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TMI Blog2024 (11) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... ngredients under Section 415 of the IPC cannot be met. Interpretation of the offence of cheating under Section 415 of the IPC need not detain this Court for long or delve deep into the matter as the Apex Court in plethora of judgments has elucidated what is necessary for an offence under Section 415 of the IPC, for it to become punishable under Section 420 of the IPC. The Apex Court in the case of VIJAY KUMAR GHAI AND OTHERS v. STATE OF WEST BENGAL AND OTHERS [ 2022 (3) TMI 1527 - SUPREME COURT] reiterated the entire spectrum of law with regard to criminal breach of trust and cheating and has held 'Having gone through the complaint/FIR and even the charge sheet, it cannot be said that the averments in the FIR and the allegations in the complaint against the appellant constitute an offence under Section 405 420 Penal Code, 1860. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making promise being absent, no offence under Section 420 IPC can be said to have been made out. In the instant case, there is no material to indicate that Appellants had any mala fide intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners, Sri Harish Ganapathy, learned High Court Government Pleader for respondent No. 1 and Sri M.N. Kumar, learned counsel for respondent No. 2. 3. Facts in brief, germane, are as follows: A crime comes to be registered before the first respondent - police by the second respondent that the first petitioner - proprietor of one M/s. Iobitcode Interactive, having its office within the jurisdiction of the police station before whom the crime is registered, on the allegation that the first petitioner - company is in evasion of payment of GST, which is to be paid to the government. It is the contention of the second respondent GST Intelligence that upon certain investigation conducted by them, it is noticed that certain documents reveal that 12 companies registered in different places under different names, were involved in online betting and found to be of certain suspicion that more than ten companies are operating from the said address. Petitioner No. 2 is said to be the Human Resource Manager of the company who has illegally purchased several SIM cards and those SIM cards were linked to different bank accounts, which allegedly facilitated certain fake transactions. Based upon this, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. 7. I have given my anxious consideration to the submissions made by the learned counsel for the respective parties and have perused the material on record. 8. The afore-narrated facts are not in dispute and requires no reiteration. Petitioner No. 2 - GST Intelligence on investigation and procuring certain documents files a complaint before the jurisdictional police. Since the entire issue has now triggered from the complaint, it reads as follows: To The Station House Officer, Vivek Nagar Police Station, Bengaluru, Karnataka 560 047. Sir, Sub: Indulging in suspicious/illegal transactions including betting/gambling by the entities operating https://betstarexch. com; https://khelo24bet.com/; https://bet inexchange.com/-Reg. This office has initiated investigation on the evasion of GST by a group of entities which are engaged in rendering taxable supplies involving games of skill. However, during the search proceedings initiated on one of such business entities i.e M/s lobitcode Interactive located at Alfa Centre, 20, Outer Ring Rd, Venugopal swamy Layout, Bengaluru, Karnataka 560047 on 02/08/2021, it is noticed that a group of entities are operating from the same premises, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law in the state of Karnataka. In view of such law in force in the state of Karnataka and having come to notice about such illegal betting being taken place at a location in Bengaluru, it is opined it is more appropriate to hand over the case to Police Department for their further necessary proceedings as deemed fit. 6. Presently, Smt. Shymala N who is one of the crucial persons in the helm of affairs is available this Office i.e Directorate of Goods and Services Tax Intelligence, No. 112, S.P. Enclave Adjacent to Karnataka Bank, K.H Road, Bengaluru - 560 027, in connection with the ongoing investigation against such group of entities. (Emphasis added) The companies that are allegedly run by the petitioners, first petitioner in particular, is projected to be the foundation of the crime. The GST Intelligence suspects that these petitioners are involved in arranging SIM cards, facilitating opening of bank accounts, registration on GST portal of multiple fake entities and arranging for co-working space for non-existing entities. Based upon this, the GST Intelligence communicates to the Station House Officer of the Viveknagar Police Station to register a crime and it then becomes a cri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in plethora of judgments has elucidated what is necessary for an offence under Section 415 of the IPC, for it to become punishable under Section 420 of the IPC. The Apex Court right from the year 2000 in the case of HRIDAYA RANJAN PRASAD VERMA v. STATE OF BIHAR (2000) 4 SCC 168 has held as follows:- 14. On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest. 15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r action or omission; (ii) fraudulently or dishonestly inducing any person to deliver any property; or to consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit. For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Penal Code can be said to have been made out. 28. A matter which essentially involves dispute of a civil nature should not be allowed to be the subject-matter of a criminal offence, the latter being not a short cut of executing a decree which is non-existent. The superior courts, with a view to maintain purity in the administration of justice, should not allow abuse of the process of court. It has a duty in terms of Section 483 of the Code of Criminal Procedure to supervise the functionings of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess against the appellant for the said offence. Unfortunately, the High Court also failed to correct this manifest error. 13. Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168: 2000 SCC (Cri) 786].) In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached Respondent 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence . Even if all the facts in the complaint and material are taken on their face value, no such dishonest r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any property to any person or to consent that any person shall retain any property, or 16.1.2. The person so induced should be intentionally induced to do or to omit to do anything which he would not do or omit if he were not so deceived; and 16.2. In cases covered by 16.1.2. above, the act or omission should be one which caused or is likely to cause damage or harm to the person induced in body, mind, reputation or property. 17. A fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating. 18. Section 420 of the Penal Code reads thus: 420. Cheating and dishonestly inducing delivery of property. Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. 19. The ingredients to constitute an offence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that person to do or omit to do anything which he would not do or omit if he were no 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. 56. A fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating. 57. Section 420 IPC defines cheating and dishonestly inducing delivery of property which reads as under: 420. Cheating and dishonestly inducing delivery of property. Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine. 58. Section 420 IPC is a serious form of cheating that includes inducement (to lead or move someone to happen) in terms of delivery of property as well as valuable securities. This section is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case, it has nowhere been stated that at the very inception that there was intention on behalf of the accused person to cheat which is a condition precedent for an offence under 420 IPC. 7. In our view petition of complaint does not disclose any criminal offence at all much less any offence either under Section 420 or Section 120-B IPC and the present case is a case of purely civil dispute between the parties for which remedy lies before a civil court by filing a properly constituted suit. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of court and to prevent the same it was just and expedient for the High Court to quash the same by exercising the powers under Section 482 Cr.P.C which it has erroneously refused. 62. There can be no doubt that a mere breach of contract is not in itself a criminal offence and gives rise to the civil liability of damages. However, as held by this court in Hridaya Ranjan Prasad Verma v. Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the case at hand, in the considered view of this Court, it would not meet the necessary ingredients of Section 415 of the IPC for it to become punishable under Section 420 of the IPC for permitting further proceedings to continue. Therefore, the offence under Section 420 of the IPC is loosely laid against these petitioners. 14. The other offence alleged against the petitioners is under Section 66D of the Act. Section 66D of the Act reads as follows: 66-D. Punishment for cheating by personation by using computer resource. Whoever, by means of any communication device or computer resource cheats by personation, shall be punished with imprisonment of either description for a term which may extend to three years and shall also be liable to fine which may extend to one lakh rupees. Whoever, by means of any communication cheats by personation shall be punished with imprisonment for a period of three years and fine. Therefore, two of the ingredients that are found in Section 415 of the IPC should be found in Section 66D of the Act as well, cheating and personation. As observed hereinabove, there is no person who has complained against the petitioners, it is the GST Intelligence who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 155 (2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155 (2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciousl ..... 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