Prashant Dingra vs Chenab Textiles Mills and Another

Sunil Hali, J.—A complaint has been filed before the Chief Judicial Magistrate, Kathua under Sections 420, 120-B and 34 RPC by

respondent -1 against the petitioner and respondent -2. The cognizance of the case has been taken by the trial court and accordingly process has

been issued against the petitioner and respondent -2. It is under these circumstances, that the present petition has been filed by the petitioner in this

Court.

I have heard the Learned Counsel for the parties and perused the record. Before adverting to the controversy raised in this petition, it is

important to note the allegations levelled in the complaint. The respondent-1 is a company carrying business of manufacturing of Fabrics items such

as threads etc. An order was placed by respondent-1 - complainant for supply of yarn worth Rs. 48,69,225/- with the petitioner. A Letter of

Credit for Rs. 53,23,500/- was opened by petitioner with Oriental Bank of Commerce, Overseas Branch, HSIDC Building, Udyog Vihar,

Gurgaon. Condition of Letter of Credit was that the shipment had to reach by 20-9-06; which could further be extended by 26-9-06. The said

date was extended by 5-10-06 on the request of respondent-1. The payment was required to be made to the supplier-respondent-1 after the

production of goods and transport receipts. The goods were supplied by respondent-1 on various dates amounting Rs. 48,69,225/-. The failure on

part of petitioner to make payment has necessitated the filing of present complaint.

The complaint reveals that after the documents including the receipt of goods issued by the petitioner and transport receipt was presented to the

banker/respondent-2 for the purpose of release of payment and collection of price of the goods, was refused by respondent-2. The payment was

refused in view of the fact that the petitioner - accused-1 had not received the goods. Transport receipt was undated and the complainant was

accordingly asked to remove these discrepancies in the documents. After the discrepancies were removed, the banker respondent -2 refused to

make the payment, as according to it, the time prescribed in the Letter of Credit had expired and negotiations were on to extend the date. The said

documents were presented on 28-9-06 much before 5-10-06, extended period provide in the Letter of Credit. The payment was withheld by

respondent-2 without any cause and reason with the sole intention not to make the payment to complainant - respondent -1. This was done by

respondent -2 in connivance with the petitioner. The question for consideration is, whether offence u/s 420 is made out. Analysing the import of the

complaint, following things emerge:

a) That despite the fact that documents were presented by the complainant on 28-9-06 well within the extended period on 5-10-06, respondent-2

did not release the amount in favour of complainant.

b) That this was done by respondent-2 with the connivance of petitioner - complainant with an intention to deny the complainant the price of the

goods which he had supplied.

In order to examine these facts, it is to be seen whether offence u/s 420 is made out. Section 420 RPC defines cheating as under:

Cheating

Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent

that any person shall retain any property or intentionally induces the person so deceived to do or omit to do anything which he would not do or

omit if he was not so deceived, and which act of omission causes or is likely to cause damage or harm to that person in body, mind, reputation or

property, is said to ""cheat

A bare reading of the aforementioned section clearly reveals that there are two elements namely, deception and dishonest intention to do or omit

to do something. In order to bring a case within the first part of Section 420, it is essential, in the first place, that the person, who delivers the

property should have been deceived before he makes delivery, and in the second place that he should have been induced to do so fraudulently or

dishonestly. Where property is fraudulently or dishonestly obtained, Section 420 would bring the said Act within the ambit of cheating provided the

property is to be obtained by deception. It is not necessary that the complainant should verbatim reproduce in the body of his complaint all the

ingredients of the offence he is alleging. Nor it is necessary that the complainant should state in so many words that the intention of the accused was

dishonest or fraudulent. The crux of the postulate is the intention of the person who induces the victim of his representation and not the nature of the

transaction which would become decisive in discerning whether there was commission of offence or not.

The aforesaid discussion clearly reveals that deception must be from the inception. Applying text to the present case, following facts are to be

observed:

That the petitioner had opened the Letter of Credit for an amount of Rs. 53.00 lacs with the banker of respondent-2. The date of shipment was

20-9-06 extended by five days i.e. upto 25-9-06, which was again extended upto 5-10-06 on the request of respondent complainant. Admittedly,

the petitioner had shown his intention to complete the transaction by opening the Letter of Credit for an amount of Rs. 53.00 lacs, which would be

paid to the complainant - respondent -1 on supply of the goods. It cannot be said by reading the complaint that there was any intention to deceive

the complainant. As a matter of fact, the petitioner had opened the Letter of Credit, which was a assured guarantee that the amount will be paid to

the complainant on receipt of the goods, subject to the certain formalities, which were required to be complied by the complainant-respondent-1.

It is essential that the person who delivers the property, should have been deceived before he makes the delivery. In essence, it means that before

the delivery of the property, the complainant should have been deceived. In the present case, mode of delivery of payment was agreed by the

parties and in that context, a Letter of Credit was opened by the petitioner with his banker at Gurgaon before the delivery of the goods was made.

The allegations levelled in the complaint that respondent-2 despite the fact that he complied with the condition, the payment was not made, could

not have been attributed to the petitioner unless it is shown that due to the intervention of petitioner, the operation of the Letter of Credit was

stopped. Nothing of this sort has been stated. Neither there is any allegation in the complaint nor any material has been produced to suggest that

due ,to the intervention of petitioner, the operation of the Letter of Credit was stopped, resulting in refusing payment to respondent-complainant for

the | supply of goods. It would be important to mention that certain queries, were raised by respondent -2 before the encashment of the Letter of

Credit by respondent-2. Why respondent -2 had not permitted encashment of the Letter of Credit, can be only explained by him.

Mr. D.S. Thakur, Learned Counsel appearing for the respondents has relied upon a judgment of the Supreme Court titled Rajesh Bajaj Vs.

State NCT of Delhi and Others, . For facility of reference, relevant para of the judgment is quoted hereinbelow:

It is not necessary that a complaint should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. Nor is it

necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. Splitting up of the

definition into different components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelled out in the

complaint, is not the need at the stage of investigation. If factual foundation for the offence has been laid in the complaint the court should not

hasten to quash criminal proceedings during the investigation stage merely on the premise that one or two ingredients have not been stated with

details. For quashing an FIR (a step which is permitted only in extremely rare cases) the information in the complaint must be so bereft of even the

basic facts which are absolutely necessary for making out the offence.

The proposition as laid down by the Supreme Court in the aforementioned judgment, is not in dispute. However, applying the principle of this

judgment in the present case, it is clearly made out that the person who delivers the property should have been deceived before he makes the

delivery, which is not the oase in hand as already discussed hereinabove. The other judgment on which Mr. Thakur has placed reliance, is titled

M/s Medchi Chemicals and Pharma Pvt Ltd. v. Biological E Ltd. and Ors. reported as AIR 2000 SC 1869. The facts of this case are that an

agreement was arrived at between the accused and the complainant for supply of raw material without any interruption so as to cause no hindrance

to the manufacturing activities of the complainant's factory. The accused did not keep his commitment in pursuant to the agreement as a result of

which huge loss suffered by the complainant. On every occasion when the interruption in supply was caused, the accused made representation to

the complainant that he would make the supply which he consistently failed. That under Clause 15 of the agreement, the complainant had decided

to terminate the agreement, but the accused again made representation to the complainant that the supply of raw material would be honest

forthwith. However, these representations were not acted upon by the accused. It was stated that the accused was having dishonest intention. It is

further revealed that the object of destroying the reputation of the complainant was that the accused themselves want to enter into the business

being conducted by the complainant and the purpose was to eliminate the complainant from the said business. The Supreme Court while noticing

these facts has observed as under:

On careful reading of the complaint, in our view, it cannot be said that the complaint does not disclose the commission of offence. The ingredients

of the offence under Sections 415, 418 and 420 cannot be said to be totally absent on the basis of the allegations in the complaint. We however,

hasten to add that whether or not the allegations in the complaint are otherwise correct has to be decided on the basis of the evidence to be led at

the trial in the complaint case but simply because of the fact that there is a remedy provided for breach of contract, that does net by itself clothe the

court to come to a conclusion that civil remedy is the only remedy available to the appellant herein. Both criminal law and civil law remedy can be

pursued in diverse situations. As a maitter of fact "" they are not mutually exclusive but clearly coextensive and essentially differ in their content and

consequence. The object of criminal law is to punish an offender who commits an offence against a person, property or the State for which the

accused, on proof of the offence, is derived of his liberty and in some cases even his life. This doess not however, affect civil remedies at all for

suing the wrongdoer in cases like arson, accidents etc. It is anathema to suppose that when a civil remedy is available, a criminal prosecution is

completely barred. The two type of actions are quite different in content, scope and impart"" Pratibha Rani Vs. Suraj Kumar and Another, .

While examining the import of the judgment, it is to be noted that unless and until the ingredients constituted an offence are disclosed in the

complaint, the criminal proceedings cannot be initiated. While applying the aforementioned judgment in the present case as discussed hereinabove,

the principles of the judgment cannot be applied, for the simple reason that the petitioner had clearly shown 1 lis bonafide by bringing the Letter of

Credit before the goods were delivered. There is no allegation in the complaint that before encashment of the Letter of Credit, the petitioner had

taken steps to stop its encashment. As discussed above, it has been clearly stated that a false representation has been made by the accused person

to the complainant to continue supply without making the same with an intention to throw him out of the business.

On the other hand, Mr. P.N. Goja, Learned Counsel for the petitioner has relied upon the judgment of the Supreme Court titled Veer Parkash

Sharma v. Anil Kumar Aggarwal reported as 2007 (5) Supreme 771. In this judgment, the Supreme Court has observed as under:

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, that is, the time when the offence is said to have been committed. Intention is the gist of the offence. In absence of any allegation

of inducement and intention to cheat, merely by issuing the cheques which have bounced, cheating cannot be inferred.

The aforementioned judgment clearly spells that unless the ingredients of the offence are not disclosed, no prosecution can be lodged against

the accused. It clearly specifies that unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is, the time when

the offence is said to have been committed. Intention is the gist of the offence.

From the discussion made hereinabove, it can safely be stated that the complaint does not disclose offence u/s 420 against the petitioner. The

Apex Court has consistently held that underlying principle for exercise of jurisdiction by the High Court u/s 561-A Cr.P.C., is that allegations

contained in the complaint even if taken at their face value and taken to be correct in its entirety do not disclose an offence.

For the reasons stated hereinabove, I find that the facts as disclosed in the complaint do not constitute an offence so far as the petitioner is

concerned. The proceedings before the Chief Judicial Magistrate, Kathua are as such quashed to the extent it relate to the petitioner. The trial

court is, however, free to proceed against respondent-2 in the matter. Disposed of alongwith connected Cr.M.P.