IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL Stay Vacation App. No. 730 of 2008 In Criminal Miscellaneous App. No. 424/2008 Joginder Singh Sidhu & Others. ……… Petitioners. Versus Gurpreet Singh Brar. ………. Respondent Mr. Pawan Mishra, Advocate for the petitioners. Mrs. Pushpa Joshi, Advocate for the respondent. Hon’ble J.C.S. Rawat, J. Mr. Pawan Mishra, Advocate for the petitioners. Mrs. Pushpa Joshi, Advocate for the respondent. 2. The present petition has been filed by the petitioners under Section 482 Cr.P.C to quash the summoning order dated 08.10.2007 passed in Criminal case No. 1195/2008 titled as Gurpreet Singh Brar Vs. Guru Arjun Dev Educational Society and others u/s 420 & 120 (B) IPC pending in the court of Addl. Chief Judicial Magistratae, Ist, Dehradun. 3. The complaints/respondent had filed a complaint before the learned magistrate alleging therein that he had given a loan of Rs. 88.00 lacs to Guru Arjun Dev Educational Society of the which petitioner no. 1 is the Chairman, petitioner no. 2 is the Secretary and petitioner no. 3 is the member of the said society and it was agreed between the parties that the petitioners will repay the loan with 24% annual interest. The petitioners repaid only Rs. 77.50 lacs to the respondent. Now till 23.07.2007, a sum of Rs. 1,05,67446.00 of the respondent is still outstanding with the petitioners which has not been paid by the petitioners to the respondent. After filing of the complaint, the cognizance of the offence was taken by the magistrate and thereafter evidence under section 200 & 202 Cr.P.C was recorded by the trial court and subsequently, the accused petitioners were summoned. 4. I have heard the learned counsel for the parties and perused the record. 5. The learned counsel for the petitioners contended that as per the averments made in the complaint, the petitioners did not repay the loan of the respondent with 24% annual interest hence, the dispute between the parties is purely civil in nature; the complainant/the respondent should have filed a suit for recovery of the amount due against him before the competent civil court; the respondent instead of taking recourse of filing a civil suit, filed the complaint before the criminal court under Section 420 & 120-B of IPC; and it is absolutely an abuse of process of law. 6. The learned counsel for the respondent refuted the contentions of the learned counsel for the petitioners. I have gone through the entire complain as well as the statements recorded under Sections 200 & 202 Cr.P.C. According to the complaint, the complainant/respondent has specifically mentioned that after readjustment of the payment received by him, a sum of Rs. 1,05,67,446.00 is still payable to the complaint/respondent by the petitioners, which includes the interest, calculated upto the date of the notice. The complainant/respondent further alleged that the accused petitioners had cheated him by dishonestly inducing him to lend a sum of Rs. 88.00 lacs on the inducement of payment of interest at the rate of 24% per annum. The entire averments of the complaint as well as the statements recorded under Sections 200 & 202 Cr.P.C. merely give a picture that an agreement was made between the parties and the petitioners have not fulfilled the said agreement, as such it is merely a breach of contract which is not a cheating within the purview of section 420 IPC. The ingredients of an offence of cheating which comes within the purview of section 420 IPC are as follows: (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii) (a) the person so deceived should be induced to deliver any perperty to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases covered by (ii) b, the act of omission should be one which causes or is likely to cause damage or harm to the person induced in dody, mind, reputation or property. 7. Hence, if the complainant/respondent has no mens rea from intial stage, it cannot be held to be a cheating within the purview of Section 420 IPC. It is merely a beach of contract. The hon’ble Apex Court in Hridaya Ranjan Prasad Verma v. State of Bihar reported in (2000) 4 SCC 168 , at page 177 has held as follows: “15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.” 8. The Hon’ble Apex Court in S.W. Palanitkar v. State of Bihar reported in 2002 Vol 1 SCC (Cri) 241 has held as follows: “21. It is clear from the allegations made in the complaint and the sworn statements that Appellant 1 Company entered into an agreement with Respondent 2 on certain terms and conditions. It is alleged that Appellant 7 went to Patna and contacted Respondent 2 and induced him to enter into an agreement assuring him of huge profit. At the time of arriving at such an agreement, none of the other appellants either met Respondent 2 or induced him to enter into any agreement with a view to cheat him. The agreement was further renewed for a period of one year. It is not the case that there was no supply of goods at all as it has come on record that there was supply of 400 tons of fertilizer, maybe it was far less than the required quantity. The allegations made against the appellants other than Appellant 7 are very vague and bald. From the material that was placed before the Magistrate, even prima facie, it cannot be said that thee was conspiracy or connivance between the other appellants and Appellant 7. If the appellants have committed breach of agreement, it is open to Respondent 2 to seek redressed in a competent court or forum to recover damages, if permissible in law in case he had sustained any loss. In order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made. It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating. A mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating. 22. Looking to the complaint and the grievances made by the complainant therein and having regard to the agreement, it is clear that the dispute and grievances arise out of the said agreement. Clause 29 of the agreement provides for reference to arbitration is case of disputes or controversy between the parties and the said clause is wide enough to cover almost all sorts of disputes arising out of the agreement. As a matter of fact, it is also brought to out notice that the complainant issued a notice dated 3-10-1997 to the appellants invoking this arbitration clause claiming Rs 15 lakhs. It is thereafter the present complaint was filed. For the alleged breach of the agreement in relation to commercial transaction, it is open to Respondent 2 to proceed against the appellants for his redressal for recovery of money by way of damages for the loss caused, if any. Merely because there is an arbitration clause in the agreement, that cannot prevent criminal prosecution against the accused if an act constituting a criminal offence is made out even prima facie. 23. Many a times, complaints are filed under Section 200 CrPC by the parties with an oblique motive or for collateral purposes to harass, to wreck vengeance, to pressurize the accused to bring them to their own terms or to ͏ 251 enforce the obligations arising out of breach of contract touching commercial transactions instead of approaching civil courts with a view to realize money at the earliest. It is also to be kept in mind that when parties commit a wrongful act constituting a criminal offence satisfying necessary ingredients of an offence, they cannot be allowed to walk away with an impression that no action could be taken against them on the criminal side. A wrongful or illegal act such as criminal breach of trust, misappropriation, cheating or defamation may give rise to action both on civil as well as on the criminal side when it is clear from the complaint an sworn statements that necessary ingredients of constituting an offence are made out. Maybe parties are entitled to proceed on civil side only in a given situation in the absence of an act constituting an offence but not to proceed against the accused in a criminal prosecution. Hence before issuing a process a Magistrate has to essentially keep in mind the scheme contained in the provisions of Sections 200-203 CrPC keeping in mind the position of law stated above and pass an order judiciously and not mechanically or in a routine manner.” 9. In view of the above and having regard to the facts stated and the legal position explained above, I am of the view that the magistrate has committed a serious error in issuing the process against the petitioners under Sections 420 & 120 (B) IPC as the act alleged against them did not constitute the offence satisfying the ingredients even prima facie. 10. Hence in view of above, the petition is allowed. Consequently, the summoning order dated 08.10.2007 and the proceedings of Criminal Case No. 1195/2008 titled as Gurpreet Singh Brar Vs. Guru Arjun Dev Educational Society and others u/s 420 & 120 (B) IPC pending in the court of Addl. Chief Judicial Magistratae, Ist, Dehradun is liable to be quashed and is hereby quashed. 11. The stay vacation application is disposed of accordingly. (J.C.S. Rawat, J.) 25.11.2008 V.K