Allowed

M/S. Red Fab Pvt.Ltd , Hyd and Five Others v. M/S. Goyal Steel Enterprises, Hyd and Another

Telangana HC8 Jul 2022CRLP/8943/2015

Case brief

AI extract

What is this about?

The High Court allowed a criminal petition under Section 482 Cr.P.C. to quash proceedings alleging cheating and breach of trust under Sections 420, 406, 421, and 120-B IPC. The Court held that the dispute arose from a commercial transaction and failure to pay, constituting a civil breach of contract rather than a criminal offence, as there was no evidence of dishonest intent at the inception.

What did the court decide?

Criminal proceedings under C.C. No. 1210 of 2014 against petitioners in Sections 420, 406, 421 & 120-B IPC were quashed.

M/S. Red Fab Pvt.Ltd , Hyd and Five Others Vs M/S. Goyal… — Quashing and FIR | Telangana HC (2022)

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IN THE HIGH COURT FOR^{THE STATEOF TELANGANA} AT HYDERABAD

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FRIDAY, THE EIGHTH DAY OF JULY TWO THOUSAND AND TWENTY^TWO

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PRESENT

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THE HONOURABLE SRI JUSTICE A.SANTHOSH REDDY

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CRIMINAL PETITION NO: 8943 OF 2015

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Between:

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M/s. RED FAB PW. LTD., Rep. by its Director

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Venkatram Reddy Damannagari, S/o. Ravinder Reddy,

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ltrlunnangi lndira Devi, W/o. tr,4.Ram Mohan Reddy,

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lr,4unnangi Venkata Sekhar Reddy,

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Munnangi Narmada Reddy, W/o. M.Venkata Sekhar Reddy,

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Ramakrishna Reddy Dasarypally, S/o. Chenna Reddy,

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...PET|T|ONERS/ACCUSEDITO5&8

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M/s. Goyal Steel Enterprises, Rep. by its prop. Smt. Manju Goel,

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2 The State of Telangana, Rep. by its Public Prosecutor, High Court for the State of Telangana at Hyderabad.

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...RESPONDENTS

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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 quash the proceedrngs in c.c.No.1210 of 2014 on the file of the court of the Xl Additional Chief Metropolitan Magistrate, Secunderabad.

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CRLPMP . NO: 8980 oF 2015

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Petition under section 492 of cr.p.c praying that in the circumstances stated in the Memorandum of Grounds of criminar'peiition, the High court ;;/b" qle-a9ed to stay arr fu rther .proc-eed ings incruding appearance of the petitioner in c'c.No.1210/2014 on the fire of the dourt of trJ iihaoitionar chief rr,,|"tropoiitun Magistrate, Secunderabad

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This petition coming on for hearing, upon perusing the memorandum of grounds of criminar petition and upon neiiing in" "uigrr"nt. of sri A.prabhakar Rao, Advocate for the oetition.r ,no or trr ntiiiili"r pruri" prosecutor (TG) on Hespondent beharf of the No.1.Respondent No.2 and ot sri pramoJ Kuiar Kedia, Advocate for the

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The Court made the following: ORDER

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l.A. NO: 2 OF 20,tS(CRLPMP.^{NO:13219 OF 201s)}

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Petition under Section⁴⁸² of^{cr.P.cpraying that in the circumstances} stated in the Memorandum^{of Groundsof criminalPetition,the High court may,be} pi"u."o to extend the lnterim^{staygrantedin crl.p.No.8943of 2015,dated 28-} iOZO1S until further^{ordersand pisi sucfr other order or ordersas this Honible} Court may deem^{fit and properin the circumstances of the case'}

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l.A. NO: 2 OF²⁰²⁰

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Petition under^{section482 of cr.P.C praying that in the circumstances} stated in the^{Memorandu, oi Cr*nA. of CriminaipJrition,theHighCourt T1y^?"} pleased to extend^{the lnte;;;rderdated 28 10 2015 in Crl P No 8943 of 2015} and to Pass

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l.A NO: 20F 201 CRLPM N 1 11 F2 16

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PetitionunderSection4B2ofCr.P.Cpra.ylsthatintheCircumstances stated in^{the Memorand";ii;;;t} oi iriminai^{petition'the HighCourt mavbe} oteased to^{extend tne in'ieim -si"y- grrnt"o in crl.P.No 8943/2015'dated} 28.10.2015^{until further orders}

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I.A. NO;2^OF2019

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Petition^{underSection 482 ot cr'P'c Pt?Ils,,i:il,n:} ffir"J::[ilT: n::^{I;ff ff Tii:i: ff '":J: : ::il' ;i#?'"u:xxi: ;il' ; :'a e +r o'l z o r 5}

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016 CRLP^{MP,NO:9425 OF2016} I.A, N O:^1OF

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that^{in the circumstances} Petitro^{n u nder section} tion.the^{High court} la^y:^" 8943^{of 2015, dated zb- ru-} .{rru'"'"trq.*+'{ii: dfl:,'1,*il:#:l^{li?" I x.,} ".'

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F 2020 l.A.^Not10

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Petition^under stated^{in the Memora} pleased^{to extend tnf'lt",fl 3i:.:.;l*hqsrj;T:*diJfi :'f':#i?r:} and^to Pass t.A. o: 10^F 0 19 o.,"^{o ?."1l3'in: li?ffii'J T 3K;i.T t :.il3l'J&'i:x:#li,;,.T:l[ *tT:}

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pleased to extend the interim orders dated 2811012015 in Criminal^petition No. 8943 of 2015. .

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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 RAJA REDDY KONETI ,Advocate for the Petitioner and the Public Prosecutor (TG/AP) on behalf of the Respondent No. and of Sri_Advocate for the Respondent No.

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THE HONOURABLE SRI JUSTICE A.SANTHOSH^REDDY P.No.8943 F2 l5

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ORDER:

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This criminal petition is filed under Section 482 Cr.P.C to quash the proceedings against the petitioners/A-1 to A-5 and A-8 in C.C.No.1210 of 2014, on the file of the Xl-Additional Chief Metropolitan Magistrate, Secunderabad.

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Heard leamed counsel for the petitioners, learned^counsellor the first respondenVde facto complainant and learned Assistant Public Prosecutor for the second respondent/State. Perused the record.

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The second respondent herein filed a^{private complaint} before the learned Xl-Additional Chief^{MetropolitanMagistrate,} Secunderabad alleging offences^{ttnder Sections420, 406, 421 &} 120-B IPC. Later, the learned Magistrate^{recordedthe stryments} of the first respondent and other^{witnessesand registeredthe same} as C.C.No.1210 of 2014 against^{the petitioners/A-1 to A-5 and A-8} and other accttsed i.e., ,{-6,^{A-7, A-9 to A-12. Aggrieved by the} same, the^{presentcriminal petitionis fited'}

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A-l and A-10 are private limited companies. A-2 to A -9 are the Managing Directors and Directors of A-1 company and responsible persons for its day to day affairs and A-1i and A-12 are the responsible persons for the day to day affairs of A-10 company.

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As per the allegations in the complaint, the first petitioner/ A-l company is into the business of iron and steel and first petitioner represented by A-4 to A-9 approached the hrst respondent/complainant lor supply ol iron and steel on credit basis. They assured the complainant to pay the amounts of the purchases within 30 days or immediately after realizing the sale proceeds, failing which they have agreed to pay interest aI 24yo per annum. They further assured and alfirmed the complainant that they would treat the goods supplied as entrusted goods and would not divert, rnisappropriate and rnisuse the sale proceeds of the goods and the same would be only remitted and paid to the complainant.

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The petitioners and other accused are alleged to have induced and persuaded the complainant to believe the said representations and assurances made by them as true. Accordingly,

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the complainant supplied^{the goodsworth Rs. 15,95,918/-on credit} basis to accused No.10^{company and later receivedthe} material from time to^{time under27 dilferent invoicesin the year} 2012. ln all, the accused^{are due and liable to pay a sum of} Rs.85,99,436/-. It is alleged^{that the petitioners criminally} misappropriated^{the saleproceeds of the materials suppliedto} them on credit basis by^{diverting and misusingthe sameand} thereby committed^{the offencesalleged.A-10 company is alleged} to have issued cheque^{for an amountof Rs.20lakhs, but the same} on presentation,^{was returned unpaidby the bankerof the accused'} Thus, A-1 to A-12^{with an intentionto cheat the first respondent} had issued false and bogus^{cheque and the alleged acts of the} accused constitute the offences^{as stated above.}

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The leamed counsel for^{the petitioners/A-i to A-5 and A-8} would submit that the dispute^{between the partiesis purely civil in} nature and initiation^{of criminal proceedings amountsto abuse of} process of the court. The^{learned counsel further submits thateven} 1 if the allegations in^{the complaint are acceptedto be true and} ) correct, the offences under^{offences underSections 420, 406,421,}

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120-8 IPC are not made out. In support of his submissions and

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contentions, the leamed counsel for the petitioners has relied on the judgment of the Supreme Couft in VIR PRAKASH SHARMA v. ANIL KUMAR AGARWAL AND ANOTHER'.

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The leamed counsel for the first respondent submits that the allegations in the complaint and the statement of witnesses prina facie^{satisfy the ingredients} of the alleged offences and there are no merits in the criminal petition and the same may be dismissed. In support of his contentions, he relied on the judgment of the Hon'ble Apex Court in PRITI SARAF AND ANR. v. STATE OF NCT OF DELHI AND ANR2.

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Thus, the question which arises for consideration is whether there are any justifiable grounds to interfere and quash the criminal proceedings initiated against the petitioners herein by invoking the inherent powers of this court under Section 4g2 Cr.p.C.

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)

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' rzooTt t scc a73 ' alR 2021 SC 1531

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In STATE OF HARYANA^{v. BHAJAN LAL3,the} Hon'ble Apex Court^{laid the lollowing guidelines while exercising} the powers under^{Section 482 Cr.P.Cand gave the lollowing} categories of cases^{by way of illustrations wherein such power} could be exercised^{either to prevent abuseofprocess of the courtor}

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otherwise to secure^{the endsofjustice,as under:}

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(a) where the^{attegations made inthe First} lnformation Report^{or the complaint, even if they} are taken at^{their face vatueand acceptedin} their entirety^{do not prima facie constitute any} offence or^{makeout a case against the accused;}

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(b) where the^{attegationsin the First lnformation} R6port and^{other materials,if any' accompanying} the F.l.R. do^{not disctosea cognizabte offence'} justifying an^{investigationby policeofficers} under^{Section156(1 ) of the Code except under an} order of^{a Magistratewithin the purview of} Section^{155(2) of the Code;}

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(c) where^{the uncontrovertedaltegations made in the} FIR or^{'comptaint and the evidencecotlected'in} support^{of the same do not disctosethe} commission^{of any offence and make out a case} against^{the accused;}

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where^{the allegations in the FIR do not constitute}

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(d) u aogni'uUiu^{offence but constituteonly a non'}

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3 1992 SCC^(Cri)426

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cognizabte offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section^'155(2) of the Code;

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(e)

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(f)

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where the atlegations made in the FIR or comptaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conctusion that there is sufficient ground for proceeding against the accused;

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where there is an express [egat 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;

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(C) where a criminat proceeding is manifestly attended with mata fide and/or where the proceeding is maticiousty instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personaI grudge,,.

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I L From a careful reading of the allegations in the complaint and the statements of witness, it reveals that A_ I and A_ I 0 are private Iimited companies and A_2 to A_9 are its Managing

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Directors and Directors and responsible for the day-to-day alfairs of A-l company and A-l 1 and A-12 are responsible for the day-today affairs of A-10 company. Petitioner/A-l represented by A-4 to A-9 approached A-1 company stating that they are in dire need of goods in the form of iron and steel assuring that they will make payments within 30 days failing which they would^{pay interest at} 24Yo per annum. It is also alleged that^{the first respondent supplied} material worth Rs. 15,95,918/- to A-10^{company.In the year2012,} the complainant has supplied^{materialfrom time to timeunder} 27 different invoices to^{the petitioners herein and other accused'} ln total, the accused are^{due an amount of Rs.85,99,436/-' It is also} alleged that the^{petitioners sold iron and steel supplied to them on} credit basis and^{criminallymisappropriatedthe sale proceeds'} Based on the^{aboveallegations, the learnedMagistratehastaken} cognizance^{of the case for the offences punishableunder Sections} 420,406,421^{& 120-B IPC'}

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The^{essential requirements to constitutethe offence under} Section^{420 IPC are:}

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(i) cheating and dishonest inducement of the person deceived to detiver any property to any person, or

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(ii) to make, alter or destroy the whote or any part of a vatuabte security, or anything which is signed or seated, and is capabte of being converted into a vatuabte security.

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Undisputedly, there is no averment in the complaint or in the statements of the witnesses that the accused made a false representation or with dishonest inducement on their part, the iron and steel rnaterial was delivered to them by the first respondent. On the other hand, it is a business transaction between the parties and in pursuance of the oral agreement between the parties, iron and steel was supplied to the accused. Therefore, the misuse of sale proceeds and not paying the amount against the goods supplied or failed to account for the material supplied to the first respondent may be a breach of contract. As such, the dispute between the pafties is purely a civil litigation arising out of breach oflcontract, since the accused failed to account for and failed to pay the amounts against the supply of goods i.e., iron and steel by the first respondent. Therefore, the said allegations do not constitute any offence under Section 120 IpC.

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The other offence under Section 406 IPC relates to criminal

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breach of trust. Criminal breach of trust has been defined in Section 403 IPC. In order to constitute the ollence of criminal breach ol trust, the necessary ingredients are: (i) entrustment of property or dominion over property, (iii) such entrustment must be in trust, (iii) dishonest misappropriation or dishonest conversion to one's own use by the receiver of the properly,^{(iv) violation of the law} prescribing the modes in which the trust is to^{be discharged or} violation of legal contract touching the^{discharge of the lrusts.}

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The allegations in the^{complaintand statementsof the} witnesses do not fit into^{any ofthe aboveingredients'} Undisputedly,^{the first respondentmighthave supptied the goods} i.e., iron and^{steel and entrusted the goods to the accused'lt was} notonaccountoftrustorsafecustodybutitwasonlyforthe purpose of business^{and in pursuanceof an understandingbetween} the parties.^{lf the accused fails to account for the material supplied} by the first^{respondent, certainly they wouldbe liable lor breach of} agreement^{or understanding'}

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16.^{lt is settledprinciple of law that mere breach of contract or} an understanding^{cannotgive rise to criminal prosecution for} cheating^{unless fraudulent or dishonest intentionis shown rightat} the beginning^{of the transactlon'}

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17 .^{The Hon'bleApex Cou(in PRITI SARAF'scase (2 supra)'} relied on^{by learned counselfor the first respondent'heldat para 23} as under:

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,,lt being a settted^{principte of Law that to} exercise^{powers under Section482 CrPC'the comptaint} in its entirety^{shatt haveto be examined on the basis of} the attegation^{made in thecomptaint/ FIR/ charge-sheet} and the^{High Court at that stage was not underan} obtigation^{to go into the mattero1- s13rni6eits} correctness.^{Whatever appears on the face of the} com^{pLaint/ FIR/charge-sheet shatt be taken into} consideration^{withoutany criticat examinationof the} same.^{The offence ought to appearex facie on the} comptaint/^{FIR/ charge'sheet and otherdocumentary} evidence,^{if anY,on record"'}

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In view^{of the above and taking into considerationthe} allegations^{in the complaint and the statements of the witnesses'} they are without^{adding or subscribinganything'The alleged} I offences under Sections 420, 406, 421 & 120-9^{IPC could notbe} \

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made out. The disputr appears to be purely civii in nature As such, the .rrr,n, proceedings initiated against the peritioners/A-l to a-s un] I A-8 in c'c'No'1210 of 2014are liable to be quashed.

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For the foregoing reasons, the criminal petition is allowed and the proceedings against the petitioners/A_l to A_5 ancl A_g in C.C.No. 12t0 of 2014, on the file of the Xl_Addirional Chief Metropolitan Magistrate, Secunderabad, are hereby q uashed.

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pending miscellaneous petitions, if any, stand closed.

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Sd/-N.CHANDRASEKHAR RAO ASSISTANT REGIST //TRUE COPY//

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SECTION OFFICER

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1' T he Ho n' ble- x Ad d itio n at clief l\zrehoporita n Ma gistrate, secu ndera bad. ? 9n"^{CC to Sri A.prabhakar} nao, nduJcjie io;;iicr'' 9. 9n"^{CC to Sri pramodxrmr,} xiaii, aaro.rt" iO'ducl 4 Two CCs to the pubric prosecutor, t-iigh couri roiine Siate of rerangana, Hyderabad (OUT)

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