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Issues Involved:
1. Whether the disputes between the parties were of a civil nature arising out of a contractual relationship. 2. Whether the ingredients of the offences u/s 406, 420 read with Section 120B IPC were satisfied. 3. Whether the High Court erred in dismissing the petition u/s 482 Cr.P.C. for quashing the process issued by the Magistrate. Summary of Judgment: Issue 1: Civil Nature of Disputes The Court observed that the disputes between the appellants and respondent no. 2 were purely of civil nature arising out of a contractual relationship relating to a commercial transaction. The agreement between the parties included a clause for arbitration, which was invoked by the respondent before filing the complaint. The Court noted that merely because there is an arbitration clause in the agreement, it cannot prevent criminal prosecution if an act constituting a criminal offence is made out even prima facie. Issue 2: Ingredients of Offences u/s 406, 420 read with Section 120B IPC The Court emphasized that every breach of trust does not result in a penal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent misappropriation. The essential ingredients to constitute a criminal breach of trust and cheating were not satisfied in this case. The Court found that there was no entrustment of property to the appellants, nor was there any dishonest misappropriation or conversion of property to their own use. The allegations made against the appellants other than appellant no. 7 were vague and bald, and there was no prima facie evidence of conspiracy or connivance. The Court held that the learned Magistrate committed a serious error in issuing the process against the appellants for the said offences, and the High Court also failed to correct this manifest error. Issue 3: High Court's Dismissal of Petition u/s 482 Cr.P.C. The Court held that the High Court erred in dismissing the petition u/s 482 Cr.P.C. The exercise of inherent power u/s 482 Cr.P.C. should be limited to very extreme exceptions, but in cases where the ingredients of alleged offences are not satisfied even prima facie, the power should be exercised to quash the process issued by a Magistrate. The Court noted that the High Court failed to exercise jurisdiction to correct the manifest error committed by the learned Magistrate in issuing process against the appellants 1-6 and 8. Conclusion: The Supreme Court set aside the issue of process against appellant nos. 1-6 and 8 for offences u/s 406, 420, and 120-B IPC. The process issued against appellant no. 7 for offences u/s 406 and 120-B IPC was also set aside, but the process against him u/s 420 IPC was maintained. The order of the learned Magistrate and the impugned order were modified to this extent. The appeal was partly allowed and disposed of accordingly.
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