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TMI Blog2024 (8) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... es not contain any provision for attaching vicarious liability on the part of the appellant Nos. 2 and 3 respectively herein who are none other than office bearers of the appellant No. 1 Company. When the appellant No. 1 is the Company and it is alleged that the company has committed the offence then there is no question of attributing vicarious liability to the office bearers of the Company so far as the offence of cheating or criminal breach of trust is concerned - Vicarious liability of the office bearers would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a crimi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st and cheating on a mere allegation of some dishonesty or fraud, without any proper application of mind. The impugned order passed by the High Court is set aside so also the order passed by the Additional Chief Judicial Magistrate, Khurja, Bulandshahar taking cognizance upon the complaint - Appeal allowed. - J. B. Pardiwala And Manoj Misra , JJ. For the Appellant : Mr. Suhail Dutt, Sr. Adv. Mr. Azhar Alam, Adv.Mr. Sankalp Goswami, Adv. Ms. B. Vijayalakshmi Menon, AOR For the Respondent : Mr. Rajat Singh, AOR Mr. Neeraj Kumar Sharma, Adv. Mr. Sarthak Chandra, Adv JUDGMENT J. B. PARDIWALA , J. 1. This appeal arises from the order passed by the High Court of Judicature at Allahabad dated 03.04.2024 in Application No. 15453 of 2023 filed by the appellant herein by which, the High Court rejected the same and thereby declined to quash and set aside the summoning order dated 28.02.2023 passed by the Additional Chief Judicial Magistrate, Khurja, Bulandshahar in Complaint Case No. 547 of 2021. 2. Facts giving rise to this appeal may be summarised as under: (i) The respondent No. 2 herein is the original complainant. He lodged a private complaint in the court of Additional Chief Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iving the notice, the above people neither gave any reply to the notice nor was the applicant's outstanding amount paid. In this context, the applicant gave an application to Inspector-in-charge of Kotwali Khurja Nagar on 25.07.2021 and on 06.08.2021, an application letter was sent to SSP Sir Bulandshahar through postal registry, but till date no action has been taken nor has the applicant's report been registered. Therefore, it is prayed that after the investigation, please summon the accused along with evidence to the court and punish them for the crime committed by them. Date 27.08.2021 (ii) The plain reading of the complaint would indicate that the appellant No. 1 is a legal entity. The appellant No. 2 is the Secretary of the appellant No. 1 Company, and the appellant No. 3 is the Honorary President and Non- Executive Director of the appellant No. 1 Company. They used to purchase grains and oats from the complainant meant to be fed to the horses maintained by the appellant No. 1 Company. According to the complainant, an amount of Rs. 9,11,434/- (Rupees Nine Lakh Eleven Thousand Four Hundred Thirty Four) is due and payable to him by the appellants towards the sale of hor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en buying horse grain and oats. President of this firm J S Bedi and Secretary H K Uppal have been coming to our firm to buy horse feed and oats and the firm has been paying for the purchased goods. It was said by the above two that now the bills for horse feed and oats will be made in the name of Delhi Horse Trainers Association Delhi and the Head of this firm, Kazim Ali and Secretary Sanjeev Charan will pay it. On the request of the above people, horse grain and oats continued to be supplied from our firm. The above mentioned people owes Rs. 9,11,434/- to our firm, upon being repeatedly asked for payment, the above mentioned people are evading. Once Chirag Agarwal and I went to their office in New Delhi, they refused to talk to Vipin Agarwal and us and they threatened that if they come here again, it will be very bad and they started scuffle. The outstanding amount of Rs. 9,11,434/- has not yet been paid by the officials of the above two firms. The above mentioned people have fraudulently obtained the goods from our firm in bad faith and do not want to pay for the same. They have used the supplied goods. Certified after reading and listening. (v) At the end of the magisterial inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatements, a photocopy of the registry receipt, one copy of the net receipt postal registry, five copies of the bill book, one true copy of the remaining balance, one copy of receipt of goods, one copy of remaining balance, one copy of legal notice were filed per receipt. The complainant has stated in his statement under Section 200 CrPC, after five years of 1990, these people said that we will not make the payment. A separate organization has been formed for payment, which will do it. An organization named Delhi Trainers Association has been formed. Now I owe these people nine lakh eleven thousand four hundred thirty-four rupees. When we asked for money several times, we did not receive it. The President of Delhi Race Course is not ready to talk. I am suffering from cancer. Business is seen by children only. We also gave them legal notice but nothing happened. Perused the entire evidence material available on file. On the basis of the evidence presented by the complainant under section 200 CrPC and section 202 CrPC, there is prima facie basis for summoning the opposition parties Delhi Race Course Club, Delhi Race Horse Trainers Association, JS Bedi, HK Uppal, Kazim Ali Khan and Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 9,11,434/- by the applicants who instead transferred their responsibility to the 'Association . 17. Suffice to mention here that the copies of the invoices are brought on record through counter affidavit by the complainant and the same are not controverted by the applicants. Prima facie, it reflects that the invoices were raised by complainant in accordance with the advice received by him and he continued to receive payment on the basis of such invoices and when the payment of Rs. 9,11,434/- was not paid to the complainant he contacted Delhi Race Club (1940) Ltd. which averted him to the 'Association'. It appears that Delhi Race Club (1940) Ltd. and the 'Association' are not separate entity. 18. On the face of record, it appears that originally complainant was supplying oats to the 'Company'. In the year 1995, the complainant was directed to raise invoices in favour of the 'Association'. The Company continued to receive supply of Oats made by the complainant even after 1995, whereas invoices were raised in favour of the 'Association'. This direction of the company goes to show that there was some mala fide intention on the part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot reasonably be held to be true. [See : D.N. Bhattacharjee v. State of West Bengal : (1972) 3 SCC 414 : AIR 1972 SC 1607 : (1972 Cri LJ 1037)]. 7. Further it is also well settled that at the stage of issuing process a Magistrate is mainly concerned with the allegations made in the complaint or the evidence led in support of the same and he is only to be prima facie satisfied whether there are sufficient grounds for proceeding against the accused. It is not the province of the Magistrate to enter into a detailed discussion of the merits or demerits of the case nor can the High Court go into this matter in its inherent jurisdiction which is to be sparingly used. The scope of the inquiry under Section 202 of the CrPC is extremely limited only to the ascertainment of the truth or falsehood of the allegations made in the complaint (i) on the materials placed by the complainant before the Court (ii) for the limited purpose of finding out whether a prima facie case for issue of process has been made out, and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defence that the accused may have. In fact in proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Indian Penal Code or of the other laws can be subjected to an analysis by posing and answering the following questions: - I. What is the overt act stipulated in the Section, which overt act has resulted in an injury? II. What is the state of mind stipulated in respect of the accused and which state of mind must precede or accompany the act of the accused? ANALYSIS 9. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the High Court committed any error in passing the impugned order. 10. The case at hand is one of an unpaid seller. It is the case of the complainant that he used to regularly supply consignments of grains oats meant for horses at the Delhi Race Club. The complainant used to raise invoices in favour of the Club and the Club used to pay the requisite amount. However, according to the complainant after 2017, the Club stopped making the payment. It is the case of the complainant that an amount of Rs. 9,11,434/- is due and payable by the appellants towards the supply of the consignment of oats. 11. The impugned order passed by the High Court is a fine spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n other words, the complainant has to demonstrate that he has been cheated on account of criminal breach of trust or cheating or deception practiced by the office bearers. The Magistrate failed to pose unto himself the correct question viz. as to whether the complaint petition, even if given face value and taken to be correct in its entirety, would lead to the conclusion that the appellant Nos. 2 and 3 herein were personally liable for any offence. The appellant No. 1 is a body corporate. Vicarious liability of the office bearers would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities. Even for the said purpose, it is obligatory on the part of the complainant to make requisite allegations which would attract the provisions constituting vicarious liability. 15. In Legal Remembrancer, West Bengal v. Abani Kumar Banerji reported in AIR 1950 Cal 437, a Division Bench of the Calcutta High Court speaking through Justice K.C. Das Gupta (as he then was) held that a magistrate is not bound to take cognizance of an offence merely because a complaint is filed before him. He is required to carefully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held that the power under Section 156(3) of the CrPC can be exercised by a magistrate even before he takes cognizance provided the complaint discloses the commission of cognizable offences and if the complaint does not disclose commission of cognizable offences, such an order of the magistrate directing investigation is liable to be quashed. The relevant observations read as under: - 11. After considering the rival submissions, we are of the view that the contentions of Mr Luthra are correct in view of Section 155(2) of the Code as explained in Bhajan Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] . We are of the opinion that the statutory safeguard which is given under Section 155(2) of the Code must be strictly followed, since they are conceived in public interest and as a guarantee against frivolous and vexatious investigation. 12. The order of the Magistrate dated 21-6-2010 does not disclose that he has taken cognizance. However, power under Section 156(3) can be exercised by the Magistrate even before he takes cognizance provided the complaint discloses the commission of cognizable offence. Since in the instant case the complaint does not do so, the order of the Magistrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplied) 21. The Principle of law discernible from the aforesaid decision is that issuance of summons is a serious matter and, therefore, should not be done mechanically and it should be done only upon satisfaction on the ground for proceeding further in the matter against a person concerned based on the materials collected during the inquiry. 22. In the aforesaid circumstances, the next question to be considered is whether a summons issued by a Magistrate can be interfered with in exercise of the power under Section 482, CrPC. In the decisions in Bhushan Kumar v. State (NCT of Delhi) reported in (2012) 5 SCC 424 and Pepsi Foods Ltd. (supra), this Court held that a petition filed under Section 482, CrPC, for quashing an order summoning the accused is maintainable. There cannot be any doubt that once it is held that sine qua non for exercise of the power to issue summons is the subjective satisfaction on the ground for proceeding further while exercising the power to consider the legality of a summons issued by a Magistrate, certainly it is the duty of the Court to look into the question as to whether the learned Magistrate had applied his mind to form an opinion as to the existence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, (ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases covered by (ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property. 25. What can be discerned from the above is that the offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients. In order to constitute a criminal breach of trust (Section 406 IPC): - 1) There must be entrustment with person for property or dominion over the property, and 2) The person entrusted: - a) dishonestly misappropriated or converted property to his own use, or b) dishonestly used or disposed of the property or willfully suffers any other person so to do in violation of: i. any direction of law prescribing the method in which the trust is discharged; or ii. legal contract touching the discharge of trust (see: S.W.P. Palanitkar (supra). Similarly, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aint to show that the respondents had dishonest or fraudulent intention at the time the appellant parted with Rs. 35.000/- There is also nothing to indicate that the respondents induced the appellant to pay them Rs. 35,000/- by deceiving him. It is further not the case of the appellant that a representation was made, the respondents knew the same to be false. The fact that the respondents subsequently did not abide by their commitment that they would show the appellant to be the proprietor of Drang Transport Corporation and would also render accounts to him in the month of December might create civil liability on the respondents for the offence of cheating. 29. To put it in other words, the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d simple. He says that the price of the goods sold by him has not been paid. Once there is a sale, Section 406 of the IPC goes out of picture. According to the complainant, the invoices raised by him were not cleared. No case worth the name of cheating is also made out. 32. Even if the Magistrate would have issued process for the offence punishable under Section 420 of the IPC, i.e., cheating the same would have been liable to be quashed and set aside, as none of the ingredients to constitute the offence of cheating are disclosed from the materials on record. 33. It has been held in State of Gujarat v. Jaswantlal Nathalal reported in (1968) 2 SCR 408, The term entrusted found in Section 405 IPC governs not only the words with the property immediately following it but also the words or with any dominion over the property occurring thereafter see Velji Raghvaji Patel v. State of Maharashtra [(1965) 2 SCR 429]. Before there can be any entrustment there must be a trust meaning thereby an obligation annexed to the ownership of property and a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. But that do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and servant, pledger and pledgee. When some goods are hypothecated by a person to another person, the ownership of the goods still remains with the person who has hypothecated such goods. The property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or the beneficial interest in or ownership of it must be in the other person and the offender must hold such property in trust for such other person or for his benefit. In a case of pledge, the pledged article belongs to some other person but the same is kept in trust by the pledgee. [...] (Emphasis supplied) 35. The aforesaid exposition of law makes it clear that there should be some entrustment of property to the accused wherein the ownership is not transferred to the accused. In case of sale of movable property, although the payment may be deferred yet the property in the goods passes on delivery as per Sections 20 and 24 respectively of the Sale of Goods Act, 1930. 20. Specific goods in a deliverable state. Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the continuation of the criminal proceeding would be nothing but abuse of the process of law. FINAL CONCLUSION 41. Before we close this matter, we would like to say something as regards the casual approach of the courts below in cases like the one at hand. The Indian Penal Code (IPC) was the official Criminal Code in the Republic of India inherited from the British India after independence. The IPC came into force in the sub-continent during the British rule in 1862. The IPC remained in force for almost a period of 162 years until it was repealed and replaced by the Bharatiya Nyaya Sanhita ( BNS ) in December 2023 which came into effect on 1st July 2024. It is indeed very sad to note that even after these many years, the courts have not been able to understand the fine distinction between criminal breach of trust and cheating. 42. When dealing with a private complaint, the law enjoins upon the magistrate a duty to meticulously examine the contents of the complaint so as to determine whether the offence of cheating or criminal breach of trust as the case may be is made out from the averments made in the complaint. The magistrate must carefully apply its mind to ascertain whet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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