The Supreme Court, while expounding the difference between Cheating and Criminal Breach of Trust, held that “The two offences cannot coexist simultaneously in the same set of facts. They are antithetical to each other”.
Apex Court also observed that “issuance of summons is a serious matter and, therefore, should not be done mechanically”.
Facts
The present appeal arises from the order passed by Allahabad High Court declining to quash and set aside the summoning order passed by Add. CJM in a complaint case alleging offences under Section 406, 420 & 120B Indian Penal Code, 1860 (Hereinafter, ‘IPC’) for non-payment of dues towards the sale of horse grains and oats supplied to Delhi Race Club (Appellant herein).
Issues:
1. Whether the magistrate has the power under section 156(3) CrPC to order police investigation prior to taking cognizance of a complaint?
2. What is the standard of satisfaction required for a magistrate to issue a process under section 204, CrPC, and is the magistrate required to provide specific reasons or evidence displaying application of mind in the concerned order?
3. What is the difference between Cheating under Section 420 and Criminal Breach of Trust under Section 406 IPC?
Contentions of Appellant
The appellant urged that under Section 156(3) CrPC, 1973, a magistrate can order a police investigation before taking cognizance of a complaint only if it discloses a cognizable offense, otherwise, such an order should be quashed. Regarding Section 204 CrPC, 1973, the appellant argues that the magistrate must apply their mind to the complaint and provide specific reasons when issuing process, ensuring that the facts prima facie disclose an offense. Appellant also asserted that cheating under Section 420 IPC, 1860 involves a fraudulent inducement to deliver property, whereas criminal breach of trust under Section 406 IPC, 1860 involves the misappropriation of entrusted property and the complaint in hand did not substantiate either offence adequately. The Appellant also argued that for disputes relating to non-payment of dues, the appropriate remedy is civil suit and not a criminal complaint.
Contentions of Respondent
Respondent argued that the magistrate’s direction for a police investigation under section 156(3), even before cognizance, is valid as the complaint disclosed a cognizable offence. Respondents further contended that the Magistrate’s direction for issue of process was also correct as it was passed after the magistrate considered the complaint, accompanying statements which disclosed the offence. With respect to Section 406 and 420 IPC, the Respondent asserted that the complaint involves allegations of fraudulent non-payment and misappropriation and moreover, there was sufficient material to substantiate these charges, thus, the criminal proceedings were correctly initiated.
Observation of the Court
With respect to issue no. 1, the SC Bench stated that “In Tilak Nagar Industries Ltd. & Ors. v. State of A.P. reported in (2011) 15 SCC 571, this Court held that the power under Section 156(3) of the CrPC can be exercised by a magistrate even before he takes cognizance provided the complaint discloses the commission of cognizable offences and if the complaint does not disclose commission of cognizable offences, such an order of the magistrate directing investigation is liable to be quashed.”.
In addition to the above, Apex Court added that “The aforesaid decision was in context with the power of the Magistrate to order police investigation under Section 156(3) of the CrPC. What is sought to be conveyed in the said decision is that when the Magistrate orders police investigation under Section 156(3) of the CrPC he does not take cognizance upon the complaint. It is only upon receipt of the police report that the Magistrate may take cognizance. If at the stage of pre-cognizance, the Magistrate is expected to be careful or to put it in other words, the Magistrate is obliged to look into the complaint threadbare so as to reach to a prima facie conclusion whether the offence is disclosed or not, then he is expected to be more careful when he is actually taking cognizance upon a private complaint and ordering issue of process.”
With respect to the Issue No. 2, the Supreme Court bench observed that “The Principle of law discernible from the aforesaid decision is that issuance of summons is a serious matter and, therefore, should not be done mechanically and it should be done only upon satisfaction on the ground for proceeding further in the matter against a person concerned based on the materials collected during the inquiry.”
With respect to Issue no. 3, the Apex Court laid down that, “What can be discerned from the above is that the offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients.”… “Further, in both the aforesaid sections, mens rea i.e. intention to defraud or the dishonest intention must be present, and in the case of cheating it must be there from the very beginning or inception.”…
The Court elaborated the above by stating “…if it is a case of the complainant that offence of criminal breach of trust as defined under Section 405 of IPC, punishable under Section 406 of IPC, is committed by the accused, then in the same breath it cannot be said that the accused has also committed the offence of cheating as defined and explained in Section 415 of the IPC, punishable under Section 420 of the IPC”… “To put it in other words, the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case”
Apex Court also observed that “… For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously.”
Decision
The court allowed the Appeal and set aside the previous orders passed by the High Court and Addl. CJM.
Case Title: Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
Citation: Criminal Appeal No. 3114 of 2024
Court: Supreme Court of India
Coram: Justice J.B. Pardiwala and Justice Manoj Misra
Date: 23rd August, 2024
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