Smt. Manisha And Another vs Devendra Parmar

This application under Section 482 of Cr.P.C. has been filed for quashment of the order dated 21-1-2016 passed by 19th A.S.J., Indore in Criminal

Revision No.690/2015, thereby affirming the order dated 24-8-2015 passed by J.M.F.C., Indore in Criminal Case No.19585/2012, by which charge

under Section 420 of I.P.C. has been framed.

It is submitted by the Counsel for the parties that the Trial is still at the initial stage.

The necessary facts for the disposal of the present application in short are that the respondent Devendra Parmar, filed a criminal complaint against the

applicants for offence under Sections 420, 405 and 406 of I.P.C. on the allegations that the applicants had approached the complainant and made an

oral agreement with the complainant for taking the liaisoning services of the complainant for a sum of Rs.10 lakh. A Cheque of Rs.1.50 lakhs was also

given to the complainant, by way of token amount. In all, the applicants have paid Rs.2.15 lakhs to the complainant by way of part payment of

liaisoning fees of the complainant. It was further alleged that the complainant had also hired the services of different Advocates and had also spent

considerable amount under different heads and when the complainant demanded his remaining liaisoning fees, then the applicants gave a cheque of

Rs.7 lakhs dated 1-3-2011 and assured that the said cheque would get encashed. However, the said cheque stood bounced and the applicants all the

time were assuring the complainant that they would pay the amount, but it appears that the applicants were making false promises to the complainant,

so that the statutory period for filing complaint under Section 138 of Negotiable Instruments Act, may expire. Later on, they refused to pay the amount

and openly said that they were gaining time so that the statutory period of filing complaint under Section 138 of Negotiable Instruments Act is over. It

is also submitted that the complainant has already filed a civil suit against the applicants for recovery of the amount. It is further submitted that the

Trial Court (J.M.F.C., Indore) by order dated 24-8-2015 passed in Criminal Case No.19585/2012, framed charge under Section 420 of I.P.C. Being

aggrieved by the order of the Trial Court, the applicants filed a Criminal Revision, which was registered as Cr. R. No.690/2015 and the 19th A.S.J.,

Indore by order dated 21-01-2016 has dismissed the Revision.

Challenging the orders passed by the Courts below, by which the charge under Section 420 of I.P.C. was framed, it is submitted by the Counsel for

the applicants, that in order to make out an offence under Section 420 of I.P.C., it is essential to show that right from very inception, the applicants had

dishonest intention of cheating the complainant. Even if the allegation that a part of the liaisoning fee has not been paid by the applicants is accepted,

then at the best, it would be a mere failure to keep the promise at a later stage and would not bring the act within the ambit of Section 420 of I.P.C. It

is further submitted that the allegations made by the complainant are of civil in nature and the complainant himself has filed a civil suit which is

pending, therefore, the dispute which is of civil in nature, cannot be allowed to be converted into a criminal case and thus, the order framing charge is

liable to be set aside and the applicants are liable to be discharged.

Per contra, it is submitted by the Counsel for the respondent that the applicants knew the fact that there is no sufficient amount in the bank account,

but still with an intention to cheat the complainant, the cheque in question was issued, and further by making false promise of making the payment,

they kept the complainant in dark, as a result of which, the statutory period for filing the complaint under Section 138 of Negotiable Instruments Act,

also expired.

Heard the learned Counsel for the parties.

In order to make out a prima facie case for prosecuting a person, the complainant must show that the accused had dishonest intention of cheating the

complainant, right from very inception.

The Supreme Court in the case of State of Kerala Vs. A.P. Pillai reported in AIR 1973 SC 326 has held as under :

“…….. To hold a person guilty of the offence of cheating, it has to be shown that his intention was dishonest at the time of making the promise.

Such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfill the promise.

The Supreme Court in the case of Hridaya Rajan Pd. Verma Vs. State of Bihar, reported in AIR 2000 SC 2341 has held 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. Therefore, it is the intention which is 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…..â€​.

The Supreme Court in the case of S.N. Palanitkar Vs. State of Bihar reported in AIR 2001 SC 2960 has held as under:

“The ingredients of an offence of cheating are (i) there should be fraudulent or dishonest inducement of a person by deceiving him (ii)(a) the

person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property ; or (b) the person

so deceived should be intentionally induced to do so or omit to do anything which he would not do omit if he were not so deceived; and (iii) in cases

covered by (ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation

or property.

It is further held 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 the promise subsequently cannot be presumed as an act leading to cheating.â€​

Thus, if the complaint is considered in the light of the law laid down by the Supreme Court in the above mentioned cases along with Section 420 of

I.P.C., then it is clear that the complainant has no where made a basic allegation against the applicants that they had dishonest intention at the very

inception. On the contrary, it is mentioned in the complaint that the applicants had dishonest intention at the time, when the cheque was issued as they

knew this fact that the bank account has no sufficient funds and later on the bank account was closed. Thus, the basic allegation of dishonest intention

on the part of the applicants at the time of oral agreement for taking liaisoning services of the complainant are missing in the complaint.

Further, it has been admitted by the parties that a civil suit has already been filed by the complainant against the applicants for recovery of the fees,

which is still pending.

The moot question for determination is that even if the entire allegations are accepted, then whether the dispute would be predominantly of civil in

nature or it also involves the ingredients of criminal intent. It is well established principle of law that where the dispute is predominantly of civil in

nature, then the same cannot be given the colour of criminal case. Similarly, where the criminal intents are involved, then the prosecution cannot be

quashed only on the ground that the allegations also involve civil dispute.

The Supreme Court in the case of Binod Kumar & Ors. v. State of Bihar & Anr. reported in (2014) 10 SCC 663 has held as under:-

“8. In proceedings instituted on criminal complaint, exercise of the inherent powers to quash the proceedings is called for only in case where the

complaint does not disclose any offence or is frivolous. It is well settled that the power under Section 482 Cr.P.C. should be sparingly invoked with

circumspection, it should be exercised to see that the process of law is not abused or misused. The settled principle of law is that at the stage of

quashing the complaint/FIR, the High Court is not to embark upon an enquiry as to the probability, reliability or the genuineness of the allegations made

therein.

In Smt. Nagawwa vs. Veeranna Shivalingappa Konjalgi, (1976) 3 SCC 736, this Court enumerated the cases where an order of the Magistrate

issuing process against the accused can be quashed or set aside as under: (SCC p.741, para 5)

“(1) 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 complainant does not disclose the essential ingredients of an offence which is alleged against the

accused;

(2) 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 a sufficient ground for proceeding against the accused;

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

materials which are wholly irrelevant or inadmissible; and

(4) where the complaint suffers from fundamental legal defects such as, want of sanction, or absence of a complaint by legally competent authority

and the like.â€​

The Supreme Court pointed out that the cases mentioned are purely illustrative and provide sufficient guidelines to indicate contingencies where the

High Court can quash the proceedings.

In Indian Oil Corporation vs. NEPC India Ltd. And Ors., (2006) 6 SCC 736, this Court has summarised the principles relating to exercise of

jurisdiction under Section 482 Cr.P.C. to quash complaints and criminal proceedings as under:- (SCC pp.747-48, para 12)

“12. The principles relating to exercise of jurisdiction under Section 482 of the Code of Criminal Procedure to quash complaints and criminal

proceedings have been stated and reiterated by this Court in several decisions. To mention a fewâ€"Madhavrao Jiwajirao Scindia v. Sambhajirao

Chandrojirao Angre (1988) 1 SCC 692, State of Haryana v. Bhajan Lal,1992 Supp (1) SCC 335; Rupan Deol Bajaj v. Kanwar Pal Singh Gill (1995) 6

SCC 194, Central Bureau of Investigation v. Duncans Agro Industries Ltd (1996) 5 SCC 591; State of Bihar v. Rajendra Agrawalla (1996) 8 SCC

164, Rajesh Bajaj v. State NCT of Delhi,(1999) 3 SCC 259; Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd(2000) 3 SCC 269 [pic]Hridaya

Ranjan Prasad Verma v. State of Bihar (2000) 4 SCC 168, M. Krishnan v. Vijay Singh (2001) 8 SCC 645 and Zandu Pharmaceutical Works Ltd. v.

Mohd. Sharaful Haque( 2005) 1 SCC 122. The principles, relevant to our purpose are:

(i) A complaint can be quashed where the allegations made in 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 the case alleged against the accused.

For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a

meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining

prayer for quashing of a complaint.

(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been

initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.

(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant

caution.

(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the

complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the

complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.

(v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A

commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal

offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a

commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal

proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not.â€​

Referring to the growing tendency in business circles to convert purely civil disputes into criminal cases, in paragraphs (13) and (14) of the Indian

Oil Corporation’s case (supra), it was held as under:- (SCC pp.748-49)

“13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases.

This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of

lenders/creditors. Such a tendency is seen in several family disputes also, [pic]leading to irretrievable breakdown of marriages/families. There is also

an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle

civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and

discouraged. In G. Sagar Suri v. State of U.P., (2000) 2 SCC 636 this Court observed: (SCC p. 643, para 8)

“8. … It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a

short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a

serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code.

Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.â€​

While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who

initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should

himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law. One positive step that can be taken by

the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power under Section 250 CrPC more frequently,

where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may.â€​

The Supreme Court in the case of International Advanced Research Centre For Powder Metallurgy and New Materials (ARCI) & Ors. v. Nimra

Cerglass Technics Private Limited and Anr. reported in (2016) 1 SCC 348 had held as under:-

“13. The legal position is well-settled that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the court is, as to

whether uncontroverted allegations as made in the complaint establish the offence.

The High Court being superior court of the State should refrain from analyzing the materials which are yet to be adduced and seen in their true

perspective. The inherent jurisdiction of the High Court under Section 482 Cr.P.C. should not be exercised to stifle a legitimate prosecution. Power

under Section 482 Cr.P.C. is to be used sparingly only in rare cases. In a catena of cases, this Court reiterated that the powers of quashing criminal

proceedings should be exercised very sparingly and quashing a complaint in criminal proceedings would depend upon facts and circumstances of each

case. Vide State of Haryana & Ors. vs. Bhajan Lal & Ors., 1992 Supp.(1) SCC 335; State of T.N. vs. Thirukkural Perumal, (1995) 2 SCC 449; and

Central Bureau of Investigation vs. Ravi Shankar Srivastava, IAS & Anr. (2006) 7 SCC 188.

In the light of the well-settled principles, it is to be seen whether the allegations in the complaint filed against ARCI and its officers for the alleged

failure to develop extruded ceramic honeycomb as per specifications disclose offences punishable under Sections 419 and 420 IPC. It is to be seen

that whether the averments in the complaint make out a case to constitute an offence of cheating.

The essential ingredients to attract Section 420 IPC are: (i) cheating; (ii) dishonest inducement to deliver property or to make, alter or destroy any

valuable security or anything which is sealed or signed or is capable of being converted into a valuable security and (iii) mens rea of the accused at the

time of making the inducement. The making of a false representation is one of the essential ingredients to constitute the offence of cheating under

Section 420 IPC. In order to bring a case for the offence of cheating, it is not merely sufficient to prove that a false representation had been made,

but, it is further necessary to prove that the representation was false to the knowledge of the accused and was made in order to deceive the

complainant.

The distinction between mere breach of contract and the cheating would depend upon the intention of the accused at the time of alleged

inducement. If it is established that the intention of the accused was dishonest at the very time when he made a promise and entered into a transaction

with the complainant to part with his property or money, then the liability is criminal and the accused is guilty of the offence of cheating. On the other

hand, if all that is established that a representation made by the accused has subsequently not been kept, criminal liability cannot be foisted on the

accused and the only right which the complainant acquires is the remedy for breach of contract in a civil court. Mere breach of contract cannot give

rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of the transaction. In S.W. Palanitkar &

Ors. vs. State of Bihar & Anr. (2002) 1 SCC 241, this Court held as under:

“21 ……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.â€​

The above view in Palanitkar’s case was referred to and followed in Rashmi Jain vs. State of Uttar Pradesh & Anr. (2014) 13 SCC

By analysis of terms and conditions of the agreement between the parties, the dispute between the parties appears to be purely of civil nature. It is

settled legal proposition that criminal liability should not be imposed in disputes of civil nature. In Anil Mahajan vs. Bhor Industries Ltd. & Anr. (2005)

10 SCC 228, this Court held as under:-

“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.

The substance of the complaint is to be seen. Mere use of the expression “cheating†in the complaint is of no consequence. Except mention of

the words “deceive†and “cheat†in the complaint filed before the Magistrate and “cheating†in the complaint filed before the police,

there is no averment about the deceit, cheating or fraudulent intention of the accused at the time of entering into MOU wherefrom it can be inferred

that the accused had the intention to deceive the complainant to pay…. We need not go into the question of the difference of the amounts mentioned

in the complaint which is much more than what is mentioned in the notice and also the defence of the accused and the stand taken in reply to notice

because the complainant’s own case is that over rupees three crores was paid and for balance, the accused was giving reasons as above-noticed.

The additional reason for not going into these aspects is that a civil suit is pending inter se the parties for the amounts in question.â€​

In Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736, this court observed that civil liability cannot be converted into criminal liability and

held as under:- “13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into

criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the

interests of lenders/creditors. Such a tendency is seen in several family disputes also, leading to irretrievable breakdown of marriages/families. There

is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to

settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and

discouraged. In G. Sagar Suri v. State of U.P. (2000) 2 SCC 636 this Court observed: (SCC p. 643, para 8)

'8. … It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short

cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious

matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code.

Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.†14. While

no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or

persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be

made accountable, at the end of such misconceived criminal proceedings, in accordance with law. One positive step that can be taken by the courts, to

curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power under Section 250 CrPC more frequently, where they

discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may.â€​

The above decisions reiterate the well-settled principles that while exercising inherent jurisdiction under Section 482 Cr.P.C., it is not for the High

Court to appreciate the evidence and its truthfulness or sufficiency inasmuch as it is the function of the trial court. High Court’s inherent powers,

be it, civil or criminal matters, is designed to achieve a salutary public purpose and that a court proceeding ought not to be permitted to degenerate into

a weapon of harassment or persecution. If the averments in the complaint do not constitute an offence, the court would be justified in quashing the

proceedings in the interest of justice .â€​

If the facts of the present case are considered in the light of the law laid down by the Supreme Court, then it would be clear that as per the allegations,

the applicants had agreed to hire the liaisoning services of the complainant and had agreed to pay the fees for the services rendered by the

complainant. It is the case of the complainant, that the applicants have not paid the entire fee and had issued a cheque knowingfully well that there is

no sufficient fund in the bank account and later on, the said bank account was closed. The applicants were making false promise to make payment of

the cheque amount, so that the limitation for filing the complaint under Section 138 of Negotiable Instruments Act, may expire.

So far as the question of non-payment of fees for the services rendered by the complainant is concerned, it is clear that there is no allegation to the

effect that the applicants had dishonest intention right from the very beginning. Thus, mere failure on the part of the applicants to pay the remaining

liaisoning fee to the complainant, would certainly give rise to a civil dispute, but would not be an offence under Section 420 of I.P.C. It is well

established principle of law that a dispute, which is predominantly of a civil in nature, cannot be allowed to be converted into a criminal case, so that a

shortcut method for recovery of money can be adopted.

Thus, considering the allegations made against the applicants, this Court is of the considered opinion, that the complaint filed by the complainant, lacks

the basic allegation of dishonest intention on the part of the applicants, right from the very inception of the agreement and secondly, even if the entire

allegations are accepted, then it would give rise to a civil dispute and the same cannot be allowed to be converted into a criminal case and admittedly,

the complainant has already filed a civil suit against the applicants before a Court of competent jurisdiction, which is pending.

Thus, this Court is of the considered opinion, that the Courts below have lost sight of the above mentioned circumstances, accordingly, the order dated

21-1-2016 passed by 19th A.S.J., Indore in Criminal Revision No.690/2015 as well as the order dated 24-8-2015 passed by J.M.F.C., Indore in

Criminal Case No.19585/2012, by which charge under Section 420 of I.P.C. has been framed, are hereby set aside.

The criminal complaint filed by the complainant against the applicants is hereby quashed and the applicants are discharged.

The application succeeds and is hereby Allowed.