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IN THE HIGH COURT OF DELHI AT NEW DELHI
Dinesh Kumar Sharma, J.
Shri Srinivasa Balaji – Appellant
Versus
State of NCT Delhi & Anr. – Respondents
Cr.M.C. 3250 of 2022 & Cr.M.A. 13696 of 2022
Decided On : 02-06-2023
Cheating - Criminal Breach of Trust - Indian Penal Code, 1860 - 420/406/120B - The court discussed the necessary ingredients of offences punishable under Sections 420/406 and 120B and found that the intent to cheat or fraudulent intention was not made out against the Petitioner. The court also determined that the dispute was of an entirely civil nature and therefore liable to be quashed.
Fact of the Case:
The petitioner, a company, was accused of misappropriating a grant under the 'Scheme For Development Of Ayush Clusters'. The Ministry of AYUSH filed an FIR against the company under sections 420/406/120B of IPC. The petitioner argued that the delay in project completion was not within their control and the transaction was civil in nature.
Finding of the Court:
The court found that the necessary ingredients of offences punishable under Sections 420/406 and 120B were not prima facie made out. It also concluded that the dispute was of an entirely civil nature and therefore liable to be quashed.
Issues: 1. Whether the necessary ingredients of offences punishable under Sections 420/406 and 120B are prima facie made out? 2. Whether the dispute is one of an entirely civil nature and therefore liable to be quashed?
Ratio Decidendi: The court held that the intent to cheat or fraudulent intention was not made out against the Petitioner. It also determined that the dispute was of an entirely civil nature and therefore liable to be quashed.
Final Decision: The petition was allowed and the impugned F.I.R. No. 290 of 2019 dated 26.12.2019 and proceedings against the petitioner for offences under Sections 420/406 read with Section 120B of IPC were quashed and disposed of.
JUDGMENT
Dinesh Kumar Sharma,J.
1. This present petition has been filed under Article 227 of the Constitution of India read with Section 482 of the Code of Criminal Procedure seeking quashing of FIR No. 290/2019, dated 26.12.2019, under section 420/406/120B of Indian Penal Code, 1860 registered at Police Station Economic Offences Wing (EOW), Mandir Marg, Delhi, and all proceedings incidental thereto.
A. BRIEF FACTS
2. The Ministry of AYUSH introduced a `Scheme For Development Of Ayush Clusters' (herein referred to as "the said scheme") for capacity building through a cluster-based approach for Ayurvedic, Siddhi, Unani, and Homeopathic drugs, inter alia, that- the Scheme would be implemented on the Support from Department of AYUSH and support would be by the way of a grant to the Special Purpose Vehicle (SPV), formed by a group of entrepreneurs from AYUSH sector.
3. Lipakshi Ayush Park Private Limited (herein referred to as "the said company") floated in the year around 2010 to develop an AYUSH cluster near Anantapuram, Andhra Pradesh under the said scheme. The said company submitted the proposal for development of the AYUSH Cluster in Anantapuram and the proposal was accepted by the Scheme Monitoring Committee vide its meeting dated 03.08.2010 and an initial grant of Rs 2,00,00,000/- (Rupees Two crores) was released on 28.08.2010 for setting up a common facility center.
4. The said company couldn't achieve the targets of the said scheme and misappropriated the grant of personal gain and which resulted in the withdrawal of the financial support by Respondent no 2. Further, the initial grant released by the Ministry of AYUSH was sought from the said company vide notice dated 19/22.02.2023. The said company returned back Rs. 1,23,00,000 (One crore twenty-three lakhs) to Respondent no 2. and the remaining amount of Rs. 77,00,000/- (Seventy-seven lakhs) was to be paid within ninety days. However, the remaining amount was not returned by the said company.
5. Respondent no 2 preferred Civil Suit No. 56/2014 in District Court, Family Court-ADJ, Anantapuram, Andhra Pradesh, wherein vide decree/judgment dated 06 June 2017, the Hon'ble Court passed an ex-parte decree in favor of Respondent No. 2. and the said company along with its directors jointly and severally were held liable to pay a sum of Rs. 1,42,59,556/- (Rupees One crore forty-two lakhs fifty-nine thousand five hundred and fifty-six) along with interest thereon at 10% per annum till the date of decree and thereafter 6% till the date of realization. Thereafter an Execution Petition of recovery suit no. 56/2014 was filed in 2018.
6. While the matter rested thus, considering the acts of the said company, Respondent no 2 filed a complaint before Economic Offences Wing regarding cheating the government and not starting any work for implementation of the scheme awarded in their favor in spite of the release of an installment of Rs. 2 Crores. An FIR bearing no. 0290/2019 was registered under sections 420/406/120B of IPC against the company and its directors.
B. SUBMISSIONS ON BEHALF OF PETITIONER
7. Learned counsel for the petitioner submitted that upon receipt of Rs. 1.23 Crores from the Petitioner, Respondent No. 2 was fully aware that the delay in project completion was not due to circumstances within the Petitioner's control, but rather due to change in site. Furthermore, the whole transaction between Respondent No. 2 and Petitioner was completely civil in nature. Respondent No. 2 filed civil suit no. 56 of 2014 titled "M/s Union of Indian v. M/s Lepakshi Ayush Park, Ltd. and Ors." along with an application under Order XXXIX Rule 1 and 2 of the Code of Civil Procedure, 1908 to retain assets created by the grant and reclaim the outstanding money.
8. Learned counsel further submitted that the Civil Suit No. 56 of 2014 was decreed ex-parte by the Family Court-cum-additional District Judge, Anantapuram vide Judgement dated 06.06.2017 against M/s Lepakshi Ayush Park Pvt. Ltd and i
The main legal point established in the judgment is that the intent to cheat or fraudulent intention must be established for offences punishable under Sections 420/406 and 120B of the Indian Penal Co....
A breach of contract does not constitute cheating unless fraudulent intent is proven at the outset of the agreement, as established in relevant legal precedents.
The court affirmed that a party only involved in a civil contract cannot face criminal liability unless it directly transacted or misappropriated funds, supporting the need for a clear distinction be....
Point of law : exercise powers under Section 482 CrPC, the complaint in its entirety shall have to be examined on the basis of the allegation made in the complaint/FIR/charge-sheet and the High Court....
Court held that breaches of contract, if primarily civil in nature, do not implicate criminal liability unless fraudulent intent is evident from the outset.
Criminal liability cannot be imposed in contractual disputes; only clear criminal intent warrants legal action under penal provisions.
Criminal proceedings cannot proceed where allegations only constitute a civil dispute without intent to cheat.
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