The Supreme Court while allowing an appeal seeking the quashing of an FIR remarked that it has time and again pointed out the clear distinction between a civil wrong in the form of breach of contract, non-payment of money, or disregard to and violation of the contractual terms; and a criminal offense under Sections 420 and 406 of the IPC.
A division bench of Justice Sanjeev Khanna and Justice Dipankar Dutta observed that initiating the criminal process for oblique purposes is bad in law and amounts to abuse of process of law.
The Court stated that the various judgments addressing this point are somehow overlooked, and are not being applied and enforced.
It mentioned “Mohammed Ibrahim and Others v. State of Bihar and Another” and “V.Y. Jose and Another v. State of Gujarat and Another” wherein it has been explicitly stated that a contractual dispute or breach of contract per se should not lead to initiation of a criminal proceeding. The ingredient of ‘cheating’, as defined under Section 415 of the IPC, is the existence of a fraudulent or dishonest intention of making an initial promise or representation thereof, from the very beginning of the formation of contract.
"In the absence of the averments made in the complaint petition wherefrom the ingredients of the offence can be found out, the High Court should not hesitate to exercise its jurisdiction under Section 482 of the Cr.P.C.", the Court further stated adding that Section 482 of the Cr.P.C. saves the inherent power of the High Court, as it serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years, when no criminal offence is made out.
"It is one thing to say that a case has been made out for trial and criminal proceedings should not be quashed, but another thing to say that a person must undergo a criminal trial despite the fact that no offence has been made out in the complaint", the court said.
To elaborate on the above, the court referred to V.Y.Jose (supra) wherein reliance was placed on several earlier decisions such as “Hira Lal Hari Lal Bhagwati v. CBI”, M/S Indian Oil Corporation Vs. M/S Nepc India Ltd., & Ors, 2006 Latest Caselaw 434 SC, Vir Prakash Sharma v. Anil Kumar Agarwal, All Cargo Movers (I) Pvt. Ltd. & Ors Vs. Dhanesh Badarmal Jain & Anr, 2007 Latest Caselaw 837 SC
With respect to the present impugned FIR, the court was of the view that even if the assertions of failure of the appellants to pay the outstanding amount despite the respondent's repeated demand is to be assumed true, still a criminal offence under Section 420 read with Section 415 of the IPC is not established in the absence of deception by making false and misleading representation, dishonest concealment or any other act or omission, or inducement of the complainant to deliver any property at the time of the contract(s) being entered.
"The ingredients to allege the offence are neither stated nor can be inferred from the averments. A prayer is made to the police for recovery of money from the appellants. The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money", the court observed.
Noting that although the chargesheet mentions charges under Section 406 IPC, it hasn't been pointed out how the ingredients of said section are satisfied as no details and particulars are mentioned.
"There are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously.10 For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later", the court noted.
The Court went on to state that in the particular case, entrustment is missing, in fact, it is not even alleged and the case is of simple sale of goods.
"The chargesheet does refer to Section 506 of the IPC relying upon the averments in the complaint. However, no details and particulars are given, when and on which date and place the threats were given. Without the said details and particulars, it is apparent to us, that these allegations of threats etc. have been made only with an intent to activate police machinery for recovery of money", the court opined.
The Court thus concluded that while it is at the discretion of the respondent to file a civil suit, a criminal case is quite clearly not made out.
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