Criminal proceedings cannot be initiated for breach of contract or promise in business transactions, and the intention to cheat must be present from the inception of the transactions to constitute the offence of cheating under Section 420 of the IPC.

ORDER :

1. Criminal Petition No. 1690 of 2018 is filed by A1 and Criminal Petition No. 1689 of 2018 is filed by A2 and A3 for quashing the proceedings against them in Crime No. 109 of 2017 pending investigation before the CCS, Hyderabad.

2. The defacto complainant approached the Commissioner of Police, CCS and filed written complaint on 21.07.2017 which was registered for the offence under Sections 420 and 406 r/w 34 of IPC. It is alleged in the complaint that the petitioners approached the defacto complainant for purchase of refined edible oils. Petitioners promised to pay cost of the supplied material within 15 days from the date of supply and also assured interest at the rate of 24% per annum if the payment goes beyond the promised date. Believing the representation and assurance given by the petitioners, from 20.12.2014 to 06.02.2015 against 9 invoices, oil was supplied. Prior to the said transactions initially amounts were paid within time from the date of purchase and thereafter started making payments belatedly and callously. Thereafter, the petitioners denied to payment of major amounts. On verification of the accounts, the total outstanding was Rs. 1,00,24,069/-. For not paying the said amount, the defacto complainant suffered mental stress.

3. Thereafter, the 2nd respondent persuaded the petitioners for issuance of cheques. The chques which were issued by the petitioners when presented for clearance were returned unpaid by the bank with an endorsement ‘insufficient funds’. Intimation was given of the said dishonour and complaints were also filed under Section 138 of the Negotiable Instruments Act.

4. The conduct of the petitioners in delaying payment and issuing cheques which were dishonoured amounts to an offence of cheating and criminal breach of trust, as such, complaint was filed. The said complaint was registered and being investigated into by the police.

5. Learned counsel appearing for the petitioners would submit that the petitioners have in fact made payments even according to the defacto complainant, however, the cheques which were issued towards payment were returned unpaid, for which reason, the present complaint was filed. To attract an offence of cheating, the intention to cheat should be from the inception of the transactions and subsequent failure to pay the amount during business transactions would not amount to criminal offence of either cheating or criminal misappropriation. He relied on the judgment of the Hon’ble Supreme Court in the case of Uma Shankar Gopalika vs. State of Bihar and Another, (2005) 10 SCC 336 wherein the Hon’ble Supreme Court held that there has to be an allegation in the compliant that the intention to cheat was from the inception and also the fact should be made out that the accused intended to cheat, failing which, proceedings would be quashed. In Anil Mahajan vs. Bhor Industries Limited and Another, (2005) 10 SCC 228 similar view was taken by the Hon’ble Supreme Court. Learned counsel also relied on the judgments reported in the case of Reginald Abraham and Others vs. State of A.P. 2002 (1) ALD (Crl.) 889 (A.P.) and HICEL Pharma Limited and Others vs. State of Andhra Pradesh and Others, 2000 (1) ALD (Crl.) 895 (A.P.) on similar grounds, the proceedings were quashed.

6. On the other hand, learned counsel appearing for the 2nd respondent/defacto complainant would submit that quashing of FIRs can only be in the rarest of rare cases. If the Court finds that prima facie the allegations leveled in the complaint make out the offence as alleged, High Court should restrain from quashing the proceedings. In the present case, the police should be given free hand to investigate into the case and the petitioners would be at liberty to question the charge sheet filed after investigation either by approaching the trial Court by filing a discharge application or approaching this Court under Section 482 of Cr.P.C. He relied on the judgment of Hon’ble Supreme Court in the case of Iqbal alias Bala