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IN THE HIGH COURT OF JHARKHAND AT RANCHI
HON’BLE MR. JUSTICE SANJAY KUMAR DWIVEDI
Asit C. Mehta Investment Intermediates Ltd., and ors. – Petitioners
Versus
The State of Jharkhand and ors. - Opposite Parties
Cr.M.P. No. 1241 of 2016, Cr.M.P. No. 669 of 2008, Cr.M.P. No. 889 of 2008
Decided On : 22-02-2024
[CRIMINAL LAW] - [CRIMINAL BREACH OF TRUST AND CHEATING] - [IPC SECTIONS 405, 406, 415, 420, 120-B] - [The court discussed the essential ingredients of criminal breach of trust and cheating under the IPC, emphasizing that mere breach of contract does not constitute a criminal offense unless there is evidence of fraudulent intent at the inception of the agreement. The court highlighted that entrustment of property and dishonest misappropriation are pivotal to establishing criminal breach of trust. The interpretation of these sections influenced the court's decision to dismiss the petitions for quashing the criminal proceedings, as the allegations indicated potential criminality rather than mere civil disputes.]
Fact of the Case:
The case involves multiple petitions seeking to quash criminal proceedings initiated against stock brokers and their associates for alleged criminal breach of trust and cheating in connection with stock trading activities. The complainant alleged that the accused misappropriated funds and shares entrusted to them under a tripartite agreement, leading to significant financial losses.
Finding of the Court:
The court found that the allegations made in the complaints disclosed sufficient grounds to proceed with the criminal charges. It emphasized that the nature of the transactions and the alleged fraudulent activities suggested potential criminal liability, thus justifying the continuation of the criminal proceedings.
Issues: The primary issues revolved around whether the allegations constituted a criminal offense under the IPC or were merely civil disputes arising from contractual obligations. The court also considered the implications of the arbitration proceedings on the criminal charges.
Ratio Decidendi: The court held that the essential elements of criminal breach of trust and cheating were present in the allegations, particularly the aspects of entrustment and dishonest misappropriation. It reiterated that a mere breach of contract does not equate to a criminal offense unless fraudulent intent is established from the outset.
Final Decision: The petitions to quash the criminal proceedings were dismissed, allowing the cases to proceed in the trial court without prejudice to the merits of the allegations.
JUDGMENT :
HON’BLE MR. JUSTICE SANJAY KUMAR DWIVEDI
Heard Mr. Jitendra S. Singh along with Mr. Onkar Nath Tewari, learned counsel appearing for the petitioners in Cr.M.P. Nos. 1241 of 2016 and Cr.M.P. No. 669 of 2008, Ms. Nehala Sharmin, Mr. Navin Kumar Singh and Mr. Jitendra Pandey, learned A.P.Ps. for the State in respective cases and Mr. R.S. Mazumdar, learned senior counsel along with Mr. Rishav Kumar, learned counsel appearing for the O.P. No. 2.
2. Nobody has responded on behalf of the petitioner in Cr.M.P. No. 889 of 2008, that’s why, this petition is being heard on merits in absence of the petitioner.
Cr.M.P. No. 1241 of 2016
3. In this petition prayer is made for quashing of the entire criminal proceeding including the order taking cognizance dated 21.01.2016, by which cognizance for the offence under Section 409 of the Indian Penal Code has been taken against the petitioner Nos. 1 to 3 and Section 120-B of the Indian Penal Code against the petitioner Nos. 4 and 5, in connection with P.C.R. Case No. 192 of 2010 (T.R. No. 387 of 2016), pending in the court of learned Chief Judicial Magistrate, Dumka.
4. The complaint case was lodged by the O.P. No. 2, alleging therein that the accused No.1 is a Stock Broker and also a Depository Participant and the accused No.4 is stock sub broker and associate of accused No.1 and both of them are engaged in the business of stock broking of shares with National stock exchange as well as Bombay stock exchange and they are providing stock broking services through on line computers system at Dumka through the computer terminals installed at the office of the accused No.4 at Zila School Road, Dumka to the clients who are registered with them for the purpose of availing stock broking services.
It is further stated that accused No.2 is the Managing Director and accused No.3 is the whole time Director of accused No.1 and they are in charge of and responsible for the conduct and day to day affairs of the business of the company accused No.1 and the accused No.5 is the proprietor and person in charge and responsible for the conduct and day to day affairs of the business of the accused No.4.
It is further stated that for providing the said stock broking service to the complainant, the accused persons entered into the Tripartite agreement with the complainant at Dumka for dealing in the shares with National stock exchange and Bombay Stock Exchange for which they obtained the signatures of the complainant on to many printed papers contained in a booklet including the power of attorney at Dumka which the accused No.5 got it executed by the complainant in favour of accused No.1 and accordingly the complaint was registered as a client under group code of the accused No.4 and client I.D. Code No. 116525 and 116526 were allotted to the complainant for cash segment and derivative segment.
The said tripartite agreement in original is lying either with the stock broker accused No.1 or stock sub broker accused No.4. The accused No.5 has provided the specimen copy of the said tripartite agreement, duly certified by him, to the complainant.
It is further stated that the agreed terms and conditions of the said tripartite agreement, the complainant placed orders of purchase of shares and the said order was carried out by accused persons at Dumka and the remittance was made at Dumka and accordingly shares of different company were purchased by the accused persons for the complainant's code No. 116525 and the purchased shares were kept in the demat account No. 1201320000495114 of the complainant.
It is further stated that on 22.01.2008, the accused persons, fraudulently and dishonestly violated the terms and conditions of the tripartite agreement and behaved abnormally and caused immense loss to the complainant against which apart from the other notices to the accused, the complainant vide his office Notice dated 28.01
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....
Fraudulent intent at the inception of a transaction is essential to establish cheating; mere breach of contract does not constitute a criminal offence.
Allegations of financial misconduct must establish criminal intent; mere breach of contract does not constitute a criminal offence under IPC sections 406 and 420.
Criminal proceedings cannot be initiated for mere breach of contract; allegations must disclose a criminal offence to justify prosecution.
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.
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