Penal Code, 1860 – Section 405/420 – Cheating – Breach of Contract – A distinction has to be kept in mind between mere breach of contract and the offence of cheating. It depends upon the intention of the accused at the time of inducement. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent, dishonest intention since inception is shown at the beginning of the transaction.
Criminal Breach of Trust – Essential ingredients of – To make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the accused rather it must be shown that the accused dishonestly retained the same. The mere fact that the accused did not pay the money to the complainant does not amount to criminal breach of trust.
HIGH COURT OF JUDICATURE AT ALLAHABAD
Hon’ble Bharat Bhushan,J.
Case :- APPLICATION U/S 482 No. – 39907 of 2013 Applicant :- K.L. Agarwal Opposite Party :- State Of U.P. And Another Counsel for Applicant :- Ajay Bhanot Counsel for Opposite Party :- Govt. Advocate,Anil Kumar Verma,Anil Srivastava AND Case :- APPLICATION U/S 482 No. – 40200 of 2013 Applicant :- Ashok Agrawal Opposite Party :- State Of U.P. And Another Counsel for Applicant :- Ajay Bhanot Counsel for Opposite Party :- Govt. Advocate,Anil Kumar Verma,Anil Srivastava AND Case :- APPLICATION U/S 482 No. – 39908 of 2013 Applicant :- Arun Agarwal Opposite Party :- State Of U.P. And Another Counsel for Applicant :- Ajay Bhanot Counsel for Opposite Party :- Govt. Advocate,Anil Srivastava
1. All the three aforesaid applications, filed by three different applicants arise out of the same facts in the same complaint case, therefore all the three applications are being disposed of by a common order.
2. In all the three applications, the applicants have prayed for quashing of the order dated 22.9.2012 passed by learned Judicial Magistrate-II, Varanasi in Misc Case No. 151 of 2012 whereby the the application filed under Section 156(3) Cr.P.C. was treated as complaint and cognizance taken and also the summoning order dated 20.4.2013 passed by learned Judicial Magistrate-II, Varanasi in Complaint Case No. 2063 of 2012 as well as proceedings of said Complaint Case under Sections 406, 420 IPC.
3. The encapsulated facts of the case are that the complainant/opposite party no. 2, is proprietor of a firm in the name and style of M/s Radhika Inter Prises having its registered office at Varanasi, which deals into the business of food products as Consignment Sale Agent (herein after referred as CSA). It is alleged that the opposite party no. 2 entered into a business of food processing and trading of food products with the firm namely K.L.A. Foods India Limited, having its registered Head Office at 2nd Milestone, Kichha Road, Rudrapur-261153, District Udham Singh Nagar, Uttarakhand and its office at 21/4 Geeta Mandir Marg, New Rajendra Nagar, New Delhi-110060. The applicant namely K. L. Agarwal is said to be Chairman of the said firm. Applicant Arun Kumar Agarwal is Director of the said firm and applicant Ashok Kumar Agarwal is authorized signatory of the firm. It is alleged that the Regional Sales Manager and Regional Manager of applicant’s firm approached the complainant at its firm and offered to appoint the complainant’s firm as a Consignment Sale Agents after depositing a sum of Rs. 5 Lacs as a security money in favour of applicant’s firm which was accepted by complainant no. 2. It is alleged that the opposite party no. 2, thereafter, issued a cheque for Rs. 1.21 Lacs vide Cheque No. 025637 dated 27.8.2011 of Federal Bank, Branch Mahmoorganj, Varanasi which was encashed by the applicant’s firm. It is further alleged that the complainant is also said to have issued a cheque of balance amount of security money being Cheque No. 025638 dated 07.09.2011 and requested the applicant’s firm to keep the said cheque as a security deposit and prepare an agreement for appointment of complainant’s firm as Consignment Sale Agents. It is alleged that on 5.9.2011 Consignee Sales Agent Agreement was prepared at Rudrapur between the complainant and applicant’s firm whereby the complainant was appointed as Consignee Sales Agent. The complainant is said to have paid the balance amount of security money through RTGS facility in the account of applicant’s firm at Rudrapur. It is alleged that the food products sent to the complainant’s firm by the applicant’s firm were sold by the complainant’s firm and the sale proceeds were deposited with the applicant’s firm but the applicant’s firm failed to pay the commission, rent etc of the food products to the complainant as per the terms and conditions of the agreement deed and also stopped to send further the consignment of food products to the complainant in contravention to the business agreement entered into between them.
4. It is further alleged that the complainant demanded the cheque No. 025638 dated 07.09.2011 kept with applicant’s firm as a security deposit and the payments of commissions, rents etc as Consignment Sales Agents to be allegedly made by the applicant’s firm on which threats were extended to the complainant of dire consequences. This incident is said to have been reported to the concerned Police Station but of no avail. Thereafter a complaint was filed on 25.8.2012 by way of an application under Section 156(3) Cr.P.C. which was treated as complaint and cognizance was taken vide order dated 22.9.2012 . Learned Magistrate after recording the statement of the complainant under Section 200 Cr.P.C. and his witnesses namely Sanjay Ji (P.W.-1) and Sanjay Kumar Rai (P.W-2), summoned the applicant for facing the trial under
Section 406, 420 IPC
vide order dated 20.4.2013. It is these orders which are subject matter of challenge before this court.
5. Heard Mr Ajay Bhanot, learned Senior counsel assisted by Mr S. K. Singh, learned counsel for the applicants, learned AGA and Mr Anil Srivastava, leaned counsel for the respondent no. 2.
6. It is contended by learned counsel for the applicants that prima facie no criminal offence against the applicants is made out and the present prosecution has been instituted with malafide intention for the purposes of harassment. It is further contended that the dispute between the parties is purely of civil nature which have been deliberately converted into criminal case with a view to pressurize the applicants to settle the dispute. It is further submitted that the allegations levelled against the applicants at best be termed as breach of contract for which the appropriate remedy would be before the competent civil court. It is further submitted that under the Consignee Sales Agent Agreement, it has been agreed between the parties that in case of any dispute arisen between the parties out of or in connection with the agreement same shall be finally settled through an Arbitration proceedings under the Arbitration and Conciliation Act, 1996.
7. It is further submitted that the courts at Varanasi had no jurisdiction to deal with the dispute which had arisen between the parties as no cause of action has arisen at Varanasi. It is further submitted that essentially the dispute between the parties is with respect to refund of Security deposit and payments allegedly to be made by the applicant’s firm and it is admitted fact that the security deposit was submitted as well as agreement was executed at applicant’s firm at Rudrapur, Uttarakhand.
8. It is further contended that that even if the uncontroverted allegations in the complaint are to be read as a whole, and accepted in its entirety as true, no case is made out against the applicants. It is further submitted that while non-payment of the amount due would, at best, result in a civil liability, in the absence of any specific allegation in the complaint that the accused had, at the very inception, induced the complainant with dishonest intention and further the inability of the accused to make payment of the amounts due would not attract the ingredients of Sections 406and 420 IPC. In support of his argument, learned counsel for the applicants has relied upon the cases of V.P. Shrivastava Vs Indian Explosives Ltd., (2010) 10 SCC 261; V.Y.Jose Vs State of Gujarat, (2009) 3 SCC 78.
9. To the contrary, learned counsel for the opposite party no. 2 and learned AGA have contended that the points argued by learned counsel for the applicants cannot be seen at this initial stage being a disputed question of facts. From the material on record and looking into the facts of the case at this stage it cannot be said that no offence is made out against the applicants. All the submissions made at the bar relates to the disputed question of facts, which cannot be adjudicated upon by this Court under Section 482 Cr.P.C. At this stage only prima facie case is to be seen in the light of the law laid down by Supreme Court in various decisions.
10. It is further argued by learned counsel for the opposite party no. 2 that the argument of learned counsel for the applicants is not sustainable for the simple reason that there cannot be any agreement which blocks right to initiate criminal proceedings. If any financial or business transaction involves criminality, the victim always has right to initiate criminal proceedings. Whether the criminal proceedings is justified or not is a question of fact which cannot be adjudicated under inherent jurisdiction of court provided under Section 482 Cr.P.C. Moreover, it is further contended that some times a case may apparently look to be of civil nature or may involve a commercial transaction but such civil disputes or commercial disputes in certain circumstances may also contain ingredients of criminal offences and such disputes have to be entertained notwithstanding they are also civil disputes. In support of his argument, learned counsel for the complainant has relied upon the cases of Mohammed Ibrahim and others Vs State of Bihar and another, (2009) 8 SCC 751 and Arun Bhandari Vs State of UP and others, (2013) 2 SCC 801.
11. I have considered the respective arguments of learned counsel for the parties but looking to the growing tendency on the part of mischievous litigants to file vexatious and frivolous complaints, it is necessary to examine the credibility of the complaint to see whether any criminal offence under Sections 406, 420 IPC is made out or not.
12. Section 405 IPC deals with criminal breach of trust. A careful reading of the Section 405 IPC shows that a criminal breach of trust involves the following ingredients: