The division judge bench of Justice Dr Dhananjaya Y Chandrachud and Justice A S Bopanna of the apex court in the case of M N G Bharateesh Reddy vs Ramesh Ranganathan and Another held that an alleged breach of the contractual terms does not ipso facto constitute the offence of the criminal breach of trust without there being a clear case of entrustment.
BRIEF FACTS
The factual matrix of the case is that when the differences arose between the respondent no. 1 and management of the hospital. the respondent wrote a letter to the appellant alleging that at the enquiry and reception centre, the patients were being diverted to other doctors of the hospital. He also asked the Appellant to discipline the staff members who were acting improperly through the aforementioned letter. Due to the first respondent's inconsistent and unacceptable behaviour in accordance with the Consultancy Agreement, the first respondent's services were terminated. Angry with his layoff, the first respondent complained to the managing director of Apollo Group of Medical Sciences pointing out serious errors in patient invoicing. Additionally, he claimed that the appellant had been harassing and threatening him in this representation. The first respondent sent a letter to the director of medical services. the hospital's request for authorization to continue treating patients through, his notice time is expired.
After that the first respondent filed a complaint and alleged that the appellant misused his authorities and terminated his services with an oblique and ulterior motive of defaming him. Then the judicial magistrate first class took cognizance under Sections 120A, 405, 415, 420, 499, and 500 of the Indian Penal Code.
COURT’S OBSERVATION
The hon'ble court points out that the ingredients of the offence under Section 415 emerge from a textual reading. Firstly, to constitute cheating, a person must deceive another. Secondly, by doing so the former must induce the person so deceived to (i) deliver any property to any person; or (ii) to consent that any person shall retain any property; or (iii) intentionally induce 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 such an act or omission must cause or be likely to cause damage or harm to that person in body, mind, reputation or property.
Further in the case of Hridaya Ranjan Prasad Verma v. State of Bihar stated that
“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”
The offence of criminal breach of trust contains two ingredients: (i)entrusting any person with property, or with any dominion over property; and (ii) the person entrusted dishonestly misappropriates or converts to his own use that property to the detriment of the person who entrusted it. After that the apex court relied upon the judgements titled Anwar Chand Sab Nanadikar v. State of Karnataka and Kumar Ghai v. State of West Bengal put emphasis on the vital ingredients of the offense of criminal breach of trust
In the case of Ajay Mitra V. state of MP it held that If the dispute between the parties was essentially a civil dispute resulting from a breach of contract on the part of the appellants by non-refunding the amount of advance the same would not constitute an offence of cheating. Similar is the legal position in respect of an offence of criminal breach of trust having regard to its definition contained in Section 405 of the Indian Penal Code.
The court held that the None of the ingredients of the offence of criminal breach of trust have been demonstrated on the allegations in the complaint as they stand. The first respondent alleges that the Appellant caused breach of trust by issuing grossly irregular bills, which adversely affected his professional fees. However, an alleged breach of the contractual terms does not ipso facto constitute the offence of the criminal breach of trust without there being a clear case of entrustment. No element of entrustment has been prima facie established based on the facts and circumstances of the present matter. Therefore, the ingredients of the offence of criminal breach of trust are ex facie not made out on the basis of the complaint as it stands and it was also held that the there is a patent error on the part of the High Court in setting aside the judgment of the Additional Sessions Judge and by holding that cognizance was correctly taken of the offence punishable under Sections 405, 415, and 420 of the IPC.
CASE NAME- M N G Bharateesh Reddy vs Ramesh Ranganathan and Another
CITATION- Criminal Appeal No 1273 of 2022
DATE- 18.08.22
CORUM- Justice Dr Dhananjaya Y Chandrachud and Justice A S Bopanna
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