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2024 Supreme(Online)(AP) 22832
HIGH COURT OF ANDHRA PRADESH
SMT VENKATA JYOTHIRMAI PRATAPA, J
Argus Cosmetics Limited – Appellant
Versus
The State Of Andhra Pradesh – Respondent
Crl.P.No.9794 of 2022
For the Appellants/Petitioners: Sri T V P SAI VIHARI
For the Respondents: Sri ANCHA PANDURANGA RAO, PUBLIC PROSECUTOR (AP)
Merely breaching a contractual obligation does not establish criminal liability; a prosecution for cheating requires evidence of fraudulent intent from the outset.
Headnote:(A) Code of Criminal Procedure, 1973 - Section 482 - Indian Penal Code, 1860 - Sections 409, 384, 506, 420 r/w 120A and 34 - Quashing of criminal proceedings - Petitioners sought to quash proceedings arising from allegations of cheating and extortion related to a stockist agreement, contending that the complaint involves a breach of contract and does not amount to criminal wrongdoing - Court found no mens rea or dishonest intent present in the actions of the accused, ruling that the matter concerns a civil dispute - Criminal proceedings quashed as an abuse of process. (Paras 1-36)
(B) Criminal law - Distinction between civil and criminal liability - Mere breach of agreement does not suffice to establish criminal culpability; prosecution for cheating requires fraudulent intent from inception. (Paras 22-26)
Facts of the case:
The complaint stemmed from allegations that the accused failed to honor a stockist agreement, not providing owed margins, and threatening to supply goods to competitors, leading the complainant to file a criminal case.
Findings of Court:
No basis for criminal liability was established; the issues were civil in nature, primarily involving financial disputes and contractual obligations.
Issues: Main issue addressed was whether the allegations constituted a valid basis for prosecution under the IPC.
Ratio Decidendi: The court emphasized that without evidence of mens rea or fraudulent intent, mere allegations of breach of contract do not warrant criminal prosecution.
Result: Criminal petition allowed and proceedings quashed.
| Table of Content |
|---|
| 1. breach of contract does not constitute a criminal offence. (Para 3) |
| 2. allegations do not establish cheating without deceit. (Para 5 , 6 , 7) |
| 3. court's role is to prevent abuses of legal process. (Para 11 , 12) |
| 4. criminal liability not established in purely civil disputes. (Para 19 , 20) |
| 5. petition allowed; proceedings quashed. (Para 36) |
ORDER:
1. The instant Criminal Petition under Section 482 of the Code of Criminal Procedure , 1973, for short „Cr.P.C‟ has been filed by Petitioners/Accused Nos.1, 2, 3 & 5, seeking to quash the C.C.No.1555/2022 on the file of I Additional Metropolitan Magistrate at Vijayawada, Krishna District registered for the offences Under Sections 409 , 384, 506, 420 r/w 120A and 34 of IPC.
2. Heard Sri K.S. Murthy, learned Senior Counsel representing Sri T.V. Sai Vihari, learned counsel for the Petitioners, Sri T. Ramesh Babu, learned counsel representing Sri A. Pandu Ranga Rao, learned counsel for the Respondent No.2 and Ms. Lakshmi Priyanka, learned Assistant Public Prosecutor, representing the State.
3. The brief contents of the complaint which was filed by Respondent No.2, are thus
a. It is stated that Respondent No.2 is doing business in cosmetics since 2004 and is a stockist/distributor of various cosmetic brands. A1 is a manufacturing company. On 01.12.2016, Respondent No.2 deposited Rs.1.25 crores with A1 for business of mega stockist on assurance of 3% margin/discount per month irrespective of sales as per the agreement.
b. Just after few months of such agreement with the Company they did not pay the monthly interest/margin and it is accumulated to a huge value.Respondent No.2 is raising monthly debit notes and communicating to the Company by e-mails regularly. The Company failed to supply stocks from August, 2017 to December, 2017. In December, 2017 they have asked for extra finance to manufacture stocks with assurance of 25% to 30% of extra supply to clear the accumulated amount slowly, else they threatened that they will supply stocks to others who come with cash and that Respondent No.2 yielded to their blackmailing demand and it was carried on till August, 2020 by falling and rising.
c. Accused sent accounts statements dated 09.08.2017 and 19.02.2018 admitting the arrears of Rs.14 lakhs and Rs.44 lakhs respectively. Thereafter, in spite of several requests made by Respondent No.2 through mails Accused is not sending account statements. In August, 2020 again they stopped supplies and Respondent No.2 sent an e-mail requesting to restore the supply or return the deposit altogether Rs.1.64 crores but there is no response from the Company.
d. Respondent No.2 gave a complaint to the Commissioner of Police on 12.08.2020 which was forwarded to Suryaraopeta Police Station and that after few calls to the accused Company by police they have restored the supplies on 29.08.2020 that an e-mail with clear assurance to review the system within three months by then. The business ran-up to December, 2020. In December, 2020 while Respondent No.2 asked the accused Company to review the system, they totally stopped the supplies from 01.01.2021. As there is no other go, Respondent No.2 approached the police. A6 and A7 came to the police station along with their counsel on 28.01.2021 and the counsel by name M. Vasu Venkat, who came from Chennai accepted that stoppage of supply by the accused is wrong. Accused Company requested the police for negotiations. On their request, Respondent No.2 has sent statement of account through e-mail for reconciliation. The Advocate for accused Company replied showing his inability to settle the issue. The accused are supplying the stocks directly to the super stockist in utter violation of the terms of the agreement highhandedly. The Respondent No.2 received a notice from Telangana Sales Tax Department on 22.01.2021 asking to pay Rs.11.72 crores which was fallen due from M/s Argus Cosmetics Limited since 2006-07 to 2017-18 financial years. Respondent No.2 also received
