Allowed

Naveen S/O K Karthakeyan v. the State of Karnataka

Karnataka HC1 Oct 2020CRL.P/100759/2017

Case brief

AI extract

What is this about?

In a criminal petition under Section 482 Cr.P.C., the High Court quashed an FIR and complaint for cheating arising from a commercial dispute. The Court held that a civil suit conclusively determined the parties' rights and obligations, rendering continuance of criminal proceedings redundant and serving no purpose.

What did the court decide?

The complaint in Crime No.26/2016 registered by the Hosapete Extension Police Station is quashed.

Naveen S/O K Karthakeyan Vs the State of Karnataka — Quashing and FIR | Karnataka HC (2020)

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Crl.P.No.100759/2017

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IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH

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DATED THIS THE 1^ST DAY OF OCTOBER, 2020

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BEFORE

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THE HON’BLE MR.JUSTICE SURAJ GOVINDARAJ

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CRIMINAL PETITION NO. 100759/2017

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BETWEEN:

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NAVEEN S/O. K. KARTHAKEYAN AGE: 42 YEARS, OCC: BUSINESS, R/O: NO.20, VENKATESA, THYAGARAYA NAGAR, VILIVAKKAM, CHENNAI.

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... PETITIONER

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(BY SRI. SRINIVAL B. NAIK, ADVOCATE)

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AND:

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THE STATE OF KARNATAKA, REP BY SPP, HIGH COURT OF KARNATAKA, DHARWAD BENCH, THROUGH BADAVANE PS, DISTRICT BALLARI.

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MAILAR RAO, S/O. BALAVANTHA RAO, AGE: MAJOR, R/O: NEAR RADHAKRISHNA SCHOOL MJ NAGAR, HOSAPETE, DISTRICT: BALLARI.

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... RESPONDENTS (BY SRI. RAMESH CHIGARI, HCGP FOR R1; SRI. SATISH M. S., ADVOCATE FOR R2)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C., SEEKING TO QUASH THE FIR AND COMPLAINT IN CRIME NO. 26 OF 2016 OF HOSAPETE EXTENSION POLICE STATION, REGISTERED FOR THE OFFENCES PUNISHABLE UNDER SECTIONS 406 AND 420 OF IPC.

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THIS PETITION COMING ON FOR ADMISSION THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner is before this Court seeking for quashing of the FIR and complaint in Crime No.26/2016 of the Hosapete Extension Police Station, registered for the offences punishable under Sections 406 and 420 of the IPC.

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The brief facts of the case are that:

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2.1 The petitioner is stated to be carrying on the business of supplying of Automatic Paper Cup Forming Machines.

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2.2 Since the complainant was intending to start paper cup production unit, the complainant approached the petitioner for supply of two

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Cup Star Ultra Model Machines and after negotiations the petitioner agreed to supply two sets of Cup Star Ultra Model Machines as per the design and specification of the complainant at the rate of Rs.11,83,200/-.

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2.3 It was further agreed between them that, 50% of the advance amount i.e., Rs.5,80,000/- was to be paid at the time of the order and balance at the time of delivery.

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2.4 The complainant deposited a sum quantified to 25% of the agreed amount i.e., Rs.2,83,200/- and insisted on the petitioner to supply the machines. However, the petitioner reminded to the complainant that the entire amount as agreed had not been paid, despite which the complainant did not make any payment and insisted on the petitioner to supply the machines.

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2.5 On 18.08.2014, the complainant alleging that there was delay in supplying the machinery and terminated the contract and called upon the petitioner to refund the advance amount along with certain other amounts claimed as losses suffered by the complainant on account of the delay in supply.

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2.6 The petitioner replied on 18.11.2014 stating that, since the machines are ready for delivery, the complainant ought to take delivery and make payment of the balance amount, more so, for the reason that the machinery had been specifically designed and assembled as per the requirement of the complainant. This was followed up with a remark on 16.12.2014.

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2.7 The complainant on 18.12.2014 replied stating that the complainant was no longer interested in taking delivery of the machine

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and called upon the petitioner to make payment of monies as sought for in the letter dated 18.08.2014.

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2.8 When the petitioner did not refund the monies, the respondent No.2/complainant filed the aforesaid complaint alleging that the petitioner has cheated the complainant inasmuch as the petitioner has collected the monies and is refusing to refund the same despite being called upon to do so.

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2.9 It is alleging that the said complaint is totally false, frivolous, vexatious and filed with an intention to harass the petitioner, more so when the dispute between the petitioner and the complainant are of civil in nature, the petitioner is before this Court by way of above petition under Section 482 of the Cr.P.C.

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On service of notice respondent No.2 the de-facto complainant has entered appearance and filed his objections contending that:

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3.1 The reduction in the advance amount is as agreed between the parties. The advance payment was made on 22.05.2014. The machines were to be delivered within 35-45 days thereon. However, they are not so delivered.

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3.2 Therefore, the complainant by way of his letters dated 09.07.2014 and 17.07.2014 called upon the petitioner to supply the said machines.

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3.3 Vide letter dated 18.08.2014, the complainant withdrawing the purchase order also called upon the petitioner to make payment of interest on the amount alleged to have been borrowed by the complainant, allegedly being paid to the premises taken on rent by the

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complainant as also other expenses incurred by the complainant in connection with the negotiations, traveling as also the profit that the complainant would have earned by making use of the said machinery.

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3.4 The complainant had filed the complaint on 31.12.2014 against the petitioner, wherein the presence of the petitioner was secured and there was a kind of compromise arrived at directing the petitioner to make payment of the monies received. However, the same was not paid. Hence, thereafter the complainant filed the present complaint which came to be registered as Crime No.26/2016 on 15.03.2016, for the offences punishable under Sections 406 and 420 of the IPC.

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3.5 Despite these letters having been issued, no payments were forthcoming from the petitioner and as such, the complainant filed

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a suit in O.S.No.99/2017 on the file of the Addl. Senior Civil Judge and JMFC, Hosapete. On coming into force of the Commercial Courts Act, the same came to be transferred to the IV Addl. District and Sessions Judge (Commercial Court), Ballari and renumbered as Commercial O.S.No.86/2019.

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3.6 The petitioner who is arrayed as defendant therein entered appearance. The suit came to be decreed on 29.11.2019 directing the petitioner herein and the defendant therein to make payment of a sum of Rs.2,83,200/along with interest at the rate of 9% p.a. which is subsequent thereto.

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3.7 It is alleged in the objections that the petitioner never intended to supply the machinery and received the money only to defraud the complainant and therefore, the present petition is required to be dismissed.

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Sri. Srinivas B. Naik, learned counsel for the petitioner, while reiterating the averments made in the petition also submits that:

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4.1 The dispute between the parties are civil in nature.

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4.2 The dispute arises out of the commercial contract.

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4.3 That the petitioner was ready to supply the machines which had been fabricated as per the design and requirement of the complainant, though belatedly, but the complainant refused to receive the said machines.

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4.4 The petitioner has fabricated the machinery as per the specific requirement of the complainant and they cannot be sold to any third party and as such, the machines are incapable of any use by anyone, which can only to be used by the complainant.

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4.5 These aspects had all been bought to the notice of the complainant in the various correspondence, which had been exchanged, despite which the complainant refused to take delivery of the machines. Instead of taking delivery, the complainant had filed a suit seeking for various amounts under various heads of accounts and those claims have been rejected by the IV Addl. District and Sessions Judge( Commercial Court), Ballari vide its judgment dated 29.11.2019 in Commercial O.S.No.86/2019 and only refund of the advance amount was decreed.

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4.6 The fact that the suit had been filed would indicate that the disputes are civil in nature and no complaint could have been filed and on the above basis Sri.Srinivas Naik submits that continuance of the complaint against the petitioner causes harassment to the petitioner

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and there is no offence made out. On the entire reading of the complaint, the allegations which have been made as regards offence of cheating against the petitioner are patently absurd. The complaint has been filed only to pressurize the petitioner to make payment of monies which are not due by the petitioner.

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4.7 On these grounds he submits that the above petition ought to be allowed and the complaint be quashed.

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Per contra, Sri. Satish M. S., learned counsel appearing for the de-facto complainant – respondent No.2 would submit that:

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5.1 It was solemnly agreed between the parties that the machinery was to be supplied between 35-45 days after receipt of the initial

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advance amount, despite which the machinery was not supplied.

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5.2 The amounts having been received on 22.05.2014, the machinery had to be supplied by the first week of July, 2014. The machineries were not even ready as on 18.08.2014, when the complainant withdrew the purchase order dated 12.05.2014 and called upon the petitioner to refund the amounts as also to pay certain additional amount as damages.

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5.3 He submits that the complainant waited for a period of nearly double of what was agreed upon. The amounts having been received on 22.05.2014, it was only on 18.08.2014 after nearly 90 days that the purchase order came to be withdrawn. He further submits that the petitioner had no intention to ever supply the

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machinery and this by itself amounts to cheating within the meaning of Section 420 of the IPC.

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5.4 In this regard he relies on the following decisions of the Hon’ble Apex Court:

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5.4.1 S. P. Gupta Vs. Ashutosh Gupta in Special Leave Petition (CRL) No.1953 of 2008 dated 13.05.2010, more particularly para 13 thereon, which is extracted hereunder:

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“13. Having carefully considered the submissions made on behalf of the respective parties and the complaint filed by the father of the Respondent, we are inclined to agree with the views expressed by the High Court that a prima facie case had been made out to go to trial. There is a positive assertion in the complaint that an assurance had been given by the Petitioner to the complainant that the property in question was free from all encumbrances and that the Accused No.1 was the sole owner of the property. It has been mentioned in the complaint that had not such a representation been made relating to the status of ownership of the property in question, the complainant may not have entered into the transaction at all. Whether or not the Petitioner was truly mistaken with regard to

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the information given by him is a question of utmost importance in answering a charge of the nature indicated in the complaint. Merely because the Petitioner had received part payment of the consideration amount and had made over the same to the Accused No.1 and merely because possession of the land had been handed over by him to the complainant, cannot form the basis of a presumption that he had no knowledge that there was a dispute regarding the ownership of the property, as to whether the same belongs to a HUF or not. It is true, as pointed out by Mr. Lekhi, that Section 415 IPC, which defines the offence of cheating, provides in Illustration (g) as follows :

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"(g). A intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery, A cheats; but if A, at the time of obtaining the money, intends to deliver the indigo plant, and afterwards breaks his contract and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract."

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However, the aforesaid provision clearly indicates that if at the very initiation of the negotiations it was evident that there was no intention to cheat, the dispute would be of a civil nature. But such a conclusion would depend on the evidence to be led at the time of trial. In the instant case, the complaint does not make out a prima facie case to go to trial. The Petitioner may have discharged his functions as a constituted attorney for the Accused No.1 by acting as a liaison between the

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Accused No.1 and the father of the Respondent, but that does not in itself indicate that he did not have any knowledge of the status of ownership of the land forming the subject matter of the transaction.”

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5.4.2 Medchl Chemicals & Pharma (P)

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Ltd. Vs. Biological E. Ltd., and Others reported in (2000) 3 SCC 269, more particularly para 15 thereon, which is extracted

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hereunder:

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“15.In the matter under consideration, if we try to analyse the guidelines as specified in Shivalingappa case (supra) can it be said that the allegations in the complaint do not make out any case against the accused nor it discloses the ingredients of an offence alleged against the accused or the allegations are patently absurd and inherently improbable so that no prudent person can ever reach to such a conclusion that there is sufficient ground for proceeding against the accused. In the present case, the complaint as noticed above does not, however, lend credence to the questions posed. It is now well settled and one need not dilate on this score, neither we intend to do so presently that the allegations in the complaint will have to be accepted on the face of it and truth or falsity of which would not be gone into by the Court at this earliest stage as noticed above: whether or not allegations in the

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complaint were true is to be decided on the basis of the evidence led at the trial and the observations on this score in the case of Nagpur Steel & Alloys Pvt. Ltd. v. P. Radhakrishna [1997 SCC (Crl.) 1073] ought to be noticed. In paragraph 3 of the report this Court observed:

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“3. We have perused the complaint carefully. In our opinion it cannot be said that the complaint did not disclose the commission of an offence. Merely because the offence was committed during the course of a commercial transaction, would not be sufficient to hold that the complaint did not warrant a trial. Whether or not the allegations in the complaint were true was to be decided on the basis of evidence to be led at the trial in the complaint case. It certainly was not a case in which the criminal trial should have been cut short. The quashing of the complaint has resulted in grave miscarriage of justice. We, therefore, without expressing any opinion on the merits of the case, allow this appeal and set aside the impugned order of the High Court and restore the complaint. The learned trial Magistrate shall proceed with the complaint and dispose of it in accordance with law expeditiously”.

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5.4.3 Devender Kumar Singla Vs.

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Baldev Krishan Singla reported in (2005) 9 SCC 15, more particularly para 8, which is extracted hereunder:

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“8. As was observed by this Court in Shivanarayan Kabra v. State of Madras, AIR (1967) SC 986 it is not necessary that a false pretence should be made in express words by the accused. It may be inferred from all the circumstances including the conduct of the accused in obtaining the property. In the true nature of things it is not always possible to prove dishonest intention by any direct evidence. It can be proved by number of circumstances from which a reasonable inference can be drawn.

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5.5 On the basis of the above decisions, Sri.Satish M.S. would submit that the amounts having been received without an intention to supply the machinery amounts to an offence of cheating. This Court ought not to interfere in the matter by exercising the extraordinary jurisdiction under Section 482 Cr.P.C. The defence of the petitioner has to be established during the course of trial and if the accused were able to establish that there was no dishonest intention and/or no offence of cheating committed, the Magistrate would acquit the accused.

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5.6 On the basis of such submissions, Sri.Satish M. S. prays to dismiss the petition.

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Heard Sri. Srinivas B. Naik, learned counsel for the petitioner, Sri. Ramesh Chigari, learned HCGP for the 1^st respondent and Sri. Satish M. S., learned counsel for the respondent No.2. Perused the records.

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Though various arguments have been advanced by both the counsels, the questions that arise for determination are:

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i. Whether there is prima facie an offence of cheating which could be said to have been committed and,

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ii. Whether this Court ought to exercise its extraordinary inherent power under Section 482 of the Cr.P.C. or not?

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Both points being related are considered together as under:

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The facts insofar as placing of the purchase order and payment of monies on 22.05.2014, delivery within 45 days thereof, the reminders letters issued by the complainant calling upon the petitioner to supply the machines and finally withdrawal of the purchase order on 18.08.2014 are not in dispute. It is also not in dispute that the machines were in fact ready as on 18.11.2014, when the petitioner has sent an e-mail to the complainant informing the complainant about the same. This was again reminded on 16.12.2014. Despite which the complainant vide his letter dated 08.12.2014 had informed that there is no purpose in keeping the machines ready after the withdrawal of the purchase order. The complainant was not ready to take delivery of the machines, which is said to have been kept ready for delivery and called upon the petitioner to make payment of the amounts demanded in the letter dated 18.08.2014. Thus

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the aspect of the machines being ready are also not in dispute.

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The complainant had filed a suit as aforestated and the trial Court after holding the trial has held that there was indeed delay in the supply of the machines. However, having held that the complainant itself had breached the terms of the agreement by not making payment of the entire advance amount, the plaintiff was held to be not entitled to for the amounts claimed by the complainant/plaintiff and as such dismissed the said claim of the complainant/plaintiff.

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Aggrieved by the said judgment, the petitioner is stated to have filed an appeal before this Court. On enquiry Sri. Satish M. S, learned counsel informs that there is no appeal or cross-appeal filed by the complainant/plaintiff, even though the judgment was delivered nearly a year ago on 29.11.2019.

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In the above background, though Sri. Satish M. S., learned counsel for the respondent No.2/ complainant contended that the petitioner ought to face trial, I am of the considered opinion that the said trial was already taken place in Commercial O.S.No.86/2019, where the trial Court in civil proceedings filed by the complainant has rejected the claims of the complainant which has not been challenged by the complainant. There is a decree which has been obtained by the complainant for payment of Rs.2,83,000/- which decree is required to be enforced by the complainant in accordance with law, subject to result of the appeal filed by the petitioner.

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In view of the same, the suit having conclusively determined the rights and obligation of the parties, I am of the considered opinion that there is no purpose which would be served by the continuance of criminal proceedings against the petitioner, when

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the very basis of the complaint has already been decided by the Commercial Court in Commercial O.S.No.86/2019.

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In view thereof, the petition is allowed. The complaint in Crime No.26/2016 registered by the Hospete Extension Police Station is quashed.

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The observations made above is only for the purpose of consideration of the petition under Section 482 of the Cr.P.C.

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In view of disposal of the main petition, I.A.1/2018 does not survive for consideration.