Vinar Ltd. and Others vs Chenab Textile Mills

A.S. Anand, C.J.—This is a petition u/s 561, Cr. P.C. filed by the Directors of the Calcutta based business concern, accused of cheating,

praying this Court for quashing the proceedings against them on the ground that the complaint discloses no offence.

Chief Judicial Magistrate, Kathua, issued process u/s 420, R.P.C. against the accused on the allegations set out in paras 3 to 6 of the complaint.

Para 3 of the complaint reads:

That the accused persons after hatching a criminal conspiracy, with common, fraudulent and dishonest intention induced the complainant at Kathua

in July 1980 to part with the goods like yarn worth Rs. 6,12,247.19 paise as per contract 10 and 11, of 27-9-1980 (Subsequently drawn

formally) whereas the accused persons at the very beginning had no intention to pay for these goods, rather they had intended to cheat the

complainant. It is submitted that the accused persons tried to create its confidence by making payments of the goods, but that was with fraudulent

and dishonest intention, so that the complainant might fell prey to the trap of cheating planned by the accused. And that is what actually happened

that the accused persons got successful in inducing the complainant to part with the goods mentioned in contract 10 and 11, for which they

intended not to pay at all, rather to cheat the complainant thereby brining wrongful loss to it and wrongful gain to the accused.

Later, the goods were supplied by the petitioner through the Jammu and Kashmir Bank Ltd., Calcutta, along with RR/MR and Hundies details of

which Ls contained in para 4 of the complaint.

The substance of the charge of criminal conspiracy as to how the fraud was committed, is contained in paras 5 and 6 of the complaint which are

reproduced below:

That again the criminal intention of cheating by accused persons came to the surface when they at different times between 12-12-1980 to 13-

12-1980 approached the J. & K. Bank, Calcutta for delivery of the goods as against the assurance given by them in a fraudulent and dishonest

manner for making the payment within 30 days to the Bank and accepted the Hundies. The accused persons 8 to 9 on behalf of and with common

intention of accused 1 to 7 and as a result of criminal conspiracy, made the representation at different occasions as stated above to the J. & K.

Bank, Calcutta that the payment of the goods would be made within 30 days from the date of acceptance of the Hundies, got the MR/RR released

from the Bank and got the delivery of goods mentioned above, whereas they from the very beginning had no intention to pay for the goods.

That as a consequence of such representation the MR/RRs were got released and the delivery of the goods was taken by the accused persons

in full as against the acceptance of the Hundies but the accused persons did not make any payment of the goods as stated above. The complainant

requested the accused persons to make payment of the goods as represented by they have refused to do so and have also shown their mind that

they have succeeded in cheating the complainant by not paying the price of the goods, and successfully entrapped the complainant.

The petitioners who are all Directors of the Vinar Limited, want the proceedings to be quashed on the grounds that no criminal case is made out on

the admitted facts of the case as the transaction is based on the breach of contracts which is civil wrong. According to Mr. Singh the order

impugned is misuse of the process of the Court : firstly, because the trial Court had no jurisdiction when the alleged occurrence, as admitted by the

complainant, had taken place in Calcutta where the officials of the Jammu and Kashmir Bank Ltd. Branch Calcutta were deceitfully persuaded to

part with the goods on the promise that payment would be made within 30 days from the date of acceptance of the Hundies as stated in para 5 of

the complaint; and, secondly, it is not the complainant but the Bank which was defrauded as alleged and merely it is a case of civil transaction pure

and simple for which civil remedy is available.

On behalf of the complainant, Mr. Gupta has however contended that merely because a civil remedy is available, the jurisdiction of the criminal

courts is not barred. His contention is that the facts of this case are very close to the facts of the case, Ram Avtar Gupta Vs. Gopal Das Taliwal

and Others, and the trial Court was perfectly justified in issuing the process.

The question that arises for consideration is : whether the facts as disclosed in the body of the complaint constitute an offence of cheating so as

to justify the issue of process?

Before proceedings to find out as to whether the facts disclosed in the complaint constitute the commission of an offence, it is necessary to

appreciate the facts in Ram Avtar Gupta Vs. Gopal Das Taliwal and Others, which have been summarised as under:

Where a criminal prosecution under Sections 420, 467, 468, 34 and 120B, I.P.C. launched by the carriers of a consignment against the partners

of the consignee firm on the ground that by misrepresentation and deceit the partners of the consignee firm induced the carriers to deliver the

consignment to them without retiring the transport receipt from the Bank and without making payment to the Bank as required by the contract was

quashed by the High Court on feeling that the consignee had later on in three instalments paid both the freight and the price and as such it was a

case of mere delay in discharge of monetary liability which need not necessarily amount to dishonest intention on their part but it was found that the

carriers had in fact settled all the dues of the consignors and the consignees even after getting delivery of the consignment from the carriers allegedly

by making mis-representation and practising deceit have failed to make good a substantial part of the price of the goods the order of the High

Court was quashed by Supreme Court....

It is clear from the facts that the complaint was by the carrier of the goods whom the consignee persuaded to deliver the consignment by promising

payment within a specified period of time. But here the Bank on whom the alleged fraud was practised has not preferred any complaint. No one

has even stated on behalf of the Bank that it was so cheated. So the authority relied upon by Mr. Gupta is not applicable to the facts of the present

case because of a different fact situation. In the instant case, it is admitted that the goods were despatched to the petitioners through J. & K. Bank

who were to deliver them on payment after the RRs were retired. The Bank, however, released the goods without insisting on payment. Thus,

there is no direct contract between the petitioners and the respondent. Non-payment of money by itself, is, however, no ground to proceed against

the petitioners when there is no evidence furnished by the Bank that the goods were released by it only on such an assurance and such assurance

was accepted on behalf of the consignor so as to bind the parties. There is no allegation that complainant ever agreed to what transpired between

the accused and the Bank at Calcutta. Thus, the Courts at Kathua had no jurisdiction because the Bank was obliged to release the consignments

only after the consignee had retired the RR/MRs. But, even if what is stated on behalf of the Bank is true, it is only the Courts at Calcutta who have

the jurisdiction and that too at the instance of the Bank on whom the fraud was practised. There was, thus, no justification for the trial Court to

issue process in this case for want of jurisdiction.

Although the complainant has specifically based its complaint on what transpired between the J. & K Bank Ltd. Calcutta and the petitioners for

which the trial Court was not justified to issue process but in case it is considered that the complaint has still been cheated because the accused

tried to gain its confidence by making initial payments as stated in para 3, that also does not justify the issue of process. What transpired between

the complainant and the petitioners in Kathua in July 1980, which followed the drawing up of contract Nos. 10 and 11 of 27-9-1980 as narrated

in para 3 of the complaint, was purely a civil transaction. The contracts worked for some time and even payments were received by the

complainant for the supplies made following the drawing of the contract. Any breach of contract thereafter will not create a criminal liability unless

something more has been done with a purpose to deceit the complainant independent of what transpired between the J. & K. Bank Ltd., Calcutta

and the petitioners because if what transpired at Calcutta is excluded and has to be excluded in this case for what has been said above the facts are

covered by the following observations made in AIR 1938 Mad 129 : 1938 Cri LJ 261:

...In the world of business things are often done which are betrayals of confidence and deceptions which arouse moral indignation but are

nevertheless civil wrongs which can be righted by Civil Courts and are not crimes which can be punished by a Criminal Court. Not every immoral

act is criminal and it is an abuse of the process of a Court to attempt to create new crimes in order to compel men to conform to a high standard of

probity in business dealings or to force them to execute their promises.

For the foregoing reasons the petition is allowed and the proceedings pending in the Court of Chief Judicial Magistrate, Kathuna, in which

process u/s 420, R.P.C. has been issued, against the accused are quashed.