2018 (3) TMI 1960 - HC - Indian Laws

Dishonor of Cheque - insufficiency of funds - criminal breach of trust or not - section 138 of NI Act - offences punishable under Sections 420 and 406 IPC - HELD THAT - Every breach of trust may not result in a penal offence of criminal breach of trust as the act of breach of trust involves a civil wrong in respect of which a civil action can be initiated. A breach of trust with mens rea is an important aspect to attract the provisions under Sections 406 and 420 IPC. In this particular case the petitioner is subscriber of a chit. He became the successful bidder and received the bid amount. However he could not pay the last five instalments for which he has issued a cheque which was dishonoured because of insufficiency of funds. For dishonour of cheque the 2nd respondent/complainant has got the remedy of approaching the appropriate Court under Section 138 of the Negotiable Instruments Act. Instead of resorting to the said remedy the 2nd respondent/complainant has filed the present private complaint against the petitioner which is nothing but an abuse of the process of law and hence the petitioner is entitled for quashing of the proceedings against him. This Criminal Petition is allowed by quashing the proceedings against the petitioner/sole accused for the offences punishable under Sections 420 and 406 IPC.

Summary

Issues: Quashing of criminal proceedings under Section 482 Cr.P.C. for offences under Sections 420 and 406 IPC in a chit fund business case.

Analysis:
1. Issue of Quashing Proceedings: The petitioner, the sole accused, filed a Criminal Petition under Section 482 Cr.P.C. seeking to quash the proceedings initiated against him for offences under Sections 420 and 406 IPC. The case pertains to a chit fund business where the petitioner failed to pay the last five instalments of a chit, leading to the dishonour of a cheque issued by him.

2. Prosecution's Allegations: The prosecution alleged that the petitioner, a subscriber of a chit, became the successful bidder but failed to pay the monthly subscriptions for the last five months. The cheque issued by the petitioner bounced due to insufficient funds, prompting the complainant to file a private complaint resulting in the registration of a criminal case against the petitioner.

3. Petitioner's Defense: The petitioner contended that he had no intention to defraud the complainant. He explained that his business premises were acquired by the Government, affecting his ability to pay the instalments. The petitioner argued that the complainant's decision to file a private complaint instead of pursuing remedies under the Negotiable Instruments Act was an abuse of process.

4. Legal Analysis: The Court considered the essential elements of criminal breach of trust under Sections 406 and 420 IPC. It emphasized that mens rea, the mental element of fraudulent misappropriation, is crucial to establish these offences. The Court highlighted that not every breach of trust results in criminal liability and that civil remedies are available for breach of trust without mens rea.

5. Judicial Precedent: The petitioner relied on a previous court decision to support his argument that without fraudulent intent, the offences under Sections 406 and 420 IPC should not apply. The Court agreed with this interpretation and concluded that the complainant's failure to follow the procedure under the Negotiable Instruments Act rendered the private complaint an abuse of process.

6. Decision: After considering the arguments and legal principles, the Court allowed the Criminal Petition, quashing the proceedings against the petitioner for offences under Sections 420 and 406 IPC. The Court found that the complainant's approach in filing a private complaint instead of utilizing the appropriate legal remedy was improper, leading to the quashing of the criminal proceedings.

7. Conclusion: The judgment highlights the importance of establishing mens rea in cases of criminal breach of trust and emphasizes the availability of civil remedies for breach of trust without fraudulent intent. It underscores the need for complainants to follow the prescribed legal procedures, such as those under the Negotiable Instruments Act, before resorting to criminal complaints, to avoid abuse of the legal process.