Judgment:
ORDER
S.S. Dwivedi, J.
1. Applicants have preferred this revision petition under Section 397/401 of the Criminal Procedure Code feeling aggrieved by the impugned order dated 14-8-2006 passed by the Judicial Magistrate, Indore in Criminal Case No. 214/2003 whereby ordered for framing of the charge -under Section 420 and 406 read with Section 34 of the Indian Penal Code against the applicants.
2. Brief facts of the case which are necessary for the disposal of this revision petition are that non-applicant Sanghi Brothers (Indore) Limited, Indore is a registered company dealing with the sale of auto vehicles at Indore. Similarly, present applicants are Directors of the Chetak Construction Limited, a registered company having its Head Office at Chetak Chamber, R. N. T. Mark, Indore and applicant /accused No. 3 is the Secretary of that company. It is alleged that in the year 1988-89 applicants/ accused approach the complainant company for obtaining lease of Tata dumpers and light commercial vehicles for a specific period on monthly lease rent basis. Applicants /accused assured complainant company that as per the agreement they will pay monthly lease rent without any default and to support their claim, they will also furnish bank guarantee for due performance of the condition of the contract. In view of that proposal, one agreement has been executed in between the parties on 13-5-1988, on 14-11-1988 and on 25-3-1989 for delivery of the 25 dumpers, 10 dumpers, 20 dumpers and 4 light commercial vehicles and from the complainant, accused persons took the delivery of the aforesaid vehicles and also agreed for payment of the monthly lease rent for 36 months. For the due performance of agreement, necessary documents were executed by the applicants/accused persons in favour of the complainant. After some time, complainant came to know that accused No. 4 was unable to pay him lease rent according to the agreement, then complainant party called accused No. 1 & 2 to execute personal guarantee bonds in favour of the complainant and after some persuasion, so called personal guarantee bonds were executed by the applicant /accused No. 1 and 2 in favour of the complainant for due performance of the agreement on 6-12-1991. They also gave collateral security in favour of the complainant of the property belonging to the M/s. Choudhary Builders Private Limited and also produced board resolution dated 6-2-1990 to the complainant. Complainant unable to get any rent in time from the accused persons and also found that applicants/accused in violation of the condition of the agreement have illegally sold eight vehicles to other parties with ulterior motive, thus, committed criminal breach of trust also and also cheated the complainant. On the allegations, complainant through its Manager has filed this complaint under Sections 420 and 406 of the Indian Penal Code against the applicants/ accused. Before the trial Court, learned trial Magistrate after taking the cognizance against the applicants recorded before charge evidence and on consideration of the before charge evidence by impugned order dated 14-8-2006 ordered for framing of the charge under Sections 420 and 406 of the Indian Penal Code against the applicants /accused. Feeling aggrieved by which, the applicants have preferred this revision petition under Section 397 of the Criminal Procedure Code.
3. I have heard the learned senior counsel for the applicants Shri A.S. Garg and learned Counsel appearing on behalf of complainant Shri Vinay Saraf and perused the documents produced by the parties.
4. It is submitted by the learned Counsel for the applicant that admittedly in between both the parties an agreement has been executed for supply of vehicles on the part of complainant and payment of rent on the part of the accused persons. In compliance of that agreement, applicants/accused have paid the necessary rent timely to the complainant. Whatever vehicles they have sold that had been sold with the consent of the complainant and for that sale proceed has been deposited in the account of the complainant, which they have admitted receipt and thus, on the basis of these facts, if any, breach has been committed by the accused persons, then it will not be a cause for criminal action against the applicants. Only civil liability can be fasten against them and complainant has also approached arbitrator for non-compliance of the conditions of the agreement concerned and arbitrator has also passed an award in favour of the complaint against the applicants for payment of due amount of near about Rs. 85,00,000/- therefore, learned trial Court has overlooked the aforesaid facts and the circumstances of the case that this case has been filed only to pressurize the accused persons for payment of remaining amount or sale proceed of the so-called rent. No prima facie charge under Sections 420 or 406 the Indian Penal Code is made out against the applicants and learned trial Court has wrongly ordered for framing of the aforesaid charges against the applicants, therefore, learned senior counsel for the applicants prayed for setting aside of the impugned order and for discharge of the applicants.
5. In reply, learned Counsel for the complainant/ non-applicant supported the impugned order and submits that it is proved by the complainant by appropriate evidence that accused persons have committed criminal breach of trust by selling vehicles without prior consent of the complainant, which were entrusted to them for use on rental basis only. Similarly, it is also proved by the complainant that the accused persons have also not paid rent as per the condition of the agreement and by this act they have willfully cheated the complainant, also submitted forged security of the property which were already mortgaged with the bank concerned and willfully concealed the aforesaid facts that whatever properly they have sub-milled for security is already mortgaged with the bank. Thus, they have also committed offence of cheating punishable under Section 420 IPC and thus, the aforesaid charges are prima facie made out. against the applicants and learned trial Court has rightly ordered for framing of the charges against the applicants, therefore, no substantial or legal grounds are available for any interference in the impugned order passed by the trial Court, therefore, learned Counsel for the non-applicant complainant prayed for dismissal of the revision petition.
6. On perusal of the entire documentary evidence on record, it is apparent that admittedly one agreement has been executed in between the parties for supply of the vehicles dumpers and light commercial vehicles by the complainant to the accused persons for which necessary lease rent has been fixed which the applicants/accused ought to be deposited regularly to the complainant. The execution of the aforesaid agreements is not at all in dispute in between the parties.
7. On behalf of the complainant Manager Narayan Sumrani (PW-1) has been examined on behalf of the complainant, who clearly stated that the aforesaid agreement has been executed in between the complainant and the accused persons and on the basis of that agreement, first of all 25 dumpers having value of Rs. 80,00,000/- have been delivered on lease as per the agreement Ex. P/7. Similarly, by second agreement Ex. P/9 dated 14-11-1988 10 14-11-1988 10 dumpers and 4 LCV having value of Rs. 44,26,000/- have been delivered to the accused persons. Similarly, by agreement Ex. P/11 dated 25-3-1989 10 dumpers having been delivered to accused persons having value of Rs. 38,50,000/- and on the same day by agreement Ex. P/13 10 more dumpers having value of Rs. 38,50,000/- have been delivered to the accused. Total 55 dumpers and 4 light commercial vehicles were delivered to the accused persons. It is alleged that up to 25-3-1989 accused persons have regularly deposited the lease rent to the complainant party, but after 25-3-1989 accused persons have stopped their payment of the aforesaid lease rent to the complainant. Four agreements were executed in between the parties. At the time of filing of this complaint, 13 vehicles were in possession of the accused persons, which they have not returned as per the condition of the agreement; out of which 6 vehicles they have sold to other parties and not deposited the sale price to the complainant and thus committed criminal breach of trust.
8. On the basis of this statement, learned senior counsel appearing for the applicants/accused submits that actually agreement which has been executed in between the parties are the agreement of hire purchase agreement and not one as lease agreement. Sale proceed will not be given into the account of the complainant /seller so that he will get the benefit of depreciation also and to save other taxes such type of agreement has been executed in between the parties which actually intent outright sale of the vehicles on hire purchase basis. Thus, the intention of the parties is of outright sale on hire purchase basis and not an agreement for lease only. In view of that, no offence of any commission of criminal breach of trust has been prima facie proved against the applicants /accused. For this proposition, learned senior counsel for the applicants relied on the decision of the Apex Court reported in Asea Brown Boveri Limited v. Industrial Finance Corporation of India and Ors. : AIR2005SC17 wherein the Hon'ble apex Court while dealing with hire purchase agreement held as under:
17. In our opinion, financial lease is a transaction current in the commercial world, the primary purpose whereof is the financing of the purchase by the financier. The purchase of assets or equipments or machinery is by the borrower. For all practical purposes, the borrower becomes the owner of the property Inasmuch as it is the borrower who chooses the property to be purchased, takes delivery, enjoys the use and occupation of the property, bears the wear and tear, maintains and operates the machinery/ equipments, undertakes indemnity and agrees to bear the risk of loss or damage, if any. He is the one who gets the property insured. He remains liable for payment of taxes and other charges and indemnity. He cannot recover from the lessor, any of the above mentioned expenses. The period of lease extends over and covers the entire life of the property for which it may remain useful divided either into one term or divided Into two terms with clause for renewal In either case the lease is non cancellable.
18. All the abovesaid features are available in the transaction entered into by the appellant, In addition, we find that the registration of the 56 cars stood in the name of the appellant from the very beginning and on payment of full amount including termination fee, as agreed upon, nothing more was needed to be done to vest the appellant with ownership and only loan documents were needed to be discharged and cancelled. 19. There are certain tax benefits which by styling the transaction like a financial lease become available to the lessor (financier) and the lessee (borrower) both. Accounting standards have been devised consistently with which the entries are made in the accounts so as to satisfy the requirements of tax laws and to avail the best benefits by way of tax planning to both the parties.
9. Thus, Hon'ble Apex Court interpreted the lease agreement as hire purchase agreement, which are usually executed in between the parties for some legal tax benefit. In the present case also, it is apparent that by execution of the lease agreement, the intention of the complainant behind it is for sale of the vehicles on hire purchase scheme basis, but agreement has been termed as lease agreement of the vehicles so that maximum tax benefit could be availed by the complainant by executing the aforesaid lease agreement. In view of the aforesaid and on perusal of the agreement executed in between the parties, in the present case also, the arguments advanced by the learned senior counsel for the applicants appears to be fully supported by the aforesaid law laid down by the Hon'ble apex Court and in the present case also, it is apparent that vehicles have been sold to the applicants/accused by the complainant on hire purchase agreement only and not delivered the vehicles as per the lease agreement basis.
10. This fact has also found support with the admission that the accused /applicants have sold certain vehicles which they have received in compliance of the agreement concerned and for which the amount has been deposited to the complainant without any objection at the time of receipt of the aforesaid sale proceed of the vehicles concerned and not objected that how the accused persons have sold these vehicles to the third party. Sale proceed of Rs. 1,08,00,000/- have already been deposited by the accused persons to the complainant which they received without any objection for so called sale of the vehicles,
11. Similarly, witness Narayan Sumrarti (PW-1) also admitted in paragraph 37 of his statement that out of bank guarantee submitted by the accused persons, complain-ant has also received Rs. 45,87,000/- also in view of that also, criminal intention of the applicants for commission of offence of cheating to the complainant is also not made out, which is the necessary ingredient for framing of the charge under Section 420 IPC. Complainant ought to prove the fact that from the initial stage of execution of the contract, accused persons were having criminal intention for cheating to the complainant party.
12. As discussed herein above, for the offence punishable under Section 420 IPC, complainant ought to prove dishonest intention of the executor of the agreement from the initial stage, then only charge under Section 420 IPC can be found proved. For this proposition, I rely on the decision of the Apex Court reported in The State of Kerala v. A. Pareed Pillal and Anr. : 1972CriLJ1243 wherein Hon'ble apex Court held as under : (Para 16)
It is not sufficient to fasten a criminal liability on them. To hold a person guilty of the offence of cheating, it has to be shown that his intention was dishonest at the time of making the promise. Such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfill the promise.
13. The same view has again been reiterated in Hari Prasad Chamaria v. Bishun Kumar Surekha and Ors. : 1974CriLJ352 wherein Apex Court held as under : (Para 4)
There is nothing in the complaint to show that the respondents had dishonest or fraudulent intention at the time of the appellant parted with Rs. 35,000/-. There is also nothing to indicate that the respondents Induced the appellant to pay them Rs. 35,000/- by deceiving him. It is further not the case of the appellant that a representation was made by the respondents to him at or before the time he paid the money to them and that at the time the representation was made, the respondents knew the same to be false. The fact that the respondents subsequently did not abide by their commitment that they would show-the appellant to be the proprietor of Drang Transport Corporation and would also render accounts to him in the month of December might create civil liability for them, but this fact would not be sufficient to fasten criminal liability on the respondents for the offence of cheating.
14. The same view again been reiterated by the Apex Court in S.N. Palanitkar and Ors. v. State of Bihar and Anr. : 2001CriLJ4765 where Hon'ble Apex Court held as under:
10. The ingredients of an 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 of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind reputation or property. One of us (D.P. Mohapatra, J.) speaking for the Bench, in Haridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Anr. 2000(4) SCC 168 : 2000 Cri LJ 2983, on facts of that case, has expressed : (Para 16 of Cri LJ)
11. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. 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.
15. In view of he aforesaid law laid down by the Hon'ble Apex Court, it is apparent that in the present case from the initial stage of the execution of the agreement, the applicants were not having any criminal intention of cheating to the complainant. They have also paid substantial amount in compliance of the agreement. Due to financial crises, they have failed to deposit the remaining amount of the agreement to the complainant, in that case, no criminal liability can be fasten against the applicants /accused and they cannot be held liable for the offence punishable under Section 420 IPC and civil claim can be filed against them as in the present case also complainant has filed arbitration proceeding against the applicants for recovery of the remaining amount due on the accused persons. Hon'ble Apex Court again in Nageshwar Prasad Singh alias Sinha v. Narayan Singh and Anr. : 1999CriLJ598 held 'In a situation where a party to the agreement could not perform his part of the contract, then action can lie only before Civil Court and not before Criminal Court.'
16. Learned Counsel for the non-applicant in support of the arguments advanced by him that due to criminal breach of trust as well as the offence of cheating criminal action can lie against the defaulter and such type of criminal complaint cannot be quashed by the High Court under the powers conferred under Section 482 of the Criminal Procedure Code and for this proposition, learned Counsel for the non-applicant/complainant relied on the decisions of the Apex Court reported in Lalmuni Devi (Smt.) v. State of Bihar 2001(1) M.P. Weekly Notes 167 : 2001 AIR SCW 2504 Kamaladevi Agarwal v. State of W.B. and Ors. : 2001CriLJ4733 and Medchl Chemicals and Pharma Pvt. Ltd. v. Biological E. Ltd. and Ors. AIR 2000 Supreme Court 1869 : 2000 Cri LJ 1487. In these cases Hon'ble Apex Court held that 'prima facie if the offence of heating /fraud is made out on the basis of the allegation made in the complainant then in such cases, complaint cannot be quashed under the provisions of Section 482 of the Criminal Procedure Code only on the basis that civil remedy is also available to the complainant. '
17. All these cases are distinguishable with the facts of the present case. In the present case applicants are not praying quashment of the proceedings under the provisions of Section 482 of the Criminal Procedure Code. The applicants/accused came up before this Court against the order of framing of the charge and on the basis of the prima facie evidence recorded before charge and is trying assail the finding of the trial Court and submits that no charge under Sections 420 and 406 IPC is clearly made out against the applications on the basis of evidence on record and it is also not so unimpeachable that if it is not rebutted then a conviction can be based on it.
18. As discussed herein above in detailed, it is apparent that the applicants/accused have no criminal intention at the initial stage of agreement to deceive the complainant. They have deposited the considerable amount as per the agreement to the complaint. Complainant has also recovered the sufficient amount from the bank guarantee submitted by the applicants. Similarly, complainant has also taken step for recovery of the dues as per the arbitration proceeding. Arbitrator has also passed an award for payment of Rs. 85,00,000/- in favour of the complainant against the applicants /accused. In such a situation, criminal proceedings which has been lodged against the applicants and on the basis of the evidence on record, charge under Sections 420 and 406 IPC is not clearly made out as held by the various decisions of the Apex Court as referred herein above.
19. In view of the aforesaid facts and the law discussed herein above, in my considered opinion, framing of the charge under Sections 420 and 406 IPC is not made out against the applicants/accused persons.
20. Resultantly, this revision petition is allowed. The impugned order passed by the trial Court for framing of the charge under Sections 420 and 406 IPC is set aside and applicants are discharged from the aforesaid charges.