2008 (12) TMI 809 - SC - Indian Laws

Cheating - Application filed u/s 482 - agreement to manufacture a machine to purify and desalt the dyes of a particular quality and quantity - said machine did not conform to the specifications contained in the order placed with the firm - refusal to take the delivery thereof. HELD THAT - For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in absence of a culpable intention at the time of making initial promise being absent, no offence u/s 420 of the IPC can be said to have been made out. There exists a distinction between pure contractual dispute of civil nature and an offence of cheating. Although breach of contract per se would not come in the way of initiation of a criminal proceeding, there cannot be any doubt whatsoever that in absence of the averments made in the complaint petition wherefrom the ingredients of an offence can be found out, the court should not hesitate to exercise its jurisdiction u/s 482 of the CrPC. Section 482 of the Code of Criminal Procedure, saves the inherent power of the court. It serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years although no case has been made out against him - We may reiterate that one of the ingredients of cheating as defined in Section 415 of the IPC is existence of an intention of making initial promise or existence thereof from the very beginning of formation of contract. A matter which essentially involves dispute of a civil nature should not be allowed to be the subject matter of a criminal offence, the latter being not a shortcut of executing a decree which is non-existent. The Superior Courts, with a view to maintain purity in the administration of justice, should not allow abuse of the process of court. It has a duty in terms of Section 483 of the Code of Criminal Procedure to supervise the functionings of the trial courts. We may notice a decision of this Court in from State of Madhya Pradesh v. Awadh Kishore Gupta 2003 (11) TMI 584 - SUPREME COURT held that it is open to the High Court to quash the same in exercise of the inherent powers u/s 482 of the Code. It is not, however, necessary that there should be meticulous analysis of the case before the trial to find out whether the case would end in conviction or acquittal. The complaint has to be read as a whole. If it appears that on consideration of the allegations in the light of the statement made on oath of the complainant that the ingredients of the offence or offences are disclosed and there is no material to show that the complaint is mala fide, frivolous or vexatious, in that event there would be no justification for interference by the High Court. No exception can be taken to the aforementioned principles of law, as therein also it has categorically been held that exercise of inherent power u/s 482 is permissible where allegations set out in the complaint do not constitute the offence for which cognizance has been taken by the Magistrate. It is evidently a case of that nature. Therefore, the judgment of the High Court cannot be sustained - appeal is allowed.

Summary

Issues Involved:
1. Allegations of cheating under Section 420 of the Indian Penal Code.
2. Breach of contract and its implications.
3. Exercise of jurisdiction under Section 482 of the Code of Criminal Procedure.

Issue-wise Detailed Analysis:

1. Allegations of Cheating under Section 420 of the Indian Penal Code:
The appellants were accused of cheating under Section 420 of the Indian Penal Code. The court examined whether the allegations made in the complaint disclosed an offense under this section. The essential ingredients of cheating, as defined in Section 415 of the IPC, include deception, fraudulent or dishonest inducement to deliver property, or to consent to retain property. For an offense of cheating to be established, the complainant must show that the accused had fraudulent or dishonest intention at the time of making the promise or representation. The court noted that the complaint and subsequent correspondences did not indicate any such intention at the time of entering into the contract. The court emphasized that mere failure to keep a promise does not constitute cheating unless there was a culpable intention at the inception of the contract.

2. Breach of Contract and Its Implications:
The dispute arose from a contractual agreement where the firm was supposed to manufacture a machine to purify and desalt dyes. The specifications of the machine were changed, and the second respondent alleged that the machine did not conform to the revised specifications. The court observed that the issue primarily involved a breach of contract, which is a civil matter. The court reiterated that a breach of contract per se does not constitute a criminal offense unless there is clear evidence of fraudulent or dishonest intention from the beginning. The court referred to several precedents, including Hira Lal Hari Lal Bhagwati v. CBI and Indian Oil Corporation v. NEPC India Ltd., to underline that civil disputes should not be converted into criminal cases unless the necessary ingredients of a criminal offense are present.

3. Exercise of Jurisdiction under Section 482 of the Code of Criminal Procedure:
The appellants sought to quash the criminal proceedings under Section 482 of the Code of Criminal Procedure, which saves the inherent powers of the court to prevent abuse of the process and to secure the ends of justice. The court noted that the High Court failed to provide reasons for not applying Section 482 in this case. The Supreme Court emphasized that the inherent power should be exercised sparingly and only in the rarest of rare cases. The court referred to the principles laid down in State of Haryana v. Bhajan Lal, which provide illustrative categories where such power can be exercised. The court concluded that the allegations in the complaint did not constitute the offense of cheating, and hence, the criminal proceedings should be quashed to prevent unnecessary harassment of the appellants.

Conclusion:
The Supreme Court set aside the judgment of the High Court and quashed the criminal proceedings against the appellants. The court highlighted the distinction between civil disputes and criminal offenses and emphasized the importance of preventing the misuse of criminal law to settle civil disputes. The appeal was allowed, and the inherent powers under Section 482 of the Code of Criminal Procedure were invoked to secure justice.