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SUPREME COURT OF INDIA
J.B. PARDIWALA, MANOJ MISRA, JJ.
Delhi Race Club (1940) Ltd. & Ors. – Appellants
Versus
State of Uttar Pradesh & Anr. – Respondents
Criminal Appeal No. 3114 of 2024
Decided On : 23-08-2024
(A) Criminal Procedure Code, 1973 – Section 202 [Bharatiya Nagarik Suraksha Sanhita, 2023 – Section 225] – Issuance of process – At stage of issuing process it is not duty of Court to find out as to whether accused will be ultimately convicted or acquitted – Object of consideration of merits of case at this stage could only be to determine whether there are sufficient grounds for proceeding further or not – Mere existence of some grounds which would be material in deciding whether accused should be convicted or acquitted does not generally indicate that case must necessarily fail – On other hand, such grounds may indicate need for proceeding further in order to discover truth after a full and proper investigation – What Magistrate has to determine at stage of issue of process is not correctness or probability or improbability of individual items of evidence on disputable grounds, but existence or otherwise of a prima facie case on assumption that what is stated can be true unless prosecution allegations are so fantastic that they cannot reasonably be held to be true – Scope of inquiry under Section 202 of Cr.P.C. is extremely limited – It is not the province of Magistrate to enter into a detailed discussion of merits or demerits of case nor can High Court go into this matter in its inherent jurisdiction which is to be sparingly used – Once Magistrate has exercised his discretion, it is not for High Court or even Supreme Court to substitute its own discretion for that of Magistrate or to examine the case on merits with a view to find out whether or not allegations in complaint, if proved, would ultimately end in conviction of accused – These considerations are totally foreign to scope and ambit of inquiry under Section 202 of Cr.P.C. which culminates into an order under Section 204. (Paras 6 and 7)
(B) Criminal Procedure Code, 1973 – Sections 156(3) and 202 [Bharatiya Nagarik Suraksha Sanhita, 2023 – Sections 175 and 225] – Issuance of process – Summoning of an accused in a criminal case is a serious matter – Criminal law cannot be set into motion as a matter of course – It is not that complainant has to bring only two witnesses to support his allegations in complaint to have criminal law set into motion – Order of Magistrate summoning accused must reflect that he has applied his mind to facts of the case and law applicable thereto. (Paras 13 and 21)
(C) Indian Penal Code, 1860 – Sections 406, 420 and 120B [Bharatiya Nyaya Sanhita, 2023 – Sections 316(2), 318(4) and 61(2)] – Criminal Procedure Code, 1973 – Section 482 [Bharatiya Nagarik Suraksha Sanhita, 2023 – Section 528] – Criminal breach of trust, cheating and conspiracy – Summoning order – Case at hand is one of an unpaid seller – Even if entire case of complainant is accepted as true no offence worth name is disclosed – When appellant No. 1 is Company and it is alleged that company has committed offence then there is no question of attributing vicarious liability to office bearers of Company so far as offence of cheating or criminal breach of trust is concerned – Office bearers could be arrayed as accused only if direct allegations are levelled against them – Vicarious liability of office bearers would arise provided any provision exists in that behalf in Statute – It is not even case of complainant that any property was lawfully entrusted to appellants and that same has been dishonestly misappropriated – None of ingredients to constitute offence of cheating are disclosed from materials on record – Till this date, complainant has not filed any civil suit for recovery of amount which according to him is due and payable to him by appellants – He seems to have prima facie lost period of limitation for filing such a civil suit – Continuation of criminal proceeding would be nothing but abuse of process of law – Impugned orders set aside. (Paras 10, 12, 14, 31, 32, 39. 40 and 45)
(D) Indian Penal Code, 1860 – Sections 406 and 420 [Bharatiya Nyaya Sanhita, 2023 – Sections 316(2) and 318(4)] – Criminal breach of trust and cheating – Distinction – Offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients – Distinction between mere breach of contract and offence of criminal breach of trust and cheating is a fine one – Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation – An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well – In case of cheating, intention of accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, subsequent conduct is not the sole test – Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from beginning of transaction – It is this intention which is gist of offence – For cheating, criminal intention is necessary at the time of making a false or misleading representation – In case of criminal breach of trust, offender is lawfully entrusted with property and he dishonestly misappropriated the same – Whereas, in case of cheating, offender fraudulently or dishonestly induces a person by deceiving him to deliver any property – In such a situation, both offences cannot co-exist simultaneously. (Paras 25, 28, 29, 30 and 31)
(E) Indian Penal Code, 1860 – Sections 406 and 420 [Bharatiya Nyaya Sanhita, 2023 – Sections 316(2) and 318(4)] – Criminal breach of trust and cheating – Distinction – Law enjoins upon Magistrate a duty to meticulously examine contents of complaint so as to determine whether offence of cheating or criminal breach of trust as the case may be is made out from averments made in complaint – In contrast, when a case arises from FIR, this responsibility is of Police to thoroughly ascertain whether allegations levelled by informant indeed falls under category of cheating or criminal breach of trust – It is high time that police officers across the country are imparted proper training in law so as to understand fine distinction between offence of cheating vis-à-vis criminal breach of trust – Both offences are independent and distinct – The two offences cannot coexist simultaneously in same set of facts. (Paras 42 and 43)
(F) Indian Penal Code, 1860 – Section 406 [Bharatiya Nyaya Sanhita, 2023 – Section 316(2)] – Sale of Goods Act, 1930 – Sections 20 and 24 – Criminal breach of trust – In case of sale of goods, property passes to purchaser from seller when goods are delivered – Once property in goods passes to purchaser, it cannot be said that purchaser was entrusted with property of seller – Without entrustment of property, there cannot be any criminal breach of trust – Prosecution of cases on charge of criminal breach of trust, for failure to pay consideration amount in case of sale of goods is flawed to the core – There can be civil remedy for non-payment of consideration amount but no criminal case will be maintainable for it. (Para 36)
Facts of the case:
Present appeal arises from the order passed by High Court of Judicature at Allahabad dated 03.04.2024 in Application No. 15453 of 2023 filed by appellant herein by which, High Court rejected the same and thereby declined to quash and set aside summoning order passed by Additional Chief Judicial Magistrate, Khurja, Bulandshahar in Complaint Case No. 547 of 2021.
Findings of Court:
Impugned order passed by High Court is set aside so also order passed by Additional Chief Judicial Magistrate, Khurja, Bulandshahar taking cognizance upon complaint.
Result : Appeal allowed.
Key Points: - The court discusses the scope of Section 202 CrPC, limited inquiry, and what Magistrate must determine at the stage of issuing process (!) (!) (!) . - Emphasizes that summoning is a serious matter and requires a prima facie case; High Court cannot substitute its discretion for the Magistrate (!) (!) (!) . - Distinguishes between criminal breach of trust (entrustment and dishonest misappropriation) and cheating (fraudulent inducement to deliver property) and states they cannot coexist in the same set of facts; vicarious liability of office bearers requires direct allegations (!) (!) (!) (!) (!) . - In case of sale of goods, property passes to purchaser on delivery; without entrustment there is no criminal breach of trust; civil remedy for non-payment exists (!) (!) . - The judgment concludes that continuation of criminal proceedings when no offence is made out constitutes abuse of process and quashes the summoning order (!) (!) . - The need for proper consideration of mind and reasons in the order issuing process, with reference to what constitutes "sufficient grounds for proceeding" (!) (!) . - The judgment notes the shift to a new code but focuses on pre-existing principles of cognizance and procedure (contextual notes) (!) .
JUDGMENT :
(J.B. Pardiwala, J.) :
1. This appeal arises from the order passed by the High Court of Judicature at Allahabad dated 03.04.2024 in Application No. 15453 of 2023 filed by the appellant herein by which, the High Court rejected the same and thereby declined to quash and set aside the summoning order dated 28.02.2023 passed by the Additional Chief Judicial Magistrate, Khurja, Bulandshahar in Complaint Case No. 547 of 2021.
2. Facts giving rise to this appeal may be summarised as under:
(i) The respondent No. 2 herein is the original complainant. He lodged a private complaint in the court of Additional Chief Judicial Magistrate, Khurja, Bulandshahar against the appellants herein for the offence punishable under Sections 406, 420 & 120B respectively of the Indian Penal Code, 1860 (for short, “IPC”).
The complaint reads thus:
“It is most respectful that the Applicant Vipin Kumar Agarwal, son of Late Shri Bhagwat Swaroop Agarwal, who is the owner of a firm Agarwal Udyog, New Mandi, Khurja. The applicant’s firm used to supply horse feed, barley and oats to Delhi Race Club 1940 Limited, New Delhi since 1990. In the year 1995, the then head of the Race Club, Shri PS Vedi and the then Secretary Sehgal told the applicant that from now on the bills for the supply of horse grain and oats would be made in the name of Delhi Horse Trainers Association, Race Course Road, New Delhi. And the Head and Secretary of the same association have now been made separate, they will pay you for the goods supplied. Till the year 2017, the payment of the applicant’s firm continued to be regular and now at present Delhi Horse Trainers Association President Kazim Ali Khan and Secretary Sanjeev Charan owe a payment of Rs 9,11,434/- to the applicant's firm. Whenever the applicant makes demands, they keep evading when the applicant tried to talk to the current President of the Race Club, J. S. Vedi and the current Secretary about this. Then the Secretary GS Vedi said that you should demand your dues from Delhi Horse Trainers Association only, we have no relation with them, then the applicant tried to meet Kazim Ali Pradhan along with Manish Kumar Sharma, son of Mahesh Kumar Sharma, resident of Nawalpura Khurja and Chirag Agarwal, son of Vijay Agarwal, resident of Malpura, Khurja but they refused to talk to the applicant and threatened that if he came here again, it would be very bad and started a scuffle. The applicant feels that both the above mentioned officials of Delhi Race Club 1940 Limited, New Delhi and Delhi Horse Trainers Association, in connivance with each other, cheated the applicant and dishonestly obtained the goods from the applicant's firm in bad faith and they used it for their club and association and now they do not want to pay for the goods given by the applicant. All of them under conspiracy want to grab the money of the applicant's firm, after which the applicant had given a legal notice to the above mentioned people through his advocate on 18th June 2020 but even after receiving the notice, the above people neither gave any reply to the notice nor was the applicant's outstanding amount paid. In this context, the applicant gave an application to Inspector-in-charge of Kotwali Khurja Nagar on 25.07.2021 and on 06.08.2021, an application letter was sent to SSP Sir Bulandshahar through postal registry, but till date no action has been taken nor has the applicant's report been registered.
Therefore, it is prayed that after the investigation, please summon the accused along with evidence to the court and punish them for the crime committed by them.
Date 27.08.2021”
(ii) The plain reading of the complaint would indicate that the appellant No. 1 is a legal entity. The appellant No. 2 is the Secretary of the appellant No. 1 Company, and the appellant No. 3 is the Honorary President and Non- Executive Director of the appellant No. 1 Company. They used to purchase grains and oats from the complainant meant to be fed to the horses maintained by th
(1) Issuance of process – Mere existence of some grounds which would be material in deciding whether accused should be convicted or acquitted does not generally indicate that case must necessarily fa....
The court determined that mere breaches of contract do not constitute criminal offences without proof of fraudulent intent, emphasizing that civil disputes should not be converted into criminal compl....
The High Court established that criminal proceedings cannot be pursued for matters fundamentally rooted in civil disputes, reinforcing the principle against abusing the legal system.
Non-payment of dues does not constitute criminal cheating or breach of trust unless fraudulent intent is established from the inception of the transaction.
Fraudulent intent at the inception of a transaction is essential to establish cheating; mere breach of contract does not constitute a criminal offence.
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