IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD MONDAY, THE SEVENTEENTH DAY OF AUGUST TWO THOUSAND AND NINE HON’BLE SRI JUSTICE G. BHAVANI PRASAD Criminal Petition No.8140 of 2008 Between: Industrial Boilers Ltd., and others .. Petitioners AND The State of A.P., through SHO, Nuzvid Town PS, rep. By Prosecutor, High Court Of A.P., Hyderabad and another .. Respondents Petition under Section 482 of Cr.P.C. praying that in the circumstances stated in the grounds filed therewith, the High Court will be pleased to quash the proceedings against the petitioners in C.C. No.616 of 2008 on the file of the Judicial First Class Magistrate, Nuzvid, Krishna District. The petition coming on for hearing, upon perusing the petition and the grounds filed in support thereof and upon hearing the arguments of Sri C. Padmanabha Reddy, learned senior counsel for the petitioners, Sri D. Ramalingaswamy, learned counsel for the 2nd respondent and of the learned Public Prosecutor for the 1st respondent, the Court made the following: ORDER: The 2nd respondent to this criminal petition filed a private complaint against the four petitioners herein, dated 20-12-2007 before the Judicial Magistrate of First Class, Nuzvid, Krishna District alleging that a work order was given to petitioners 1 to 3 through the 4th petitioner on 08-01-2006 for supply of a boiler, turbine and accessories by petitioners 1 to 3 respectively as per the terms and conditions of the work order and the 2nd respondent made payments of Rs.43,73,313/-, 30,24,320/- and Rs.7,00,000/- respectively to petitioners 1 to 3. The boiler installed in May, 2007 by the 1st petitioner was unable to produce necessary steam to produce power as per the specification in the work order. The 1st petitioner collecting an additional sum of Rs.50,000/- and making the 2nd respondent spend Rs.4,50,000/- for constructing a bunker, made him believe that the machinery will work with wood as alternative fuel. The structures and fixtures were again made to be changed to erect a boiler capable of working with husk by investing another Rs.2,00,000/-. The turbine alternator supplied by the 2nd petitioner with the steam turbine, blasted on 02-11-2007 due to faulty design and assembly and lack of proper attendance. The accessories supplied by the 3rd petitioner were not in a position to reduce pressure and heat as required to enable running the plant and on verification in the presence of Sri Nagabhushanam, boiler operator and Prasad, an electrician, the 2nd respondent came to know that the accused/petitioners colluded and supplied a duplicate turbine affixing the label of the company and collected huge amount making him believe that original turbine of their own make was supplied. The 2nd respondent claimed that he sustained heavy financial loss to a tune of Rs.1.00 crore and above due to the fraud and cheating committed by the petitioners and he could not run the main plant to give his product to customers. Hence, the complaint alleging the offences under Sections 409, 420 and 388 of the Indian Penal Code to have been committed by the petitioners. The Magistrate referred the matter for investigation and report to the police under Section 156(3) of the Code of Criminal Procedure and the police after investigation into Crime No.2 of 2008, sent a final report, dated 28-02-2008 stating that the scene of offence was inspected and seven witnesses were examined. The investigating agency claimed that the alleged accused supplied the machinery to the complainant as per the terms and conditions and installed the same and handed over in good working condition. The Sub-Inspector of Police also stated that the alleged accused examined the turbine on the complaint of the complainant about its not working properly and found the same to have been operated by unqualified persons and rectified the same, repaired it and handed over in good working condition. The police further stated that the machinery is now in working condition with power and hence, it is clearly and purely a civil dispute due to misunderstandings between the parties and has to be settled before Consumer Forum. The Magistrate was, hence, requested to treat the case as one of civil nature and a notice was also accordingly served on the 2nd respondent, which was claimed to have been refused on 05-03-2008. Subsequently, on 30-03-2008, the 2nd respondent filed a protest petition alleging the police to have forced him to compromise with the 3rd accused and to have submitted an incorrect final report. He, therefore, requested for recording of the statements of his witnesses and to take cognizance of the offences. The 2nd respondent and two witnesses were examined by the learned Magistrate and by an order, dated 23-10-2008, the learned Magistrate after hearing the counsel for the 2nd respondent and perusing the sworn statements, opined that there is a prima facie case made out against accused 1 to 4 for the offence under Section 420 of the Indian Penal Code. Accordingly, the learned Magistrate took the case on file against the petitioners. The petitioners filed the present criminal petition to quash the said proceedings in C.C. No.616 of 2008 on the file of the Judicial Magistrate of First Class, Nuzvid, Krishna District. They claimed that the 2nd respondent changed the initial work order given on 08-01-2006, on 04-07-2006 for supply of a boiler suitable to burn mango wood, which necessitated change of the model of the boiler at a higher cost. A change in the turbine also was contemplated due to the information from the 2nd respondent during his visit on 08-02-2007 to the 2nd petitioner’s factory. The wood fired boiler commissioned on 29-08-2007, operated smoothly till it stopped giving adequate performance due to use of freshly cut mango wood with high moisture content. The 2nd respondent himself decided to change the fuel from wood to rice husk and a quotation, dated 10-09-2007 was given by the 1st petitioner at his instance. The 2nd respondent himself picked up a few items by visiting the 1st petitioner’s factory and issued a post-dated cheque, dated 18-03-2008. The boiler was satisfactorily recommissioned on 28-10-2007 and operated satisfactorily as per the service report. Due to continuous overloading of turbine and tripping, the alternator may have got burnt, which was immediately attended to by the petitioners on the complaint of the 2nd respondent. The alternator was supplied by an international company of repute and was repaired free of cost, but the 2nd respondent refused to take delivery of the same. The 2nd respondent filed Criminal Petition No.2650 of 2008 for directions to the police much later to the final report and Sri Nagendra Prasad, the alleged engineering expert is not a member of Board of Examiners of Andhra Pradesh Boilers Department of the State Government and is not authorized to carry out boiler inspection under the Boilers Act, 1923 and certify fitness of boilers. His statement, therefore, could not have been relied on and the boilers departments of States of Andhra Pradesh and Gujarat issued statutory certificates concerning the quality of the boilers. The Deputy Chief Inspector of Factories furnished information that no blast of any turbine was reported by the 2nd respondent as per the statutory requirements of the Factories Act. The information from the A.P. State Financial Corporation shows forged and fabricated invoices being used as if they were raised by the 3rd petitioner. Thus, it is purely a civil dispute or a consumer dispute without any criminality and continuance of the criminal proceedings is an abuse of process of law being utilized to compel the petitioners to succumb to the illegitimate demands of the 2nd respondent. Hence, the criminal petition. The 2nd respondent in his affidavit in support of vacate stay petition in Criminal M.P. No.4874 of 2009 stated that Sri Nagendra Prasad is a certified professional as a Boiler Operation Engineer with corporate membership of the Institution of Engineers (India) and was proposed as a member of the Board of Boilers Department under the Statutory Rules in 2007. He is a competent and efficient technical expert to give his opinion. His inspection revealed that the petitioners did not supply the material as per the specifications in the purchase order, disabling the 2nd respondent from running the main paper plant and the fraud and cheating committed in supplying the turbine, boiler and other accessories could not have been negatived by the Sub-Inspector of Police, who is not a technical person. As the blast of the turbine did not cause any bodily injury to any of the workers in the factory, no statutory report under the Factories Act need be given and in view of the need to examine the witnesses before the Court about the fraud involving heavy amounts, the proceedings cannot be quashed in a summary enquiry. Hence, the 2nd respondent sought for negativing the request of the petitioners. Learned senior counsel for the petitioners, Sri C. Padmanabha Reddy, learned counsel for the 2nd respondent, Sri D. Ramalingaswamy and Sri A. Ramesh, learned counsel representing the learned Public Prosecutor for the 1st respondent, are heard at length. Before going into the specifics of the case, the parameters of the inherent jurisdiction under Section 482 of the Code of Criminal Procedure as settled by the Apex Court, illustratively referred to in the precedents relied on by the learned counsel for the 2nd respondent, need to be noted. As pointed out in M. Narayandas v. State of Karnataka and others[1], referring to State of Haryana v. Bhajan Lal[2], the power to quash must be exercised very sparingly and with circumspection in the rarest of rare cases and the Court would not be justified in embarking upon an inquiry as to the reliability or genuineness or otherwise of the allegations made in the first information report and the Court cannot inquire whether the allegations in the complaint are likely to be established or not. Similarly, in State of Maharashtra v. Salman Salim Khan and another[3], the Apex Court pointed out that the High Court cannot weigh the correctness or sufficiency of evidence in a petition under Section 482 of the Code of Criminal Procedure and the principle to be adopted by the High Court should be that if the entire evidence produced by the prosecution is to be believed, will it constitute an offence or not. The truthfulness, the sufficiency and acceptability of the material produced at the time of framing of charge can be done only at the stage of trial. It should also be noted that the facts may give rise to a civil claim and also amount to an offence, but merely because a civil claim is maintainable, it does not mean that the criminal complaint cannot be maintained, as held in Lalmuni Devi v. State of Bihar and others[4]. It was similarly held in M/s. Medchl Chemicals and Pharma Pvt. Ltd., v. M/s. Biological E. Ltd.[5] that both criminal law and civil law remedy can be pursued in diverse situations and they are not mutually exclusive but clearly co-extensive. Simply because there is a remedy provided for breach of contract, the civil remedy alone cannot be said to be the remedy available. The Apex Court also reiterated the limitations of inherent jurisdiction and with reference to an offence of cheating, pointed out that mensrea is one of the essential ingredients of the offence of cheating under Section 420 of the Indian Penal Code and mere failure to deliver in breach of an agreement would not amount to cheating, but is liable only to civil action for breach of contract. In Pratibha Rani v. Suraj Kumar and another[6], it was reiterated that the High Court would have to proceed entirely on the basis of the allegations made in the complaint or the documents accompanying the same per se for the purpose of exercising its power under Section 482 of the Code of Criminal Procedure and it has no jurisdiction to examine the correctness or otherwise of the allegations. In Rajesh Bajaj v. State NCT of Delhi and others[7] also, the Apex Court pointed out that it is not necessary that the complainant should verbatim reproduce in the body of the complaint all the ingredients of the offence he is alleging. Nor is it necessary that he should state in so many words that the intention of the accused was dishonest or fraudulent. If factual foundation for the offence has been laid in the complaint, the Court should not hasten to quash criminal proceedings during investigation stage merely on the premise that one or two ingredients have not been stated with details. For quashing a first information report, a step which is permitted only in extremely rare cases, the information in the complaint must be so bereft of even the basic facts which are absolutely necessary for making out the offence. The Apex Court also observed that many a cheatings were committed in the course of commercial and money transactions as illustrated in illustration (f) to Section 415 of the Indian Penal Code. A hyper technical approach is deprecated. If the facts of the present case are examined with reference to the above principles, it is seen from the complaint, dated 20-12- 2007 that the 2nd respondent did not attribute any culpable intention or knowledge to any of the petitioners since the work order, dated 08-01-2006 till the supply of the boiler in May, 2007. Even then, the 2nd respondent was convinced with the sweet words of the 1st petitioner and indulged in further expense, according to the private complaint. The further change of the boiler into one working with rice husk was also claimed by the 2nd respondent to be at the instance of the 1st petitioner and the specific allegations in the private complaint about the alleged collusion between the petitioners and the alleged committal of the offence of cheating, was only on verification by the 2nd respondent in the presence of a boiler operator and an electrician after the alleged blast of turbine alternator by 02-11-2007. The alleged illegal and fraudulent acts of the accused in collusion committing breach of trust and cheating constituting offences under Sections 409, 420 and 388 of the Indian Penal Code were, thus, clearly alleged to have come to the knowledge of the 2nd respondent only on verification by him in the presence of a boiler operator and an electrician subsequent to the blast of turbine alternator by 02-11-2007, after which the private complaint, dated 20-12-2007 was filed into Court. In the sworn statement of the 2nd respondent after the protest petition also, while alleging the petitioners to have not complied with the agreed terms and conditions, the 2nd respondent suspected the bona fides of the petitioners only after the blast of the equipment alternator and after the expert’s opinion of Sri Nagendra Prasad. He was clear that it is only on perusal of the opinion given by the expert that the petitioners were known to have cheated them by supplying defective and substandard material with an intention to cheat them, clearly knowing even prior to supply that the material does not generate the required energy. Thus, the private complaint and the sworn statement of the 2nd respondent clearly disclose that an inference of an intention to cheat was drawn by the 2nd respondent from the circumstances said to have been disclosed after the blast of the alternator, but not before. The sworn statement of Sri Nagendra Prasad, who claimed to be a member of the Board of Examiners of Andhra Pradesh Boilers Department is about his opinion that the equipment was substandard and was not as per the work order. He also stated about there being no proper and standard firing arrangement for the operation of the boiler and he elaborated his opinion given on 25-12-2007 in the sworn statement. He stated that the suppliers of the equipment can easily understand the standards of the work order given by the de facto complainant. The sworn statement of the electrician is about the inspection by Sri Nagendra Prasad and his opinion after the equipment failed to work. In this criminal petition, it is seen that Sri Nagendra Prasad was only proposed to be included in the Board of Examiners for Boiler Attendants, but was not, in fact, included in the said Board as claimed by him in his sworn statement and that he is not authorized to carry out boiler inspections. The allegation that the petitioners supplied a duplicate turbine affixing the label of their company making the 2nd respondent believe that original turbine of the own make of the petitioners was supplied, was not reiterated in the sworn statements of P.Ws.1 to 3, which alone was stated in the private complaint to have led to the committal of the offence of cheating. Thus, it was on the opinion of Sri Nagendra Prasad after the troubles in the working of the turbine and blast of the alternator that the 2nd respondent had, for the first time, reason to believe that he was cheated. Apart from certification by the Boilers Departments of Gujarat and Andhra Pradesh regarding the boilers, as statutorily required, and the other documents relied on by the petitioners, obtained under the Right to Information Act from the concerned officials, it may be noted that the learned Magistrate had not taken cognizance of the alleged offences committed by the petitioners under Sections 409 and 388 of the Indian Penal Code and took the case on file against the petitioners only for an offence punishable under Section 420 of the Indian Penal Code and in respect of the said offence under Section 420 of the Indian Penal Code, it should be seen whether the private complaint and the other material produced by the 2nd respondent per se and prima facie can be considered to constitute an offence under Section 420 of the Indian Penal Code, for which purpose even the alleged inspection by the Investigating Officer and his satisfaction about the supply by the petitioners of the machinery to the 2nd respondent as per the terms and conditions of the contract, may be ignored. Even the affidavit filed in support of Criminal M.P. No.4874 of 2009 herein is also about the technical inspection carried out by Sri Nagendra Prasad as a cross check revealing the non-supply of the material by the petitioners as per the specifications of the purchase order, but no circumstances from which the existence of a culpable state of mind can be inferred since inception. It is true that illustrations (b), (c) and (h) to Section 415 of the Indian Penal Code defining cheating, illustrating intentional dishonest inducement making the victim buy and pay, may be of guidance as pointed out by the learned counsel for the 2nd respondent, but Section 415 defining cheating with Section 420 prescribing punishment for dishonest inducement of delivery of property by cheating, primarily refers to deceit and fraudulent and dishonest inducement including dishonest concealment of facts as essential ingredients for the offence. In K. Srinivas v. State of Andhra Pradesh[8] relied on by the learned senior counsel for the petitioners, the learned Judge noted the tendency of increasing overflow of matters from the civil side to the criminal side in disputes of civil nature and observed that allegations relating to a bona fide civil dispute even assuming the facts to be substantially correct, should be quashed in respect of the proceedings before the criminal Court in exercise of the Court’s inherent jurisdiction. The learned Judge relied on Trilok Singh v. Satya Deo Tripathi[9]. In the case before the learned Judge, the dispute was held to be purely civil litigation arising out of breach of contract and the ingredients of the criminal offence were found to be wanting. In M. Sivaram v. State of A.P.[10], the learned Judge made an exhaustive survey of the precedential law on the aspect and with reference to the alleged offence under Section 420 of the Indian Penal Code, the learned judge noted that there was no allegation in the complaint that there was a fraudulent or dishonest intention at the beginning of the transaction or at the time when the supplies were effected. There was also no allegation about any fraudulent or dishonest intention when the order was placed, but it was only the subsequent acts that were alleged to reflect an intention to cheat, which would not attract the ingredients of Section 420 of the Indian Penal Code. The learned Judge held that necessary postulate of an offence under Section 420 is that the intention to cheat must have been in existence at the very inception and not subsequently and mere failure on the part of the accused to keep up the promise subsequently will not give rise to the presumption of their culpable intention right at the beginning. The learned Judge pointed out that mere use of expression ‘cheating’ in the complaint is of no consequence and even the subsequent conduct is not the sole test. The intention to deceive should be in existence at the time when the inducement was made and it is only where a fraudulent representation leads to delivery of property, which is dishonestly retained, that the ingredients of Section 415 of the Indian Penal Code are established. Tested in that light, the complaint and the other material relied on by the 2nd respondent cannot be construed to have laid the factual foundation for an offence under Section 420 of the Indian Penal Code. There was no allegation of any wilful misrepresentation at the inception and the change in the nature and content of the machinery from time to time was admittedly with mutual consultation. Therefore, the facts and circumstances may disclose the existence of a bona fide civil dispute between the parties, but not any existence of any criminal liability for the petitioners under Section 420 of the Indian Penal Code. Even otherwise, it may be seen from the material on record that it was only the 4th petitioner that was sued in the criminal complaint by name in his individual capacity as Marketing Manager of IBL & IB Turbo (P) Limited, while petitioners 1 to 3 were sued as the Companies and Firms represented by their Chairpersons and Managing Directors or Proprietor respectively. The offence under Section 420 of the Indian Penal Code has its basic ingredient in culpable intention and it was decided by a Division Bench of this Court in State Bank of Hyderabad v. State of Andhra Pradesh[11] that the offences such as cheating under Section 420 of the Indian Penal Code, etc., are incapable of being committed by a body corporate. In that case also, the State Bank of Hyderabad was sought to be prosecuted and the Division Bench observed that a fraudulent or dishonest intention, which is one of the essential ingredients of such offence, can never be attributed to a body corporate. In that view also, the prosecution of petitioners 1 to 3 may have to be considered as untenable. As an ex facie consideration of the private complaint and the other material relied on by the 2nd respondent for attributing committal of an offence under Section 420 of the Indian Penal Code to the petitioners discloses prima facie that such a criminal liability cannot, per se, be fastened to the petitioners, the continuance of the criminal proceedings will not be in the interests of justice, if not be an abuse of process of the Court. The criminal proceedings have to be accordingly quashed, of course, without prejudice to the civil rights of the parties and in determination of such civil rights, no observations made in this order shall influence any consideration or conclusion. In the result, the further proceedings against the petitioners in C.C. No.616 of 2008 on the file of the Judicial Magistrate of First Class, Nuzvid, Krishna District are quashed and the criminal petition is allowed accordingly. _____________________ G. BHAVANI PRASAD, J Date: 17-08-2009 Svv [1] 2003(6) Supreme 863 [2] (1992) Supp. (1) SCC 335 [3] 2004 Supreme Court Cases (Cri) 337 [4] 2001 (1) ALT (Crl.) 219 (SC)