The distinction between civil wrong and criminal wrong, and the principles for exercising jurisdiction to quash complaints and criminal proceedings.

ORDER :

Leave granted. This appeal has been preferred against judgment and order dated 22nd September, 2014 of the High Court of Judicature at Bombay in Criminal Writ Petition No. 1040 of 2014. By the said order, the High Court declined to quash proceedings against the appellants under Section 417 read with Section 34 I.P.C. while quashing proceedings under Section 420 I.P.C.

2. Respondent No.1-complainant filed the impugned complaint dated 17th February, 2009 in the Court of Additional Chief Metropolitan Magistrate at Mumbai being Criminal Case No. 60/SW/2009 stating that the complainant was having business of export, import, stockiest and dealers of pipes etc. The accused approached the complainant for the engineering works and on 16th June, 2008, the accused gave a letter of proposed requirement of pipes. This was followed by letter of intent dated 16th June, 2008. Thereafter, the accused gave manufacturing clearance on 31st July, 2008. Though the complainant had a policy not to accept any order without initial deposit of letter of credit and asked the accused to deposit the initial amount or give letter of credit, but the accused with mala fide intention undertook to provide letter of credit later. On this the complainant undertook manufacture of pipes. Thereafter, on 29th October, 2008, the accused sought reduction in price. But suddenly on 5th December, 2008 the accused cancelled the order.

3. The accused appellant filed a petition in the Bombay High Court submitting that the complaint was abuse of the process of criminal law. Dispute between the parties was a civil dispute. The goods were to be supplied to the NTPC and the letter of intent had to be cancelled in view of the developments with the NTPC. The complainant was not a manufacturer and was merely a supplier and suffered no loss.

4. The High Court held that there was no straight jacket formula to decide as to what amounted to civil wrong as against a criminal wrong. This had to be decided on the facts of each case. No offence was made out under Section 420 I.P.C. as there was no delivery but there was a prima facie case under Section 417 read with Section 34 I.P.C.

5. We have heard learned counsel for the parties.

6. Learned counsel for the appellants submitted that breach of contract could not be treated as cheating. The offence of cheating is attracted only when there is deception at the very inception. In the present case, there was no concluded contract and even letter of credit had not been issued by the appellant. On admitted facts, there was nothing to infer the intention of cheating at the inception. There was a growing tendency to convert a civil case to a criminal case to create pressure to deprive a party of the defences available under the civil law against claim for damages. In any case, mere failure to honour a contract did not by itself amount to cheating.

7. Learned counsel for the respondent complainant submitted that at the stage of quashing the court had to take the averments in the complaint at the face value and only if no case was made out, prayer for quashing could be accepted. A civil dispute arising out of breach of contract could also amount to cheating and a remedy available to a party under the criminal law could not be barred merely because the dispute involved breach of contract also. The complainant had clearly pleaded that the accused had no intention to purchase the goods and only with a view to cause loss to the complainant the accused had sent the letter of intent.

8. We have considered the rival submissions. We are of the view that the law on the point is quite well settled in a series of judgments of this Court including Hridaya Ranjan Pd. Verma v. State of Bihar, (2000) 4 SCC 168, Anil Mahajan v. Bhor Industries Ltd., (2005) 10 SCC 228 Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736 Inder Mohan Goswami v. State of Uttaranchal, (2007) 12 SCC 1 and Chandran Ratnaswami v. K.C. Palanisamy, (2013) 6 SCC 740.

9. In Indian Oil Co