The court held that the allegations in the complaint, if proven, could potentially establish a prima facie case of cheating under Section 420 of IPC, and that the determination of whether the accused's representation was dishonest and fraudulent from the inception or whether there was a subsequent breach of contract was a question of fact to be decided during the trial.

( 1 ) THIS petition under Section 482 of Cr. PC has been filed for quashing the proceedings in C. C. No. 12 of 1999 on the file of the XI Metropolitan Magistrate, Secunderabad wherein the petitioners are the accused and are prosecuted for the offence under Section 420 of IPC on the basis of the complaint filed by respondent No. 1 herein.

( 2 ) THE relevant facts may be stated briefly : the complainant has been running the business in iron and steel at Boiguda. The complainant supplied stainless steel material worth Rs. 3,65,000. 00. Towards part payment of the same, accused No. 2 who is the Managing Director of accused No. 1-M/s. Raman Tech and Process Engineering Limited issued a cheque for an amount of Rs. 2,50,000. 00. After issuing of cheque, accused No. 2 made certain part payments towards remaining balance amount payable to the complainant. On being asked to do so by accused No. 2, the complainant presented the cheque in their Bank, namely, Vardhaman Mahila Co-operative Bank for realisation of the amount on 7-5-1997 and the said cheque has been sent back without realisation of the amount on the ground of insufficiency of funds on 8-5-1997. The complainant got issued a legal notice as required under Section 138 of the Negotiable Instruments Act on 9-5-1997 which was received by the accused on 25-5-1997. But, neither amount was paid nor any reply was sent. Under these circumstances, the complainant filed a complaint for an offence under Section 138 of the Negotiable Instruments Act which was numbered as C. C. No. 105 of 1997.

( 3 ) HOWEVER, during the continuance of those proceedings, the complainant and the accused entered into mutual settlement and an agreement was accordingly entered into between the first accused represented by the 2nd accused and the complainant firm on 27-10-1998 in the office of the first accused at Hyderabad. Thus, the accused are said to have induced the complainant to enter into that agreement. Under this agreement, the accused agreed to pay the amount due in 12 monthly instalments at the rate of Rs. 20,000. 00 per month either in cash or in equivalent value of stainless steel pipes, sheets, shafts and the complainant in turn agreed to withdraw the case and accordingly withdrew the case. According to the complainant, after this agreement, the accused dishonestly and fraudulently avoided the payment after withdrawal of the case from the Court. Thus, accordingly, the complainant had committed the offence under Section 420 of IPC and hence the impugned complaint.

( 4 ) THE learned counsel for the petitioners Sri Milind G. Gokhale submits that the learned Magistrate erred in taking cognizance of offence under Section 420 of IPC as the facts disclosed do not attract the said provision. It is contended that there was no false representation on the part of the accused. If the accused had committed any breach of terms of the agreement, the complainant has a remedy under civil law based on the said breach of contract and under no circumstances can it be said that the offence under Section 420 of IPC has been made out.

( 5 ) ON the other hand, the learned counsel for respondent No. 1 Sri V. Shankar Rao contends that the original promise made by the accused itself was fraudulent and dishonest which was never intended to be kept and that it is in pursuance of such dishonest misrepresentation that the complainant has foregone his right to continue the prosecution of the accused and withdrew the complaint which he would not have done but for such false representation. The further contention is that this in fact was confirmed by the breach of the agreement at the earliest inasmuch as the accused failed to pay even the first instalment as agreed to under the said agreement. This however seems to be disputed question of fact inasmuch as on behalf of the accused it is stated that they were willing to pay the first instalment by way of stainless steel material as provided for under the agreement and