Sections 415, 418 and 420 IPC. - No FIR be quashed basing on the proposed defence of the accused that it was simply a termination of contract and breach of contract as many a times, offence of cheating is committed in the course of commercial transactions
we are satisfied that the issue involved in the matter under consideration is not a case in which the criminal trial should have been short-circuited. The High Court was not justified in quashing the criminal proceedings in exercise of its inherent jurisdiction. The High Court has primarily adverted on two circumstances, (i) that it was a case of termination of agreement to sell on account of an alleged breach of the contract and (ii) the fact that the arbitral proceedings have been initiated at the instance of the appellants. Both the alleged circumstances noticed by the High 23 Court, in our view, are unsustainable in law. The facts narrated in the present complaint/FIR/charge-sheet indeed reveal the commercial transaction but that is hardly a reason for holding that the offence of cheating would elude from such transaction. In fact, many a times, offence of cheating is committed in the course of commercial transactions and the illustrations have been set out under Sections 415, 418 and 420 IPC.Similar observations have been made by this Court in Trisuns Chemical Industry Vs. Rajesh Agarwal and Ors.(supra) :- “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 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 [1992 Supp (1) SCC 335]” .So far as initiation of arbitral proceedings is concerned, there is no correlation with the criminal proceedings. That apart, the High Court has not even looked into the charge-sheet filed against 2nd respondent which was on record to reach at the conclusion that any criminal offence as stated is prima facie being made out and veracity of it indeed be examined in the course of criminal trial.
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO(S).296 OF 2021
(Arising out of SLP(Crl.) No(s). 6364 of 2019)
PRITI SARAF & ANR. ….APPELLANT(S)
VERSUS
STATE OF NCT OF DELHI & ANR. ….RESPONDENT(S)
J U D G M E N T
Rastogi, J.
1. Leave granted.
2. The appellants who are the de-facto complainants in FIR No.
132/2017 dated 28th April, 2017 are questioning the order of the
High Court dated 15th March, 2019 passed in Criminal Miscellaneous
Case Nos. 1718/2017 and 7009/2017 whereby the learned Single
Judge in exercise of its jurisdiction under Section 482 of the Code of
Criminal Procedure(hereinafter being referred to as “CrPC”) taking
cognizance for the offence under Sections 420, 406 and 34 IPC
2
quashed the orders and set aside the criminal proceedings against
2nd respondent on the foundation that the allegations made in the
complaint/FIR does not constitute offences under aforestated
sections.
Brief facts of the case
3. The factual matrix of the matter as reflected from the complaint
as alleged are that the subject property in question, i.e., 37, Friends
Colony(East), New Delhi is in the ownership of 2nd respondent. The
said property was mortgaged with State Bank of Patiala and the total
legal liability payable to the Bank was Rs. 18 crores. That in order
to clear the said dues, 2nd respondent hatched a conspiracy with
broker Ashok Kumar so as to cheat and defraud the
appellants/complainants and to further misappropriate the amounts
paid by the complainants as part of the deal, the 2nd respondent
breached the trust of the appellants/complainants deliberately and
falsely stating to the appellants/complainants that the 2nd
respondent would be liable to pay a sum of Rs. 25.50 crores to the
complainant if the deal is not carried forward by the 2nd respondent.
Keeping in view the overall scenario, agreement to sell was executed
3
on 24th December, 2011 between the 2nd respondent and the 1st
appellant. The 2nd respondent agreed to sell 1205.43 sq yds. of the
property in question for a total sale consideration of Rs.
63,28,50,750/-. At the time of execution, 1st appellant paid a sum of
Rs. 12.50 crores vide cheque dated 24th December, 2011 drawn on
HDFC Bank, New Friends Colony, Delhi. As per clause 3 of the said
agreement to sell, 2nd respondent had to perform and complete three
requirements which were compulsory in nature. The said
requirements were to be completed by the 2nd respondent latest by
24th March, 2012 before any further amount is to be received by her
from the 1st appellant/complainant.
4. It was further alleged in the complaint that the three
requirements in terms of clause 3 of the agreement to sell were not
fulfilled by the 2nd respondent and even after there being a delay in
obtaining sanction plans, still the 1st appellant on demand made a
payment of Rs. 5.40 crores by a cheque dated 23rd May, 2012 and to
show her bonafides, the 2nd respondent handed over post-dated
cheques worth Rs. 25.50 crores towards security for performance of
agreement dated 24th December 2011. After the amount was received
4
from the 1st appellant/complainant, 2nd respondent immediately
cleared her outstanding legal liability of State Bank of Patiala and
obtained NOC from the bank, however, the fact of obtaining NOC was
never divulged by the 2nd respondent to the complainants
deliberately. This fact for the first time was disclosed by the 2nd
respondent at the stage when post-dated cheques of Rs.25.50 crores
handed over as security to the complainant were rendered invalid.
5. The intention of the 2nd respondent from the very inception to
cheat and deceive the complainants/appellants is made out from the
fact that the 2nd respondent had to complete the compulsory
requirement on or before 24th March, 2012 but the first two
requirements were completed on 11th May, 2012 and 2nd June, 2012
respectively and the third requirement was still not complete. At this
stage, just to cheat the 1st appellant/complainant, 2nd respondent
illegally terminated the agreement to sell vide communication dated
30th January, 2013. The 1st appellant had tried her level best to get
the matter settled but, the modus operandi of the 2nd respondent was
to cheat from the very inception when the agreement to sell was
executed, nothing materialised.
5
6. In this regard, a private complaint was filed under Section 200
read with Section 190 CrPC on 23rd September, 2015 before the
learned Magistrate for taking cognizance of the offence committed by
the 2nd respondent before Saket Court, Delhi wherein it was directed
to the concerned Police Station to register the FIR under Section
156(3) CrPC vide Order dated 15th November, 2016 that came to be
challenged by the 2nd respondent by filing of a criminal revision but
that came to be dismissed by the ASJ & Special Judge(NDPS), South
East, Saket Courts, New Delhi vide Order dated 26th April, 2017 and
thereafter FIR under Section 156(3) CrPC came to be registered
against the 2nd respondent and the broker Mr. Ashok Kumar under
Sections 420, 406 and 34 IPC on 28th April, 2017.
7. The Investigation Officer conducted investigation and filed
charge-sheet dated 5th October, 2018 under Sections 420, 406 and
34 IPC. It reveals from the charge-sheet that the property in question,
i.e. 1205.43 sq. yds was alleged to be sub-divided whereas the subject
property, i.e. Plot No. 37 is admeasuring 3930 sq. yds. and subdivision of the plot is not permitted to be sanctioned as per Clause
4.4.3(IV) of the Master Plan Delhi, 2021. It also reveals from the
6
charge-sheet that prior to the present transaction which was
executed pursuant to agreement to sell dated 24th December, 2011,
2nd respondent under the same modus operandi earlier in reference
to self-same subject property forfeited in the year 2007 a sum of
Rs.18 crores from M/s. Shinestar Buildcon Private Ltd. It further
reveals that 2nd respondent never got the site plan sanctioned for
appellants nor the bifurcated & demarcated area knowingly because
of her malafide intentions. The role of husband of 2nd respondent as
a suspect is under pending investigation under Section 173(8) CrPC
and if adverse material comes on record, the supplementary chargesheet may be filed against S.C. Goyal(husband of 2nd respondent) at
a later stage.
8. The 2nd respondent challenged the orders dated 15th November,
2016 and 26th April, 2017 passed in revision petition filed at her
instance before the High Court under Section 482 CrPC.
9. It reveals from the record that after this fact was brought to the
notice of the learned Judge of the High Court that the charge-sheet
has been filed, the learned Judge directed the Public Prosecutor by
Order dated 9th October, 2018 to place the charge-sheet on record.
7
Even after the charge-sheet came to be filed by the Public Prosecutor
in compliance of the Order of the Court, the learned Judge of the
High Court while noticing the facts has only taken note of the
agreement to sell dated 24th December, 2011, notice of termination
dated 30th January, 2013 and without examining the bare facts on
record, what being transpired in the complaint and so also during
the investigation reflected from the charge-sheet filed before the trial
Court and which was part of the record still proceeded on the premise
and observed that the case is of a simple breach of contract, which
gives rise to purely civil dispute and cannot be converted into a
criminal offence, more so, when the arbitral proceedings have been
initiated, in the given circumstances, held that if such civil disputes
as alleged are being permitted to be prosecuted in the criminal
proceedings, this according to the learned Judge, would be a sheer
abuse of the process of the Court. In consequence thereof, quashed
all the criminal proceedings and the orders under challenge therein
dated 15th November, 2016 and 24th April, 2017 and further observed
that the observations made shall not be construed to be expression
on merits, in the arbitration proceedings by impugned judgment
dated 15th March, 2019.
8
10. We have heard Mr. Mukul Rohatgi, learned senior counsel for
the appellants, Mr. P. Chidambaram, learned senior counsel for 2nd
respondent and Ms. Aishwarya Bhati, learned Additional Solicitor
General for the State.
11. Mr. Mukul Rohatgi, learned senior counsel for the appellants
submitted that the charge-sheet filed by the Investigating Officer on
5th October, 2018 discloses that the offence under Sections 406, 420
and 34 IPC has been committed by the 2nd respondent and pursuant
to the order of the learned Judge of the High Court dated 9th October,
2018, copy of the charge-sheet was placed on record still no reference
of the charge-sheet has been made by the learned Judge in the
impugned judgment while quashing the criminal proceedings.
12. Learned counsel further submits that the exercise of inherent
power of the High Court under Section 482 CrPC is an exceptional
one. Great care should be taken by the High Court before embarking
to scrutinise the complaint/FIR/charge-sheet in deciding whether
the rarest of the rare case is made out to scuttle the prosecution in
its inception. It was expected from the High Court to prima facie
consider the complaint, charge-sheet and the statement of witness
9
recorded in support thereof which was recorded by the Investigating
Officer in arriving at a conclusion whether court could take
cognizance of the offence, on that evidence and proceed further with
the trial. If it reaches a conclusion that no cognizable offence is made
out, no further act could be done except to quash the FIR/chargesheet. But only in exceptional cases, i.e., in rarest of rare cases of
mala fide initiation of the proceedings to wreak private vengeance
process is availed of in laying a complaint or FIR itself does not
disclose any cognizable offence.
13. Learned counsel submits that the High Court has committed a
manifest error in ignoring the material facts on record which make
the orders sensitively susceptible and further submits that the
learned Additional Sessions Judge had considered the entire gamut
of facts and appositely opined that the order taking cognizance could
not be flawed but the High Court has completely erred in its
conclusion and has not even looked into the bare facts available on
record and has proceeded on a premise that in case where there is
an agreement to sell and its subsequent termination for its alleged
breach, such disputes are civil disputes and more so where the
10
arbitral proceedings are pending, criminal proceedings will be an
abuse of the process of the Court, in the given circumstances, what
has been made to be a basis by the learned Judge is unsustainable
in law and hence the order deserves to be set aside.
14. In support of his submissions, learned counsel has placed
reliance on the judgments of this Court in R.P. Kapur Vs. State of
Punjab1; State of Haryana and Ors. Vs. Bhajan Lal and Others2;
Trisuns Chemical Industry Vs. Rajesh Agarwal and Ors.3; M.
Krishnan Vs. Vijay Singh & Anr.4; Joseph Salvaraj A. Vs. State
of Gujarat and Ors.5; Arun Bhandari Vs. State of Uttar Pradesh
and Ors.6; Anand Kumar Mohatta and Anr. Vs. State (NCT of
Delhi), Department of Home and Anr.7.
15. Per contra, Mr. P. Chidambaram, learned senior counsel for 2nd
respondent submits that agreement to sell dated 24th December,
2011 discloses all the facts about the ownership of the property,
11960 (3) SCR 388
21992 Suppl (1) SCC 335
31999 (8) SCC 686
42001 (8) SCC 645
52011 (7) SCC 59
62013 (2) SCC 801
72019 (11) SCC 706
11
property being mortgaged with the State Bank of Patiala and after the
payment, property to be redeemed after obtaining the original papers
and no objection certificate from the Bank, thereafter further
procedure to be carried out by the parties as per the terms and
conditions of the agreement to sell dated 24th December, 2011. When
the appellant failed to carry out its obligation in compliance of the
terms and conditions of the agreement to sell,the agreement to sell
was terminated by letter dated 30th January, 2013 and that
empowers the 2nd respondent to forfeit the earnest money which was
deposited in terms of the agreement and it was purely a civil dispute
and as their being a clause of arbitration, arbitral proceedings were
initiated at the instance of the 1st appellant and although during
pendency of the proceedings in the Court, learned Arbitrator has
passed an award dated 8thMay, 2020 which has been challenged by
the 2nd respondent under Section 34 of the Arbitration and
Conciliation Act, 1996 which is pending before the High Court of
Delhi.
16. Learned counsel further submits that parties have entered into
an agreement to sell that does not amount to an offence under
12
Section 420 IPC. Neither the complaint which was initially instituted
at the instance of the appellants nor the charge-sheet dated 5th
October, 2018 which was later filed although remain unnoticed by
the High Court in the impugned judgment nowhere reveals even a
prima facie case of a criminal offence being committed by the 2nd
respondent under Sections 420, 406 and 34 IPC and if the parties
have entered into an agreement to sell which is purely a commercial
transaction, and if there is a breach of the terms of agreement to sell,
the party to the agreement in consequence was justified to forfeit the
earnest money, it is simply a civil dispute. As there was a demand
to refund the forfeited amount failing which FIR was registered to set
the criminal law into motion obviously to settle the scores giving the
colour of criminal proceedings which is impermissible and this what
has been observed by the High Court in the impugned judgment
supported by the factual matrix on record.
17. Learned counsel further submits that the present case is of civil
dispute as earnest money was forfeited by the 2nd respondent when
the 1st appellant was not ready to fulfil and perform the terms and
conditions of agreement to sell dated 24th December, 2011 and after
13
the arbitral proceedings were initiated, criminal proceedings were
initiated just to harass the respondent with criminal charge under
Sections 420, 406 and 34 IPC and further submits that no offence
under Section 406 is made out as the earnest money was paid in
terms of the contract and there was no restriction in the agreement
as to how this money was to be utilised therefore, there is no
misappropriation.
18. Learned counsel further submits that the appellant has not
come with clean hands and she has suppressed the fact that she did
not receive the letter dated 28th February, 2012 sent by 2nd
respondent. To the contrary, there is sufficient documentary
evidence, as well as his/her admission to this effect by the 1st
appellant, which would show that she had received the said letter.
Since she did not respond to the letter dated 28th December, 2012, it
was observed that she was not ready to perform her obligations in
terms of the contract and consequently, the 2nd respondent was well
within her rights to terminate the contract by letter dated 30th
January, 2013.
14
19. Learned counsel has further tried to justify that all the three
conditions of clause 3 of agreement hammered by the appellants were
fulfilled, and there is documentary evidence placed on record in
support thereof in the counter affidavit.
20. Learned counsel for the 2nd respondent has also placed reliance
on various judgments of this Court which lays down the basic
principles under which inherent powers under Section 482 CrPC to
be exercised by the High Court and has set aside the criminal
proceedings observing that when there are civil disputes, the
initiation of criminal proceedings would be abuse of the process of
the Court and placed reliance on the judgments in Rajabhai Abdul
Rehman Munshi Vs. Vasudev Dhanjibhai Mody8; G.
Narayanaswamy Reddy (Dead) by LRs. & Anr. Vs. Govt. of
Karnataka and Anr.9; G. Sagar Suri & Anr. Vs. State of U.P. and
Ors.10; Murari Lal Gupta Vs. Gopi Singh11; Indian Oil
Corporation Vs. NEPC India Ltd. and Ors.12; Harmanpreet Singh
8 1964 (3) SCR 480
91991 (3) SCC 261
102000 (2) SCC 636
112005 (13) SCC 699
122006 (6) SCC 736
15
Ahluwalia and Ors. Vs. State of Punjab and Ors.13; Joseph
Salvaraj A. Vs. State of Gujarat and Ors.14; Chandran
Ratnaswami Vs. K.C. Palanisamy and Ors.15; VESA Holdings
Private Limited and Anr. Vs. State of Kerala & Ors.16; K. Subba
Rao and Ors. Vs. State of Telangana Rep. by its Secretary,
Department of Home & Ors.17.
21. Learned counsel has further submitted in his written
submissions that the High Court indeed has not referred to the
charge-sheet of which a reference has been made, this Court if
considers it appropriate, in the facts and circumstances, may remit
the matter back to the High Court for fresh consideration. It would
be unjust if the 2nd respondent was compelled to face criminal
prosecution on the ground that the High Court had not looked into
the material available on record.
22. After the conclusion of the submissions, an IA has been filed at
the instance of the 2nd respondent for initiating proceedings under
132009 (7) SCC 712
142011 (7) SCC 59
152013 (6) SCC 740
162015 (8) SCC 293
17 2018 (14) SCC 452
16
Section 340 read with Section 195 CrPC, in which it has been alleged
that the appellants have not only concealed the documents but has
made false statement and it has been prayed that proceedings under
Section 340 CrPC may be initiated against the appellants.
23. It being a settled principle of law that to exercise powers under
Section 482 CrPC, the complaint in its entirety shall have to be
examined on the basis of the allegation made in the
complaint/FIR/charge-sheet and the High Court at that stage was
not under an obligation to go into the matter or examine its
correctness. Whatever appears on the face of the
complaint/FIR/charge-sheet shall be taken into consideration
without any critical examination of the same. The offence ought to
appear ex facie on the complaint/FIR/charge-sheet and other
documentary evidence, if any, on record.
24. The question which is raised for consideration is that in what
circumstances and categories of cases, a criminal proceeding may be
quashed either in exercise of the extraordinary powers of the High
Court under Article 226 of the Constitution, or in the exercise of the
inherent powers of the High Court under Section 482 CrPC. This has
17
often been hotly debated before this Court and various High Courts.
Though in a series of decisions, this question has been answered on
several occasions by this Court, yet the same still comes up for
consideration and is seriously debated.
25. In this backdrop, the scope and ambit of the inherent
jurisdiction of the High Court under Section 482 CrPC has been
examined in the judgment of this Court in State of Haryana and
Others Vs. Bhajan Lal and Others(supra). The relevant para is
mentioned hereunder:-
“102. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and of
the principles of law enunciated by this Court in a series of
decisions relating to the exercise of the extraordinary
power under Article 226 or the inherent powers under
Section 482 of the Code which we have extracted and
reproduced above, we give the following categories of cases
by way of illustration wherein such power could be
exercised either to prevent abuse of the process of any
court or otherwise to secure the ends of justice, though it
may not be possible to lay down any precise, clearly defined
and sufficiently channelised and inflexible guidelines or
rigid formulae and to give an exhaustive list of myriad
kinds of cases wherein such power should be exercised.
(1) Where the allegations made in the first information report
or the complaint, even if they are taken at their face value
and accepted in their entirety do not prima facie constitute
any offence or make out a case against the accused.
(2) Where the allegations in the first information report and
other materials, if any, accompanying the FIR do not
disclose a cognizable offence, justifying an investigation by
18
police officers under Section 156(1) of the Code except
under an order of a Magistrate within the purview of
Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR or
complaint and the evidence collected in support of the
same do not disclose the commission of any offence and
make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable
offence, no investigation is permitted by a police officer
without an order of a Magistrate as contemplated under
Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no
prudent person can ever reach a just conclusion that there
is sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which
a criminal proceeding is instituted) to the institution and
continuance of the proceedings and/or where there is a
specific provision in the Code or the concerned Act,
providing efficacious redress for the grievance of the
aggrieved party.
(7) Where a criminal proceeding is manifestly attended with
mala fide and/or where the proceeding is maliciously
instituted with an ulterior motive for wreaking vengeance
on the accused and with a view to spite him due to private
and personal grudge.”
26. This Court has clarified the broad contours and parameters in
laying down the guidelines which have to be kept in mind by the High
Courts while exercising inherent powers under Section 482 CrPC.
The aforesaid principles laid down by this Court are illustrative and
not exhaustive. Nevertheless, it throws light on the circumstances
19
and the situation which is to be kept in mind when the High Court
exercises its inherent powers under Section 482 CrPC.
27. It has been further elucidated recently by this Court in Arnab
Manoranjan Goswami Vs. State of Maharashtra and Others18
where jurisdiction of the High Court under Article 226 of the
Constitution of India and Section 482 CrPC has been analysed at
great length.
28. It is thus settled that the exercise of inherent power of the High
Court is an extraordinary power which has to be exercised with great
care and circumspection before embarking to scrutinise the
complaint/FIR/charge-sheet in deciding whether the case is the
rarest of rare case, to scuttle the prosecution at its inception.
29. In the matter under consideration, if we try to analyse the
guidelines of which a reference has been made, can it be said that
the allegations in the complaint/FIR/charge-sheet do not make out
a case against the 2nd respondent or do they disclose the ingredients
of an offence alleged against the 2nd respondent or the allegations are
patently absurd and inherently improbable so that no prudent
18 2020 SCC Online SC 964
20
person can ever reach to such a conclusion that there is sufficient
ground for proceeding against the 2nd respondent.
30. In the instant case, the complaint/FIR/charge-sheet as noticed
above, does, however, lend credence to the questions posed. It is
settled that one is not supposed to dilate on this score, or intend to
present that the allegations in the complaint will have to be accepted
on the face of it and the truth or falsity of which would not be gone
into by the Court at this stage, as noticed above, whether the
allegations in the complaint were true is to be decided on the basis
of the evidence led at the stage of trial and the observations on this
score in the case of Nagpur Steel & Alloys Pvt. Ltd. Vs. P.
Radhakrishna and Others19 ought to be noticed. In para 3, 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,
19 1997 SCC(Cri) 1073
21
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.”
31. Be it noted that in the matter of exercise of inherent power by
the High Court, the only requirement is to see whether continuance
of the proceedings would be a total abuse of the process of the Court.
The Criminal Procedure Code contains a detailed procedure for
investigation, framing of charge and trial, and in the event when the
High Court is desirous of putting a halt to the known procedure of
law, it must use proper circumspection with great care and caution
to interfere in the complaint/FIR/charge-sheet in exercise of its
inherent jurisdiction.
32. In the instant case, on a careful reading of the
complaint/FIR/charge-sheet, 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 406 and 420 IPC cannot
be said to be absent on the basis of the allegations in the
complaint/FIR/charge-sheet. We would like to add that whether the
allegations in the complaint are otherwise correct or not, has to be
decided on the basis of the evidence to be led during the course of
22
trial. Simply because there is a remedy provided for breach of
contract or arbitral proceedings initiated at the instance of the
appellants, that does not by itself clothe the court to come to a
conclusion that civil remedy is the only remedy, and the initiation of
criminal proceedings, in any manner, will be an abuse of the process
of the court for exercising inherent powers of the High Court under
Section 482 CrPC for quashing such proceedings.
33. We have perused the pleadings of the parties, the
complaint/FIR/charge-sheet and orders of the Courts below and
have taken into consideration the material on record. After hearing
learned counsel for the parties, we are satisfied that the issue
involved in the matter under consideration is not a case in which the
criminal trial should have been short-circuited. The High Court was
not justified in quashing the criminal proceedings in exercise of its
inherent jurisdiction. The High Court has primarily adverted on two
circumstances, (i) that it was a case of termination of agreement to
sell on account of an alleged breach of the contract and (ii) the fact
that the arbitral proceedings have been initiated at the instance of
the appellants. Both the alleged circumstances noticed by the High
23
Court, in our view, are unsustainable in law. The facts narrated in
the present complaint/FIR/charge-sheet indeed reveal the
commercial transaction but that is hardly a reason for holding that
the offence of cheating would elude from such transaction. In fact,
many a times, offence of cheating is committed in the course of
commercial transactions and the illustrations have been set out
under Sections 415, 418 and 420 IPC. Similar observations have
been made by this Court in Trisuns Chemical Industry Vs. Rajesh
Agarwal and Ors.(supra) :-
“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 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 [1992 Supp (1) SCC 335]”
34. So far as initiation of arbitral proceedings is concerned, there is
no correlation with the criminal proceedings. That apart, the High
Court has not even looked into the charge-sheet filed against 2nd
24
respondent which was on record to reach at the conclusion that any
criminal offence as stated is prima facie being made out and veracity
of it indeed be examined in the course of criminal trial.
35. The submission made by Mr. P. Chidambaram, learned senior
counsel for 2nd respondent showing bonafides and taking us through
the documentary evidence annexed to the counter affidavit on record
to show that it was a simple case of termination because of breach of
terms of the contract giving rise to a purely civil dispute or initiation
of the arbitral proceedings would not attract the provisions under
Sections 406, 420, 34 IPC may not hold good at this stage for the
reason what is being suggested by the learned counsel for the 2nd
respondent can be his defence during the course of trial but was not
open to be examined by the High Court to take a judicial notice and
for quashing of the criminal proceedings in exercise of its inherent
powers under Section 482 CrPC.
36. So far as the further submission made by learned counsel for
the 2nd respondent that if the High Court has failed to consider the
charge-sheet and other material available on record, the matter be
remitted back to the High Court for re-consideration afresh in
25
accordance with law. There may be some substance in what being
urged by learned counsel for the 2nd respondent but for the reason
that matter has been argued threadbare before us, and learned
counsel for the parties have taken us through the record of criminal
proceedings. After going through the record, we are satisfied that
there was sufficient material available as manifests from the record
of criminal proceedings to connect the 2nd respondent in the
commission of crime. Consequently, we do not consider it
appropriate to remit the matter back at this stage, as it would be an
exercise in futility; on the contrary, it will just delay the proceedings,
and hold the criminal trial at bay, which deserves to be expedited.
37. At the time of conclusion of the proceedings, IA has been filed
at the instance of 2nd respondent initiating criminal proceedings
against the 1st appellant under Section 340 read with Section 195
CrPC. We find that such applications are being filed for ulterior
reasons which we seriously deprecate. The said IA is accordingly
dismissed.
38. Consequently, the appeal succeeds and is accordingly allowed.
The judgment of the High Court impugned dated 15th March, 2019 is
26
hereby set aside. We, however, make it clear that what has been
observed by us is only for the purpose of disposal of the present
appeal. The trial Court may proceed with the trial expeditiously
without being influenced by the observations made in this judgment
or taken as an expression of our opinion.
39. All pending IAs stand disposed of.
……………………………J.
(INDU MALHOTRA)
.…………………………..J.
(AJAY RASTOGI)
NEW DELHI
March 10, 2021
