Case: S.N. Palanitkar and Ors Vs. State of Bihar and Anr

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 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 criminal side when it is clear from the complaint and sworn statements that necessary ingredients of constituting an offence are made out. May be 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 of Cr.P.C. keeping in mind the position of law stated above and pass an order judiciously and not mechanically or in routine manner. 24. The learned Magistrate, in our view, having regard to the facts stated and the legal position explained above, committed a serious error in issuing the process against the appellants 1 to 6 and 8 for offences under Sections 406, 420 and 120-B IPC when the acts alleged against them did not constitute these offences satisfying their ingredients even prima facie. In the light of the material brought on record at that stage process could have been issued only as against the appellant No. 7, that too for an offence under Section 420 IPC only. 25. The High Court dismissed the petition filed under Section 482 Cr.P.C. by the impugned order placing reliance, in particular, on two decisions of this Court, one Trisuns Chemical Industry (supra) and Medchl Chemicals and Pharma (P) Ltd. v. Biological E. Ltd. and others, 2000(3) SCC 269. In the first case, this Court held that the exercise of inherent power should be limited to very extreme exceptions. Further it was held that referring the disputes to arbitration is not an effective substitute for a criminal prosecution when the disputed act is an offence. It may be noted that the said judgment gets attracted only when the disputed act is an offence, which the High Court has failed to notice. No doubt, exercise of inherent power under Section 482 Cr.P.C. by High Court should be limited to very extreme exceptions but in a case where ingredients of alleged offences are not satisfied even prima facie, it cannot be said that power under Section 482 Cr.P.C. should not be exercised to quash the process issued by a Magistrate. In the case of Smt. Nagawwa (supra), it is laid down that in such a case, power under Section 482 Cr.P.C. can be exercised to quash the process issued by a Magistrate. 26. In the second case also, this Court has expressed that "exercise of jurisdiction under the inherent power as envisaged under Section 482 Cr.P.C. to have the complaint or the charge-sheet quashed is an exception rather than a rule and the case for quashing at the initial stage must have to be treated as rarest of rare so as not to scuttle the prosecution. .......................In the event, however, the court on perusal of the complaint comes to a conclusion that the allegations levelled in the complaint or charge-sheet on the face of it does not constitute or disclose any offence as alleged, there ought not to be any hesitation to rise up to the expectation of the people and deal with the situation as is required under the law." Even from this case also, it is clear that if no offence is made out from the allegations made in the complaint, there should be no hesitation in exercising power under Section 482 Cr.P.C. to pass appropriate order. 27. In the case on hand, we have already stated above, that except against the appellant No. 7, no offence was made out against the remaining appellants as the ingredients of offences alleged against them were not satisfied. Unfortunately, the High Court failed to exercise jurisdiction under Section 482 Cr.P.C. to correct manifest error committed by the learned Magistrate in issuing process against the appellants 1-6 and 8 when the alleged acts against them did not constitute offences for want of satisfying the ingredients of the offences. The approach and considerations while exercising power and jurisdiction by a Magistrate at the time of issuing process are to be in terms of Sections 200 to 203 under Chapter XV of Cr.P.C., having due regard to the position of law explained in various decisions of this Court, and whereas while exercising power under Section 482 of Cr.P.C. the High Court has to look at the object and purpose for which such power is conferred on it under the said provision. Exercise of inherent power is available to the High Court to give effect to any order under the Cr.P.C., or to prevent abuse of the process of any court or otherwise to secure the ends of justice. This being the position, exercise of power under Section 482 Cr.P.C. should be consistent with the scope and ambit of the same in the light of the decisions aforementioned. In appropriate cases, to prevent judicial process from being an instrument of oppression or harassment in the hands of frustrated or vindictive litigants, exercise of inherent power is not only desirable but necessary also, so that the judicial forum of court may not be allowed to be utilized for any oblique motive. When a person approaches the High Court under Section 482 Cr.P.C. to quash the very issue of process, the High Court on the facts and circumstances of a case has to exercise the powers with circumspection as stated above to really serve the purpose and object for which they are conferred.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]An act of breach of trust involves a civil wrong in respect of which the person wronged may seek his redress for damages in a civil Court but a breach of trust with mens rea gives rise to a criminal prosecution as well.9. The ingredients in order to constitute a criminal breach of trust are : (i) entrusting a person with property or with any dominion over property (ii) that person entrusted (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged (ii) of any legal contract made touching the discharge of such trust.10. The ingredients of an offence of cheating are : (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 property 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 body, mind, reputation or property.12. Finding that ingredients of the offence of cheating and its allied offences had not been made out, this Court interfered with the order of the High Court and quashed the criminal proceedings.Turning to the facts of the case, there is nothing either in the complaint and/or in the sworn statements of the complainant and the three witnesses that any property was entrusted to any of the appellants at all or the appellants had domain over any of the properties of respondent No. 2 which they dishonestly converted to their own use so as to satisfy the ingredients of Section 405 IPC punishable under Section 406 IPC. Further the agreement also did not require entrustment of any property to the appellants. Taking the complaint and the statements of the witnesses as they are, it cannot be said even prima facie, that the appellants committed any offence punishable under Section 406 IPC, since the ingredients of that offence were not satisfied. Hence the learned Magistrate committed a serious error in issuing process against the appellants for the said offence. Unfortunately, the High Court also failed to correct this manifest error.21. It is clear from the allegations made in the complaint and the sworn statements that the appellant No. 1 company entered into an agreement with the respondent No. 2 on certain terms and conditions. It is alleged that the appellant No. 7 went to Patna and contacted respondent No. 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 the respondent No. 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 ton of fertilizer, may be it was far less than the required quantity. The allegations made against the appellants other than the appellant No. 7 are very vague and bald. From the material that was placed before the Magistrate, even prima facie, it cannot be said that there was conspiracy or connivance between the other appellants and the appellant No. 7. If the appellants have committed breach of agreement, it is open to respondent No. 2 to seek redressal 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 in 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 our notice that the complainant issued a notice dated 3.10.1997 to the appellants invoking this arbitration clause claiming Rs. 15 lacs. It is thereafter the present complaint was filed. For the alleged breach of the agreement in relation to commercial transaction, it is open to the respondent No. 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.The learned Magistrate, in our view, having regard to the facts stated and the legal position explained above, committed a serious error in issuing the process against the appellants 1 to 6 and 8 for offences under Sections 406, 420 andIPC when the acts alleged against them did not constitute these offences satisfying their ingredients even prima facie. In the light of the material brought on record at that stage process could have been issued only as against the appellant No. 7, that too for an offence under Section 420 IPCdoubt, exercise of inherent power under Section 482 Cr.P.C. by High Court should be limited to very extreme exceptions but in a case where ingredients of alleged offences are not satisfied even prima facie, it cannot be said that power under Section 482 Cr.P.C. should not be exercised to quash the process issued by a Magistrate. In the case of Smt. Nagawwa (supra), it is laid down that in such a case, power under Section 482 Cr.P.C. can be exercised to quash the process issued by afrom this case also, it is clear that if no offence is made out from the allegations made in the complaint, there should be no hesitation in exercising power under Section 482 Cr.P.C. to pass appropriateof inherent power is available to the High Court to give effect to any order under the Cr.P.C., or to prevent abuse of the process of any court or otherwise to secure the ends of justice. This being the position, exercise of power under Section 482 Cr.P.C. should be consistent with the scope and ambit of the same in the light of the decisions aforementioned. In appropriate cases, to prevent judicial process from being an instrument of oppression or harassment in the hands of frustrated or vindictive litigants, exercise of inherent power is not only desirable but necessary also, so that the judicial forum of court may not be allowed to be utilized for any oblique motive. When a person approaches the High Court under Section 482 Cr.P.C. to quash the very issue of process, the High Court on the facts and circumstances of a case has to exercise the powers with circumspection as stated above to really serve the purpose and object for which they are conferred.