Prateek Apparels Pvt. Ltd. vs S.S. Sundaresan

Aruna Jagadeesan, J.—The petitioner who is facing the criminal proceedings in CC No. 305 of 2006 on the file of the Judicial Magistrate

No. III, Salem for an offence u/s 420 IPC has filed this petition seeking to quash the proceedings.

The brief facts which are leading to the petition are that the respondent/complainant is a manufacturer exporting fabrics and the petitioner has

placed an order with the complainant for the purchase of 2200 Mtrs. of Doby Grey fabrics at Rs. 58/- per meter and thereafter, placed a revised

order increasing his requirement from 2,200 to 3150 sq.meter. Immediately after the placement of order, the respondent/complainant has engaged

his weavers purchased cotton yarn and manufactured the fabrics and supplied the same to the petitioner/accused who also received the said

goods. According to the complainant, the petitioner/accused has verified the quality and quantity and was satisfied with the fabrics.

It is the further case of the respondent/complainant that on 09.05.2005, he received a sum of Rs. 50,000/- from the petitioner/accused at

Bangalore and he promised to send the balance within a week. On 17.05.2005, the petitioner pointed out some defects in the fabrics which was

quantified as Rs. 8,021/- but the same has been disputed by the respondent/complainant. According to the complainant, the petitioner agreed to

send the balance within 3 days and but only paid Rs. 24,667/- by way of cheque and assured to send the balance within a day or two. But, he did

not send the balance amount as promised but issued a debit note for a sum of Rs. 82,545/-.

The respondent/complainant has alleged that the petitioner in order to defeat the claim and defraud the respondent, has raised the debit note

with a dishonest intention, despite the fact there was no defects in the fabrics supplied by the complainant. Further, it is alleged that the petitioner

has converted the fabrics supplied by the complainant into garments and sold it to his customers received the money and appropriated the same to

his use. It is further alleged that the goods were supplied to the petitioner/accused believing his promise that he would pay the money immediately

after the receipt of the goods and thus, the petitioner dishonestly induced the complainant to send the fabrics and after receipt of the same had

converted the fabrics into garments and received the value from the customers and thereby, he cheated the complainant with a malice intention. The

complainant had issued legal notice to the petitioner on 01.07.2005 and though the same was duly acknowledged by him, but has not chosen to

pay the amount and hence the complaint.

Mr. D. Shivakumaran, learned Counsel for the petitioner strenuously contended that the averments in the complaint prima facie revealed that

there is a dispute over the debit note which has been raised by the petitioner against the respondent/complainant and that the complaint is filed only

to settle the dispute. He would contend that a reading of the complaint does not show the presence of the ingredients of cheating and the complaint

filed only to settle the dispute is a clear illustration of abuse the process of law.

The learned Counsel for the petitioner drew the attention of this Court to a catina of decisions of the Hon''ble Supreme Court to countenance his

argument that non-payment or under payment of price of goods by itself does not amount to commission of offence of cheating or criminal breach

of trust.

He also placed reliance on a recent decision of the Hon''ble Supreme Court reported in R. Kalyani v. Janak C. Mehta and Ors. 2008 (4)

Crimes 406 (SC) wherein, after making reference to various decisions rendered by the Hon''ble Supreme Court held that no hard and fast rule can

be laid down in regard to cases in which, the High Court will exercise its jurisdiction of quashing the proceedings at any stage. However, it held

that the Court while exercising its inherent jurisdiction, although would not interfere with a genuine complaint keeping in view the purport and object

for which the provisions of Sections 482 and 483 of the Code of the Criminal Procedure had been introduced by the Parliament but would not

hesitate to exercise its jurisdiction in appropriate cases.

In State of Haryana and others Vs. Ch. Bhajan Lal and others, the Hon''ble Supreme Court has laid down various guidelines in regard to

quashing the FIR/Charge Sheet at the threshold stage some of which are relevant to this case are extracted below:

Where the allegations made in the First Information Report or the Complaint, even if they are taken at their face value and accepted in their

entirety do not prima-facie constitute any offence or make out a case against the accused.

Where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence,

justifying an investigation by police officers u/s 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of

the Code.

Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the

commission of any offence and make out a case against the accused.

4....

Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever

reach a just conclusion that there is sufficient ground for proceeding against the accused.

6....

Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive

for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.

In yet another decision reported in Rajesh Bajaj Vs. State NCT of Delhi and Others, the Hon''ble Supreme Court held as under:

After quoting Section 415 of IPC learned judges proceeded to consider the main elements of the offence in the following lines-

A bare reading of the definition of cheating would suggest that there are two elements thereof, namely, deception and dishonest intention to do or

omit to do something. In order to bring a case within the first part of Section 415, it is essential, in the first place, that the person, who delivers the

property should have been deceived before he makes the 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 415 would bring the said act within the ambit of cheating provided

the property is to be obtained by deception.

The High Court seems to have adopted a strictly hyper-technical approach and sieved the complaint through a calendar of finest gauzes for testing

the ingredients u/s 415, IPC. Such an endeavour may be justified during trial, but certainly not during the stage of investigation. At any rate, it is too

premature a stage for the High Court to step in and stall the investigation by declaring that it is a commercial transaction simplicitor wherein no

semblance of criminal offence is involved.

The Apex Court has observed that in a case where the materials relied upon by a party are required to be proved, no inference can be drawn

on the basis of those materials to conclude the complaint to be unacceptable. It held that the Court should not act on annexures to the petition u/s

482 of the Cr.P.C., which cannot be termed as evidence without being tested and proved. The said view is expressed in State of Orissa and

Another Vs. Saroj Kumar Sahoo, the relevant portion is extracted below:

As noted above, the powers possessed by the High Court u/s 482 of the Cr.P.C. are very wide and the very plenitude of the power requires great

caution in its exercise. Court must be careful to see that its decision in exercise of this power is based on sound principles. The inherent power

should not be exercised to stifle a legitimate prosecution. The High Court being the highest court of a State should normally refrain from giving a

prima facie decision in a case where the entire facts are in complete and hazy, more so when the evidence has not been collected and produced

before the Court and the issues involved, whether factual or legal, are of magnitude and cannot be seen in their true perspective without sufficient

material. Of course, no hard and fast rule can be laid down in regard to cases in which the High Court will exercise its extraordinary jurisdiction of

quashing the proceedings at any stage.

It is to be noted that the investigation was not complete and at that stage it was impermissible for the High Court to look into materials, the

acceptability of which is essentially a matter for trial. While exercising jurisdiction u/s 482 of the Cr.P.C., it is not permissible for the Court to act as

if it was a trial Court. Even when charge is framed at that stage, the Court has to only prima facie be satisfied about existence of sufficient ground

for proceeding against the accused. For that limited purpose, the Court can evaluate material and documents on records but it cannot appreciate

evidence. The Court is not required to appreciate evidence to conclude whether the materials produced are sufficient or not for convicting the

accused.

The propositions of law that emerge from the above said decisions are given below:

The High Court ordinarily would not exercise its inherent jurisdiction to quash a criminal proceedings and, in particular, a First Information

Report unless the allegations contained therein, even if given face value and taken to be correct in their entirety, disclosed no cognizable offence.

For the said purpose, the Court, save and except in very exceptional circumstances, would not look to any document relied upon by the

defence.

Such a power should be exercised very sparingly. If the allegations made in the FIR disclose commission of an offence, the Court shall not go

beyond the same and pass an order in favour of the accused to hold absence of any mens rea or actus reus.

If the allegation discloses a civil dispute, the same by itself may not be a ground to hold that the criminal proceedings should not be allowed to

continue.

Bearing in mind the above principles, we have to consider the contentions putforth on either side as to whether the complaint filed by the

petitioner/accused for an offence u/s 420 IPC is liable to be quashed. The learned Counsel for the petitioner would contend that to attract the

offence of cheating the intention to cheat should be from the inception of the transaction and mere failure to pay the amount will not be sufficient to

satisfy the ingredients of offence u/s 420 IPC. To support his contention he has placed reliance on a decision reported in the case of Vir Prakash

Sharma v. Anil Kumar Agarwal (2007) 7 SCC 373 that non-payment or underpayment of price of goods by itself does not amount to commission

of offence of cheating and it is essentially a civil dispute. Therefore, in the absence of allegations as to act of inducement on the part of the accused

and intention to cheat the complainant from the very inception, it cannot be held that the offence u/s 420 IPC is attracted to allow the

petitioner/accused to face the criminal proceedings.

Yet another decision he has laid hands is the case reported in Jamals Enterprises (Pvt.) Ltd. v. Mrs. Vanisri (2006) 2 M.L.J. (Crl) 50 wherein

it is held that it would be an abuse of process of Court if the accused is allow to face the ordeal of trial based on such a complaint, which is

essentially of a civil nature.

On the other hand, Mr. V.V. Giridhar, learned Counsel for the respondent referred to a decision of the Hon''ble Supreme Court reported in

M. Krishnan Vs. Vijay Singh and Another, to substantiate his contention that it is not desirable to quash the complaint merely on grounds that

nature of dispute was primarily of civil nature, inasmuch as in all cases of cheating and fraud, in the whole transaction, there would generally be

some element of civil nature. It is held in the said decision as under:

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 complainant has stated in the body of the complaint that

he was induced to believe that respondent would honour payment on receipt of invoices, and that the complainant realised later that the intentions

of the respondent were not clear. He also mentioned that respondent after receiving the goods have sold them to other and still he did not pay the

money. Such averments would prima facie make out a case for investigation by the authorities.

It is reiterated that Court''s approach should be very circumspect, cautious and careful and mere fact that the offence was committed during the

course of a commercial transaction by itself not sufficient to quash the complaint and it should be seen whether on the fact situation ""civil profile

outweigh the ""criminal outfit"".

At this juncture, it is relevant to point out to the oft quoted decision of the Hon''ble Supreme Court which had given a cautious note while

exercising jurisdiction under the inherent powers u/s 482 of Code of Criminal Procedure. In M/s. Medchl Chemicals and Pharma P. Ltd. Vs. M/s.

Biological E. Ltd. and Others, .

It is held thus:

Exercise of jurisdiction under the inherent power as envisaged in Section 482 of the Code to have the complaint or the charge-sheet quashed is an

exception rather than a rule and the case for quashing at the initial stage must have to be treated as rarest of rare so as not to scuttle the

prosecution. With the lodgement of first information report the ball is set to roll and thenceforth the law takes its own course and the investigation

ensues in accordance with the provisions of law. The jurisdiction as such is rather limited and restricted and its undue expansion is neither

practicable nor warranted. In the event, however, the court on a perusal of the complaint comes to a conclusion that the allegations levelled in the

complaint or charge-sheet on the face of it does not constitute or disclose any offence as alleged, there ought not to be any hesitation to rise up to

the expectation of the people and deal with the situation as is required under the law. Frustrated litigants ought not to be indulged to give vent to

their vindictiveness through a legal process and such an investigation ought not to be allowed to be continued since the same is opposed to the

concept of justice, which is paramount.

Therefore, the factual matrix would thus be relevant in the matter of assessment of the situation so as to whether the averments made in the

complaint is purely of a civil dispute or it discloses prima facie an offence of cheating.

The excerpts from the complaint is extracted below for better appreciation:

The said orders were placed by the accused representatives at Salem. The complainant has agreed to supply the accused requirements on

condition that the fabrics would be checked within 3 days on receipt of the consignment and payment should be made within 30 days from the date

of invoice. The accused has also agreed for the said condition and the accused has requested the complainant to manufacture the fabrics as per the

accused requirement.

The complainant has engaged various weavers and purchased cotton yarn by cash in the open market and manufactured the fabrics as per the

accused requirement and supplied the fabrics to the accused. The accused have also duly received the said fabrics and checked and verified the

quality and quantity and satisfied about the fabrics and accused has processed the fabrics as per his requirement and the accused have not made

any complaint in this regard as per the agreement.

Believing the accused words the complainant has returned to Salem but to the surprise of the complainant the complaint has received a courier

from the accused along with another debit note for a sum of Rs. 82,545/-(Rupees Eighty two thousand five hundred and forty five only). The

accused have purposely raised the said debit note and the complainant denies and disputes the alleged debits raised in the accused debit note.

There was no defect in the fabrics supplied by the complainant. In order to decheat and defraud the accused have raised the debit note with an

ulterior intention.

There is no defects in the fabrics supplied by the complainant. The accused are not entitled to raise any debit note after the final settlement. The

accused are liable to pay a sum of Rs. 83,145-60 (Rupees Eighty three thousnd one hundred and forty five and paise sixty only) along with interest

to the complainant. In order to escape from the clutches of law the accused have invented a theory of debit which is against law. The accused

action is highly illegal, improper and unjustified.

The accused has converted the fabrics supplied by the complainant into garments and sold it to his customer and received the money and

swallowed the money without paying the lawful due to the complainant herein. While purchasing the fabrics the accused has promised that he will

pay the money immediately after the receipt of the fabrics. Believing his promise the goods were supplied. The accused has dishonestly induced the

complainant to send the fabrics and the same was dishonestly received by him and he has converted the fabrics into garments and received the

value and thereby he has cheated the complainant with a malice intention. The intention of the accused is highly illegal and improper.

The sworn statement given by the respondent/complainant before the learned Magistrate is also to the same effect though narrated the facts in

brief.

On a careful reading of the complaint and the sworn statement of the complainant recorded by the learned Magistrate it cannot be said that the

complaint does not disclose the commission of an offence and the ingredients of the offence u/s 420 IPC cannot be said to be totally absent.

Whether or not the allegations in the complaint are otherwise correct, whether the debit note issued by the accused is genuine has to be decided on

the basis of evidence to be led at the trial, but simple because there is a civil remedy that does not by itself clothe the Court to come to a

conclusion that it is essentially a civil nature.

Considering the factual aspect of this case, I find prima facie allegations against the petitioner/accused for the offence of cheating and hence, I

am not inclined to quash the proceedings.

For the reasons stated above, the Criminal Original Petition stands dismissed. Consequently, connected miscellaneous petition is dismissed.