Allowed

M/s.Zenith Weldaids Ltd. v. The State of Telangana

Telangana HC28 Sept 2022CRLP/7359/2019

Case brief

AI extract

What is this about?

A commercial dispute over non-supply of accessories arose after the complainant failed to pay the agreed balance despite an initial advance and a revised payment order. The High Court held the proceedings for cheating untenable as the failure to pay made the legal position clear and amount to abuse of process.

What did the court decide?

Criminal proceedings in C.C. No. 448 of 2014 were quashed. Pending Miscellaneous Petitions were closed. Order passed without costs.

M/s.Zenith Weldaids Ltd. Vs The State of Telangana — Cheque Dishonour | Telangana HC (2022)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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WEDNESDAY ,THE TWENTY EIGHTH DAY OF SEPTEIVBER TWO THOUSAND AND TWENTY TWO

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PRESENT

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THE HONOURABLE DR. JUSTICE D.NAGARJUN

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CRIMINAL PETITION NO: 735I OF 2019

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Between:

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M/s.Zenith Weldaids Ltd, Having its office At C-^.164, Site No. 1 Bulandarsh ahar Ro-ad, lndustrial Area, Ghaziabad - 201 OO1 (UT) Rep. by its Authorized person Dr. Deepak Tyagi.

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... PETITIONERYACCUSED

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AND

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The State of Telangana, Rep. Through its publjc prosecutor, High Court for the State of Telangana at Hyderabad.

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I\rlls. Hardens Steel lndustries, Having its office at Deshaipet Road, Warangal Drstrict, Telangal? Bep, by Prop. Kuiuma Satyanarayana, Rged Ob yearsi .Y..9^SV 1.lo^{548/4(OId), 466 (New)Prlgathitirdustriat Esiat6, Sambampalty} Village, Gesugonda Mandal, Warangal District.

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...RESPONDENT

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Petition under Section 482 of Cr.p.C praying that in the circumstances stated in the Memorandum of Grounds of Criminal petition, the High Court may be pleased to call for the records in C. 448 of ZO14 on the file of Hon,ble Vl Addl. Judicial First Class Magistrate at Warangal the same l.A. NO: 2 OF 2019

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Petition under Section 482 of Cr.P.C praying that in the circumstances stated in the Memorandum of Grounds of Criminal Petition,the High Court may be pleased to grant of stay of all further proceedings including the appearance of the petitioner in C. C. No. 448 ol 2014 on the file of Hon'bte Vl Addl. Judicial First Class Magistrate at Warangal pending djsposal of the above Criminal Petition.

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This Petition coming on for hearing, upon perusing the Memorandum of Grounds of Criminal Petition and upon hearing the arguments of Sri A. VENKATESH, Advocate for the Petitioner and the Public Prosecutor (TG) on behalf of the Respondent No. and of Sri. AKELLA. SREENIVASA RAO, Advocate for the Respondent No. 2

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The Court made the following: ORDER

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TH] ) HON'BLE DR. JUSTICE D.NAGIJI.TUII

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CI IIMINAL PETITION No.7359 OF 1Z,l.l 9

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ORDER:

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Tl-ris^t lriminal Petition is liled under Secl ion 482 ol the Code o Crrminal Procedure by the petitrc ner-rrccused seel<ing to c uash the proceedings in C.C.No.4,I3 of 11014 on the lilc of he learned VI Additional Judici;d }rirst Class Magistr-atc, War:rngal, against him. The c,c gr-riz:rnce of offencc und::- Section 42O of the Indian Penzrl Cocle was tal<en rLgain ;t the petitioner basing on a prival o complaint filecl b-v resp rnd,--nt No.2 complainant.

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The fa:ts, in brief, as per the private cor:rtrrlaint filed b1' the Propr ietor of respondent No.2-complainalt, are that he has been running an industry in the name ald style of M/ s. Harclen r Stt:el lndustries in Pragathi Industrrai Dstate, Narsampr:t I loacl, Warangal, since 2O 1O. The petitroneraccused con rpanv has been doing business o[ suirplying machines ar d rrLachine tools. On 16.11.2010 rc sp,tndent No.2 compla nant and the petitioner-accused trad elltered into an agr )ement, r,r'herein the petitioner-et<:t:used^Itas

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DT.DNR'^J C .P-No.7359 oJ 2019

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agreed to supply^{accessoriesworth of Rs.32,40'000/-'for} which the complainant^{has paid Rs. 10,01,000/- to the} petitioner-accused as advance^{on differentdates, but the} accused did not supply the^{accessories as agreed and he} was postponing the supply^{of accessorieson one pretext or} the other. It is stated^{further inthe complaintthat} respondent No.2-complainant^{has constructed a godown by} taking loan of Rs.1,00,OO,0OO/-^{from the Bank and on} account of non-supplying^{the accessoriesby the accused,} he could not start his^{business.The petitioner-accused} has expressed his inability^{to supply accessoriesstating} that they have to receive^{those accessoriesfrom Germany'} The petitioner accused^{ultimatelyhas neither supplied} accessories nor returned^{his money. On 16 'O7 '2O 12 the} petitioner-accused had executed^{anotheragreement} acknowledging the receipt^{of Rs. 10,01,000/- and agreed to} supply some other accessories, but^{he did not supply any} such accessories even as per this^{agreementand did not} repay the amount. It is stated that due^tonon- commencement of the Industry, the Bank^{has seized thc} godown of the complainant, thereby the^{petitioner-accused}

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Dr.lr.'R. J ( n. t', No.: I i9 of )019

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has cheatec hinr. It is further stated that the ,rc,mplain;urt has issued r legal notice on 28.09.2013 and c n re:eipt of the same, ,he petitioner-accused has give'n ,3 15,p11l ()n 17.1O.2O13 with false and baseless allegation,s Th,:refore, responrlent No.2-complainant prayed the C,r -.rt t o take cognizance rf ttre offence under Section 42O t'the Inclian Penal Code rgainst the petitioner-accused and pr-rnish 1'rim

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Agpgie 'ed by the same, the petitioner ac lus:d has filed this pe ition seeking quashment of the^{pro,:,:edings} in the aforesair I C. C., on the following ground s:

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(a) I hat the petitioner-accused l:i tl s; t tppr lisr 6f machines ar Ld machine tools and runnir-rg b,-tr; u :ss in the name and style of M/s.Zenith Welcaids Linriled.^'l'he cornplainant has approached the authorized 5rt;':;on of the petitioner cc mpany by name Dr.Deepak Tr agi l,rr slrpplt ol ACCESSOTICS vorth of Rs.32,10,000/ - and rnaclc rr pr,rlcherse ofler throug h letter dated 16.1 1.20 10. Th,: :retitione r' accused has agreed to supply the machines zLrrcl machine tools worth of Rs.32,10,000/- upon certain^,-i.rr s and conditions u s per the letter dated i6.07.2(). () an:l it is

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Dr.DNR. J Ol.P.No.7359 ol²⁰¹⁹

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agreed that the^{paymentsto be made withina periodof 30} days as^per the^{termsand conditions'}

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(b) In pursuance of^{thesaid agreement'the} complainant has^{advalceda sum of Rs'10,01,00O/- on} various dates and^{thepetitionerhas alsogiven} acknowledgment.

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(c) The complainant^{was in defaultin paymentof} the arnounts within^{3O days as per the agreement} dated 16.11.2010.^{The complainant has made part} payment on 23.12.2010^{after the validity of the said} agreement has expired,^{as such, he has failedto adhereto} the terms of the^{agreement' Since May, 201 1} '^the petitioner had several^{times cautionedthe complainant} stating that the cost^{of manufactureof the machineryis} Iikely to increase.^Ot16.07 '2012,^{tLre complainanthas} approached^{the petitioner at his work placei'e' Ghaziabad'} and requested to^{revise the order on assuranceof instant} payment and instant^{deliveryand he has given a revised} order dated 16.07.2012^vide reference No.ZW:HS:OO3:2012-2013:756.^{The petitionerhas}

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Dr.D.\R, J {il.^D.No.i359 of20l9

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requested t re complainant to adhere to the r3,isecl order terms and r rrrange the payment since the cosl of the raw material su(ldenly took a sharp increase, therelty. the direct increase in the cost of manufacturing requires additional price revisi( n. However, subsequentl_v, the <:r rnplainsll has not pz id any amount pursuant 1o reyised order dated 16.C7.2012, \i.hich ^ras valid for :lO days. Suppressing all these facts, the complainirnt has issued a legal notice to the petitioner. It is statecL th:rt the complainant has committed breach of contract rrnd there is no lapse o I his part and therefore, he sought for quashment c f the proceedings in C.C., against him.

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Now th: pornt lor determination is:

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"\ /hether the proceedings in C.C.No.-l4g of 2Ol,- on the file of VI Additional Ju,jicial First⁽ )lass Magistrate, Warangal, pending against the petitioner-accused can bt: quashed under lection 482 of the Code of Criroinal Procedr re?"

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Dt-DNR. J Crl-P.No.7359^{of 2019}

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Heard learned^{counsel for the petitioner and learned} AssistantPublicProsecutorrepresentingrespondentNo.lState.

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The contention^{of the complainaltis that he has} placed an order^{to the petitioner's company' represented by} its authorized^{person Dr'Deepak Tyagi' forsupply of} accessories^{worthRs.32,10,000/videagreement} dated16.11'2ol0andthepetitioner-companyhasagreed to supply the^{same with a condition that the payments to} be made^{within30 days as mentioned as per the terms of} the agreement.^{The complainant'while agreeing the terms} of the^{petitionercompany'has paid anadvance of} Rs.10,O1,000/-^{to the company in five installments by way} of money^{orders,RTGS of Union Bank of India'}

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The d.ispute^{arose u'hen the petitioner-companyhas} not supplied^{the accessorics as allegedly agreed' It is to be} notedthatthecomplainantwasexpectedtopaytheentire the date of^the Purchase amount^{within 30 daYs from} complainant,^{he has} Paid order. Even^{according to the} only Rs.10,oi,000/ⁱⁿ "ff' The last Payment^of

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Dr.DNR, J Crt P.N,.7359 of 2019

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Rs.4,0O,00t)/- was paid on 06.0S.2011. ,a.s per letter dated i6.O /.2010, the complainant ought t3 have paicl entire am(unt within 30 days from 16.11.2010, but admittedly, as on 06.0S.2011, the complainsnt has paid on11, Rs.10,11,00O/-. After May,2O11, the p,:tLtioner has inlormecl t re complainant for payment of th e balance amount as the cost of the manufacturing eqrripment has been incre lsed and therefore, requested lo pay the amounts as quickiy as possible.

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B. It is a so an admitted fact that one year a.fter initial agreement i e. in the month of July, 2012, the,tomplainant has approa ched the petitioner at his ,,l.ork place at Gaziabzrd, rn d requested to revise the orcler giving assurance .hat he would pay the balan,:r: pavment. Agreeing thr same, the petitioner has revised thr: order on 16.07 .2012 :rnd requested the complainant to adhere to the term s o^- the revised order and arrange f,tr. ptryment since the c rst of the raw material has inc.:eased and therebt.the {rost of manufacturing requires add;tional price ..ri"ior. Hr u,ever, the complainant has faile,l to pay the

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Dr.D\ll. l Crt.P.N(r.7359^{of 20t9}

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balance^{amount even as per revisedorder} dated 16.07.2012^{though he has agreedto pay the entire} balance amount^{within 30days' According tothe} petitioner, he has^{never refused todeliver the goods} provided il the^{paymentis made as agreed in the order} dated 16.O7.2012.

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9 Section 42O of the^{IndianPenal Code,readsas under:}

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42O. Ctrccttirtg and-^{dishonestlginducing deliuery of} propeftg.-Whoeuer^{ch.eats and therebg dishonestly} itduces the^{persondeceiued to deliuer anA propertAto} tu1lJ person, or^{to make,alter or destroA ttw ttthole or} any parl of o^{ualuableseanitg, or ongthing rtthichis} signed or sealed,^{and rtLhich kcapable ofbeing} conuefted into a^{ualuableseanrity, shall be punished} uith impisonment^{of either description} for^atertn u.thich rnay extend"^{to seuengears' and shallalso be} liabte tc.t firc.

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lr-r Vijay^{Kumar Ghai and others vs' The State of} West Bengal^{and otherslthe Hon'ble Supreme Courtheld}

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at paragraphs^{31 to 36 as under:}

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"31. Scctiort^{415 IPC delines 'cheating"which readsas} tt nclcr:

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'(2022)^{l sccl l.l}

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Dr.Dt\R, J at l.l' N'o.:'.i59 of 2019

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".'LS. Cheqting.-Whoever, by deceivirrg ar\ t)crs()n, frau( ulently or dishonestly induces the person so rlcceir,(:d to de iver ?rny property to any person, or to consent I I.at any pers( n shall retain any property, or intentionally ill(lu(:r)s the J 3rson so deceived to do or omit to do anl thi ta u,h( h he w )uld not do or omit if he were not so dcc,:ive,l, ar,d lvhiclr act or omission causes or is likely tc caus( (lirrrl.ise or h trm to that person in body, mind, repulat on or prop( rt,, is said to "cheat"."

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The esse ltial ingredients of the offence of cheating art,

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I Deception of any person

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2 (a) Fraudulently or dishonestlv indur:i rg tl irt pefso 1-

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(rJ to deliver any property to an,,person; or

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(il) to consent that any person shall r,rlairr a,t\ pr cperty; or

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(b intentionally inducing that person to do or ornil to rlo ar ything which he would not do or omit il he !.( r( r)() ji) dt:eived, and which act or omission causes or is likr.lv to cause damage or harm to that person in lxrdi, IriDrt. re )utation or property.

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A frauclulent or dishonest inducement is an tsr;ential ingredien of the offence. A person who dishorlestll ir. ltr.,'s another p:rson to deliver any property is liable for tl c o It tt.r.t:l cheating.

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Se:tion 420 IPC defines "cheatin€i and disl)rrcsll.. inducing lelivery of property" which reads as un(!er:

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"41O. Cheating and. d.lshonestlg inducing dcliuery of ProPe.tg.-Whoever^cheats and thercbr rirjir^)nt.srl. induc,s the person deceived to deliver an! propert. l).llL\ p€ rsor , or to make, alter or destroy the q,ltolr or aI. I)ir rt )l a valuable security, or anl,thing which is siBrrcrt r,r r, irlt'rl, and vhjch is capable of treing converte(l into it vir Llal)l(l securi y, shall be punished with imprisonrlrent ot ,.rtit(,,' descri )tion for a term which may extend to ser en 'tru-:., ilr(l shall r lso be liable to fine."

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Se:tion 42O IPC is a serious [orm of clrr:r irr rlril inclrrcles r lducement (to lead or move someone to ha1,p, rr) rr. lerms ofc:livery of property as well as valuable secrrriti,J.^'l'ir s scction is also applicable to matters where the (icstr.Ll^.r )t) rll

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Dr.l)t\R, J 0-1.P.No.7.t59 of²⁰¹⁹

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the property^{is causedby the way of cheatingor inducement'} i,"ni.ttrneni for cheating^{is proYided underthis sectionrvhich} may extend^{to 7 yearsaatd d"o makesthe personliable to fine'}

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To establish the^{offence of cheating ininducingthe} a"tlr.ry of p.op.rty,^{the following ingredientsneed to be proved:}

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{0 The representation^{madeby the person was}

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false.

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(i0 The accused^{had priorknowledgethat the} representation^{he madewas false'}

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(it.) The accused made^{fatse representation\r'ith} dishonest intention^{in orderto deceivethc} person to whom it^{was made.}

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(iu) The act where the^{accusedinducedthc pcrson to} deliver the Property^{or to perform or to abstain} from any aat^{which the person$'ouldhave not} done or had^{otherwise committed'}

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As observed^{and held by this Courtin R K'} Vijagasarathg v. Sudha^Seeth.tram lR^{K Vijayasarathll.v-'} -Sudha si.iin"r" ,^{(iors) ro scc739:} {2o2ol^{2 scc(cri)} .as4l '^the ingredients io constitute^{an offenceunder Section 420 arc as} follows:

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(0 a person must commit^{theoffenceof cheatittgutrder} Section^{415; and}

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(ir) the person cheated^{mustbe dishonestll- irtduccdto:}

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(a) deliver property to any^{pcrson; or}

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(b) make, alter or^{destroy valuablc sectlritYor} ..,yihi.tg signed^{orsealed audcapablcofbeing} "oi.,".t"-d essential ingredient^{inio valuable security. for an act to Thus, constitute cheatitrg an offenceis at.t} under Section^42OIPC-"

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1 1. In the case^{on hand, in order to fasten the liability}

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under Section^{42O of Indian Penal Code, the prosecution} has to prove that the^{petitioner with an intentiou from tl-t c}

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Dr.l),\ll, J ( r'.P.Yo.7ji9 4 2019

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inception lras induced respondent No.2:..,:le facto complainant to part ^rith the money.

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A pert sal .of the contents of the corrt:spondence between the petitioner and the complainant r;hows that originally, th e complainant has agreed to pay the entire amount of Rs.32, 10,000/- within 30 davs from 16.11.2010. Horvever, he has paid only Rs.10,C t 000/- in Iive installmt nts and lailed to pay the balance arnount. Simultaneoul Iy, on the request of tl-r e complairant, again the petitione' company has issued a revised order on 16.07 .2012. Even as per the revised order also, r,rithin 30 days, the con plainant has to pay the total Llmourlt, but he has not paic. Even as on the date of cornplaint i.e. 09 .O7 .2O14, also, the complainant has not paid the amount agre,:d as per the terms of the revisc.d order dated 16.O7.2)12.

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Therefor:, the complainant having agreed ro pa1' the balance amou'rt vvithin 30 days has failecl tc, pa-v the same, as such he c:.nnot found fault rvith the petition€.r stating that the good s, which r.r.ere orclered, have nor s upplied.

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l)r.D,\ ll, J Crl. P..\o.7.t59 ol 20 I 9

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Unless the entire amount as agreed is paid, the petitioner is not bound to supply the goods ordered. As per the sworn statement dated 07 .08.2014 of the complainant, it is mentioned that he has entered into agreement with the petitioner on 16.11.2010. However, even according to the complaint, on 16.O7.2012, the complainant went to Ghaziabad and requested the petitioner to revise the order, and on the assurance given by the complainant that he would pay the balance amount, the petitioner-company has issued revised order dated 16.O7.2012.

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L4. The grievance of the complainant is that the petitioner, who has undertaken to supply the accessories worth of Rs.32,10,0O0/- as per the revised order in spite of taking money, has not supplied those accessories, thereby he has filed a complaint belore the Police alleging that the petitioner has committed an offence under Section 42O of Indian Penal Code.

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In order to establish the guilt of the accused for the offence under Section 42O of Indian Penal Code, the complainant is expected to prove that the petitioner right ,

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Dr.Dt\R.l Ctl.P No.7359 oJ 20l9

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from the inc:ption has an intention to induce, deceive the complainant ancl thereby the complainant part3d with the money. But rn the case on hand, it is the compllinant, who has voluntarilt. approached the petitioner and l)aid money as advance f rr supply of goods. Even if there is any breach of such agr:ement in respect of supply of goods, the dispute betw:en the parties would certainl}, amcunt to civil in nature. I owt,ver, the complainant has filed a criminal complair-rt wi -hout actually complying with the conclitions agreed with regard to payment of balanct: arrrount. Therefore, nonc of the ingredients of Section 42O of Indian Penal Code ar rplir.s to the facts of the present case.

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Conside ring these circumstances, it is a fit case where the c,rntinuation of proceedings before the trial Court for thr oflence under Section 42O of Inrlian penal Code amounr s to abuse of process of law. Hence, this Court is of tt e opinion that proceedings in C.C.No.448 of 20 I 4 on tht lile of VI Additional Judiciat F'irst lass Magistrate at Warangal, against the petitioner-accused, are liable to be qu ashc-d.

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Dr.DNR, J Crl.P.No.7359 of20l9

17 . Accordingly, the Criminal Petition is allowed and the

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proceedings in C.C.No.44a of 2014 on the file of VI Additional Judicial First lass Magistrate at Warangal, are quashed against the petitioner-accused.

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Pending Miscellaneous Petitions, if any, shall stand closed.

To,

//TRUE COPY//

SDA P.G. SHANKAR ASSIST REGISTRAR 1.b SECTION F ER

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The Vl Addl. Judicial First Class fvlagistrate at Waranoal. 3 I!:^{S]:!"-lHouse orficer,rvlatwaaa"poliCeStaiio;, W1;nsalDistrict.} J. rwo uus to^pubttc prosecutor ,High Court for the State of-Telangana,at Hyderabad[OUTI ! One CC lo tr,4/s A. VENKATESH, Advocate IOpuC1 5. One CC to t,4/s/ A SREENTVASA nnO, nOvotiielO'CUC1 6. Two CD copies

BIV *-^

:: :

HIGH CC URT

DATED:i 810912022

ORDER

CRLP.No 7359 of 2019