Judgment:
ORDER
1. This petition is filed under Section 482 of the Code of Criminal Procedure by the petitioners who are the accused in C.C. No. 8478 of 1999 on the file of the Court of IV Additional Chief Metropolitan Magistrate, Bangalore City seeking for quashing the above proceedings pending against them for the offences punishable under Sections 406 and 420 ofthe Indian Penal Code by the impugned order dated 14-7-1999 passed by the learned Magistrate.
2. The respondents herein filed a complaint in the Trial Court against the petitioners for the offences under Sections 406 and 420 of the Indian Penal Code alleging that they have entered into an agreement dated 13-5-1997 with the respondents according to the terms of which the first petitioner undertook to procure 1/11th undivided share in the site bearing No. 15, Khata No. 497/2 situated in Gurukamathanapalya, K.R. Puram, Bangalore for a consideration of Rs. 87,000.00. The respondents granted the right to construct a residential flat either directly or through a contractor in favour of the petitioner under the said agreement. Respondents also engaged the first petitioner to build the flat and the first petitioner agreed to sell the said flat for Rs. 12,10,520.00 after completion of the construction before the end of 1997. It is the further case of the respondents that they have made a part payment of Rs. 5,05,001.00 towards the value of the said flat and the balance amount of Rs. 4,18,001.00 has to be paid by them after the completion of the construction of the flat. It is the further case of the complainant that the respondents sent an intimation letter dated 24-10-1997 informing them that the construction of flat in the second floor was completed and it was ready for occupation and demanded them to pay the balance amount due by them as mentioned in the agreement Rs. 7,05,519.00 before 20-11-1997. The first petitioner demanded an additional sum of Rs. 53,580.00 claiming the same towards the alleged extra built-up area. The complainant thereafter visited the flat along with one Mr. N. Srinivasan, Consulting Engineer, Bangalore and found that the construction has not been completed and that the said flat was not ready for occupation. The said Consulting Engineer also furnished a certificate confirming that the said flat was not fit for occupation. Thereafter, the first respondent sent a letter dated 5-11-1997 informing the first petitioner that the construction of flat was not completed and requested for furnishing the certified final measurements regarding the chargeable area. First petitioner sent a reply to that letter on 11-11-1997 without furnishing the final measurements. Thereafter the first respondent wrote another letter dated 14-11-1997 and once again requested the first petitioner to expeditiously furnish the data in support of its claim of additional built-up area. A reply was sent to the said letter on 25-11-1997 by the first petitioner. Subsequently, the second petitioner held out threats that if the respondents fail to pay the balance amount due by them, the flat would be sold to some other person. Immediately thereafter the respondent got issued a notice dated 26-11-1997 calling upon the petitioner to complete the flat in all respects and to execute a registered sale deed in respect of 1/11th undivided share in the land and to hand over possession of the same to them. The first petitioner in collusion with the 6th petitioner entered into negotiations to sell the said flat and ultimately sold the said flat to one Mr. Premanand Baindoor for a sum of Rs. 6.33 lakhs. With these allegations, the respondents filed the complaint alleging that the petitioners committed offences of cheating and misappropriation of amount paid by them punishable under Sections 406 and 420 of the Indian Penal Code. The learned Magistrate on receiving the complaint referred the matter for investigation under Section156(3) of the Code of Criminal Procedure. Thereafter, the police conducted investigation and submitted a 'B' report. However, the learned Magistrate permitted the complainants to prove the case against the petitioners and after recording the sworn statement of the respondent 1, the learned Magistrate passed the impugned order directing to register a case against the petitioners for the offences punishable under Sections 406 and 420 of the Indian Penal Code. The said order is now challenged before this Court in the present petition.
3. I have heard the arguments advanced by the learned Counsel appearing on both sides.
4. The learned Counsel for the petitioners vehemently contended that the facts alleged in the complaint do not disclose any of the offences under Sections 406 and 420 of the Indian Penal Code and the dispute is purely of civil nature and therefore, there are no grounds to proceed against the petitioners for the offences under Sections 406 and 420 of the Indian Penal Code. He further submitted that it is nowhere alleged in the complaint that the petitioner had any guilty intention at the time of entering into the contract to cheat the complainants and in the absence of said averment, the learned Magistrate ought to have held that there are no grounds to proceed against the petitioners for the offences under Sections 406 and 420 of the Indian Penal Code. According to him, the entire case of the complainants is that the petitioners have committed a breach of contract by not selling the flat constructed by them in their favour and caused loss to them by selling the flat to a third party. He therefore, submitted that the dispute is purely of civil nature and there are no grounds to initiate criminal proceedings against the petitioners for the offences under Sections 406 and 420 of the Indian Penal Code.
5. In reply to these contentions, the learned Counsel for respondents submitted that the petitioners have induced the complainants to part with more than Rs. 5 lakhs agreeing to put up the flat in the second floor and sell the same for a total consideration of Rs. 12,10,520.00 under the terms of the agreement dated 13-5-1997 entered into by the parties and without completing the construction of the flat, demanded the complainants to pay the balance amount and in spite of the complainants pointing out that the construction of the flat has not been completed in all respects and expressing their readiness and willingness to pay the balance amount of sale consideration if the remaining part of the construction work were to be attended, the petitioner deliberately sold the flat to a third party for Rs. 6.33 lakhs and caused wrongful loss to the respondents and all the above facts in the complaint clearly disclose a prima facie case against the petitioners for the offences punishable under Sections 406 and 420 of the Indian Penal Code.
6. The learned Counsel for the petitioners has relied upon a decision rendered by this Court in case of Silk Import and Export Inc., California, U.SA. v Exim Aides Silk Exporter, Bangalore and Anr., wherein it was held that when the criminal proceeding is initiated on a private complaint for the offences punishable under Sections 418 and 420 of the Indian Penal Code, it can be quashed if it is shownthat at the time of entering into the contract or transaction, the only intention of the opposite party was to cheat the complainant and not otherwise. He also relied upon another decision of this Court rendered in the case of India Brewery and Distillery Limited, Bangalore and Others v Shaw Wallace and Company Limited, Bangalore, wherein it was held that in the absence of allegation in the complaint that at the time of the entering into the transaction, the only intention of the accused was to cheat the complainant, Magistrate was wrong in taking cognizance of the offences under Sections 406 and 420 of the Indian Penal Code and issuing process. The learned Counsel for the petitioners contended that it is nowhere alleged in the complaint filed by the respondents that at the time of entering into the above transaction, the only intention of the petitioners was to cheat the complainants and in the absence of the said averment in the complaint, he contended that the above case registered against the petitioners for the offences under Sections 406 and 420 of the Indian Penal Code is liable to be quashed.
7. On a careful perusal of the complaint filed by the respondents in the Trial Court, it is found that the respondents have nowhere alleged that at the time when they entered into an agreement dated 13-5-1997 with the petitioners for construction of a fiat in the second floor of their site bearing No. 15, Khata No. 497/2, Gurukamathanapalya, K.R. Puram Hobli, the petitioners entertained an intention to cheat them and thus induced them to enter into the said agreement. It is also not alleged in the said complaint that even at the time when the complainants paid a part of the sale consideration amount of Rs. 5,05,001.00, the petitioners entertained an intention to cheat them and thus induced them to part with the said portion of the consideration amount. On the other hand, according to the facts leading to the above case, a dispute arose between the parties only after the respondents received an intimation letter from the petitioners dated 24-10-1997 informing them that they have completed the construction of the flat and that it was ready for occupation and called upon them to pay the balance amount of Rs. 7,05,519.00 before 20-11-1997 and demanded payment of additional sum of Rs. 53,580.00 claiming the same towards the extra built-up area. According to the respondents when they inspected the flat constructed by the petitioners along with their Consulting Engineer, they found that the construction had not been completed and that it was not fit for occupation. Thereafter there was exchange of letter correspondence between the parties and finally when the respondents failed to pay the balance amount of sale consideration within the time fixed by the petitioners, the petitioners sold the said flat to a third party. According to the respondents, the petitioners committed a breach of contract by selling the said flat to a third party when they were ready to pay the balance sale consideration amount and they were asking the petitioners to complete the construction of the flat and to make it ready for their occupation. But according to the petitioners, the respondents committeda breach of contract by not paying the balance amount though they had completed the construction work within the stipulated time and sent intimation to the respondents to pay the balance amount and obtain the registered sale deed. All these facts, in my opinion, clearly go to show that the dispute between the parties is purely of civil nature. The allegations made in the complaint do not make out a case for the offences under Sections 406 and 420 of the Indian Penal Code. It is pointed out by the learned Counsel for the respondents that now the dispute i; pending before the Consumer Forum and they have sought for refund o the amount paid by them with interest at 24%. The learned Counsel for the respondents has relied upon a recent decision of the Supreme Court reported in the case of Medchl Chemicals and Pharma (Private) Limited v Biological E. Limited and Ors, wherein it was held that the ingredients required to constitute an offence under Section 415 has been lucidly dealt with by this Court in the case of Ram Jas v State of Uttar Pradesh, wherein this Court observed as below:
'The ingredients required to constitute the offence of cheating are-
(i) there should be fraudulent or dishonest inducement of a person by deceiving him;
(ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or
(b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and
(iii) in cases covered by (ii)(b) the act or omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property'.
It has held further as under:
'While Section 415 is an offence of cheating, Section 418 deals with cheating with knowledge that wrongful loss may ensue to a person whose interest the offender is bound to protect and Section 420 is cheating and dishonestly inducing delivery of property. In order to attract the provisions of Sections 418 and 420 the guilty intent, at the time of making the promise is a requirement and an essential ingredient thereto and subsequent failure to fulfil the promise by itself would not attract the provisions of Section 418 or 420. Mens rea is one of the essential ingredients of the offence of cheating under Section 420. As a matter of fact illustration (g) to Section 415 makes the position clear enough to indicate that mere failure to deliver in breach of an agreement would not amount to cheating but is liable only to a civil action for breach of contractand it is this concept which obviously has weighed with the learned Single Judge'.
'It is now well-settled and one need not dilate on this score, neither do we intend to do so presently that the allegations in the complaint will have to be accepted on the face of it and truth or falsity of which would not be gone into by the Court at this earliest stage as noticed above: whether or not the allegations in the complaint were true is to be decided on the basis of the evidence led at the trial'.
At page 280 it has observed as follows:
'......Both criminal law and civil law remedy can be pursued indiverse situations. As a matter of fact they 'are not mutually exclusive but clearly co-extensive and essentially differ in their content and consequence. The object of criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect the civil remedies at all for suing the wrongdoer in cases like arson, accidents, etc. It is anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. The two types of actions are quite different in content, scope and import'.'
Placing reliance on the above decision, he contended that merely because the matter is pending in a civil proceeding, the complainant cannot be prevented from prosecuting the petitioners in a Criminal Court. But in the instant case, since it is found that there are no allegations in the complaint to the effect that at the time of entering into the contract at the inception the petitioners, entertained any dishonest intention to cheat the respondents and thus induced them to enter into the said contract and since it is further found that there are no allegations in the complaint to the effect that even at the time of payment of part of the sale consideration amount, the petitioners entertained a dishonest intention to cheat the respondents and thus induced them to part with the said amount, I find that the facts alleged in the complaint taken as they are, do not disclose any grounds to proceed against the petitioners for the offences under Sections 406 and 420 of the Indian Penal Code.
8. For the above reasons, I find that the proceedings in C.C. No. 8478 of 1999 pending against the petitioners are liable to be quashed.
9. The petition is, therefore, allowed and the impugned order passed by the learned Magistrate dated 14-7-1999 registering the case against the petitioners for the offences under Sections 406 and 420 of the Indian Penal Code is set aside and the above proceedings pending in the Court of IV Additional Chief Metropolitan Magistrate, Bangalore City are hereby quashed.