Sirohiya Synthetics Pvt. Ltd. and Another vs Chenab Textile Mills

Permod Kohli, J.—Petitioner is a Private Limited Company with its place of business at Bhilwara, Rajasthan. This petition has been filed

through Sh. Chand Mal and Smt. Prem Devi Sirohiya W/o Chand Mal Jain invoking the inherent jurisdiction of this Court u/s 561-A Cr.P.C for

quashment of the criminal proceedings initiated on the complaint of the respondent by the Chief Judicial Magistrate, Kathua. On the complaint filed

by the respondent for the alleged commission of offences u/s 415 RPC, 418 RPC, 420 RFC and 34 RPC, the trial court has passed the impugned

order dated 26th August, 03 summoning the petitioners to face the trial before him. Aggrieved of the initiation of the criminal proceedings,

petitioners have approached this Court seeking quashment of the same.

Petitioners have been accused of commission of offence of cheating. The trial magistrate has passed the speaking order. The facts as notified by

the trial magistrate in its order are reproduced hereunder:

The allegations on the complaint are that accused No. 2 and 3 who are Directors of the accused No. 1, a private limited company, with common

criminal intention dishonestly and fraudulently induced the complainant to part with the supply of yarn manufactured by the complainant on credit

basis by making false promises, making the complainant to believe that they will make payment of the goods supplied with interest @ 24% per

annum. The total price of the yarn supplied by the complainant to the accused comes to Rs. 26,319947-. The accused have refused to make

payments. By doing so, the accused have cheated the complainant to get unlawful gains and to bring unlawful loss to the complainant at the same

time.

The set of allegations as contained in the complaint are noticed as under:

(2) That the accused No. 1 is a Private Limited Company and accused No. 2 & 3 are its Director.

(3) That in the month of February to June 2001 the accused with common/criminal intention dishonestly and fraudulently induced the complainant

at its place of business i.e. Kathua (J&K) to part with the supply of yarn manufactured by it (complainant) to them (accused) on credit basis and

further represented by making false promises/assurance to their (accused) knowledge making the complainant to believe that they (accused) would

be making the payment of the goods supplied, to the complainant with interest at the rate of 24% p.a at Kathua (J&K) the place of business of the

complainant. (6) That the complainant on various occasions, during the supplies of goods being made, has been approaching and requesting the

accused persons to make payment, but the accused persons again with dishonest and fraudulent intention, like the previous, have been making

false promises to their knowledge, to the complainant that they would be making payment and in order to create belief in the complainant did make

the payment of some goods by draft No. 562179 dated 05.07.2002 of Rs. 8877/- and further made fraudulently false promises/assurance to pay

the rest of the goods supplied or to be supplied.

Apart from above, the complainant/respondent has given the details of the bills of the goods supplied by it to the accused/petitioners. Goods

were supplied in as many as 20 transactions w.e.f 9th March 01 to 26th June, 01. Total value of the goods is said to be Rs. 26,31,994/-.

It has been urged on behalf of the petitioner that complaint do not disclose any offence against the petitioner and thus the initiation of criminal

proceedings amount to abuse of the process of the court and same are liable to be quashed. With a view to find out whether any offence is made

out. I have perused the complaint and the statements recorded. Relevant part of the complaint has been noticed hereinabove. Accused persons

have been summoned for commission of offence u/s 415 RFC, 418 RPC, 420 RPC and 34 RPC. These sections are reproduced hereunder:

415 RPC - 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 were 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'

418 - Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect - Whoever cheats with the

knowledge that he is likely thereby to cause a wrongful loss to a person whose interest in the transaction to which the cheating relates, he was

bound either by law, or by any legal contract, to protect, shall be punished with imprisonment of either description for a term which may extend to

three years, or with fine, or with both.

Cheating and dishonestly inducing delivery of property - Whoever cheats and thereby dishonestly induces the person deceives to deliver any

property to any person or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is

capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven

years and shall also be liable to fine.

Acts done by several persons in furtherance of common intention - When a criminal act is done by several person, in furtherance of the

common intention of all, each of such persons is liable for that act in the same manner as if it were done by him alone.

As far as offence of cheating is concerned, the essential ingredients of these offences are (1) fraudulent inducement, (2) delivery of property and

(3) cause of damage or harm to the person in body, mind, reputation or property.

Section 415 RFC defines the offence of cheating. Section 418 RPC speaks of cheating with the knowledge of causing a wrongful loss to a person

whose interest in the transaction, the person inducing is bound by law or by legal contract to protect. Offence u/s 420 RPC relates to dishonest

inducement and delivery of property to deceive the person. Section 34 RPC only speaks of a common intention for all.

From the perusal of para (3) and para (6) of the complaint, which contain the main set of allegations, it transpires that alleged inducement was

made at Kathua. In para (2) of the complaint, it is mentioned that the accused No. l is a Private Ltd. Company and accused No. 2 & 3 are its

Directors. The complaint nowhere speaks as to who amongst the Directors or even both or any one of them, came to Kathua and induced the

complainant. It is relevant to notice that even the complainant is a Company. The manner of the inducement has not been disclosed. The complaint

even do not contain any averment that money was required to be paid within any specified period and the accused had intention not to pay the

same within the period agreed to. On the other hand, it is averred in para (3) of the complaint that money was required to be paid with interest @

24% per annum. Similarly, in para (6), it is admitted that some payments were made on 5th July, 2002. In para (4) of the complaint, details of bills

in respect to the supplies made is given and the last supply was made on 26th June, 2001. The present complaint came to be filed on 26th August,

There is absolutely no specific averment that at the time of seeking the supply on credit basis, the accused had no intention to pay the amount.

As noticed above, there was as many as 20 transactions. It is also not stated, whether inducement was made at every stage in respect to each

transaction or it was in respect to which transaction. The facts alleged in the complaint disclose purely a commercial business transaction amongst

the parties and even if there is any breach, no criminal offence is constituted. Two factors which are pointer to this opinion are; payment of part of

amount in the year 2002 and secondly, interest on the amount payable. Complainant has even not mentioned as to how much amount was paid in

the year 2002 by the accused/petitioner.

Petitioners herein are Managing Director and Director of the Private Limited Company. Before a person is held responsible for criminal liability,

it must be specifically alleged that either the act complained off is directly attributable to them on behalf of the company or under their specific

authority. There is no such allegation in the complaint. From the set of allegations made in the complaint, ingredients of none of the offences defined

under Sections 415 RPC, 418 RPC and 420 RPC are made out. Even there is no averment of common intention.

The Apex Court in case of Smt. Nagawwa Vs. Veeranna Shivalingappa Konjalgi and Others, laid down the circumstances warranting

interference of the High Court for quashment of the criminal proceedings. The circumstances are noticed as under:

Where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make

out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the

accused;

Where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a

conclusion that there is sufficient ground for proceeding against the accused;

Where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on

material which are wholly irrelevant or inadmissible; and

Where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of complaint by legally competent authority

and the like.

These tests were further examined in case of State of Haryana and others Vs. Ch. Bhajan Lal and others, , where following tests were laid

down:

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 FIR 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 with 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 made out a case against the accused.

Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is

permitted by a police officer without an order of a Magistrate as contemplated u/s 155(2) of the Code.

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.

Where there is an express legal bar engrafted in any of the provisions of the code or the concerned Act (under which a criminal proceeding is

instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or concerned Act, providing

efficacious redress for the grievance of the aggrieved party.

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.

The Apex Court in a later case reported in AIR 2000 SC 2341 while considering the criminality of a person in civil transaction, observed as

under:

In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one.

It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent

conduct is not the sole test. 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. Therefore, it is the intention which

is the gist of the offence. 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, that is, when he made

the promise cannot be presumed.

As noticed, the tests laid down by the Supreme Court for quashment of the criminal proceedings are attracted in the present case. Here the

facts do not disclose commission of any criminal offence for want of necessary allegations. The transaction is purely a commercial and civil in

nature and even if there is breach at a later stage, no criminal liability can be fastened.

For what has been stated above, the complaint filed do not disclose any criminal offence much less the offence of cheating and the process

initiated against the petitioner is an abuse of the process of court warranting interference by this Court in exercise of its inherent powers u/s 561-A

Cr.P.C. The compliant and criminal proceedings initiated against the petitioner including the impugned order dt. 26.08.2000, summoning the

petitioners to face the trial are hereby quashed and accused discharged.