Amrit Hatcheries Private Limited vs Saasta Farms

R.K. Bag, J.—The petitioners have prayed for quashing of the criminal proceeding of CNS/Case No. 406021 of 2014 pending before the court of learned Metropolitan Magistrate, 20th Court, Calcutta by filing this revision under Section 482 of the Code of Criminal Procedure.

The backdrop of filing the present revision is as follows: The Opposite Party, M/s. Saasta Farms (hereinafter referred to as the complainant firm) filed a petition of complaint against the petitioners before the court of learned Metropolitan Magistrate praying for issuance of process against the petitioners for the offence punishable under Sections 420/406/120B of the Indian Penal Code. The petitioner no.1, M/s. Amrit Hatcheries Private Limited (hereinafter referred to as the accused company) is running hatchery-cum-poultry firm by purchasing hatching eggs. The petitioner no.2 is the Managing Director of the accused company and the petitioner no.3 and the petitioner no.4 are the Directors of the said accused company. One Mrs. T. Kavita happens to be the proprietor of the complainant firm. It is alleged in the petition of complaint that pursuant to an agreement between the complainant firm and the accused company, the complainant firm started to supply hatching eggs to the hatcheries of the accused company at different places with effect from the month of July, 2013. It is further alleged that the complainant firm supplied total quantities of 49,39,310 pieces of egg valued at Rs.1,44,18,442/- till the month of January, 2014. It is specifically alleged that the accused company did not make payment of dues of Rs.1,44,19,442/- to the complainant firm in spite of repeated requests. As a result, the complainant firm started the criminal proceeding against the accused company and its Managing Director and other two Directors on the allegation that they have committed offence punishable under Sections 420/406/120B of the Indian Penal Code.

Learned Magistrate took cognizance of the offence on the basis of petition of complaint filed by the complainant firm and issued process against all the petitioners for the offence punishable under Sections 420/406/120B of the Indian Penal Code. On October 30, 2014 the petitioners filed two separate applications before the court of learned Magistrate - one application was filed praying for exemption from personal appearance before the court under Section 205 of the Code of Criminal Procedure and another application was filed praying for representing the accused company through authorised agent under Section 305 of the Code of Criminal Procedure. The criminal proceeding is under challenge in this revision.

By referring to the communication between the complainant firm and the accused company through e-mails, Mr. Debashis Roy, learned counsel for the petitioners submits that there is long standing business relation between the complainant firm and the accused company. He has further referred to the print-out of the e-mails annexed to the revisional application and submitted that the accused company transferred funds to the complainant firm through R.T.G.S. from time to time from December 11, 2013 to January 11, 2014, but there was outstanding dues of Rs.1,44,18,488/- which was not paid due to supply of inferior quality of eggs by the complainant firm. Mr. Roy contends that on March 12, 2014 the accused company started criminal proceeding against the complainant firm and its proprietor for the offence punishable under Sections 420/406/408/34 of the Indian Penal Code. He has further pointed out that the accused company instituted money suit no.33 of 2014 against the complainant firm for realisation of Rs.4 crores. Relying on the decision of the Supreme Court in "S.W. Palanitkar v. State of Bihar" reported in (2002) 1 SCC 241 and in "Anil Mahajan v. Bhor Industries Ltd." reported in (2005) 10 SCC 228 Mr. Roy argues that no offence is made out against the petitioners for continuation of the criminal proceeding and as such the criminal proceeding initiated at the instance of the complainant firm is liable to be quashed.

Mr. Ranjit Kumar Ghosal, learned counsel for the Opposite Party submits that the accused company received the eggs without raising any objection, but did not make payment of Rs.1,44,18,488/- in spite of repeated requests for which the complainant firm was compelled to initiate criminal proceeding against the accused company and its Managing Director and other two Directors. Relying on the decision of the Supreme Court in "Lee Kun Hee v. State of U.P." reported in AIR 2012 SC 1007. Mr. Ghosal submits that the action of the accused company can give rise to both civil liability and criminal culpability and the complainant firm has the option to proceed against the accused company for the criminal liability. According to Mr. Ghosal, the accused company and its Managing Director and other two Directors are liable to be prosecuted before the trial court.

The contents of the petition of complaint disclose that the complainant firm started to supply hatching eggs to the accused company from the month of July, 2013, but the accused company did not make payment of outstanding dues of Rs.1,44,18,442/- till January, 2014. The exchange of communication between the complainant firm and the accused company through e-mails (print-out of the said e-mails are annexed to the revisional application) indicates that the accused company transferred funds to the complainant firm through R.T.G.S. from December 11, 2013 to January 11, 2014, though the outstanding dues are shown as Rs.1,44,18,488/- on January 11, 2014. The copy of First Information Report no. 26 dated March 12, 2014 of Electronic Complex Police Station annexed to the revisional application indicates that the accused company started criminal proceeding against the complainant firm and its proprietor Mrs. T. Kavita and her husband Mr. Raja for criminal misappropriation of Rs.4 crores. This criminal case under Sections 420/406/408/34 of the Indian Penal Code was initiated at the instance of the accused company long before institution of the criminal proceeding by the complainant firm against the petitioners. It also appears from the copy of plaint of money suit no.33 of 2014 (Annexure P-10 to the revisional application) that the accused company instituted the civil suit against the complainant firm and its proprietor Mrs. T. Kavita and one M. Jagadishan for realisation of Rs. 4 crores. It is also evident from Annexure 11 to the revisional application that the complainant firm and its proprietor Mrs. T. Kavita filed written statement in the said money suit. With the above background facts I am of the view that there is long standing business relation between the complainant firm and the accused company before institution of the present criminal proceeding by the complainant firm against the petitioners.

Now, the question for consideration of the court is whether the offence under Sections 420/406/120B of the Indian Penal Code is made out against the petitioners on the basis of the allegation made by the complainant firm. In "Hriday Ranjan Prasad Verma v. State of Bihar" reported in 2000 SCC (Cr.) 786 the Supreme Court has made clear distinction between mere breach of contract and the offence of cheating. It is held in the said report that 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, i.e. the time when the offence is said to have been committed. 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, i.e., when he made the promise, cannot be presumed. It is also held by the Supreme Court in paragraph 21 of "S.W. Palanitkar v. State of Bihar" reported in (2002) 1 SCC 241 that "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 presumed as an act leading to cheating."

In "Anil Mahajan v. Bhor Industries Ltd." reported in (2005) 10 SCC 228 the Supreme Court has also made distinction between breach of contract and the offence of cheating in paragraph 6, which is as follows: -

"6........A distinction has to be kept in mind between mere breach of contract and the offence of cheating. It depends upon the intention of the accused at the time of inducement. The subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent, dishonest intention is shown at the beginning of the transaction."

In the instant case the complainant firm started the criminal proceeding against the accused company and the petitioners for nonpayment of outstanding dues of Rs.1,44,18,442/-. I have already observed that there was long standing business relation between the complainant firm and the accused company and the accused company made payment for supply of eggs to the complainant firm by transfer of fund through R.T.G.S. till January 11, 2014 when the complainant firm claimed to have outstanding dues of Rs.1,44,18,488/-. Accordingly, the allegation made by the complainant firm cannot establish dishonest intention of the accused company from the beginning of the transaction. Moreover, on March 12, 2014 the accused company initiated criminal proceeding against the complainant firm and its proprietor on the allegation of misappropriation of fund to the tune of Rs. 4 crores by the complainant firm and the said criminal case started for the offence punishable under Sections 406/408/420/34 of the Indian Penal Code is still pending. The institution of the Money Suit against the complainant firm for realisation of Rs.4 crores by the accused company is done before filing of the present complaint case by the complainant firm against the petitioners. Since there was no fraudulent or dishonest intention on the part of the accused company from the beginning of the transaction, the non-payment of outstanding dues by the accused company to the complainant firm must be treated as breach of contract and not the offence of cheating.

The decision of the Supreme Court in "Lee Kun Hee v. State of U.P." reported in AIR 2012 SC 1007 cited by learned counsel for the complainant firm has laid down the proposition that there can be civil liability coupled with criminal culpability for the same transaction. It is held in paragraph 26 of the said report that the aggrieved party can prosecute for the criminal offence even when civil remedy is available. In the instant case there is no criminal culpability on the part of the accused company and its Managing Director and other two Directors who are the petitioners in the present revisional application and as such they cannot be prosecuted for the offence alleged to have been committed by them. The facts of the present case are clearly distinguishable from the facts of the case reported in AIR 2012 SC 1007 and as such the ratio of the said report is not applicable in the facts of the present case.

In view of my above findings, I am constrained to hold that the dispute between the complainant firm and the accused company is breach of contract for which remedy is available before the civil court. Since no offence punishable under the law is made out against the petitioners on the basis of the allegations made by the complainant firm and since the present criminal proceeding is initiated by the complainant firm against the accused company and its Director and two other Directors in a mala fide way, I am of the view that the criminal proceeding against the petitioners is liable to be quashed by invoking inherent power under Section 482 of the Code of Criminal Procedure. As a result, the criminal proceeding of CNS/Case No. 406021 of 2014 pending before the court of learned Metropolitan Magistrate, 20th Court, Calcutta is quashed.

Criminal revision is, thus, disposed of.

Let a copy of this judgement and order be sent down to learned court below for favour of information and necessary action.