Calcutta High Court (Appellete Side)

Sahadev Prasad Agarwal & Anr vs The State Of West Bengal & Anr on 30 July, 2021

                 IN THE HIGH COURT AT CALCUTTA
                CRIMINAL REVISIONAL JURISDICTION
                          APPELLATE SIDE


The Hon'ble JUSTICE BIBEK CHAUDHURI


                              CRR 355 of 2016


                       Sahadev Prasad Agarwal & Anr.
                                     -Vs-
                       The State of West Bengal & Anr.

      For the petitioners:       Mr. Ayan Bhattacherjee, Adv.,
                                 Mr. Pawan Kumar Gupta, Adv.,
                                 Mr. Manish Shukla, Adv.,
                                 Mr. Aditya Tiwari, Adv.

      For the State:             Mr. Prasun Kumar Datta, A.P.P
                                 Mrs. Sukanya Bhattacherjee, Adv.,

      For opposite party No.2:
                                 Mr. Imran Siddiqui, Adv.

Heard on: 24th June, 9th July, 13th July, 15th July and 19 July, 2021.
Judgment on: July 30, 2021.

BIBEK CHAUDHURI, J. : -


1.    The petitioners being the accused persons of GR Case No.1524 of

2015 arising out of Hare Street P.S Case No.397 dated 3rd July, 2015

under Section 406/420/120B of the Indian Penal Code (hereinafter

described as the IPC) presently pending before the court of the learned

Chief Metropolitan Magistrate, Calcutta have invoked the jurisdiction of
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this Court under Section 482 of the Code of Criminal Procedure praying

for quashing of the above mentioned proceedings pending against them.

2.    Followings are the undisputed factual circumstances which laid to

the dispute between the petitioners and the opposite party No.2:

            a) The petitioners are the partners of Shree Raj Steal

               Products having its office at 20 Mullick Street within P.S -

               Burrabazar, Kolkata- 700007.

            b) The opposite party No.2 is a businessman dealing with

               sale and supply of iron and steel materials including CR

               Coil. The petitioners placed an order for supply of 60.52

               M.T of C.R Coil with the opposite party No.2. The opposite

               party No.2 sold said materials at a consideration price of

               Rs.24,24,723/- only and supplied the materials to the

               petitioners. The petitioners also issued five cheques dated

               10th June, 2013, 21st June, 2013, 11th July, 2013, 22nd

               July, 2013 and 30th July, 2013 of different amounts, total

               being the entire consideration price for 60.52 Mt. C.R Coil.

               The opposite party No.2 presented the said cheques to the

               banker for encashment but the said cheques were

               dishonoured and returned to him. Subsequently, the

               petitioners paid a sum of Rs.8 lakh to the opposite party

               No.2 and at present the outstanding dues payable by the

               petitioners   in   favour   of   opposite   party   No.2   is

               Rs.16,24,723. The opposite party No.2 requested the
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   petitioners     repeatedly   to   make   payment   of   such

   outstanding dues, but the petitioners went on delaying all

   the said payment of the said sum of one pretext or the

   other.

c) It is also an undisputed fact that the opposite party No.2

   filed a complaint under Section 138/141 of the Negotiable

   Instrument Act against the petitioners after the cheques

   being dishonoured. The said petition of complaint was

   however returned to the opposite party No.2 by the learned

   Metropolitan Magistrate vide order dated 31st March, 2015

   relying upon decision of the Hon'ble Supreme Court in the

   case     of   Dashrath   Rupsingh   Rathod   vs.   State   of

   Maharashtra for filing the same to the court having

   jurisdiction.

d) The opposite party No.2 however did not file the said

   complaint under Section 138/141 of the Negotiable

   Instrument Act before the court having jurisdiction. On

   the contrary he filed a petition of complaint under Section

   156(3) of the Code of Criminal Procedure alleging, inter

   alia, that petitioners entered into a criminal conspiracy to

   misappropriate the outstanding dues payable to the

   opposite party No.2 and thereby committed cheating upon

   him.
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3.    The learned Chief Metropolitan Magistrate sent the said petition of

complaint to the Officer-in-Charge of Hare Street P.S directing him to

treat the same as FIR and start a specific case against the petitioners.

Accordingly, Hare Street P.S Case No.397 dated 3rd July, 2015 under

Section 406/420/120B of the IPC was registered against the petitioners.

4.    The petitioners has challenged the legality and validity of Hare

Street P.S Case No.396 dated 3rd July, 2015 corresponding to GR Case

No.1524 of 2015 by filing the instant application under Section 482 of the

Code of Criminal Procedure on 28th January, 2016 and prayed for

quashment of the proceeding.

5.    It is submitted by Mr. Ayan Bhattacherjee, learned Advocate for the

petitioners that the opposite party No.2 did not mention in the petition of

complaint that he on the self same issue filed a complaint case under

Section 138/141 of the Negotiable Instrument Act. The said complaint

case was however returned to the complainant/opposite party No.2 with a

direction to file the same before the court having jurisdiction on the basis

of the judgment of the Hon'ble Supreme Court in Dashrath Rupsingh

Rathod. The opposite party No.2 however, did not file the said complaint

before the court of competent jurisdiction. He also did not mention the

said fact in his subsequent complaint under Section 156(3) of the Code.

According to Mr. Bhattacharjee, amounts to practising fraud upon the

court. Secondly, it is submitted by him that the opposite party No.2

manufactured     some    new    grounds     of   cheating   and    criminal

misappropriation in the petition of complaint under Section 156(3) of the
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Code. Admittedly, the petitioners never denied their obligation to make

payment of dues to the opposite party No.2. It is also not disputed that

the petitioners have already paid Rs.8 (eight) lakh to the opposite party

No.2 and at present outstanding dues is Rs.16,24,723/- only. When the

petitioners made part payment of their dues, question of deception and

fraud does not arise.

6.    Last but not the least, it is urged by the learned Advocate for the

petitioner that the dispute between the parties is essentially civil in

nature. The petitioners submitted an order for purchasing certain amount

of materials from the opposite party No.2. He agreed to sale the said

materials at a consideration price of Rs.24,24,723/-. The petitioners made

part payment of the outstanding dues and if at all the allegations made by

the opposite party is true the efficacious relief lies in filing a suit for

recovery of outstanding dues. The petitioners have no criminal liability in

the instant case and continuation of the criminal proceeding being GR

Case No.1524 of 2015 is abuse of process of the court and should be

quashed. In support of his contention Mr. Bhattacherjee refers to the

following decisions of the Hon'ble Supreme Court :-

            i)     Vir Prakash Sharma vs. Anil Kumar Agarwal : (2007)

                   7 SCC 373.

            ii)    G. Sagar Suri vs. State of U.P : (2000) 2 SCC 636.

            iii)   Anil Mahajan vs. Bhor Industries Ltd.:(2005) 10 SCC

                   228.
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            iv)     Satishchandra Ratanlal Shah vs. State of Gujrat :

                    (2019) 9 SCC 148.

            v)      Vinod Natesan vs. State of Kerala : (2019) 2 SCC

                    401.

            vi)     Murari Lal Gupta vs. Gopi Singh : (2005) 13 SCC

                    699.

            vii)    MedMeme LLC vs. iHorse BPO Solutions (P) Ltd.:

                    (2018) 13 SCC 374.

            viii)   Hotline Teletubes and Components Ltd. vs. State of

                    Bihar, (2005) 10 SCC 261.

7.    In Vir Prakash Sharma (supra) the parties entered into a contract

for sale and purchase of welding rods. The appellant issued two cheques

which were eventually dishonoured. The respondent filed a complaint

before the court of the learned Special Judicial Magistrate, Rampur under

Section 406/409/420/417 of the Indian Penal Code against the

petitioners. The learned Magistrate took cognizance of offence against the

appellant. The appellant filed an application before the High Court at

Allahabad praying for quashing of the proceeding against him. The High

Court rejected the said application which led the appellant to file Criminal

Appeal No.980 of 2007 before the Hon'ble Supreme Court. The Hon'ble

Supreme Court was pleased to hold that the dispute between the parties

is essentially a civil dispute. Nonpayment or under payment of the price of

the goods by itself does not amount to commission of an offence of

cheating or criminal breach of trust.

8. In G. Sagar Suri (supra), similar question was raised. In the said

case the appellants were roped in a case under Section 406/420 of the

IPC. In the counter affidavit filed on behalf of the complainant, it was

found that none of the appellants is a director of Ganga Automobile Ltd.

The first appellant was, however the authorized signatory of the company

and he had signed the cheques which were returned dishonoured. The

record of the said case nowhere stated as to how the complainant

company was duped. The complainant filed a complaint under Section

138 of the NI Act and the said complaint was pending. The Hon'ble

Supreme Court held that there is no occasion for the complainant to

prosecute the appellants under Sections 406/420 IPC and in its doing so

it is clearly abuse of the process of law and prosecution against the

appellant was quashed.

9. The Hon'ble Supreme Court in the case of Anil Mahajan (supra)

lays down a fine line of distinction between cheating and breach of

contract. It is observed by the Hon'ble Supreme Court that failure of a

person to keep up promise subsequently, a culpable intention right at the

beginning, that is when he made the promise cannot be presumed. A

distinction has to be kept in mind between mere breach of conduct and

the offence of cheating. It depends upon the intention of the accused at

the time of inducement. The subsequent contact 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.

10. Satishchandra Ratanlal Shah's case (supra) came up before the

Hon'ble Supreme Court against an order of refusal of quashment of

complaint by the High Court. The facts giving rise to the appeal before the

Hon'ble Supreme Court is that respondent No.1 is a money lending

company of which respondent No.2 is the director. The appellant

approached respondent No.2 for a loan. The respondent No.2 sanctioned

the said loan on condition that the appellant would repay the same with

interest within one year. However the appellant did not repay the said

loan. On the contrary he threatened the respondent No.2 with dire

consequence. The Hon'ble Supreme Court held that mere breach of

promise, agreement or contract does not ipso facto, constitute an offence

of the criminal breach of trust within the meaning of Section 405 of the

IPC without their being a clear case of entrustment. Moreover, some

inability of the appellant to return the loan amount cannot give rise to a

criminal prosecution for cheating unless fraudulent or dishonest intention

is shown right at the beginning of the transaction, as it is the mens rea

which is the crux of the offence.

11. In the case of Vinod Natesan (supra) the Hon'ble Supreme Court

has taken the same view that since the dispute between the parties arose

out of failure or breach of an agreement, the same at the most can be said

to be the civil dispute and there is no ingredient of offence under Section

406 and 420 of the IPC.

12. In subsequent decisions referred to by the learned Counsel for the

petitioners, the Hon'ble Supreme Court lays down the law as to whether

an offence under Section 406 and Section 420 of the IPC can be said to be

committed in case of a breach of contract without any ingredient in the

FIR or complaint as to the fraudulent and dishonest intention to deceive

the complainant by the accused persons. It is consistently held by the

Apex Court that no criminal case shall lie, the dispute being essentially

civil in nature arising out breach of contract.

13. Learned Advocate for the private opposite parte No.2 has filed a

written note of argument in the instant case. At the outset it is stated on

behalf of the opposite party No.2 that during the pendency of the instant

revisioinal application, police submitted final report of conclusion of

investigation on 26th June, 2016 on the ground that the dispute between

the parties was essentially civil in nature. Challenging the said final

report. The opposite party no.2 preferred a narazi petition whereupon a

direction was passed for further investigation of this case. Subsequently,

police submitted charge-sheet against the petitioners on 27th November,

2019 under Section 406/420/120B of the Indian Penal Code. During

investigation of the case. It was brought to the notice of the Investigating

Officer that the opposite party No.2 had filed a complaint under Section

138/141 of the Negotiable Instrument Act. The trial court returned the

complaint to file the same before a court of competent jurisdiction. But

the opposite party did not file the said complaint to a court having

jurisdiction to try the case under the Negotiable Instrument Act. It is

stated in the written argument that there is no impediment or bar in filing

a complaint under Section 406/420 of the IPC without filing a complaint

under Section 138/141 of the Negotiable Instrument Act. Both the penal

provisions operate in different fields. Therefore the FIR under Section

406/420 of the IPC cannot be quashed on the ground of non filing of

complaint under Section 138/141 of the Negotiable Instrument Act. The

opposite party No.2 did not mention in his petition of complaint which

was treated as FIR that previously he filed a complaint under Section

138/141 of the Negotiable Instrument Act. Such omission cannot be

described as willful suppression of fact and commission of fraud upon the

court.

14. It is further stated in the written notes of argument on behalf of the

opposite party No.2 that admittedly the petitioners offered to purchase

C.R Coil weighing about 62.52 M.T at a consideration price of

Rs.24,24,723/-. The opposite party No.2 accepted such offer and

delivered goods to the petitioners. The petitioners issued five numbers of

cheques to make payment of the said amount. All the said cheques were

dishonoured. So, from the very beginning the petitioners knew that they

did not have sufficient money in the account to honour the cheques. In

spite of the said fact being known to the petitioners they issued the

cheques only to deceive the opposite party No.2. Therefore, dishonest and

fraudulent intentions of the petitioners are apparent from the very

beginning of the transaction. In view of such circumstances, the FIR filed

by the opposite party No.2 against the petitioners or the charge-sheet file

by the Investigating Officer cannot be quashed at this stage.

15. It is further stated on behalf of the opposite party No.2 that in the

instant case ingredients of offence under Section 420 and 406 of the IPC

are prima facie established on filing of the charge-sheet. The allegation of

the defacto complainant/opposite party No.2 shall only to be proved on

the basis of evidence led by the witnesses during trial of the case. Even if

the opposite party has civil remedy, a criminal case cannot be quashed on

this ground. As a matter of fact, both Criminal Law and Civil Law can be

perused in diverse situations. They are not mutually exclusive but clearly

coextensive and essentially differ in their contents and consequences. In

support of his contention, the learned Advocate for the opposite party

No.2 refers to a decision of the Hon'ble Supreme Court in M/s Indian Oil

Corporation vs. M/s NEPC India Ltd & Ors : AIR 2006 SC 2780

wherein it was held that where the civil remedy is availed of any dispute

arising from a breach of contract, remedy under the criminal law is not

barred if the allegation disclosed a criminal offence.

16. Having heard the learned Advocates for the parties and on careful

perusal written notes of argument submitted on behalf of the opposite

party No.2, one uncontroverted factual situation comes to the surface.

The opposite party No.2 supplied C.R Coil amounting to Rs.24,24,723/-

to the petitioners. Petitioners made part payment of the consideration

price amounting to Rs.8 lakh. Thus, a sum of Rs.1624723/- is lying due.

In Indian Oil Corporation vs. Nepc India Ltd. (supra) relied on by the

learned Advocate for the opposite party No.2, it was held by the Hon'ble

Supreme Court that the distinction between breach of contract and the

offence of cheating 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. In

the instant case I do not find any material of involving the ingredients of

Section 420 of the IPC. There is neither any allegation nor any evidence

that the petitioners deceived the opposite party at the time of initial

transaction or that they fraudulently or dishonestly induced the opposite

party to deliver any property.

17. In the instant case the petitioners practically admitted their

outstanding dues by filing the instant application. It is contended on

behalf of the petitioners that they have no fraudulent or dishonest

intention to induce the opposite party to deliver the goods, viz, C.R Coil

and the petitioners have already paid a sum of Rs.8 (eight) lakh as part

payment of the consideration money. Since there is no ingredient of

offence under Section 420 of the IPC against the petitioners from the very

inception of transaction between the parties the dispute is essentially civil

in nature.

18. Now comes to the issue on applicability of Section 482 of the Code.

Section 482 runs thus:-

482. Saving of inherent powers of High Court.-Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice.

19. It is no longer a res integra that the power under Section 482 of the

Code must be exercised sparingly, with circumspection and in rarest of

rare cases. Exercise of inherent power under Section 482 of the Code is

not the rule but the exception. The exception is applicable only when it is

brought to the notice of the court that grave miscarriage of justice would

be committed if the trial is allowed to proceed where the accused would be

harassed unnecessarily. The High Court can exercise its inherent power

in the following cases:-

a) To give effect to an order under the Code.

b) To prevent abuse of the process of the Court and

c) To otherwise secure the ends of justice.

20. In State of Haryana & Ors. vs. Ch. Bhajan Lal & Ors, 1992 SCC

(Cri.) 426 the Hon'ble Supreme Court laid down the categories of cases

where the High Court may, in exercise of powers under Section 226 of the

Constitution of India or under Section 482 of the Code, interfere in a

proceeding to prevent abuse of process of the court or otherwise to secure

ends of justice;

a) Where the allegations in the First Information Report and

other materials, if any, accompanying the FIR did not

disclose a cognizable offence under Section 154 of the

Code.

b) 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

make out a case against the accused.

c) 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 under

Section 155(2) of the Code.

d) Where the allegations made in the FIR or the complaint

are 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.

e) Where there is an express legal bar contained 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 proceeding and/or where there is

specific provision in the Code or the concerned act,

providing efficacious relief for the grievance of the aggrieve

party.

f) 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.

21. This court is not unmindful to note that there remains fine line of

distinction between breach of contract and cheating. In case of cheating,

it is the duty of the complainant to make out a case that from the very

inception of establishment of commercial contractual relation between the

parties, the accused had an intention to deceive fraudulently or

dishonestly the complainant to induce him to deliver property. It is true

that the complainant/opposite party No.2 failed to make out any such

case in his petition of complaint. On the other hand, the petitioners paid

part of consideration money to the opposite party No.2. Subsequently, the

rest amount of Rs.16,24,723/- was not paid to the opposite party No.2.

22. This court has inherent power under Section 482 of the Code

amongst other to prevent abuse of the process of the court and to