Steel dealer accused of cheating after receiving Rs.30 lakhs without supplying steel sought quashing of FIR. Holding the dispute a civil money-recovery claim between dealers with long-standing transactions, lacking dishonest intention at inception, the High Court quashed the crime proceedings relying on Lalit Chaturvedi.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF JUNE, 2024
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 2287 OF 2023
BETWEEN:
MR. GAGAN S/O N.NARAYANA SWAMY AGED ABOUT 30 YEARS PROPRIETOR OF GO CREATIVE STEELS KHB COLONY, WARD NO.1, A-BLOCK GUDIBANDE TOWN CHIKKABALLAPURA DISTRICT – 561 209.
…PETITIONER
(BY SRI. M.R.BALAKRISHNA, ADVOCATE)
AND:
Digitally signed by NAGAVENI Location: HIGH COURT OF KARNATAKA
HIGH COURT BUILDING BENGALURU – 560 001.
…RESPONDENTS
(BY SRI. HARISH GANAPATHI, HCGP FOR R1;
SRI. H.S.RAGHAVENDRA, ADVOCATE FOR R2-ABSENT)
THIS CRL.P IS FILED U/S.482 OF THE CR.P.C., PRAYING TO QUASH THE FIR AND CRIMINAL PROCEEDINGS IN CR.NO.24/2023 REGISTERED BY THE RESPONDENT NO.1 THALAGHATTAPURA POLICE STATION, FOR THE OFFENCE P/U/S 420, 417 OF IPC NOW PENDING ON THE FILE OF A.C.J.M., BENGALURU RURAL DISTRICT.
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
Petitioner is before this Court calling in question registration of a crime in Crime No.24 of 2023 registered for offences punishable under Sections 417 and 420 of the IPC.
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
the said amount. The jurisdictional police, on the basis of the complaint, registers a crime in Crime No.24 of 2023 for offences punishable under Sections 420 and 417 of the IPC. This Court grants an interim order of stay. It is the allegation that during the subsistence of the interim order, charge sheet is filed by the police. Charge sheet is not specifically called in question, as it is filed during the subsistence of the interim order. This is taken note of, as the registration of crime itself did drive the petitioner to this Court in the subject petition.
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
Learned counsel would seek quashment of the entire
proceedings.
has remained absent throughout. This Court, on 12-06-2024 had passed the following order:
“This Court on 29.05.2024 had passed the following order:
“Heard the learned counsel appearing for the petitioner and the learned HCGP appearing for respondent No.1.
Learned counsel appearing for respondent No.2 remains absent.
As a last chance, awaiting his appearance, list the matter on 12.06.2024.
Interim order granted earlier is extended till the next date of hearing.”
Even today there is no representation on behalf of the 2nd respondent-complainant. As a last chance, list this matter on 19.06.2024.
In the event no representation would be made, appropriate orders would be passed.
Interim order, granted earlier would be continued till the disposal of the petition.”
Even today there is no representation on behalf of the complainant. Therefore, the learned counsel for the petitioner
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
and the learned High Court Government Pleader appearing for the State are heard.
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NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
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The complainant, in the complaint would seek support from the police for recovering Rs.30 lakhs from the hands of the petitioner. Therefore, it is a clear case where criminal law is set into motion for the purpose of recovery of money. The documents that are appended to the petition would further
demonstrate that financial transaction between the two being dealers has gone on for the last 3-4 years. Therefore, the dispute arising with regard to invoices or supply or short supply of certain material, after receiving certain amount or the amount to be recovered, cannot be made the subject matter of crime. It was always open to the 2nd respondent to register appropriate civil proceedings for recovery of money. The offences alleged in the case at hand are for the offence under Sections 417 and 420 of the IPC. Section 417 and 420 of the IPC have their ingredients in Section 415 of the IPC. Section 415 of the IPC reads as follows:
“ 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”.
Explanation.—A dishonest concealment of facts is a deception within the meaning of this section.”
For an act to become an offence under Section 420 of the IPC, the dishonest intention of the accused should be from the
inception. Here is a case where both are dealers and have financial transactions between them. If the petitioner and the 2nd respondent have mutual transactions between them with regard to distribution of certain products, one such transaction going bad, would not mean that the complainant would be permitted to set the criminal law into motion and permits its continuance.
“5. This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, nonpayment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC. Repeated judgments of this Court, however, are somehow overlooked, and are not being applied and enforced. We will be referring to these judgments. The impugned judgment dismisses the application filed by the appellants under Section 482 of the Cr. P.C. on the ground of delay/laches and also the factum that the chargesheet had been filed on 12.12.2019. This ground and reason is also not valid.
6. In “Mohammed Ibrahim v. State of Bihar ”4 , this Court had referred to Section 420 of the IPC, to observe
1 2024 SCC OnLine SC 171
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
that in order to constitute an offence under the said section, the following ingredients are to be satisfied:—
“18. Let us now examine whether the ingredients of an offence of cheating are made out. The essential ingredients of the offence of “cheating” are as follows:
(i) deception of a person either by making a false or misleading representation or by dishonest concealment or by any other act or omission;
(ii) fraudulent or dishonest inducement of that person to either deliver any property or to consent to the retention thereof by any person or to intentionally induce that person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived; and
(iii) such act or omission causing or is likely to cause damage or harm to that person in body, mind, reputation or property.
19. To constitute an offence under section 420, there should not only be cheating, but as a consequence of such cheating, the accused should have dishonestly induced the person deceived
(i) to deliver any property to any person, or
(ii) to make, alter or destroy wholly or in part a valuable security (or anything signed or sealed and which is capable of being converted into a valuable security).”
7. Similar elucidation by this Court in “V.Y. Jose v. State of Gujarat ”5 , explicitly states that a contractual dispute or breach of contract per se should not lead to initiation of a criminal proceeding. The ingredient of ‘cheating’, as defined under Section 415 of the IPC, is existence of a fraudulent or dishonest intention of making initial promise or representation thereof, from the very beginning of the formation of contract. Further, in the absence of the averments made in the complaint petition wherefrom the ingredients of the offence can be found out, the High Court should not hesitate to exercise its jurisdiction under Section 482 of the Cr. P.C. Section 482 of the Cr. P.C. saves the inherent power of the High Court, as it serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years, when no criminal offence is made out. It is one thing to say that a case has been made out for trial
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
and criminal proceedings should not be quashed, but another thing to say that a person must undergo a criminal trial despite the fact that no offence has been made out in the complaint. This Court in V.Y. Jose (supra) placed reliance on several earlier decisions in “Hira Lal Hari Lal Bhagwati v. CBI ”6 , “Indian Oil Corporation v. NEPC India Ltd. ”7 , “Vir Prakash Sharma v. Anil Kumar Agarwal ”8 and “All Cargo Movers (I) (P) Ltd. v. Dhanesh Badarmal Jain ”9 .
8. Having gone through the complaint, which was registered as an FIR and the assertions made therein, it is quite clear that respondent no. 2/complainant - Sanjay Garg's grievance is regarding failure of the appellants to pay the outstanding amount, in spite of the respondent no. 2/complainant - Sanjay Garg's repeated demands. The respondent no. 2/complainant - Sanjay Garg states that the supplies were made between the period 01.12.2015 and 06.08.2017. The appellants had made the payments from time to time of Rs. 3,76,40,553/- leaving a balance of Rs. 1,92,91,358/-.
9. We will assume that the assertions made in the complaint are correct, but even then, a criminal offence under Section 420 read with Section 415 of the IPC is not established in the absence of deception by making false and misleading representation, dishonest concealment or any other act or omission, or inducement of the complainant to deliver any property at the time of the contract(s) being entered. The ingredients to allege the offence are neither stated nor can be inferred from the averments. A prayer is made to the police for recovery of money from the appellants. The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money.
10. The chargesheet also refers to Section 406 of the IPC, but without pointing out how the ingredients of said section are satisfied. No details and particulars are mentioned. There are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously .10 For the offence of cheating, dishonest intention must
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later. In this case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods. The chargesheet does refer to Section 506 of the IPC relying upon the averments in the complaint. However, no details and particulars are given, when and on which date and place the threats were given. Without the said details and particulars, it is apparent to us, that these allegations of threats etc. have been made only with an intent to activate police machinery for recovery of money.
11. It is for the respondent no. 2/complainant - Sanjay Garg to file a civil suit. Initiation of the criminal process for oblique purposes, is bad in law and amounts to abuse of process of law.
12. In view of the aforesaid discussion, the impugned judgment is set aside and the present appeal is allowed quashing the FIR and resultant proceedings, including the chargesheet.
13. We clarify that the present appeal only deals with the question of criminal offence. We have not commented or made any observations on the civil rights of respondent no. 2/complainant - Sanjay Garg.”
(Emphasis supplied)
NC: 2024:KHC:21895 CRL.P No. 2287 of 2023
process of the law and result in miscarriage of justice. Therefore, I deem it appropriate to obliterate the proceedings against these petitioners.
ORDER
Sd/JUDGE
BKP
List No.: 1 Sl No.: 53 CT:SS
1 issue framed by the court
Whether criminal proceedings for cheating under Sections 417/420 IPC can be sustained where the complaint seeks recovery of money for a failed commercial supply transaction.
Colour shows how this judgement treated each authority
Lalit Chaturvedi v. State of Uttar PradeshRelied on¶8
2024 SCC OnLine SC 171 · Who else cites this
4 provisions across 2 enactments
Gagan S/o N.Narayana Swamy
State of Karnataka by Talaghattapura Police Station
Yathish Kumar S/o Manje Gowda
M.Nagaprasanna
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
