High Court
Legal Reasoning
(1) appln-77-2021.odtIN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABADCRIMINAL APPLICATION NO.77 OF 20211.Nitin Chandulal Thakkar,Age – 60 years, Occ – Business,R/o-88, Balkrishna, Sector -7, Satyagarh Chavni, Ahmedabad City, Ahmedabad, Gujarat.2.Lalitmohan Radhakrishna Chamariya,Age 59 years, Occ-Business, R/o-T-98, Sharanam Country, Chitvan Society, Gala Gymkana Road, At Bopal, Ahmedabad.3.Nareshkumar Ramgopal Sharma,Age 58 years, Occ - Business, R/o-02, Shailraj Bunglows, Ramdev Nagar, Satellite, Ahmedabad City, Ahmedabad, Manekbag, Gujarat.4.Ashish Virendrabhai Shah,Age-62 years, Occ-Business, R/o-2, Jain Merchant Society, Ellisbridge, Paldi, Ahmedabad.5.Devkinandan Gopiram Agarwal,Age-65 years, Occ - Business, R/o-Gopiram, 4, Nilgiri Bunglo, Behind Ashwamegh-5, 132 feet, Road, Satellite, Ahmedabad City, Ahmedabad, Manekbag, Gujarat...ApplicantsVersus1.State of Maharashtra,Through Investigation Officer City Police Station, Jalgaon Taluka & District - Jalgaon. 2.Rishabh Metals & Chemicals Pvt Ltd.Through Shri. Dnyandev Devidas Wani, Law Officer, Address - Khandesh Mill Complex,Jalgaon, Taluka & District – Jalgaon...Respondents …
Legal Reasoning
(2) appln-77-2021.odtMr. V. B. Patil, Advocate for the Applicants.Mr. V. K. Kotecha, APP for Respondent No.1.Mr. S. S. Bora, Advocate for Respondent No.2. … CORAM : SMT. VIBHA KANKANWADI AND S. G. CHAPALGAONKAR, JJ. DATED : 18th SEPTEMBER, 2024.JUDGMENT (Per S. G. Chapalgaonkar, J.)1.The applicants have approached this Court under Section482 of the Criminal Procedure Code for quashing of FIR in CrimeNo.652/2020 dated 30.10.2020 registered with Jalgaon City PoliceStation, Dist. Jalgaon for offences punishable under Sections 406,420 r/w 34 of the Indian Penal Code and consequential criminalproceeding in R.C.C. No.450/2021 pending before JudicialMagistrate First Class, Jalgaon.2.The respondent no.2 lodged report to the Jalgaon City PoliceStation alleging he is Law Officer of M/s. Rishabh Metals andChemicals Private Limited, which is a registered company in termsof Companies Act. It has been incorporated in the year 1975 andengaged in business of processing and selling variety of chemicals.The company accepts orders through emails and supply chemicalson credit as per demand of customers. It is alleged thatapplicants / accused are Directors of company namely Narol TextileInfrastructure and Enviro Management (NTIEM). The saidcompany put purchase orders for ‘Rishlyte and Rishfloc’ during theperiod from 21.07.2019 to 21.08.2019 worth Rs.44,09,234/-. Inresponse goods were supplied through Chintan Freights Carrier onassurance that bills shall be cleared within a period of 30 days.The GST amount on the goods supplied was paid by M/s. RishabhMetals and Chemicals Private Limited. The accused persons failedto release the amount of bills towards goods supplied. As such, (3) appln-77-2021.odtaccused persons deceived M/s. Rishabh Metals and ChemicalsPrivate Limited and caused loss of Rs.44,09,234/-. 3.In pursuance of aforesaid report, Crime No.652/2020 came tobe registered against applicants, who are Directors of NTIEM. Theinvestigation progressed in crime. Finally, charge-sheet has beenfiled and R.C.C. No.450/2021 which is pending before JudicialMagistrate First Class at Jalgaon for trial.4.Mr. Patil, learned Advocate appearing for the applicantssubmits that FIR is false, frivolous and without element ofcriminality. The applicants have been falsely implicated in theaforesaid crime. The applicants have been arraigned as accusedwithout making company as accused. The dispute between twocompanies is predominantly of civil nature. The matter falls shortof offence of cheating and criminal breach of trust. There is noelement of deception at the inception of transaction. It may be amatter of non-fulfillment of contractual liability and nothing else.Both the companies were in the regular business. The NTIEM hasmade payment of Rs.1,45,33,055/- on or around 21.10.2019.However, later on there had been dispute over cost, which can beobserved in the telecommunication and email exchanged betweenparties. He would, therefore, urge that ingredients of offencecharged are absent in the matter. The registration of FIR andconsequential proceeding is abuse of process of law. Hence, heurges to quash and set aside FIR and further proceeding.5.Per contra, Mr. Kotecha, learned APP appearing for therespondent-State and Mr. Satyajit Bora, learned Advocateappearing for respondent no.2 vehemently opposes prayers in theapplication. They would submit that applicants are Directors of (4) appln-77-2021.odtNTIEM. They were responsible for day to day business of theCompany. The applicants, while discharging their duties asDirectors induced M/s Rishabh Metals and Chemicals PrivateLimited to supply goods on credit. After receipt of goods, they wereobliged to release payment towards goods supplied within a periodof 30 days. However, amount of Rs.44,09,234/- has been illegallywithhold by applicants- Directors of NTIEM. Time and again theywere persuaded to release the payment. The GST amount isalready deposited by M/s. Rishabh Metals and Chemicals PrivateLimited for goods supplied. Now applicants are raising false andfrivolous grounds in the application. Their intention to deceive canbe gathered from their conduct. The correspondence between theparties also support the case of informant. There is sufficientmaterial to gather deceitful intentions of the applicants in thetransaction. There is triable material against them. The inherentpowers under Section 482 of the Criminal Procedure Code cannotbe exercised in such a set of factual aspects and parties must berelegated to the trial. As such, they urge to reject the application.6.We have considered submissions advanced on behalf oflearned Advocates appearing for respective parties. We haveminutely considered the contents of the FIR and material placedinto service alongwith reply affidavit filed by respondent no.2. TheFirst Information Report has been lodged against applicants byauthorized officer of M/s. Rishabh Metals and Chemicals PrivateLimited. They are Directors of NTIEM situated at Ahmedabad.There was privity of contract between companies. In pursuance oforder placed for supply of goods by NTIEM, M/s. Rishabh Metalssupplied goods worth Rs.44,09,234/- during the period from21.07.2019 to 21.08.2019. The component of GST worthRs.7,13,700/- is also deposited by M/s. Rishabh Metals. However, (5) appln-77-2021.odtthe bills towards supply of aforesaid goods have not been clearedwithin credit period of 30 days as agreed between parties. Theapplicants being Directors were responsible for day to day businessof NTIEM hence they have been arraigned as accused. The sumand substance of allegation in the FIR is that applicants- Directorsof NTIEM have illegally withhold bills towards goods supplied oncredit by M/s. Rishabh Metals. As such, they have committedoffence under Section 406 and 420 of the Indian Penal Code.Section 420 of the Indian Penal Code prescribes for punishment forcheating. 7.The term cheating has been defined under Section 415 of theIndian Penal Code. Section 415 of the Indian Penal Code reads asfollows:“415. Cheating —Whoever, by deceiving any person, fraudulently or dishonestlyinduces the person so deceived to deliver any property to anyperson, or to consent that any person shall retain anyproperty, or intentionally induces the person so deceived to door omit to do anything which he would not do or omit if hewere not so deceived, and which act or omission causes or islikely to cause damage or harm to that person in body, mind,reputation or property, is said to "cheat".”8.Plain reading of aforesaid section depicts that to bring homeingredients of Section 415 of the Indian Penal Code, it is necessaryto show that at the time of making the promise, accused hadfraudulent and dishonest intention to retain property or to inducethe person so induced to do something which he would nototherwise. The aforesaid ingredients are more elaborately andsuccinctly laid down in case of Ram Jas vs State of U.P.1, whichreads as follows:(i) There should be fraudulent or dishonest inducement of aperson by deceiving him; 1AIR 1974 SC 1811. (6) appln-77-2021.odt(ii)(a) The person so deceived should be induced to deliver anyproperty to any person, or to consent that any person shallretain any property; or (b) The person so deceived should be intentionally induced todo or omit to do anything which he would not do or omit if hewere not so deceived; and (iii)In cases covered by (ii) (b), the act or omission should beone which causes or is likely to cause damage or harm to theperson induced in body, mind, reputation or property. 9.Further, in case of Hira Lal Hari Lal Bhagwati Vs.C.B.I., New Delhi2, Supreme Court of India observed that in orderto constitute an offence of cheating it must be shown that accusedhad fraudulent or dishonest intention at the time of makingrepresentation or promise and such culpable intention right at thetime of entering into agreement cannot be presumed merely fromhis failure to keep promise subsequently. Similarly, in the case ofHridaya Ranjan Prasad Verma & Ors. Vs. State of Bihar &Anr.3, it is observed as under:- “15. ….that the distinction between mere breach ofcontract and the offence of cheating is a fine one. Itdepends upon the intention of the accused at the time toinducement which may be judged by his subsequentconduct but for this subsequent conduct is not the soletest. Mere breach of contract cannot give rise to criminalprosecution for cheating unless fraudulent or dishonestintention is shown right at the beginning of thetransaction, that is the time when the offence is said tohave been committed. Therefore it is the intention whichis the gist of the offence. To hold a person guilty ofcheating it is necessary to show that he had fraudulentor dishonest intention at the time of making thepromise.” 10.In the instant case, what has been alleged is that M/s.Rishabh Metals and Chemicals Private Limited had policy ofsupplying goods on credit period of 30 days. The NTIEM orderedfor supply of chemicals ‘Rishlyte and Rishfloc’ from M/s. Rishabh2(2003) 5 SCC 257.32000 (4) SCC 168. (7) appln-77-2021.odtMetals and Chemicals Private Limited. Consequently, goods weresupplied during the period from 21.07.2019 to 21.08.2019 worthRs.44,09,234/- on credit basis. However, NTIEM failed to releasepayment within 30 days. Consequently, M/s. Rishabh Metals andChemicals Private Limited has been deceived and cheated for theamount of Rs.44,09,234/- towards bills of goods supplied and GSTamount of Rs.7,13,700/- realized by M/s. Rishabh Metals andChemicals Private Limited against sale of aforesaid goods. 11.Pertinently, from the contents of the FIR it is not discerniblethat at the inception of the transaction, NTIEM had fraudulentintention and order for supply of goods was deceitful or M/s.Rishabh Metals was induced to release the goods with intention todefraud them. In short, allegations in the FIR fall short of offenceof cheating. Even FIR is absolutely silent about deception byNTIEM. Pertinently, there are no stipulations in FIR against anyof the applicants/directors depicting their overtact. Eventually,keeping in mind principles of law espoused by the Supreme Courtingredients of cheating as defined under Section 415 of the IndianPenal Code are found to be absent in the present case. 12.Now let us turn to the another charge for offence underSection 406 of the Indian Penal Code. Section 406 of the IndianPenal Code prescribes punishment for criminal breach of trust. Thecriminal breach of trust is defined in Section 405 of the IndianPenal Code, which reads as under:“405. Criminal breach of trust —Whoever, being in any manner entrusted with property, orwith any dominion over property, dishonestlymisappropriates or converts to his own use that property, ordishonestly uses or disposes of that property in violation ofany direction of law prescribing the mode in which such trustis to be discharged, or of any legal contract, express orimplied, which he has made touching the discharge of such (8) appln-77-2021.odttrust, or wilfully suffers any other person so to do, commits"criminal breach of trust".”13.Plain reading of Section 405 depicts following ingredients tofulfill definition of criminal breach of trust:(a)that person should have been entrusted with property orentrusted dominion over the property;(b) that person should dishonestly misappropriate or convertto his own use property, or dishonestly used or disposed ofthat property or wilfully suffered any other person to do soand;(c) that such misappropriation, conversion, used or disposalshould be in violation of any direction of law prescribingthe mode in which such trust is to be discharged or by anylegal contract, which person has made, touching thedischarge of such trust. 14.In case of Onkar Nath Mishra & Ors Vs. State (NCT OfDelhi) & Anr4, the Supreme Court of India observed that thereare two distinct parts involved in commission of offence of criminalbreach of trust. First part consists of creation of obligation inrelation to the property over which dominion or control is acquiredby the accused. Second is misappropriation or dealing with theproperty dishonestly and contrary to the terms of the obligationcreated. In facts of the present case, it can be observed that incourse of regular business transaction with M/s. Rishabh Metals,NTIEM has released total amount of Rs.1,45,33,055/- towardsgoods supplied on or around 21.10.2019. Pertinently, this regularnature of transaction as pleaded in the application is notcontroverted in the affidavit-in-reply filed on behalf of respondentno.2. It is, therefore, discernible that NTIEM had regular businesstransactions for which they have made payments. However, so faras the goods supplied during the period from 21.07.2019 to21.08.2019, the NTIEM has raised issue of costing based onmanufacturing process adopted by M/s. Rishabh Metals and made4(2008) 2 SCC 561. (9) appln-77-2021.odtcorrespondence for issuing credit note worth Rs.44,09,234/- towhich M/s. Rishabh Metals has not agreed. As such, the amountworth Rs.47,16,950/- was debited in the account of respondent no.2.Copy of such debit note alongwith communication dated 14.03.2020is placed on record. Even aforesaid documents are not disputed inaffidavit-in-reply filed by respondent no.2. At this stage, it isapposite to refer certain parameters of jurisdiction under Section482 of the Criminal Procedure Code as observed by the SupremeCourt of India in case of Mitesh Kumar J. Sha (supra) inparagraph nos.39 and 40, which reads as under:“39.It was also observed:- (Indian Oil Corpn. Case, SCC pp.748-49, para 13) “13. While on this issue, it is necessary to take notice of agrowing tendency in business circles to convert purelycivil disputes into criminal cases. This is obviously onaccount of a prevalent impression that civil lawremedies are time consuming and do not adequatelyprotect the interests of lenders/creditors….There is alsoan impression that if a person could somehow beentangled in a criminal prosecution, there is a likelihoodof imminent settlement. Any effort to settle civil disputesand claims, which do not involve any criminal offence,by applying pressure though criminal prosecutionshould be deprecated and discouraged.” 40. On an earlier occasion, in case of G. Sagar Suri and Anr. Vs. State of UP, this Court has also observed:- “8. Jurisdiction under Section 482 of the Code has to beexercised with a great care. In exercise of its jurisdictionHigh Court is not to examine the matter superficially. Itis to be seen if a matter, which is essentially of civilnature, has been given a cloak of criminal offence.Criminal proceedings are not a short cut of otherremedies available in law. Before issuing process acriminal court has to exercise a great deal of caution.For the accused it is a serious matter. This Court haslaid certain principles on the basis of which High Courtis to exercise its jurisdiction under Section 482 of theCode. Jurisdiction under this Section has to beexercised to prevent abuse of the process of any court orotherwise to secure the ends of justice.”” (10) appln-77-2021.odt15.The net result of aforesaid discussion would lead us toconclude that impugned FIR predominantly suggests dispute ofcivil nature without any element of criminality. Both the partieshave entered into contractual obligation and dispute appears to beregarding cost reduction of the supplied goods. The FIR ordocuments placed into service before us are bereft to make outoffence like cheating and criminal breach of trust. Even there areno specific wordings in the FIR attributing intentional deceptionfrom the inception of the transaction. Apparently, it is a matter ofnon-fulfillment of contractual liability. The criminal proceedingcannot be allowed to be used as tool for settling contractualobligations. Resultantly, we are of the considered view that inabsence of prima facie case to make out ingredients to attractoffence under Section 406 and 420 of the Indian Penal Code, it is afit case to invoke jurisdiction under Section 482 of the CriminalProcedure Code for quashing of FIR. Hence, we proceed to passfollowing order:ORDERa.Criminal Application is allowed in terms of prayer Clause(B), which reads as under:“B. By appropriate order or direction in the like nature, FIRno. 652/2020/C.R. no. 202/2020 registered with the CityPolice Station, Jalgaon for the offence punishable u/s. 406,420, 34 of the I P C and Chargesheet bearing no. as R.C.C.No.450/21 may please kindly be quashed & set aside and for thatpurpose appropriate orders may kindly be passed.”b.Criminal Application is disposed of.(S. G. CHAPALGAONKAR) (SMT. VIBHA KANKANWADI) JUDGE JUDGEDevendra/September-2024