S.V.N. BHATTI, J.

1. Leave granted.

2. The appellant filed R/Criminal Misc. Application No. 11506 of 2017 before the High Court of Gujarat at Ahmedabad under section 482 of The Code of Criminal Procedure (“the Code”) for quashing the FIR bearing C.R. No. I- 06 of 2017 registered with Salabatpura, Police Station, Surat for the alleged offences punishable under sections 406 and 420 of the Indian Penal Code (“ IPC ”). The said Criminal Misc. Application was dismissed (“Impugned Order”) by the High Court resulting in the filing of the Criminal Appeal.

3. The second respondent claims that he is running a business at Surat Textile market under the name and style of “Ansh Prints”. The nature of the business activity of the second respondent is to subject the Grey cloths purchased from weavers and process them for “Dyeing prints” and “Bal Signature Not Verified Digitally signed by geeta ahuja Date: 2025.05.01 prints”. As a further process, the printed sarees are sent for cutting and saree 17:24:16 IST Reason:

Ltd., Maayu Impex No.103, Third Cross Street, Colombo 11, Sri Lanka and was interested in doing business with the respondent no. 2. Since the sold goods were to be sent out of India and the respondent no. 2 did not possess an import-export licence, the appellant had asked him to send the goods through Vikrambhai Mahendrabhai Barmecha (“Vikrambhai”), owner of M/s. Oswal Overseas, at Raghunandan Textile Market. It was agreed that the payment would be made via a cheque within 60 to 90 days. 3.3 From 16.10.2013 to 05.03.2014, the second respondent, vide different bills, had sent reniyal sarees, work sarees and cotton work quality goods of 75,515 metres and 44,753 pieces, along with saree packing material bags, handwork beads and stone goods of a total worth of Rs. 39,18,108/- to the appellant through M/s. Oswal Overseas. The above-mentioned Vikrambhai of M/s. Oswal Overseas used to stamp and sign the invoice bill of the second respondent and share the container bill and the customs clearance bill for sending goods to Sri Lanka.

3.4 The Packing List No. AP- 1 to 98 goods were sent through M/s. Oswal Overseas to the appellant in Sri Lanka. However, the other packing list No. AP- 99 to 103 worth Rs. 4,46,764/- for some reason could not be sent by Vikrambhai to the appellant in Sri Lanka. Vikrambhai paid the money for the said goods to the second respondent. Hence, the total goods worth Rs. 34,71,344/- were exported through M/s. Oswal Overseas to the accused. 3 3.5 Until March 2014, the second respondent had sent the goods to the appellant, but despite repeated demand, no payment was made. Consequently, the second respondent had himself gone to Sri Lanka to the appellant, and the appellant had assured him of payment regarding the same. After the second respondent returned to Surat, the appellant stopped receiving his calls in March 2016. Hence, the FIR was registered.

4. The appellant filed R/Criminal Misc. Application No. 11506 of 2017 under section 482 of the Code for quashing the subject FIR. The foremost grounds, from the nature of the relationship between the appellant and the respondent for invoking the jurisdiction of the High Court under section 482 of the Code are summarised as thus:

c. The export of goods from the second respondent to the appellant, on the very showing of the second respondent, is through M/s. Oswal Overseas. The second respondent sold or supplied goods to M/s Oswal Overseas, and the said exporter has exported the goods to the appellant. d. The claim of the second respondent is based on the unpaid sale consideration of goods sold. There is no privity of contract or a shred of document establishing a tri-partite arrangement between the second respondent/seller on one hand and M/s. Oswal Overseas/exporter and the appellant/the importer, on the other hand.

e. None of the ingredients of sections 406 and 420 are attracted from the accusations in the FIR, and on the mere statement of the second 4 respondent, the transaction does not turn out to be an offence under IPC .

5. The High Court, through the impugned order, dismissed R/Criminal Misc. Application No. 11506 of 2017. The gist of the consideration of the High Court is that the appellant misrepresented to the respondent no. 2 and convinced the latter to do business with the appellant through the exporter. The High Court, after relying upon judicial pronouncements defining essential ingredients of criminal breach of trust and cheating, observed that the distinction between mere breach of contract and offence of cheating has to be kept in mind. It emphasised that the same would depend upon the intention of the accused at the time of the alleged inducement, and mere breach of contract cannot give rise to criminal prosecution for cheating unless a fraudulent or dishonest intention is shown at the inception of the transaction. The High Court considered the details provided by the respondent no. 2, showing how the appellant misrepresented and induced the second respondent to deliver the goods. On the basis of documents of supply of goods placed on record and affidavit filed by the respondent no. 2 stating that others were also cheated by the appellant, the High Court found that the offences as mentioned in the FIR were substantiated and refused to exercise the powers under section 482 of the Code to quash the FIR.

6. Mr. P.S. Patwalia, learned Senior Counsel appearing for the appellant, argues that the accusations in the FIR do not make out an offence of criminal breach of trust or cheating. The FIR refers to the total outstanding from the export made through M/s. Oswal Overseas as Rs. 39,18,108/- and the consignment worth Rs. 4,46,764/- could not be exported to the appellant. M/s. Oswal Overseas, through one Vikrambhai, paid the said amount to the 5 second respondent, thus reducing the unpaid sale consideration of exports made to the appellant to Rs. 34,71,344/-. Either for un-exported or exported goods, the liability towards the unpaid sale price is with M/s. Oswal Overseas. As per the transfer documents, the unpaid sale price can be recovered only by M/s. Oswal Overseas and the second respondent by treating the director of M/s. Oswal Overseas, as a witness, cannot convert a pure and simple dispute on unpaid sale price by the appellant into criminal prosecution under sections 406 and 420 of the IPC. The appellant prays for quashment of the FIR not by looking at any extraneous documents but by accepting the accusation in the FIR.

7. Mr. Mohit D. Ram, learned Counsel, appearing for the second respondent, contends that business transactions have happened, and sarees have been exported through M/s. Oswal Overseas on the negotiations held between the appellant and the second respondent. M/s. Oswal Overseas is a mere facilitator. The goods sold have finally benefited the appellant. The non- payment of the full sale price amounts to criminal Breach of trust and cheating. The investigation into the allegations of the FIR would disclose whether the case warrants filing a chargesheet or closure report. At this stage, invoking the power of section 482 of the Code by the appellant is illegal. He invites our attention to a status report filed by the first respondent, to the evidence gathered so far and argues that the complicity of the appellant to convince the second respondent to do business through M/s. Oswal Overseas can be investigated. The High Court, according to him, has rightly dismissed the prayer.

8. We have heard the learned Counsel and perused the record. The appellant prays for quashment of FIR, and we are conscious of the exercise of 6 jurisdiction in interdicting an FIR and the legal position is fairly well established by a catena of decisions, and we refer to the following three decisions:

It is not open to the High Court to rely on the report of the investigating agency, nor can it direct the report to be submitted before it as the law is very clear that the report of the investigating agency may be accepted by the Magistrate, or the Magistrate may reject the same on consideration of the material on record. Such being the position, the report of the investigating agency cannot be relied on by the High Court while exercising powers under section 482 of the Code.

9. The FIR has been registered under sections 406 and 420 of the IPC. The scope and expanse of these sections is better appreciated in the company of sections 405 and 415 of the IPC. This court in the case of Radheyshyam v. State of Rajasthan4 , culled out the following ingredients to constitute the criminal breach of trust:

contexts. In its most general significance, all its imports is handing over the possession for some purpose which may not imply the conferment of any proprietary right therein. The ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. 9.2 Further, in Hridaya Ranjan Prasad Verma v. State of Bihar6 , this court observed as follows:

11. As stated in the FIR:

2, gave him his visiting card, and saw the samples of the work being done by the latter;

(ii) Further, the appellant also enquired from respondent no. 2 from whom he was purchasing the goods of sarees. After 2-3 days, he came to the office of the appellant and demanded other samples;

(iii) Appellant had asked respondent no. 2 to prepare goods and informed that he would make the payments in 60 to 90 days; and

(iv) Appellant had assured and given trust for making timely payments, stating that he has his own house in Chennai and had good contacts with political persons.

12. From the above, respondent no. 2 has not availed the services of M/s. Oswal Overseas as a transport carrier. It is unclear whether the invoice has been raised in the name of the appellant or the exporter. The “bill of lading” would have disclosed the transfer of title in goods in favour of the appellant. On the contrary, the FIR is filed showing that the appellant, as accused, had an intention to cheat and commit breach of trust. The documents belie the allegations in the FIR. Looking at the controversy from any perspective, a mere civil dispute has been given the colour of an offence of cheating and criminal breach of trust. We have perused the FIR and are convinced that the inducement is an explanation to contradict the documents through which exports have been completed. In the circumstances of this case, by referring to inducement, the continuation of investigation/prosecution into the offence of cheating and breach of trust would amount to an abuse of the process of 11 law. Further, what begs the question is whether such non-payment of the sale price can be an offence of criminal breach of trust and cheating at the hands of the second respondent. The answer is clearly no.

13. As per the FIR, the goods were to be exported out of India. The respondent no. 2, since did not possess an import/export license, the appellant had asked respondent no. 2 to export the goods through M/s. Oswal Overseas. Accordingly, from 16.10.2013 to 05.03.2014, respondent no. 2 has in all exported sarees worth Rs. 34,71,344/- through Vikrambhai, owner of M/s. Oswal Overseas to the appellant.

14. By keeping in perspective the ratio in the judgments referred supra and also the well-established position of law under section 482 of the Code, we will examine the crux of the complaint. The respondent no. 2 complains that the appellant, after appropriating the goods exported, has not paid the sale price of Rs. 34,71,344/-. M/s. Oswal Overseas is the exporter, and the primary liability for the goods entrusted lies with the appellant. The respondent no. 2 has treated the Director/Partner of M/s. Oswal Overseas as a witness to bring home the accusation of breach of trust and cheating. We do not want to hold a mini trial and observe whether such an effort, either in the course of the investigation by the police or finally in the prosecution, will bring home the aforesaid charges. In the documents filed as Annexure P2, which is a true copy of the invoices and the payment receipt made by the appellant, the appellant is shown as the consignee and M/s. Oswal Overseas is the exporter. Annexure P2 is as follows:

15. Therefore, the entrustment was made to M/s. Oswal Overseas by respondent no. 2 and not to the appellant.

16. The sale price was agreed to be debited to the account of M/s. Oswal Overseas accepted the same as part payment against the subject export of goods from the appellant. It might be true that the appellant is yet to discharge the sale price of the subject export. The respondent no. 2, by referring to an oral arrangement of inducement, tries to plead a case contrary to the documents through which the final “entrustment” of the exported goods happened in Sri Lanka.

17. For the above reasons, and particularly appreciating Annexures-P1 to P3, we are of the view that the continuation of the FIR against the appellant is an abuse of the process of law, and at best, the non-payment of the sale price could be a civil dispute between the appellant and M/s. Oswal Overseas. The appeal is accordingly allowed, the impugned order is set aside and FIR No. I-06 of 2017 is quashed.

……….…………………J [PANKAJ MITHAL] ..…………………………J [S.V.N. BHATTI] New Delhi;

May 1, 2025.