Ashok Kumar Agarwal vs The State Of Jharkhand
2023 Latest Caselaw 3914 Jhar

                                                   1                  Cr.M.P. No. 2896 of 2016


                  IN THE HIGH COURT OF JHARKHAND AT RANCHI
                            Cr.M.P. No. 2896 of 2016
            1.   Ashok Kumar Agarwal
            2.   Ajay Agarwal                                 ... Petitioners
                                       -Versus-
            1.   The State of Jharkhand
            2.   M/s. Arzoo Construction, Jamshedpur represented by its Director Md.
                 Ashfaque Alam                             ... Opposite Parties
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CORAM: HON'BLE MR. JUSTICE SANJAY KUMAR DWIVEDI

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            For the Petitioners      : Mr. Indrajit Sinha, Advocate
                                       Mr. Rishav Kumar, Advocate
            For the State            : None
            For O.P. No.2            : Mr. Prabhash Kumar, Advocate
                                           -----

03/12.10.2023     Heard Mr. Indrajit Sinha, learned counsel for the petitioners and

Mr. Prabhash Kumar, learned counsel for opposite party no.2. On repeated

calls, nobody has responded on behalf of the State.

2. This petition has been filed for quashing of the entire criminal

proceeding in connection with C1/512/2014, corresponding to G.R.

No.3608/2013 including the order taking cognizance dated 29.09.2014,

pending in the Court of the learned Judicial Magistrate, 1 st Class at

Jamshedpur.

3. The complaint case was filed alleging therein that the complaint

company-M/s Arzoo Construction deals in the business of Sponge Iron Kiln

Erection and alignment, structural fabrication and erection with Civil Works

with its office at Marina City Shop No.8 near Sahara City Mango,

Jamshedpur. As per the quotation dated 24.02.2007, submitted by the

accused company and subsequent discussion with accused nos. 2 to 4 at

Jamshedpur office of the complainant, they planned Work Order from

coming out the job by the complainant on the terms and conditions agreed

by both the parties. As per the specification and consent of accused nos. 2

to 4, the complainant completed the job as per the work order and

submitted the Bill for payment for the period till 31.05.2008 amounting to

Rs.14,45,250/- out of which the accused persons paid only a sum of

Rs.10,00,000/- leaving behind the balance sum of Rs.4,45,250/-. The

accused persons and the other officers connected with the job done by the

complainant company were highly satisfied and permitted the complainant

company to continue with the job and directed the complainant company to

submit his Bill accordingly. Initially, the complainant was not agreed to

continue with the further job allotted by the accused company to the

complainant since his balance due of Rs.4,45,250/- was not paid, but at the

persistent request and representation made by accused nos. 2 and 3 that in

future they will not make delay in making payment after submission of the

bill by the complainant company and placing implicit reliance upon the

version of the accused nos. 2 and 3, the complainant agreed to continue

with the job offered by the accused company to the complainant.

Accordingly, the complainant continued with the further job entrusted to

him by the accused persons and the next bill for Rs.5,93,131/- till

18.07.2008 and bill of the TG Building amount to Rs.1,20,000/- was also

submitted which was duly checked by the G.M. and other officials of the

company. The complainant carried out the job of the accused company for

the total amount of Rs.98,67,521/- till 12.08.2008 out of which the accused

company paid a total sum of Rs.42,82,251/- as its bill transpires from the

Ledger account of the complainant company maintained by the complainant

in its regular course of business. In the above connection, the lawyer of the

complainant company in his notice dated 21.10.2011 through inadvertence

made demand of Rs.15,97,147/- from the accused company in place of

Rs.42,82,251/-. The aforesaid complaint was sent to the Mango Police

stating for the institution of the case against the accused persons and for

submission of final form after investigation and after conclusion of the

investigation, the Mango Police submitted final form No.266/13 against the

accused persons with the observation that the case relates to civil dispute.

4. Mr. Indrajit Sinha, learned counsel for the petitioners submits that

earlier the case being Mango P.S. Case No.586/2013 has been registered on

the same set of allegations, which was investigated by the police and final

form was submitted disclosing the case is civil in nature. He further submits

that pursuant to that protest petition was filed and on the protest petition,

the learned Court has taken cognizance under Section 418/34 of the Indian

Penal Code. He further submits that the case was registered as a fresh

dispute of payment of bill for the period till 31.05.2008 amounting to

Rs.14,45,250/- out of which it is admitted by the complainant that

Rs.10,00,000/- has been paid by the petitioners. He also submits that in the

complaint petition itself, it has been admitted that sum of Rs.55,85,270/-

has already been paid and the allegations are made that sum of

Rs.42,82,251/- is still recoverable from the petitioners. He further submits

that legal notice was issued for demand of Rs.15,97,147/- only, which has

been disclosed in the protest petition at paragraph 2(g). He submits that the

case of cheating is not made out as there was no intention from the very

beginning, which is essential ingredient of making out the case for cheating.

He further submits that the case is arising out of commercial transaction

and the payment has already been made and if any case is there, the police

has rightly submitted final form stating the case is civil in nature. To

buttress this argument, he relied upon the judgment passed by the Hon'ble

Supreme Court in the case of Vir Prakash Sharma v. Anil Kumar

Agarwal and another, reported in [(2007) 7 SCC 373]. Paragraph 8 of

the said judgment reads as under:

"8. The dispute between the parties herein is essentially a civil dispute. Non-payment or underpayment of the price of the goods by itself does not amount to commission of an offence of cheating or criminal breach of trust. No offence, having regard to the definition of criminal breach of trust contained in Section 405 of the Penal Code can be said to have been made out in the instant case. Section 405 of the Penal Code reads, thus:

"405. Criminal breach of trust.--Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits 'criminal breach of trust'."

Neither any allegation has been made to show existence of the ingredients of the aforementioned provision nor any statement in that behalf has been made."

5. Mr. Indrajit Sinha, learned counsel for the petitioners further relied

upon the recent judgment passed by the Hon'ble Supreme Court in the case

of Vijay Kumar Ghai and others v. State of West Bengal and others ,

reported in [(2022) 7 SCC 124]. Paragraphs 31 to 39 of the said

judgment read as under:

"31. Section 415IPC defines "cheating" which reads as under:

"415. Cheating.--Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were 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, is said to "cheat"."

The essential ingredients of the offence of cheating are:

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 that person to do or omit to do anything which he would not do or omit if he were no 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.

32. A fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating.

33. Section 420IPC defines "cheating and dishonestly inducing delivery of property" which reads as under:

"420. Cheating and dishonestly inducing delivery of property.--Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine."

34. Section 420IPC is a serious form of cheating that includes inducement (to lead or move someone to happen) in terms of delivery of property as well as valuable securities. This section is also applicable to matters where the destruction of the property is caused by the way of cheating or inducement. Punishment for cheating is provided under this section which may extend to 7 years and also makes the person liable to fine.

35. To establish the offence of cheating in inducing the delivery of property, the following ingredients need to be proved:

(i) The representation made by the person was false.

(ii) The accused had prior knowledge that the representation he made was false.

(iii) The accused made false representation with dishonest intention in order to deceive the person to whom it was made.

(iv) The act where the accused induced the person to deliver the property or to perform or to abstain from any act which the person would have not done or had otherwise committed.

36. As observed and held by this Court in R.K. Vijayasarathy v. Sudha Seetharam [R.K. Vijayasarathy v. Sudha Seetharam, (2019) 16 SCC 739 : (2020) 2 SCC (Cri) 454] , the ingredients to constitute an offence under Section 420 are as follows:

(i) a person must commit the offence of cheating under Section 415; and

(ii) the person cheated must be dishonestly induced to:

(a) deliver property to any person; or

(b) make, alter or destroy valuable security or anything signed or sealed and capable of being

converted into valuable security. Thus, cheating is an essential ingredient for an act to constitute an offence under Section 420IPC.

37. The following observation made by this Court in Uma Shankar Gopalika v. State of Bihar [Uma Shankar Gopalika v.

State of Bihar, (2005) 10 SCC 336 : (2006) 2 SCC (Cri) 49] with almost similar facts and circumstances may be relevant to note at this stage : (SCC pp. 338-39, paras 6-7) "6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of the complaint any criminal offence whatsoever is made out much less offences under Sections 420/120-BIPC. The only allegation in the complaint petition against the accused persons is that they assured the complainant that when they receive the insurance claim amounting to Rs 4,20,000, they would pay a sum of Rs 2,60,000 to the complainant out of that but the same has never been paid. ... It was pointed out on behalf of the complainant that the accused fraudulently persuaded the complainant to agree so that the accused persons may take steps for moving the consumer forum in relation to the claim of Rs 4,20,000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case, it has nowhere been stated that at the very inception that there was intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420IPC.

7. In our view petition of complaint does not disclose any criminal offence at all much less any offence either under Section 420 or Section 120-BIPC and the present case is a case of purely civil dispute between the parties for which remedy lies before a civil court by filing a properly constituted suit. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of court and to prevent the same it was just and expedient for the High Court to quash the same by exercising the powers under Section 482CrPC which it has erroneously refused."

38. There can be no doubt that a mere breach of contract is not in itself a criminal offence and gives rise to the civil liability of damages. However, as held by this Court in Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786] , the distinction between mere breach of contract and cheating, which is criminal offence, is a fine one. While breach of contract cannot give rise to criminal prosecution for cheating, fraudulent or dishonest intention is the basis of the offence of cheating. In the case at hand, complaint filed by Respondent 2 does not disclose dishonest or fraudulent

intention of the appellants.

39. In Vesa Holdings (P) Ltd. v. State of Kerala [Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8 SCC 293 : (2015) 3 SCC (Cri) 498] , this Court made the following observation : (SCC pp. 297-98, para 13) "13. It is true that a given set of facts may make out a civil wrong as also a criminal offence and only because a civil remedy may be available to the complainant that itself cannot be ground to quash a criminal proceeding. The real test is whether the allegations in the complaint disclose the criminal offence of cheating or not. In the present case, there is nothing to show that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420IPC. In our view, the complaint does not disclose any criminal offence at all. Criminal proceedings should not be encouraged when it is found to be mala fide or otherwise an abuse of the process of the court. The superior courts while exercising this power should also strive to serve the ends of justice. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of the court and the High Court committed [Maniprasad v. State of Kerala, 2011 SCC OnLine Ker 4251] an error in refusing to exercise the power under Section 482CrPC to quash the proceedings.""

6. Relying on these two judgments and further referring the contents of

the complaint petition, Mr. Indrajit Sinha, learned counsel for the petitioners

submits that the if there is any case, i.e. civil in nature and for that criminal

case has been filed.

7. Mr. Prabhash Kumar, learned counsel for opposite party no.2 submits

that the protest petition was filed and the learned Court looking into the

solemn affirmation and enquiry witnesses has been pleased to take

cognizance and in view of that, at this stage, this Court may not interfere

and the argument of the learned counsel for the petitioners can only be

appreciated in the trial by the learned Court. He further submits that dues

are there and that is why the case has been rightly filed.

8. In view of the above submissions of the learned counsel for the

parties, the Court has gone through the materials on record including the

contents of the protest petition. It is an admitted fact that earlier Mango

P.S. Case No.586/2013 was filed, in which, the police has submitted final

form stating therein that the case is civil in nature. On the protest petition,

the learned Court has been pleased to take cognizance. Further looking into

paragraph 2(g) of the complaint case, it is crystal clear that sum of

Rs.55,85,270/- has already been received by opposite party no.2 and the

allegations are there that sum of Rs.42,82,251/- was not paid. A legal notice

for demand of only Rs.15,97,147/-was issued. Looking into these facts, it

clearly suggest that the case is arising out of commercial transaction and for

recovery of the amount, protest petition has been filed.

9. It is not a case that from very inception, the intention of cheating was

there and in view of that, the case of the petitioners is fully covered by two

judgments relied by the learned counsel for the petitioners in the cases of

Vir Prakash Sharma and Vijay Kumar Ghai (supra).

10. In view of the above facts, reasons and analysis, the entire criminal

proceeding in connection with C1/512/2014, corresponding to G.R.

No.3608/2013 including the order taking cognizance dated 29.09.2014,

pending in the Court of the learned Judicial Magistrate, 1 st Class at

Jamshedpur are quashed.

11. It is made clear that if any civil proceeding is there, that will be

decided in accordance with law without prejudiced to this order.

12. Accordingly, this petition is allowed and disposed of.

13. Pending I.A., if any, is disposed of.

(Sanjay Kumar Dwivedi, J.) Ajay/