Raj Tilak Jain vs State of U.P.and Others

B.K. Shanna, J.—These are two connected criminal revisions preferred by the sales officers of Star Paper Mills Ltd. Saharanpur.

The facts leading to these revisions are that Raj Tilak Jain, Sales Officer, Star Paper Mills Ltd., Saharanpur filed a Criminal Case No. 4416 of 1989, before the Chief Judicial Magistrate, Saharanpur against (1) Vijay Kumar Sarawgi son of Satya Narain Sarawgi, Partner of M/s. Kagaz Kendra Bombay, (2) Smt. Kanta Devi Sarawgi, wife of Sri Satya Narain Sarawgi partner of M/s. Kagaz Kendra, Bombay, (3) M/s. Kagaz Kendra, Bombay, (4) M/s. Vijai Kumar Satya Narain, Bombay and (5) M/s. Deepak Transport Agency Associates, under Sections 407, 420 and 120B IPC mentioning therein that M/s. Star Paper Mills Ltd. are manufacturers of various varieties of Kraft, writing and printing papers that goods are supplied by the company to the buyer against the terms of payment through DP and DA documents, that in case of DA documents the Hundi, Bill and consignee copy of the goods receipt for the goods despatched are sent through bankers for presentation to the buyer for acceptance and payment on due dates mentioned on each Hundi, that in the event of despatch through railways, sometimes the railway receipts are delivered directly to the buyers against assurance of buyer of payment of Hundi on due date in bank to avoid demurrage at destination on account of delay in presentation of RR through bank, that thus in case of DA documents the buyer, in lieu of cash payment, accepts and signs the hundies with assurance of their payment on due dates in the bank and on this assurance obtains the valuable documents including consignee copy of the goods receipt or railway receipt and collects goods from carrier, that they are required to deposit its value in the bank on due dates, that the hundi documents so accepted and signed by the buyers against the receipt of the goods are ''Negotiable Instruments'' and are considered a valid order of payment by the bankers, that this is an accepted mode of business recognised by the bankers for, extending various credit facilities that the goods are supplied against terms of payment through DA documents only where the financial position of the buyer is considered sound, that in the first week of August, 1986 and Shri Vijay Kumar Sarawgi son of Sri Satya Narain Sarawgi approached the complainant and other sales executive of the Star Paper Mills (hereinafter referred to as the company) at Saharanpur and introduced himself as leading paper merchant of Bombay, that he informed that he was trading in paper in the name of Ms. Kagaz Kendra and M/s. Vijay Kumar Satya Narain both having their business premises at 73, Bajaj Bhawan Nariman Point, Bombay that he represented himself as partner of these firms that the name of other partners were not disclosed by him except that of Smt. Kanta Devi Sarawgi wife of Sri Satya Narain Sarawgi as partner of M/s. Kagaz Kendra, resident of the same place, that Sri Vijay Kumar Sarawgi represented that they shall be purchasing their main requirement in M/s. Kagaz Kendra and he said firm was having sound financial status and was enjoying good banking facilities and thus they were capable of paying the hundi documents sent by the Star Paper Mills through its bankers on specified dates that they informed the names of their bankers as M/s. Central Bank of India, Bombay, Main Branch Bombay and M/s. Allahabad Bank, Bombay Samachar Marg, Bombay and represented that they had good limits in the said banks that the complainant and other officers of the company felt impressed by his representations and accordingly to supply goods to the said firms on the terms of payment through DA documents payable on specified dates and in pursuance thereof sent six consignments for M/s. Kagaz Kendra (details of the six consignments disclosed in para 6 of the complaint); that out of the above six consignments 5 consignments were dispatched from Saharanpur to Bombay through Railways; that Sri Vijay Kumar Sarawgi of M/s. Kagaz Kendra obtained the railway receipt of the 5 consignments on assurance of the acceptance and payment of Hundi documents in the bank on due dates specified on each Hundi when presented through bank that the said railway receipts were received by them alongwith the copy of the letter to the bankers whereby Hundis and bills of the respective consignments were sent through Bank of Baroda, Saharanpur for payment of M/s. Kagaz Kendra on due dates, that Sri Vijay Kumar Sarawgi accepted and signed the Hundi documents in the bank and received goods by using the railway receipts pertaining to the said hundies but did not pay Hundi documents in the bank as assured when presented and the same were returned by the bank unpaid that similarly the 6th consignment pertaining to Hundi No. CB123 was sent from Saharanpur to Vapi through Truck No. URF3145 and the documents of the same were sent through bank that Sri Vijay Kumar Sarawgi of M/s. Kagaz Kendra accepted the said Hundi for Rs. 1,49,465 and collected the goods receipt of the consignment from the bank with assurance of its payment on due date specified on it but did not deposit the value of the said Hundi as assured after collecting the goods from the transport company and all the hundies were returned by the bank as unpaid, that thus they succeeded in fraudulently obtaining the goods of the said 6 consignments worth Rs. 3,62,354 by accepting the Hundi documents in the bank without any intention to pay the same on due dates as assured by them that the said hundies were signed only to induce the complainant and other concerned officers of the company and to fraudulently obtain the goods from the company and they had no intention to pay the same right from the beginning that further the company despatched goods worth Rs. 3,61,337 vide 6 consignments through DA documents from Saharanpur to Bombay and Vasi through M/s. Deepak Transport Agency, Saharanpur, (details of the consignments are given in para 8 of the complaint), that the aforesaid company also despatched one consignment through M/s. Deepak Transport Agency, Saharanpur to the other firm of Sri Vijay Kumar Sarawgi, namely M/s. Vijay Kumar Satya Narain, that the Hundi bill and consignee copy of the goods receipts of the above 7 consignments were sent through bank of Baroda, Saharanpur to M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain respectively for acceptance and payment that the said consignments were entrusted to M/s. Deepak Transport Agency as ''Self consignments and the company Star Papers Mills Ltd. as the consignor as well as consignee in respect of the said consignments and M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain were required to retire the said documents from the bank against acceptance of hundi documents and pay the same to the bank on due dates mentioned on the hundi that M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain were entitled to receive the said consignments from the transport company only on the production of consignee copy of the goods receipt to be obtained by them from the bank against acceptance of hundies that M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain, however did not accept the hundies and as required did not collect the goods receipts of the said consignments from the bank for taking delivery of goods and fraudulently obtained the goods of the said consignments from the staff of the said transport company at Bombay and Vasai without producing the consignee copies of the goods receipts out of the way knowing fully well that they had no right whatsoever to receive the said goods without accepting the hundies for payment on due date in the bank and producing consignee copies of goods receipts duly endorsed in their favour by the bank that the said transport company was required to deliver the said consignments only to the consignor or to their nominee on production of consignee copies of the goods receipts duly endorsed by the bank but as it has come to the complainants knowledge from the transport company that they had delivered the said consignments to the said M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain without obtaining the consignee copy of the goods receipts that this act of the transport company amounted to criminal breach of trust in respect of the property worth Rs. 4,68,097 entrusted to them as carrier for which they were strictly accountable to the company that the consignments being ''self were to be delivered to the company or to their nominee against production or consignee copies of the goods receipts duly endorsed by bank that thus in collusion and conspiracy with the staff of the said transport company M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain and its partners further succeeded in obtaining fraudulently and dishonestly the goods worth Rs. 4,68,097 pertaining to the said 7 consignments without accepting and retiring the documents from the bank as assured by the said Sri Vijay Kumar Saraogi and made no payment towards them that similarly the company from their mills delivered goods worth Rs. 2,23,105 vide 4 consignments against acceptance of hundies documents by the said Sri Vijay Kumar Sarogi on behalf of M/s. Kagaz Kendra as partner on his specific assurance for payment on due dates (the details of the consignments are available in para 10 of the complainant), that Sri Vijay Kumar Saraogi, however instructed that the said hundies may not be presented to the bank for payment on due dates as they shall be making the payment of the said hundies directly that however despite repeated assurance neither the dishonoured hundies returned by the bank were paid nor the said four hundies duly accepted and singed by him for M/s. Kagaz Kendra against receipt of the goods were paid by them and the company was further deprived of goods worth Rs. 2,23,105 by them by accepting the hundi documents which they never intended to pay and they merely signed the same to wrongfully induce the company to part with the goods which the company would not have delivered had the company back knowing that they would not pay the hundies as assured by the said Sri Vijay Kumar Sarawgi, that the they have defrauded the company to the tune of Rs. 10,53,547 the value of the above mentioned 17 consignments and have caused wrongful loss to the company and gain to themselves, that after the return of the documents the company was given further false assurances by the said Sri Vijay Kumar Sarawgi that the payments of the same were being arranged but it was later on revealed that he was only gaining time and in the meanwhile they have disposed off the major assets of the said business as well as the place of business and have shifted to premises II, Horniman Circle Botawala Building, Bombay that they have by various modus operandi taken out the proceeds of the goods from the said firms to defraud in a well planned manner in collusion and conspiracy with the partners of the said firms and cheated the company to the extent of Rs. 10,53,547.

It was claimed in the complaint that the matter was reported to the police of police station Sadar Bazar but no action was taken. It was prayed that the police be directed to register and investigate the case and that the accused be tried and redress by given. On this complaint, the CIM Saharanpur acting under Section 156 (3) vide its order dated 23111987 directed the SHO Sadar Bazar to register a case under the appropriate section of law and to investigate. The case was accordingly registered under Sections 407, 420 and 120B IPC and investigation was made. After investigating the case the police submitted a final report dated 15111988 on which notice was sent to the present revisionist/complainant by CJM. He filed protest petition on 16 1 1979 in which inter alia it was pleaded that the seven consignment detailed in para 8 of the compliant (which became the FIR on the registration of the case in pursuance of the direction of Section 156 (3) of the Crl. Procedure Code) were sent by the company to the nominees of Vijay Kumar Saraogi, the present Opp. Party No. 2 in revision No. 50 of 1990. It was alleged that the understanding arrived at between the complainant and Shri Vijay Kumar Saraogi was that Shri Saraogi will get the documents released from bank after executing hundies and after making an endorsement on the GR in favour of the above mentioned parties, the goods shall be released by the Transport Company in favour of those parties i.e. nominees of the accused V.K. Saraogi after collecting AG Rs, that Shri Vijay Kumar Saraogi instead of getting the accidents released and without executing the hundies got the consignments released in league with the above mentioned nominees from M/s. Deepak Transport Agency (Opp. Party No. 6 in present Revision No. 50 of 1990) that the IO found that the nominee had made payments to him Le to Vijay Kumar Saraogi. It was claimed that Vijay Kumar Saraogi was acting as agent of the complainant company and so he was legally bound to pay it to the complainant company but he did not pay the amount received from his said nominees to the company and instead misappropriated the same to his own use and committed misappropriation and breach of trust. The names of these nominees have been specified in para 9 of the protest petition that the interest clause in the Hundi was introduced in order to meet any eventuality that may arise due to unavoidable circumstances and in case the accused persons are not able to arrange for the payment of Hundies within 45 days of the day of execution and that they need a week or two more to arrange for the payment that in that case only the interest clause was to be put into operation that in any case the main purposes for cxeuction of Hundies was to clear the payment of the goods within 45 days and at no time it was intended that the accused persons shall be permitted to sit over the payment for an indefinite period that it was only due to this reason that the goods were sent through Bank and the goods were to be released only after the execution of Hundies and clearance of documents from the Bank and then the goods were supposed to be released from the railways or the Transport Company depending upon case to case whether the fraudulent intention on the part of the accused was proved or not, was to be decided by the Court that it was wrong to say that offence under Section 407 IPC is also not proved against Deepak Transport on the ground that merely because goods were released without obtaining clearance documents no wrongful loss and no wrongful gain has been caused to any one that because Shri Vijay Kumar Saraogi has admitted the acceptance of goods the question of wrongful loss to the complainant Comany and wrongful gain to Shri Vijay Kumar Saraogi did not arise that it is only because of the act of Deepak Transport Agency that wrongful loss has been caused to the complainant company because Shri Vijay Kumar Saraogi got the goods released through his nominees without his executing Hundies which is negotiable instrument as defined under the Negotiable Instruments Act that the investigating officer took into consideration the defence of Shri Vijay Kumar Saraogi when he told the investigating officer that he has not received any intimation from the Bank regarding receipt of documents concerning 7 consignments as mentioned in the para 8 of the complaint that the investigating officer wrongly discarded the official version of the bank officers when they told him that they had sent the information to Shri Vijay Kumar Saraogi regarding the receipt of Hundies and other documents concerning the said 7 consignments as mentioned in para 8 of the complaint that clear case of cheating and criminal breach of trust is also made out against accused No. 5 Deepak Transport Agency as it fraudulently and dishonestly handed over the goods the accused Shri Vijay Kumar Saraogi directly against the procedure and instructions of the complainant company that Transport Company will not hand over the goods to the accused without the clearance from the bank and thus the accused escaped from their legal guarantee of paying the price of the goods within 45 days that as Deepak Transport Company (accused No. 5) handed over the goods to the accused directly against and in violation of the directions of the complainant company that the goods will be handed over only after the clearance from the Bank it the accused Transport company committed an offence of Criminal breach of trust as defined under Section 405 of IPC which is punishable under Section 406 IPC. After that the learned Magistrate by passing the order dated 411989 accepted the final report in respect of the accused No. 5 Deepak Transport Agency but rejected the same to the extent of accused Nos. 1 to 4 in the compliant namely Vijay Kumar Saraogi partner of M/s. Kagaz Kendra Bombay, Smt.Kanta Devi Saraogi, wife of Sri Satya Narain Saraogi, partner of M/s. Kagaz Kendra, M/s. Kagaz Kendra Bombay and M/s. Vijay Kumar Satya Narain Bombay and directs their summoning for the offences under Sections 403, 409 and 420 IPC. He took note of the fact that the persons to whom the goods of the six consignments of August, 1986 were sent had made payment to M/s. Kagaz Kendra but these accused persons did not pay the amount to the complainant that about the more consignments sent in August and September, 1986 also its price had been realised by M/s. Kagaz Kendra accused but it also was not paid to the complainant that in the same manner the four accused had received the payment of the 4 consignments sent in August and September, 1986 and this amount also was not paid by them to the complainant company and that they had misappropriated the same to their own use. He was of the view that these 4 accused have prima facie committed the offence under Section 403 IPC as these four accused had realised the price of the goods and misappropriat the same. He also tooknote of the fact that these accused persons used to send orders for supply of goods to different persons and the company used to send goods to those persons and the price of those goods used to be paid to these accused that so these four accused were acting as agents of the company aforesaid that consequently these amounts got entrusted to these accused and they were under obligation to deliver these amounts to the company but did not deliver it to the company and instead misappropriated the same and therefore the offence under Section 409 IPC was made out. He rejected the view of the investigating officer that it is a civil matter.

Regarding the transport company, he took the view that it is a carrier and carried the goods to the destination and received transport charges and that the consignees received the goods and that consequently no prima facie offence is made out against this transport agency.

The accused Opp. No. 2 Vijay Saraogi alone preferred Crl. Revision No. 524 of 1989 against the said order dated 4101989 of the CJM before the Sessions Judge. The learned Sessions Judge after hearing the Counsel for Vijay Kumar Saraogi, the complainant and the learned State Counsel allowed the revision and accepted the final report in regard to all the four forever accused Opp. parties by his order dated 411990. The learned Sessions Judge took the view that there was no Criminal intent in the beginning and that it was merely a case of breach of contract and cannot give rise to prosecution under Section 420 IPC regarding the complainant company''s plea that these accused realised the price from their nominees but did not make payment of these consignment to the company, the learned Sessions Judge observed that no such case was taken in the complaint. He observed that it was in the protest petition that the plea was taken. He also took the view that the nonpayment of the price realised to the company did not constitute an offence under Section 420 IPC. He rejected the view taken by the CJM that the goods were entrusted to these 4 accused as agent and held that it was a new case which was neither the complainant nor in the evidence nor even in the protest petition. He further took the view that it was not a case of entrustment to the accused in any manner much less an agent that thus no prima facie case under Section 409 IPC was made out. Regarding the offence under Section 420 IPC he took the view that the ingredients of the offence of cheating were also not satisfied. He observed that there was a distinction between breach of contract and cheating and that it depends upon the intention of the accused at the time of the inducement which may be judged by his subsequent conduct but for which the subsequent conduct is not the sole test, that 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, that from his mere failure to keep up the promise subsequently such a culpable intention right at the beginning Le. when he made the promise cannot be presumed that where there was no evidence to show that the accused had dishonest intention right from the beginning not to pay for the goods ordered on credit no offence of cheating can be made out. He further observed that it was to be seen whether there was deception on the part of the accused at the time of making promise or it was a mere failure to honour the promise and in the case of mere failure it will not by itself constitute the offence of cheating. He referring to the allegation in the complaint that goods are supplied against the terms of payment of DA documents only where the financial position of the buyer is considered sound. He also quoted from the statement of the president director of the company (Star Paper Mills) to show that he considered Vijay Kumar Sarawgi accused No. 1 in the complaint to be a creditable business man that the sale of goods to the accused Nos. 1 to 4 was on interest free credit through DA documents in pursuance of a policy laid down by the directors of the company and that it was not as a result of any inducement or fraudulent representation to the company by the accused, that the term of payment of interest in case of non payment within the stipulated period in hundies showed that there was no dishonest or fraudulent intention.

Being aggrieved by this order of the Sessions Judge in Revision No. 524 of 1989 Raj Tilak Jain has preferred this revision No. 50 of 1990 on behalf of the company. He has also filed revision No. 86 of 14)0 against the order dated 4101989 of the CJM. In so far as it accepted the final report as regards the fifth accused in the complaint namely M/s. Deepak Transport Company.

Parties Counsel in both revisions have been heared together and it is proposed to dispose of these revision by this common judgment.

We have noted earlier that in this case initially a complaint was filed by the Sales Officer of the Star Paper Mills Saharanpur before the Magistrate and that the Magistrate acting under Section 156 (3) CrPC had directed the SHO to register a case under the appropriate section of law and to investigate and that thereupon the case was registered under Sections 481, 420 and 120 B IPC and investigation has followed resulting in the submission of a final report on which a protest petition was filed by the complainantpresent revisionist and thereupon the learned Magistrate had rejected the final report in respect of accused Nos. 1 to 4 (Opp. Parties Nos. 2 to 5 in the Crl. Revision No. 50 of 1990) in the complaint and had directed their summoning for the offences under Sections 403, 409 and 420 IPC while he had accepted the final report in reference to accused No. 5 Deepak Transport Company (Opp. Party No. 6 in Criminal Revision No. 50 of 1990 and Opp. Party in Criminal Revision No. 86 of 1990) and the present Opp. Party No. 2 VK. Saraogi challenged their summoning by preferring Criminal Revision No. 524 of 1989 which was allowed by the learned Sessions Judge and consequently the revisionistcomplainant had challenged this order byway of Criminal Revision No. 50 of 1990 and'' against the order of the CJM in so far as it discharged M/s. Deepak Transport Agency, he preferred Criminal Revision No. 86 of 1990.

Now in the case of Abhinandan Ojha and others v. Dinesh Mishra, AIR 1968 SC117, it was held in para 15 dealing with the report submitted by the police under Section 173 CrPC that no case is made out for sending up an accused for trial (a final report) that if the Magistrate feels after considering the final report that the investigation is unsatisfactory incomplete or that there is scope for further investigation it will be open to the Magistrate to decline to accept the final report and direct the police to make further investigation under Section 156 (3) that the police after such investigation again submit a final report that if ultimately the Magistrate forms the opinion that the facts set out in the final report constitute an offence he can take cognizance of the offence under Section 190 (l)(b), notwithstanding the contrary opinion of the police expressed in the final report. Thereafter it was observed in this authority in para 17 �it is open to the Magistrate to take cognizance of the offence under Section 190 (l)(c) on the ground that after having due regard to the final report and the police records placed before him he has reason to suspect that an offence has been committed.� This aspect again came up for consideration before the apex Court in the case of H.S. Bains v. The State (Union Territory of Chandigarh), AIR 1980 SC 1883, that was a case precisely of the present nature where the Magistrate on receipt of a complaint ordered the investigation under Section 156 (3) and received a police report under Section 173(1), Cr.P.C. In that case it was observed in para 6 that thus, a Magistrate who on receipt of a complaint, orders an investigation under Section 156 (3) and receives a police report under Section 173(1), may thereafter do one of three things : (1) may decide that there is no sufficient ground for proceeding further and drop action ;

(2) he may take cognizance of the offence under Section 190(l)(b)on the basis of the police report and issue process ; this he may do without being bound in any manner by the conclusion arrived at by the police in their report ; (3) he may take cognizance of the offence under Section 190 (l)(a) on the basis of the original compliant and proceed to examine upon oath the complainant and his witnesses under Section 200. If he adopts the third alternative, he may hold or direct an inquiry under Section 202 if he thinks fit. Thereafter he may dismiss the complaint of issue process as the case may be.

Regarding decision of Abhinandan Jha''s case it was observed by the apex Court in Bain''s case in para 7 while expressing the opinion that the Magistrate could take cognizance of the offence notwithstanding the contrary opinion of the police that the Magistrate could take cognizance under Section 190 (l)(c). We do not have any doubt that the reference to Section 190 (l)(c) was a mistake for Section 190 (l)(b). That appears to be obvious to us. So the learned CJM had ample jurisdiction and authority to take cognizance of the offence under Section 190 (l)(b) of Criminal Procedure Code in a case like the present one dispite the final report of the police.

Now at this stage where the question is whether the process should be issued it is to be seen whether that is sufficient ground for proceeding. At the time of taking cognizance the Court is not required to closely scrutinize the material on record. The Court at that stage after application of mind to the statements of the witnesses has to satisfy itself that aprima facie case is made out. Prima facie materials means material that is sufficient to establish a fact or to raise apresumption of truth of facts unless (sic). The Court has merely find out if the materials alleged are sufficient to make out aprima facie case of offence alleged to have been committed by the accused. The provisions of Section 203 CrPC were considered by the apex Court in the case of Debendra Nath Bhattacharyya and others v. The State of W.B. and another, 1972 CrLJ 1037, therein it was observed that what the Magistrate has to determine at the stage of issue of process is not the correctness or the probability or improbability of individual items of evidence on disputable grounds, but the existence or otherwise of a pritna facie case on the assumption that what is stated can be true unless the prosecution allegations are so fantastic that they cannot reasonably be held to be true.� These observations could be profitably used in the present case also. The following observations in the authority Nirmaljit Singh Hoon v. State of West Bengal and others, AIR 1972 SC2639, may be apposite. The words ''sufficient ground'' used in Sections 203 and 209 mean the satisfaction that a prima facie case is made out against the person accused, by the evidence of witnesses entitled to a reasonable degree of credit and do not mean sufficient ground for the purpose of conviction. The test is whether there was sufficient ground for proceeding and not whether there is sufficient ground for conviction and where ihcrev/asprimafacie evidence even though the person charged of an offence in the complaint might have a defence, the matter had to be left to be decided by the appropriate forum at the appropriate stage and issue of a process could not be refused. Unless therefore, the Magistrate finds that the evidence led before is self contradictory, or intrinsically untrustworthy process cannot be refused if that evidence makes out aprimafacie case.�

The scope of interference in revision by the Sessions Judge under Section 397 CrPC in regard to the order of a Magistrate issuing process against the accused is limited. The learned Sessions Judge has himself observed in his judgment in para 32 that in Criminal Revision the evidence can neither be re appraised nor reappreciated but in the name of looking into the evidence i.e. the material on record with the object of finding out whether any prima facie offence is made out, he embarked upon lopsided scrutiny of the circumstances to set up justification for letting off all the four accused. The approach of the learned Sessions Judge was unbalanced and was unsustainable. It has led to miscarriage of justice and this Court has no option than to interfcree.

The learned Sessions Judge appeared to be of the view that where there could be civil liability arising from the facts criminal liability should not be held to arise unless there is unimpeachable evidence at the very out set establishing beyond doubt an intention to defraud and so he observed that to issue process on such a complaint in order that criminal proceedings may be held in terror would be an abuse of process. He dealing with the provisions of Section 200 CrPC which referred to a compliant pure and simple in which the Magistrate examined the complainant and his witnesses. His emphasis was on the dismissal of the complaint. He said that the Magistrate may dismiss the complaint forthwith:

(1) if he finds that no offence has been committed, or

(2) if he distrusts the statement of the complainant and his witnesses examined ; and

(3) if on a consideration of the result of enquiry or investigation, if any, under Section 202 he thinks that there is no ground for proceeding.

He further observed that �if bare perusal of a complaint or the evidence show that essential ingredients of the offence alleged are absent or that the dispute is only of a civil nature or that there are such patent absurdities in evidence that it would be waste of time to proceed further the complaint could properly be dismissed.

In the present case a perusal of the complaint on which a chik FIR was registered by the police showed that it contained enough allegations of fact which constitute criminal offences by the accused persons named therein and it cannot be said for a moment that the essential ingredients of the offences alleged were absent. It cannot also be said that the allegations were such which showed that the dispute was only of civil nature. It cannot be said that there were patent absurdities in the material collected during the investigation or that it was wastage of time to proceed further. The principal offence alleged in this case was under Section 420 IPC. The learned Sessions Judge observed that, �For an offence under this section it must be proved that the complainant parted with his property acting of a representation which was false to the knowledge of the accused and that the accused had a dishonest intention from the outset. He also referred to the offenceof cheating and observed as follows:

�There is distinction between breach of contract and cheating. It is to be conceded that this distinction 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 which the subsequent conduct is not the sole test. 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 main failure to keep up the promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed. Where there was no evidence to show that the accused had dishonest intention right from the beginning not to pay for the goods ordered on credit no offence of cheating could be made out. Deceptions of the essence of the offence of cheating. Mere failure to honour a promisedoes not by itself constitute the offence of cheating. So, in order that the act of the accused may amount to cheating it is to be seen whether there was deception on the part of the accused at the time of making the promise or a mere failure to honour the promise. If it was mere failure to honour the promise, it will not by itself constitute the offence of cheating and resultantly an offence under Section 420IPC.�

The intention of the accused was to be inferred from his subsequent conduct and all the surrounding circumstances. Where there is an averment of fraudulent and dishonest intention and these averments and the constitute factual allegations taken together go to constitute an offence and the material on record discloses sufficient ground to proceed against the accused, the Magistrate cannot decline to issue process. It is only at the trial that the trial Court would come to a categorical finding on the point of fraudulent and dishonest intention. If a different view is taken, then there will not be a single case of prosecution for the offence of a cheating where the facts also amounted to a breach of contract. In a case of a mere breach of civil contract a criminal prosecution may be unwarranted but where there is prima facie material on record disclosing sufficient ground to proceed then the accused must be summoned. At the trial he will have every opportunity to show that he had no fraudulent or dishonest intention. There is a clear averment in the complaint that the accused had no intention to pay for the goods to be supplied right from beginning. The learned Sessions Judge had concluded on a detailed appraisal of the facts and circumstances of the case that there was no such mala fide intention and that in the circumstances of the case the failure to pay the price in no way constituted a prima facie offence under Section 420 IPC. It is not the stage for such detailed appraisal and that too an unbalanced one. An unbalanced appraisal at any stage cannot be sustained.

In this regard he has taken into account several factors. ONE was that in the complaint there was an averment that the goods are supplied against the terms of payment through DA document only where the financial position of the buyers is considered sound. The learned Sessions Judge seems to have taken the view that the financial position of the buyers was actually sound and that they must therefore, he held to be acting like gentleman and that it cannot be believed that a person with sound financial position would cause it an offence under Section 420 IPC. Here I may refer to the distinction between the supply of goods through DP and DA documents stated in the complaint. In case of DP documents the hundi, bill alongwith consignee copy of the goods receipt of the transport company are sent through the bankers of the company to the buyers for retiring in regard payment in the bank and the buyers after depositing the value of the consignment can obtain the documents from the bank duly endorsed in their favour for collection of consignments from the transport that however in case of DA documents the hundi, bill and consignee copy of the goods receipts for the goods despatched are sent through bankers for presentation to the buyer for acceptance and payment on due dates mentioned on each hundi that at the event of despatch through railway sometimes the railways receipt are delivered directly to the buyers against assurance of buyer of payment of Hundi on due date in bank to avoid demurrage at destination on account of delay in presentation of RK through bank that thus in case of DAdocument the buyers in lieu of cash payment accepts and sings the hundies with assurance of their payment at due dates in the bank and on this assurance obtain the valuable documents including consignee copy of the goods receipt or railway receipt and collects goods from carrier and they are required to deposit its value in the bank on due dates that the hundi documents so accepted and signed by the buyers against the receipt of the goods are ''negotiable instruments'' and are considered a valid order of payment by the bankers that this is an accepted mode of business recognised by the bankers for extending various credit facilities that the goods are supplied against terms of payment through DA documents only where the financial position of the buyers is considered sound.

It will be seen that while in the case of DP documents the consignee would first deposit the value of the consignment in the bank and then alone he could obtain goods receipt relating to the consignment without which he cannot get the delivery of the goods from the railways or transport as the case may be while in the case of DA documents he obtains the hundies without making any cash payment but only there is an assurance of payment on the due dates Le. the dates given in the hundi. Thus the buyer gets the grace period for making the payment. Much emphasis has been laid by the learned Sessions Judge on the interest clause in the hundi i.e. clause for payment of interest if the payment was not made within the stipulated period of 45 days. The learned Sessions Judge went wrong in concluding from the mere fact that there was clause in t he hundi for payment of interest in case of delay in payment of price of the consignment to the seller that this would mean that there could be no question of cheating in the presence of such a clause. If this were the view then the accused with escape the charge of cheating in every case where there is a provision in the contract for payment of interest in the case of nonpayment of the amount within the stipulated time. If the intention from the very beginning was to do fraud then the offence of cheating would very well be made out even though there is, clause for payment of interest for the entire period of delay in payment of the amount. Here we cannot lose sight of the fact that in this case substantial amounts were involved. There were 6 consignments detailed in para 6 of the complaints worth Rs. 3,02,345 against the documents that there was 6 further consignment total worth Rs. 4,61,337 and one more consignment worth Rs. 1,06,76 (all detailed in paragraph No. 8 of the complaints), that there were 4 more consignments worth Rs. 2,23,105 detailed in para 10 of the complaint. Thus, the total costs of these consignments on the date of dispatch comes to Rs. 10,53,547.

These consignments related to the year 1986 and the criminal revision was preferred by these accused persons before the learned Sessions Judge on 3111989 Le. full three years after the dispatch of the consignment mentioned in the complaint and in this memo of revision, there is no denial of the contract of the dispatch of the consignments or their costs or the terms thereof and of the breach thereof, nor a word to the effect that payment has been made for has any justification for nonpayment been advanced therein nor was any allegation therein that the accused persons had become insolvent and so were unable to pay for the consignments.

As noted these consignments related to the year 1986 and we are now sitting in theyear 1999so that thequantum of interest would itself by considerable but even at the arguments in revision No. 50 of 190 there was no denial of the contract or the terms thereof or the deposits of the consignments and the other factual allegations except as to intention and there was not a whisper from the side of these accused persons that a single penny has been paid against these consignments up till then. There was also no plea raised from their side by way of justification of nonpayment thereof and even now there was no averments that they had become insolvent and so has failed to make the payment. So there is a continuous course of conduct pointing in only one direct. The court cannot ignore these (sic) facts and still say that it was a case of mere breach of a contracta civil wrong and not a case of cheating and not a case of intent to defraud. The Court cannot legitimately infer thatprima facie it was a case of mere breach of contract and that there was nothing to lead to the inference even prima facie that at the time when the contract was entered into there was not discernible any dishonest intention an intent to defraud. The approach of the learned Sessions Judge is manifestly illegal and perverse which cannot be countenanced by the High Court.

Reference was made by the learned Sessions Judge to the statement of RS Kachoria, President Director to the Star Paper Mills to the investigating officer indicating that the accused VR. Saraogi was well known to him and that he found Saraogi to be a well established businessman having sound financial position. But this is consistent with the prosecution stand that DA facilities were extended only to those whose financial position was considered sound.

The the learned Sessions Judge referred to the siatement of Kachoria to show that when he joined the complainantMills on 4 81988 the financial position of the complainantmills was not at all satisfactory ; that at that time there was huge old stock that in order to clear that old stock and to give a fill of to the financial position of the complainantmills he held discussions with Shri VK. Agarwal Chief Marketing Manager of the complainantmills ; that a policy in this regard was adopted that according to this policy the terms and conditions of sales were as below:

(1) 22/1 % cash discount on payment in 10 days on stock transfer sale and on sale to near about areas and 15 days on other areas.

(2) Interest free credit to be allowed for 45 days from the date of despa tch.

(3) To levy individual charges Rs. 150 per tonne on sale from Delhi Godown and Rs. 450 per tonne on sale from Calcutta godown.

(4) Prices to be comparable with other mills on the mills stock.

(5) Unsold stock to be liquidated at the best prices.

That thus the sale of the goods to the accused on 45 days interest free credit strictly though DA documents payable in the bank was under the said policy approved by Shri Kochodia and adopted by the complainantmills and was in no way under any special favour shown to the accused muchless as a result of any inducement or fraudulent representation made to the complainant mills by the accused.

Hence the essential ingredient of the offence of cheating and dishonestly inducing delivery of goods under Section 420IPC is also not fulfilled. This conclusion is perverse. If the policy was valued, it did not mean that the company was squandering its goods to all and sundry and that it ruled out any inducement or fraudulent representation by the purchasers to persuade the Mills to extend the benefit of the policy to them. There are clear cut allegations of sue!, inducement and representation in the complaint and all the material facts are available in the investigation record to substantiate the same. The intention is to be inferred from the conduct and all the surrounding circumstances. It is only at the trial that a categorical finding in the subject would come but there is enough material on record to how a prima facie case and enough ground to proceed against these accused who are opposite parties 2 to 5 in this revision No. 50 of 1990.

Then the learned Sessions Judge highlighted the fact that there was provision in the Hundies to pay interest if the payment is not made within the stipulated period of 45 days but the inferences, by him that the incorporation of this clause takes the case out of the purview if a criminal offence is wholly misconceived. If the intention is to cheat and never to pay then an interest clause in the Hundi would be immaterial.

The total number of consignments sent in this case was 17. Out of them six consignments were detailed in para 6 of the complaint then 7 consignments were detailed in para 8 of the complaint. About the 7 consignments contained in para 8 of the complaint clear averments have been made in para 9 of the complaint in the followingwords:

�Thus the hundi, bill and consignee copy of the goods receipts of the above 7 consignments were sent through Bank of Baroda, Saharanpur to M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain for acceptance and payment. The said consignments were entrusted to M/s. Deepak Transport Agency as ''Self consignments anu Star Paper Mills Limited were the consignor as well as consignee in respect of the said consignments and M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain were required to retire the said documents from the Bank against acceptance of hundi documents and pay the same to the bank on due dates mentioned on the Hundi. M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain were entitled to receive the said consignments from the transport company only on the production of consignee copy of the goods receipts to be obtained by them from the bank against acceptance of hundics. M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain, however did not accept the hundies and as required did not collect the goods receipts of the said 7 consignments from the bank for taking delivery of goods and fraudulently obtained the goods of the said consignments from the staff of the said transport company at Bombay and Vasai without producing the consignee copies of the goods receipts out of the way knowing fully well that they had no right whatsoever to receive the said goods without accepting the hundies for payment on due date in the bank and producing consignee copies of good receipts duly endorsed in their favour by bank. The said transport company was required to deliver the said consignments only to consignor or to their nominee on production of consignee copies of the goods receipts duly endorsed by the bank but as it has come to our knowledge from the transport company, they had delivered the said consignments to the said M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain without obtaining the consignee copy of the goods receipts. This act of the transport company amounts to criminal breach of trust in respect of the property worth Rs. 4,68,097 entrusted to them as carrier for which they were strictly accountable to us. The consignments being ''self were to be delivered to Star Paper Mills Limited or to their nominee against production of consignee copy of the goods receipts duly endorsed by bank. Thus in collusion and conspiracy with the staff of the said transport company M/s. Kagaz Kendra and M/s. Vijay Kumar Satya Narain and its partners further succeeded in obtaining fraudulently and dishonestly the goods worth Rs. 4,68,097 pertaining to the said 7 consignments without accepting and retiring the documents from the bank as assured by the said Shri Vijay Kumar Sarawgi and made no payment towards them.�

This position has been repeated in paras 7 and 8 of the protest petition. In para 9 of the pretext petition the details of firms to which the 7 consignments as detailed in para 8 of the complaint were disclosed. It was stated that these consignments were entrusted to M/s. Deepak Transport Company to be delivered to these firm at the instance and on behalf of Vijay Kumar Saraogi. It was also stated that as per understanding with the complainant company Sri Vijay Kumar Saraogi will get the documents released from bank after executing hundies and after making an endorsement on the goods receipt in favour of the parties and thereafter got these consignments released from the transporter. Thus it was clear case of breach of trust by carrier punishable under Section 407 IPC. There can be no doubt about it. These allegations were not in the air. There was obvious factual basis for the same. The transporter was a carrier and there was entrustment of the properties of the consignments by the complainant mills to these carrier. Further there was entrustment and a legal contract prescribed the mode in which the trust was to be the discharged as disclosed above and if there was any violation of the terms in disposing of the properties it was a clear case of breach of trust by a carrier. The Chief Judicial Magistrate concerned even while summoning the present accused opposite parities 2 to 5 illegally let off M/s. Deepak Transporter Co. His observations are that from the statements recorded by the Investigating Officer it is clear that the transporter carried the consignments to their real destination and the goods were received by the persons in whose favour the consignments were sent and that the carrier received only the transport charges and no dishonest attention on its part is proved. Since the transporter committed breach of express terms of the contract under which the goods of the consignments were entrusted to him in the circumstances of this case that was enough to pin him with criminal liability under Section 407 IPC as dishonest intention must be inferred here. It was not at all necessary to show that the transporter digested the property in the consignments himself. The definition of Section 405 IPC runs as under:

�405. Criminal breach of trust. Whoever being in any manner entrusted with property or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged or of any legal contract, express or implied which he has made touching the discharge of such trust or wilfully suffers any other person so to do commits �criminal breach of trust.� (Emphasis is mine)

Thus in criminal breach of trust it may be either dishonest misappropriate of property to his own use by the accused or the dishonestly making disposal of the entrusted property in violation of any direction of any legal contract, express or implied which he may have made touching the discharge of the trust. From the act of dealing with the goods in the circumstances aforementioned the prima facie dishonest intention is to be inferred from the hard facts of the case it is equally obvious that the opposite parties to in Revision No. 50/89 Reacted in concert wi th the transporter (the carrier) aforesaid and so each one of them was prima fade liable for the offence under Section 402 read with Section 120 IPC. There was no escape for them.

The learned Sessions Judge has proceeded in his judgment from a wrong angle. He emphasized that the Chief Judicial Magistrate went wrong in concluding that the offence of criminal misappropriation under Section 403 IPC was made out. He also emphasised that the goods were not entrusted to the accused as agent of the complainant mill. It maybe that in respect of the goods of 7 consignments mentioned in para 8 of the complaint which were sent to the nominees of the present opposite parties 2 to 5, as disclosed in para 9 of the pretext petition no relation ship of agent arose between complainant mill and accused opposite parties 2 to 5 and that when the opposite parties 2 to 5 of this Revision Nos. 50 of 90 realised the cost of the same and did not pay the same to the mill it may not be a breach of trust by them as an agent of the complainant mill nevertheless the fact that these accused opposite parties 2 to 5 realised price of the goods of these consignments detailed in para 8 of the complaint from the consignee detailed in para 9 of the protest petition and digested the same and did not pay the same to the complainant mill do indicate their dishonest intention and does go to establish the offence of cheating, punishable under Section 420 IPC.

Then coming to the four consignments detailed in para 10 of the complaint. The averments made in para 10 of the complaint were that Shri Vijay Kumar Sarawgi however instructed that the said hundies may not be presented to the bank for payment on due dates as they shall be making the payment of the said hundies directly that however despite repeated assurances neither the dishonoured hundies returned by the bank were paid nor the said 4 hundies duly accepted and signed by him for M/s. Kagaz Kendra against receipt of the goods were paid by them. There was material on record about these facts and the inference of cheating was obvious.

From the above discussion, it is clear that there was aprimafacie case made out for summoning the accused opposite parties 2 to 5 of the offence under Section 420 IPC and 407/120B IPC in Criminal Revision No. 50 of 1990 and further that there was aprimafacie case under Section 407 IPC made out against the transporter M/s. Deepak Transport Agency opposite party No. 6 in the aforesaid revision and opposite party No. 2 in Criminal Revision No. 86 of 1990. Consequently both these revisions shall have to be allowed. If it were a case where the Chief Judicial Magistrate has dismissed the complaint in it entirety there might be necessity of passing an order for him to enquire further and pass orders according to law but here the summoning of the said four accused for the offence under Section 420 IPC has already been sustained and at the stage of framing of charge the Magistrate can always frame charges for all the offences prima facie made out from the material on record and it is unnecessary to make an order for further enquiry in regard to the allegations constituting the offences under Sections 407/120B IPC.

Criminal Revision No. 50 of 1990, Raj TilakJain v. State ofU.P. and others, is consequently allowed and the judgment and order dated 411990 passed by Sri P.P. Gupta the then Sessions Judge, Saharanpur in Criminal Revision No. 524 of 1989 whereby he allowed that revision and set aside the order passed by the Chief Judicial Magistrate for issuing process against four accused and accepted the final report dated 15111988 and dismissed the complaint dated 231.11987 filed by complainant Raj Tilak Jain is set aside. The order of Chief Judicial Magistrate summoning the present accused opposite parties 2 to 5 for the offence under Section 420 IPC is restored but the order of Chief Judicial Magistrate for summoning these accused opposite parties for the offence under Sections 403 and 409 IPC as passed in Criminal Case No. 555 of 1987 on 4101989 is not restored since prima facie case for the offence under Section 407 read with Section 120B IPC is made out against these accused opposite parties, the Chief Judicial Magistrate, Saharanpur shall summon them and frame charges against them according to law for the offences under Sections 420 IPC and 407 read with Section 120B IPC and proceed with the trial of the case and decide the same according to law.

Criminal Revision No. 86 of 1990, Raj Tilak Jain v. Stare of U.P. and another, is allowed. The order of the Chief Judicial Magistrate, Saharanpur passed in Criminal Case No. 555 of 1987, State v. Vijay Kumar Sarogi and others, in so far as it hold that no prima facie offence is disclosed against M/s. Deepak Transport Agency, opposite party No. 2 in this revision (opposite party No. 6 in Crl. Revision No. 50 of 1990) is set aside. The Chief Judicial Magistrate, Saharanpur is directed to reconsider the matter and issue process against it (M/s. Deepak Transport Agency) according to law in the light of the observations made in the body of this judgment. It is further directed that once M/s. Deepak Transport Agency is summoned in the case, his case will also be consolidated with the main criminal case so that all the accused are tried together for their respective offences according to law.

The Chief Judicial Magistrate shall expedite the proceedings and conclude the trial at an early date preferably within six months from the date a certified copy of this order is produced before him by any of the parties.

Let a copy of this order be sent by the office of the High Court to the Sessions Judge, Saharanpur and also to the Chief Judicial Magistrate, Saharanpur by Fax and also by registered post A/D for information and necessary compliance.

Revision allowed.