2012 (12) TMI 476 - HC - Indian Laws

Breach of Contract - claim of Civil remedies - Petitioner no.1 engaged in the manufacturing of a soil stabilizer entered into an agreement with the respondent no.3 - respondent no.3 failed to pay the royalty amounts even as per the scheduled terms - respondent no. 2 could not complete the project and pay the royalty @ 12% ex-factory price in addition to the licence fee of Euro 2 million - Held that - A bare perusal of Section 415 IPC makes it clear that for the purpose of constituting an offence of cheating, complainant is required to show that accused had fraudulent or dishonest intention at the time of making promise or representation. In absence of intention at the time of making initial promise, no offence under Section 420 of the Indian Penal Code can be said to have been made out. In this case, it has been alleged in the FIR that respondent no.2 was induced to enter into agreement and invest money in the venture with dishonest intention by the accused persons, in collusion with each other, including the petitioners. A holistic reading of FIR will not show that prima facie case is not disclosed for registration of FIR and the consequential investigation. Investigation is yet to commence, pursuant to registration of the FIR, inasmuch as investigating agency has to collect relevant material. In view of the nature of allegations it cannot be said that the case has purely a civil profile. Veracity of the allegations has yet to be verified by the investigating agency by collecting materials during the investigation. Allegations and counter allegations levelled by the parties cannot be gone into threadbare at this initial stage of investigation. Thus at this nascent stage, it would not be proper for this Court to exercise its power under Section 482 Cr.P.C. to quash the FIR, more particularly when complainant (respondent no. 2) has alleged in the FIR that all the accused including the petitioners connived with each other and allured him to enter into the agreement and invest huge amount in the project and when same reached at the advanced stage petitioners terminated the contract and tried to take over the respondent no. 3. - Miscellaneous application is disposed of as infructuous.

Summary

Issues Involved:
1. Quashing of FIR under Section 420 read with Section 120-B IPC.
2. Nature of disputes: Civil vs. Criminal.
3. Alleged fraudulent intention and collusion.
4. Jurisdiction and power of the High Court under Section 482 Cr.P.C.

Detailed Analysis:

1. Quashing of FIR under Section 420 read with Section 120-B IPC:
The petitioners sought the quashing of FIR No. 195/2011 under Section 420 read with Section 120-B IPC, registered at Police Station Economic Offence of Delhi Police. The allegations in the FIR included that the accused persons, from the very inception, intended to defraud the complainant, induced the complainant into parting with funds, and then illegally terminated the Patent License Agreement, causing wrongful loss to the complainant and wrongful gain to themselves. The court noted that the allegations in the FIR, if taken at face value, prima facie constituted an offence under Section 420 read with Section 120-B IPC. The court emphasized that at the nascent stage of investigation, it is not appropriate for the High Court to quash the FIR.

2. Nature of disputes: Civil vs. Criminal:
The petitioners contended that the disputes were purely civil in nature arising out of commercial transactions without any criminality. They argued that civil remedies were available and had been availed by the parties. The court, however, held that the presence of a civil dispute does not automatically negate the possibility of a criminal offence. The court cited precedents stating that a commercial transaction or a contractual dispute might also involve a criminal offence. The court concluded that the case had both civil and criminal elements, and thus, the FIR could not be quashed solely on the ground of being a civil dispute.

3. Alleged fraudulent intention and collusion:
The respondents alleged that the petitioners, in collusion with other accused, induced the complainant to invest substantial funds with dishonest intentions and later fraudulently terminated the agreements. The court observed that the allegations pointed towards a possible fraudulent intention at the inception of the contract, which is a question of fact to be determined during the investigation. The court noted that the petitioners extended the payment schedule of royalty, which indicated bonafide intentions, but the allegations of collusion and fraudulent termination required thorough investigation.

4. Jurisdiction and power of the High Court under Section 482 Cr.P.C.:
The court discussed the scope of its power under Section 482 Cr.P.C., emphasizing that it should be exercised sparingly and only in exceptional circumstances. The court referred to the Supreme Court's guidelines in Bhajan Lal's case, which outline specific scenarios where FIRs can be quashed. The court concluded that the present case did not fall within any of those scenarios and that the allegations required a detailed investigation. The court underscored that it should not interfere with the investigation at this stage, as it would impede the collection of evidence and the determination of facts.

Conclusion:
The court dismissed the petition to quash the FIR, stating that the allegations in the FIR disclosed a prima facie case of cheating and criminal conspiracy. The court held that the investigation should proceed to uncover the truth and collect relevant material. The court emphasized that the inherent powers under Section 482 Cr.P.C. should not be used to stifle legitimate prosecution and that the investigation should be allowed to continue without interference.