Judgment:
ORDER
J.C. Gupta, J.
1. By means of this application moved under Section 482 of the Code of Criminal Procedure (in short to be referred to as Cr.P.C.) inherent powers of the Court are being invoked for quashing the criminal complaint filed by respondent No. 3 and by a supplementary affidavit a prayer has been made to quash the order dated 20-9-98 passed by the learned C.J.M. Ghaziabad summoning the applicants as accused in the aforesaid complaint for the offences punishable under Section 418/420 of the Indian Penal Code (in short Penal Code).
2. Copy of the criminal complaint filed by respondent No. 3 is AnnexUre-6 to the application. The allegations made therein may be stated in short as under :
That the complainant is a Public Ltd. Company under the provisions of the Companies Act having its Registered Office at Solan Brewery, District Solan, Himachal Pradesh and one of the Branches of the Factory/Administration Unit of the complainant Company is situate at Mohan Nagar Ghaziabad.
That accused No. 1 is a Limited Company incorporated under the Companies Act with its Registered office at 73/81 Salai Road, Thillai Nagar, Tiruchiripallai and its Regional Office at Delhi. The accused No. 3 is the Joint Managing Director, accused No. 2 is the Executive Director, accused No. 4 is the Director Marketing and accused No. 5 is the Regional Director of the accused company and the accused persons were engaged in the supply, erection and commissioning of Oil or Coal Fired Boilers and they assured the complainant that they could as well deal in the supply of Natural Gas Fired Boilers.
That the complainant company is engaged in the manufacture, inter alia, of glass bottles and various alcoholic and non-alcoholic beverages at its unit amongst others at Mohan Nagar, Ghaziabad.
That with the laying of the Hazira Bijapur Jagdishpur (HPJ) Pipeline by the Gas Authority of India, it became possible for the complainant company to consider the use of gas as a cheaper, more efficient and environmentally friendly alternative to coal as a fuel in its industry at Mohan Nagar.
That the complainant company applied for the supply of 42,000/- standard Cubic Metres of Natural Gas per day to the Gas Authority of India Ltd. and the said Authority made available the natural gas to the complainant Company w.e.f. March, 1993. Out of 42,000 standard Cubic Metres approximately 20,000 standard Cubic Metres was required to fire the Boiler Approximately 12,000 kgs. per hour of the steam for manufacturing operations on a continuous basis was required by the complainant Company for its unit at Mohan Nagar. The complainant company floated an enquiry for a Gas Fired Boiler to produce 72,000 Kgs of steam per hour on a continuous basis consuming approximately 955 Standard Cubic Meters of gas per hour. The accused persons taking advantage of previous acquaintance with the complainant company induced to place order for the Gas Fired Boiler to the complainant Company and they further persuaded to design, supply, install and commission to the satisfaction of the complainant Company in accordance with the said enquiry. In order to secure order from the complainant Company accused persons impressed upon the officials of the complainant company to the effect that accused No. 1 was a company of repute and was quite efficient in erecting installing and commissioning of Gas Fired Boiler also. It was also impressed upon the complainant company that the Boilers would be installed well in advance of the flow of gas from the pipeline to the complainant company.
That accused Nos. 2 to 5 at times separately and at times collectively represented to the complainant company that a Gas Fired Boiler was no different from a Coal Fired or Oil Fired Boiler in its essential characteristics and design. They further represented that in anticipation of demand for Gas Fired Boiler with the advent of the HBJ pipeline, the accused No. 1 company had already prepared designs for the Gas Fired Boilers in collaboration separately with M/s. Dunphy and M/s. Credfeld, both of United Kingdom. A 'Gas Burner Train' is the most critical equipment in any Gas Fired Boiler and the accused persons on various occasions assured the complainant company that the Gas Fired Boiler required to be installed at the site of the complainant Company would be fitted with the 'gas burner train the design of which would be approved either by M/s. Dunphy or M/s. Credfeld depending upon whether the gas burner train manufactured by M/s. Credfdd or by M/s. Dunphy was fitted in the Boiler.
That the accused No. 2 further represented to and assured the complainant Company that the Boiler as manufactured and supplied to it would be based entirely on designs prepared by international designers and approved by one of the two internationally renowned gas burner train manufacturers as referred to above, whose gas burner train would be incorporated in the boiler, with a view that the gas boiler supplied to complainant company would operate as a model and show piece to other prospective customers.
That the accused persons further guaranteed and assured the complainant company that the Boiler as supplied would perform in all respects to the standards required and would produce the required 12,000 kgs. of steam per hour on a gas consumption of not more than 955 cubic meters of natural gas per hour, so as to be able to meet the entire demand of steam of the complainant company and that the Boiler supplied would be of the best quality incorporating materials of the highest specifications and design safety margins, fabricated to the highest standards of workmanship so as to provide a most efficient and reliable boiler system.
That based on the said representations, inducement, persuasion and assurances given from time to time by accused persons, the complainant company placed on accused Company a purchase order for the design, supply and commissioning of the promised Natural Gas Fired Boiler at 12,00 kgs. per hour capacity along with related machinery (including one Credfeld/Dunphy Gas Burner Train) at a basic price of Rs. 32,40,000/-.
That the accused persons thereafter purporting to make delivery of the Boiler and related machinery/equipment under the purchase order under cover of its invoice dated September, 1992 for Rupees, 39,50,856/- against which the complainant Company arranged payment of Rupees 37,60,911/ on their persuasion and the balance amount was payable after the accused had successfully commissioned the Boiler.
That after when the machinery was commissioned, during testing and trial it was found that the Boiler installed by the accused company could generate steam only to a maximum of 7,500 kgs. per hour with a consumption of approximately 950 Standard Cubic Meters of Natural Gas per hour. In addition, fuel gases escaped from the boiler at various points which resulted not only in a waste of fuel gases and consequent heat but also caused the steel plates severally warning around the exit note on the top of the Boiler and around the explosion doors.
That the complainant company inquired further into the matter and was shocked to find out that each and every material representation made and assurances given by the accused with respect to the Boiler had been breached and disregarded and complainant company has been cheated inasmuch as :
a. The design for the Boiler had been locally prepared by the accused company without any collaboration, review or approval either from M/s Dunphy or M/s Credfled or any other organisation experienced in the design and/or manufacture of Natural Gas Fired Boiler system.
b. The Gas Burner Train supplied was of local substandard make and design and was totally incapable of burning gas or generating heat with the efficiency required and the design, material and workmanship of the Boiler was such that not only was the Boiler as designed, fabricated and supplied totally unable to perform to the contracted specification but the Boiler as supplied was incapable of generating even to any substantial degree the heat and steam necessary and was unable to withstand the pressure of the limited heat and steam generated in the Boiler, with the result that the plates and the fuel gases escaped from all the weaker spots and in spite of haphazard attempts by the accused persons to improve the performance of the Boiler and associated equipment/machinery they still remained wholly incapable of improved performance and remained a produce substantially different from the product contracted for.
As a consequence of accused persons failure to either rectify the defects in the Boiler and the associated machinery/equipment or to refund the aforesaid sum of Rupees 37,60,911/- the complainant company suffered a huge loss of more than two crores sixty five lakhs rupees as the complainant company was being burdened with the cost of gas supplied by the Gas Authority of India.
That accused Nos. 2 to 5 for and on behalf of the accused No. 1 severally and jointly deceived the complainant company by making misrepresentations and thereby dishonestly induced the complainant company to deliver an amount of Rupees 37,60,911/- but for the aforesaid representation, inducement and assurances extended to the complainant company from time to time by accused Nos. 2 to 5, the complainant company would not have placed the order for the installation of Gas Fired Boiler. The accused persons had full knowledge that they were likely to cause wrongful loss to the complainant company and to get wrongful gain from the transaction by supplying articles not suited to work as Gas Fired Boiler.
That the accused persons thus committed offences punishable under Section 415, 418 and 420 of the Penal Code.
3. On a consideration of the complaint, statement of S.K. Kochar and the documents placed on record from the side of the complainant, the learned Magistrate by the order dated 10-5-1996 came to the conclusion that there were sufficient grounds to proceed against the applicants under Sections 418 and 420 I.P.C. It appears that an application for recalling the order summoning the accused was filed along with an application dated 16-3-1998 on behalf of the present applicants. The Chief Judicial Magistrate, Ghaziabad vide his order dated 4-4-1998 rejected both the applications. The said order, however, has been not challenged in the present application moved under Section 482 Cr.P.C.
4. Criminal Misc. Application No. 3867 of 1998 has been filed for quashing the order dated 20-8-98 passed by the Court below whereby non-bailable warrants have been issued against the accused persons.
5. Both the applications are being disposed of by this common judgment.
6. Shri Gopal Chaturvedi Sr. Advocate, appearing on behalf of the applicants argued before the Court that the dispute between the parties was of a civil nature being at best a breach of contract and the present criminal proceedings have been drawn simply with a view to harass the applicants. In support of his argument, learned counsel wanted this Court to take into consideration a number of documents which have been annexed with the present application, though they were not on record before the Magistrate concerned with the impugned order of summoning was passed. Learned counsel for the respondents, on the other hand argued that this Court very limited powers under Section 482 Cr.P.C. for quashing a complaint at its inception and since the allegations set forth in the present complaint and evidence adduced in support thereof do make out a clear case of cheating, the application is liable to be dismissed and the possible defence of the accused cannot be taken into consideration at this stage. It was also contended that the applicants after receiving summons choose to challenge the order of summoning by moving an application by moving an application under Section 245/204 Cr.P.C. relying upon the judgment of the apex Court reported in 1992 CLJ 3779 : AIR 1992 SC 2206 K.M. Mathew v. State of Kerala without withdrawing the present application.
and since the said application moved before the Magistrate has also been rejected by him by the order dated 4-4-1998 and the said order has become final as having been not challenged in revision or other proceeding the present application is not maintainable and the applicants should be permitted to invoke inherent powers of this Court under Section 482 of the Code of Criminal Procedure, after when they have already availed an alternative remedy.
7. The first question that requires attention of the Court is as to what is the scope of the powers of this Court while dealing with a situation like the present one where inherent powers are being invoked for the quashing of criminal complaint.
8. It is well established law that Section 482 Cr.P.C. empowers the High Court to exercise its inherent powers to prevent the abuse the process of Court and while exercising such powers the High Court cannot usurp the jurisdiction of trial Court. In this connection a reference may be made to the decision of the Apex Court in the case of R.S. Khemka v. State of Bihar 1993 (2) JT SC 523 : 1993 AIR SCW 2427 : 1993 Cri LJ 2888.
9. In Mrs. Dhan Laxmi v. M.R. Prasanna Kumar AIR 1990 SC 494 : 1990 Cri LJ 320, the Supreme Court considered the scope of the inherent powers of the High Court in the matter of quashing of proceedings instituted on complaint of which cognizance has been taken by the Magistrate. It was observed as under :
Section 482 empowers the High Court to exercise its inherent powers to prevent abuse of the process of Court. In proceedings instituted on complaint exercise of the inherent power to quash the proceedings is called for only in cases where the complaint does not disclose any offence or is frivolous, vexations or oppressive. If the allegations set out in the complaint do not constitution the offence of which cognizance is taken by the Magistrate it is open to the High Court to quash the same in exercise of the inherent powers under Section 482. It is not, however, necessary that there should be a meticulous analysis of them case, before the trial to find out whether the case would end in conviction or, not. The complaint has to be read as a whole. If it appears on a consideration of the allegations in the light of the statement on oath of the complainant that ingredients of the offence/offences are disclosed and there is not material to show that the complaint is mala fide frivolous or vexatious, in that event would be no justification for interference by the High Court.
10. The Supreme Court further proceeded to observe that it was not open for the High Court to analyse the case of the complaint in the light of all the probabilities in order to determine whether a conviction would be sustainable as it was for the complainant to substantiate the allegations by the evidence at a later stage.
11. In the case of Mrs. Rupan Deol Bajaj v. K.P.S. Gill 1995 (7) JT SC 299 : AIR 1996 SC 309 : 1996 Cri LJ 381 the question arose for consideration was as to under what circumstances and in what categories of cases the High Court can quash an FIR or a complaint in exercise of its power under Article 226 of the Constitution of India or under Section 482 Cr.P.C. and their Lordships observed that the said question has been fully answered in an earlier decision in State of Haryana v. Bhajan Lal 1992 (Supplement) (I) SCC 335 : AIR 1992 SC 604 : 1992 Cri LJ 527 as under (at page 629; of AIR):
In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any Court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised.
(1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.
(2) Whether the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of Magistrate within the purview of Section 155(2) of the Code.
(3) Whether the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.
(4) Where the allegations in the FIR do not constitute a cognizable offence but constitute only a non cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the-Code.
(5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever each a just conclusion that there is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is malicious instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.
We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the Court will not be justified in embarking upon an inquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent power do not confer an arbitrary jurisdiction on the Court to act according to its whim or caprice.
12. Yet in another decision in the case of Mushtaq Ahmad v. Mohd. HabiburRehman Faizi 1996 (1) JT 656: AIR 1996 SC 2982 :1996 Cri LJ 1877 the Hon'ble Supreme Court set aside the judgment of the High Court whereby criminal complaint was quashed by the High Court in exercise of its inherent powers under Section 482 Cr.P.C. In this case inspite of the fact that the complaint and the documents annexed thereto clearly made out a prima facie case for cheating breach of trust and forgery, the High Court proceeded to consider the version of the accused given out in their petition filed under Section 482 Cr.P.C. vis a vis that of the complainant and entered into the debatable area of deciding which of the version was true. The Supreme Court held that such a course was wholly impermissible in law. In the case of State of Bihar v. Murad Ali Khan (1988) 4 SCC 655 : AIR 1989 SC 1:1989 Cri LJ 1005 the Apex Court held that it is trite that jurisdiction under Section 482, Cr.P.C. which save the inherent power of the High Court make such orders as may be necessary to prevent the abuse of the process of any Court or otherwise to secure the ends of justice, has to be exercised sparingly and with circumspection. In exercising that jurisdiction the High Court should not embark upon an inquiry whether the allegations in the complaint are likely to be established by evidence or not that is the function of the trial Magistrate when the evidence comes before him. Though no inflexible rules could be laid down to regulate that jurisdiction one thing, however, appears clear and it is that when the High Court is called upon to exercise this jurisdiction to quash a proceeding at the stage of the Magistrate taking cognizance of an offence, the High Court is guided by the allegations, whether those allegations, set out in the complaint or the charge sheet, do not in law constitute or spell out any offence and that resort to criminal proceedings would, in the circumstances, amount to an abuse of the process of the Court or not.
13. Similarly in the case of Municipal Corporation of Delhi v. P. D. Jhunjunwala (1983) 1 SCC 9 : AIR 1983 SC 158 : 1983 Cri LJ 172 it was made clear as to what would be the evidence against the accused is not a matter to consider at the stage of summoning and the matter would have to be left at the time of trial and only the allegations set forth in the complaint have to be seen and nothing further.
14. In another decision of Municipal Corporation of Delhi v. R.K. Rohtagi (1983) 1 SCC 1 : AIR 1983 SC 67 : 1983 Cri LJ 159 it was held that proceeding against an accused in the initial stages can be quashed only if on the face of the complaint or the papers accompanying the same, no offence is constituted. In other words, the test is that taking the allegations and the complaint as they are without adding or substituting anything, if no offence is made out, then the High court will he justified in quashing the proceedings in exercise of its powers under Section 482 Cr.P.C.
15. In the backdrop of the above decisions, before embarking upon examination of the issue in question it has to be kept in mind that this Court in exercise it has to be kept in mind that this Court in exercise of its inherent powers under Section 482 Cr.P.C. has a limited jurisdiction and is not empowered to look into any paper or documents which has not been filed along with the complaint nor the possible defence of the accused persons can be taken into consideration. The documents which have been annexed with the present application by the applicants may have a bearing at the time when their defence is taken into account by the trial Court either at the stage of defence or at any previous stage of proceeding but so far as the present application is concerned, they cannot be looked into for quashing the proceeding and only the allegations set forth in the complaint and the papers accompany the same have to be seen and nothing further and if thereafter it is found that taken at their face value they do not make out any offence, only then complaint can be quashed.
16. The question that now arises for consideration is whether the allegations made in the complaint taken at their face value without adding or subtracting anything make out a case of cheating punishable under Section 418 and 420 of the Penal Code. Cheating has been defined under Section 415 I.P.C. which reads as under:
Section 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'.
Explanation :- A dishonest concealment of facts is a deception within the meaning of this Section
17. From the above definition it is clear that to constitute an offence of cheating, the following ingredients are necessary :
(1) that there should be fraudulent or dishonest inducement to a person by deceiving him;
(2) that the person deceived should be induced to deliver any property to any person or to consent that any person should retain property; and
3. that 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 the act or omission should be one which causes or is likely to cause damage or harm to the person induced in body, reputation or property.
18. It may, therefore, be noted that deception is an essential ingredient of the offence of cheating, which must precede the delivery or retention of property or the act or omission referred to above. Such deception may be by words or conduct. As to what would be sufficient to constitute deception will depend in each case upon its own facts. Wilful misrepresentation of a definite fact which an intention to defraud will certainly amount to cheating. A person who tricks another to deliver money by assuring him that the goods to be supplied would be of a specified quality and nature commits the offence of cheating if he from the beginning had dishonest intention not to supply such goods. The term 'dishonestly implies a deliberate intention to cause wilful gain or wilful loss and when such an intention is proved and is coupled with cheating and deliver of property, the offence becomes punishable under Section 420 IPC in which the word fraudulently finds no place.
19. If we examine the allegations set out in the present complaint and the documents filed in support thereof, it would be found that it was the specific case of the complainant that when the present complainant desired to install Gas Fired Boiler in place of old conventional boiler and for that purpose floated an inquiry for installation of Gas Fired Boiler to produce 12,00 kgs of gas per hour on continuing basis consuming approximately 955 Std Cubic Meters of gas per hour, the accused person at some time collectively and at time individually approached the complainant and impressed upon its officials that the accused company was of repute and was efficient in erecting, installing and commissioning of Gas Fired Boilers also and it has considerable experience and further misrepresented and assured the complainant company that the Gas Fired Boiler was no different than the Coal/Oil Fired Boiler and further represented that in anticipation of demand for Gas Fired Boiler on account of laying of H.B.J. Pipeline the accused company had already prepared and got approved the design for Gas Fired Boiler in collaboration with International Companies of Repute, such as M/s Dumphy and M/s Credfeld and further assured that the boiler would be fired with 'Gas Burning Train' which would also be approved by either of the two companies. It was also guaranteed and assured by the accused persons that the boiler would be manufactured and supplied on the basis of the design prepared by international designers and approved by the manufacturers of 'Gas Burning Train' and it was only on these assurances and representation that the complainant had agreed for the supply of the said articles but accused persons with an dishonest intention and with a view to have a wrongful gain to themselves and wrongful loss-to the complaint company supplied the boiler of inferior quality which was not of the specification on for which the contract was given and the 'Gas Burning Train' was also locally made and was not approved by either of the above two referred companies i.e. M/s Dumphy or M/s Credfeld. The design of the Boiler had been locally prepared without approval of any other international organisation and the 'Gas Burning Train' was totally incapable of burning gas and generating heat as required and it was found to be unworkable and ultimately it burst. It was clearly alleged in the complaint that the accused persons played a fraud on the complainant and succeeded in extracting an amount of Rupees 37,60,911/-. If these allegations are taken at their face value, it cannot be said that they will not constitute the offence of cheating. The stand taken by the applicants in this application that the applicant supplied the boiler to the complainant company in accordance with the agreement and that before installation of the boiler in the complainant company, the same was inspected and tested by an ' expert of the complainant company and after their full satisfaction the installation was made, cannot be looked into at this stage and this has to be left for consideration at appropriate stage by appropriate forum. It cannot be said that even if the allegations made in the complaint are accepted as true, they constitute only a civil liability due to breach of contract and not any criminal offence.
20. There is a distinction between mere breach of contract and the offence of cheating though a fine one and where it is alleged that accused has dishonest intention from the very beginning not to supply Gas Fired Boiler and associated equipment/machinery of the quality and standard which have been assured earlier by the accused persons. The breach of contract would assume the character of criminal offence in addition to the civil liability. The distinction between the breach of contract and the offence of cheating depends upon the intention of the accused at the time of the inducement which may also be judged by the subsequent conduct of the accused though the subsequent conduct cannot be the sole criterion. In the case of Mobarik Ali Ahmad v. The State of Bombay AIR 1957 SC 857 : 1957 Cri LJ 1346 it was held by the Apex Court that the question whether the evidence discloses only a breach of civil liability or a criminal offence under Section 420, Penal Code, depends upon whether the complainant in parting with his money acted on the representations of the accused and in belief of the truth thereof and whether those representations when made were in fact false to the knowledge of the accused and whether he had a dishonest intention from the outset. The allegations in the present complaint fully borne out that the complainant parted with the huge money while acting on the representations and assurance of the accused persons in belief of the truth that the accused company had considerable experience in erection, installation and commission of Gas Fired Boiler also and further that the accused persons had prepared designs for the Gas Fired Boiler in collaboration with the reputed companies of international fame and that the 'Gas Burning Train' would be approved by either of the two companies referred' to above, though such representations were wholly false and accused persons had full knowledge of the same and they had dishonest intention from the very beginning to defraud the complainant company.
21. Learned counsel for the applicant placed reliance upon the decision in the case of Hari Prasad Chamaria v. Bishun Kumar Surekha AIR 1974 SC 301 : 1974 Cri LJ 352. The facts of that case were entirely different. The complainant intended to start business and gave in full faith a large amount for the same. The respondents started business in their own name but refused to render account or return the money. It was only on these facts that the Apex Court held : 'Even assuming prima facie all the allegations in the complaint to be true, they merely amount to a breach of contract and could not give rise to criminal prosecution. There was nothing in the complaint to show that the accused persons had dishonest or fraudulent intention at the time the complainant parted with the money nor did the complaint indicate that the accused had induced the complainant to pay them the amount parted with. The complainant also did not allege the accused making any representation to him for parting with the money and mere fact that they did not abide by their commitment as to starting of the business in complainant's name as agreed to would not fasten them with criminal liability'.
22-23. In the present case the Chief Judicial Magistrate, Ghaziabad after examining the complaint the accompanied documents and evidence adduced in support of the complaint came to the conclusion that there were sufficient grounds to proceed against the accused persons under Sections 418 and 420 of the Penal Code.
24. In the case of Vadi Lal Panchal v. Dattaraya Dulaji Ghadigaonkar AIR 1960 SC 1113 : 1960 Cri LJ 1499 it was held by the Apex Court (at page 1116; of AIR) :
The general scheme of the aforesaid sections is quite clear Section 200 says inter alia what a Magistrate taking cognizance of an offence on complaint shall be on receipt of such a complaint.
Section 202 says that the Magistrate may, if he thinks fit, for reasons to be recorded in writing, postpone the issue of process for compelling the attendance of the persons complained against and direct an inquiry for the purpose of ascertaining the truth of falsehood of the complaint, in other words, the scope of an inquiry under the Section is limited to finding out the truth or falsehood of the complaint in order to determine the question of the issue of process. The inquiry is for the purpose of ascertaining the truth or falsehood of the complaint, that is, for ascertaining whether there is evidence in support of the complaint so as to justify the issue of process and commencement of proceeding against the person concerned. The section does not say that a regular trial for adjudging the guilt or otherwise of the person complained against should take place at that stage; for the person complained against can be legally called upon to answer the accusation made against him only when a process has issued and he is put on trial. Section 203, be it noted, consists of two parts : the first part indicates what are the materials which the Magistrate must consider and the second parts says that if after considering those materials there is in his judgment no sufficient ground for proceeding, he may dismiss the complaint. Section 204 says that if in the opinion of the Magistrate there is sufficient ground for proceeding, he shall take steps for the issue of necessary process.
25. In another decision in Chandradeo Singh v. Prakash, Chand Bose alias Chabi Bose AIR 1963 SC 1430 : 1963 Cri LJ 397 it was held by the Apex Court that it is the bounden duty of the Magistrate while making an inquiry to elicit all facts not merely with a view to protect the interest of an absent accused person but also with a view to bring to book a person or persons against whom grave allegations are made. Whether the complaint is frivolous or not has at that stage necessarily to be determined on the basis of the material placed before him by the complainant. Whatever the defence the accused may have can only be inquired into at the trial. An inquiry under Section 202, Cr.P.C. can in no sense be characterised as a trial for the simple reason that in law there can be but one trial for an offence.
26. It was also held that the object of the inquiry as stated in Sub-section (1) of Section 202 Cr.P.C. is to ascertain the truth or falsehood of the complaint but the Magistrate making the inquiry has to do this only with reference to intrinsic quality of the statement made before him at the inquiry which would naturally mean the complaint itself, the statement on oath made by the complainant and the statements made before him by the persons examined at the instance of the complainant.
27. For determining the question whether any process is to be issued or not what the Magistrate has to be satisfied is whether there is sufficient ground for conviction. Whether the evidence is adequate for supporting the conviction can be determined only at the trial and not at the stage of the inquiry.
Similarly in the case of Smt. Nagawwa v. Veeranna Shivalingappa Kongalgi AIR 1976 SC 1947 : 1976 Cri LJ 1533 it was observed as under (at page 1951; of AIR):
The scope of the inquiry under Section 202 is extremely limited only to the ascertainment of the truth or falsehood of the allegations made in the complaint (i) on the materials placed by the complainant before the Court (ii) for the limited purpose of finding out whether a prima facie case for issue of process has been made out and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defence that the accused may have. In fact in proceedings under Section 202 the accused has got absolutely no locus standi and is not entitled to be heard on the question whether the process should be issued against him or not.
28. It was also observed in the aforesaid case that once the Magistrate has exercised his discretion in issuing process against an accused, it is not for the High Court or even the Supreme Court to substitute its own discretion for that of the Magistrate or to examine the case on merits with a view to find out whether or not the allegations made in the complaint, if proved would ultimately end in conviction of the accused. These considerations are totally foreign to the scope and ambit of an inquiry under Section 202 which culminates into an order under Section 204. The order of summoning can be quashed or set aside in the following cases :
(1) Where the allegations made in the complaint or the statement of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused:
(2) Where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused.
(3) Where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or no materials which are wholly irrelevant or inadmissible, and
(4) where the complaint suffers from fundamental legal defects such as want of sanction, or absence of a complaint by legally competent authority and the like.
29. The same view was expressed by the Supreme Court in a later decision in Sharda Prasad Sinha v. State of Bihar AIR 1977 SC 1754 : 1977 Cri LJ 1146. In another decision in Municipal Corporation of Delhi v. Ram Kishan Rohtagi AIR 1983 SC 67 : 1983 Cri LJ 159, it was held as under (at page 70; of AIR) :
It is, therefore, manifestly clear that the proceedings against an accused in the initial stages can be quashed only if on the basis of the complaint or the papers accompanying the same no offence is constituted. In other words the test is that taking the allegations and the complaint as they are without adding or subtracting anything, no offence is made out then the High Court will be justified in quashing the proceeding in exercise of the powers under Section 482 of the present code.
30. From the above decisions it, therefore, follows that at the time of issuing process the Magistrate has simply to be satisfied that there are sufficient ground for proceeding against the accused and not whether there was sufficient ground for conviction and where there is prima facie evidence against the person charged of offence even though he might be having a defence, the matter has to be left to be decided by the appropriate forum at the appropriate state and issue of process cannot be withheld or refused. The words 'sufficient grounds' should be construed to mean the satisfaction that a prima facie case is made out against a person accused and not that the evidence and material placed on record would be sufficient for the purpose of conviction. Inquiry envisaged in Sections 202 and 203 Cr.P.C. does not contemplate that a regular trial of adjudging the truth or otherwise of the person complained against should take place at that stage for such a person can be called upon to answer the allegations only when a process has been issued and he is on trial. In the present case the evidence and the documents filed in support of the complaint cannot be said to be untrustworthy or highly improbable and once discretion has been exercised by the learned Magistrate in issuing the process against the applicants in a judicial manner this Court will neither be justified nor competent to quash the said order of summoning the complainant specially where the allegations made in the complaint do make out a case of cheating.
31. Though no argument has been raised by the learned counsel for the applicant before this Court regarding maintainability of the complaint but since the applicant has raised a ground in the application that the contract entered into between the parties contained an arbitration clause in term whereof any dispute between the parties was liable to be referred to an arbitrator at Delhi as such the present complaint was not maintainable before the Court of Chief Judicial Magistrate Ghaziabad, I proceed to decide the said issue also Under the terms of the agreement only the dispute which related to the terms of the contract or any claim of one party against the other arising out of the agreement was to be referred to an arbitrator at Delhi. This clause will not give or vest any jurisdiction to the Courts at Delhi where the facts alleged related to misrepresentation deception fradulent and dishonest inducement. The arbitrator will also be not competent person to decide the issue relating to the commission of criminal offence. The allegations made in the complaint borne out that the cause of action arose at Ghaziabad where the machinery and Gas Fired Boiler were installed and thus the Court at Ghaziabad had the jurisdiction to proceed with the complaint. If after the evidence of the parties is recorded and the Court finds that no part of the cause of action relating to the offence of cheating arose within the territorial jurisdiction of Ghaziabad, the Court may in that event dismiss the complaint but so far as the present stage is concerned, the complaint on the basis of the allegations made therein is cognizable by the Court of Chief Judicial Magistrate, Ghaziabad.
32. From the above discussion this Court finds no merits in this application and declines to quash the criminal proceeding pending against the applicant in the Court of Chief Judicial Magistrate Ghaziabad on the basis of the complaint filed by respondent No. 3 in exercise of its inherent powers under Section 482, Cr.P.C.
33. For the reasons stated above both these applications are dismissed as having no merits and the stay order granted earlier stands vacated.