2020 (10) TMI 1291 - HC - Indian Laws

Seeking grant of anticipatory bail - civil proceedings given in a criminal colour or not - collection/recovery agent for commercial transaction between the parties - Section 138 of the Negotiable Instruments Act 1881 - HELD THAT - A mere breach of a promise agreement or contract does not ipso facto constitute a criminal breach of trust without there being a clear case of entrustment. Further the transaction had taken place in the year 2008 and the complaint was lodged in the year 2015. For constituting an offence of cheating the complainant is required to show that the petitioner had fraudulent or dishonest intention at the time of making promise or representation. In this case no such promise or representation was made by the petitioner. The transaction between the petitioner and the 2nd respondent is a contract mere failure of agreement and contract would not lead to offence of cheating and misappropriation. The 2nd respondent to recover the amount and its dues instituted civil proceedings seeking recovery of loan amount which is still pending for adjudication. It is observed in this case that it is difficult to establish conspiracy by direct evidence or to infer in the absence of any such averments. This Court finds that the dispute between the parties constitute only a civil wrong and not a criminal wrong. The Hon ble Apex Court in the case of Inder Mohan Goswami Versus State of Uttaranchal 2007 (10) TMI 550 - SUPREME COURT elaborately dealt on this aspect questioned dual the proceedings and observed that the criminal prosecution are not to be used as an instrument of harassment or for seeking private vendetta or with an ulterior motive to pressurise the accused when dispute between the parties constitute only a civil wrong and not a criminal wrong and also observed that allowing the proceedings to continue would be an abuse of process of Court or that the ends of justice require that the proceedings ought to be quashed. It is clear that a civil dispute has been given in a criminal colour. At the most it can only be said that the inability of the petitioner to return the loan amount cannot give rise to criminal prosecution. The respondent by himself and his family members instituted a civil proceedings for seeking recovery of loan amount - Petition allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Quashing of FIR under Sections 406, 420, 506(i), and 120(b) IPC.
2. Nature of the dispute: Civil vs. Criminal.
3. Allegations of fraudulent and dishonest intention.
4. Use of police as a recovery agent.
5. Time-barred debt and endorsements.
6. Pending civil suits and their implications on the criminal complaint.

Issue-wise Detailed Analysis:

1. Quashing of FIR under Sections 406, 420, 506(i), and 120(b) IPC:
The petitioner sought to quash the FIR registered under Sections 406 (criminal breach of trust), 420 (cheating), 506(i) (criminal intimidation), and 120(b) (criminal conspiracy) IPC. The court examined whether the allegations in the FIR constituted a criminal offense or were merely a civil dispute given a criminal color.

2. Nature of the Dispute: Civil vs. Criminal:
The court noted that the dispute between the petitioner and the 2nd respondent was essentially a commercial loan transaction. The 2nd respondent and his family had filed multiple civil suits based on Demand Promissory Notes (DPNs) for recovery of the loan amount. The court observed that the admissions in the civil suits contradicted the criminal complaint, indicating that the dispute was civil in nature.

3. Allegations of Fraudulent and Dishonest Intention:
For an offense of cheating to be constituted, the complainant must show that the accused had a fraudulent or dishonest intention at the time of making the promise or representation. The court found no such intention in the petitioner's actions. The transactions were commercial loans, and mere failure to repay the loan did not constitute cheating or misappropriation.

4. Use of Police as a Recovery Agent:
The court emphasized that the police should not be used as a collection or recovery agent for commercial transactions. The 2nd respondent's complaint seemed to be an attempt to use the criminal justice system to recover a debt, which is not permissible.

5. Time-barred Debt and Endorsements:
The petitioner argued that the debt was time-barred and that the endorsements on the DPNs were made to give life to a time-barred debt. The court noted that the 2nd respondent's claims about the endorsements were disputed and seemed to be made to circumvent the limitation period.

6. Pending Civil Suits and Their Implications on the Criminal Complaint:
The court observed that multiple civil suits were pending between the parties for the same transaction. The civil suits were based on the same DPNs cited in the criminal complaint. The court referred to precedents where it was held that civil disputes should not be given a criminal color, and criminal prosecution should not be used as an instrument of harassment or with an ulterior motive.

Conclusion:
The court concluded that the dispute was predominantly civil in nature and that the criminal complaint was an abuse of the process of law. The FIR in Crime No. 70 of 2015 was quashed, and the petition was allowed. The court reiterated that mere inability to return a loan amount does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the inception of the transaction. The connected Criminal Miscellaneous Petition was also closed.