2015 (3) TMI 1385 - SC - Indian Laws

Cheating - It is alleged in the complaint that the loan transaction of the company with IIBI was settled with the efforts of the complainant/Respondent No. 3 herein but the company, Directors and Promoter did not pay him the consultancy fee as promised and they conspired together to deceive the complainant and committed offences as alleged - breach of contract - HELD THAT - It is not in dispute that the IIBI did not issue any acceptance letter on or before 30.10.2008 with regard to the settlement of disputes of the Appellant company. The 3rd Respondent also did not present the cheque dated 6.8.2008 issued by the Appellant company for encashing a sum of ₹ 30 lakhs. Due to the efforts of the Appellant company IIBI finally agreed and issued letter of acceptance dated 5.1.2009. One year later, the 3rd Respondent sent a letter dated 6.3.2010 to the Appellant company demanding the balance amount of ₹ 70 lakhs towards the consultancy fee. No allegation whatsoever was made against the Appellants herein in the said letter. It was only mentioned in it that the consultation fee remains unpaid and the company is delaying the payment on one pretext or the other. It is true that a given set of facts may make out a civil wrong as also a criminal offence and only because a civil remedy may be available to the complainant that itself cannot be a ground to quash a criminal proceeding. The real test is whether the allegations in the complaint disclose the criminal offence of cheating or not - In the present case there is nothing to show that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence Under Section 420 Indian Penal Code. The complaint does not disclose any criminal offence at all. Criminal proceedings should not be encouraged when it is found to be malafide or otherwise an abuse of the process of the court. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Challenging the order dismissing the petition to quash FIR under Sections 417, 418, 420, 120B, and 34 IPC - Allegations of cheating and breach of contract - Appellants' contention of civil dispute, abuse of process, and absence of fraudulent intent - Respondent's argument on civil wrong and criminal offense - Examination of complaint, contract terms, and acceptance.

Analysis:
The judgment pertains to appeals challenging the High Court's order refusing to quash an FIR registered against the Appellants under various sections of the Indian Penal Code. The case involves a dispute arising from a loan settlement between a company and a bank, where the complainant, a former bank official, alleged non-payment of consultancy fees. The Appellants contended that the complaint lacked elements of fraud or dishonesty and was a civil matter at best, seeking to quash the criminal proceedings. They argued that continued efforts led to the settlement, and the complaint was an abuse of process. The Respondent, however, maintained that the facts indicated both civil and criminal aspects, citing a Supreme Court decision in support.

The Court examined the contract terms between the parties, highlighting the offer made by the Appellants and acceptance by the complainant regarding consultancy fees and settlement conditions. It noted that the bank did not issue an acceptance letter by the specified date, and the complainant did not present the cheque within the stipulated time frame. Subsequently, the bank accepted the settlement a year later, and the complainant demanded the balance consultancy fee. The Court referenced legal precedents to establish that mere breach of contract does not necessarily amount to cheating unless there was fraudulent intent from the beginning.

The judgment emphasized that for cheating to be established, fraudulent or dishonest intent at the inception of the promise or representation is crucial. It concluded that the complaint did not demonstrate such intent, and the allegations did not disclose a criminal offense of cheating. The Court highlighted the need to prevent abuse of the legal process and ensure justice, leading to the decision to allow the appeals and quash the criminal proceedings against the Appellants. The High Court's order was set aside, and the complaint in Crime No. 1461/2010 was quashed, based on the absence of criminal liability and fraudulent intent in the case.