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whether the accused can be heard at the stage of sec.156[3] of Cr.P.C.= Mr. K.T.S. Tulsi, learned senior counsel for respondent No.1 has pointed out that at this stage, namely, issuance of direction to the police for submission of report under Section 156(3) of the Code, the accused has no role and need not be heard. The said contention is undoubtedly in consonance with the procedure prescribed. However, in view of specific direction of the Division Bench of the High Court by a common order dated 10.06.2003, disposing off the cases by remitting the matter back to the Magistrate for reconsideration of the entire prayer as made by the complainant and to pass fresh orders, after giving adequate opportunity of hearing to both the sides, and decide afresh the application seeking direction under Section 156(3) by giving cogent reasons for coming to 3

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 REPORTABLE

 IN THE SUPREME COURT OF INDIA

 CRIMINAL APPELLATE JURISDICTION

 CRIMINAL APPEAL NO. 1868 OF 2011

 (Arising out of SLP (Crl.) No. 590 of 2008

M/s Thermax Ltd. & Ors. .... Appellant(s)

 Versus

K.M. Johny & Ors. .... Respondent(s)

 J U D G M E N T 

P. Sathasivam, J.

1) Leave granted.

2) This appeal is directed against the final judgment and 

order dated 11.01.2008 passed by the High Court of 

Judicature at Bombay in Criminal Writ Petition No. 1622 of 

2007 wherein the Division Bench of the High Court dismissed 

the writ petition filed by the appellants herein as 

misconceived.

 1

3) Brief Facts:

(a) M/s Thermax Ltd.-the appellant-Company, is a Public 

Limited Company having its registered office at Chinchwad, 

Pune and is engaged in the field of energy and environment 

management. Mr. K.M. Johny-the original complainant, 

Respondent No. 1 herein, is the proprietor of M/s Rini 

Engineers and M/s Sherly Engineers, which are small-scale 

industries undertaking fabrication job work for the appellant 

Company for the past several years. 

(b) On 26.05.1995, the appellant-Company placed three 

Purchase Orders on Respondent No.1 being Order No. 260062 

for designing and manufacturing two numbers of stationary 

L.P.G. Storage Tanks and Order Nos. 260063 and 260064 

were for the supply of consumables and other accessories to 

the said Tanks. On 01.06.1995, M/s Unique Engineering 

Services, the Consultants of the appellant Company addressed 

a letter specifying that they had assessed the companies of the 

Respondent No. 1 and in their opinion even though they have 

not made any static bullets and have made quite a few mobile 

 2

L.P.G. Tanks, however, they were capable of manufacturing 

the same, but needed design help.

(c) On 20.06.1995, Respondent No. 1 informed the 

appellant-Company their inability to procure the material 

(steel) and requested to supply the same and to deduct the 

material cost from the final bill. On 04.08.1995, the 

Respondent No. 1 was provided with the necessary steel of the 

technical specification. On 06.08.1995, an Engineer of the 

appellant-Company visited the company of the Respondent No. 

1 and submitted a report stating that Respondent No. 1 had 

carried out certain work using the material purchased from 

the appellant-Company. It was also pointed out in the report 

that Respondent No. 1 agreed that they would send the 

material to M/s Bureau Veritas for checking. The report also 

stated that Respondent No. 1 had not ordered for consumables 

and no rectification and drawings had been carried out. 

(d) By letter dated 10.08.1995, the Consultants informed the 

appellant-Company that there was no progress in the work 

status for the last 45 days and it was observed that 

Respondent No. 1 was not interested in executing the 

 3

assignment. In pursuance of the same, a meeting was held 

between the officials of both the Companies and the 

Respondent No. 1 agreed to complete the job by all means by 

22.09.1995. Since Respondent No. 1 failed to carry out the 

work as per the Schedule, the appellant-Company, vide letter 

dated 13.09.1995 cancelled the order placed and it was made 

effective from 26.05.1995 i.e., from the date when the order 

was placed. 

(e) On 06.05.2000, Respondent No. 1 filed a complaint with 

the Crime Branch, Pune alleging that they had carried out 

several fabrication job works for the appellant-Company and 

huge amount of Rs. 91,95,054/- was outstanding till date 

despite several requests. In the said complaint, it was further 

alleged that the appellant-Company also placed Purchase 

Order being No. 240307 dated 22.03.1993 for Rs. 8,00,000/- 

for fabrication and erection of Tower Support Structural etc., 

for the Mehasana District Taluka Sanstha (Gujarat) Project 

and also represented that they will hire the machinery of the 

Respondent No. 1 for the said job at the rate of Rs. 2,400/- per 

day and believing the same the Respondent No. 1 allegedly 

 4

purchased brand new machinery worth Rs. 5,80,000/- 

specially for the said project and dispatched the same to the 

Mehasana site. Respondent No. 1 completed the said job 

according to schedule and to the satisfaction of the appellant-

Company and also carried out additional work at the site as 

per their request. It was alleged that balance outstanding for 

the said work of Rs.2,47,570/- was still receivable from the 

appellant-Company. An amount of Rs.58,32,000/- towards 

hiring charges for the machinery is yet to be paid by the 

appellant-Company. Therefore, a total sum of Rs.68,79,750/- 

became due from the appellant-Company to respondent No.1 

and the same was not paid till date. Since the Crime Branch 

did not take any cognizance, the said complaint was filed in 

the Court of Judicial Magistrate, First Class, Pimpri being RCC 

No. 12 of 2002 and by order dated 30.05.2002, the Judicial 

Magistrate issued a direction under Section 156(3) of the Code 

of Criminal Procedure, 1973 (in short `the Code') and referred 

the same to Crime Branch, Pune, Respondent No. 2 herein, for 

investigation. Pursuant to the same, Respondent No. 2 

 5

registered an offence being C.R. No. 91/2002 and initiated 

proceedings thereunder against the appellant-Company.

(f) Aggrieved by the said order, the appellant-Company filed 

two separate Criminal Writ Petitions being Nos. 209 and 443 

of 2003 before the Bombay High Court for quashing and 

setting aside the order dated 30.05.2002 passed by the 

Judicial Magistrate, First Class, Pimpri. Vide order dated 

10.06.2003, the High Court set aside the order dated 

30.05.2002 and remitted the matter back to the Judicial 

Magistrate for reconsideration of the entire prayer and to 

decide the case afresh, after giving adequate opportunity of 

hearing to both the sides. Pursuant to the same, the appellant 

Company preferred an application dated 16.07.2003 under 

Section 91 of the Code before the Judicial Magistrate praying 

that the Assistant Commissioner of Police, Crime Branch, 

Pune City be directed to produce all the records and 

proceedings of the complaint dated 06.05.2000. After hearing 

the respective parties, the Judicial Magistrate, vide order 

dated 11.08.2003 rejected the said application. 

 6

(g) Aggrieved by the same, the appellant-Company preferred 

Criminal Application No. 3666 of 2003 before the High Court. 

The High Court, vide order dated 18.10.2006, issued rule and 

interim relief by directing the Assistant Commissioner of 

Police, Crime Branch-II, Pune city to produce the documents 

within six weeks in the Court of Judicial Magistrate, Pimpri. 

Pursuant to the said direction, Shri S.B Oahal, Inspector of 

Police, submitted a reply dated 12.03.2007 stating that the 

records and proceedings in respect of Crime Register No. 11 of 

2000 were destroyed. Pursuant to the same, the Judicial 

Magistrate, vide order dated 20.08.2007, called for a report 

under Section 156(3) of the Code from the Respondent No. 2. 

(h) Being aggrieved, the appellant-Company preferred 

Criminal Writ Petition being No. 1622 of 2007 before the High 

Court. The High Court, vide order dated 11.01.2008, 

dismissed the writ petition as misconceived on the ground that 

the Magistrate has adhered to the directions and has given 

reasons for coming to his conclusion. Aggrieved by the said 

decision, the appellant-Company has preferred this appeal 

before this Court by way of special leave petition.

 7

4) Heard Dr. A.M. Singhvi and Mr. C.S. Vaidyanathan, 

learned senior counsel for the appellant-Company and Mr. 

K.T.S. Tulsi, learned senior counsel for the respondent No.1. 

Contentions:

5) Dr. A.M. Singhvi, learned senior counsel for the 

appellant/accused, after taking us through all the earlier 

complaints including the last complaint and earlier orders 

closing those complaints, the order of the Judicial Magistrate, 

First Class, Pimpri dated 20.08.2007 in Criminal Case No. 12 

of 2002 and the impugned order of the High Court dated 

11.01.2008, at the outset, submitted that the courts below 

ought to have considered that the dispute arose out of a 

contract and a constituted remedy is only before a civil court. 

He further contended that similar claim on earlier occasions 

were indeed investigated and finally categorized as civil in 

nature, while such is the position, the direction of the 

Magistrate calling for a report under Section 156(3) of the 

Code from the Crime Branch, Pune is not sustainable. He 

further submitted that the High Court ought to have 

intervened and quashed the same. According to him, the 

 8

complaint and the allegations made therein do not disclose 

any offence and, therefore, the direction under Section 156(3) 

of the Code is untenable. He further pointed out that the 

essential ingredients for an offence under Sections 405 and 

420 of the Indian Penal Code, 1860 (in short `IPC') have not 

been made out, no such dishonest intention can be seen or 

even inferred inasmuch as the entire dispute pertains to 

contractual obligations between the parties. In any event, 

according to him, in view of long delay, namely, filing of the 

complaint in the year 2002 with reference to the alleged 

disputes which pertain to the period from 1993-1995, that is, 

after nine years, cannot be maintained as it amounts to abuse 

of process of law. He finally submitted that roping in of 

appellant Nos. 2-8 in the alleged offence on the hidden 

principle of vicarious liability is untenable. Mr. C.S. 

Vaidyanathan, learned senior counsel for the appellant also 

reiterated the same contentions. 

6) On the other hand, Mr. K.T.S. Tulsi, learned senior 

counsel for the Respondent No. 1/complainant submitted that 

interference by the court at the stage of passing orders under 

 9

Section 156 (3) of the Code is not warranted. He further 

pointed out that the accused has no right to address at this 

stage and the High Court is right in refusing to entertain the 

petition filed under Section 482 of the Code. 

Discussion:

7) In order to understand the rival contentions, it is useful 

to refer the complaint of the Respondent No. 1 dated 

30.05.2002 which was made before the Judicial Magistrate, 

First Class, Pimpri in Regular Criminal Case No. 12 of 2002. 

Respondent No. 1 herein is the complainant and all the 

appellants herein have been shown as accused. The said 

criminal complaint was made for the offences under Sections 

420, 406 read with 34 IPC. The complaint proceeds that 

complainant is the Proprietor of M/s Rini Engineers and M/s 

Sherly Engineers which are small-scale industries doing 

fabrication job work for various industries, namely, TELCO, 

Ion Exchange Ltd., etc. The following averments in the 

complaint are relevant for our consideration:

 "a) The complainant has been doing the said business in 

 Maharashtra since last more than 27 years. The accused No. 

 1 is a company and accused No. 2 is the Chairperson of the 

 Accused No. 1. Accused No. 3 was the Managing Director 

 1

and the Accused Nos. 4 to 15 was doing service as Manager 

of Accused No. 1 at the relevant time. The Accused No. 1 has 

its office at the above address. The Accused Nos. 2 to 15 

were looking after the management and business of Accused 

No. 1. 

b) The complainant was doing fabrication job work for the 

Accused for several years. The accused placed purchase 

order No. 260062 dated 24.04.1995 of Rs. 3,20,000/- for 

designing and manufacturing two numbers stationary LPG 

Storage Tanks. The complainant has been granted the 

necessary licenses by the Explosives Department for 

manufacturing LPG Storage Tanks and LPG Storage 

Tankers. The said job is a specialized job and requires Best 

quality material as it involves high risks. At the relevant 

time, the required material was not available in the market. 

Therefore, the complainant requested the Accused for the 

supply of material for the said order and to debit the 

material cost from the final bill. The accused initially agreed 

for the same. However, subsequently insisted for payment 

before delivery of material. Therefore, complainant paid Rs. 

1,14,098/- by pay order dated 31.07.1995 drawn on the 

Sadguru Jangli Maharaj Bank, Chinchwad. The Company 

issued material after receipt of pay order, vide excise gate 

Pass No. 1328 and 175713 dated 04.08.1995. The 

complainant received the material and was surprised to see 

that the accused had supplied scrap material for the 

manufacturing of LPG Storage Tanks and same was useless 

for the job. The complainant immediately contacted the 

accused and informed about the same. The complainant 

requested the accused to take the scrap material back and 

issue genuine material. However, accused refused to do so, 

the complaint has spent the amount of Rs. 60,000/- for 

drawing and approval etc. and Rs. 1,14,098/- by pay order 

for the material to the accused. Thus, the accused have 

cheated the complainant and there by caused wrongful loss 

to the complainant. 

c) The accused placed Purchase Order No. 240307 dated 

22.03.1993 for Rs. 8,00,000/- for the fabrication and 

erection of Tower Support Structural etc. for the Mehasana 

(Gujarat) Project. The accused also represented that they will 

hire the machinery of the complainant for the said job at the 

rate of Rs. 2,400/- per day. Believing the same, the 

complainant purchased brand new machinery of Rs. 

5,80,000/- specially for the said project and dispatched the 

 1

same to Mehasana site. The complainant has completed the 

said job according to schedule and to the satisfaction of the 

accused. The complainant also carried out additional work 

at the site as per the request of the accused. The balance 

outstanding for the said work is Rs. 2,47,570/- and is still 

receivable from the accused. The amount towards the hiring 

charges for the machinery is Rs. 58,32,000/- is yet to be 

paid by the accused. The accused have not returned the 

machinery of the complainant till the date and have been 

using the same for their other jobs also. Thus the accused 

owe the complainant Rs. 68,79,750/- and the same is not 

paid till the date.

d) The complainant states that he has carried out several 

fabrication job for the accused and huge amount of Rs. 

91,95,054 is outstanding from the accused till the date. In 

spite of several requests of the complainant, since the 

accused are very influential, no body has taken cognizance 

of the complaints of the complainant. The complainant has 

also filed complaint dated 15.09.1998 with Pimpri Police 

Station against the accused but all in vain. 

e) Thereafter the complainant filed complaint dated 

06.05.2000 with Crime Branch, Pune against the accused, 

however, till the date police have not taken any cognizance of 

the same in spite of the positive opinion of the police 

prosecutor attached to the Officer Commissioner of Police, 

Pune. The accused are very influential and the complainant 

has no other option but to file the present complaint in 

Hon'ble Court. 

f) The complainant is filing herewith all the relevant 

documents in support of this complaint and submits that 

the present case warrants detailed investigation under 

Section 156(3) of Cr.P.C. There is a separate cell of economic 

offences at Crime Branch, Pune and it is necessary to send 

the present complaint to Crime Branch, Pune for 

investigation under Section 156(3) of Cr.P.C The 

complainant therefore prays that:- 

i)The complaint be sent to Crime Branch, Pune for 

investigation u/s 156(3) of Cr.P.C. and;

ii) After receipt of the report of investigation, the accused be 

dealt with severally according to law and punished as per 

provision of law."

 1

8) For our purpose, we are concerned with Sections 405, 

406, 420 and 34 IPC which read thus:

 "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 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".

 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.

 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."

 34. Acts done by several persons in furtherance of 

 common intention.- When a criminal act is done by several 

 persons in furtherance of the common intention of all, each 

 of such persons is liable for that act in the same manner as 

 if it were done by him alone.

9) Now, we have to find out whether the ingredients of 

Sections 405, 420 read with Section 34 have been made out 

from the complaint and whether the Magistrate is justified in 

calling for a report under Section 156(3) of the Code from the 

 1

Crime Branch, Pune. Simultaneously, we have to see whether 

the High Court is justified in confirming the action of the 

Magistrate and failed to exercise its power and jurisdiction 

under Section 482 of the Code. 

10) Before considering the validity or acceptability of the 

complaint and the consequential action taken by the Judicial 

Magistrate under Section 156(3) of the Code, let us advert to 

various decisions on this aspect. In Suresh vs. 

Mahadevappa Shivappa Danannava & Anr., (2005) 3 SCC 

670, this Court, on the ground of delay/laches in filing the 

complaint and the dispute relates to civil nature finding 

absence of ingredients of alleged offence of cheating under 

Section 420 IPC, set aside the order of the Magistrate and that 

of the High Court. In that case, the alleged agreement to sell 

was executed on 25.12.1988. A legal notice was issued to the 

appellant therein on 11.07.1996 calling upon him to execute 

the sale deed in respect of the premises in question. Thus, the 

complaint was submitted after a gap of 7= years of splendid 

silence from the date of the alleged agreement to sell i.e. 

25.12.1988. The appellant therein responded to the legal 

 1

notice dated 11.07.1996 by his reply dated 18.07.1996 

through his lawyer specifically denying the alleged agreement 

and the payment of Rs 1,25,000/- as advance. Nothing was 

heard thereafter and the complainant after keeping quiet for 

nearly 3 years filed private complaint under Section 200 of the 

Code before the IVth Additional CMM, Bangalore on 

17.05.1999. The Magistrate, on the same date, directed his 

office to register the case as PCR and referred the same to the 

local police for investigation and to submit a report as per 

Section 156(3) of the Code. A charge-sheet was filed on 

04.08.2000 by the police against the appellant-Accused No. 1 

only for offence under Section 420 IPC. The Magistrate took 

cognizance of the alleged offence under Section 190(1)(b) of the 

Code and issued summons to the accused-appellant therein. 

Aggrieved by the aforesaid process order dated 04.08.2000 

passed by the Magistrate, the appellant-accused preferred the 

criminal revision which was dismissed by the High Court. The 

order of the High Court was under challenge in that appeal. It 

was contended that as per the averments in the complaint, 

even as per the police report, no offence is made out against 

 1

Accused Nos. 2-4 therein. Despite this, the Magistrate issued 

process against Accused Nos. 2-4 as well which clearly shows 

the non-application of mind by the Magistrate. It was further 

pointed out that a perusal of the complaint would only reveal 

that the allegations as contained in the complaint are of civil 

nature and do not prima facie disclose commission of alleged 

criminal offence under Section 420 IPC. After finding that 

inasmuch as the police has given a clean chit to Accused Nos. 

2-4, this Court concluded that the Magistrate ought not to 

have taken cognizance of the alleged offence against Accused 

No.1 and that the complaint has been made to harass him to 

come to terms by resorting to criminal process. Regarding the 

delay, this Court pointed out that the complaint was filed on 

17.05.1999, after a lapse of 10= years and, therefore, the 

private complaint filed by respondent No.1 therein is not at all 

maintainable at this distance of time. It was further observed 

that it is also not clearly proved that to hold a person guilty of 

cheating, it is necessary to show that he had a fraudulent or 

dishonest intention at the time of making the promise and 

finding that the order of the Magistrate and of the High Court 

 1

requiring Accused No.1/appellant therein to face trial would 

not be in the interest of justice, set aside the order of the High 

Court and of the Magistrate. It is clear that in view of 

inordinate delay and laches on the part of the complainant 

and of the fact that the complaint does not disclose any 

ingredients of Section 420 IPC and also of the fact that at the 

most it is the dispute of civil nature, this Court quashed the 

orders of the Magistrate and the High Court.

11) In Madhavrao Jiwajirao Scindia & Ors. vs. 

Sambhajirao Chandrojirao Angre & Ors. (1988) 1 SCC 692, 

this Court, after pointing out the grounds on which the 

criminal proceedings be quashed under Section 482 of the 

Code at preliminary stage by the High Court highlighted that a 

case of breach of trust is both a civil wrong and a criminal 

offence. While elaborating the same, this Court further held 

that there would be certain situations where it would 

predominantly be a civil wrong and may or may not amount to 

criminal offence. Based on the materials in that case, the 

Court concluded that the case is one of that type where, if at 

 1

all, the facts may constitute a civil wrong and the ingredients 

of the criminal offences are wanting. 

12) In Alpic Finance Ltd. vs. P. Sadasivan & Anr. (2001) 

3 SCC 513, this Court highlighted the grounds on which 

criminal proceedings are to be quashed under Section 482 of 

the Code and noted the ingredients of Section 420 IPC. In that 

case, the appellant was a registered company having its head 

office at Mumbai. It was a non-banking financial institution 

functioning under the regulations of Reserve Bank of India. It 

was carrying on business, inter alia, of leasing and hire 

purchase. The first respondent therein was the Chairman and 

founder-trustee of a trust by name "Visveswaraya Education 

Trust". The second respondent was wife of the first 

respondent, and was also a Trustee. The Trust runs a dental 

college by name Rajiv Gandhi Dental College. The 

respondents therein entered into an agreement with the 

appellant-Company therein whereby the appellant agreed to 

finance the purchase of 100 hydraulically-operated dental 

chairs. The total cost of the chairs was around 

Rs.92,50,000/-. The appellant-Company agreed to finance the 

 1

respondents for the purchase of these chairs through a lease 

agreement and as per the agreement, the respondents were 

liable to pay rentals quarterly. The respondents agreed to pay 

quarterly a sum of Rs 7,50,000/- for the first year; Rs 

12,50,000/- for the second year; Rs 8,00,000/- for the third 

year and Rs 6,25,000/- for the fourth year. As per the 

agreement, the appellant-Company, the lessors would have 

sole and exclusive right, title and interest in the dental chairs 

supplied till the entire hire-purchase amount was paid. In 

accordance with the agreement, the appellant made payments 

to M/s United Medico Dental Equipments and they delivered 

the dental chairs to the respondents. The appellant-Company 

alleged that the respondents were not regular in making the 

payments and committed default in payment of the 

instalments and that the bank had dishonoured certain 

cheques issued by the respondents. The appellant-Company 

also alleged that on physical verification, certain chairs were 

found missing from the premises of the respondents and thus 

they have committed cheating and caused misappropriation of 

the property belonging to the appellant. The appellant- 

 1

Company filed a private complaint under Section 200 of the 

Code before the Chief Metropolitan Magistrate, Bangalore 

alleging that the respondents had committed offences under 

Sections 420, 406 and 423 read with Section 120-B IPC. In 

that proceeding, the appellant-Company moved an application 

under Section 93 of the Code to issue a search warrant to 

seize the property in dispute and also to hand over these items 

to the complainant. The Magistrate took cognizance of the 

alleged complaint and issued summons to the respondents 

and passed an order on the application filed under Section 93 

of the Code to have a search at the premises of the 

respondents and to take possession of the properties involved 

in the case. These proceedings were challenged by the 

respondents under Section 482 of the Code before the learned 

Single Judge of the Karnataka High Court at Bangalore. The 

learned Single Judge was pleased to quash the entire 

proceedings and directed the appellant-Company to return all 

the properties seized by the police pursuant to the warrant 

issued by the Magistrate. Thus, the order of the Magistrate 

taking cognizance and issuing process to the respondents as 

 2

well as the order of search and the direction for restoration of 

the property to the appellant Company were set aside. 

Aggrieved by the same, the appellant-Company preferred 

appeal before this Court. It was contended on behalf of the 

appellant that the learned Single Judge has seriously erred in 

quashing the proceedings under Section 482 of the Code. It 

was further contended that the allegations in the complaint 

clearly made out offences punishable under Sections 420, 406, 

423, 424 read with Section 120-B IPC. On behalf of the 

respondents, it was contended that the complaint was filed 

only to harass the respondents and it was motivated by mala 

fide intention. It was further argued that the entire 

transaction was of civil nature and that the respondents have 

made a substantial payment as per the hire-purchase 

agreement and the default, if any, was not wilful and there 

was no element of misappropriation or cheating. The 

respondents also denied having removed any of the items of 

the disputed property clandestinely to defeat the interest of the 

appellant. After considering the power under Section 482 of 

the Code and adverting to series of decisions including 

 2

Nagawwa vs. Veeranna Shivalingappa Konjalgi , (1976) 3 

SCC 736 and State of Haryana vs. Bhajan Lal, 1992 Supp 

(1) SCC 335, this Court concluded thus:

 "7. In a few cases, the question arose whether a criminal 

 prosecution could be permitted when the dispute between 

 the parties is of predominantly civil nature and the 

 appropriate remedy would be a civil suit. In one case 

 reported in Madhavrao Jiwajirao Scindia v. Sambhajirao 

 Chandrojirao Angre this Court held that if the allegations in 

 the complaint are both of a civil wrong and a criminal 

 offence, there would be certain situations where it would 

 predominantly be a civil wrong and may or may not amount 

 to a criminal offence. That was a case relating to a trust. 

 There were three trustees including the settlor. A large house 

 constituted part of the trust property. The respondent and 

 the complainant were acting as Secretary and Manager of 

 the Trust and the house owned by the Trust was in the 

 possession of a tenant. The tenant vacated the building and 

 the allegation in the complaint was that two officers of the 

 Trust, in conspiracy with one of the trustees and his wife, 

 created documents showing tenancy in respect of that house 

 in favour of the wife of the trustee. Another trustee filed a 

 criminal complaint alleging that there was commission of the 

 offence under Sections 406, 467 read with Sections 34 and 

 120-B of the Indian Penal Code. The accused persons 

 challenged the proceedings before the High Court under 

 Section 482 of the Code of Criminal Procedure and the High 

 Court quashed the proceedings in respect of two of the 

 accused persons. It was under those circumstances that this 

 Court observed: (SCC Headnote)

 "Though a case of breach of trust may be both a 

 civil wrong and a criminal offence but there 

 would be certain situations where it would 

 predominantly be a civil wrong and may or may 

 not amount to a criminal offence. The present 

 case is one of that type where, if at all, the facts 

 may constitute a civil wrong and the ingredients 

 of the criminal offences are wanting. Having 

 regard to the relevant documents including the 

 trust deed as also the correspondence following 

 the creation of the tenancy, the submissions 

 advanced on behalf of the parties, the natural 

 2

 relationship between the settlor and the trustee 

 as mother and son and the fall out in their 

 relationship and the fact that the wife of the co-

 trustee was no more interested in the tenancy, it 

 must be held that the criminal case should not 

 be continued."

 10........ The injury alleged may form the basis of civil claim 

 and may also constitute the ingredients of some crime 

 punishable under criminal law. When there is dispute 

 between the parties arising out of a transaction involving 

 passing of valuable properties between them, the aggrieved 

 person may have a right to sue for damages or compensation 

 and at the same time, law permits the victim to proceed 

 against the wrongdoer for having committed an offence of 

 criminal breach of trust or cheating. Here the main offence 

 alleged by the appellant is that the respondents committed 

 the offence under Section 420 IPC and the case of the 

 appellant is that the respondents have cheated him and 

 thereby dishonestly induced him to deliver property. To 

 deceive is to induce a man to believe that a thing is true 

 which is false and which the person practising the deceit 

 knows or believes to be false. It must also be shown that 

 there existed a fraudulent and dishonest intention at the 

 time of commission of the offence. There is no allegation that 

 the respondents made any wilful misrepresentation. Even 

 according to the appellant, the parties entered into a valid 

 lease agreement and the grievance of the appellant is that 

 the respondents failed to discharge their contractual 

 obligations. In the complaint, there is no allegation that 

 there was fraud or dishonest inducement on the part of the 

 respondents and thereby the respondents parted with the 

 property. It is trite law and common sense that an honest 

 man entering into a contract is deemed to represent that he 

 has the present intention of carrying it out but if, having 

 accepted the pecuniary advantage involved in the 

 transaction, he fails to pay his debt, he does not necessarily 

 evade the debt by deception."

After finding so, this Court concluded that the learned Judge 

of the High Court was perfectly justified in quashing the 

 2

proceedings and disinclined to interfere in such matters 

dismissed the appeal. 

13) In Anil Mahajan vs. Bhor Industries Ltd. & Anr. , 

(2005) 10 SCC 228, again, a three-Judge Bench of this Court 

considered the issuance of process by a Magistrate for an 

offence under Sections 415, 418 and 420 IPC. This Court also 

analysed the difference between breach of contract and 

cheating. The appellant therein was the accused in a 

complaint filed against him by the respondent-Company for 

offence under Sections 415, 418 and 420 IPC. Based on the 

averments in the complaint, the Magistrate, by order dated 

25.06.2001, issued the process against the accused. The 

order of the Magistrate notices that the complainant has filed 

the documents on record in which the accused promised to 

pay the amount but has not paid with the intent to deceive the 

complainant and, therefore, the complainant has made out a 

case to issue process against the accused under Sections 415, 

418 and 420 IPC. The said order of the Magistrate was 

challenged before the Court of Sessions. The learned 

Additional Sessions Judge, Pune by order dated 19.10.2001, 

 2

set aside the order of the Magistrate issuing process. The 

order of the learned Additional Sessions Judge was set aside 

by the High Court. This Court, in paragraphs 8 & 9 of the 

judgment, observed as under: 

 "8. The substance of the complaint is to be seen. Mere use of 

 the expression "cheating" in the complaint is of no 

 consequence. Except mention of the words "deceive" and 

 "cheat" in the complaint filed before the Magistrate and 

 "cheating" in the complaint filed before the police, there is no 

 averment about the deceit, cheating or fraudulent intention 

 of the accused at the time of entering into MOU wherefrom it 

 can be inferred that the accused had the intention to deceive 

 the complainant to pay......................"

 "9. In Alpic Finance Ltd. v. P. Sadasivan, (2001) 3 SCC 513, 

 this Court was considering a case where the complainant 

 had alleged that the accused was not regular in making 

 payment and committed default in payment of instalments 

 and the bank had dishonoured certain cheques issued by 

 him. Further allegation of the complainant was that on 

 physical verification certain chairs were found missing from 

 the premises of the accused and thus it was alleged that the 

 accused committed cheating and caused misappropriation of 

 the property belonging to the complainant. Noticing the 

 decision in the case of Nagawwa v. Veeranna Shivalingappa 

 Konjalgi, (1976) 3 SCC 736, wherein it was held that the 

 Magistrate while issuing process should satisfy himself as to 

 whether the allegations in the complaint, if proved, would 

 ultimately end in the conviction of the accused, and the 

 circumstances under which the process issued by the 

 Magistrate could be quashed, the contours of the powers of 

 the High Court under Section 482 CrPC were laid down and 

 it was held: (SCC p. 520, paras 10-11)

 "10. The facts in the present case have to be 

 appreciated in the light of the various decisions of 

 this Court. When somebody suffers injury to his 

 person, property or reputation, he may have 

 remedies both under civil and criminal law. The 

 injury alleged may form the basis of civil claim 

 2

and may also constitute the ingredients of some 

crime punishable under criminal law. When there 

is dispute between the parties arising out of a 

transaction involving passing of valuable 

properties between them, the aggrieved person 

may have a right to sue for damages or 

compensation and at the same time, law permits 

the victim to proceed against the wrongdoer for 

having committed an offence of criminal breach of 

trust or cheating. Here the main offence alleged by 

the appellant is that the respondents committed 

the offence under Section 420 IPC and the case of 

the appellant is that the respondents have cheated 

him and thereby dishonestly induced him to deliver 

property. To deceive is to induce a man to believe 

that a thing is true which is false and which the 

person practising the deceit knows or believes to 

be false. It must also be shown that there existed a 

fraudulent and dishonest intention at the time of 

commission of the offence. There is no allegation 

that the respondents made any wilful 

misrepresentation. Even according to the 

appellant, the parties entered into a valid lease 

agreement and the grievance of the appellant is 

that the respondents failed to discharge their 

contractual obligations. In the complaint, there is 

no allegation that there was fraud or dishonest 

inducement on the part of the respondents and 

thereby the respondents parted with the property. 

It is trite law and common sense that an honest 

man entering into a contract is deemed to 

represent that he has the present intention of 

carrying it out but if, having accepted the 

pecuniary advantage involved in the transaction, 

he fails to pay his debt, he does not necessarily 

evade the debt by deception.

 11. Moreover, the appellant has no case that the 

respondents obtained the article by any fraudulent 

inducement or by wilful misrepresentation. We are 

told that the respondents, though committed 

default in paying some instalments, have paid 

substantial amount towards the consideration."

 (Emphasis supplied)

 2

By applying the above principles, this Court examined the 

complaint and concluded that it is clear from its substance 

that present is a simple case of civil disputes between the 

parties. This Court further held that the requisite averments 

so as to make out a case of cheating are absolutely absent. It 

further held that the principles laid down in Alpic Finance 

Ltd.'s case (supra) were rightly applied by the learned 

Additional Sessions Judge and it cannot be said that the ratio 

of the said decision was wrongly applied and on due 

consideration, the learned Additional Sessions Judge had 

rightly set aside the order of the Magistrate issuing process to 

the appellant. After holding so, this Court set aside the 

impugned judgment of the High Court and restored that of the 

Additional Sessions Judge.

14) In S.K. Alagh vs. State of Uttar Pradesh & Ors., 

(2008) 5 SCC 662, this Court considered the ingredients of 

Sections 405 and 406 IPC - Criminal breach of trust and 

vicarious liability. In the said decision, after finding that the 

complaint petition did not disclose necessary ingredients of 

criminal breach of trust as mentioned in Section 405 IPC and 

 2

also pointing out the ingredients of offence under Section 406 

IPC, interfered with the order passed by the High Court.

15) In Maharashtra State Electricity Distribution 

Company Limited & Anr. vs. Datar Switchgear Limited & 

Ors., (2010) 10 SCC 479, after perusal of the complaint, 

allegations therein, role of the directors mentioned therein and 

applicability of Section 34 IPC, this Court in paragraph 35 

concluded as under:

 "35. It is manifest that common intention refers to a prior 

 concert or meeting of minds, and though it is not necessary 

 that the existence of a distinct previous plan must be proved, 

 as such common intention may develop on the spur of the 

 moment, yet the meeting of minds must be prior to the 

 commission of offence suggesting the existence of a 

 prearranged plan. Therefore, in order to attract Section 34 

 IPC, the complaint must, prima facie, reflect a common prior 

 concert or planning amongst all the accused."

After saying so, verifying the complaint, this Court concluded 

that the complaint does not indicate the existence of any 

prearranged plan whereby Appellant No. 2 had, in collusion 

with the other accused decided to fabricate the document in 

question and adduce it in evidence before the Arbitral 

Tribunal. This Court further concluded that there is not even 

a whisper in the complaint indicating any participation of 

 2

Appellant No.2 in the acts constituting the offence, and that 

being the case, concluded that Section 34 IPC is not attracted. 

After saying so, allowed the appeal in relation to Appellant 

No.2 and quashed the order of the Magistrate taking 

cognizance against appellant No.2 in Complaint No. 476 of 

2004. 

16) The principles enunciated from the above-quoted 

decisions clearly show that for proceedings under Section 

156(3) of the Code, the complaint must disclose relevant 

material ingredients of Sections 405, 406, 420 read with 

Section 34 IPC. If there is a flavour of civil nature, the same 

cannot be agitated in the form of criminal proceeding. If there 

is huge delay and in order to avoid the period of limitation, it 

cannot be resorted to a criminal proceeding.

17) Dr. A.M. Singhvi, learned senior counsel for the 

appellant/accused contended that not only material facts were 

suppressed from the Magistrate but the previous three 

complaints to various police authorities and their closure 

reports were kept away from the Magistrate so as to mislead 

the Court. It is seen from the materials placed that three 

 2

complaints containing similar allegations have been 

investigated previously and all were closed as the alleged claim 

was found to be of civil nature. In those circumstances, it did 

not lie for Respondent No.1-the complainant to approach the 

Magistrate with the same subject Complaint. Inasmuch as the 

dispute arose out of a contract and a constituted remedy is 

only before a Civil Court, the Magistrate ought to have 

appreciated that Respondent No.1 was attempting to use the 

machinery of the criminal courts for private gains and for 

exerting unjust, undue and unwarranted pressure on the 

appellants in order to fulfill his illegal demands and extract 

undeserving monetary gains from them. 

18) The Courts below failed to appreciate that Ex. 61 is a 

reply filed by the Crime Branch-II and Ex. 63 is the statement 

of Shri V.B. Kadam, which categorically stated that the 

complaint preferred by Respondent No.1 registered at Crime 

Register No. 11/2000 was filed as being civil in nature. Even 

if we accept that the records were destroyed and 

notwithstanding such destruction, it was a matter of record 

that the complaint preferred by Respondent No.1 was indeed 

 3

investigated and categorized as civil in nature. This aspect 

has not been considered either by the Magistrate or by the 

High Court.

19) It is settled law that the essential ingredients for an 

offence under Section 420, which we have already extracted, is 

that there has to be dishonest intention to deceive another 

person. We have already quoted the relevant allegations in the 

complaint and perusal of the same clearly shows that no such 

dishonest intention can be seen or even inferred inasmuch as 

the entire dispute pertains to contractual obligations between 

the parties. Since the very ingredients of Section 420 are not 

attracted, the prosecution initiated is wholly untenable. Even 

if we admit that allegations in the complaint do make out a 

dispute, still it ought to be considered that the same is merely 

a breach of contract and the same cannot give rise to criminal 

prosecution for cheating unless fraudulent or dishonest 

intention is shown right from the beginning of the transaction. 

Inasmuch as there are number of documents to show that 

appellant-Company had acted in terms of the agreement and 

 3

in a bona fide manner, it cannot be said that the act of the 

appellant-Company amounts to a breach of contract.

20) Though Respondent No.1 has roped all the appellants in 

a criminal case without their specific role or participation in 

the alleged offence with the sole purpose of settling his dispute 

with appellant-Company by initiating the criminal 

prosecution, it is pointed out that appellant Nos. 2 to 8 are the 

Ex-Chairperson, Ex-Directors and Senior Managerial 

Personnel of appellant No.1-Company, who do not have any 

personal role in the allegations and claims of Respondent 

No.1. There is also no specific allegation with regard to their 

role.

21) Apart from the fact that the complaint lacks necessary 

ingredients of Sections 405, 406, 420 read with Section 34 

IPC, it is to be noted that the concept of `vicarious liability' is 

unknown to criminal law. As observed earlier, there is no 

specific allegation made against any person but the members 

of the Board and senior executives are joined as the persons 

looking after the management and business of the appellant-

Company. 

 3

22) It is useful to demonstrate certain examples, namely, 

Section 141 of the Negotiable Instruments Act, 1881 which 

specifically provides that if the person committing an offence 

under Section 138 is a company, every person who, at the 

time the offence was committed, was in charge of, and was 

responsible to, the company for the conduct of the business of 

the company, as well as the company, shall be deemed to be 

guilty of the offence and shall be liable to be proceeded against 

and punished accordingly. Likewise, Section 32 of the 

Industrial Disputes Act, 1947 provides that where a person 

committing an offence under this Act is a company, or other 

body corporate, or an association of persons, every director, 

manager, secretary, agent or other officer or person concerned 

with the management thereof shall, unless he proves that the 

offence was committed without his knowledge or consent, be 

deemed to be guilty of such offence. We have already noted 

that the offence alleged in the criminal complaint filed by 

respondent No.1 is under Sections 405 and 420 IPC 

whereunder no specific liability is imposed on the officers of 

the company, if the alleged offence is by the Company. In the 

 3

absence of specific details about the same, no person other 

than appellant No.1-Company can be prosecuted under the 

alleged complaint.

23) The Courts below failed to appreciate an important 

aspect that the complaint came to be filed in the year 2002 

when the alleged disputes pertain to the period from 1993-

1995. As rightly pointed out, the Courts below ought to have 

appreciated that respondent No.1 was trying to circumvent the 

jurisdiction of the Civil Courts which estopped him from 

proceeding on account of the law of limitation. 

24) We have already pointed out that respondent No.1 had 

previously filed three complaints which were concluded after 

exhaustive enquiry with the respective police authorities. The 

first complaint was on 06.05.2000 being Javak No. 974/2000 

with the Crime Branch-II, Pune which registered the same in 

its Criminal Register No. 11/2000. Pursuant thereto, the 

appellants were summoned and exhaustive enquiry was 

conducted by the Crime Branch-II and after recording the 

statements and perusal of documents and after undertaking 

an extensive interrogation, the Crime Branch-II closed the 

 3

case. The said closure of the case was informed to respondent 

No.1 by the police authorities by their letter dated 28.07.2000.

25) The materials placed further show that notwithstanding 

the complaint dated 06.05.2000 which was closed by the 

Crime Branch-II, another complaint on the same facts, was 

filed by respondent No.1 at the Bhosari Police Station being 

Javak No. 3142/2001. It is pointed out that the appellant and 

its officers attended the Bhosari Police Station, thereafter the 

said complaint was also closed after the facts were placed 

before the officers of the Bhosari Police Station.

26) Apart from these complaints, respondent No.1 once again 

filed a third complaint at the Commissioner's Office, Crime 

Branch, Pune being Javak No. 100/2001. The officers of 

appellant-Company appeared before the Crime Branch, who 

after perusing the documents and the written statements of 

appellant No.1, informed the appellants that the matter was 

closed.

 3

27) It is the grievance of the appellants that without 

disclosing these material facts and suppressing the fact that 

the complainant had previously filed three different complaints 

to various police authorities and that the said complaints were 

closed on being classified as civil disputes, the complainant 

had filed the aforesaid criminal complaint before the 

Magistrate being RCC No. 12 of 2002.

28) Mr. K.T.S. Tulsi, learned senior counsel for respondent 

No.1 has pointed out that at this stage, namely, issuance of 

direction to the police for submission of report under Section 

156(3) of the Code, the accused has no role and need not be 

heard. The said contention is undoubtedly in consonance 

with the procedure prescribed. However, in view of specific 

direction of the Division Bench of the High Court by a common 

order dated 10.06.2003, disposing off the cases by remitting 

the matter back to the Magistrate for reconsideration of the 

entire prayer as made by the complainant and to pass fresh 

orders, after giving adequate opportunity of hearing to both 

the sides, and decide afresh the application seeking direction 

under Section 156(3) by giving cogent reasons for coming to 

 3

such conclusion, the procedure adopted by the Magistrate 

cannot be faulted with. Though the appellant 

Company/accused has no right to be heard at this stage in 

view of the direction of the High Court, no exception be taken 

to the order of the Magistrate hearing the Complainant and 

the appellant Company/accused even at the stage of calling 

for a report under Section 156(3) of the Code. 

29) The entire analysis of the complaints with reference to 

the principles enunciated above and the ingredients of 

Sections 405, 406, 420 read with Section 34 IPC clearly show 

that there was inordinate delay and laches, the complaint 

itself is inherently improbable contains the flavour of civil 

nature and taking note of the closure of earlier three 

complaints that too after thorough investigation by the police, 

we are of the view that the Magistrate committed a grave error 

in calling for a report under Section 156(3) of the Code from 

the Crime Branch, Pune. In view of those infirmities and in 

the light of Section 482 of the Code, the High Court ought to 

have quashed those proceedings to safeguard the rights of the 

appellants. For these reasons, the order passed by the 

 3

Judicial Magistrate First Class, Pimpri in CC No. 12 of 2002 

on 20.08.2007 and the judgment of the High Court dated 

11.01.2008 in Criminal Writ Petition No. 1622 of 2007 are set 

aside. The complaint filed by Respondent No.1 herein is 

quashed.

30) For the reasons stated above, the appeal is allowed. 

 ...................

 ..............................J. 

 (P. SATHASIVAM) 

 ..................................................J. 

 (DR. B.S. CHAUHAN) 

NEW DELHI;

SEPTEMBER 27, 2011. 3

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