Uniplas India Limited vs State And Anr.
2002 Latest Caselaw 501 Del

JUDGMENT

Khan, (J)

1. Petitioner and respondent No. 2 are fighting it out for Rs. 12 lacs or more. The dispute has spilled over leading to lodging of FIR No. 65/01 u/s 420 IPC at PS Vasant Vihar by respondent No. 2. Petitioner wants its quashing and hence this writ petition.

2. Factual matrix is by and large admitted barring a minor variation here and there. Both parties entered a high sea contract for supply of PVC resin worth Rs. 26.70 lacs to petitioners by R-2. The goods were fully insured with the National Insurance Company, firstly in the name of R-2 and then endorsed in the name of petitioner company. But when the consignment was delivered at Mumbai, petitioner found 123 mt. worth Rs. 14.20 lacs or so missing.

3. There are two versions to the story thereafter. Petitioner claims that R-2 had the liability to deliver full cargo and it offered to compensate them for the loss and paid them Rs. 15 lacs till finalisation of insurance claim. But R-2 claims that petitioners had approached it to tide over their financial stringency and that it was agreed to pay them Rs. 15 lacs inclusive of interest in full and final settlement of their claim for the missing cargo on the understanding and their assurance that insurance claim for the missing goods would be reimbursed to R-2.

4. Both sides admit that one R.K. Aggarwal, an insurance consultant was appointed as legal representative to pursue the insurance claim which was lodged before National Consumer Disputes Redressal Commission and was allowed by it on 31.1.1992 with 18% p.a. interest and cost. The matter, however, landed in Supreme Court on the appeal of insurance company and during its pendency insurer was directed to deposit Rs. 7,13,533/- which was withdrawn by petitioners and reimbursed to R-2. The appeal was eventually dismissed by Supreme Court on 3.8.1999 and consequently a cheque for Rs. 22,82,235/- was received by petitioners on 8.8.2000, of which they have deposited Rs. 8 lacs or so in this court for being paid to R-2. R-2 took up the matter on the same day with petitioners and demanded the return of the amount covered by cheque dated 23.9.1999 and on petitioner's refusal, lodged the impugned FIR.

5. Petitioners are challenging the FIR on a variety of grounds. According to them, it does not disclose their criminal liability in any manner and does not make out any offence under Section 420 IPC as there was no averment in R-2's complaint alleging any inducement by them to make it part with Rs. 15 lacs in lieu of the insurance claim amount. The transaction, they claim, raises a pure civil liability arising out of a breach of contract at best. They allege that R-2's FIR was motivated and actuated by extraneous considerations and used as a weapon to blackmail them for recovery of the disputed amount.

6. R-2's case, in essence, is that petitioners were paid Rs. 15 lacs on their assurance and understanding that the whole insurance claim amount would be paid to it. That is why the insurance claim was pursued and the expenses borne by it. But petitioners had resoled from their commitment as they had no intention to return the claim amount in full and had thus committed an offence of cheating. It is asserted that even though the transaction gave rise to a civil liability, it was inconsequential as it would not operate as a bar against by criminal action nor would return of Rs. 15 lacs would wipe off he offence though it may be a mitigating circumstance in their conviction by the criminal court.

7. Written submissions have been filed on behalf of R-2 to support the case that impugned FIR made out an offence under Section 420 IPC against petitioners FIR. Reliance for this is placed on several Supreme Court judgments in Rajesh Bajaj v. NCT of Delhi , M. Krishnan v. Vijay Singh 2001 (7) SCALE 126, Lalmuni Devi v. State of Bihar 2001 Supreme Court Cases (Crl) 275, State of Bihar v. P.P. Sharma , Kamla Devi Aggarwal v. State of West Bengal 2001 III AD (Crl) SC 581, Trisuns Chemical Industry v. Rajesh Agarwal , Hazari Lal Gupta v. Rameshwar Prasad , Shanti Lal v. Vimal Chand JT 2000 (8) SC 109. Medchl Chemicals v. Biological E.Ltd. 2000 SCC (Crl) 615 and Insp. of Police, CBI v. B. Raja Gopal to suggest that a case u/s 420 IPC was made out against the petitioners and that a civil profile of the transaction could not denude it of its criminal outfit and that the criminal proceeding could not be thwarted merely because civil proceedings were also maintainable or because of any payment was made by the accused petitioners.

8. Petitioners have meanwhile deposited Rs. 8 lacs or so before this court for payment to R-2 so as to liquidate their liability of Rs. 15 lacs. The dispute now converges on Rs. 12 lacs or more claimed by R-2 and it remained to be seen in this background whether impugned FIR made out or constituted an offence under Section 420 IPC and whether it could be allowed to proceed in the facts and circumstances of the case and despite petitioners readiness to pay back the amount received by them or whether it deserved to be quashed.

9. It is by and now well settled that this court enjoyed both inherent and writ power to quash an FIR/criminal proceeding where uncontroverter allegations contained therein, even when taken on face value would not make out or constitute the alleged offence or where the complainant's action was found to be attended by malafides, personal grudge and revenge or vindictiveness or was vexatious or frivolous amounting to abuse of process of court or where it led to defeating the ends of justice. But this power was exercisable sparingly and with circumspection in exceptional circumstances and in rare cases. It is true that while exercising this power court could not examine the correctness or reliability of allegations made in the complaint/FIR but nothing would come in its way to do away with the action where it found that it amounted to abuse of process of court or defeated the ends of justice.

10. This position is no more res integra and it would be only a repeat exercise to quote from several Supreme Court judgments right from R.K. Kapoor v. State of Punjab AIR 1963 SC 1388 in this regard. It would but suffice to refer to some of these to gather the broad propositions which had stood the test of the time till date. In celebrated judgment of State of Haryana v. Bhajan Lal , Supreme Court evolved some illustrative guidelines for quashing of a complainant/ FIR/ criminal proceeding thus:-

"(1) Where the allegations made in the first information report or 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 a case against the accused.

(2) .....

(3) .....

(4) .....

(5) Where the allegations made in the FIR or complaint are so 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.

(6) .....

(7) 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 or personal grudge."

11. These were later reiterated and followed by the Apex Court in a series of judgment with some minor additions/alterations here and there depending upon the facts and circumstances of the case. The court went a step further in Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre and Ors. (1998) 1 SCC 692, to hold that court process could not be allowed to be used for oblique process could not be allowed to be used for oblique purpose and that it was for the court to consider whether it was in the interest of justice to allow a criminal prosecution to continue. It said:-

"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 the uncontroverter allegations as made prima facie establish the offence. It is also for the court to take into consideration any special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue. This is so on the basis that the court cannot be utilised for any oblique purpose and where in a the opinion of the court chances of an ultimate conviction is bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the court may while taking into consideration the special facts of a case also quash the proceeding even though it may be at a preliminary stage."

The court further widened the scope in Pepsi Foods Limited v. Special Judicial Magistrate 1998 SCC (Crl) 1400, ruling thus:-

"No doubt the Magistrate can discharge the accused at any stage of the trial if he considers the charge to be groundless, but that does not mean that the accused cannot approach the High Court under Section 482 of the Code or Article 227 of the Constitution to have the proceeding quashed against him when the complainant does not make out any case against him and still he must undergo the agony of a criminal trial.

12. It, however, clarified in State of Bihar v. P.P. Sharma that malafides attributed to complainant/informant after the lodging of FIR could not alone constitute a basis for quashing of an FIR/criminal proceeding. It held:-

"Allegations of malafides, therefore, against the informant based on the facts after the lodging of FIR are of no consequence."

13. This did not, however, mark any departure from the position enunciated in Bhajan Lal's case because the emphasis here was on the allegations of malafides subsequent to lodging of an FIR. Therefore, where a criminal action against the accused was attended by malafides prior to the lodging of FIR and where allegations of malafide were accompanied by other factors and circumstances also, the court would be within its competence to quash the FIR.

14. In Rajesh Bajaj's case, the court dealt with what a complaint was not required to contain and held that where it was benefit of even basic facts necessary for making out an offence, it would be liable to be quashed. It observed thus:-

"It is not necessary that a complainant should verbatim reproduce in the body of complaint all the ingredients of the alleged offence. Nor is ti necessary that the complainant should state in so many words that the intention of the accused was dishonest for fraudulent. Splitting up of the definition into different components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelt out in the complaint is not the need at the stage. If factual foundation of the offence has been laid in the complaint, court should not hasten to quash criminal proceedings during investigation merely on the premise that one or two ingredients have not been stated with details. For quashing an FIR, the information in the complaint must be so bereft of even the basic facts which are absolutely necessary fro making out the offence."

15. Adverting to transactions giving rise to civil and criminal liability at the same time, Supreme Court held in M. Krishnan's case, that a criminal proceeding could not be quashed merely because of pendency of a civil suit between the parties. It laid down:-

"If mere pendency of a suit is made a ground for quashing the criminal proceedings, the unscrupulous litigants, apprehending criminal against them, would be encouraged to frustrate the course of justice and law by filing suits with respect to he documents intended to be used against them after the initiation of criminal proceedings or in anticipation of such proceedings."

16. It followed this position subsequently in Lalmuni Devi's case, holding:-

"It is true that if the complaint does not make out an offence, it can be quashed. However, it is also settled law that facts may give rise to a civil claim and also amount to an offence. Merely because a civil claim is maintainable does not mean that the criminal complaint cannot be maintained."

17. Dealing with contractual and commercial transactions, Apex Court said in Insp. of Police, CBI v. B. Raja Gopal:-

"One of the premise adopted by the High Court was that there was a compromise between the bank officials and the accused and the disputed amount found due from the accused had been paid later. Even assuming that the stand of the a accused is correct, that was not enough for quashing the criminal proceedings. Perhaps that would have been a ground for pleading mitigation at the final stage."

18. The broad propositions that could be culled out from these decisions for quashing an FIR/complaint/ criminal proceeding in exercise of inherent or writ jurisdiction of this court could be capsuled as:-

1) Where the uncontroverter allegations made in the complaint/FIR, even if taken on face value and accepted in entirety, do not prima facie make out the alleged offence against the accused.

2) Where such allegations are so absurd and inherently improbable so that no prudent person could reach a conclusion that there was any sufficient ground for proceeding against the accused.

3) where the allegations were so vexatious and frivolous so as to amount to abuse of process of court.

4) Where these were manifestly attended by a malafide or grudge or oblique purpose or personal vendetta prior to lodging of complaint/FIR and subsequently also if accompanied by other attendant circumstances.

5) Where the allegations disclosed nothing but a transaction of a purely civil nature like breach of contract.

6) An FIR/Complaint/criminal proceedings was not liable to be quashed merely because of pendency of any civil litigation between the parties on the same subject matter or because the transaction gave rise to both civil and criminal liability provided it disclosed some offence giving rise to criminal liability.

19. It is in this scenario that R-2's complaint and impugned FIR was to be examined and scrutinized if only to find out whether allegations contained therein made out or constituted on offence under Section 420 IPC.

20. Section 420 IPC provides punishment for the offence of cheating which is defined in Section 415. This Sections requires (1) deception of any person, (2)(a) fraudulently or dishonestly inducing that person (i) to deliver any property to any person, or (ii) to consent that any person shall retain any property or (b) intentionally inducing a person to do or omit to do anything which he would not have done or which he would have omitted to do if he was not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property.

21. Thus, there are two separate classes of acts which the person deceived may be induced to do. First, he may be induced fraudulently or dishonestly to deliver any property to any person. Secondly, he may do or omit do to anything which he would not have otherwise done but for the deception allegedly practiced on him. The inducement, therefore, was to be fraudulent or dishonest in the first case and intentional in the second. Needless to emphasise that a mere breach of contract would not give rise to an offence of cheating unless fraudulent or dishonest intention was alleged right at the beginning of transaction. Dealing with a similar question in H.R. Verma v. State of Bihar Supreme Court held:-

"In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It 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."

22. This was in consonance with the view taken in Rajesh Bajaj v. NCT Delhi laying down thus:-

"The crux of the postulate is the intention of person who induces the victim by his representation and not the nature of transaction which would be decisive in determining whether there was a commission of offence or not."

With this preface and background, it now becomes easy to examine R-2' complaint to ascertain whether it made out or constituted the alleged offence under Section 420 IPC or whether it was liable to be quashed or any one of the permissible grounds.

23. The relevant portion of the complaint is reproduced:-

"That in return Mr. J.B.S. Bakshi promised in writing vide their letter No. UIL/UTC 89=90165 dt. 9.6.90 that the buying company M/s. Uniplas would offer all possible cooperation in early settlement of claim from the Insurance Company. He further assured as soon as the settlement of the claim was received they would immediately reimburse the amount back to us. It was further committed by them that the amount paid by us will not have any connection with the amount that be paid by the insurance company in other words, the whole amount would be paid back to us irrespective of the amount received from us towards a moral financial support extended by us while paying them an amount of Rs. 15,39,665.00 by cheques (Annexure-6).

Now when the claim has been settled the applicant is approaching again and again to the accused one, and three to honour the commitments as were done preventing in while releasing the payment (whatever be the amount) given by the National Insurance Company. We finally in addition to serving regd. letter called on him with a written request for this purpose on 8th August 2000 but the meeting was refused by him. Subsequently on 9th Aug 2000 thereafter also the main accused, the first co-accused and the second so-accused have been avoiding contract (Annexure-7).

That according to Sections 420 IPC the Act of accused person is a deception within the meaning of Section 415 IPC where cheating is defined.

That according to Section 409 IPC which suggest as under: (who ever being in any manner entrust with the property on with any dominance over party in his capacity as public servant or in the way of his business bankers merchant, Broker attorney or agent commit breach in respect of that property.

That since then approximately three weeks have passed and all accused have not honoured their commitment to us. Thus, it is apparent that the accused have committed the criminal breach of trust and dishonestly misappropriated the money which was entrusted to them and thereby offence under Section 409 IPC. The accused thus are also guilty of cheating the complainant to the tune of Rs. 22,82,235.00 and have thereby an offence Under Section 420 IPC."

24. A careful reading of the terms of this complainant do not indicate or suggest even remotely that petitioners had induced R-2 to part with Rs. 15 lacs in lieu of the insurance claim amount, least of all fraudulently or dishonestly. Thee is no averment to suggest that they had approached R-2 with any dishonest intention for this or had deceived it to believe that insurance claim amount would be paid to it in consideration of Rs. 15 lacs received by petitioners. The complaint on the other hand, alleges dishonouring of commitment and avoiding of contract which, in our view, raises a dispute of breach of contract giving rise to civil liability.

25. We are conscious of the position that a complaint/FIR need not reproduce the ingredients of the alleged offence/verbatim. But it must at least lay some factual foundation for the alleged offence and ex-facie disclose it. Similarly its text and context may give rise to both civil and criminal liability but it must still disclose the alleged offence ex-facie to sustain the proceeding. If it fails, it would only render itself liable for quashing on anyone of the approved grounds.

26. View from any angle, R-2's complaint/FIR surely falls short of the requirement. It only alleges petitioners backtracking on their commitment and contract and now here states that they had in any manner induced R-2 to part with Rs. 15 lacs in consideration of insurance claim amount which was to be paid to R-2. It also does not provide any clue whether only principal insurance claim amount was payable or something more. It is also to be noticed that dispute between parties revolved around these 12 lakhs or so now which covered the interest amount, litigation expenses and costs also. Moreover, petitioners had already paid Rs. 7 lakhs or so to R-2 and had deposited Rs. 8 Lakhs or so for being paid to it with a view to return the amount of Rs. 15 Lakhs they had received. They could not, therefore, be accused of cheating in the facts and circumstances of the case and in the light of averments of R-2's complaint.

27. We accordingly hold that impugned FIR does not make out or constitute any offence under Section 420 IPC, even if uncontroverter allegations contained in it were taken on face value. Its terms only disclosed a dispute which was wholly and purely of civil nature alleging breach of contract.

28. Therefore, all things considered, this petition succeeds and FIR No. 65/01 under Section 420 IPC registered at P.S. Vasant Vihar is quashed.