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TMI Blog2018 (8) TMI 2067X X X X Extracts X X X X X X X X Extracts X X X X ..... a prerequisite and an essential ingredient thereto, and subsequent failure to fulfil the promise by itself would not attract the provisions of Section 420 IPC - In Dalip Kaur Ors. Vs. Jagnar Singh Anr. [ 2009 (7) TMI 1365 - SUPREME COURT ], the question for determination before the Supreme Court was whether breach of contract of an agreement for sale would constitute an offence under Section 406 or Section 420 of the IPC. After examining the fact of the case and relevant Sections of the IPC, the Supreme Court held that an offence of cheating‟ would be constituted when the accused has fraudulent or dishonest intention at the time of making of promise or representation. A pure and simple breach of contract does not constitute the offence of cheating‟. In the present case, what has been alleged by the informant in his written report is that the company did not make appropriate payment to the milk suppliers. It also failed to make payment due to the milk van and salary of the informant as also wages due to the labour of the milk van. Apart from the allegation of non-payment of dues to various persons, as discussed above, there is no iota of allegation they had dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndi Upadhyay, learned Additional Public Prosecutor for the State. 2. This application under Section 482 of the Code of Criminal Procedure (for short CrPC‟) has been filed by the petitioners for quashing the order dated 25.08.2017 passed by the learned Judicial Magistrate-1 st Class, Patna in Trial No.2413 of 2013 in connection with Patliputra P.S. Case No.160 of 2012 whereby the petition filed by the petitioners under Section 239 of the Cr.P.C. for discharge from the case has been rejected. 3. First Information Report (for short FIR‟) of Patliputra P.S. Case No.160 of 2012 was registered on 19.07.2012 under Sections 406 and 420 of the Indian Penal Code, 1860 (for short IPC‟) and Section 138 of the Negotiable Instruments Act, 1881 (for short NI Act‟) on the basis of a written report submitted by one Akhilesh Kumar to the Officer-in-Charge of the Patliputra Police Station on 19.07.2012. The facts stated by the informant in his written report are as under:- (a) That on 28.07.2009, he was appointed by the petitioner no.1, the Managing Director of the Natural Dairy Pvt. Ltd. as a Supervisor of the company. After his appointment, he collected milk fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners to face trial and transferred the case to the court of Judicial Magistrate-1 st Class, Patna for disposal. 7. On receipt of the record from the court of Chief Judicial Magistrate, the learned Magistrate supplied to the accused the copy of police report and other documents, as provided under Section 207 of the CrPC and, thereafter, fixed the case for framing of charges against the petitioners. 8. At the stage of framing of charge, an application under Section 239 of the CrPC was filed by the petitioners seeking discharge from the case on the ground that upon considering the police report and the documents sent with it under Section 173 of the CrPC, it would be apparent that the charge against the petitioners was groundless. 9. After hearing the parties on the application preferred under Section 239 of the CrPC, the learned Magistrate rejected the same vide impugned order dated 25.08.2017 holding therein that the witnesses examined in course of investigation have supported the allegations made in the FIR. 10. Mr. Nikhil Kumar Agarwal, learned Advocate appearing for the petitioners submitted that the FIR has been registered against the directors of the Natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the parties and carefully perused the record. 15. In proceedings instituted on an FIR, exercise of inherent powers to quash the proceedings would arise only in case where the allegations do not disclose any offence or are frivolous. Similarly, a person can be discharged from a criminal proceeding only if the charges are groundless. 16. Having noticed the allegations made in the FIR, which were supported during investigation, let me examine now whether the allegations made in the FIR when taken on their face value would constitute the offences punishable under Sections 406 and 420 of the IPC. 17. Section 406 prescribes punishment for criminal breach of trust‟ as defined in Section 405 of the IPC. 18. Admittedly, the company has not been made an accused in the instant case. 19. Section 405 IPC, which defines the offence of criminal breach of trust‟ reads as under:- 405. Criminal breach of trust -Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;, which is defined under Section 415 of the IPC. 27. Section 415 of the IPC reads as under:- 415. Cheating - Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to cheat . Illustrations (a) A, by falsely pretending to be in the Civil Service, intentionally deceives Z, and thus dishonestly induces Z to let him have on credit goods for which he does not mean to pay. A cheats. (b) A, by putting a counterfeit mark on an article, intentionally deceives Z into a belief that this article was made by a certain celebrated manufacturer, and thus dishonestly induces Z to buy and pay for the article. A cheats. (c) A, by exhibiting to Z a false sample of an article, intentionally deceives Z into believing that the article corresponds with the sample, and thereby dishonestl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st part contemplates where by deception practiced upon a person the accused dishonestly or fraudulently induces that person to deliver a property to any person or to consent that any person shall retain any property. The second part envisages where by deception practiced upon a person the accused intentionally induces that person to do or omit to do so, if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property. 30. It would also be evident from combined reading of Sections 415 and 420 of the IPC that one of the essential ingredients of Section 420 IPC is mens rea of the accused at the time of making the inducement. 31. It is well settled position in law that in order to attract the provisions of Section 420 IPC, the guilty intent at the time of making the promise is a prerequisite and an essential ingredient thereto, and subsequent failure to fulfil the promise by itself would not attract the provisions of Section 420 IPC. 32. As a matter of fact illustration (g) of Section 415 makes the position clear enough to indicate that mere failure to deliver in breach of an agreement would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged that the respondents were not regular in making payments and committed default in payment of the installments and that the bank had dishonoured certain cheques issued by the respondents. The appellant company also alleged that on physical verification, certain chairs were found missing from the premises of the respondents and thus they committed cheating and caused misappropriation of the property belonging to the appellant. The appellant company filed a complaint under Section 200 of the CrPC before the Chief Metropolitan Magistrate, Bangalore alleging that the respondents had committed offences under Sections 420, 406 and 423 read with Section 120-B of the IPC. The Magistrate took cognizance of the alleged offence under Section 190 of the CrPC and issued summons to the respondents. The order taking cognizance was challenged by the respondents by filing an application under Section 482 of the CrPC before the Karnataka High Court. The High Court quashed the entire proceedings. Being aggrieved, the appellant company preferred an appeal before the Supreme Court. It was contended on behalf of the appellant in that case that the High Court had seriously erred in quashing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debt, he does not necessarily evade the debt by deception . (emphasis mine) 36. In Anil Mahajan vs. Bhor Industries Ltd. and Anr. [(2005) 10 SCC 228], a three-Judge Bench of the Supreme Court considered a case relating to the issuance of process for the offence punishable under Sections 415, 418 and 420 of the IPC. In that case also, the Bench analyzed the difference between breach of contract‟ and cheating . The appellant therein was the accused in complaint filed against him by the respondent company for the offence punishable under Sections 418 and 420 of the IPC. On the basis of the allegations made in the complaint, the Magistrate issued the process against the accused. The order of Magistrate would demonstrate that the complainant had filed documents on record to show that the accused promised to pay the amount, but he did not pay the same with the intent to deceive the complainant. Therefore, the Magistrate held that the complainant had been able to make out a case to issue p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty. There is no allegation that the company or the petitioners made any willful misrepresentation. There is also no allegation that the petitioners induced the informant to believe anything to be true which was false and which the petitioners knew or believed to be false. 42. The informant has also alleged that certain compromise was arrived at between the milk suppliers and the company for settlement of their dues, which has not been fulfilled by the company. 43. In view of the allegation made by the informant, the agreement, if any, was between the milk suppliers and the company and the informant had got no concern with such agreement. In the event, the company failed to fulfill its liability under the agreement, the aggrieved persons would have been the milk suppliers. 44. In view of the ratio laid down by the Supreme Court in the cases discussed above, as also the allegation made by the informant in the FIR, I have no hesitation in holding that even if the entire allegations are believed to be true at their face value, the ingredients of the offences punishable under Sections 406 and 420 IPC are not attracted in the present case. 45. Apart from the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormant himself, his appointment was in the company for collection of milk and milk had been procured from the milk suppliers in the district of Vaishali and Samastipur for and on behalf of the company. 50. Thus, in view of the ratio laid down by the Supreme Court in S.K. Alagh (supra), Maksud Saiyed (supra) and R. Kalyani (supra), in absence of the company having been impleaded as accused, the petitioners cannot be charged and put on trial for the offences punishable under the IPC. 51. As far as the offence punishable under Section 138 of the NI Act is concerned, I am of the opinion that the petitioners cannot be charged for the said offence due to various legal flaws. However, before highlighting those legal flaws, firstly, I would like to extract the provisions prescribed under Sections 138, 141 and 142 of the NI Act hereunder:- 138. Dishonor of cheque for insufficiency, etc., of funds in the account. Where any cheque drawn by a person on an account maintained by him with a banker for payment of any amount of money to another person from out of that account for the discharge, in whole or in part, of any debt or other liability, is returned by the bank unpaid, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. Explanation.- For the purposes of this section,- (a) company means any body corporate and includes a firm or other association of individuals; and (b) director , in relating to a firm, means a partner in the firm. 142. Cognizance of offences.- Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974),- (a) no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque; (b) such complaint is made within one month of the date on which the cause of action arises under clause (c) of the proviso to section 138: (c) no court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under section 138. 52. From perusal of Secti on 138 of the NI Act, it would be evident that the same mandates for filing a complaint case after issuance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders can only be brought in the dragnet on the touchstone of vicarious liability as the same has been stipulated in the provision itself . 61. In N. Harihara Krishnan v. J. Thomas [2017 SCC Online SC 1017], it was clarified by the Supreme Court that the general concept under CrPC that cognizance is taken against the offence and not against the offender was not appropriate in prosecution under the NI Act. 62. In that case, the complainant was issued a cheque, which was signed by one Harihara Krishnan. The cheque was drawn allegedly in discharge of balance sale consideration by M/s Norton Granites and Spinners Pvt. Ltd. However, the cheque was in fact drawn on account of another private limited company, M/s Dakshin Granites Pvt. Ltd. in which also Harihara Krishnan was a director. The cheque got dishonoured for insufficiency of funds. The complaint was filed only against Harihara Krishnan as an accused. Later on, the prosecution sought to summon Dakshin Granites Pvt. Ltd. as an accused invoking powers under Section 319 of the CrPC. The court of Magistrate allowed the application under Section 319 CrPC. The challenge to the order before the High Court in revision also failed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the opening of non-obstante clause under Section 142. It must also be remembered that Section 142 does not either contemplate a report to the police or authorise the Court taking cognizance to direct the police to investigate into the complaint . 63. Thus, in absence of the company having been made an accused, by no stretch of imagination, the petitioners can be tried for the offence punishable under Section 138 of the NI Act. 64. Apart from the ground on which prosecution of the petitioners would be bad, as stated above, there is yet another reason as to why the petitioners can not be tried for the offence under Section 138 of the NI Act. 65. The present case is based on an FIR whereas Section 142(a) provides that notwithstanding anything contained in the Code of Criminal Procedure, no court shall take cognizance of any offence punishable under Section 138 except upon a complaint in writing made by the payee or, as the case may be, the holder in due course of the cheque. 66. Though, the word complaint‟ has not been defined under the NI Act, the NI Act states that after dishonour of cheque a notice within thirty days of information received from the banker com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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