Commercial disputes over unpaid transactions do not constitute criminal offenses under IPC Sections 406 and 420 without sufficient evidence of deception or misappropriation.

ORDER :

This petition has been filed to quash the proceedings in C.C.No.2915 of 2024 on the file of the learned Chief Metropolitan Magistrate, Egmore, Chennai.

2. The case of the prosecution is that the defacto complainant, a power agent for M/s. Rishab Triexin LLP, lodged a complaint stating that in January 2019, M/s. Sujala and other directors, including the petitioner, introduced themselves as directors of M/s. Nandhi Irrigation Ltd. and M/s. SPY Agro Ltd. M/s. Sujala was responsible for managing the day- to-day affairs of both companies, including financial matters. Based on this introduction, the defacto complainant agreed to supply PVC raw materials to M/s. Nandhi Irrigation Pvt Ltd. Business transactions began in February 2019, but from the start, the accused company frequently defaulted on payments and failed to maintain proper accounting, leading to discrepancies. Despite this, the defacto complainant continued supplying materials. While being so, on 13.10.2022, a meeting was held in Chennai where the directors of M/s. Nandhi Irrigation Pvt Ltd. acknowledged their payment delays and poor accounting practices. They assured the defacto complainant that payments would be made once the government cleared their bills and promised to cover costs if delays occurred. Based on these assurances, the defacto complainant continued supplying PVC materials, amounting to Rs.11,79,08,234.29/- as on 19.11.2022. When the defacto complainant demanded payment, the accused company rejected the claim, alleging the materials were of inferior quality and unsuitable for manufacturing pipes. The defacto complainant alleges that the accused unlawfully obtained the materials without paying, causing significant financial loss. As a result, the defacto complainant requested the first respondent to take action to recover the owed amount. On 17.04.2023, the second respondent lodged a formal complaint, leading to the registration of Crime No. 89 of 2023 under Sections 406 , 420 r/w 34 of the IPC. The police investigated and filed a charge sheet.

3. The learned counsel for the petitioner submits that pursuant to the agreement between the second respondent and the petitioner, there has been a continuous business transaction since the year 2019. The petitioner placed orders for the supply of raw materials for the manufacturing of PVC pipes, and the total business between the parties amounted to more than Rs. 200 crores. According to the calculations of the second respondent, an outstanding amount of Rs. 11,79,08,234.29/- is due. In respect of this due amount, the second respondent has already approached the National Company Law Tribunal (NCLT), Hyderabad Bench, in C.P.No. (IB). No. 22/9/2023/HYD-II, seeking the appointment of an Insolvency Resolution Professional.

4. It is further submitted that the plea before the NCLT is based on the principal debt arising from the supply of materials for the period from 19.11.2022, amounting to Rs. 45,91,09,759/-, along with an opening balance of Rs. 11,91,56,747/-. The total amount due is Rs. 578,266,506/-, of which Rs. 46,50,24,877/- has already been paid. Consequently, the remaining balance of Rs. 11,32,41,629/- has been sought for before the NCLT at Hyderabad. However, the second respondent suppressed this fact while lodging the present complaint. Therefore, it is submitted that the dispute pertains to a commercial transaction, and if there is any outstanding amount due from the petitioner, the second respondent ought to have approached the appropriate civil court for appropriate relief. No offence, as alleged by the prosecution, is made out as against the petitioner. In support of this contention, the learned counsel for the petitioner re