Criminal proceedings under Sections 406 and 420 of the IPC cannot be sustained for disputes that are purely civil in nature arising from financial defaults in business transactions, absent evidence of fraudulent intent from the inception of the agreement.

Vinod S. Bhardwaj, J. (ORAL)

Present petition has been filed under Section 482 of the Code of Criminal Procedure (for short “the Code”) for setting aside the order dated 30.08.2016 passed by Additional Sessions Judge, Jalandhar (for short ‘ASJ Jalandhar’) whereby the order dated 23.08.2006 passed by Judicial Magistrate First Class, Jalandhar (for short ‘JMIC’), discharging respondents No.2 and 3/accused, was affirmed.

2. Vide order dated 23.08.2006, JMIC discharged respondents No.2& 3-accused while noticing that the offences under Section 406 and 420 of the IPC would not be made out as it was a case akin to civil liability. The petitioner herein preferred Criminal Revision No. 468-2014, which was dismissed by ASJ, Jalandhar vide order dated 30.08.2016; hence, the present petition.

3. Learned counsel for the petitioner contends that the petitioner is a business partner of M/s Dua Trading Company, having business dealings with M/s Shiva Trading Company Rice Mills. The petitioner is a Commission Agent who supplied paddy to M/s Shiva Trading Company Rice Mills. On 23.03.2005, the petitioner lodged an FIR against respondents No.2 & 3 for cheating to the tune of Rs.30,69,198.15/-, concerning the supply of paddy. The petitioner procured the said paddy from the farmers and supplied it to respondents No.2 & 3. When the petitioner demanded money, the respondents No.2 & 3 threatened him. He further alleged that the accused had siphoned off the whole amount and lured him to supply paddy on the assurance of profits; thus, an FIR under Sections 406/420 IPC was registered against them.

4. While considering the point of charge, in Criminal Case No. 59/1/2006, the JMIC, while appreciating the arguments of both the parties, found that the necessary ingredients for the commission of an offence under Sections 406 and 420 IPC were not made out and that it was a case of civil liability, thus, not justifying the initiation of criminal proceedings.

5. Counsel for the petitioner contends that the aforesaid accused firm took delivery of the paddy from the complainant on a false pretence and did not make payment while retaining the paddy with them. It is vehemently argued that the necessary ingredients for the offences are duly made out.

6. I have heard learned counsel for the petitioner at length and perused the documents available on record and the order passed by JMIC as affirmed by ASJ, Jalandhar.

7. The operative part of the order passed by JMIC reads thus:-

“2. I have considered the averments of the prosecution and the ld. defence counsel and have gone through the file carefully. It is pertinent to note that in the entire allegations contained in the FIR and the supplementary statement made by the complainant, there is no allegation of entrustment of paddy by the firm of the complainant to the firm of the accused. In fact, as per the version of the complainant, both the firms of the complainant and the accused had business dealings over a period of time and the complainant firm supplied paddy to the accused firm and maintained regular accounts regarding the goods supplied and the payment received. In these circumstances, offence under section 406 IPC cannot be made out.

3. The prosecution has prayed that the accused firm took delivery of paddy from the complainant on false pretences. Even though the accused did not intend to make payment for the consignment of paddy delivered by the complainant firm to the accused. The prosecution claimed that the initial payments were made by the accused to the complainant only in order to create trust and thereafter, the accused betrav