Criminal prosecution for cheating requires proof of fraudulent intent at the outset; mere breach of contract does not suffice.

ORDER

This Criminal Miscellaneous Case is filed to quash the proceedings in C.C. No.990/2015 on the file of the Judicial First Class Magistrate Court, Pala. Petitioners are accused Nos. 2 to 5 in the above case. The above case is charge sheeted alleging offences punishable under Sections 406 , 417, 420 r/w 34 IPC .

2. The crime was registered based on a complaint filed by the 2nd respondent against the petitioners and another. The 1st accused is the Managing partner of the firm by name Prestige Polymer Products, Kozhikode. According to the petitioners, the 1st accused is looking after the affairs of the firm. The defacto complainant had approached the firm for getting dealership and to appoint him as super stockiest. An agreement was entered into between the defacto complainant and the Managing partner of Prestige Polymer Products on the basis of the understanding that the defacto complainant would arrange all facilities to promote the products of the said firm is the submission. On the basis of the agreement, the cost of the products as well as for other establishment purposes, money was invested by the defacto complainant. It is submitted that the business was not fruitful because the defacto complainant could not arrange sufficient dealers and there was some dispute regarding the keeping of stocks which resulted in termination of the contract is the submission. In the meanwhile, a complaint was filed by the defacto complainant before the Judicial First Class Magistrate Court, Pala as evident by Annexure-I, which was forwarded for investigation under Section 156(3) Cr.P.C. Consequently, Annexure-II final report was filed. According to the petitioners, even if the entire allegations are accepted, no offence is made out against the petitioners.

3. Heard the learned counsel appearing for the petitioners and the learned Public Prosecutor.

4. The counsel appearing for the 2nd respondent submitted that he has no instruction from the 2nd respondent.

5. This Court perused the final report. It will be better to extract the relevant portion of the final report:

6. Admittedly, petitioners are only the partners of the firm. The 1st accused is not here. Whether the petitioners can be prosecuted for the offences under Sections 406 , 417 & 420 r/w 34 IPC is the point to be decided in this case. I am of the considered opinion that, even if the entire allegations are accepted, no offence is made out against the petitioners.

7. Moreover, the offence under Section 420 IPC is not made out in the facts and circumstances of the case as far as the petitioners are concerned. To attract the offence under , certain ingredients are necessary. The Apex Court considered the ingredients to attract the offence under inSubbiah C. @ Kadambur Jayaraj v. Superintendent of Police [2024 KHC 6288]. The relevant portion of the above judgment is extracted hereunder:

“40. The complainant has clearly alleged that the accused caused him monetary loss because the appropriate share of profits was not passed on to him after some plots from the entire chunk had been sold. This Court in the case of Sarabjit Kaur v. State of Punjab and Anr, 2023 SCC OnLine SC 201 observed that: -

"A breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up the promise will not be enough to initiate criminal proceedings".

41. Similarly, in the case of Vijay Kumar Ghai v.State of W.B., 2022 (7) SCC 124, this Court while tracing the earlier decisions on the subject observed as under:

24. This Court in G. Sagar Suri v. State of U.P. (G.Sagar Suri v. State of U.P., 2000 (2) SCC 636) observed that it is the duty and obligation of the criminal court to exercise a great deal of caution in issuing the process, particularly when matters are essentially of civil nature.

25. This Court has time and again cautioned about converting purely civil disput