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Monday, March 23, 2015

Sec.420 of I.P.C. - whether the allegations in the complaint disclose the criminal offence of cheating or not ? - every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating - because a civil remedy may be available to the complainant that itself cannot be a ground to quash a criminal proceeding - in a compromise the complainant claimed to be acted as Mediator - claimed fee - Company said to be issued a cheque towards his fee with a condition not to present unless settlement was finalized - cheque not presented - matter not settled - a criminal case after the lapse of one year with out assigning any allegations in previous correspondence about the cheating - complaint does not disclose any criminal offence at all. Criminal proceedings should not be encouraged when it is found to be malafide or otherwise an abuse of the process of the court. - 2015 S.C. msklawreports.

 the settled proposition  of
law is that every breach of contract would not give rise to  an  offence  of
cheating and only  in  those  cases  breach  of  contract  would  amount  to
cheating where there was any deception played at  the  very  inception.   If
the intention to cheat has developed later on, the  same  cannot  amount  to

The 3rd respondent filed a private  complaint  dated  13.10.2010
against the company, its Directors and Promoter in  the  Court  of  Judicial
First Class Magistrate Changanasserry  and the same  was  forwarded  to  the
police for investigation under  Section  156(3)  of  the  Code  of  Criminal
Procedure and the Police registered a case in Crime No.1461 of 2010 for  the
alleged offences under Sections 417, 418, 420,  120B  and  34  IPC.  
 It  is
alleged in the complaint that the loan transaction of the company with  IIBI
was settled with the efforts of the complainant/respondent No.3  herein  but
the company, Directors and Promoter did not pay him the consultancy  fee  as
promised  and  they  conspired  together  to  deceive  the  complainant  and
committed  offences  as  alleged. 

The  company  and  its  Directors   filed
petitions under Section 482 Criminal Procedure Code in  Criminal  M.C.No.220
to 222 of 2011 on the file  of   the  High  Court  of  Kerala  at  Ernakulam
contending that the understanding between the company  and  the  complainant
was that the settlement with the IIBI should  be  completed  by   30.10.2008
and the complainant was not able to settle the loan  before  the  said  date
and hence he could not present the cheque in  the  light  of  the  condition
imposed on  him  in  the  letter  dated  6.8.2008  and  the  settlement  was
completed only on 5.1.2009 due to the efforts of the company itself and  not
at the instance of the complainant and at any rate it can only be breach  of
contract for which  no  criminal  liability  can  be  fastened  against  the
company and its Directors.   
The  High  Court  dismissed  the  petitions  by
holding that the truth of the allegations have  to  be  ascertained  by  the
investigating agency.  Challenging the said order the present  appeals  have
been preferred.

The letter dated  6.8.2008 contains the offer  of the appellants as well  as
the acceptance made by 3rd respondent, and it reads thus :

"August 6, 2008

Mr. K.G.S. Nair
Keezhoot, Changanasserry

Dear Sir,

Sub: Settlement of IIBI dues at Rs.8.25 Crores.

Please refer to the discussion we had on the above  subject.   As  discussed
we are agreeable to pay you a  lump  sum  amount  of  Rs.  75  lacs  towards
consultancy fee for the above settlement, out of this amount Rs.5 lacs  will
be paid upfront for out of pocket expenses  and  the  balance  amount  Rs.70
lacs will be paid on completion of the assignment.

We enclose herewith a cheque bearing number 47025 for  Rs.30,00,000  (Thirty
lacs only) dated 06.08.2008 drawn on HDFC Bank Ltd, which  as  agreed,  this
cheque should be presented to bank only after  obtaining  acceptance  letter
from IIBI on or before 30th October 2008 or otherwise the cheque  should  be
returned to  us.   Please  note  that  company  should  be  informed  before
presenting the said cheque.

If it  is  agreeable you may return  the  duplicate  of  this  letter,  duly
signed in token of acceptance of the offer.
Thanking you,

Yours faithfully,
For Vesa Holdings Private Limited


I Accord my consent to this assignment.

(K.G.S. Nair)"

 It is  also   not  in  dispute  that  the  IIBI  did  not  issue  any
acceptance letter on or before 30.10.2008 with regard to the  settlement  of
disputes of the appellant company.  The 3rd respondent also did not  present
the cheque dated 6.8.2008 issued by the appellant company  for  encashing  a
sum of Rs.30 lakhs.  Due to the  efforts  of  the  appellant  company   IIBI
finally agreed and issued letter of acceptance  dated  5.1.2009.   One  year
later, the 3rd respondent sent a letter  dated  6.3.2010  to  the  appellant
company  demanding  the  balance  amount  of  Rs.70   lakhs    towards   the
consultancy fee.  No allegation whatsoever was made against  the  appellants
herein  in  the  said  letter.   It  was  only  mentioned  in  it  that  the
consultation fee remains unpaid and the company is delaying the  payment  on
one pretext or the other.  In this context it is relevant to point out  that
after the expiry of the validity period of the cheque  dated  6.8.2008,  the
3rd respondent did not ask for re-issue of the same.

It is true that a given set of facts may make out  a  civil  wrong  as
also a criminal offence and only because a civil remedy may be available  to
the complainant  that  itself  cannot  be  a  ground  to  quash  a  criminal
proceeding.  The real test is  whether  the  allegations  in  the  complaint
disclose the criminal offence of cheating  or  not.   In  the  present  case
there is nothing to show that at the very inception there was any  intention
on behalf of the accused persons to cheat which  is  a  condition  precedent
for an offence under Section 420 IPC.  In our view the  complaint  does  not
disclose any criminal offence at all.  Criminal proceedings  should  not  be
encouraged when it is found to be malafide or  otherwise  an  abuse  of  the
process of the court.  Superior courts while exercising  this  power  should
also strive to serve the ends of justice. In our opinion, in view  of  these
facts allowing the police investigation  to  continue  would  amount  to  an
abuse of the process of court and the  High  Court  committed  an  error  in
refusing to exercise the power under Section 482 Criminal Procedure Code  to
quash the proceedings. - 2015 S.C.MSKLAWREPORTS

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