IMPORTANT POINT
Cheating – Mere breach of promise to repay per se does not infer dishonest intention – Failure to pay due to unfortunate business losses cannot be clothed with culpability and process of criminal law utilized to recover outstanding dues.

JUDGMENT :

(Joymalya Bagchi, J.)

1. Leave granted.

2. The appeal is directed against judgment and order dated 27th September, 2022, passed by the High Court of Judicature at Bombay at Nagpur in Criminal Application (APL) No. 506 of 2022, whereby the appellant’s prayer for quashing of FIR No. 80/2022, dated 11th February, 2022, registered under Section 420 of the Indian Penal Code, 1860, (for short the ‘IPC’) at Police Station Lakadganj, Nagpur, was refused.

Genesis of the case:

3. The 2nd non-applicant (respondent no.2 herein) – Nitin, S/o Murlidhar Agrawal, took out an application under Section 156(3) of the Code of Criminal Procedure, 1973, before the Judicial Magistrate First Class (Nagpur) alleging as follows:-

a) The appellant/accused approached the 2nd non-applicant and represented himself as a ‘reputed, trustworthy and creditworthy’ businessman. On such representation, between 20th November, 2015 and 02nd June, 2017, the 2nd non-applicant sold coal to the appellant and raised invoices, which carried a credit period of 15 days. In respect of the few initial invoices, the appellant made payments. Subsequently, he failed to make payments and a large amount became due.

b) On 06th March, 2019, the 2nd non-applicant issued notice to the appellant claiming a sum of Rs.76,82,883/- along with interest payable within 15 days of notice. Appellant failed to pay and pursuant to negotiations, on 23rd July, 2020, a notarized agreement was executed, by and between the parties, wherein it was agreed between 01st August, 2020 and 31st January, 2021, the appellant would repay the sum of Rs.80,00,000/- in five installments to the 2nd non- applicant, failing which the latter would be at liberty to initiate civil and criminal proceedings.

c) The appellant paid Rs.5,00,000/- as per the agreement, but failed to pay the remaining sum.

d) Under such circumstances, the 2nd non-applicant approached Lakadganj Police Station on 28th June, 2021 for registration of a criminal case. Police did not take action, which constrained the 2nd non-applicant to approach the Magistrate concerned for direction to register FIR.

4. After considering the averments in the application and report from the Police Station, the Magistrate directed registration of FIR.

5. In course of investigation, police recorded further statement of the 2nd non-applicant. Other witnesses were also examined. Notarized agreement, invoices and bank statements were seized. In his further statement, the 2nd non-applicant reiterated the allegations. He further disclosed he had lodged a prior complaint at Lakadganj Police Station and the Crime Branch had started investigation thereon. At that stage, the appellant had met him in his office and the notarized agreement came to be signed, which has not been honoured by the appellant.

6. In conclusion of investigation, a charge-sheet came to be filed against the appellant alleging commission of offence punishable under Section 420 IPC.

Proceeding before the High Court:

7. The appellant assailed the charge-sheet before the High Court in Criminal Application (APL) No. 506 of 2022. The High Court refused to quash the proceeding inter alia holding the allegations prima facie divulging ingredients of offence under Section 415 IPC.

8. The High Court held the case did not divulge a purely commercial dispute and the 2nd non-applicant had not given the dispute a cloak of criminality. What primarily persuaded the High Court to come to such conclusion are the averments in the notarized agreement, wherein the appellant admitted that he had induced the 2nd non-applicant to sell coal by projecting himself as a reputed, trustworthy and creditworthy party. It is trite, the High Court would sparingly exercise its inherent powers to interdict a criminal proceeding.

Relevant Law:

9. The principles circumscribing the power of the High Court to quash a criminal proceeding are succinctly laid down in State of Haryana vs. Bhajan Lal, 1992 Supp (1) SCC 335 :-

“(1) Where the allegations m