The main legal point established in the judgment is the requirement of intention to cheat from the inception of the transaction and the significance of deception and dishonest intention in establishing the offence of cheating under Section 420 IPC.

The petitioner who is facing the criminal proceedings in CC No.305 of 2006 on the file of the Judicial Magistrate No.III, Salem for an offence under Section 420 IPC has filed this petition seeking to quash the proceedings.

2. The brief facts which are leading to the petition are that the respondent / complainant is a manufacturer exporting fabrics and the petitioner has placed an order with the complainant for the purchase of 2200 Mtrs. of Doby Grey fabrics at Rs.58/- per meter and thereafter, placed a revised order increasing his requirement from 2,200 to 3150 sq.meter. Immediately after the placement of order, the respondent / complainant has engaged his weavers purchased cotton yarn and manufactured the fabrics and supplied the same to the petitioner/accused who also received the said goods. According to the complainant, the petitioner/accused has verified the quality and quantity and was satisfied with the fabrics.

3. It is the further case of the respondent/complainant that on 09.05.2005, he received a sum of Rs.50,000/- from the petitioner/accused at Bangalore and he promised to send the balance within a week. On 17.05.2005, the petitioner pointed out some defects in the fabrics which was quantified as Rs.8,021/-but the same has been disputed by the respondent/complainant. According to the complainant, the petitioner agreed to send the balance within 3 days and but only paid Rs.24,667/-by way of cheque and assured to send the balance within a day or two. But, he did not send the balance amount as promised but issued a debit note for a sum of Rs.82,545/-.

4. The respondent/complainant has alleged that the petitioner in order to defeat the claim and defraud the respondent, has raised the debit note with a dishonest intention, despite the fact there was no defects in the fabrics supplied by the complainant. Further, it is alleged that the petitioner has converted the fabrics supplied by the complainant into garments and sold it to his customers received the money and appropriated the same to his use. It is further alleged that the goods were supplied to the petitioner/accused believing his promise that he would pay the money immediately after the receipt of the goods and thus, the petitioner dishonestly induced the complainant to send the fabrics and after receipt of the same had converted the fabrics into garments and received the value from the customers and thereby, he cheated the complainant with a malice intention. The complainant had issued legal notice to the petitioner on 01.07.2005 and though the same was duly acknowledged by him, but has not chosen to pay the amount and hence the complaint.

5. Mr. D. Shivakumaran, learned counsel for the petitioner strenuously contended that the averments in the complaint prima facie revealed that there is a dispute over the debit note which has been raised by the petitioner against the respondent/complainant and that the complaint is filed only to settle the dispute. He would contend that a reading of the complaint does not show the presence of the ingredients of cheating and the complaint filed only to settle the dispute is a clear illustration of abuse the process of law.

6. The learned counsel for the petitioner drew the attention of this Court to a catina of decisions of the Honble Supreme Court to countenance his argument that non-payment or under payment of price of goods by itself does not amount to commission of offence of cheating or criminal breach of trust.

7. He also placed reliance on a recent decision of the Honble Supreme Court reported in R. Kalyani Vs. Janak C.Mehta And Others 2008 (4) Crimes 406 (Sc) wherein, after making reference to various decisions rendered by the Honble Supreme Court held that no hard and fast rule can be laid down in regard to cases in which, the High Court will exercise its jurisdiction of quashing the proceedings at any stage. However, it held that the Court while exercising its inherent jurisdiction, although would not