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Heard. Admit. Heard finally by consent of learned counsel appearing for the parties.
The applicants have approached this Court by filing the present application under Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of the First Information Report (for short “FIR”) dated 18.05.2018, registered as Crime No. 259/2018 at Police Station Lakadganj, Nagpur, as also for quashing of charge-sheet registered as Final Report Form No.133/2018 under Sections 420, 406 and 34 of Indian Penal Code,1860. (for short “IPC”) which is pending before Judicial Magistrate, First Class, Nagpur.
As per non-applicant No. 2 and as reflected in the First Information Report, the non-applicant No. 2 is a registered broker in Kirana Line, Nagpur for the past 20 years and has known the applicants for the last 10-12 years. The applicants run grocery shops in Yavatmal under the name and style of “R.K. Traders” and “Radhakrishna Traders.” The applicants used to place orders either through their representatives or over telephone, and non-applicant No. 2 would dispatch grocery goods accordingly through transport agencies or the applicants' own vehicles. Payments were usually made within 30-45 days.
Between January 2017 and May 2017, the applicants obtained goods worth approximately Rs.25-30 lakhs (exactly Rs.25,23,744/- as per bills) through telephone orders. The goods were dispatched via Hindustan Transport, Dada Miya Transport, or the applicants' own vehicle. Despite demands, the applicants failed to pay the said amount and thereby committed criminal breach of trust in respect of the goods entrusted to them on trust. Aggrieved thereby, non-applicant No.2 lodged the First Information Report, which is now challenged in the present application.
We have heard Mr. S.K. Bhoyar, learned counsel for applicants, Mrs. Shamsi Haider, Additional Public Prosecutor, for non-applicant No.1/State and Ms. S. Lakhani with Mrs. S.P. Bhanarkar, learned counsel for the non-applicant No.2.
Mr. S.K. Bhoyar, learned counsel for the applicants, submits that the applicants are petty businessmen having no criminal antecedents whatsoever. The allegations levelled against them essentially arise out of commercial transactions and do not disclose any criminal intent on their part. The dispute is purely civil in nature and has been given a criminal colour by way of a false and motivated complaint lodged by non-applicant No.2, leading to registration of the offence by non-applicant No. 1.
Learned counsel further submits that non-applicant No.3 has absolutely no role in the alleged transactions between applicant No. 1 and non-applicant No. 2, and there is no material on record showing his involvement, inducement or participation in any manner. Similarly, applicant No. 2, who is the real brother of applicant No. 1, has been independently carrying on his grocery business for the last 20 years and is not associated in any way with the transactions alleged against applicant No.1 or with his business. There are no allegations against applicants Nos.2 and 3 regarding any direct business transactions; at the highest, some witnesses have alleged that they stood as guarantors for repayment of amounts due from applicant No.1.
Learned counsel further submits that after registration of the offence, the Investigating Officer pressurized the accused persons (except applicant No. 1) to deposit the alleged outstanding amounts by threatening severe consequences and implication in more serious offences, on the ground that they were guarantors. Accused No.7, Kailash Galani, succumbed to such pressure and deposited Rs.7,00,000/- through his brother Mahesh Galani on 24.09.2018, for which a seizure memo was prepared and entry made in the station diary.
It is lastly submitted that, barring the aforesaid material, there is nothing in the entire charge-sheet which discloses the commission of any offence by the applicants. Continuation of the proceedings against them would amount to sheer abuse of the process of the Court.
We have heard learned counsels at length and perused the charge-sheet filed by the Investigating Agency after completion of investigation. After perusal of the charge-sheet, certain admitted facts emerged from record that, the parties had an ongoing commercial relationship for 10-12 years wherein the applicants regularly placed orders and made payments within 30-45 days.
Furthermore, there is no material whatsoever against applicants Nos.2 and 3 showing their involvement in the alleged transactions. Apart from witness Mohammad Aslam Fazal Umar, no other person has alleged that applicant No.2 had taken money from them. At best, some witnesses have alleged that they know applicant No.2 as a family member of applicant No. 1 and that they stood as guarantors for repayment of amounts due from applicant No. 1.
Thus, there is no offence made out and even if there is some dispute, the same is purely contractual and is of civil nature. The Hon'ble Apex Court in the case of Delhi Race Club (1940) Limited and others Vs. State of Uttar Pradesh and another, reported in (2024)10 SCC 690 while explaining the distinction between mere breach of contract and the offence of criminal breach of trust and cheating has stated as under :
41.The distinction between mere breach of contract and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, it is this intention, which is the gist of the offence.
42.Whereas, for the criminal breach of trust, the property must have been entrusted to the accused or he must have dominion over it. The property in respect of which the offence of breach of trust has been committed must be either the property of some person other than the accused or the beneficial interest in or ownership’ of it must be of some other person. The accused must hold that property on trust of such other person. Although the offence, i.e. the offence of breach of trust and cheating involve dishonest intention, yet they are mutually exclusive and different in basic concept.
43.There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously.
44.At the most, the Court of the Additional Chief Judicial Magistrate could have issued process for the offence punishable under Section 420 of the IPC i.e. cheating but in any circumstances no case of criminal breach of trust is made out. The reason being that indisputably there is no entrustment of any property in the case at hand. It is not even the case of the complainant that any property was lawfully entrusted to the appellants and that the same has been dishonestly misappropriated. The case of the complainant is plain and simple. He says that the price of the goods sold by him has not been paid. Once there is a sale, Section 406 of the IPC goes out of picture. According to the complainant, the invoices raised by him were not cleared. No case worth the name of cheating is also made out.”
Applying the aforesaid principles to the facts of the present case, it is evident that the parties had an established commercial relationship spanning 10-12 years with regular supply of goods and timely payments, which demonstrates absence of any fraudulent intention at the inception of the transactions in question. The subsequent failure to make payment, by itself, cannot establish fraudulent intention from the inception. Thus, with regard to the offence under Section 406 IPC (Criminal Breach of Trust), the Hon'ble Supreme Court has clearly held that the property must have been entrusted to the accused or he must have dominion over it, and the accused must hold that property on trust for such other person. In the present case, the goods were sold to the applicants on credit terms, not entrusted on trust. The transaction was a straightforward commercial sale wherein ownership of the goods passed to the applicants upon delivery. The non-applicant No.2 retained only a contractual right to receive payment for the goods sold. There was no fiduciary relationship or entrustment creating any trust obligation between the parties. The failure to pay the purchase price is a breach of contract arising from non-payment of debt, not criminal breach of trust.
In a recent judgment of the Hon’ble Apex Court in the case of A.M. Mohan Vs. State represented by SHO and another, reported in (2024) 12 SCC 181, in para 18 the Hon’ble Apex Court has held as under:
“18.The law with regard to exercise of jurisdiction under Section 482 of Cr.P.C. to quash complaints and criminal proceedings has been succinctly summarized by this Court in the case of Indian Oil Corporation v. NEPC India Limited and Others1 after considering the earlier precedents. It will be apposite to refer to the following observations of this Court in the said case, which read thus: "12. The principles relating to exercise of jurisdiction under Section 482 of the Code of Criminal Procedure to quash complaints and criminal proceedings have been stated and reiterated by this Court in several decisions. To mention a few-Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre [(1988) 1 SCC 692 : 1988 SCC (Cri) 234], State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426], Rupan Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC 194 : 1995 SCC (Cri) 1059], Central Bureau of Investigation v. Duncans Agro Industries Ltd. [(1996) 5 SCC 591 : 1996 SCC (Cri) 1045], State of Bihar v. Rajendra Agrawalla [(1996) 8 SCC 164 : 1996 SCC (Cri) 628], Rajesh Bajaj v. State NCT of Delhi [(1999) 3 SCC 259 : 1999 SCC (Cri) 401], Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [(2000) 3 SCC 269 : 2000 SCC (Cri) 615], Hridaya Ranjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168 : 2000 SCC (Cri) 786], M. Krishnan v. Vijay Singh [(2001) 8 SCC 645 : 2002 SCC (Cri) 19] and Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque [(2005) 1 SCC 122 : 2005 SCC (Cri) 283]. The principles, relevant to our purpose are: (i) A complaint can be quashed where the allegations made in 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 the case alleged against the accused. For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint. (ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with mala fides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable. (iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution. (iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence. (v) A given set of facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence; or (c) a civil wrong as also a criminal offence. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceeding are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not. 13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. Such a tendency is seen in several family disputes also, leading to irretrievable breakdown of marriages/families. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged. In G. Sagar Suri v. State of U.P. [(2000) 2 SCC 636 : 2000 SCC (Cri) 513] this Court observed: (SCC p. 643, para 8) ‘8.…...It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.’ 14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law. One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power under Section 250 CrPC more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may."
Furthermore, no specific role is attributed to the applicant No.2 except the fact that he happens to be brother of applicant No.1. As far as applicant No.3 is concerned, the only role attributed to him is that he stood as guarantor for repayment. This is hopelessly insufficient to fasten criminal liability.
Statement of other persons who happens to be traders also do no spell anything incriminating against applicant except that certain amount is due against the applicant.
In fact, the First Information Report is an attempted by non-applicant No.2 to recover the amount due and is purely a civil transaction.
In the backdrop of these facts, we are of the opinion that no offence under section mentioned in the First Information Report are made out since the First Information Report and the consequent charge-sheet filed after investigation hopelessly fails to make out a case for offences under said Sections. Continuing the prosecution against the Applicants would, therefore, be an abuse of process of law and the situation would squarely fall within the various parameters laid down by the Hon’ble Supreme Court in the case of State of Haryana and others Vs. Ch. Bhajan Lal and others, reported in 1992 Supplementary (1) SCC 335 and more particularly clause 1,3 and 7 of para 102 of the judgment. 13.
"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.
3.Where 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.
7.Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously 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 are, therefore, of the considered view that this is a case where powers under Section 482 of the Criminal Procedure Code are to be exercised. However, the non-applicant No.2 in our view has abused the process of Court by giving a colour of criminality to a purely civil transaction. Hence, cost is imposed on non-applicant No.2.
O R D E R
The application allowed.
The First Information Report dated 18.05.2018 registered as Crime No.259/2018 at Police Station Lakadganj, Nagpur, and the charge-sheet registered as Final Report Form No.133/2018 under Sections 420, 406 and 34 of the Indian Penal Code is hereby quashed and set aside to the extent of present applicants.
Cost of Rs.25,000/- (on non-applicant No.2) to be paid to High Court Bar Association Library within two weeks.
If the cost is not paid, same would treated as fine imposed by this Court and the Registry would recover amount in accordance with law.
Application is hereby disposed off.