Ramwi Tissues and Another vs R.J. Kaol

Y.P. Nargotra, J.—On a private complain filed by the respondent against petitioners learned trial court, Sub-Registrar Judicial Magistrate

Jammu has issued the process of summoning the accused by his order dated 27.7.2002 on being satisfied that the complaint and preliminary

statements prima facie disclose commission of offence u/s 420 RPC. The accused petitioners through this petition are seeking quashing of the

complaint as well as the order of the learned trial court dated 27.7.2002, by invoking the powers of this court u/s 561-A Cr.P.C. The gist of the

complaint as follows:--

The complainant is the Works Manager of M/s. Trikuta Chemicals Pvt. Ltd. a company incorporated under companies Act which deals in the

manufacture of all grades of Calcium Carbonate (precipitated and activated calcium) in its industrial unit at Bari Brahamana Jammu. The petitioners

are all officers of the company, Pamwi Tissues (Lessees SWIL Limited) having its industrial unit located in Barotiwala Solan, which make use of

precipitated calcium carbonate as raw material in their unit for manufacturing of various paper products. In the first week of October 1988 the

General Manager of the complainant company and a telephonic discussion with the Purchase Manager of accused company and during the

discussion the accused-company offered to purchase the products of the complaint company i.e. precipitate calcium carbonate by extending a

representation that the company of the accused was financially viable company of national and international repute and would abide by the terms

and conditions, including timely payment for the goods purchased. Pursuant to the settlement reached the complainant by his letter dated

17.10.1998 informed the company of the accused that he would visit Barotiwala for further discussion in the matter. The purchased Manager of

the accused-company asked the complainant to send samples of them. Thereafter formalities were completed and a decision was made by the

complainant-company to supply the products to the company of the accused on the promise that payment shall be made within 45 to 60 days after

the receipt of supplies. Accordingly the complainant-company made the supplies of Precipitated calcium carbonate in trucks to the accused

company and the accused company initially made certain payments in accordance with the agreement reached but thereafter it defaulted and as per

the claim of the complainant an amount of Rs. 2,62,464/-remained unpaid upto the month of September 2001. This amount was not paid,

therefore the complainant has instituted a complaint against the accused alleging therein that the accused No. 1 to 3 had made false representation

that their company was financially viable company and that they would make payment within 40 days from the date of supply and that had the

accused made it clear that they would not be able to keep the payment schedule to the complainant would not have agreed to make supply to the

accused. The complainant further alleged that the intention of the accused persons from the very beginning was criminal and false representations

were made by them for the purpose of deceiving the complainant and dishonestly inducing him for parting with the property.

In the petitioner filed u/s 561-A Cr.PC the accused-petitioners in Para 3 of the petition have stated as follows:

Petitioner No. 1 is a sick company and was so declared by the Board for Industrial and Financial Reconstruction in February 1993 under the

Sick Companies (Special provision) Act 1983 with effect from 01.4.1985.

The petitioners have also referred to Section 22 of the sick Industrial Companies (Special Provisions) Act which contains a provision that no suit

for the recovery of money or for the enforcement of any security against the industrial company or of any guarantee in respect of any loans or

advance granted to the industrial company shall lie or be proceeded with further except with the consent of the Board, as the case may be the

appellate authority.

Learned counsel for the petitioner has argued that no offence as contemplated by Section 420 RPC is made out against the accused because the

dispute is of a purely civil nature as the goods have been supplied and the payment is claimed on the basis of such supplies Learned counsel for the

petitioner further argued that for constituting an offence u/s 420 RPC it is necessary that the intention of the accused must be dishonest at the

commencing of the transaction and in pursuance of that the intention the accused must be shown to have induced the complainant for parting with

his property. According to him in the present case it was a pure contract entered into between the parties for supply of goods and if the accused

have not been able to adhere to the payment schedule the remedy lies in the civil court and not in a criminal action. In support of his contention he

has relied upon 2002(1) SLJ 78. In this case the court has held as follows:--

The ingredient of offence u/s 420 RPC are not only that the accused has created so me one but also that by doing so he has dishonestly induced

the person who was cheated to deliver the property. This shows to constitute an offence under this section, it must be shown that the complainant

parted with his property, acting on a representation which was false to the knowledge of the accused and that the accused had a dishonest

intention from the very out set. The fraudulent and dishonest intention is the gist of the offence that is to say the accused had a fraudulent and

dishonest intention of Causing wrongful gain to one person and wrongful loss to another person and had intention to defraud the complainant at the

time of making the promise from the mere failure of the accused to keep the promise, cannot be presumed as an act leading to cheating. Besides

this is not sufficient to show that false representation had been made but it is necessary to show that the representation was false to the knowledge

of the accused and was made to deceive the complainant. In the background of this law let us examine the complaint in question instituted by the

complainant/respondent against the accused/petitioners. From the bare perusal of the complaint it reveals that the accused-petitioner No. 3 did not

falsely represent to the complainant as partner or authorized representative of M/s. Charag Deep Pictures thereby deceived the complainant by

negotiating with him for the supply of two hindi films namely ""Paap ki Duniya"" and ""Shola aur Shabnaum"" and thereby induced to pay Rs. 25000/-

as security deposit and later on failed to keep his promise. There is nothing in the complaint to show that said accused/petitioner acted with any

dishonest or fraudulent intention in receiving Rs. 25000/-from the complainant as security deposit. From the averments of the complaint it is

manifest that the accused petitioner No. 3 has made a breach of contract by not supplying the feature films as promised by him. It is settled

principle of law that mere breach of contract cannot rise to criminal prosecution u/s 420 RPC unless fraudulent or dishonest intention is shown right

at the beginning of the entering into the contract. There is nothing in the complaint to show that the complainant/respondent entrusted the said

money to the petitioner-accused No. 3 who dishonestly misappropriated or converted the said money to his own use. The simple retention of the

money by the petitioner-accused No. 3 may be civil wrong in respect to which the respondent/complainant may seek his redress for damages in a

civil court. Again mere retention of money entrusted to a person without misappropriation or its conversion to his own use is not a criminal breach

of trust as defined u/s 405 of the RPC JT 2001 SC 15. There is also nothing in the complaint to show that the petitioner, accused in any way

caused any criminal intimidation by extension threats of injury to his person, reputation or property.

On the other hand learned counsel for the complainant/respondent has argued that in view of the admitted position that the company of the

accused stood declared as a sick industrial unit and u/s 22 of the sick industrial companies (special provision) Act no suit for recovery of money

could be filed against it, it was incumbent upon the accused company to have disclosed this fact to the complainant when the agreement for supply

of goods was made. The accused company did not disclose this fact and still entered into contract for supply and then defaulted in payment of the

amount due to the complainant on account of the supplies made, the intention of the accused cannot be said to be honest. In this view of the

matter, according to the learned counsel, the criminal complaint filed by the complainant cannot be quashed at the threshold on the ground that the

transaction apparently appear to be a civil in nature. In support of his contention he has relied upon a case reported in Rajesh Bajaj Vs. State NCT

of Delhi and Others, and Trisuns Chemical Industry Vs. Rajesh Agarwal and others, . In Rajesh Bajaj Vs. State NCT of Delhi and Others, their

lordship have held as follows:--

It may be that the facts narrated in the present complaint would as well reveal a commercial transaction or money transaction. But this is

hardly a reason for holding that the offence of cheating would elude from such a transaction. In fact, many a cheatings were committed in the

course of commercial and also money transactions. One of the illustrations set out u/s 415 of the Indian Penal Code (Illustration f) is worthy of

notice now:

A intentionally deceives Z into a belief that A means repay any money that Z lend to him and thereby dishonestly induces Z to lend him money. A

not intending to repay it. A cheats.

And in the case reported in Trisuns Chemical Industry Vs. Rajesh Agarwal and others, their lordships have held as follows:--

We are unable to appreciate the reasoning that the Provision incorporated in the agreement for referring the disputes to arbitration is an effective

substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach

of the agreement but the arbitrator cannot conduct a trial of any act, which amounted to an offence albeit the same act may be connected with the

discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold

itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-

emption of such investigation would be justified only in very extreme cases as indicated in State of Haryana v. Bhajan Lal.

In view of the law laid down by their lordships it is not always true that wherever there is a commercial transaction between the parties remedy

would lie only in the civil court and not in a criminal action. In a case where prima facie it is found that the intention of the accused was dishonest,

criminal complaint could not be quashed. Intention being hidden in the mind of the accused has to be gathered from the circumstances surrounding

the transaction. In the present case admittedly the company of the accused was a sick industrial unit and its liability through a civil action was not

enforceable and still if the accused extended an assurance that they will make the payment in time for the goods supplied, prima facie their intention

cannot be held to be honest. In these circumstances the learned Trial Court was justified in issuing the process against the accused-petitioners.

Therefore the complaint and the order of the learned Trial court merit no interference. In this view of the matter the petition of the petitioner is

dismissed.