Kamlesh Gupta And Another vs Pratap Kumar Mohapatra And ...
2021 Latest Caselaw 12568 Ori

      IN THE HIGH COURT OF ORISSA AT CUTTACK

                      CRLMC No. 1299 of 2021
An application under section 482 of the Code of Criminal Procedure,
1973 challenging the order of cognizance and issuance of process
under Annexures-4 and 5 respectively passed by learned J.M.F.C.,
Jajpur Road.
                                 ---------------

Kamlesh Gupta and another                          .....   Petitioners

                        -Versus-

Pratap Kumar Mohapatra and another                 .....   Opp. Parties


Advocate(s) appeared in this case :-
_________________________________________________________

   For Petitioners      :          M/s. P.P.K. Pandit & S.S. Das,
                                   Advocates

   For Opp. Parties     :          Mr. A. Mishra, S.K. Jena,
                                   S. Biswal & R. Mahato, Advocates
                                   (for O.P. No.1)

                          Mr. P.K. Maharaj,
                          Addl. Standing Counsel
                          (for O.P. No.2)
_________________________________________________________

CORAM :
     JUSTICE SASHIKANTA MISHRA

                            ORDER

th 7 December, 2021

SASHIKANTA MISHRA, J.

In this application filed under Section 482 of Cr.P.C., the

petitioners question the legality of order dated 03.11.2020 passed by

learned J.M.F.C., Jajpur Road in taking cognizance of the offence

under Sections 409/420/34 IPC and in directing issuance of process

against them.

2. The brief facts of the case are that the petitioner no.1 is a

sub-contractor under petitioner no.2, who is the Managing Director of

a private limited company. The said company issued a work order

through petitioner no.1 to the complainant-opposite party no.2 on

10.06.2017 for execution of the work of new 33 KV line, new 11 KV

line, new distribution transformer, new LT lines, etc. in the district of

Jajpur. The complainant executed the work as per such work order and

completed the same within the stipulated period and submitted bill

before the petitioner no.1 for an amount of Rs.3,24,941.88 after

deduction of GST. It is alleged that neither the petitioner no.1 nor the

petitioner no.2 responded to such bill and did not make any payment.

The complainant-opposite party no.2 thereafter issued legal notices, to

which, the petitioner no.2, alone submitted reply through his advocate

denying the allegations. As such, by claiming that the accused persons

mischievously and intentionally cheated the complainant, resulting in

financial loss, injury and mental agony to him and his family members,

the complainant filed a complaint being ICC Case No. 31 of 2020

against the petitioners alleging commission of the offences under

Sections 409/420/34 IPC. Learned J.M.F.C., recorded the initial

statement of the complainant under Section 200 of Cr.P.C. and the

statement of a witness examined on behalf of the complainant in the

inquiry under Section 202 of Cr.P.C. and thereafter, by order dated

03.11.2020 took cognizance of the offences in question. In doing so,

learned JMFC found that prima facie evidence is well established in

respect of the alleged offence and therefore, issued process against the

petitioners-accused persons by holding that there are sufficient

materials to proceed against them. The said order is impugned in the

present application.

3. Heard Mr.P.P.K. Pandit, learned counsel for the

petitioners, Mr. A. Mishra, learned counsel for opposite party no.1 and

Mr. P.K. Maharaj, learned Addl. Standing Counsel for the State.

4. Mr. P.P.K. Pandit would argue that a purely contractual

dispute, which is civil in nature, has been given the colour of a

criminal case by the complainant only to put undue pressure on the

petitioners-accused persons. Elaborating on this, it is submitted that

firstly, the dispute involves payment of the purported dues claimed by

the complainant which, as per the contract, can be resolved through

arbitration and secondly, even on the face of the complaint, the basic

ingredients necessary to constitute the offences in question are not

made out. Therefore, according to Mr. Pandit, learned J.M.F.C.

committed an illegality in taking cognizance of the said offences and in

issuing process against the accused persons. To fortify his arguments,

Mr. Pandit has referred to two judgments of the Apex Court, i.e., the

case of Thelapalli Raghavaiah vs. Station House Officer & Ors.

reported in 2007 (2) Supreme 1034 and All Cargo Movers (I) Pvt. Ltd.

& Ors. vs. Dhanesh Badarmal Jail & Anr. reported in 2007 (7)

Supreme 334.

5. Opposing the contentions as above, Mr. A. Mishra,

appearing for the complainant has argued that only because the

complaint also involves some elements of the civil dispute does not

necessarily mean that the criminal court would lack jurisdiction to

entertain the same. Referring to the facts of the present case, it is

argued that even a commercial transaction or contractual dispute can

give rise to a cause of action for a criminal offence. So only because a

civil remedy is available is not by itself a ground to quash the criminal

proceedings.

6. To appreciate the rival contentions, it is necessary to

understand the crux of the dispute between the parties at the outset.

Admittedly a work order was issued by the petitioners in favour of

opposite party no.2 for execution of a work involving installation of

KV Lines, transformers etc. It is not disputed that the opposite party

no.2 had completed the work within the stipulated period and

submitted a bill for Rs.3,24,941.88 before the petitioner no.1. After

stating the above facts in the complaint, it is alleged that neither the

petitioner no.1 nor the petitioner no.2 made the payment, for which the

complainant had to send legal notices, to which the petitioner no.2

alone responded by denying the allegations. It is alleged that the above

act of the petitioners in withholding payment for the work done

amounts to cheating besides causing financial loss, injury and mental

agony, and thus constitutes the offence under Sections 409/420/34 of

IPC. It appears that such complaint being filed, learned J.M.F.C.,

basing on the averments made in the complaint petition, initial

statement of the complainant and that of the witness examined under

Section 202 of Cr.P.C. held that prima facie evidence is well

established in respect of the alleged offence and therefore, took

cognizance of the offence under Sections 409/420/34 IPC. Thus, the

dispute revolves around non-payment of Rs.3,24,941.88 as claimed by

the complainant. In the reply dated 04.10.2019 submitted by the

advocate for petitioner no.2-company to the legal notice issued by the

complainant dated 10.09.2019, it is stated as under:

"2. That on the basis of your request and assurance my client released a payment in the month of April, 2019 of Rs.100001/- against the last Invoices submitted, vis., Invoice no.8 dated 05/02/2018 of Rs.51113/- and Invoice no.9 dated 05/03/2018 for Rs.48888/-. The amount payment towards the execution of work by your client is Rs.98,656/-, while the amount pending towards GST formalities is Rs.1,76,703/-, exclusive of all penalties at source and an amount of Rs.1,17,392/- also pending towards reconciliation of material. Thus, the amount due and outstanding against your client exceeds the amount payable. Hence your contention that any amount is payable is denied.

3. That your client is hereby informed that the amount against the execution of work can be released only after completion of all GST formalities and the requisite deductions as per the terms and conditions of the contract duly executed by your client.

4. That my client has been acting in accordance with the statutory terms and conditions, in respect to the GST regulations which is in compliance with the contact duly executed. That your malafide intention is reflected in the fact that instead of complying with statutory conditions you have issued the instant legal notice."

7. From a bare perusal of the above, it is clear that non-

release of the so called dues of the petitioner is on account of non-

completion of all GST formalities and requisite deductions. The

complainant claims that the bill amount was arrived at after deduction

of the GST. Thus, the basis on which the amount payable is claimed is

in dispute. Admittedly, the parties are bound by a contract (work order)

dated 16.04.2018, enclosed as Annexure-2. Clause-17 of the said work

order relates to Arbitration, Governing Law & Jurisdiction. Clause-

17.1 provides as under:

"17.1 Any dispute or difference whatsoever arising between the parties out of or relating to the construction, meaning, scope, operation or effect of this contract or the validity or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration (ICA) and the award made in pursuance thereof shall be binding on the parties. The venue of Arbitration shall be at New Delhi. The Arbitration shall be held in English Language."

8. According to the complainant, non-payment of the bill

amounts to breach of contract. Such being the factual position and

there being a specific clause for arbitration of disputes relating to

breach of contract as quoted above, there can be no manner of doubt

that a definite forum has been provided for resolution of such dispute.

As a corollary to the above, it can be safely held that the dispute

having purportedly arisen out of the respective contractual liabilities of

the parties, is purely civil in nature, for which a forum has been

provided for resolution. To the above extent therefore, a criminal

proceeding could not have been initiated.

9. Coming to the contentions advanced on behalf of the

complainant that law also permits such disputes to be brought within

the purview of criminal proceeding, law is well settled that the test is

to determine whether the allegations in the complaint disclose a

criminal offence or not. It would be profitable at this stage to refer to

the observations made by the apex court in the case of M/s. Indian Oil

Corporation vs. M/s. NEPC India Ltd. & Ors., reported in AIR 2006

SC 2780. Referring to the settled position of law relating to exercise of

jurisdiction under Section 482 Cr.P.C., the apex Court inter alia

observed as under:

"xx xx xx

(v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceedings are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a

ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. (Emphasis supplied) Xx xx xx"

10. Further in the case of Thelapalli Raghavaiah (supra) it

was held that:

"xxxxxxxx though a case of breach of trust may be both a civil wrong and criminal offence but there would be certain situations where it would pre-dominantly be a civil wrong and may or may not amount to a criminal offence. It was also observed that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the Court is to as to whether the uncontroverted allegations as made prima facie established the offence." (Emphasis supplied)

11. The facts of the case may now be examined in light of the

above referred legal propositions. As already stated, the complaint in

question alleges commission of the offence under Sections 409/420

IPC. Section 409 of IPC reads as follows:

"409. Criminal breach of trust by public servant, or by banker, merchant or agent.--Whoever, being in any manner entrusted with property, or with any dominion over property in his capacity of a public servant or in the way of his business as a banker, merchant, factor, broker, attorney or agent, commits criminal breach of trust in respect of that property, shall be punished with [imprisonment for life], or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine."

12. It is well settled that in order to sustain conviction under

Section 409, two ingredients are to be proved, namely, (i) entrustment

of property of which the accused is duty bound to account for; and (ii)

committal of criminal breach of trust. As held in the case of Kailash

Kumar Sanwatia Vs. State of Bihar, reported in (2003) 7 SCC 399,

criminal breach of trust requires satisfaction of the following

ingredients.

(1) Entrusting any person with property, or with any dominion over property.

(2) The person entrusted (a) dishonestly misappropriated or converted to his own use that property; or (b) dishonestly used or disposed of that property or willfully suffered any other person so as to do in violation--

(i) of any direction of law prescribing the mode in which such trust is to be discharged; or

(ii) of any legal contract made touching the discharge of trust.

In the instant case, the complaint is silent as regards the

entrustment of property. Assuming that withholding of the amount due

to be paid to the complainant is treated as the property of the

complainant with the accused person, it has to be further proved that

there was dishonest misappropriation etc. by the accused persons of

such property. In the case at hand, it is the specific stand of the

complainant that the accused persons withheld the amount due on the

ground of non-completion of GST formalities and other requisite

deductions as per terms and conditions of the contract. Such being the

case of the complainant, by no stretch of imagination can it be said that

the offence under Section 409 IPC was committed rather, the parties

appear to be in dispute over the deductions on account of GST etc. It is

stated at the cost of repetition that it is a matter of interpretation of the

terms of the contract to be resolved through arbitration but cannot

constitute the offence under Section 409 of IPC.

13. As regards the offence under Section 420 IPC, i.e.,

cheating and dishonestly inducing delivery of property, the basic

ingredients of the said offence is that the accused must have cheated

and dishonestly induced to deliver any property. From the averments

in the complaint petition and other materials on record it is not

understood as to how the offence under Section 420 IPC is attracted,

inasmuch as withholding of the amount purportedly payable to the

complainant cannot be an act of cheating or dishonest inducement on

the part of the accused persons. To establish a case of cheating, it has

to be established that the accused made a false representation and such

representation was false to his knowledge and it was made to deceive

the complainant for his own gain. In view of the facts narrated above,

it is clear that the amount payable to the complainant was withheld not

to cheat or deceive them but because of a dispute relating to

interpretation of the terms of the contract regarding deduction of GST

and other dues.

14. For the forgoing reasons therefore, this court is of the

considered view that even the uncontroverted allegations as made in

the complaint do not prima facie establish the offence of Section 409

and Section 420 of IPC. This court is convinced that the complaint

made by the complainant primarily makes out a civil dispute arising

out of alleged breach of contract and does not make out any criminal

offence whatsoever. In such fact situation, continuance of the criminal

proceeding would amount to an abuse of the process of Court and

therefore, a case for exercising jurisdiction under Section 482 Cr.P.C.

is definitely made out. In the case of G. Sagar Suri & Anr. Vs. State

of U.P. & Ors. reported in (2002) 2 SCC 636, the apex court observed

as under;

8. Jurisdiction under Section 482 of the Code has to be exercised with great care. In exercise of its jurisdiction the High Court is not to examine the matter superficially. It is to be seen if a matter, which

is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.

15. In such view of the matter, this court has no hesitation in

holding that the learned J.M.F.C. committed gross error of law in

taking cognizance of the offence and in directing issuance of process

without examining whether the ingredients thereof are prima facie

made out or not. The impugned order, therefore, cannot be sustained in

the eye of law and is hereby quashed.

16. In the result, the CRLMC succeeds and is therefore,

allowed.

...........................

Sashikanta Mishra, Judge

Orissa High Court, Cuttack The 7th December, 2021/A.K. Rana