to around 60 to 70 lakhs. Later, the complainant found out that the petitioner-accused committing malpractices to subside the dues or payments to be made. Since March 31sl 2022 is Financial Year closing day, the complainant supposed to at least close his GST by that time. After accounting his total due from the company with 18% GST penalties and 24o/o interest rate for the whole one year for personal damage occurred to him it came to Rs.1,12,70,072.27. Hence, the complainant requested for necessary action against the petitioner-accused.

04. Learned counsel for the petitioner submitted that the petitioner is nothing to do with the alleged offences .a'- 6 There is no dishonest intention on the part of the - petitioner-accused. It/lere failure to repay the amount woulcj not amount to criminal offence of cheatinq. There is no ek:ment of cheating from the beginnin,E of the transaction. There is no fraudulent intention on the part of the petrtioner-accused to cheat the complainant. The Police filed the charge sheet without proper inverstigation and reproduced the contents of the complaint and FIR in the chargte sheet and there is no incriminating material collected by the Police by way of investioation. All the allegations levelled against the petitioner-accused are purely civrl in nature and the respondent No.2-conr plainant is trying to convert the civil dispute into a criminal dispute The offences under Sections 406 and 420 of IPC are anti- thetical arrd cannot co-exist simultaneously

05. lVith the above submissions, learned counsel for the petitic ner-accused while praying for the quashment of criminal proceedings relied upon a decisron of the Honourable Supreme Court of lndia in Delhi Race Club 7 - (1940) Ltd., v State of UPl , wherein it was held at Paragraph No. 43 that. '43. There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention ls necessa4z at the time of making a false or misleading representation i.e., since inception. ln criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted wtth the propefty, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any propefty. ln such a siluation. both the offences cannot co-exist simultaneously."

06. Further, he relied upon a decision in Rikhab Birani and another v Stafe of UC it was held by the Honourable Supreme Court at Paragraph Nos.2,6, 12, 13, 14, 20 thar "2 The appellants, Rikhab Birani and Sadhna Birani. had entered into an oral agreement to sell Roti Godown No. 28/27, [3irhana Road, Kanpur, Uttar Pradesh, to respondent No.2, Shilpi Gupta, for a consideration o{ {1,35,00,000/- (Rupees one crore thirly five lakhs only) in June, 2020. A lt /s lhe case of the appellants, Rikhab Birani and Sadhna Birani, that they had (2024) 10 scc 690 - '2025 SCC Onl rne SC 823 I -I suffered /osses of {45.00,000/- (Rupees t'orly five lakhs only) on account of the failur<: of .espondent No 2, Shilpi Gupta, and her \usband, in paying the sale consideration amount and abiding by the oral agreemcnt. \ence. they are not liable to refund or pay any amount to respondent No.2, Shilpi Gupta. lt is ,'he accepted position that neither the ,tppellants, Rikhab Birani and Sadhna Birani, nor respondent No.2. Shilpi Gupta. inttietted itny civil proceedings On the other hancl. respondent No 2. Shilpi Gupta. approachecl the t)ouft of the Metropolitan Magistrale Kanpur It!agar. for registration of a First lnformalon l?epoftl by taking recourse to the provision:; of :Section 156(3) of the Code of Crimind l)rocedure, 1973. llowever. by the deta;lec1 and reasoned order dated 26.04.2022. the l/letropolitan lvlagistrate, Kanpur Naglar. r/lsmlssed the application under Section 1 5()(3) of the Cr.P.C. holding that thls ls a civit matter ernd no criminal offence is made out.

12. Thereupon. the appellanls. Rikhab flirani and Sadhna Birani. preferred a pet ion tnder Section 482 of the Cr P.C. before ttte Lltgh Court, which was dlsmrssed by the ltigth Couft, vide the rmpugned order dalcd C'9.05.2024, notwithstanding the aforesaid fitcts. stating that at that stage onty a printa fitcie case was to be seen in the tiqht of the law laid down by this Courl 13 We are constrained to pass this detailed soeaking order, as lt ls noticed that. notwithstanding the law clearty laid clown by tltrs Couri on the difference between a breach ot contract and the cnminal offence of c,ieathg, we are continuously flooded with c,tses where the police regrcter an FiR, conduct investigation and even chargesheet(s) in undeserving cases-

14. During the last couple of months, a number of iudgments/orders have been pronounced by this Courl, especially tn cases arising from the Stafe of Uttar Pradesh, deprecating the stance of the police as well as the courts in failing to distingursh between a civil wrong in the form of a breach of contract, non-payment of money or disregard to and violation of contractual terms; and a criminal offence under Secfions 420 and 406 of the tPC, the ingredients of which are quite different ancl requires mens rea at the time when the contract is entered into itself to not abide by the terms thereot. 20 ln yet another case, again arising from criminat proCeedings it-titiated in the State of uttar Pradesh. this Court was constrained to note recurring cases being encountered wherein parties repeatedly attempted to invoke the lurisrliction of criminal courts by filing vexatious complaints, camouflaging allegations that are ex facie outrageous or are pure civil claims 'fhese attemPts must not be entertained and shoutd be dismissed at the threshold. Reference was made to a judgment of this Courl in Thermax Limited and Others v K.lll. Johny and Others, which held that coutts shoutd be watchfut of the difference between civil and crimtnal wrongs' though there can be situations where the allegation may constitute both civil and criminat wrongs Fufther, there has to be a conscious application of mind on lhese aspecis by the Magistrate, as a summoning order has grave consequences of setting criminal proceedings in motion Though the Magistrate is not required to record detailed 7- .- 10 reasons, there should be adequate evtdence on record to set cnmrnal proceedings into motion. The Magistrate should ca:refully scrutinize the ewdence on record anri may even put questions to complainanUinvestigating officer etc. tc' elicit answers to find out the truth aboLl the allegations. The summoning order has to be passed when the complaint or chargesheet discloses an offence and when thetrc is material that supporls and constitutes es.sentra/ ingredients of the offence. The sumnoning order should not be passed lightly or as a matter of course." 07 Further, he relied upon a decisror n Sharif Ahmert y State of UC it was held by the llonourable Suprerne Court at Paragraph No.13 that "13. The charge sheef is complete when it refers to material and evidence sufficr'=ni ta take cognizance and for the trial. The nature and standard of evidence to be elucidate'cl n a charge sheet should prima facie show that an offence is established if the ntatenal and evidence is proven." \ 0B On the other hand, learned Assistant Public Prosecutor appearing for the State-respondent No.1 as well as learned counsel for the unofficial respc,ndent No.2 contended that there are triable issues and factual aspects to be examined by the learned trial Cor-rrt and it is ' 2024 SCC Or Line SC 726 -- 11 not a fit case to quash the proceedings against petitioner at this juncture and the matter is to be decided after conducting full-fledged trial by the learned trial Court and prayed to dismiss thrs Criminal Petition

09. Having regard to the submissions made on either side and on perusal of the material record' it is apparent that there was an oral agreement between the complainant and the petitioner-accused with regard to painting works. Admittedly, the payments were done for a period of two months. Thereafter, certain amounts were due from the petitioner-accused to the complainant, for which, the complainant halted the works. Subsequently, there were discussions between the complainant and ihe petitioner-accused and the work has been resumed by the complainant. Some part payments were also made by the petitioner-accused and the same were accepted by the complainant. lt is also apparent on the face of the record that the petitioner-accused had admittedly promised to repay the balance amount to the complainant. ln so far as uploading or deletion of GST invoices is concerned, it is evident from the contents of the complaint itself that the 12 GST registration was done by the complainant, only after - demand of GST invoices from the petitioner-accused Hence. it is for the concerned authorities to take necessary action, if any, violation was comnrittr:d by the com pla in a nt 10 lt is settled principle of law that the disionest or fraudulerrt intention on the part of the petitioner.accused, to cheat the complainant shall be from inceptror-r ln the case on hand, on the demand made by the corrplainant for payment of due amount, the petitioner-accused had paid part of the amount to the complainant ancl further undertook to return the remaining amount. I herr:fore, the allegatior that there is dishonest or fraudulent intr:ntion on the part of the petitioner-accused to cheat the complainitnt. right from the beginning of the transaction, is not sustainable in the eye of law.

11. l. is to be noted that admittedly there is no complaint lodged or reported grievance by the complainernt when initially the petitioner-accused failed to pay the amounts. lt rs settled principle of law trat mere inability of the petltioner-accused to pay the amount 13 cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. 12 The offences that are registered against the petitioner-accused are under Sections 420,40G of IPC' Section 406 of IPC Criminal Breach of Trust' deals with dishonestly misusing property entrusted to someone, where the person is in a position of trust- lt is about violating a duty or obligation associated with the property Section 42O of lPC.deals with cheating and focuses on deceiving someone to induce them to deliver property or consent to the retention of property, typically involving fraud or dishonest inducement. lt is about making a false representation or inducing someone to believe in something false. Cheating requires the element of deception, while criminal breach of trust requires a trust relationship and dishonestly using property entrusted' '1 3 ln case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. [Vlere breach of ,/,,/ 14 contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest tntention is shown right fronr the beginning of the transaction ie the time when thr: offence is sard to have been cc mmitted Therefore, it is this intention, which is the gis;t of the offence /Vhereas, for the criminal breach of lrust, the property rnust have been entrusted to the accused or he must have dominion over it. The property in rerspect of which the offence of breach of trust has been committed must be erither the property of some person other than the accused cr the beneficial interest in or ownership' of it must be rf some other person. The accused mr-rst hold that prope:rty on trust of such other person. Although the offence. ie. the offence of breach of trust and cheating involve rJishonest intention, yet they m u tua lly exclusive and different in basic concept. ln such a situation, both the offences cannot co,exist simultane:usly, as they are anti-thetical of each other and cannot dr.t,ell together in the same set-of-facts

14. Ctn a careful scrutiny of charge sheet avr:rments, it appears that there is reiteration of the contenls of the 15 - complaint and FlR. The investigation to be conducted subsequent to registration of an FIR and prior to filing of a charge sheet is a crucial step in criminal proceedings. The contents of the charge sheet must reflect the result of the said investigation including material evidence sufficient to prove the alleged offences. But, in the case on hand, the contents of the complaint and FIR are reproduced in the charge sheet without any reference to the investigation done or material evidence collected.

15. To prove Jhe basic allegations against the petitioneraccused for the alleged offences, there is no single independent witness examined by the Police. Out of seven list of witnesses examined, there are three official witnesses, one de-facto complainant and three circumstantial witnesses. ln order to prove the alleged oral agreement between the complainant and the petitioner-accused, no independent witness was examined. LWS is shown as Expert witness. lt is not known from the entire record as to what type of specialized expertise or skill possessed by LW5 and there is no whisper about his role in the investigation. However, 16 the entire allegations revolves around the paym,3nt of due amount by the petitioner-accused to the complainant lt appears that all the allegations levelled against the petitioner-accused are of purely civil in nature Ihelefore, ihitiation of criminal proceedings against the cetitioner- accused is not tenable 16 ln view of the aforesaid facts and circumstances of the case including the settled principle of law Iaid down by the llon'ble Supreme Court of lndia in the above decrsions;, this Co.urt is of the firm opinion that the required material ingredients for constituting the offences under Sections 406.420 of IPC are not made out aqainst the petitioner accused. Hence, the continuatior of the criminal proceedings against the petitioner-accused amounts to abuse of process of law and the same are liable to l,e quashed. 17 r\ccordingly, this Criminal Petition is allc,wed ancl the proceedings against the petitioner-accused in C C No.3114 of 2022 pending on the file of learned XVll Additional Chief Metropolitan Magistrate at Nampally, Hyderabad, are hereby quashed. 17 As a sequel, pending miscellaneous applications, if any, shall stand closed //TRUE COPY/I I) SD/- MOHD. ISMAIL DEPUTY REGISTRAR 1i(\o SEGTION OFFICER One fair copy to THE HONOURABLE SMT JUSTICE JUWADI SRIDEVI (For Her Lordship's Kind Perusal) To, Hyderabad [OUT]

1. The XVll Additional Chief lvletropolitan Magistrate, at Nampally, Hyderabad. 2. The Station House Officer, Jubilee Hills Police Station, Hyderabad. 3. Two CCs 1o the Public Prosecutor, High Court for the State of Telangana at 4. One CC to Sri Duwa Pavan Kumar, Advocate [OPUC] 5. One CC to Sri Dishit Bhattacharjee, Advocate [OPUC] 6. 11 L.R. Copies. 7. The Under Secretary, Union of lndia, Ministry of Law, Justice and Company Affairs, New Delhi.

8. The Secretary, Telangana Advocates Association Library, High Court Buildings, Hyderabad

9. Two CD Copies NVB/gh I I HIGH COURT DATED:1610612025 ORDER CRLP.No.11127 ot 2022 ( oRTHIS t4 o , * 16 JLI 206 P -- !, (:\ a"r' - -:-*:--. - )|'lr_O * ALLOWING THE CRIMINAL PETITION )K \b