THE HON'BLE SRI JUSTICE C. PRAVEEN KUMAR CRIMINAL PETITION No.13568 OF2010Dated:
11. 07-2013 1.V.Ramesh Babu S/o. Ranga Rao, aged 48 years, occupation: Business,r/o. PlotNo.526 MIG-2, Road No.1, KPHB Colony, Hyderabad-500 085. 2.S.Ram Mohan S/o. S.V.Purnachander Rao,aged 47 years, occupation: Finance Manager in VR Equipments & Consumables Pvt. Ltd., r/o. Balajinagar, Kukatpally,Ranga Reddy District. ..... PETITIONERS/ A-1 & A-2 1.State of A.P. rep.by P.P. High Court, Hyderabad...... RESPONDENT/RESPONDENT2 M/s. Goutham Printers rep.by its Sole Proprietor A.Manikyala Rao S/o. Venkat Swamy, aged about:
38. years, Occ: Business, Having their office at H.No.1-73/1, BJP office road,Kukatpally, Ranga Reddy District. .... RESPONDENT/ DEFACTO COMPLAINANT Counsel for Petitioners:Sri P.Prabhakar Reddy & G.Mallesham. Counsel for Respondent : Public Prosecutor GIST : HEAD NOTE : ?.Cases referred :
2012. (2) ALD (Crl.) 211 (AP) (2007)12 SCC page 1 (2005)10 Supreme Court Cases 228 (2010)10 Supreme Court Cases 361 (2011)13 Supreme Court Cases 412 (2001)3 SCC513(2005)10 SCC228(2008)5 SCC662(2010)10 SCC479(2010)6 SCC562HON'BLE SRI JUSTICE C. PRAVEEN KUMAR CRIMINAL PETITION NO.13568 OF2010ORDER
: The petitioners are accused 1 and 2 in C.C.No.1592 of 2010 on the file of IX Metropolitan Magistrate, Cyberabad at Kukatpally. The present criminal petition is filed under section 482 Cr.P.C. seeking to quash the proceedings in the said case, which was taken on file against them for the offences punishable under Sections 406, 420 and 506 read with 34 I.P.C.
2. The allegations in the complaint in brief are as under : The second respondent herein is a proprietary concern running a printing press under the name and style of M/s.Gowtham Printers at Kukatpally. A-2 approached the respondent in the month of April 2009, introduced himself as Finance Manager of V.R.Equipments and Consumables Private Limited and informed the respondent that their company intend to conduct a survey in the general public, for which they need huge quantity of survey forms. The respondent agreed to supply the survey forms and accordingly an order dated 25.04.2009 was placed with the complainant for print and supply of 8 crores of survey forms. The accused agreed to pay @ Rs.46,000/- per one lakh forms and the total cost of the order was estimated as Rs.3,68,00,000/-. Initially the complainant printed 70 lakhs forms, but 50,000 forms were supplied to the accused in five consignments, costing Rs.25 lakhs. Apart from the forms, the complainant also supplied stationery worth Rs.2,00,000/- to the petitioners. Out of the said amount of Rs.25,00,000/-, the petitioners paid Rs.15,00,000/- to the complainant. The complainant had been asking the accused to pay the balance of Rs.10,00,000/- and also to receive 20,000 forms, which were lying in the printing press, which are worth about Rs.9,20,000/-. As the material was printed in various printing presses, the printing operators were pressurizing the complainant for payment of money. Since the second accused was also a resident of Kukatpally, mediation took place wherein he promised to pay the amount within a short period. As things became worse, the respondent proceeded to the house of A-1 and to his surprise he was informed that the accused vacated the house and his whereabouts are not known. When he met the second accused, he not only went back on his word, but also abused him in filthy language and threatened him with dire consequences if a case is filed against him. The office of the Accused No.1 was also found closed and he was absconding from the said area. But A-1 used to telephone to the complainant from different numbers and used to abuse him in vulgar language and threatened him with dire consequences in case any coersive steps are taken against him. Recently, the complainant found that A-1 started a new business at Madapur in the name of Ramesh Charities and also came to know that both the accused are involved in many cases by collecting huge money from public by deceiving them with false promises. Basing on these allegations, the police filed charge-sheet.
3. The learned counsel for the petitioners mainly submits that even accepting the allegations in the charge-sheet to be true, no offence is made out under section 420 I.P.C. According to him one of the main ingredients to constitute cheating is that there should be dishonest intention from inception, which according to him is lacking in the present case. He would further contend that since the offence is committed by company, the criminal case cannot be continued without making the company as an accused. He submits that question of breach of trust as contemplated under section 406 I.P.C. would not arise as there was no entrustment of any property to the complainant. Since substantial amount was paid, it cannot be said that there was dishonest intention right from inception and the proper remedy for the complainant will be to approach the civil Court to recover the balance amount and damages if any. The learned counsel for the petitioners further submits that in every case of 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 deception played at the very inception. He further submits that even an offence under section 406 I.P.C. is not made out as there was neither entrustment of property nor was there misappropriation of property entrusted to the accused. He thus submits that continuation of proceedings against the petitioners would be an abuse of process of law.
4. There is no representation on behalf of the respondent inspite of service of notice in the month of July, 2011.
5. The learned Additional Public Prosecutor for the respondent submits that a reading of the charge-sheet as a whole would indicate that the petitioners have committed offences punishable under Sections 406 and 420 I.P.C. The subsequent conduct of the accused should also be taken into consideration for deciding as to whether there was any dishonest intention at inception. In view of the same, he submits that there are no merits in the petition and the same has to be rejected.
6. The learned Additional Public Prosecutor would furthr contend that a reading of the charge-sheet as a whole would indicate that the petitioners are in the habit of cheating the public at large. Number of cases are registered against the petitioners and it has become a habit for them to cheat the public at particular place, close the business at the said place, then move to a different place and establish a firm with a different name.
7. Section 482 of Cr.P.C. envisages three circumstances under which inherent jurisdiction can be exercised viz. (1) to give effect to an order under the Code; (2) to prevent abuse of process of Court; and (3) to otherwise secure ends of justice. It is neither possible nor desirable to lay down any inflexible rule, which would govern the exercise of inherent jurisdiction. In order to quash a First Information Report under this Section, the High Court has to see whether prima facie case against the accused is made out or not. When the allegations in the Report make out a prima facie cognizable offence, it is the duty of police to conduct investigation. The said power cannot be invoked to interdict a legitimate prosecution and it has to be exercised very sparingly to render real and substantial justice to the parties. As held by the Apex Court, it is to be exercised very sparingly and with circumspection in rare cases to prevent abuse of process of Court or to otherwise secure ends of justice. In BMW India Pvt. Ltd., Gurgaon, Haryana v. State of A.P.1, this Court while interpreting the word 'abuse of process of Court' held that the words would mean an improper use of legal process with a view to obtain unfair advantage or undeserving benefit. It should be considered having due regard to the provisions of the Code and keeping in mind the underlying object for which the provision has been enacted with a view to preventing Courts from being rendered impotent by any omission of the Code. This Court also held that the ends of justice will be achieved when a matter is decided on the basis of a material available on record. What would mean 'ends of justice' would always depend upon the facts and circumstances of each case.
8. In a case of Inder Mohan Goswami and another v. State of Uttaranchal and others2, the Apex Court summarized some categories of cases where inherent power can and should be exercised to quash the proceedings: (i) where it manifestly appears that there is a legal bar against the institution or continuance of the proceedings; (ii) where the allegations in the first information report or complaint taken at their face value and accepted in their entirety do not constitute the offence alleged; (iii) where the allegations constitute an offence, but there is no legal evidence adduced or the evidence adduced clearly or manifestly fails to prove the charge.
9. The point that arises for consideration would be ".Whether the ingredients constituting an offence punishable under section 420 and 406 I.P.C. are made out against the petitioner?.".
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 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. Keeping in view the principle of law enunciated by the Apex Court with regard to scope and power of the High Court under Section 482 Cr.P.C, I propose to deal with the matter. To constitute an offence punishable under Section 420 IPC, it has to be shown that not only a person has cheated someone, but also that by doing so, he has dishonestly induced a person who was cheated to deliver any property, etc. A person can be said to have done an act dishonestly if he does so with the intention of causing wrongful gain to one person or wrongful loss to another person. 'Wrongful loss' is the loss by unlawful means of property to which a person loosing it, is legally entitled, while 'wrongful gain to a person' means a gain by unlawful means of property to which the person gaining is not legally entitled. These are the two facets of definition of 'dishonestly'. A reading of Section 415 IPC, which defines 'cheating', it is manifest that two different classes of acts are set forth which the person deceived may be induced to do so. In the first class, he may be induced fraudulently or dishonestly to deliver any property to any person. Second class of facts set forth in the section are that doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases, inducement must be fraudulent or dishonest. In the second class of acts, inducement must be intentional but not fraudulent or dishonest. To hold a person guilty of cheating, it is necessary to show that he had fraudulent or dishonest intention at the time of making promise. In a case of mere failure to keep up promise subsequently, such culpable intention right at the beginning i.e. when he made a promise, cannot be presumed.
10. Section 406 I.P.C. reads as under :- 406. Punishment for criminal breach of trust:- Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both. Section 405 IPC defines 'criminal breach of trust'. Necessary ingredients to constitute the offence of criminal breach of trust are (1) the accused must have been entrusted with a property or a dominion over it; (2) the accused must have misappropriated the property or disposed of that property in violation of such trust. In other words, dishonest misappropriation or conversion to his own use or dishonest use or disposal of the property in violation of any direction of law or on any legal contract is necessary ingredient of the offence of criminal breach of trust.
11. The learned counsel for the petitioners relied upon the following Judgments of the Apex Court to substantiate his plea that the transactions of this nature would not constitute an offence of cheating and criminal breach of trust.
12. Anil Mahajan v. Bhor Industries Limited and another3, was a case, where a memorandum of understanding dated 16.08.2000 was executed between the accused and the complainant for supply of steel grip tapes inter alia stipulating that 50% of the payments against monthly quantity would be given in advance and balance 50% on receipt of the goods. The complainant delivered 56,94,120 reels of steel grip tapes valued at Rs.3,38,62,860 to the accused and out of this amount, the accused made only part-payment of Rs.3,05,39,086 leaving balance amount of Rs.33,23,774. The allegation is that after paying the said amount, the accused did not make any further payment inspite of repeated demands and was postponing the same on one pretext or the other. Notices were exchanged between the parties in which there was no averment of any dishonest intention on the part of the accused. A complaint, which came to be filed stating that the accused has cheated the complainant as there was dishonest intention right from the time of entering in the said Memorandum of Understanding. The Apex Court in the said case held that a distinction has to be kept in mind between mere breach of contract and the offence of cheating, it depends upon the intention of the accused at the time of inducement. The subsequent conduct 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 Apex Court found that except for mention of the words the ".deceive". and ".cheat". in the complaint, there is no averment about the deceit, cheating or fraudulent intention of the accused at the time of entering into MOU wherefrom it can be inferred that the accused had the intention to deceive the complainant to pay. After observing that the substantial amount was paid and that a civil suit is pending intersay between the parties for the balance amount in question, the court held that the matter is purely civil in nature and ingredients constituting an offence of cheating are not made out.
13. V.P.Shrivastava v. Indian Explosives Limited and others4, was a case in which the complainant who was engaged in the manufacture and sale of industrial explosives placed an order for purchase of ammonium nitrate from FCIL. As per the agreement, it was agreed that FCIL would supply ammonium nitrate to IEL and against this supply, IEL would supply explosives of an equivalent value to BCCL, which in turn would supply coal of equivalent value to FCIL. In the month of July and September 2002, the Government of India issued a memorandum for enclosing of all the units of FCIL. On 22.05.2003, IEL instituted a criminal complaint for the offences under sections 406, 420 and 120-B I.P.C. read with Sections 540 and 542 of the Companies Act, 1956. They also filed a suit O.S.No.34 of 2003 for recovery of the outstanding amount. Issue of summons in the criminal case was the subject matter of challenge. It was specifically alleged in the complaint therein that FCIL has deliberately suppressed the fact that they had already been referred to BIFR and was likely to be declared as a sick company and induced IEL to pay Rs.4,20,41,622/- to FCIL who in turn did not supply ammonium nitrate to them. In those circumstances, the Apex Court was dealing as to whether an offence under Sections 420 and 406 I.P.C. are made out against the accused. The Apex Court held that on their own showing IEL was purely aware of financial condition of FCIL at the time the said contract was entered into and also the reason why FCIL was unable to continue the production of ammonium nitrate. The court held that in order to constitute an offence of cheating, intention to deceive should be in existence at the time when alleged inducement was made. In the facts and circumstances of the case, the court held that such an intention cannot be inferred from the allegations made in the complaint. The court found that it may amount to breach of terms of contract by FCIL, but do not constitute an offence of cheating punishable under section 420 I.P.C. While dealing with the offence under Section 406 I.P.C., the Apex Court held that there is nothing in the complaint which suggests remotely that IEL has entrusted any property to the appellants therein or that the appellant has dominion over any of the properties of IEL which they dishonestly converted for their own use so as to satisfy the ingredients of Section 406 I.P.C. In those circumstances, the Supreme court quashed the proceedings against the accused.
14. In Thermax Limited and others v. K.M.Johny and others5 the Apex Court, was also dealing with situation, where the accused are alleged to have committed the offence under sections 420 and 406 I.P.C. After referring to the Judgment, the Alpic Finance Ltd., v. P.Sadasivam6, Anil Mahajan v. BhorIndustries Ltd.,7 Sk.Alagh v. State of U.P.8 Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd,9 the Apex Court held that to constitute an offence punishable under Section 420 I.P.C, there has to be dishonest intention to deceive another person. In the facts and circumstances of the case, the court held that no such dishonest intention can be seen or even inferred inasmuch as the entire dispute pertains to contractual obligations between the parties. Accepting the allegations to be true, the Court held that a breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction. The Court find that even ingredients constituting the offence under section 406 I.P.C. are not made out. The Apex Court further held that the dispute is of the year 1993 to 1995 and a complaint came to be lodged in the years 2002, obviously trying to circumvent the jurisdiction of the civil courts which estopped him from proceeding on account of the law of limitation. Apart from that three complaints similar in nature were closed on the ground that the matter is purely civil in nature. In view of the above circumstances, the Apex Court quashed the proceedings against the accused.
15. The cases referred to above may not apply to the facts on hand. It is true that to constitute an offence under Section 420 I.P.C., there has to be dishonest intention to deceive another person and the said dishonest intention should be there from inception. But whether the accused had dishonest intention at inception has to be gathered from the facts and circumstances of each case. The Apex Court in S.P. Gupta v. Ashutosh Gupta10, after referring to illustration (g) to Section 415 I.P.C., held that whether there was an intention to cheat at inception would depend on the evidence to be led at the time of trial. It is true that the allegations in the charge-sheet itself disclose that the accused has paid part of the amount due to the respondent, but the subsequent conduct of the accused also matters, in deciding as to whether the accused had dishonest intention to cheat the complainant from inception. In the cases referred to above, the Apex Court never had an occasion to consider the subsequent conduct of the accused. Except a passing reference in Mahajan's case, wherein the Apex Court held that subsequent conduct cannot be a sole test for deciding as to whether the accused had dishonest intention to cheat from inception. The facts in the said case were different from the present case. As referred to earlier, it was a case where there were exchange of notices and as the accused failed to pay the amount inspite of repeated demands, hence a criminal complaint came to be filed for an offence of cheating. The grievance appears to be that the accused failed to discharge the obligations under the Memorandum of Understanding. No allegations of fraud, inducement have been alleged in the complaint. In those circumstances, the Apex Court made the above observations. But situation on hand is different. The question as to whether the accused had dishonest intention right from inception can be gathered from the subsequent conduct of the party though it cannot be the sole test, it is definitely one of the circumstances which has to be taken into account for deciding as to whether the accused had dishonest intention from inception.
16. The fact that the accused failed to pay the entire amount, take back 20 lakhs forms lying with various print operators, conduct of the accused in closing down his business, shifting his residence due to demands made by the accused for payment of money can definitely be taken into consideration to hold that the accused had intention to deceive from inception. As stated above, the accused was involved in number of cases and one of such case is with reference to C.C.No.2075/2010, which was also registered for an offence punishable under Sections 420 and 406 I.P.C. Therefore, the subsequent conduct of the petitioners coupled with his antecedents can be taken into consideration to hold that prima facie there was dishonest intention from inception. It is always open to the petitioners to plead and adduce evidence to show that they had no dishonest intention at inception and definitely the same cannot be the basis for quashing of the proceedings by invoking the inherent jurisdiction of Section 482 Cr.P.C.
17. The fact that the accused placed an order for 8 crores forms is not in dispute. 70 lakhs forms were printed by the respondent through various print operators and out of which 50 lakhs forms were taken by the accused is also not in dispute. The question would be ".Whether the placement of order would amount to entrustment of the property and non taking of the property would amount to breach of trust ?."..
18. A reading of Section 405 I.P.C, would reveal that to constitute an offence under Section 406 I.P.C., there must be entrustment with the property and the accused must have misappropriated the property or disposed of that property in violation of such trust. Dishonest use or disposal of the property in violation of any direction of law or legal contract is the necessary ingredients to constitute an offence of breach of trust. None of the ingredients required to constitute an offence of criminal breach of trust are made out against the petitioners. Even if placing an order to print material is to be treated as entrustment, the second limb of Section 405 I.P.C. i.e., misappropriation of property entrusted is missing. Prima facie placing an order to print 8 crores forms, which lead to printing of 50 lakh forms, payment of meager amount and thereafter refusing to take the material would not fall within the meaning of entrustment as defined in Section 405 I.P.C.
19. Accordingly, the Criminal Petition filed for quashing of proceedings against the petitioners/accused in C.C.No.1592 of 2010 on the file of IX Metropolitan Magistrate, Cyberabad at Kukatpally, is allowed in part. The proceedings in sofar as offence under Section 406 I.P.C alone are quashed. As sequel to it, miscellaneous petitions, if any pending, shall stand dismissed. _________________________ JUSTICE C.PRAVEEN KUMAR1107-2013