Full Judgment Text
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CASE NO.:
Special Leave Petition (crl.) 1971 of 1999
PETITIONER:
M/S. MEDCHL CHEMICALS & PHARMA P. LTD.
Vs.
RESPONDENT:
M/S. BIOLOGICAL E. LTD. & ORS. RESPONDENTS
DATE OF JUDGMENT: 25/02/2000
BENCH:
G.B.Pattanaik, U.C.Banerjee
JUDGMENT:
BANERJEE,J.
L.....I.........T.......T.......T.......T.......T.......T..J
Leave granted.
Exercise of jurisdiction under the inherent power as
envisaged in Section 482 of the Code to have the complaint
or the charge-sheet quashed is an exception rather a rule
and the case for quashing at the initial stage must have to
be treated as rarest of rare so as not to scuttle the
prosecution. With the lodgment of First Information Report
the ball is set to roll and thenceforth the law takes its
own course and the investigation ensues in accordance with
the provisions of law. The jurisdiction as such is rather
limited and restricted and its undue expansion is neither
practicable nor warranted. In the event, however, the court
on perusal of the complaint comes to a conclusion that the
allegations levelled in the complaint or charge-sheet on the
face of it does not constitute or disclose any offence as
alleged, there ought not to be any hesitation to rise upto
the expectation of the people and deal with the situation as
is required under the law. Frustrated litigants ought not
to be indulged to give vent to their vindictiveness through
a legal process and such an investigation ought not to be
allowed to be continued since the same is opposed to the
concept of justice, which is paramount. Factual matrix
therefore would thus be relevant in the matter of assessment
of the situation as to whether civic profile would
outweigh the criminal outfit. It appears that as against
the initiation of proceeding on the file of 17th
Metropolitan Magistrate, Hyderabad against the appellant
under Sections 120B, 418, 415 and 420 read with Section 34
Indian Penal Code, the respondents moved the High Court for
quashing of complaint and the Learned Single Judge on 15th
February, 1999 in Criminal Petition No.5386 of 1998 did
quash the complaint and hence the petitioner is in appeal
before this Court. The Learned Single Judge while dealing
with the matter came to a definite conclusion that the
complaint does not disclose any offence having been
committed by the accused petitioner and as such allowed the
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petition for quashing of the complaint. The factual score
depict that the respondents approached the petitioner for
the purpose of securing Ethambutol Hydrochloride drug in
bulk for sale and use in various pharmaceutical drugs and
products being manufactured by the respondent Company. It
is at this juncture that the Petitioner has come out with a
definite case that by reason of a promise of maintaining
continuous supply of raw materials to the petitioners herein
for the purpose of manufacturing Ethambutol Hydrochloride
and in such a way so as not to cause any interruption or
hindrance to the manufacturing activity of the Complainants
factory, the Complainant-petitioner entered into an
agreement dated 31st August, 1997 which inter alia records
as below: It is the responsibility of the party of the 2nd
part to maintain sufficient inventory of the Raw Materials
as described in the Annexure I in order to maintain
consistent supplies to the manufacturer and not to cause any
interruption/hindrance with the manufacturing activity by
the manufacturer.
It is on the basis of the agreement as noticed above
and failure to comply therewith, it is stated that the
petitioner herein has lost a substantial amount of money and
to the extent of about one crore and the sufferance of loss
has been by reason of specific assurance and representation
which obviously turned out to be false. Misrepresentation
on the part of the respondent accused persons to the
Complainant, has been the major grievance and a definite and
specific case has been made out that such a
misrepresentation was intentionally effected since the
accused persons were in the know of things that in the event
the supplies are not effected, as per the agreement, the
Complainant is likely to suffer a wrongful loss which as the
complaint proceeds, in the interest of the transaction
between the parties, the accused persons were bound to
protect. It is on this score that relevant extracts of the
complaint ought to be noticed at this juncture. The
complaint inter alia provides as below: (i) ...Clause 9 of
the Agreement dated 31.8.1997 states that the schedule of
supply of raw materials by the party of the 2nd Part (A1
Company) and the delivery of the finished product by the
party of the 1st Part (Complainant) shall be as in Annexure
III (to the Agreement)
(ii) Annexure III to the Agreement dated 31.8.1997
would show that the supply of raw material DL2 Amino Butanol
by A1 to the Complainant must be 15,210 Kgs or 15.21 Mts per
month to facilitate and sustain a monthly production of 8500
Kgs. or 8.5 Mts. of the finished product Ethambutol
Hydrochloride per month.
(iii) Another main factor being that the Complainant
should not suffer any loss on account of the execution of
the agreement with A1. The Complainant states that it
entered into the Agreement dated 31.8.1997 with A1 under
which the Complainant has been converting the raw materials
supplied by A1 into the bulk drug Ethambutol Hydrochloride
and supplying it back to A1 on prescribed conversion
charges.
(iv) ..The Complainant states that the supply of raw
materials, particularly the principal imported raw material
DL2 Amino Butanol, by A1 was far from regular almost from
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the beginning of the agreement. This was often being
informed to A1 through A2, A3, A4 and A5. Based on the
representations made by A1 through A2 to A5, the Complainant
had planned its production according to the agreement i.e.
on the basis of supply of 15,210 kgs. DL2 Amino Butanol by
A1 for conversion every month, but the Complainants
production plans were totally dislocated and disrupted on
account of A1s willful failure to supply the raw materials
as represented by them through A2, A3, A4 and A5.
(v) ..The Complainant states that it had to incur a
loss of over Rs. One crore due to the willful defaults
committed by the Accused. These defaults on part of A1 were
repeatedly brought to the notice of the Accused through
telephonic calls by the Complainant, more particularly in
the fax message of 15.12.97 and 10.2.98 to A1 and A3.
(vi) The Complainant had a meeting with A2 on 4.4.1998
which was also attended by A3. At this meeting held on
4.4.98, A2 and A3 agreed with the position stated by the
Complainant and made representations that the supply of raw
material by A1, particularly the critical raw material DL2
Amino Butanol, would be kept up regularly to enable
production of 8 MTs of the finished product. The
Complainant reduced these representations by A1 through A2
and A3 into writing on the same day and wrote the letter
dated 4.4.98 to A1 through A3. The contents of this letter
have not been rebutted by A1. The Complainant states that
inspite of this, the Accused deliberately failed to act on
their representations made to the Complainant on 4.4.98 and
thus continued to inflict huge losses on the Complainant
(vii) ..The Complainant states that in its talks and
discussions with the Accused, it had been indicating to A2,
A3, A4, A5 and A6 that in case A1 could not keep up to its
representations which put the Complainant to huge losses,
this clause 15 could be invoked and the agreement terminated
by the Complainant giving 2 months notice to A1. But the
Accused would, on these occasions, persuade the Complainant
not to invoke this provision and make further
representations to the Complainant that the supply of raw
materials would henceforth be kept at the agreed level.
However, these representations were not acted upon by the
Accused while, on the other hand, believing these
representations, the Complainant made schedules of
production, but was left without materials, holding on to an
idle plant carrying idle labour and thus incurring huge
monetary losses.
(viii) ..The Complainant now understands that the
above false representations were made by the Accused solely
with the purpose of putting the Complainant to huge losses
and crippling them since the Accused themselves were
planning to manufacture in their own facilities the bulk
drug Ethambutol Hydrochloride and wanted to put the
Complainant out of competition by ruining them by keeping
them out of production which was achieved by the Accused by
making false representations of supply of raw material at
the agreed levels and then willfully failing and omitting to
act as per these representations.
(ix) The Complainant was also persuaded by the
representations of the Accused to desist from invoking
Clause 15 of the Agreement and revoke it which would have
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reduced its losses to some extent. The above acts of the
Accused clearly attract the ingredients of the offence
punishable U/Sec.415 I.P.C..
(x) the Accused were having dishonest intention and
it was with such intention that the Complainant Company was
fraudulently and dishonestly induced to enter into the
Agreement dt. 31.8.97. The dishonest intention of the
Accused is further seen from the complaint lodged by A6 on
behalf of A1 against three officers of the Complainant.
(xi) The Accused were fully aware that the Complainant
is a reputed manufacturer of Ethambutol Hydrochloride and
they are having good reputation in Indan and Overseas
markets. The Accused were themselves contemplating entering
into production of Ethambutol Hydrochloride and wanted to
eliminate the competition from the Complainant who had
established their name in the market. Keeping this in mind,
the Accused, in order to earn wrongful gain and cause
wrongful loss to the Complainant, acted in the aforesaid
manner, inducing the Complainant through representations (by
the Accused) to commit to conversion work and consequently
schedule its production accordingly and then willfully
failing to act as per the representations thus putting the
Complainant to huge losses.
(xii) The Complainant further states that but for the
false representations made by the Accused at the time of
entering into the Agreement dt. 31.8.97, it (Complainant)
would not have entered into this Contract. The aforesaid
acts of the Accused have ruined the finances of the
Complainant and it had to incur huge loss due to these acts
of the Accused. The Complainant states that the above said
acts of the Accused clearly attract the ingredients of
Section 420 I.P.C..
(xiii) The preceding paragraphs in this Complaint
would clearly reveal that the Accused who are bound to
protect the interests of the Complainant in the transactions
under the Agreement dt.31.8.97 have not only cheated the
Complainant by causing wrongful loss to it, but have also
failed to protect the interests of the Complainants in the
transactions. Hence, the Accused are liable to be punished
U/Sec.418 I.P.C.
(xiv) .The Complainant states that from whatever has
been stated and set out herein above, it is absolutely clear
that A1 to A6 had, in criminal conspiracy with each other
and in furtherance of the common intention of all have
committed the above offences under Section 415 I.P.C. and
420 I.P.C. Letter correspondence, the Complaint and the
documents relating to the Agreement dt. 31.8.97 would prove
that A2 to A6 have very much participated in the affairs of
A1 and in particular, those relating to the transactions
under the Agreement dt. 31.8.97.
This longish narration could have probably been
avoided, but it cannot be so done by reason of the fact that
the Learned Single Judge has only recorded : It appears
that under an agreement the accused were obliged to supply
raw materials for production to the Complainant which they
failed to do. I do not find any allegation whatsoever in
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the complaint which would disclose a criminal offence.
Before proceeding further in the matter, let us now
deal with the offences alleged in the First Information
Report. The first offence alleged is that of cheating
within the meaning of Section 415 IPC . For convenience
sake Section 415 reads as below: 415. Cheating Whoever,
by deceiving any person, fradulently or dishonestly induces
the person so deceived to deliver any property to any
person, or to consent that any person shall retain any
property, or intentionally induces the person so deceived to
do or omit to do anything which he would not do or omit if
he were not so deceived, and which act or omission causes or
is likely to cause damage or harm to that person in body,
mind, reputation or property, is said to cheat
. Explanation A dishonest concealment of facts is a
deception within the meaning of this section.
The Complaint is also said to be under Section 418
I.P.C. which reads as below: 418. Cheating with knowledge
that wrongful loss may ensue to person whose interest
offender is bound to protect. Whoever cheats with the
knowledge that he is likely thereby to cause wrongful loss
to a person whose interest in the transaction to which the
cheating relates, he was bound , either by law or by a legal
contract, to protect, shall be punished with imprisonment of
either description for a term which may extend to three
years, or with fine, or with both.
The Complaint also alleges an offence said to have
been committed under Section 420 I.P.C. which reads as
below: 420. Cheating and dishonestly inducing delivery of
property. Whoever cheats and thereby dishonestly induces
the person deceived to deliver any property to any person,
or to make, alter or destroy the whole or any part of a
valuable security, or anything which is signed or sealed,
and which is capable of being converted into a valuable
security, shall be punished with imprisonment of either
description for a term which may extend to seven years, and
shall also be liable to fine.
The ingredients require to constitute an offence under
Section 415 has been lucidly dealt with by this Court in the
Case of Ram Jas v. State of U.P. (1970 (2) SCC 740)
wherein this Court observed as below: The ingredients
required to constitute the offence of cheating are-
(i) there should be fraudulent or dishonest inducement
of a person by deceiving him;
(ii)(a) the person so deceived should be induced to
deliver any property to any person, or to consent that any
person shall retain any property; or (b) the person so
deceived should be intentionally induced to do or omit to do
anything which he would not do or omit if he were not so
deceived; and
(ii) in cases covered by (ii)(b), the act or omission
should be one which causes or is likely to cause damage or
harm to the person induced in body, mind, reputation or
property.
While Section 415 is an offence of cheating, Section
418 deals with cheating with knowledge that wrongful loss
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may ensue to a person whose interest the offender is bound
to protect and Section 420 is cheating and dishonestly
inducing delivery of property. In order to attract the
provisions of Sections 418 and 420 the guilty intent, at the
time of making the promise is a requirement and an essential
ingredient thereto and subsequent failure to fulfil the
promise by itself would not attract the provisions of
Section 418 or 420. Mens rea is one of the essential
ingredients of the offence of cheating under Section 420.
As a matter of fact illustration (g) to Section 415 makes
the position clear enough to indicate that mere failure to
deliver in breach of an agreement would not amount to
cheating but is liable only to a civil action for breach of
contract and it is this concept which obviously has weighed
with the Learned Single Judge. But can the factual
situation as narrated above in the longish reproduction of
the complaint lend support to the observations of the
Learned Judge, the answer is pivotal one but before so doing
one other aspect as regards the powers under Section 482
Cr.P.C. ought to be noticed. As noted herein before this
power is to be exercised with care and caution and rather
sparingly and has been so held on more occasions than one.
In the case of Pratibha Rani v. Suraj Kumar 1985 SCC (Crl.)
180 this Court pointed out that the High Court should very
sparingly exercise its discretion under Section 482 Cr.P.C.
In L.V.Jadhav v. Shankarrao Abasaheb Pawar [AIR 1983 SC
1219: (1983) 4 SCC 231: 1983 SCC (Crl) 813] this Court
observed: The High Court, we cannot refrain from
observing, might well have refused to invoke its inherent
powers at the very threshold in order to quash the
proceedings, for these powers are meant to be exercised
sparingly and with circumspection when there is reason to
believe that the process of law is being misused to harass a
citizen.
Needless to record however and it being a settled
principle of law that to exercise powers under Section 482
of the Code, the complaint in its entirety shall have to be
examined on the basis of the allegation made in the
complaint and the High Court at that stage has no authority
or jurisdiction to go into the matter or examine its
correctness. Whatever appears on the face of the complaint
shall be taken into consideration without any critical
examination of the same. But the offence ought to appear ex
facie on the complaint. The observation in Smt. Nagawwa v.
Veeranna Shivalingappa Konjalgi [1976 (3) SCC 736] lend
support to the above statement of law. (1) Where the
allegations made in the complaint or the statements of the
witnesses recorded in support of the same taken at their
face value make out absolutely no case against the accused
or the complaint does not disclose the essential ingredients
of an offence which is alleged against the accused;
(2) Where the allegations made in the complaint are
patently absurd and inherently improbable so that no prudent
person can ever reach a conclusion that there is sufficient
ground for proceeding against the accused;
(3) Where the discretion exercised by the Magistrate
in issuing process is capricious and arbitrary having been
based either on no evidence or on materials which are wholly
irrelevant or inadmissible; and
(4) Where the complaint suffers from fundamental legal
defects, such as, want of sanction, or absence of a
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complaint by legally competent authority and the like.
The cases mentioned by us are purely illustrative and
provide sufficient guidelines to indicate contingencies
where the High Court can quash proceedings.
58. The same principles would apply mutatis mutandis
to a criminal complaint.
59. We now come to the question as to whether or not
a clear allegation of entrustment and misappropriation of
properties was made by the appellant in her complaint and,
if so, was the High Court justified in quashing the
complaint at that stage. It is well settled by a long
course of decisions that for the purpose of exercising its
power under Section 482 Cr.P.C. to quash a FIR or a
complaint the High Court would have to proceed entirely on
the basis of the allegations made in the complaint or the
documents accompanying the same per se. It has no
jurisdiction to examine the correctness or otherwise of the
allegations. In case no offence is committed on the
allegation and the ingredients of Sections 405 and 406, IPC
are not made out, the High Court would be justified in
quashing the proceedings.
In the matter under consideration, if we try to
analyse the guidelines as specified in Shivalingappas case
(supra) can it be said that the allegations in the complaint
do not make out any case against the accused nor it
discloses the ingredients of an offence alleged against the
accused or the allegations are patently absurd and
inherently improbable so that no prudent person can ever
reach to such a conclusion that there is sufficient ground
for proceeding against the accused. In the present case,
the complaint as noticed above does not, however, lend
credence to the questions posed. It is now well settled and
one need not dilate on this score, neither we intend to do
so presently that the allegations in the complaint will have
to be accepted on the face of it and truth or falsity of
which would not be gone into by the Court at this earliest
stage as noticed above: whether or not allegations in the
complaint were true is to be decided on the basis of the
evidence led at the trial and the observations on this score
in the case of Nagpur Steel & Alloys Pvt. Ltd. v. P.
Radhakrishna [1997 SCC (Crl.) 1073] ought to be noticed. In
paragraph 3 of the report this Court observed: 3. We have
perused the complaint carefully. In our opinion it cannot
be said that the complaint did not disclose the commission
of an offence. Merely because the offence was committed
during the course of a commercial transaction, would not be
sufficient to hold that the complaint did not warrant a
trial. Whether or not the allegations in the complaint were
true was to be decided on the basis of evidence to be led at
the trial in the complaint case. It certainly was not a
case in which the criminal trial should have been cut short.
The quashing of the complaint has resulted in grave
miscarriage of justice. We, therefore, without expressing
any opinion on the merits of the case, allow this appeal and
set aside the impugned order of the High Court and restore
the complaint. The learned trial Magistrate shall proceed
with the complaint and dispose of it in accordance with law
expeditiously.
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Be it noted that in the matter of exercise of High
Courts inherent power, the only requirement is to see
whether continuance of the proceeding would be a total abuse
of the process of Court. The Criminal Procedure Code
contains a detailed procedure for investigation, charge and
trial, and in the event, the High Court is desirous of
putting a stop to the known procedure of law, the High Court
must use a proper circumspection and as noticed above, very
great care and caution to quash the complaint in exercise of
its inherent jurisdiction. Recently, this Court in Trisuns
Chemical Industry v. Rajesh Agarwal and others (1999 (5)
SCALE 609) observed: 5. Respondents counsel in the High
Court put forward mainly two contentions. First was that
the dispute is purely of a civil nature and hence no
prosecution should have been permitted, and the second was
that the Judicial Magistrate of First Class, Gandhidham has
no jurisdiction to entertain the complaint. Learned Single
Judge has approved both the contentions and quashed the
complaint and the order passed by the magistrate thereon.
6. On the first count learned Single Judge pointed
out that there was a specific clause in the Memorandum of
Understanding arrived between the parties that disputes, if
any, arising between them in respect of any transaction be
resolved through arbitration. High Court made the following
observations:
Besides supplies of processed soyabean were received
by the complainant company without any objection and the
same have been exported by the complainant-company. The
question whether the complainant-company did suffer the loss
as alleged by it are the matters to be adjudicated by the
Civil Court and cannot be the subject matter of criminal
prosecution.
7. Time and again this Court has been pointing out
that the quashment of FIR or a complaint in exercise of
inherent powers of the High Court should be limited to very
extreme exceptions (vide State of Haryana v. Bhajan Lal
(1992 Suppl.(1) SCC 335 and Rajesh Bajaj v. State NCT of
Delhi (1999 (3) SCC 259)].
8. In the last referred case this court also pointed
out that merely because an act has a civil profile is not
sufficient to denude it of its criminal outfit. We quote
the following observations:
It may be that the facts narrated in the present
complaint would as well reveal a commercial transaction or
money transaction. But that is hardly a reason for holding
that the offence of cheating would elude from such a
transaction. In fact, many a cheatings were committed in
the course of commercial and also money transactions.
9. We are unable to appreciate the reasoning that the
provision incorporated in the agreement for referring the
disputes to arbitration is an effective substitute for a
criminal prosecution when the disputed act is an offence.
Arbitration is a remedy for affording reliefs to the party
affected by breach of the agreement but the arbitrator
cannot conduct a trial of any act which amounted to an
offence albeit the same act may be connected with the
discharge of any function under the agreement. Hence, those
are not good reasons for the High Court to axe down the
complaint at the threshold itself. The investigating agency
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should have had the freedom to go into the whole gamut of
the allegations and to reach a conclusion of its own.
Pre-emption of such investigation would be justified only in
very extreme cases as indicated in State of Haryana v.Bhajan
Lal (Supra).
On careful reading of the complaint, in our view, it
cannot be said that the complaint does not disclose the
commission of an offence. The ingredients of the offences
under Sections 415, 418 and 420 cannot be said to be totally
absent on the basis of the allegations in the complaint.
We, however, hasten to add that whether or not the
allegations in the complaint are otherwise correct has to be
decided on the basis of the evidence to be led at the trial
in the complaint case but simply because of the fact that
there is a remedy provided for breach of contract, that does
not by itself clothe the Court to come to a conclusion that
civil remedy is the only remedy available to the appellant
herein. Both criminal law and civil law remedy can be
pursued in divers situations. As a matter of fact they are
not mutually exclusive but clearly co-extensive and
essentially differ in their content and consequence. The
object of criminal law is to punish an offender who commits
an offence against a person, property or the State for which
the accused, on proof of the offence, is deprived of his
liberty and in some cases even his life. This does not,
however, affect civil remedies at all for suing the
wrongdoer in cases like arson, accidents etc. It is
anathema to suppose that when a civil remedy is available, a
criminal prosecution is completely barred . The two types
of actions are quite different in content, scope and impart
[vide Pratibha Rani v. Suraj Kumar (supra)]. Mr. Mishra,
the learned Senior Advocate for the respondents herein being
the accused persons, strongly relied upon the decisions of
this Court in the case of Dr. Sharma Nursing Home v. Delhi
Administration 1998 (8) SCC 745 wherein this Court observed:
that findings of Section 420 IPC has been rested only on
the reception and did not go into the question whether the
complainant and its accompanymen disclosed the essential
ingredient of the offence under Section 420 IPC namely,
disclosed inducement. Mr. Mishra upon reliance in Dr.
Sharmas case (supra) also contended that Section 24 of the
I.P.C has defined the word dishonesty to mean a deliberate
intent to cause wrongful gain or wrongful loss. It has been
the specific case of the complainant that from the beginning
of the transaction there was a definite intent on the part
of the accused persons to cause wrongful loss to the
complainant. This aspect of the matter, however, has not
been taken note of by the learned Single Judge. The
decision of this Court in Dr. Sharmas case (supra) thus
does not lend any assistance to Mr. Mishra in support of
quashing of the criminal complaint. Some other decisions
have also been cited but we do not feel it inclined to refer
to the same except one noted above since they do not advance
the case of the respondents in any way whatsoever.
Considering the factual aspect of the matter, we
unhesitatingly state, however, that the issue involved in
the matter under consideration is not a case in which the
criminal trial should have been short circuited. We, thus,
without expressing any opinion on the merits of the case
allow the Appeal and set aside the impugned order of the
High Court and restore the complaint. The learned trial
Magistrate shall proceed with the complaint and dispose of
the same in accordance with the law with utmost expectation.
Be it clarified however that observations as above in this
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judgment be not taken as an expression of opinion of ours.