Dismissed

M/S P.R.Fuels Pvt. Ltd. v. Union of India And Anr.

Jharkhand HC5 Dec 2019Cr.M.P./191/2012

Case brief

AI extract

What is this about?

This petition sought quashing of criminal proceedings against M/s P.R. Fuels Pvt. Ltd. for alleged coal diversion. The High Court rejected the submission that mere contractual breach excludes criminal liability, holding that evidence of false records established a prima facie case, and the petition was dismissed.

What did the court decide?

The criminal miscellaneous petition was dismissed; the Interlocutory Application I.A. No. 10833 of 2019 was allowed.

M/S P.R.Fuels Pvt. Ltd. Vs Union of India And Anr. — Corruption | Jharkhand HC (2019)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI

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Cr.M.P. No. 191 of 2012

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With

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I.A. No. 10833 of 2019

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M/s P.R. Fuels Pvt. Ltd. represented through its Director Ram Sahay Singh, son of Late S.N. Singh, Resident of B.M. Agrawal Colony, P.O. & P.S. Dhanbad, District – Dhanbad

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… … Petitioner

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Versus

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Union of India through Central Bureau of Investigation, Economic Offence Wing, 8^th Floor, Lok Nayak Bhawan, Khan Market, New Delhi.

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Dy. Superintendent of Police, C.B.I., A.C.B., Ranchi. … … Opp. Parties ---

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CORAM: HON’BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY --For the Petitioner : Mr. Rajendra Krishna, Advocate : Ms. Archi Ravi, Advocate For the State-C.B.I. : Mr. Rajiv Nandan Prasad, Advocate ---

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27 /05.12.2019

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1. Heard Mr. Rajendra Krishna, the learned counsel appearing on behalf of the petitioner alongwith Ms. Archi Ravi, Advocate.

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2. Heard Mr. Rajiv Nandan Prasad, the learned counsel appearing on behalf of the C.B.I.

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3. This petition has been filed for the following reliefs: - “for quashing the entire criminal proceeding including the FIR arising out of Dhanbad CBI/ACB/Dhanbad, RC 3(A)/2012 (D) dated 23.01.2012 registered under Sections 120B r/w 420 of IPC and Sections 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988 and the said case is pending in the court of District Judge-cum-Special Judge, CBI at Dhanbad. And/or challenging the charge-sheet bearing No. 1/2013 dated 30.4.2013.”

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I.A. No. 10833 of 2019 in Cr.M.P. No. 191 of 2012

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4. The learned counsel for the petitioner submits that one Interlocutory Application being I.A. No. 10833 of 2019 has been filed for challenging the order taking cognizance dated 09.01.2014. He also submits that earlier one I.A. No. 7471 of 2019 was filed with a prayer to quash the Charge-sheet No. 01/2013 dated 30.04.2013. He submits that I.A. No. 7471 of 2019 has been allowed earlier and the present Interlocutory Application i.e. I.A. No. 10833/2019 challenging the order taking cognizance may be allowed. He further submits that aforesaid developments have taken place during the pendency of the present case, as cognizance has been taken on 09.01.2014.

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5. Learned Counsel for the opposite parties has no serious objection to this Interlocutory Application being I.A. No. 10833/2019 and he does not dispute the fact that cognizance has been taken during the pendency of the present case.

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6. Accordingly, I.A. No. 10833/2019 is hereby allowed and this interlocutory application will form a part of the main petition.

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7. Thus, in the present case, the F.I.R., Charge-sheet as well as the order taking cognizance dated 09.01.2014 are under challenge.

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Cr. M. P. No. 191 of 2012

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8. It is submitted that the First Information Report was registered under Section 120B read with Section 420 of Indian Penal Code and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 against the petitioner, its Director and unknown officers of the coal company namely, Bharat Coking Coal Limited. After investigation, the CBI has submitted Charge-sheet being Charge-sheet No. 1 of 2013 dated 30.04.2013 against the petitioner as well as its Director namely, Ram Sahay Singh under sections 420, 468 and 471 of Indian Penal Code and cognizance of the offence under sections 420,

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468 and 471 of Indian Penal Code has been taken against the petitioner and its aforesaid Director.

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9. By referring to the First Information Report, the learned counsel for the petitioner submits that the FIR was instituted on the basis of certain information received by Central Bureau of Investigation from reliable sources to the effect that M/s P.R. Fuels Pvt. Ltd., represented through its Director Shri Ram Sahay Singh having its registered office at S-2/1C-32, Bhubaneshwar Nagar Colony, Varanasi, Uttar Pradesh and unknown officials of Bharat Coking Coal Limited (BCCL), Dhanbad, during the period September, 2008 to March, 2011, entered into a criminal conspiracy, pursuant to which, the petitioner had dishonestly and fraudulently diverted the coal lifted under linkage quota vide Fuel Supply Agreement (FSA) entered by the petitioner with the coal company, BCCL Dhanbad and sold the same in black market at premium price causing wrongful loss to BCCL, Dhanbad and corresponding wrongful gain to themselves.

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It is alleged that the petitioner, represented by its Director Shri Ram Sahay Singh executed the Fuel Supply Agreement dated 25.09.2008 with BCCL, Dhanbad wherein supply of 43,200 MT of coal per annum to the petitioner was agreed by BCCL at cheaper/subsidized rate in comparison to the sale of coal by BCCL under E-Auction, with a view for compulsory utilization of said coal at the company’s plant situated in Uttar Pradesh for manufacturing of hard coke. As per the said FSA entire quantity of coal so supplied is meant for use at the unit/plant of the petitioner and it shall not sell/divert and/or transfer the coal for any purpose other than for which it was given. It was further mentioned in agreement that BCCL officials shall have right to verify end use of supplied coal and satisfy themselves for its authenticity and will have right to

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inspect the plant and records thereof. In pursuant to the said FSA, the petitioner had lifted 57,870 MT (approx.) of coal of Rs. 8,40,44,601/- approx. (at an average rate of Rs. 1,452.30/- per MT approx.) from BCCL between 25.09.2008 to 24.03.2011.

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It is further alleged that the petitioner has resorted to preparation of false/bogus/inflated records such as sale invoices, transportation details, diesel consumption vouchers, etc. related to manufacturing/sale of Hard Coke, out of coal supplied by BCCL under Fuel Supply Agreement at subsidized rate, with intent to conceal fraudulent utilization/diversion of coal. Joint Surprise Check conducted on 24.03.2011 at the said unit/plant/factory premises of the petitioner by a team comprising officials of CBI & BCCL (Vigilance) had also revealed that the unit/plant of the petitioner was partly functional and that only 4 out of 40 ovens were found operational which indicated diversion of coal lifted under Fuel Supply Agreement from BCCL during the said period.

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It is further alleged that unknown officials of BCCL, Dhanbad, by abusing their official position and in connivance with the Directors of the petitioner did not conduct any verification/inspection either of the plant or of connecting records for the purpose of ensuring proper end use of coal lifted by the petitioner under FSA in order to avoid detection of fraudulent sale/diversion of coal by the petitioner during the relevant period and thus, committed criminal misconduct.

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Arguments on behalf of the petitioner

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10. The learned counsel for the petitioner, while challenging the entire criminal proceedings including the First Information Report and the order taking cognizance, has advanced his arguments on two grounds :

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(i) The entire allegation arises out of contract i.e. Fuel Supply Agreement (FSA) and no liability can be imposed on

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account of violation of terms and conditions of the agreement.

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(ii) None of the ingredients of Section 420 I.P.C. is attracted in the facts and circumstances of this case.

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Submissions on behalf of the Petitioner on Ground No.(i)

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11. Learned counsel for the petitioner submits that the allegation, as is apparent from the First Information Report and the charge-sheet, relates to violation of the terms and conditions of the Fuel Supply Agreement, which in turn, was entered into pursuant to New Coal Distribution Policy dated 18^th October, 2007. He submits that New Coal Distribution Policy was itself promulgated pursuant to the judgment passed by the Hon’ble Supreme Court in the case of “ Ashoka Smokeless Coal India (P) Ltd. and others vs. Union of India and others” reported in (2007) 2 SCC 640 . The learned counsel submits that by virtue of the aforesaid judgment passed by the Hon’ble Supreme Court, the policy of selling the coal through e-auction was done away with and certain directions were issued by the Hon’ble Supreme Court which ultimately led to formation of New Coal Distribution Policy. He submits that the New Coal Distribution Policy clearly indicates that so far as the consumers, like the unit of the petitioner are concerned, 75% of the quantity as per the normative requirement of the petitioner would be considered for supply of coal through FSA (Fuel Supply Agreement) by Coal India Limited at notified prices to be fixed and declared by Coal India Limited. The balance 25% of coal requirement of the units will be sourced by them through e- auction/import of coal, etc. and it was clearly indicated in the New Coal Distribution Policy that all the existing linked holders of erstwhile core and non-core sector and not having FSAs would be required to enter into Fuel Supply Agreement with the coal companies and as far as the linked consumers of

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erstwhile non-core sector whose annual requirement was less than 4,200 tonnes are concerned, they were to be given option to either enter into FSA with the coal company as per the terms and conditions including satisfaction level applicable to the other consumers or they may opt out of FSA (fuel supply agreement) regime and access their coal requirement through agencies, nominated by the State Governments. The learned counsel submits that Para 2.3 and 4 of the New Coal Distribution Policy would be relevant for the purposes of this case. He also refers to clause 4.4 as well as clause 15 of the Fuel Supply Agreement (FSA) which has been entered into between the parties to submit that the consequences of violation of terms and conditions of the agreement have been mentioned therein and accordingly, even if it is assumed that the petitioner had violated the terms and conditions of the agreement, no criminality can be said to be involved in the entire transaction. He submits that at best the entire dispute can be a subject matter of civil dispute, as per the terms and conditions of the agreement between the petitioner and the BCCL and the alleged offence arising out of violation of the terms and conditions of FSA (Fuel Supply Agreement) is itself an abuse of process of law.

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Submissions on behalf of the Petitioner on Ground No.(ii) 12. The learned counsel for the petitioner further submits that at the stage of entering into the agreement i.e. FSA (Fuel Supply Agreement), there was no element of any fraudulent intention and accordingly, the basic element for constituting an offence under Section 420 of IPC is totally absent. He further submits that there was no illegality or irregularity in entering into the agreement and accordingly, the consequences, which flow out of the violation of the terms and conditions of the agreement, are guided by the agreement itself and therefore, no criminality

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can be imputed in the facts and circumstances of this case. Counsel for the petitioner has specifically argued in this case that at the time of entering into the FSA (fuel supply agreement), no document as such was required and accordingly, by no stretch of imagination, it can be said that there was any incident of committing offence under section 420 at the time of entering into the agreement.

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13. The learned counsel for the petitioner further submits that although the First Information Report was instituted under the provisions of Indian Penal Code as well as under the provisions of Prevention of Corruption Act, 1988, but charge-sheet against the petitioner and the Director of the petitioner has been submitted only under the provisions of Sections 420, 468 and 471 of the Indian Penal Code. He submits that so far as Section 420 of IPC is concerned, there is no dispute that the agreement was entered into between the petitioner and the BCCL and there is no allegation that there was any criminal intention right at the stage of entering into the agreement and therefore, the basic element of constituting an offence under Section 420 of IPC is lacking against the petitioner.

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14. The learned counsel for the petitioner has referred to the following judgments to submit that no offence under section 420 is made out against the petitioner.

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a) (2003) 5 SCC 257 (Hira Lal Hari Lal Bhagwati –versusCBI, New Delhi), Para-40

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b) (2010) 10 SCC 361 (V.P. Shrivastava –versus- Indian Explosives Ltd and others) Paras-25 and 31

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c) (2009) 3 SCC 78 (V. Y. Jose and another –versus- State of Gujarat and Another), Paras-14, 21 and 22.

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Arguments on behalf of the Opposite Party-Central Bureau of Investigation (CBI)

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15. Learned Counsel appearing on behalf of the C.B.I., on the other hand, submits that allegation made against the petitioner

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not only relates to the violation of the terms and conditions of the contract i.e FSA, but it also relates to the manner in which the agreement was entered into and the manner in which the petitioner continued to lift coal under the agreement by creating bogus books of accounts and other records relating to production and sales of hard coke. He submits that enough material has been collected during investigation to make out a prima facie case against the petitioner under sections 420, 468 and 471 of IPC.

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He further submits that even if the coal is not an essential commodity within the meaning of Essential Commodities Act, but it is not in dispute that the coal is a scarce commodity and even as per the judgment passed by the Hon’ble Supreme Court, its sale and use are required to be regulated and for the purposes of which the Coal Distribution Policy was framed in which the FSA (Fuel Supply Agreement) was to be entered into for 75% of the coal requirement by the linked consumers and 25% was to be purchased through e-auction i.e. through open market. The learned counsel submits that no case for quashing of the F.I.R. or the charge-sheet or the order taking cognizance is made out.

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Findings of this Court

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16. After hearing the counsel for the parties and after considering the materials on record, this Court finds that the entire dispute revolves around FSA (Fuel Supply Agreement) pursuant to the New Coal Distribution Policy.

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17. The judgment of the Hon’ble Apex Court which has been referred in the charge-sheet is reported in (2007) 2 SCC 640 (Ashoka Smokeless Coal India (P) Ltd. and others vs. Union of India and others) . The Hon’ble Supreme Court was dealing with the matter regarding sale/distribution of coal and in Para188 to 194 of the said judgment, it has been held as follows: -

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“188. Coal being a scarce commodity, its utility for the purpose for which it is needed is essential. Although, technically, in view of the fact that no price is fixed for coal, there may not be any black marketing in the technical sense of the terms; but this Court cannot also encourage black marketing in general sense. Nobody should be allowed to take undue advantage while dealing with a scarce commodity. The very fact that despite best efforts of the Central Government, the coal companies failed to curb the menace of a section of people and to deal in coal excluding other general people therefrom or the linked consumers misusing their position of obtaining allotment of coal either wholly or in part, it is absolutely necessary that some mechanism should be found out for plugging the loopholes. The Union of India or the coal companies appear to have lost confidence in the State Governments. They had carried out joint inspection and in that process they must have arrived at a satisfaction about the genuineness of the claims of industrial units for which the linkage system was meant for.

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189. Before us most of the consumers, with a view to obtain supply of coal had filed documents to prove their genuineness. The said documents must be scrutinised by the authorities of the coal companies. In the event, they have any suspicion, inspection should be carried out by officers appointed by the Chairman-cum-Managing Director of the company concerned within whose jurisdiction the unit is situated.

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190. With a view to evolve a viable policy, a committee should be constituted by the Union of India with the Secretary of Coal being the Chairman. In such a committee, a technical expert in coal should also be associated as most of the projects involve consumers of coal, particularly manufacturers of hard coke and smokeless fuel. In our opinion, it may not be difficult to find out, having regard to the technologies used therein as regards the ratio of the input vis-à-vis the output, with a balance and 10% margin. On the basis of such finding alone, apart from the requirements of five years, supply should form the basis of MPQ. We may, however, hasten to add that the Central Government in collaboration with the coal companies would be at liberty to evolve a policy which would meet the requirements of public interest visà-vis the interest of consumers of coal. They would be entitled to lay down such norms as may be found fit and proper. They would be entitled to fix appropriate norms

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therefor. In the event, any industrial unit is found to violate the norms, it should be stringently dealt with. 191. Hard coke plants are also coal mines within the meaning of the Colliery Control Order, 2000. Hard coke is coal within the meaning of the provisions thereof. The Central Government, therefore, may think it fit to widen the definition of coal so as to include the smokeless coal in exercise of its power under the Essential Commodities Act. We may notice in ONGC that this Court has held that slurries are a part of coal and is governed by the provisions of the Mines and Minerals (Regulation and Development) Act. Such being the wider definition of coal, we fail to see any reason as to why proper measure cannot be taken by the Union of India to have a complete control thereover. Any strict mechanism to find out the genuine consumers would go a long way in taking preventive measures and dealing with coal by unscrupulous persons for unauthorised purposes. Those who do so, should be dealt with stringently but the same would not mean that the genuine consumers should suffer for want of coal.

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192. We, in the peculiar facts and circumstances of this case, are of the opinion that it may not be difficult to find out as to who the genuine consumers are. So far as owners of the hard coke ovens are concerned, they are members of the association and their identity can easily be verified.

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193. However, discussions made hereinbefore should not be taken to lay down a law that the Central Government and for that matter the coal companies cannot change their policy decision. They evidently can; but therefor there should be a public interest as contradistinguished from a mere profit motive. Any change in the policy decision for cogent and valid reasons is acceptable in law; but such a change must take place only when it is necessary, and upon undertaking of an exercise of separating the genuine consumers of coal from the rest. If the coal companies intend to take any measure they may be free to do so. But the same must satisfy the requirements of constitutional as also the statutory schemes; even in relation to an existing scheme e.g. Open Sales Schemes, indisputably the coal companies would be at liberty to formulate the new policy which would meet the changed situation. E-advertisement or e-tender would be welcome but then therefor a greater transparency should be maintained.

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194. For the reasons aforementioned, Civil Appeals Nos. 2972 and 2975 of 2005 being devoid of any merits are dismissed. Civil appeal arising out of SLP (Civil) No.

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24034 of 2005 is allowed and the impugned judgment of the Madhya Pradesh High Court is set aside. No separate order is required to be passed on Civil Appeal No. 5547 of 2004 arising out of the judgment and order of the Calcutta High Court as the said case would also be governed by this judgment. All other appeals, writ petition and transferred cases are disposed of with the aforementioned observations and directions.”

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18. Upon perusal of Para-192 of the aforesaid judgment, it is apparent that the Hon’ble Supreme Court found it difficult to identify as to who are the genuine customers. Accordingly, a scheme was to be framed by the coal companies for the purposes of separating the genuine customers for the coal from the rest. Pursuant to the judgment passed by the Hon’ble Supreme Court reported in (2007) 2 SCC 640 (Ashoka Smokeless Coal India (P) Ltd. and others vs. Union of India and others) , New Coal Distribution Policy was framed and as per the provisions of the New Coal Distribution Policy, the verification of the erstwhile non-core sector consumers was to be undertaken which has been mentioned in the policy itself as follows:-

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“ verification of erstwhile none core sector consumers

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CIL would undertake verification of such consumers of erstwhile non-core sector consumers, in a time bound manner, either directly or through an agency, so as to check the veracity of their claim of being bonafide consumers of coal and thereafter act accordingly. This exercise should be carried out keeping in view the observations and directions of Hon’ble Supreme Court in the case of M/s. Ashoka Smokeless Coal India (P) Ltd. and others. In respect of those consumers who are not found to be bonafide, Coal companies can cancel their allocation.”

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19. In the charge-sheet, it has been recorded that the petitioner-company was incorporated in the year 1995 which was registered on 21.03.1997 with district industries Centre,

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Jaunpur having annual capacity of production of 40320 MT of Hard Coke. Initially the petitioner was granted linkage of coal of 4800 MT per month for 6 months which was later regularized with the same quantity of non-linked washery coal since 1997. As per the directions of National Coal Distribution Policy (NCDP), a Fuel Supply Agreement (FSA) was executed between BCCL and the petitioner on 25.09.2008 and Shri Ram Sahay Singh, one of the Directors of the petitioner had signed the said FSA on behalf of the company. Vide the said FSA, petitioner was entitled to get 43,200 MT/annum of NLW Raw Coal from BCCL and as per the clause 4.4 of the same, they were compulsorily required to use the coal at their unit for the purpose of production of hard coke. Investigation revealed that petitioner did not use any non-FSA (coal acquired from sources other than FSA) coal during the said check period, whereas as per the provisions of the NCDP, they were required to arrange 25% from non-FSA sources.

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Investigation revealed that petitioner was having 40 TATA Bee Hive Hard Coke Oven and certain other machines including 01 Diesel Generator set of 110 KV capacity. Number of ovens charged per day was 24, average coking time per oven was 36 hours and daily working hours was 16. Only Diesel (no electricity connection) has been used by the company in production of hard coke during the relevant period/check period i.e. between date of FSA and date of Joint Surprise Check by CBI.

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As per the details provided by BCCL, Dhanbad, the petitioner lifted 58445.852 MT of coal from BCCL during the check period and it revealed that 58007.220 MT was received at the unit by them. Investigation also established that the standard average consumption of diesel for production of 1 MT

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of beehive hard coke from coal and for charging (consuming) 1 MT of coal was taken.

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20. The charge-sheet also gives following details with supporting materials under the various headings:-

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A. Details of false and fictitious coal charging shown by the company and it has been found that percentage of yield of coke at various columns has been shown to be more than 100% whereas the same should normally be not more than 72%. A chart in that connection has been given in the charge-sheet. The charge-sheet also mentions total quantity of coal falsely and fictitiously shown as charged in the records of the company as 24387.45 MT.

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B. Details of false and fictitious coke sale/ production by the company. The company had sold its product to different 200 parties and 13 parties have denied to have purchased any product from the petitioner. The detail of such parties has been mentioned in the chargesheet and total such bogus sales have been mentioned as 1769.33 MT. 09 firms had purchased less coal than the sale shown to such parties during the check period. The difference was 834.405 MT. 3559.79 MT of coke was transported through such 19 vehicles which were either non-existing or were non-coal transporting vehicles such as scooters, motor cycles, etc.. The details of such fictitious transportation have been mentioned in the charge-sheet.

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A joint Surprise Check (JSC) of the plant of the petitioner was conducted on 24.03.2011 and they had found that only 04 coke ovens (out of 40) were in operational condition. The petitioner had 02 different sizes of coke ovens (a) 22 ovens of 7.6 MT capacity and (b) 18 ovens of 5.5 MT capacity. On the basis of records, it has been alleged that the petitioner had fraudulently shown

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excess coke production. Further, total quantity of Coke falsely and fictitiously shown as sold/produced by the petitioner was found to be 6205.33 MT.

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C. Details of false and fictitious use of fuel (diesel) shown by the company. Records of diesel consumption were also found to be incorrect and a large numbers of diesel filling station’s bills were found to be fictitious and forged. The details have been given in the charge-sheet.

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21. The learned counsel for the petitioner has relied upon Para-40 of the judgment reported in (2003) 5 SCC 257 (Hira Lal Hari Lal Bhagwati –versus- CBI, New Delhi) , which is quoted hereunder: -

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“40. It is settled law, by a catena of decisions, that for establishing the 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. From his making failure to keep promise subsequently, such a culpable intention right at the beginning that is at the time when the promise was made cannot be presumed. It is seen from the records that the exemption certificate contained necessary conditions which were required to be complied with after importation of the machine. Since the GCS could not comply with it, therefore, it rightly paid the necessary duties without taking advantage of the exemption certificate. The conduct of the GCS clearly indicates that there was no fraudulent or dishonest intention of either the GCS or the appellants in their capacities as office-bearers right at the time of making application for exemption. As there was absence of dishonest and fraudulent intention, the question of committing offence under Section 420 of the Indian Penal Code does not arise. We have read the charge-sheet as a whole. There is no allegation in the first information report or the charge-sheet indicating expressly or impliedly any

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intentional deception or fraudulent/dishonest intention on the part of the appellants right from the time of making the promise or misrepresentation. Nothing has been said on what those misrepresentations were and how the Ministry of Health was duped and what were the roles played by the appellants in the alleged offence. The appellants, in our view, could not be attributed any mens rea of evasion of customs duty or cheating the Government of India as the Cancer Society is a non-profit organization and, therefore, the allegations against the appellants levelled by the prosecution are unsustainable. The Kar Vivad Samadhan Scheme certificate along with Duncan and Sushila Rani judgments clearly absolve the appellants herein from all charges and allegations under any other law once the duty so demanded has been paid and the alleged offence has been compounded. It is also settled law that once a civil case has been compromised and the alleged offence has been compounded, to continue the criminal proceedings thereafter would be an abuse of the judicial process.”

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22. The other judgment relied upon by the petitioner is reported in (2010) 10 SCC 361 (V.P. Shrivastava versus Indian Explosives Ltd and others) , Paras-25 and 31, which are quoted hereunder:

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“25. It is well settled that in order to constitute an offence of cheating, it must be shown that the accused had fraudulent or dishonest intention at the time of making the representation or promise and such a culpable intention right at the time of entering into an agreement cannot be presumed merely from his failure to keep the promise subsequently.

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31. In our view, the averment strikes at the root of the allegation that at the time of entering into the agreement sometime in the year 2001, the appellants had fraudulent intention to somehow induce IEL to enter into the said

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agreement and part with a huge sum of money. It bears repetition that on their own showing IEL was fully aware of the financial health of FCIL at the time the said contract was entered into, as also the reason why FCIL was unable to continue the production of ammonium nitrate. It needs little emphasis that in order to constitute an offence of “cheating”, the intention to deceive should be in existence at the time when the alleged inducement was made. In the instant case, such an intention cannot be inferred from the aforenoted allegations in the complaint and averments in the plaint.”

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23. Another judgment relied upon by the petitioner is reported in (2009) 3 SCC 78 (V. Y. Jose and another versus State of Gujarat and Another), Para 14, 21 and 22, which are quoted as under:

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“14. An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied:

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(i) deception of a person either by making a false or misleading representation or by other action or omission;

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(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.

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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.

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21. There exists a distinction between pure contractual dispute of a civil nature and an offence of cheating. Although breach of contract per se would not come in the way of initiation of a criminal proceeding, there cannot be any doubt whatsoever that in the absence of the averments made in the complaint petition wherefrom the ingredients of an offence can be found out, the court should not hesitate to exercise its jurisdiction under Section 482 of the Code of Criminal Procedure.

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22. We may reiterate that one of the ingredients of cheating as defined in Section 415 of the Penal Code is existence of an (sic fraudulent or dishonest) intention of making initial promise or existence thereof from the very beginning of formation of contract.”

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24. This Court is of the considered view that the aforesaid judgments do not apply to the facts and circumstances of this case.

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25. On the basis of the materials collected during investigation, it has been alleged by the C.B.I. in the chargesheet itself that under the facts and circumstances mentioned in the charge-sheet, investigation has clearly established that Sri Ram Sahay Singh, Director of M/s P. R. Fuels Pvt. Ltd, Varanasi did not utilize the coal lifted under FSA from BCCL with criminal intention of cheating, by creating false and bogus books of accounts and other records pertaining to production / sale of hard coke and used the same as genuine, to be able to continue/keep on lifting the coal under FSA from BCCL, Dhanbad and diverting/selling it in black/open market and thereby causing wrongful loss to the BCCL to the tune of Rs. 3.89 crores and wrongful gain to themselves which disclose a prima-facie case punishable under sections 420, 468 and 471 of IPC.

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26. Considering the nature of allegations levelled against the petitioner, it cannot be said at this stage that the agreement having been entered into between the parties, no case under sections 420, 468 and 471 IPC is made out against the petitioner and only the consequences of violation of the terms and conditions of the agreement has to follow as mentioned in the agreement itself. This Court is of the considered view that merely because there is an agreement between the parties, it cannot be said that the criminal liability arising out of transactions between the parties is completely excluded, if the basic ingredients of offence is available. There can be no dispute that there are situations where the civil consequences as well as criminal consequences arise out of the same transactions between the parties .

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27. Accordingly, the arguments of the petitioner that no prima-facie case is made out for constituting a case under section 420 of IPC is hereby rejected at this stage.

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28. This criminal miscellaneous petition is accordingly dismissed .

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29. Pending interlocutory application, if any, is dismissed as not pressed.

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30. Interim order, if any, stands vacated.

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31. However, it is made clear that dismissal of this case will not prejudice the case of the petitioner before the learned court below and it will be open to the petitioner to raise all the points, which are available to the petitioner under law.

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(Anubha Rawat Choudhary, J.)

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Pankaj/ Mukul

M/S P.R.Fuels Pvt. Ltd. v. Union of India And Anr.

Case brief

What is this about?

What did the court decide?

M/S P.R.Fuels Pvt. Ltd. v. Union of India And Anr.

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