Criminal Appeal No.566 of 2016

4th July, 2016.

Petitioner Counsel: Mr. SUBRAMONIUM PRASAD, Sr. Adv., Mr. BHAKTI VARDHAN SINGH, Mrs. VARUNA BHANDARI GUGNANI, Dr. KAILASH CHAND
Respondent Counsel: Mr. MOHIT D. RAM

Cases Cited:
Hridaya Ranjan Pd. Verma Vs. State of Bihar, 2000 ALL MR (Cri) 1490 (S.C.)=(2000) 4 SCC 168 [Para 8]
Anil Mahajan Vs. Bhor Industries Ltd., (2005) 10 SCC 228 [Para 8]
Indian Oil Corporation Vs. NEPC India Ltd., (2006) 6 SCC 736 [Para 8,9]
Inder Mohan Goswami Vs. State of Uttaranchal, 2007 ALL MR (Cri) 3302 (S.C.)=(2007) 12 SCC 1 [Para 8]
Chandran Ratnaswami Vs. K.C. Palanisamy, 2013 ALL SCR 2691=(2013) 6 SCC 740 [Para 8]

JUDGMENT

JUDGMENT :- Leave granted. This appeal has been preferred against judgment and order dated 22nd September, 2014 of the High Court of Judicature at Bombay in Criminal Writ Petition No.1040 of 2014. By the said order, the High Court declined to quash proceedings against the appellants under Section 417 read with Section 34 IPC while quashing proceedings under Section 420 IPC.

2. Respondent No.1-complainant filed the impugned complaint dated 17th February, 2009 in the Court of Additional Chief Metropolitan Magistrate at Mumbai being Criminal Case No.60/SW/2009 stating that the complainant was having business of export, import, stockiest and dealers of pipes etc. The accused approached the complainant for the engineering works and on 16th June, 2008, the accused gave a letter of proposed requirement of pipes. This was followed by letter of intent dated 16th June, 2008. Thereafter, the accused gave manufacturing clearance on 31st July, 2008. Though the complainant had a policy not to accept any order without initial deposit of letter of credit and asked the accused to deposit the initial amount or give letter of credit, but the accused with mala fide intention undertook to provide letter of credit later. On this the complainant undertook manufacture of pipes. Thereafter, on 29th October, 2008, the accused sought reduction in price. But suddenly on 5th December, 2008 the accused cancelled the order.

3. The accused appellant filed a petition in the Bombay High Court submitting that the complaint was abuse of the process of criminal law. Dispute between the parties was a civil dispute. The goods were to be supplied to the NTPC and the letter of intent had to be cancelled in view of the developments with the NTPC. The complainant was not a manufacturer and was merely a supplier and suffered no loss.

4. The High Court held that there was no straight jacket formula to decide as to what amounted to civil wrong as against a criminal wrong. This had to be decided on the facts of each case. No offence was made out under Section 420 IPC as there was no delivery but there was a prima facie case under Section 417 read with Section 34 IPC.

5. We have heard learned counsel for the parties.

6. Learned counsel for the appellants submitted that breach of contract could not be treated as cheating. The offence of cheating is attracted only when there is deception at the very inception. In the present case, there was no concluded contract and even letter of credit had not been issued by the appellant. On admitted facts, there was nothing to infer the intention of cheating at the inception. There was a growing tendency to convert a civil case to a criminal case to create pressure to deprive a party of the defences available under the civil law against claim for damages. In any case, mere failure to honour a contract did not by itself amount to cheating.

7. Learned counsel for the respondent complainant submitted that at the stage of quashing the court had to take the averments in the complaint at the face value and only if no case was made out, prayer for quashing could be accepted. A civil dispute arising out of breach of contract could also amount to cheating and a remedy available to a party under the criminal law could not be barred merely because the dispute involved breach of contract also. The complainant had clearly pleaded that the accused had no intention to purchase the goods and only with a view to cause loss to the complainant the accused had sent the letter of intent.

8. We have considered the rival submissions. We are of the view that the law on the point is quite well settled in a series of judgments of this Court including Hridaya Ranjan Pd. Verma versus State of Bihar, (2000) 4 SCC 168 : [2000 ALL MR (Cri) 1490 (S.C.)], Anil Mahajan versus Bhor Industries Ltd., (2005) 10 SCC 228, Indian Oil Corporation versus NEPC India Ltd., (2006) 6 SCC 736, Inder Mohan Goswami versus State of Uttaranchal, (2007) 12 SCC 1 : [2007 ALL MR (Cri) 3302 (S.C.)] and Chandran Ratnaswami versus K.C. Palanisamy, (2013) 6 SCC 740 : [2013 ALL SCR 2691].

9. In Indian Oil Corporation case (supra) it was observed :

"12. The principles relating to exercise of jurisdiction under Section 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 Jiwaji Rao Scindia v. Sambhajirao Chandrojirao Angre [1988 (1) SCC 692], State of Haryana vs. Bhajanlal [1992 Supp (1) SCC 335], Rupan Deol Bajaj vs. Kanwar Pal Singh Gill [1995 (6) SCC 194], Central Bureau of Investigation v. Duncans Agro Industries Ltd., [1996 (5) SCC 591], State of Bihar vs. Rajendra Agrawalla [1996 (8) SCC 164], Rajesh Bajaj v. State NCT of Delhi, [1999 (3) SCC 259], Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [2000 (3) SCC 269], Hridaya Ranjan Prasad Verma v. State of Bihar [2000 (4) SCC 168], M. Krishnan vs Vijay Kumar [2001 (8) SCC 645], and Zandu Phamaceutical Works Ltd. v. Mohd. Sharaful Haque [2005 (1) SCC 122]. 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 malafides/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 proceedings 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 break down 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 though criminal prosecution should be deprecated and discouraged. In G. Sagar Suri vs. State of UP [2000 (2) SCC 636], this Court observed :

"It is to be seen if a matter, which is essentially of 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 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 Cr.P.C. more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may.

15. Coming to the facts of this case, it is no doubt true that IOC has initiated several civil proceedings to safeguard its interests and recover the amounts due. It has filed C.S. No.425/1997 in the Madras High Court and O.S. No.3327/1998 in the City Civil Court, Chennai seeking injunctive reliefs to restrain the NEPC India from removing its aircrafts so that it can exercise its right to possess the Aircrafts. It has also filed two more suits for recovery of the amounts due to it for the supplies made, that is CS No.998/1999 against NEPC India (for recovery of Rs.5,28,23,501/90) and CS No.11/2000 against Skyline (for recovery of Rs.13,12,76,421/25), in the Madras High Court. IOC has also initiated proceedings for winding up NEPC India and filed a petition seeking initiation of proceedings for contempt for alleged disobedience of the orders of temporary injunction. These acts show that civil remedies were and are available in law and IOC has taken recourse to such remedies. But it does not follow therefrom that criminal law remedy is barred or IOC is estopped from seeking such remedy.

16. The respondents, no doubt, have stated that they had no intention to cheat or dishonestly divert or misappropriate the hypothecated aircraft or any parts thereof. They have taken pains to point out that the aircrafts are continued to be stationed at Chennai and Coimbatore Airports; that the two engines of VT-NEK though removed from the aircraft, are still lying at Madras Airport; that the two DART 552 TR engines of VT-NEJ were dismantled for the purpose of overhauling/repairing; that they were fitted to another Aircraft (VTNEH) which had been taken on lease from 'M/s Aircraft Financing and Trading BV' and that the said Aircraft (VT-NEH) has been detained by the lessor for its dues; that the two engines which were meant to be fitted to VT-NEJ (in places of the removed engines), when sent for overhauling to M/s Hunting Aeromotive, U.K., were detained by them on account of a dispute relating to their bills; and that in these peculiar circumstances beyond their control, no dishonest intent could be attributed to them. But these are defences that will have to be put forth and considered during the trial. Defences that may be available, or facts/aspects when established during the trial, may lead to acquittal, are not grounds for quashing the complaint at the threshold. At this stage, we are only concerned with the question whether the averments in the complaint spell out the ingredients of a criminal offence or not.

17. The High Court was, therefore, justified in rejecting the contention of the respondents that the criminal proceedings should be quashed in view of the pendency of several civil proceedings."

10. Question in each case is of application of the above principles to the individual fact situations. It is not permissible for the Court to go into the defence pleaded by the appellants. The High Court has already held that no case is made out under Section 420 IPC from the allegations in the complaint which part of the order is not under challenge before this Court. In the present case, even if the allegations in the complaint are taken at their face value, the dispute between the parties is purely of civil nature involving breach of contract. Even according to the complainant, the accused did not give letter of credit nor made any deposit and the matter was thus, at the negotiation stage. We are conscious that merits of the controversy cannot be gone into in quashing proceedings but the Court can certainly see the substance of allegations with the view to examine the contention whether initiation of criminal proceedings was abuse of the process of court or not. Having seen the allegations in the complaint, we do not find any prima case for initiating criminal proceedings against the appellants.

11. Accordingly, this appeal is allowed and the proceedings against the appellants are quashed. It is made clear that we have not expressed any opinion on availability of any other remedy of the complainant against the appellants.

Appeal allowed.