Allowed

B L Nagendra Prasad v. State of Karnataka

Karnataka HC14 Jul 2022CRL.P/2742/2022

Case brief

AI extract

What is this about?

Complaints seeking recovery of consideration paid under plot-sale agreements were held to concern civil disputes without the ingredients of criminal breach of trust or cheating. The Court allowed all four petitions and quashed the criminal proceedings.

What did the court decide?

Proceedings in crime Nos.51/2022, 1/2022, 50/2022 and 52/2022 pending before the IV Additional Chief Metropolitan Magistrate, Bengaluru City, quashed.

B L Nagendra Prasad Vs State of Karnataka — Contract and Commercial Disputes | Karnataka HC (2022)

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CRL.P No. 3647 of 2022 C/W CRL.P No. 2742 of 2022 CRL.P No. 3650 of 2022 CRL.P No. 3657 of 2022

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 14^TH DAY OF JULY, 2022

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BEFORE

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THE HON'BLE MR JUSTICE M.NAGAPRASANNA CRIMINAL PETITION NO. 3647 OF 2022

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C/W.

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CRIMINAL PETITION NO. 2742 OF 2022 CRIMINAL PETITION NO. 3650 OF 2022 CRIMINAL PETITION NO. 3657 OF 2022

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IN CRIMINAL PETITION NO. 3647 OF 2022 BETWEEN:

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B.L.NAGENDRA PRASAD AGED ABOUT 63 YEARS S/O LATE SHRI C.V.L SHASTRY RESIDENT OF THE PREMISES BEARING 29/A, 9^TH MAIN, SADASHIVNAGAR BENGALURU – 560 080.

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… PETITIONER

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(BY SRI C.V.NAGESH, SR. ADVOCATE A/W SRI. RAGHAVENDRA K., ADVOCATE)

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AND:

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STATE OF KARNATAKA

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Digitally signed by PADMAVATHI B K Location: HIGH COURT OF KARNATAKA

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BY STATION HOUSE OFFICER SESHADRIPURAM POLICE STATION BENGALURU.

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REP BY SPP HIGH COURT BUILDING

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CRL.P No. 3647 of 2022 C/W CRL.P No. 2742 of 2022 CRL.P No. 3650 of 2022 CRL.P No. 3657 of 2022

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BENGALURU - 560 001 REPRESENTED BY S.P.P. HIGH COURT BUILDING BENGALURU – 560 001.

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C.N.SEETHARAM

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AGED ABOUT 73 YEARS S/O LATE C.K.N.AYENGER RESIDENT OF NO.3, 1^ST CROSS SRIPURAM, SESHADRIPURAM BENGALURU – 560 020.

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…RESPONDENTS

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(BY SMT.K.P.YASHODHA, HCGP FOR R1; SRI M.T.NANAIAH, SR. ADVOCATE A/W SRI PRABHUGOUD.B.TUMBIGI., ADVOCATE FOR R2)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C., PRAYING TO QUASH THE FIR IN CR.NO.51/2022 REGISTERED AT SESHADRIPURAM POLICE STATION, BENGALURU FOR THE OFFENCES THAT ARE MADE PENAL U/S 406, 420 OF IPC WHICH FIR HAS BEEN SUBMITTED TO THE COURT OF THE IV ADDL.C.M.M., BENGALURU.

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IN CRIMINAL PETITION NO. 2742 OF 2022

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BETWEEN:

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B.L.NAGENDRA PRASAD AGED ABOUT 63 YEARS S/O LATE SHRI C.V.L SHASTRY RESIDENT OF THE PREMISES BEARING 29/A, 9^TH MAIN,

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CRL.P No. 3647 of 2022 C/W CRL.P No. 2742 of 2022 CRL.P No. 3650 of 2022 CRL.P No. 3657 of 2022

SADASHIVNAGAR

BENGALURU – 560 080.

… PETITIONER

(BY SRI C.V.NAGESH, SR. ADVOCATE A/W SRI. RAGHAVENDRA K., ADVOCATE)

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AND:

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STATE OF KARNATAKA BY STATION HOUSE OFFICER J.P.NAGAR POLICE STATION BANGALORE - 560 078 REPRESENTED BY STATE PUBLIC PROSECUTOR HIGH COURT BUILDING BENGALURU - 560 001.

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REPRESENTED BY

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G.KARTHIKEYAN

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AGED ABOUT 48 YEARS S/O GOPAL C.,

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RESIDENT OF NO.224, 4^TH CROSS, 2^ND PHASE, SHOBHA DEW FLOWER 1^ST PHASE, J.P.NAGAR BENGALURU – 560 078.

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…RESPONDENTS

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(BY SMT.K.P.YASHODHA, HCGP FOR R1; SRI M.T.NANAIAH, SR. ADVOCATE A/W

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SRI PRABHUGOUD.B.TUMBIGI., ADVOCATE FOR R2)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482

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OF CR.P.C., PRAYING TO QUASH THE FIR IN CR.NO.1/2022

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REGISTERED AT J.P.NAGAR POLICE STATION BENGALURU FOR OFFENCE THAT ARE MADE PENAL U/S.406, 420, 506, 120-B OF IPC PENDING ON THE FILE OF THE IV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE BENGALURU CITY.

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IN CRIMINAL PETITION NO. 3650 OF 2022

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BETWEEN:

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B.L.NAGENDRA PRASAD AGED ABOUT 63 YEARS S/O LATE SHRI C.V.L SHASTRY

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RESIDENT OF THE PREMISES BEARING 29/A, 9^TH MAIN, SADASHIVNAGAR BENGALURU – 560 080.

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… PETITIONER

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(BY SRI C.V.NAGESH, SR. ADVOCATE A/W SRI. RAGHAVENDRA K., ADVOCATE)

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AND:

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STATE OF KARNATAKA BY STATION HOUSE OFFICER SESHADRIPURAM POLICE STATION BENGALURU – 560 020

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REPRESENTED BY SPP HIGH COURT BUILDING BENGALURU - 560 001.

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SHRISH N.R., AGED ABOUT 45 YEARS S/O RANGARAMAUJAM C.N.,

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RESIDENT OF NO.4, 1^ST CROSS SRIPURAM, SESHADRIPURAM BENGALURU – 560 020.

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…RESPONDENT'S

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(BY SMT.K.P.YASHODHA, HCGP FOR R1; SRI M.T.NANAIAH, SR. ADVOCATE A/W SRI PRABHUGOUD.B.TUMBIGI., ADVOCATE FOR R2)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF CR.P.C., PRAYING TO QUASH THE FIR IN CR.NO.50/2022 REGISTERED AT SESHADRIPURAM P.S., BANGALORE FOR THE OFFENCES THAT ARE MADE PENAL U/S 406, 420 OF IPC WHICH FIR HAS BEEN SUBMITTED TO THE COURT OF THE IV ACMM, BANGALORE.

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IN CRIMINAL PETITION NO. 3657 OF 2022

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BETWEEN:

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B.L.NAGENDRA PRASAD AGED ABOUT 63 YEARS S/O LATE SHRI C.V.L SHASTRY RESIDENT OF THE PREMISES BEARING 29/A, 9^TH MAIN, SADASHIVNAGAR BENGALURU – 560 080.

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… PETITIONER

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(BY SRI C.V.NAGESH, SR. ADVOCATE A/W SRI RAGHAVENDRA K., ADVOCATE)

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AND:

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STATE OF KARNATAKA BY STATION HOUSE OFFICER SESHADRIPURAM POLICE STATION BENGALURU 560 020 REPRESENTED BY SPP HIGH COURT BUILDING BENGALURU – 560 001.

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PRAMOD B.N., AGED ABOUT 38 YEARS S/O BADRINATH C.N., RESIDENT OF NO.5, 1^ST MAIN SESHADRIPURAM BENGALURU – 560 020.

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…RESPONDENTS

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(BY SMT.K.P.YASHODHA, HCGP FOR R1; SRI M.T.NANAIAH, SR. ADVOCATE A/W SRI PRABHUGOUD.B.TUMBIGI., ADVOCATE FOR R2)

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THIS CRIMINAL PETITION IS FILED UNDER SECTION 482

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OF CR.P.C., PRAYING TO QUASH THE FIR IN CR.NO.52/2022 REGISTERED AT SESHADRIPURAM POLICE STATION BENGALURU FOR OFFENCE THAT ARE MADE PENAL UNDER SEC.406, 420 OF IPC WHICH FIR HAS BEEN SUBMITTED TO THE COURT OF IV ADDITIONAL CHIEF METROPOLITAN MAGISTRATE BENGALURU CITY.

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THESE CRIMINAL PETITIONS COMING ON FOR FURTHER HEARING THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner, common in all these petitions, has knocked the doors of this Court calling in question proceedings instituted in crime No.51/2022 for the offences punishable under Sections 406 and 420 of the IPC, which is impugned in Crl.P.No.3647/2022; crime No.1/2022 for the offences punishable under Sections 406, 420, 506 and 120B of the IPC impugned in Crl.P.No.2742/2022; crime No.50/2022 for the offences punishable under Sections 406 and 420 of the IPC impugned in Crl.P.No.3650/2022 and crime No.52/2022 for the offences punishable under Sections 406 and 420 of the IPC impugned in Crl.P.No.3657/2022, all pending before the IV Additional Chief Metropolitan Magistrate, Bengaluru City.

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2. The complainants differ in all these cases but the

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petitioner - accused remains the same and he is the sole

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accused in all these cases. Therefore, the cases are taken up together and considered by this common order.

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Brief facts of the case leading to the filing of the petitions as borne out from the common pleadings are as follows:

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The petitioner and the respective complainants in all these cases enter into agreements of sale with regard to different properties, by way of separate agreements. All the agreements of sale are executed on a single day i.e., 27.04.2012, in all these cases. Correspondences were generated between the complainants and the petitioner, which appear to have gone in vain. This lead the complainants to register complaints against the petitioner in all these cases. The complaints become crimes as aforequoted. Registering crimes by the complainants is what drives the petitioner to this Court in all these petitions.

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Heard Sri C.V.Nagesh, learned senior counsel for the petitioner, Smt. K.P.Yashodha, learned High Court Government Pleader appearing for respondent Non.1, Sri M.T.Nanaiah, learned senior counsel along with Sri Prabhugoud B. Tumbigi, learned counsel for respondent No.2, in all the petitions.

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The learned senior counsel appearing for the petitioner takes this Court through the documents appended to the petitions particularly, referencing to the sale agreements, to contend that they were agreements between the parties, after thorough scrutiny by the respective complainants, they having signed the agreements, it was not open for the complainants to register complaints as an alternate to time barred civil proceedings. Learned senior counsel would emphasize on clause 16 of the agreement of sale, which depicts the

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resolution of dispute by way of arbitration in terms of the Arbitration and Conciliation Act, 1996. He would further submit that the petitioner has also communicated on 04.01.2022, that if the complainants would visit the place, finalise the same and inform it in writing, the properties would be registered. He would seek quashment of the proceedings.

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Per contra, learned senior counsel appearing for the respondents – complainants would refute the submissions to contend that the petitioner did not have any intention to sell the property right from the beginning and his intention was only to cheat the complainants. Therefore, Section 420 of the IPC is clearly made out against the petitioner in the complaints and since the money of the complainants are lying with the petitioner and that having not been returned, has lead to registration

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of the crimes for the offences as afore-quoted. Therefore,

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he submits that the matter is still under investigation and it has to be investigated and liability should be fixed on the petitioners. He would seek dismissal of the petitions.

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Learned High Court Government Pleader would toe

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the lines of the learned senior counsel appearing for the respondents to contend that the matter is under investigation and police should be permitted to investigate and file a report before the concern Court.

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I have given my anxious consideration to the submissions made by the learned senior counsel appearing for both the parties and perused the material on record.

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The afore-narrated facts are not in dispute. The

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complainants have on their own volition entered into respective agreements of sale for purchase of properties being developed by the petitioner in terms of agreements

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of sale, all dated 27.04.2012. The terms and conditions of the agreement of sale in Crl.P.No.3657/2022, which are germane for consideration of the lis are extracted, as follows:

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“7. It is mutually agreed between the parties that if the layout is not approved & the sale deed is not executed within 24 months and/or the layout is not developed within 33 months from the date of this agreement, the VENDOR shall refund the amount paid by the PURCHASER/s with interest from the date of payment of the total 25% of the property value mentioned in clause #2 of the above agreement. Such payment will need to be made by the Vendor within 15 days from the date of the written request from PURCHASER/S after deducting processing & service charges of Rs.12,000/irrespective of the sital area.

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8. It is mutually agreed that the site number/s selected by the PURCHASER/s shall be changed / relocated if there are any changes / modifications / alternations in the sanctioned / approved layout plan by the competent authority. The decision will be taken by mutual consent of both the parties and binding on both the parties.

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9. The VENDOR assure that if the new site allocated to the PURCHASER is of dimension larger than that of one mentioned in this agreement due the changes / modifications / alterations in the layout sanctioned / approved by the competent authority, then the Purchaser would pay extra cost for the increased Sq. feet at the rate mentioned under Clause # 1 of this agreement (Rs.675/- Sq. Ft). The VENDOR agreed to keep the sale rate of the scheduled property same as mentioned in Clause # 2of this agreement and shall in no manner escalate the sale cost hereafter for the purchaser for the schedule property.

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xxxxxxxxxxxx

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16. Any disputes, differences arising out of this agreement either with regard to the interpretation or implementation of this AGREEMENT OF SALE, shall be referred to sole arbitrator who shall resolve in accordance with the provisions of the Indian Arbitration and Conciliation Act, 1996 or any of its modifications thereof and the courts of Mysore shall have jurisdiction to adjudicate such disputes.”

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In terms of the agreement of sale, the complainants appear to have paid the petitioner certain amounts, pending registration of the sale in their favour. It appears

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that the complainants have generated certain correspondences to the petitioner and that having gone in vain, have later registered the impugned complaints. The registration of complaints against the petitioner is what triggers the entire proceedings. The narration in the complaint insofar as it is germane for the consideration of the subject lis, is as follows:

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“3. Some of the any victims of this elaborate scam having similar devious designs perpetrated by the accused what I am personally aware of are:

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1. (Myself) Sri G Karthikeyan : S/o Sri Gopal aged about 47 residing at # 224 Shobha Dewilanar Apartments 4^th Cross Sarakki Nagar 1^st Phase, JP nagar, Bangalore.

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2. Sri N R Shrish S/o Sri C N Rangaramnujam aged about 45 years residing at No:4 Ammani Cross Sripuram Sheshadrpuram Bangalore 560020.

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3. Sri B N Pramod S/o Sri C N Badrnath aged about 38 years residing at No: 8 1^st Main Sripuram Sheshadripuram Bangalore 560020.

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4. Sri C N Seetharam S/o Late Sri C N Iyengar aged about 72 years residing at No:3 “Arunoday 1^st Cross Sripuram Seshadripuram Bangalore – 560020 and now representatie by his General power of Attorney holder Sri N R Shrish.

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5. Sri Maghizn Anandan S/o Anandan aged about 46 years and now represented by his General power of Attorney holder Sri G Karthikeyan.”

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The claim of the complainants in all these cases is

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that, their hard earned money amounting to Rs.16,20,000/- each lying with the petitioner needs to be returned. Therefore, the crime is ostensibly registered for the purpose of recovery of money. It is also germane to notice the communication by the petitioner to one of the respondents – complainants dated 04.01.2022, which is likewise communicated to other respondents. The same reads as follows.

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“Dr. Gopal Karthikeyan

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No.453, 9^th Cross

J.P.Nagar II Phase

Bangalore 560 078

Dear Sir,

Sub: Skytop Golf Village Registration

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This is in continuation with your correspondence and mails exchanged with our Director Mr. Nagesh Gudihal for pending sites to be registered in your group. We would like to inform

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you that Mr. Nagesh Gudihal is unwell for sometime and has not been coming to the office.

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We apologisse for the dealy arised due to various reasons like the recent panademic etc., As per your discussions with Mr. Nagesh we had arranged to showed you Sy.nos.110/11 situated in Karkanahali, Mysore. You were more interested in Golf sites and now since the sites are ready for Registration, we request you kindly to visit the place, finalise and inform us by writing for registration.

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Please inform us your dae of visit to SKYTOP GOLF VILLAGE, MYSORE, our representatives will be there to show you the sites.

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Attached is the pictures of site development works.

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Thanking you

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Yours Sincerely

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For Skytop Builders (P) ltd.,

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Sd/-

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B.L.Nagendra Prasad

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Managing Director

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(Emphasis added)

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The delay is accepted and also apologized with a request

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to the complainants to appear before him and identify their sites, so that, it could be registered. The

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correspondence was communicated on 04.01.2022, by then, the crimes had already been registered on 02.01.2022.

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The issue in the cases at hand would be, whether the act of the complainants in setting the criminal law in motion in crime Nos.51/2022, 1/2022, 50/2022 and 52/2022, registered for the offences punishable under Sections 406 and 420 of the IPC, would be tenable for the purpose of recovery of money.

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Section 406 of the IPC, which deals with criminal

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breach of trust, has its ingredients in Section 405 of the IPC. It mandates that there must be entrustment of the property by the victim to the accused and the accused should dishonestly misappropriate the said property. If the complaints are noticed on the bedrock of the ingredients of Section 405 of the IPC, the unmistakable

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inference is that, it would not get attracted as the transaction between the petitioner and the respondents are in respect of the agreements of sale, which is mutually arrived at, albeit for a consideration. The consideration having remained with the hands of the petitioner and the petitioner also coming forward to execute a sale deeds in favour of the complainants, would not mean that there has been criminal breach of trust by the petitioner. Therefore, the said offence cannot be laid against the petitioner. The unwillingness of the complainants to take the plots, does not mean that they can set the criminal law in motion.

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The other offence that is alleged against the petitioner is under Section 420 of IPC. To drive home offence punishable under Section 420 of the IPC, ingredients of Section 415 of the IPC ought to be present in the complaint. Section 415 of the IPC mandates inducement by the accused on the victim with dishonest

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intention right from the inception of the transaction. Mutually drawn agreements for particular transaction cannot mean that the accused has induced the victim to invest in housing properties. The agreements were for sale of plots. Agreement of sale can hardly be said to be a product of investment, which cannot be said as an offence punishable under Section 420 of the IPC. The said provision of law cannot be invoked against the petitioner as there is no transfer of property and such property being used dishonestly later on. The agreements are mutual and they are for sale of plots. Agreements of sale are hardly be said a product of inducement by the accused over the victims. Therefore, the offence punishable under Section 420 of the IPC also cannot be laid against the petitioner in the cases at hand.

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The submission of the learned senior counsel for

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the respondents – complainants that the intention of the

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petitioner right from the outset was to cheat the complainants, would tumble down on the fact that the complainants having entered into their respective agreements in the year 2012, did not choose to agitate their rights before the competent civil Court seeking specific performance of the agreements. After about 10 years of the agreements, they have registered the crimes and set the criminal law in motion notwithstanding the fact that there are plethora of communications between the parties with regard to giving of sites. Even otherwise, the agreements of sale which are entered into mutually between the parties with the eyes wide open, cannot give raise to a crime for the offence punishable under Section 406 or 420 of the IPC, as it would be in the realm of civil Court and the complainants ought to have agitated before the civil Court.

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If the complaints which have become crimes as afore-quoted, if permitted to continue would fall foul of the plethora of judgments rendered by the Apex Court on the issue whether the mutually signed agreement between the parties or a joint development agreement or an agreement to sell, which would not be enforceable. Considering the entire spectrum of law earlier laid down, the Apex Court in the case of R.K. VIJAYASARATHY v. SUDHA SEETHARAM reported in (2019) 16 SCC 739 holds as

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follows:

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“11. The first respondent has alleged in the complaint that the appellants have committed offences under Sections 405, 406, 415 and 420 read with Section 34 of the Penal Code. It would thus be necessary to examine the ingredients of the above offences and whether the allegations made in the complaint, read on their face, attract those offences under the Penal Code.

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12. 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

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discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits “criminal breach of trust”.”

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13. A careful reading of Section 405 shows that the ingredients of a criminal breach of trust are as follows:

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13.1. A person should have been entrusted with property, or entrusted with dominion over property;

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13.2. That person should dishonestly misappropriate or convert to their own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; and

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13.3. That such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.

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14. Entrustment is an essential ingredient of the offence. A person who dishonestly misappropriates property entrusted to them contrary to the terms of an obligation imposed is liable for a criminal breach of trust and is punished under Section 406 of the Penal Code. [ 406. Punishment for criminal breach of trust .— Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.]

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15. Section 415 of the Penal Code reads thus:

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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

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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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16. The ingredients to constitute an offence of cheating are as follows:

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16.1. There should be fraudulent or dishonest inducement of a person by deceiving him:

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16.1.1. The person so induced should be intentionally induced to deliver any property to any person or to consent that any person shall retain any property, or

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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

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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.

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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.

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18. Section 420 of the Penal Code reads thus:

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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

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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.”

¶203

19. The ingredients to constitute an offence under Section 420 are as follows:

¶204

19.1. A person must commit the offence of cheating under Section 415; and

¶205

19.2. The person cheated must be dishonestly induced to

¶206

(a) deliver property to any person; or

¶207

(b) make, alter or destroy valuable security or anything signed or sealed and capable of being converted into valuable security.

¶208

20. Cheating is an essential ingredient for an act to constitute an offence under Section 420.

¶209

… … … …

¶210

28. The jurisdiction under Section 482 of the Code of Criminal Procedure has to be exercised with care. In the exercise of its jurisdiction, a High Court can examine whether a matter which is essentially of a civil nature has been given a cloak of a criminal offence. Where the ingredients required to constitute a criminal offence are not made out from a bare reading of the complaint, the continuation of the criminal proceeding will constitute an abuse of the process of the court.”

¶211

(Emphasis supplied)

¶212

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The afore-quoted judgments of the Apex Court were also interpreting offences punishable for criminal breach of trust as obtaining in Section 406 of the IPC, cheating as obtaining in Section 420 of the IPC and offences punishable under Sections 409 and 418 of the IPC, which would be ancillary to Sections 406 and 420 of the IPC. Sections 406, 409, 418 and 420 of the IPC are the offences alleged in the case at hand.

¶215

Taking a little further, the Apex Court at a later point in time in RANDHEER SINGH v. STATE OF U.P.

¶216

AND OTHERS¹ has held as follows:

¶217

”33. In this case, it appears that criminal proceedings are being taken recourse to as a weapon of harassment against a purchaser. It is reiterated at the cost of repetition that the FIR does not disclose any offence so far as the Appellant is concerned. There is no whisper of how and in what manner, this Appellant is involved in any criminal offence and the charge sheet, the relevant part whereof has been extracted above, is absolutely vague. There can be no doubt that jurisdiction under Section 482 of the Cr.P.C. should be used sparingly

¶218

1 2021 SCC OnLine SC 942

¶219

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for the purpose of preventing abuse of the process of any court or otherwise to secure the ends of justice. Whether a complaint discloses criminal offence or not depends on the nature of the allegation and whether the essential ingredients of a criminal offence are present or not has to be judged by the High Court. There can be no doubt that a complaint disclosing civil transactions may also have a criminal texture. The High Court has, however, to see whether the dispute of a civil nature has been given colour of criminal offence. In such a situation, the High Court should not hesitate to quash the criminal proceedings as held by this Court in Paramjeet Batra (supra) extracted above.”

¶222

(Emphasis supplied)

¶223

Again, the Apex Court in the case of MITESH KUMAR J.SHA v. STATE OF KARNATAKA AND OTHERS

¶224

reported in 2021 SCC OnLine SC 976, while answering the question whether the dispute was entirely civil in nature and, therefore, proceedings were liable to be quashed, answers as follows:

¶225

“ Whether the dispute is one of entirely civil nature and therefore liable to be quashed?

¶226

41. Having considered the relevant arguments of the parties and decisions of this court we are of the considered view that existence of dishonest or fraudulent intention has not been made out against the Appellants. Though the instant dispute certainly involves determination of issues

¶227

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which are of civil nature, pursuant to which Respondent No. 2 has even instituted multiple civil suits, one can by no means stretch the dispute to an extent, so as to impart it a criminal colour. As has been rightly emphasised upon by this court, by way of an observation rendered in the case of Indian Oil Corporation v. NEPC India Ltd., as under:—

¶230

“14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law.”

¶231

42. It was also observed:—

¶232

“13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors….There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be deprecated and discouraged.”

¶233

43. On an earlier occasion, in case of G. Sagar Suri v. State of UP, this Court has also observed:—

¶234

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¶236

“8. Jurisdiction under Section 482 of the Code has to be exercised with a great care. In exercise of its jurisdiction High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this Section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.”

¶237

44. Furthermore, in the landmark judgment of State of Haryana v. Ch. Bhajan Lal regarding exercise of inherent powers under section 482 of CrPC, this Court has laid down following categories of instances wherein inherent powers of the can be exercised in order to secure the ends of justice. These are:—

¶238

“(1) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused;

¶239

(2) where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code;

¶240

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(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;

¶243

(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;

¶244

(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;

¶245

(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;

¶246

(7) where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.”

¶247

45. Applying this dictum to the instant factual matrix, it can be safely concluded that the present case clearly falls within the ambit of first, third and fifth category of the seven categories enlisted in the above said judgment. The case therefore warrants

¶248

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intervention by this Court, and the High Court has erred in dismissing the petition filed by the Appellants under section 482 CrPC. We find that there has been attempt to stretch the contours of a civil dispute and thereby essentially impart a criminal color to it.

¶251

46. Recently, this Court in case of Randheer Singh v. The State of U.P., has again reiterated the long standing principle that criminal proceedings must not be used as instruments of harassment. The court observed as under:—

¶252

“33. ….There can be no doubt that jurisdiction under Section 482 of the Cr.P.C. should be used sparingly for the purpose of preventing abuse of the process of any court or otherwise to secure the ends of justice. Whether a complaint discloses criminal offence or not depends on the nature of the allegation and whether the essential ingredients of a criminal offence are present or not has to be judged by the High Court. There can be no doubt that a complaint disclosing civil transactions may also have a criminal texture. The High Court has, however, to see whether the dispute of a civil nature has been given colour of criminal offence. In such a situation, the High Court should not hesitate to quash the criminal proceedings as held by this Court in Paramjeet Batra (supra) extracted above.”

¶253

47. Moreover, this Court has at innumerable instances expressed its disapproval for imparting criminal color to a civil dispute, made merely to take advantage of a relatively quick relief granted in a criminal case in contrast to a civil dispute. Such an exercise is nothing but an abuse of the process of law which must be discouraged in its entirety.”

¶254

(Emphasis supplied)

¶255

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¶257

Yet again, the Apex Court in the case of VIJAY KUMAR

¶258

GHAI AND OTHERS v. STATE OF WEST BENGAL AND

¶259

OTHERS² reiterated the entire spectrum of law with regard to criminal breach of trust and cheating and has held as follows:

¶260

“46. This Court in G. Sagar Suri v. State of UP observed that it is the duty and obligation of the criminal court to exercise a great deal of caution in issuing the process, particularly when matters are essentially of civil nature.

¶261

47. This Court has time and again cautioned about converting purely civil disputes into criminal cases. This Court in Indian Oil Corporation (Supra) noticed the prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. The Court further observed that:—

¶262

“13. …any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged.”

¶263

48. At the outset, Respondent No. 2/Complainant alleged that the Appellants were responsible for the offence punishable under Section 420, 405, 406, 120B IPC. Therefore, it is also imperative to examine the ingredients of the said offences and whether the allegations made in the complaint, read on their face, attract those offences under the Penal Code.

¶264

49. Section 405 of IPC defines Criminal Breach of Trust which reads as under:—

¶265

“405. Criminal breach of trust.—Whoever, being in any manner entrusted with property, or with

¶266

2 2022 SCC OnLine SC 344

¶267

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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”.

¶270

50. The essential ingredients of the offense of criminal breach of trust are:—

¶271

(1) The accused must be entrusted with the property or with dominion over it,

¶272

(2) The person so entrusted must use that property, or;

¶273

(3) The accused must dishonestly use or dispose of that property or wilfully suffer any other person to do so in violation,

¶274

(a) of any direction of law prescribing the mode in which such trust is to be discharged, or;

¶275

(b) of any legal contract made touching the discharge of such trust.

¶276

51. “Entrustment” of property under Section 405 of the Penal Code, 1860 is pivotal to constitute an offence under this. The words used are, ‘in any manner entrusted with property’. So, it extends to entrustments of all kinds whether to clerks, servants, business partners or other persons, provided they are holding a position of ‘trust’. A person who dishonestly misappropriates property entrusted to them contrary to the terms of an obligation imposed is liable for a criminal breach of trust and is punished under Section 406 of the Penal Code.

¶277

52. The definition in the section does not restrict the property to movables or immoveable alone. This Court in R K Dalmia v. Delhi Administration held that the word ‘property’ is used in the Code in a much wider sense than the expression ‘moveable property’. There is no good reason to restrict the meaning of the word ‘property’ to

¶278

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moveable property only when it is used without any qualification in Section 405.

¶281

53. In Sudhir Shantilal Mehta v. CBI it was observed that the act of criminal breach of trust would, Interalia mean using or disposing of the property by a person who is entrusted with or has otherwise dominion thereover. Such an act must not only be done dishonestly but also in violation of any direction of law or any contract express or implied relating to carrying out the trust.

¶282

54. Section 415 of IPC define cheating which reads

¶283

as under:—

¶284

“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”.”

¶285

55. The essential ingredients of the offense of cheating are:

¶286

1. Deception of any person

¶287

2. (a) Fraudulently or dishonestly

¶288

inducing that person-

¶289

(i) to deliver any property to any person :

¶290

¶291

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

¶292

(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.

¶293

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¶295

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.

¶296

57. Section 420 IPC defines cheating and dishonestly inducing delivery of property which reads as under:—

¶297

“ 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.”

¶298

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 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.

¶299

59. To establish the offence of Cheating in inducing the delivery of property, the following ingredients need to be proved:—

¶300

1. The representation made by the person was false

¶301

2. The accused had prior knowledge that the representation he made was false.

¶302

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

¶303

4. 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.

¶304

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60. As observed and held by this Court in the case of Prof. R.K. Vijayasarathy v. Sudha Seetharam, the ingredients to constitute an offence under Section 420 are as follows:—

¶307

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

¶308

ii) the person cheated must be dishonestly induced to;

¶309

a) deliver property to any person; or

¶310

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 420 IPC.

¶311

61. The following observation made by this Court in the case of Uma Shankar Gopalika v. State of Bihar with almost similar facts and circumstances may be relevant to note at this stage:—

¶312

“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 Section 420/120B IPC. The only allegation in the complaint petitioner against the accused person 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 that 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. 4,20,0000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases of 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

¶313

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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.

¶316

“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.”

¶317

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. State of Bihar26, 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 the Respondent No. 2 does not disclose dishonest or fraudulent intention of the appellants.

¶318

63. In Vesa Holdings Pvt. Ltd. v. State of Kerala27, this Court made the following observation:—

¶319

“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

¶320

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was any inception on behalf of an accused person to cheat which is a condition precedent for an offence u/s 420 IPC. 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 courts. 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 an error in refusing to exercise the power under Section 482 Cr.P.C to quash the proceedings.”

¶323

64. Having gone through the complaint/FIR and even the chargesheet, 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 intention against the Respondent which is clearly deductible from the MOU dated 20.08.2009 arrived between the parties.”

¶324

(Emphasis supplied)

¶325

On a coalesce of the afore-quoted judgments of the Apex Court what would unmistakably emerge is, for an offence punishable under Section 406 of the IPC which deals with criminal breach of trust, the ingredients as obtaining in

¶326

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Section 405 of the IPC should necessarily be present which

¶329

are, the accused must be entrusted with the property or with any dominion over it. The person so entrusted must use that property dishonestly and dispose of that property which would result in willful suffering to the other person upon whom a legal contract is made in discharge of such trust. Entrustment or dishonest misappropriation of property which is entrusted to the accused is the soul of the said provision.

¶330

Insofar as the judgments relied on by the learned senior counsel for the respondents are concerned, they are all distinguishable on the facts obtaining in the cases at hand and the cases therein without much ado, as they are entirely different from each other. The judgment rendered by the Co-ordinate Bench of this Court in the case of MRS. MANISHA PRASHANT MEHTA AND OTHERS VS. STATE AND ANOTHER in Crl.P.No.6248/2020

¶331

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¶333

disposed on 23.03.2021 , wherein, the Court found that the act of the accused was deceitful and forgery had been proved prima facie, thereby, the Court did not accept the issue to be purely civil in nature.

¶334

The Apex Court in the case of PRITI SARAF AND ANOTHER VS. STATE OF NCT OF DELHI AND

¶335

ANOTHER reported in 2021 SCC OnLine SC 206 , which were on the same lines, dismissed the petition on the ground that there were specific allegations of cheating, dishonestly misappropriation of funds by the petitioners therein and those offences were clearly made out. That was not a case which arose by a breach of agreement as is in the case at hand.

¶336

The other judgments which are relied on by the learned senior counsel for the respondents are on the same issue where despite the matter being civil in nature,

¶337

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criminal proceedings are permitted to continue. There can be no qualm about the principles laid down in the judgments of the Apex Court or the issue before the Coordinate Bench of this Court in the afore-said judgment. The issue in the case at hand is whether the complaints itself would narrate the circumstance that would become an offence punishable under Section 406 or 420 of the IPC.

¶340

In the considered view of this Court, as observed hereinabove, there was no inducement for the complainants to enter into their respective agreements of sale, they have on their volition have entered into the agreements of sale in the year 2012 and no civil proceedings are instituted even as on date against the petitioner or in furtherance of the agreements of sale seeking specific performance of the agreements. After about 10 years, they have chosen to set the criminal law

¶341

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in motion. Therefore, in the teeth of the aforesaid facts, permitting criminal proceedings to continue, which is purely a civil in nature giving a colour of crime, would become an abuse of the process of law and result in miscarriage of justice.

¶344

In the light of the aforesaid judgments, which are in favour of the petitioner, the judgments relied on by learned senior counsel appearing for the respondents would have to be placed into oblivion as they are not the one applicable to the facts of the case at hand.

¶345

For the aforesaid reasons, the following:

¶346

ORDER

¶347

i. The criminal petitions are allowed.

¶348

ii. The proceedings in crime No.51/2022 for the offences punishable under Sections 406 and 420

¶349

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of the IPC, impugned in Crl.P.No.3647/2022, crime No.1/2022 for the offences punishable under Sections 406, 420, 506 and 120B of the IPC impugned in Crl.P.No.2742/2022, crime No.50/2022 for the offences punishable under Sections 406 and 420 of the IPC impugned in Crl.P.No.3650/2022 and crime No.52/2022 for the offences punishable under Sections 406 and 420 of the IPC impugned in Crl.P.No.3657/2022, all are pending before the IV Additional Chief Metropolitan Magistrate, Bengaluru City, stand quashed.

¶352

Sd/JUDGE

¶353

nvj

B L Nagendra Prasad v. State of Karnataka

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B L Nagendra Prasad v. State of Karnataka

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