Allowed

Tomy Mathew v. State of Kerala

Kerala HC2 Dec 2016Crl.MC/3552/2016

Case brief

AI extract

What is this about?

The Kerala High Court quashed criminal proceedings against the petitioner for cheating and criminal breach of trust. The bench held that the dispute arose from a terminated commercial agreement where the petitioner argued valid grounds for termination and lack of fraudulent intent at the contract's inception, constituting a civil matter.

What did the court decide?

The final report in C.C. No. 139 of 2015 is quashed, and all further proceedings against the petitioner in that case are quashed.

Tomy Mathew Vs State of Kerala — Contract and Commercial Disputes | Kerala HC (2016)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V

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FRIDAY, THE 2ND DAY OF DECEMBER 2016/11TH AGRAHAYANA, 1938

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Crl.MC.No. 3552 of 2016 ()

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AGAINST THE ORDER/JUDGMENT IN CC 139 /2015 of J.M.F.C.-III,KOZHIKODE CRIME NO. 530/2014 OF KASABA POLICE STATION , KOZHIKODE.

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PETITIONER(S):

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TOMY MATHEW

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S/O MATHEW (VADAKKANCHERIL)

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MG. DIRECTOR, M/S ELEMENTS HOMESTEAD

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PRODUCTS PVT. LTD 4/1418,

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B, CUSTOMS ROAD, KOZHIKODE PIN-673032, KERALA

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BY ADVS.SRI.MANJERI SUNDERRAJ SRI.M.SANJEEVE

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RESPONDENT(S):

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1. STATE OF KERALA REP. BY SHO, CUSBA POLICE STATION, KASABA, PUTHIYARA, KOZHIKODE PIN673004. (CRIME FIR NO.530/2014 DT. 30/6/14)

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2. VINOD NATESAN (FATHER'S NAME NOT KNOWN) M/S MAYAN CONSULTANTS, B55, MAHINDRA PARK, NARAYAN NAGAR, LCS MARG, GHATKOPAR WEST, MUMBAI. PIN400086. AND ALSO AT. CRA.63/10, LIC COLON, PONGUMOODU, THIRUVANANTHAPURAM PIN-695 001.

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3. LIJIN JACOB TOM S/O THOMAS, PARAYIL VEEDU, KALLERI PO, PERUVAYAL, KOZHIKODE PIN-673 001

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4. ANOOP G NAIR S/O GOPALAKRISHNAN NAIR F3 VB ROYAL APARTMENTS, ELAMAKKARA, KOCHI.PIN-682 026

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The Description of the second respondent VINOD NATESAN (FATHER'S NAME NOT KNOWN) occurring in the cause title of final order dated 02.12.2016 in Crl.M.C No. 3552/2016 stands corrected and substituted as VINOD NATESAN, S/O K.R. NATESAN as per order dated 20.11.2017 in SLP Criminal Diary No. 9241/2017 of Supreme Court of India.

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Sd/Assistant Registrar

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Crl.MC.No. 3552 of 2016 ()

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R1 BY PUBLIC PROSECUTOR SRI T R RENJITH R2 BY ADV. SRI.MATHEW SKARIA

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THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION ON 02-122016, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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Crl.MC.No. 3552 of 2016 ()

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APPENDIX

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PETITIONER(S)' EXHIBITS

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A1 TRUE COPY OF THE SAID CR. FIR NO.530/2014 DATED 30/06/2014 REGISTERED BY THE 1ST RESPONDENT POLICE BASED ON COMPLAINT BY THE 2ND RESPONDENT.

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A2 TRUE COPY OF THE FINAL REPORT IN THE MATTER AS FR NO.89/15 DATED 24/01/2015

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A3 TRUE COPY OF THE LETTER DATED 16/06/2014 FROM THE ASST. COMMISSIONER OF POLICE CRIME DETACHMENT, KOZHIKODE CITY.

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A4 TRUE COPY OF THE MEMO OF EVIDENCE.

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A5 TRUE COPY OF THE R2 VINOD NATESAN'S LAWYER NOTICE DATED 20/05/.2014 THROUGH COUNSEL W S KANE & CO. TO THE PETITIONER

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A6 TRUE COPY OF THE REPLY LAWYER NOTICE DATED 28/05/2014 BY ADV. MANJERI S. SUNDER RAJ AND ANOTHER.

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A7 PETITIONER E-MAIL DATED 26/04/2014 TO THE 2ND RESPONDENT. A8 TRUE COPY OF THE LAWYER NOTICE DATED 03/08/2014 THROUGH COUNSEL CALLING UPON HIM TO STOP FORTHWITH HIS ACTS OF MENACE.

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A9 TRUE COPY OF THE MINUTES DATED 06/03/2014.

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A10 TRUE COPY OF THE COMPLAINANT LODGED TO THE CIRCLE INSPECTOR OF POLICE, KASABA, KOZHIKODE ON 25/07/2014 BY FRANCIS, MANAGER, ADMINISTRATION ELEMENTS BESEECHING TO TAKE APPROPRIATE ACTION AGAINST THE 2ND RESPONDENT VINOD NATESAN.

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A11 COPY OF ANUP NAIR'S E MAIL.

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A12 COPY EMAIL DATED 26.04.2014.

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A13 COPY OF THE DY.COMMISSIONER APPEALS COMMERCIAL APPEALS COMMERCIAL TAXES, KOZHIKODE.

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A14 COPY OF LETTER FROM DY.INCOME TAX COMMISSIONER.

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A15 COPY OF CERTIFICATE FROM FLOCERT GBMH, BONN, GERMANY.

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RESPONDENT(S)' EXHIBITS:

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----------------------R2a PROFILE OF RESPONDENT 2

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R2b PROFESSIONAL REFERENCES FOR R2 VINOD NATESAN

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R2c SCREEN SHOT: SMS TO APP ON JUNE 17 2016 JFCM-3 CASE STATUS WEB SITE CC 139/2015

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R2d EMAIL CORRESPONDENCE WITH RESPONDENT 4

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Crl.MC.No. 3552 of 2016 ()

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R2e RESPONDENT'S INVOICE OF 6TH MARCH, 2014.

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R2f1 EMAIL CHAIN LEADING TO OFFER & ACCEPTANCE.

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R2f2 HEADER NOTE OF THE EMAIL CHAIN, CYBER EVIDENCE.

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R2g1 AGREEMENT SIGNED AND SENT BY THE PETITIONER ON 31ST MARCH 2014 VIDE EMAIL.

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R2g2 AGREEMENT SIGNED AND RETURNED VIDE EMAIL BY THE RESPONDENT 2 ON 1ST APRIL, 2014.

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R2h EXHIBIT ILLUSTRATING CONTRADICTORY STATEMENTS OF THE PETITIONER ON THE VALIDITY OF THE CONTRACT.

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R2i DEPOSITIONS MADE TO CALICUT POLICE (1) TO THE ACP CRIME DETACHMENT (2) TO ASI SIVADAS ON 15TH JULY & 11TH AUG 2014 3) EMAIL FORWADING OFFER AND ACCEPTANCE EMAILS ON 8TH JAN 2015.

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R2j 1)CORRESPONDENCE WITH CALICUT POLICE ON A CYBER COMPLAINT BY PETITIONER'S ADMIN MGR. 2) EXT.SHOWING DIFFERENCE IN THE COLOR OF COCONUT OIL SOLD BY THE PETITIONER AND THE MARKER.

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R2k REPLY TO STOP MENACE NOTICE SENT BY RESPONDENT. STANDARD BUSINESS UPDATE.R2 TO PEOPLE APPROACHED.

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R2l 1. EMAIL SHOWING CREATION OF DIGITAL ASSETS BY 2ND RESPODNENT 2)FB ANNOUNCEMENT AND APPRECIATION FROM FAIR TRADE ADVOCATE ANDY G 3) EXTRACT FROM PURPLE DOT ON FAIR TRADE AND FAIRLY TRADED 4) NOTIFICATION FROM WORLD FAIR TRADE ORGANIZATION. 5) ANDY GOOD'S APPRECIATION OF SUB-JUDICE ON TWITTER.

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R2m 1. RULING OF THE DEPUTY INCOME TAX COMMISSIONER AGAINST ELEMENTS HOMESTEAD PRODS.PVT.LTD 2) FORM 16A SUBMITTED BY THE PETITIONER, 41 DAYS AFTER THE LAWFUL DUE DATE OF 30.05.2014.

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R2n FIR 0494/2014 U/S 66A OF IT ACT. ACCUSED:PETITIONER.

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R2o EMAILS OF TURBULENCE, TROUBLES WITH PETITIONER'S PLANS, EXODUS OF EMPLOYEES “MID-AIR TURBULENCE”.

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R2p 1. UNNI FUEL CELL AND LEDS. PART OF CHEATING PLAN. 2. CORPORATE LEAFLET DESIGNED BY THE PETITIONER.

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R2q 1.EMAIL OF APPRECIATION FOR DESIGNS SUBMITTED BY PETITIONER AND REQUEST FOR FURTHER CHANGES 2) TRUNCATION TO TERMINATION. SEQUENCE OF EMAILS.

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R2r PROOF OF RESPONDENT'S WORK BEING USED BY PETITIONER.1. CHANGE IS PACK LAYOUTS. A & B. 2. P.R PROPOSAL 3. CAFE PAPAYA PRESS CONFERENCE 4. DIGITAL BRIEF 5. SELFIE CONTEST 6. 11TH MARCH RECOMMENDATIONS.7. APPRECIATION LETTERS FROM THE PETITIONER 8. MEDIA PLANS, COSTINGS AND STRATEGY SUBMITTED 9. CRAYONS MEDIA PROPOSAL. 10. PACK DESIGNS SUBMITTED.

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R2s 1. LEGAL NOTICES SENT BY TATVA LEGAL & 2. REPLY FROM THE PETITONER.

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Crl.MC.No. 3552 of 2016 ()

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R2t 1. LEGAL NOTICE FOR DEFAMATION. 2. REPLY FROM THE PETITIONER. 3. Crl.MC.No. 3552 of 2016 ()

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RESPONSE FROM VIREN KAMDAR TO RESPONDENT ON RECEIPT OF ANNX.7 4. SUMMONS ISSUED BY THE BORIVALI MAGISTRATE TO THE PETITIONER UNDER SEC.500 IPC 5. EMAIL ON TAG LINE DEVELOPMENT 6. RECRUITMENT OF VIREN KAMDAR.

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R2u ELEMENTS HOMESTEAD V.INSPECTOR COMMERCIAL TAX. WPC NO. 23184 OF 2010 JUDGMENT.

/TRUE COPY/

P.A TO JUDGE

LSN

RAJA VIJAYARAGHAVAN.V, J.

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==================

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Crl.M.C.No. 3552 of 2016

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==================

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Dated this the 02^nd day of December, 2016

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O R D E R

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The petitioner herein is the first accused in C.C No. 139 of 2015 on the file of the Judicial First Class Magistrate Court-III, Kozhikode. In the aforesaid case, he faces indictment under Sections 406, 420 r/w 34 of IPC. The 2^nd respondent is the de facto complainant and the respondents 3 and 4 are the accused Nos.2 and 3 in the final report.

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2.For the sake of convenience, the parties shall henceforth be described as “complainant” and “accused”, as per their status in the final report.

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3.Facts in brief:-

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(a) The complainant is the sole proprietor of Mayan Consultants, a full service advertising agency providing advertising and consultant services. The 1^st accused is the Managing Director of M/s Elements Homestead

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Crl.M.C.No. 3552 of 2016

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Products Pvt. Ltd., having its business at Kozhikode. The 1^st accused deals with products such as coconut oil, cashew nut, Coffee powder.

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(b) The 1^st accused entered into an agreement with the complainant at the behest of accused Nos. 2 and 3. As per the terms of the agreement entered into between the parties, the complainant had agreed to provide necessary advice and inputs to launch and market the various products of the 1^st accused in the State of Kerala and the 1^st accused agreed to compensate him by a sum of Rs 5,00,000/-. A sum of Rs.1,50,000/-, being the 1^st installment, was paid by the 1^st accused to the complainant. In total violation of the terms of the agreement, the 1^st accused reneged from the contract. Annexure-5 legal notice was issued to the accused calling upon the 1^st accused to make immediate payment of Rs.3,00,000/- towards settlement of the claims. However, no payment was effected.

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(e) In the said circumstances, the complainant approached the Superintendent of Police and submitted

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Crl.M.C.No. 3552 of 2016

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a complaint which was forwarded to the Assistant Commissioner of Police, Kozhikkode for inquiry and report.

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(f) On the basis of his report, Annexure-1 FIR was registered alleging offences punishable under sections 406 and 420 read with section 34 of the IPC. Later, investigation was concluded and Annexure-2 final report was laid before the jurisdictional Court. The same is under challenge.

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I have heard Sri. Manjeri Sunder Raj, the learned Counsel appearing for the petitioner, Sri.Vinod Natesan, the 2^nd respondent who argued as party-in-person and also the learned Public Prosecutor. I have also gone through the notes of argument submitted by the contesting parties.

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The learned Counsel appearing for the petitioner submitted that the allegations in the final report, even if they are taken at their face value and accepted in its entirety, do not prima facie constitute any offence or

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Crl.M.C.No. 3552 of 2016

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make out a case against the accused. According to the learned counsel, even if the allegations raised by the complainant is accepted as such it would amount only to a breach of contract and the same cannot be the basis of a criminal prosecution. Referring to the transaction entered into between the parties, it is pointed out that the service of the complainant was availed by the company for launch of its products in the State of Kerala. The parties fell apart and the accused had immediately informed the complainant that the contract was being terminated and that the service was no longer required. This fact was communicated to the 2^nd respondent on 21.04.2014 itself. Stating his version of the incident and claiming damages and compensation, the 2^nd respondent has preferred a Civil suit in the City Civil Court, Mumbai, which is pending. It is submitted that the continuance of proceedings is nothing but an abuse of law as there is nothing in the final report to conclude that the petitioner had guilty intent when the transaction was entered into. A

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Crl.M.C.No. 3552 of 2016

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dishonest intention, according to the learned counsel, cannot be inferred from the mere fact that the contract entered into was terminated for valid reasons. Referring to the final report, it is submitted that the only person who has been cited by the prosecution to prove the offence under sections 420 and 406 of the IPC is the 2^nd respondent himself and none else. In support of the aforesaid contention, learned counsel appearing for the petitioner would rely upon the decisions rendered in Ajay Mitra v. State of M.P . [2003 (3) SCC 11]; G. Sagar Suri v. State of U.P. [2000 (2) SCC 636]; Maksud Saiyed v. State of Gujarat [2008 (5) SCC 668]; Dalip Kaur v. Jagnar Singh [2009 (14) SCC 696] and S. W. Palanikar v. State of Bihar [2002 (1) SCC 241].

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Per contra, the 2^nd respondent, who himself argued the matter, took this Court extensively through the materials and submitted that the fact that the intention of the petitioner was fraudulent at the very inception is blatantly obvious. According to the 2^nd respondent, the

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Crl.M.C.No. 3552 of 2016

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intention was not to retain the 2^nd respondent for three months, but to obtain ideas from him within a month and to execute it through some one else. It is admitted that a Civil Suit was instituted seeking damages and compensation but referring to the decision of the Apex Court in Indian Oil Corporation V NEPC India Ltd & Others [2006 (6) SCC 736] it is contended that a commercial transaction or a commercial dispute apart from furnishing a cause of action for seeking remedy in Criminal Law, may also involve a criminal offence. According to the 2^nd respondent, the offenses alleged are clearly made out. Referring to a catena of decisions of the Apex Court in Indian Oil Corporation (supra), Kurukshetra University v. State of Haryana [AIR 1977 SC 229], Rupan Deol Bajaj v. Kanwar Pal Singh Gill [AIR 1996 (SC) 309] and State of Haryana v. Bhajan Lal [1992 AIR SCW 237] it is submitted that the inherent powers of this Court is not to be exercised to stifle a legitimate prosecution, unless it finds that the allegations in the FIR is absurd or inherently

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improbable. The powers are to be used sparingly and with caution and it is submitted that the instant case is not a case where this Court can justifiably invoke powers under section 482 to quash the proceeding .

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The 2^nd respondent would also highlight various other aspects in his argument note which for the purpose of adjudicating this matter has no significance. It appears that quite a bit of bad blood exists between the parties.

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8.I have considered the submissions.

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Essentially, the matter involves an agreement entered into between the parties with regard to availing of intellectual services of the 2^nd respondent for marketing the products of the petitioner. Admittedly, an agreement was entered into between the parties and a sum of Rs.1,50,000/- was transferred to the 2^nd respondent. A sum of Rs.1,00,000/- was also transferred in the name of Mr. Viren Kamdar, who was assigned with incidental tasks. It appears that the petitioner had terminated the services and informed the

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Crl.M.C.No. 3552 of 2016

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said fact to the 2^nd respondent on 21.04.2014 .

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10.In so far as the instant final report is concerned, the allegation is that the complainant had entered into an advertisement contract with M/s Elements Products Pvt. Ltd., owned by the accused No.1 and signed an agreement agreeing to pay a sum of Rs 5,00,000/- for his services. However, only a sum of Rs.1,50,000/- was paid and by failing to pay the balance amount of Rs.3,50,000/- the accused have committed offence under sections 406, 420 read with section 34 of the IPC .

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11.The question is whether the above allegations would would attract the penal provisions as alleged .

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12.For the purpose of constituting an offence for criminal breach of trust and/or cheating, the ingredients thereof as contained in Sections 405 and 415 respectively must be borne out from the records.

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13.The punishment for criminal breach of trust as defined in section 405 of the IPC is provided in Section 406 of

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Crl.M.C.No. 3552 of 2016

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the IPC. Punishment for aggravated forms of criminal breach of trust is provided in Section 407 to Section 409 of the IPC.

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14.The terms of the section are very wide. It applies to one who is in any manner entrusted with property or dominion over property. The section provides inter alia, that if such a person dishonestly misappropriates or converts to his own use property entrusted to him, he commits criminal breach of trust. There are separate offences by which criminal breach of trust may be committed. This section requires:

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Entrusting any person with property or with dominion over property.

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That person entrusted (a) dishonestly misappropriates or converting to his own use that property; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation --

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

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

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15.In Onkar Nath Mishra and Others v. State (NCT of

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Delhi) and Another [2008 (2) SCC 561], the Apex Court has held that in the commission of the offence of criminal breach of trust, two distinct parts are involved. The first consists of the creation of an obligation in relation to the property over which dominion or control is acquired by the accused. The second is misappropriation or dealing with the property dishonestly and contrary to the terms of the obligation created.

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16.After having perused the final report and the statement of the 2^nd respondent, I am unable to hold that the petitioner had committed any offence under section 406 of the IPC in the instant case. An agreement was entered into between the parties and the same was terminated for one reason or the other. Whether it was on rightful grounds or whether the 2^nd respondent is entitled to damages etc., are the concern of the Civil Court, which aspect can be determined only after recording the evidence adduced by the parties.

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17.In so far cheating is concerned, the offence cannot be

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said to be made out unless the following ingredients are

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satisfied:

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

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(ii) fraudulently or dishonestly inducing any person to deliver any property; or

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(iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.'

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18.For the purpose of constituting an offence of cheating,

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the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in absence of a culpable intention at the time of making initial promise being absent, no offence under section 420 of the Indian Penal Code can be said to have been made out. A guilty intention is an essential ingredient of the offence of cheating. In other words 'mens rea' on the part of the accused must be established before he can

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Crl.M.C.No. 3552 of 2016

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be convicted of an offence of cheating.

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In Indian Oil Corpn . (supra), the Supreme Court held that in a dispute arising from breach of contract wherein civil remedy has been availed by a party, the remedy in criminal law is not barred, if the allegation discloses a criminal offence, however, the Supreme Court has held that a purely civil dispute cannot be permitted to be converted into a criminal offence. Referring to G. Sagar Suri (supra) the Supreme Court held thus in para 13 :

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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. Such a tendency is seen in several family disputes also, leading to irretrievable breakdown of marriages / families. 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 through criminal prosecution should be deprecated and discouraged.

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20.Testing the facts of the instant case on the basis of the above settled legal position, I am of the view that the ingredients of the offence under section 406 or section 420 is not made out. Even if it is admitted that an agreement was entered into, and that the petitioner had reneged his promise at some stage, in the facts of the instant case, it will be well nigh impossible to hold that the petitioner had guilty intent at the inception. It is specifically alleged that the petitioner was forced to terminate the contract after paying a sum of Rs.1,50,000/- to the 2^nd respondent and a sum of Rs.1,00,000/- to his associate when it was found that the intellectual inputs from the side of the 2^nd respondent was not to his satisfaction. Allegations and counter allegations are made. According to the 2^nd respondent, the petitioner was not justified in leaving him midway whereas the specific case of the petitioner is that the services offered by the 2^nd respondent was below par and did not suit their cause or need. The contract was terminated by the petitioner and even if

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there is any breach, the remedy is to approach the Civil Court, which has been done by the 2^nd respondent. There are no materials attracting the ingredients of sections 406 or 420 of the IPC.

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21.In Madhavrao Jiwajirao Scindia (AIR 1988 SC 709)

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the Supreme Court held thus :

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The legal position is well settled that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the Court is as to whether the uncontroverted allegations as made prima facie establish the offence. It is also for the Court to take into consideration any special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue. This is so on the basis that the Court cannot be utilised for any oblique purpose and where in the opinion of the Court chances of an ultimate conviction are bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the Court may while taking into consideration the special facts of a case also quash the proceeding even though it may be at a preliminary stage.

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22.I have no hesitation in my mind that if the prosecution

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is permitted to continue, it will be a clear case of abuse

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of powers of the Court. The final report is liable to be

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quashed for the aforesaid reasons.

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This petition will stand allowed. All further proceedings against the petitioner in C.C.No 139 of 2015 on the file of the Judicial Magistrate of the First Class-III, Kozhikkode are quashed.

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RAJA VIJAYARAGHAVAN.V, JUDGE

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lsn

Tomy Mathew v. State of Kerala

Case brief

What is this about?

What did the court decide?

Tomy Mathew v. State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

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