Allowed

Vijay Choudhary Alias Vijay Madan Lal Choudhary v. State of Jharkhand and Anr.

Jharkhand HC2 Nov 2023Cr.M.P./1750/2013

Case brief

AI extract

What is this about?

The High Court quashed criminal proceedings against a petitioner and a company for cheating and criminal breach of trust. Relying on Supreme Court precedents, the court held the case arose from a commercial dispute over unpaid dues where no dishonest intention existed at the inception, making it a civil matter.

What did the court decide?

The entire criminal proceedings, including the order taking cognizance dated 29.03.2011, against the petitioners under Sections 420, 406, and 120-B of the Indian Penal Code were quashed.

Vijay Choudhary Alias Vijay Madan Lal Choudhary Vs… — Cheating and Forgery | Jharkhand HC (2023)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI

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Cr.M.P. No. 1750 of 2013

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Vijay Choudhary @ Vijay Madan Lal Choudhary ..... … Petitioner Versus 1. The State of Jharkhand. 2. M/s Feegrade & Co. Pvt. Ltd. ..... … Opposite Parties with Cr.M.P. No. 1318 of 2011 M/s Zoom Vallabh Steel Limited represented through Nazim Khan ..... … Petitioner Versus

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The State of Jharkhand. 2. M/s Feegrade & Co. Pvt. Ltd. ..... … Opposite Parties --------

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CORAM : HON’BLE MR. JUSTICE SANJAY KUMAR DWIVEDI

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-----For the Petitioners : Mr. Mohammad Asghar, Advocate. For the State : Mrs. Lily Sahay, A.P.P. : Mr. S.K. Srivastava, A.P.P. For the O.P. No. 2 : Mr. Indrajit Sinha, Advocate. ------

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07/ 02.11.2023 Heard Mr. Mohammad Asghar, learned counsel appearing for the petitioners, Mrs. Lily Sahay and Mr. S.K. Srivastava, learned A.P.Ps. appearing for the State and Mr. Indrajit Sinha, learned counsel appearing for the O.P. No. 2 in respective cases.

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Learned counsel appearing for the petitioners submits that both the cases are arising out of the same complaint case and the company is the petitioner in Cr.M.P. No. 1318 of 2011 and the Director of the said company is the petitioner in Cr.M.P. No. 1750 of 2013.

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Both these petitions have been filed for quashing of the entire criminal proceedings, including the order taking cognizance dated 29.03.2011, by which, cognizance for the offence under Sections 420, 406 and 120-B of the Indian Penal Code has been taken against the petitioners, in connection with C/1 Case No. 89 of 2010, pending in the court of learned CJM, Chaibasa.

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The complaint was filed alleging therein that the complainant carries on business of producing and marketing iron ore and the accused No. 2, who is in charge of day to day affairs of accused No. 1 (company) contacted the sister concern of complainant company in March concern 2008 and requested for supply of iron ore and thereafter the complainant company and its sister concern supplied iron ore to the accused company, but a sum of Rs. 1,32,31,194/- has not

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been paid by the accused to the complainant company causing unlawful loss to the complainant. It is further alleged that the aforesaid due amount has been calculated after adjusting the credit balance but when the said sum was not paid to the complainant, a notice was sent to the accused persons on 09.02.2009 and 27.02.2009 and in reply the accused persons admitted the debt and requested for some time for payment of outstanding amount and again the complainant sent letter to accused persons on 01.04.2009 and on 06.01.2010, but no payment was made by the accused persons.

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Learned counsel appearing for the petitioners submits that the petitioner in Cr.M.P. No. 1750 of 2013 namely Vijay Choudhary @ Vijay Madan Lal Choudhary was the Director of M/s Zoom Vallabh Steel Limited and he has not played any role. He submits that the entire allegation is based on the commercial transaction and the petitioner and the petitioner’s company as well as the O.P. No. 2 were in business terms. He further submits that certain dues has not been paid for that the complaint case has been filed. He further submits that in the complaint itself, it is admitted that the security amount has been adjusted and thereafter the figures shown in the complaint petition has been disclosed, which clearly suggests that this is a case of recovery of money. He further submits that for a civil wrong, if any, the complaint case has been filed and the learned court has taken the cognizance. On these grounds, he submits that the entire criminal proceedings may kindly be quashed.

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Mr. Indrajit Sinha, learned counsel appearing for the O.P. No. 2 submits that the dues is there and fraudulently the amount has not been paid and in view of that the learned court has rightly taken the cognizance. He refers to the complaint petition and submits that the allegations are there.

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Learned A.P.Ps. appearing in respective cases jointly submit that the learned court has rightly taken the cognizance on the basis of the complaint made by the O.P. No. 2.

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In view of the above submissions of learned counsel appearing for the parties and looking into the complaint case, it transpires that in para-4 of the complaint, it is admitted that the

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amount disclosed in the complaint petition has been calculated after adjusting the credit balance lying with the complainant’s sister concern M/s Rungta Mines Ltd. Thus, it is crystal clear that certain amount has already been paid. There is no intention of cheating from very beginning and it also appears that for recovery of the amount, the complaint case has been filed, wherein the complainant was required to file the money suit. As such, it appears that for the civil wrong, the complaint case has been filed.

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Every contract cannot be a subject matter of criminal proceeding, as has been held by the Hon’ble Supreme Court in the case of Vir Prakash Sharma Vs. Anil Kumar Agarwal & Anr., reported in [(2007) 7 SCC 373]. Paragraph 8 of the said judgment reads as under:-

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“8. The dispute between the parties herein is essentially a civil dispute. Non-payment or underpayment of the price of the goods by itself does not amount to commission of an offence of cheating or criminal breach of trust. No offence, having regard to the definition of criminal breach of trust contained in Section 405 of the Penal Code can be said to have been made out in the instant case. Section 405 of the Penal Code reads, thus:

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“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 prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits ‘criminal breach of trust’.”

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Neither any allegation has been made to show existence of the ingredients of the aforementioned provision nor any statement in that behalf has been made.”

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Further in the case of Vijay Kumar Ghai & Ors. Vs. State of West Bengal & Ors ., reported in [(2022) 7 SCC 124], the Hon’ble

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Supreme Court in paras-31 to 39 of the said judgment held as under:-

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“31. Section 415IPC defines “cheating” which reads as under:

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“ 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”.”

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The essential ingredients of the offence of cheating are:

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1. Deception of any person

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2. (a) Fraudulently or dishonestly inducing that person—

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(i) to deliver any property to any person; or

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(ii) to consent that any person shall retain any property; or

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(b) intentionally inducing 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.

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32. 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.

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33. Section 420IPC defines “cheating and dishonestly inducing delivery of property” which reads as under:

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“ 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

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seven years, and shall also be liable to fine.”

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34. Section 420IPC 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 also applicable to matters where the destruction of the property is caused by the way of cheating or inducement. Punishment for cheating is provided under this section which may extend to 7 years and also makes the person liable to fine.

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35. To establish the offence of cheating in inducing the delivery of property, the following ingredients need to be proved:

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(i) The representation made by the person was false.

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(ii) The accused had prior knowledge that the representation he made was false.

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(iii) The accused made false representation with dishonest intention in order to deceive the person to whom it was made.

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(iv) The act where the accused induced the person to deliver the property or to perform or to abstain from any act which the person would have not done or had otherwise committed.

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36. As observed and held by this Court in R.K. Vijayasarathy v. SudhaSeetharam [R.K. Vijayasarathy v. SudhaSeetharam, (2019) 16 SCC 739 : (2020) 2 SCC (Cri) 454] , the ingredients to constitute an offence under Section 420 are as follows:

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(i) a person must commit the offence of cheating under Section 415; and

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(ii) the person cheated must be dishonestly induced to:

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(a) deliver property to any person; or

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(b) make, alter or destroy valuable security or anything signed or sealed and capable of being converted into valuable security. Thus, cheating is an essential ingredient for an act to constitute an offence under Section 420IPC.

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37. The following observation made by this Court in Uma Shankar Gopalika v. State of Bihar [Uma Shankar Gopalika v. State of Bihar, (2005) 10 SCC 336 : (2006) 2 SCC (Cri) 49] with almost similar facts and circumstances may be relevant to note at this stage : (SCC pp.

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338-39, paras 6-7)

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“6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of the complaint any criminal offence whatsoever is made out much less offences under Sections 420/120-BIPC. The only allegation in the complaint petition against the accused persons is that they assured the complainant that when they receive the insurance claim amounting to Rs 4,20,000, they would pay a sum of Rs 2,60,000 to the complainant out of that but the same has never been paid. … It was pointed out on behalf of the complainant that the accused fraudulently persuaded the complainant to agree so that the accused persons may take steps for moving the consumer forum in relation to the claim of Rs 4,20,000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract 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 persons to cheat which is a condition precedent for an offence under Section 420IPC.

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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-BIPC 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 482CrPC which it has erroneously refused.”

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38. 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. State of

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Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786] , the distinction between mere breach of contract and cheating, which is criminal offence, is a fine one. While breach of contract cannot give rise to criminal prosecution for cheating, fraudulent or dishonest intention is the basis of the offence of cheating. In the case at hand, complaint filed by Respondent 2 does not disclose dishonest or fraudulent intention of the appellants.

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39. In Vesa Holdings (P) Ltd. v. State of Kerala [Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8 SCC 293 : (2015) 3 SCC (Cri) 498] , this Court made the following observation : (SCC pp. 297-98, para 13)

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“13. It is true that a given set of facts may make out a civil wrong as also a criminal offence and only because a civil remedy may be available to the complainant that itself cannot be ground to quash a criminal proceeding. The real test is whether the allegations in the complaint disclose the criminal offence of cheating or not. In the present case, there is nothing to show that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420IPC. In our view, the complaint does not disclose any criminal offence at all. Criminal proceedings should not be encouraged when it is found to be mala fide or otherwise an abuse of the process of the court. The superior courts while exercising this power should also strive to serve the ends of justice. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of the court and the High Court committed [Maniprasad v. State of Kerala, 2011 SCC OnLine Ker 4251] an error in refusing to exercise the power under Section 482CrPC to quash the proceedings.”

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In view of the above facts and considering the above judgments of the Hon’ble Supreme Court in the cases of Vir Prakash Sharma (Supra) and in the case of Vijay Kumar Ghai (Supra), the case of the petitioner is fully covered in the light of the above judgments.

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Accordingly, the entire criminal proceedings, including the order taking cognizance dated 29.03.2011, by which, cognizance for the offence under Sections 420, 406 and 120-B of the Indian Penal Code has been taken against the petitioners, in connection with C/1 Case No. 89 of 2010, pending in the court of learned CJM, Chaibasa, are hereby, quashed.

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Both these petitions are allowed and disposed of. Pending

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I.A., if any, stands disposed of.

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It is made clear that if any civil proceeding is there, that will be decided in accordance with law, without prejudiced to this order.

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(Sanjay Kumar Dwivedi, J.)

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Amitesh/-

Vijay Choudhary Alias Vijay Madan Lal Choudhary v. State of Jharkhand and Anr.

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Vijay Choudhary Alias Vijay Madan Lal Choudhary v. State of Jharkhand and Anr.

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