The judgment establishes the principle that criminal proceedings cannot be entertained for disputes of civil nature and emphasizes the jurisdictional limitations of the Magistrate's court in such matters.

1. The petitioner, praying to call for the records in C.C.No.4628 of 2000 on the file of the Court of VII Metropolitan Magistrate, George Town, Chennai and quash the same, has come forward to file the above criminal original petition on averments such as that the petitioner is a limited company doing business in drip irrigation system and more than 150 persons are working in the company; that during the course of business, the petitioner borrowed a sum of Rs.25lakhs from the respondent and subsequently, it was repaid with interest, but the respondent, with fraudulent intention and to harass the petitioner, filed an application under Section 439(1)(b) read with Section 433(e) and (f) and 434 (1)(a) of the Companies Act before this court in Company Petition No. 529 of 2000 for winding up of the petitioners company, which is pending.

2. The petitioner would further submit that suppressing the fact of filing of C.P. 529 of 2000 before this court, the respondent filed a private complaint contemplating the offences punishable under Section 406 and 420 read with 34 Indian Penal Code before the Court of VII Metropolitan Magistrate, George Town, Chennai alleging that the petitioner has committed the offences in respect of the amount claimed in C.P. No. 529 of 2000; that the learned Magistrate forwarded the complaint under Section 156(3) Code of Criminal Procedure to the Inspector of Police, B1 Police Station, Chennai -1 for investigation and report. in these circumstances, the petitioner, stating that the respondent is converting the civil dispute into a criminal case in order to harass the petitioner, has come forward to file the above criminal original petition seeking the relief extracted supra.

3. During arguments, the learned counsel appearing on behalf of the petitioner would lay emphasis on the factual position of the case being brought forth as it has been brought froth in the petition further stating that it is purely a civil dispute and the money borrowed on promissory note to the extent of Rs. 25 lakhs has been repaid on periodical installments and that the respondent company also filed a winding up petition before the High Court which is pending and while such proceedings have been initiated, they cannot resort to the criminal proceedings particularly when there is no prima facie case made out. At this juncture, the learned counsel for the petitioner would cite two judgments in support of the case of the petitioner, the first one delivered by the Honourable Apex Court in Hridaya Ranjan PD. Verma and others v. State of Bihar and another, AIR 2000 SC 2341 and the second one delivered by a learned single judge of the Bombay High Court in Chandrakani Chandulal Bhansali v. Srikant Shrikishna Joshi & another, 1993 (2) Crimes 389.

4. So far as the first judgment referred to above is concerned, it has been held therein:

“The distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed”.

5. In the second judgment cited above, a learned single judge of the Bombay High Court, while dealing with an application for cancellation of bail filed not by the State but by the defacto- complainant himself under Section 482 of the Code of Criminal Procedure, quoting the passing observations made by C