Pepsi Foods Limited and Another v Special Judicial Magistrate and Others
Supreme Court of India

4 November 1997
Cr.A. No. 1019 of 1997
The Judgment was delivered by : D. P. Wadhwa, J.
1.  Leave granted.
2.  The appellants are aggrieved by the judgment dated September 23, 1996 of the Division Bench of the High Court of Judicature at Allahabad (Lucknow Bench) dismissing their writ petition filed u/arts. 226 and 227 of the Constitution. The appellants sought quashing of the compliant filed against them u/s. 7 read with S. 16 of the Prevention of Food Adulteration Act, 1954 (for short 'the Act'). The prayers in the writ petition were worded as under:
"(a) issue a writ of prohibition or a writ, order or direction in the nature of prohibition, prohibiting the Opposite Party Number-1 to proceed with case No.699 of 1994 (Anurag Narain vs. Nitin Sachdeva and others);
(b) issue a writ of certiorari or a writ, order or direction in the nature of certiorari quashing the proceedings in Case no. 699 of 1994 together with the consequential order dated 9.5.1994 and the complaint dated 6.5.1993 in so far as it pertains to the petitioners;
(c) issue a writ of mandamus or a writ, order or direction in the nature of mandamus commanding the Opposite Party Number-1 not to proceed with the Case No.699 or 1994 during the pendency of the aforesaid writ petition;
(d) issue any other appropriate writ, order or direction which this Hon'ble Court may deem just and necessary in the circumstances of the case may also be passed; and
(e) to allow the writ petition with costs".
3.  There are two appellants, second appellant is the Managing Director of first appellant, The respondents are three. First respondent is the court where the appellants alongwith others have been summoned for having committed offences under Sections 7/16 of the Act. The second respondent is the complainant and the third respondent is the State of Uttar Pradesh.
4.  The allegation in the complaint is that complainant was sold a bottle of beverage under the brand "Lehar Pepsi" which was adulterated. The bottle was purchased by the complainant on September 13, 1993. He filed the complaint on May 6, 1994. After recording preliminary evidence the Magistrate passed orders summoning the appellants and others on May 9, 1994. It appears that when the summons reached the appellants they immediately approached the High Court seeking aforesaid reliefs. The High Court, however, refused to entertain the writ petition on the ground that the appellants should approach the 1st respondent for their discharge u/s. 245 of the Code of Criminal Procedure (for short 'the Code'), if the complaint did not disclose commission of any offence by the appellants and the Court considered the charge to be groundless. The High Court did not approve of the appellants approaching it under writ jurisdiction when sufficient remedy was available under the Code.
5. The High Court was also of the opinion that it could not be said at that stage that the allegations in the complaint were so absurd and inherently improbable on the basis of which no prudent man could ever reach a just conclusion that there existed no sufficient ground for proceedings against the accused. On the plea of the appellants that the provisions of S. 13(2) of the Act read with Rule 9-A of the Rules framed under the Act were violated and on that account the inquiry or trial stood vitiated the High Court said that the appellants could well approach the court for that purpose and that it was no stage for the High Court to record its finding. yet another plea of the appellants that provisions of S. 203 and 245 (2) of the Code did not provide an adequate remedy for a person charged on flimsy grounds and that in view of the decision of this Court in State of Haryana vs. Chaudhary Bhajan Lal and others (JT 1990 (4) S.C. 650 [(1992) supp. 1 SCC 335 1990 Indlaw SC 91] . the court should interfere also did not find favour with the High Court. It was of the opinion that Chaudhary Bhajan Lal's case pertained to a cognizable offence where police had taken cognizance of the matter and in a complaint case the Magistrate was empowered to discharge the accused at any stage of the trial if it was found that the charge was groundless.
6.  There are as many as 12 accused in the complaint. If we refer to the order summoning them on the basis of the allegations made in the complaint and evidence available on record it appeared to the 1st respondent, the Magistrate, that all the 12 accused had committed offence punishable under Sections 7/16 of the Act and they were therefore summoned to appear before the court to stand their trial. before we advert to the allegations made in the complaint and the preliminary evidence brought on record which led to the first respondent to summon the accused, we may briefly refer to the provisions of law as contained in the Act and the Code.
7. U/s. 7 of the Act, in relevant part, no person shall himself or by any person on his behalf manufacture for sale, or store, sell or distribute any adulterated food. U/cl. (ia) of S. 2 of the Act which defines 'adulterated" an article of food shall be deemed to be adulterated-
(a) if he sold by a vendor is not of the nature, substance or quality demanded by the purchaser and is to his prejudice, or is not of the nature, substance or quality which it purports or is represented to be;
(b) if the article contains any other substance which affects, or if the article is so processed as to affect injuriously the nature, substance or quality thereof;
(c) if any inferior or cheaper substance has been substituted wholly or in part for the article so as to affect injuriously the nature, substance or quality thereof;
(d) if any constituent of the article has been wholly or in part abstracted so as to affect injuriously the nature, substance or quality thereof;
(e) if the article had been prepared, packed or kept under insanitary conditions whereby it has become contaminated or injurious to health;
(f) if the article consists wholly or in part of any filthy, putrid, rotten, decomposed or diseased animal or, vegetable substance or is insect-infested or is otherwise unfit for human consumption;
8.  Under clause (viiib) "manufacture" includes any process incidental or ancillary to the manufacture of an article of food. "Food" is also defined to mean any article used as food or drink for human consumption (S. 2 (v). S. 16 of the Act prescribes penalties for contravention of the provisions of the Act. The sentence can vary from minimum imprisonment of three to six months to two or three years and imposition of prescribed amount of fine.
9.  If we look at the Act and the Rules the primary duty for enforcement of the provisions of the Act is on the Food Inspector and Public Analyst appointed under the Act. Powers of Food Inspector and procedure to be followed by him are prescribed. U/s. 20 of the Act no prosecution for an offence under Act except for offences u/s. 14 and 14A shall be instituted except with the written consent of the Central Government or the State Government or a person authorised in that behalf by general or special order, by the central Government or the State Government. However, there is proviso to the section under which a purchaser can also file a complaint and this reads as under:
"Provided that a prosecution for an offence under this Act may be instituted by a purchaser [or recognised consumer association] referred to in Section 12, if he [or it] produces in court a copy of the report of the public analyst along with the complaint." U/s. 12 of the Act a purchaser may also have food analysed. This Section reads as under:
"12. Purchaser may have food analysed. Nothing contained in this act shall be held to prevent a purchaser f any article of food other than a food inspector or a recognised consumer association, whether the purchaser is a member of that association or not, from having such article analysed by the public analyst on payment of such fees as may be prescribed and from receiving from the public analyst a report of his analysis; Provided that such purchaser or recognised consumer association shall inform the vendor at the time of purchase of his or its intention to have such article so analysed; provided further that the provisions of sub-section (1), sub s. (2) and sub-s. (3) of S. 11 shall, as far as may be, apply to a purchaser of article of food or recognised consumer association who or which intends to have such article so analysed, as they apply to a food inspector who takes a sample of food for analysis; Provided also that if the report of the public analyst shows that the article of food is adulterated, the purchaser or recognised consumer association shall be entitled to get refund of the fees paid by him or it under this section."
10.  In S. 12 we find reference of S. 11 which is reproduced as under:-
"11. Procedure to be followed by food inspectors, 91) When a food inspector takes a sample of food for analysis, he shall
(a) give notice in writing then and there of his intention to have it so analysed to the person from whom he has taken the sample and to the person, if any, whose name, address and other particulars have been disclosed under section 14-A;
(b) except in special cases provided by rules under this Act, divide the sample then and there into three parts and mark and seal or fasten up each part in such a manner as its nature permits and take the signature or thump impression of the person from whom the sample has been taken in such place and in such manner as may be prescribed; Provided that where such person refuses to sign or put his thumb impression the food inspector shall call upon one or more witnesses and take his or the signatures or thumb-impressions, as the case may be, in lieu of the signature or thumb-impression of such person;
(c) (i) send one of the parts for analysis to the public analyst under intimation to the Local (Health) Authority; and (ii) send the remaining two parts to the Local (Health) Authority for the purposes of sub-s. (2) of this Section and sub-section (2-A) and (2-F) of S. 13. (2) Where the part of the sample sent to the public analyst under sub-cl. (i) of cl. (c) of sub-s. (1) is lost or damaged, the Local (Health) Authority shall, on a requisition made to it by the public analyst or the food inspector despatch one of the parts of the sample sent to it under sub cl. (ii) of the said cl. (c) to the public analyst for analysis. (3) When a sample of any article of food [or adulterant] is taken under sub-s. (1) or sub-s. (2) of Section 10, [the food inspector shall, by the immediately succeeding working day, send a sample of the article of food or adulterant or both, as the case may be], in accordance with the rules prescribed for sampling to the public analyst for the local area concerned."
11. S. 13 deals with the report of the public analyst. It provides, among other things, that a public analyst shall deliver, in such form as may be prescribed, a report of the result of the analysis of any article of food submitted to him for analysis. Any document purporting to be a report signed by a public analyst, subject to certain inspections, may be used as evidence of the facts therein in any proceeding under the Act (S. 13 (5)). Since no argument was addressed before us on the violation of S. 13(2) read with Rule 9-A we do not think it necessary either to set out or to refer to the same the Code provides the procedure as to how a complaint can be filed and how the court will proceed in the matter. (The word 'court' and 'magistrate' are synonymous here) Since for an offence under the Act imprisonment for a term exceeds two years it would be a case tried as warrant-case. One of the modes by which a court can take cognizance of an offence is on filing of a complaint containing facts which constitutes such offence. A Magistrate taking cognizance of an offence on complaint shall examine upon oath the complainant and the witnesses present, if any, and the substance of such examination shall be reduced to writing and shall be signed by the complainant and the witness, and also by the Magistrate (Ss. 190 and 200 of the Code). If in the opinion of a Magistrate taking cognizance of an offence there is sufficient ground for proceeding, and the case appears to be a warrant case, he may issue a warrant, or, of he thinks fit, summons for causing the accused to be brought or to appear before him on a date fixed by him (Subs. (1) of S. 204). Whenever a Magistrate issues a summon, he may, if he sees reasons so to do, dispense with the personal attendance of the accused and permit him to appear by his pleader (sub-s. (1) of S. 205).
12. In the present case though it was a warrant case the first respondent issued summons but he did not dispense with personal attendance of the accused. Chapter XIX-B of the Code provides for trial of warrant cases instituted on a complaint. We may noted Ss. 244 and 245 falling under this Chapter:
"244. Evidence for prosecution.-
(1) When, in any warrant-case instituted otherwise than on a police report, the accused appears or is brought before a Magistrate, the Magistrate shall proceed to hear the prosecution and take all such evidence as may be produced in support of the prosecution.
(2) The Magistrate may, on the application of the prosecution, issue a summons to any of its witnesses directing him to attend or to produce any document or other thing. 245. When accused shall be discharged.-
(1) If, upon taking all the evidence referred to in section 244, the Magistrate considers, for reasons to be recorded, that no case against the accused has been made out which, if unrebutted, would warrant his conviction, the Magistrate shall discharge him.
(2) Nothing in this section shall be deemed to prevent a Magistrate from discharging the accused at any previous stage of the case if, for reasons to be recorded by such Magistrate, he considers the charge to be groundless".
13. U/art. 227 of the Constitution of India High Court has power of superintendence over courts. Cl. (1) provides that every High Court shall have superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction. High Court has power to issue certain writs, orders and directions u/art. 226 of the Constitution. Cl. (1) of Article 226, which is relevant, is as under:
"(1) Notwithstanding anything in art. 32 every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including [writs in the nature of habeas corpus, mandamus, prohibition, quo warrant to and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purposes.]"
14.  Having set out the relevant provisions of law to some extent and before we consider the merits and demerits of the case and the jurisdiction of the High Court u/art. 226 and 227 of the Constitution, we may refer to the complaint and the evidence which led the 1st respondent to issue summons to the appellants and others for an offence u/s. 7 of the Act.
15.  The complainant (second respondent) is a student. He says that he is appearing in examinations is various State and Central Services. On September 13, 1993, he went to a shop known as "The Flavours Fast Food and Cool Corner" and purchased 500 m1. chilled bottle of 'Lehar Pepsi' for drinking. Nitin Sachdeva is stated to have (Accused named as No.1) sold the bottle to the complainant. After he had consumed the beverage contained in the bottle, the complainant felt a strange taste. On observation, he found that the bottle contained many white particles. The complainant felt giddy and nauseated. One Divya Trivedi was present at the shop as a customer. Another shopkeeper by the name Lal Bahadur Singh who owned a shop opposite to from where the complainant purchased the 'Lehar Pepsi' bottle was also present. They were shown the bottle by the complainant. The beverage was put in two glasses to see the while particles clearly and Nitin Sachdeva accepted the presence of the particles. Suspecting adulteration, the complainant told Nitin Sachdeva that he would take sample of the beverage for analysis. He thereupon gave notice to Nitin Sachdeva, purchased three clean and dry empty new plastic jars from hereby Suri Stores and filled up the same with the beverage and which, according to the complainant, were sealed as per rules, wrapped in the paper and tied with thick yearn. Nitin Sachdeva signed the jars and put stamp of his shop thereon. The complainant obtained the stamp of the shop "The Flavour Fast Food and Cool Corner" on a separate paper and one jar of the sample with stamp used in the sample was deposited by the complainant in he office of the State Public Analyst, Uttar Pradesh, Lucknow on September 20, 1993 for analysis. The complainant says that the three jars were sealed in the presence of the witnesses and he also recorded their statements in writing including that of Nitin Sachdeva. The complainant also made a report to the Police on September 13, 1993 itself about the incident.
16.  The complainant then started making enquiries. Crown cap of the bottle had the words "Residency Foods and Beverages, Sataria, Jaunpur" printed. Nitin Sachdeva told the complainant with the bottle was supplied by the distributor "A.Kumar & Company", Lucknow whose proprietor was A.K. Jain (Accused No.2 and 3). The complainant was also told that A.K. Jain was the person responsible for conduct of the day-to-day business of A.K. Kumar and Company. Nitin Sachdeva also informed the complainant that marketing of Lehar Pepsi was done by "Taj Service Ltd." Lucknow (Accused No.4). From A.K Jain, the complainant learnt that Anil Nigam (Accused No.5) was the person responsible for the conduct of business of Taj Services Ltd. Yet, on further enquiry, the complainant learnt that bottling of Lehar Pepsi was done by Residency Foods and Beverages Ltd., Jaunpur (Accused No.6) and mr. N.K. Hariharan (Accused No.7) was the manager and person responsible for the conduct of day-to-day business of the said company and Mark Yadav (Accused No.8) was the Distribution Manager of that Company. V.S. Gurmany has been pleaded as Accused No.9 being the Director of Residency Foods and Beverages Ltd. The complainant then states that "upon enquiry and information from A.K. Jain, it was learnt that the manufacturer of the bottle of sample is "Pepsi Foods Ltd.", New Delhi (Accused No.10) and its incharge and the person responsible for conduct of business is Ravi Dhariwal, Executive Director (Accused No.11) and P.M. Sinha (Accused No.12) its Managing Director. The complainant then says that he personally contacted Ravi Dhariwal on December 4, 1993 who asked Subrat Padhi, Field Manager to look into the grievance of the complainant but no action was taken. The State Public Analyst, Lucknow gave his report on October 29, 1993 and expressed his opinion that due to the presence of fungus in the sample, the sample was adulterated. The complainant says that out of the two jars of the sample, he had deposited one jar with Nitin Sachdeva and other one was in his possession. The complainant then says that he was taken serious ill and could recover only after two months. That is all the complaint is about. On the basis of the allegations, the complainant alleges that Accused Nos. 1 to 12, by selling, distributing, manufacturing and marketing adulterated ad harmful for health 'Lehar Pepsi, have committed an offence u/s. 7(1) of the Act which is punishable u/s. 16(1A) of the Act. With the complaint report of the Public Analyst was filed.
17.  In the order dated May 9, 1994, summoning the accused, the 1st respondent very breifly records the averments made in the complaint and then notes as under:
"In support of the complaint allegations, the Complainant has recorded his statement and presented the statement on oath of the witness Lal Bahadur Singh and as documentary evidence notice annexure-1, receipt for deposit of the bottle of sample for analysis with Public Analyst annexure-3A and application to the Public Analyst for analysis annexure-3B, report of the incident with O.S. Ghazipur annexure-4, cash memo issued by the vendor annexure-5, statement of Executive Director of Pepsi Foods Ltd. annexure-6, report of the Public Analyst annexures 7A and 7B and prescriptions of the doctor for treatment have been filed."
18.  Then the first respondent records that on the basis of the evidence available on record, prima facie, it appeared that the complainant got the sample sealed and analysed in accordance with the procedure prescribed which sample was found to be adulterated. He, therefore, ordered that "based on the evidence available on record, I, prima facie, find that the accused Nos.1 to 12 have committed offence under Section 7/16 of the Prevention of Food and Adulteration Act. Accordingly, accused Nos. 1 to 12 are directed to appear before Court on 23.05.1994 through summons."
19.  When the summons were served on the appellants, they approached the High Court seeking reliefs as aforementioned bu the High Court declined to interfere.
20.  The questions which arise for consideration are if in the circumstances of the case, the appellants rightly approached the High Court u/arts. 226 and 227 of the Constitution and if so, was the High Court justified in refusing to grant any relief to the appellants because of the view which it tool of the law and the facts of the case. We have, thus, to examine the power of the High Court u/arts. 226 and 227 of the Constitution and s. 482 of the Code.
21.  It is settled that High Court can exercise its power of judicial review in criminal matters. In State of Haryana and others vs. Bhajan Lal and others 1992 Supp (1) SCC 335 1990 Indlaw SC 91, this court examined the extraordinary power u/art. 226 of the Constitution and also the inherent powers u/s. 482 of the Code which it said could be exercised by the High Court either to prevent abuse of the process of any court or otherwise to secure the ends of justice. While laying down certain guidelines where the court will exercise jurisdiction under these provisions, it was also stated that these guidelines could not be inflexible or laying rigid formulae to the followed by the facts and circumstances of each case but with the sole purpose to prevent abuse of the process of any court or otherwise to secure the ends of justice. One of such guideline is 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.
22. U/art. 227 the power of superintendence by the High Court is not only of administrative nature but is also of judicial nature. This article confers vast powers on the High Court to prevent the abuse of the process of law by the inferior courts and to see that the stream of administration of justice remains clean and pure, The power conferred on the High Court u/arts. 226 and 227 of the Constitution and u/s. 482 of the Code have no limits but more the power more due care and caution is to be exercised invoking these powers. When the exercise of powers could be u/art. 227 or S. 482 of the Code it may not always be necessary to invoke the provisions of Art. 226. Some of the decisions of this Court laying down principles for the exercise of powers by the High Court u/arts. 226 and 227 may be referred to.
23.  In Waryam Singh and another vs. Amarnath and another [AIR 1954 SC 215 = 1954 SCR 565 1954 Indlaw SC 180]. this Court considered the scope of Art. 227. It was held that the High Court has not only administrative superintendence over the subordinate courts and tribunals but it has also the power of judicial superintendence. The court approved the decision of the Calcutta High Court in Dalmia Jain Airways Ltd. vs. Sukumar Mukherjee [AIR 1951 Cal 193 1950 Indlaw CAL 142 (SB)] where the High Court said that the power of superintendence conferred by Art. 227 was to be exercised most sparingly and only in appropriate cases in order to keep the Subordinate Courts within the bounds of their authority and not for correcting their mere errors. The Court said that it was, therefore, a case which called for an interference by the Court of the Judicial Commissioner and it acted quite properly in doing so.
24.  In Babhutmal Raichand Oswal vs. Laxmibai R. Tarte and another AIR 1975 SC 1297 = (1975) 1 SCC 858 1975 Indlaw SC 594.  this Court again reaffirmed that the power of superintendence of High Court u/art. 227 being extraordinary was to be exercised most sparingly and only in appropriate cases. It said that the High Court could not, while exercising jurisdiction under Article 227, interfere with the findings of fact recorded by the subordinate court or tribunal and that its function was limited to seeing that the subordiante court or tribunal functioned within the limits of its authority and that it could not correct mere errors of fact by examining the evidence or reappreciating it. The Court further said that the jurisdiction u/art. 227 could not be exercised, "as the cloak of an appeal in disguise. It does not lie in order to bring up an order or decision for rehearing of the issues raised in the proceedings." The Court referred with approval the dictum of Morris, L.J. in Rex vs. Northumberland Compensation Appeal Tribunal.
25.  In Nagendra Nath Bora vs. The Commissioner of Hills Division [1958 SCR 1240 1958 Indlaw SC 62].  This Court observed as under:
"It is thus, clear that the powers of judicial interference under Art.227 of the Constitution with orders of judicial or quasi judicial nature, are not greater than the power under Art of the Constitution, Under Art the power of interference may extend to quashing an impugned order on the ground of a mistake apparent on the face of the record. But under Art. 227 of the Constitution, the power of interference is limited to seeing that the tribunal functions within the limits of its authority."
26.  Nomenclature under which petition is filed is not quite relevant and that does not debar the court from exercising its jurisdiction which otherwise it possesses unless there is special procedure prescribed which procedure is mandatory. If in a case like the present one the court find that the appellants could not invoke its jurisdiction under Article 226, the court can certainly treat the petition one u/art. 227 or S. 482 of the Cod. it ay not however, be lost sight of that provisions exist in the Code of revision and appeal but sometime for immediate relief S. 482 of the Code or Art. 227 may have to be resorted to for correcting some grave errors that might be committed by the subordinate courts. The present petition though filed in the High Court as one u/arts. 226 and 227 could well be treated u/art. 227 of the Constitution.
27.  We have not been able to understand as to why it was necessary for the appellants to implead the first respondent as a party to the proceedings. There are no allegations of personal bias against the presiding officer. A court is not to be equated with a tribunal exercising quasi judicial powers. We would, therefore, strike out the name of the 1st respondent from the arrary of the parties.
28.  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 the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof and would that be sufficient for the complainant to succeed in bringing charge home to the accused. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused.
29.  No doubt the magistrate can discharge the accused at any stage of the trial if he considers the charge to be groundless, but that does not mean that the accused cannot approach the High Court u/s. 482 of the Code or Art. 227 of the Constitution to have the proceeding quashed against him when the complaint does not make out any case against him and still he must undergo the agony of a criminal trial. it was submitted before us on behalf of the State that in case we find that the High Court failed to exercise its jurisdiction the matter should be remanded back to it to consider if the complaint and the evidence on record did not make out any case against the appellants, If, however, we refer to the impugned judgment of the High Court it has come to the conclusion, though without referring to any material on record, that "in the present case it cannot be said at this stage that the allegations in the complaint are so absurd and inherently improbable on the basis of which no prudent man can ever reach a just conclusion that there exists no sufficient ground for proceedings against the accused." We do not think that the High Court was correct in coming to such a conclusion and in coming to that it has also foreclosed the matter for the magistrate as well, as the magistrate will not give any different conclusion on an application filed u/s. 245 of the Code.
30. The High Court says that the appellants could very well appear before the court and move an application u/s. 245(2) of the Code and that the magistrate could discharge them if he found the charge to be groundless and at the same time it has itself returned the finding that there are sufficient grounds for proceeding against the appellants. if we now refer to the facts of the case before us it is clear to us that not only that allegation against the appellants make out any case for an offence u/s. 7 of the Act and also that there is no basis for the complainant to make such allegation. The allegations in the complaint merely show that the appellants have given their brand name to "Residency Foods and Beverages Ltd." for bottling the beverage "Lehar Pepsi". The complaint does not shoe what is the role of the appellants in the manufacture of the beverage which is said to be adulterated. The only allegation is that the appellants are the manufacturer of bottle. There is no averment as to how the complainant could say so and also if the appellants manufactured the alleged bottle or its contents. His sole information is from A.K. Jain who is impleaded as accused No.3. The preliminary evidence on which the 1st respondent relied in issuing summon to the appellants also does not show as to how it could be said that the appellants are manufacturers of either the bottle or the beverage or both.
31. There is another aspect of the matter. The Central Government in the exercise of their powers u/s. 3 of the Essential Commodities Act, 1955 made the Fruit Products Order, 1955 (for short, the "Fruit Order"), It is not disputed that the beverage in the question is a "fruit product" within the meaning of cl. (2)(b) of the Fruit Order and that for the manufacture thereof certain licence is required. The fruit Order defines the manufacturer and also sets out as to what the manufacturer is required to do in regard to the packaging, making and labeling of containers of fruit products. One of such requirement is that when a bottle is used in packing any fruit products, it shall be so sealed that it cannot be opened without destroying the licence number and the special identification mark of the manufacture to be displayed on the top or neck of the bottle. The licence number of manufacturer shall also be exhibited prominently on the side label on such bottle [cl. (8)(1)(b)].
32.  Admittedly, the name of the first appellant is not mentioned as a manufacturer on the top cap of the bottle. It is not necessary to refer in detail to other requirements of the Fruit Order and the consequences of infringement of the Order and to the penalty to which the manufacturer would be exposed under the provisions of the Essential Commodities Act, 1955. We may, however, note that in The Hamdard Dawakhana (WAKF) Delhi & Anr. vs. The Union of India & Ors. [AIR 1965 SC 1167 = (1965) 2 SCR 192 1964 Indlaw SC 370], an argument was raised that the Fruit Order was invalid because its provision indicated that it was an Order which could have been appropriately issued under the  Prevention of Food Adulteration Act, 1954. This Court negatived this plea and said that the Fruit Order was validly issued under the Essential Commodities Act. What we find in the present case is that there was nothing on record to show if the appellants held the licence for the manufacture of the offending beverage and if, as noted above, the first appellant was the manufacturer thereof.
33.  It is no comfortable thought for the appellants to be told that they could appear before the court which is at a far off place in the Ghazipur in the State of Uttar Pradesh, seek their release on bail and then to either move an application u/s. 245(2) of the Code or to face trial when the complaint and the preliminary evidence recorded makes out no case against the. it is certainly one of those cases where there is an abuse of the process of the law and the courts and the High Court should not have shied away in exercising its jurisdiction. Provisions of Arts. 226 and 227 of the Constitution and S. 482 of the Code are devised to advance justice and not to frustrate it. In our view High Court should not have adopted such a rigid approach which certainly has led to miscarriage of justice in the case. Power of judicial review is discretionary but this was a case where the High Court should have exercised it.
34.  We, therefore, allow this appeal, set aside the order of the High Court and quash the complaint and proceeding against the appellants.
Appeal allowed.


K. Ramakrishna and Others v State of Bihar and Another
Supreme Court of India

22 September 2000
Appeal (crl.) 89 of 1999
The Judgment was delivered by : R. P. Sethi, J.
1. The appellants, who are senior officers of the United Bank of India, have been arraigned as accused persons in the charge-sheet submitted by the CBI in the Court of Judicial Magistrate, First Class, Patna, for the offences punishable under Sections 467, 468, 420 and 120B IPC. They filed a petition under Section 239 of the Code of Criminal Procedure praying for being discharged as, according to them, no case was disclosed either in the FIR or in the documents accompanying the final report submitted under Section 173 of the Code of Criminal Procedure. The Magistrate, vide his order dated 6 July 1996, rejected the application and directed the presence of the appellants in the court for framing of charges. Feeling aggrieved the appellants moved the High Court under Section 482 of the Code of Criminal Procedure with prayer for quashing the order of the Magistrate. Their prayer was rejected vide the order impugned, hence this appeal.
2. Mr. Altaf Ahmad, the learned Additional Solicitor General, appearing for the appellants submitted that the averments made in the FIR do not make out any case against his clients, inasmuch as none of them have even been named therein. He further submitted that without disputing the validity of the allegations made in the FIR and the accompanying documents, including the statements of witnesses recorded under Section 161 of the Criminal Procedure Code, no case is made out against anyone of the appellant under any penal law. Learned counsel appearing for the respondents has, however, submitted that the Judicial Magistrate has taken note of the case diaries and other record produced before him and found on facts, that as the appellants were posted on different administrative and responsible posts in the Bank at the time of occurrence which took place during their tenure, to their direct or indirect knowledge and in that commission, the possibility of their involvement in criminal conspiracy could not be ruled out. He has also drawn our attention towards paras 48, 63, 64, 71, 79, 82, 83, 84, 86, 110 and 112 of the case diaries to impress upon that there existed evidence against the appellants which justified the passing of the impugned orders. It is contended that this Court cannot re-evaluate the evidence at this stage for the purposes of prima-facie finding out as to whether the appellants had committed the offences with which they are directed to be charged.
3. The inherent powers of the High Court under Section 482 of the Code of Criminal Procedure can be exercised to quash proceedings, in appropriate cases either to prevent the abuse of process of any court or otherwise to secure the ends of justice. Ordinarily the criminal proceedings which are instituted against the accused must be tried and taken to logical conclusions under the Code of Criminal Procedure and the High Court should be reluctant to interfere with the proceedings at an interlocutory stage. However, there may be cases where the inherent jurisdiction to quash proceedings can and should be exercised. Where there is a legal bar against the institution or continuance of the criminal proceedings in respect of the alleged offence, the High Court should not be reluctant to exercise the inherent jurisdiction. Similarly where the allegations in the FIR or the complaint, even if they are taken at their face value do not constitute the offence alleged, or without appreciating the evidence but only merely by looking at the complaint or the FIR or the accompanying documents, the offence alleged is not disclosed, the person proceeded against in such a frivolous criminal litigation has to be saved.
4. The Trial Court under Section 239 and the High Court under Section 482 of the Code of Criminal Procedure is not called upon to embark upon an enquiry as to whether evidence in question is reliable or not or evidence relied upon is sufficient to proceed further or not. However, if upon the admitted facts and the documents relied upon by the complainant or the prosecution and without weighing or sifting of evidence, no case is made out, the criminal proceedings instituted against the accused are required to be dropped or quashed. As observed by this Court in Rajesh Bajaj v. State NCT of Delhi & Ors. [1999 (3) SCC 259], 1999 Indlaw SC 447 the High Court or the Magistrate are also not supposed to adopt a strict hyper-technical approach to sieve the complaint through a cullendar of finest gauzes for testing the ingredients of offence with which the accused is charged. Such an endeavour may be justified during trial but not during the initial stage.
5. In view of the legal position, as noticed above, it has to be seen whether the FIR or the documents accompanying the final report under Section 173 of the Criminal Procedure Code including the statements recorded by the prosecution under Section 161 of the Code of Criminal Procedure, discloses the commission of any offence against the appellants. The charge-sheet (Annexure B) filed does not refer to any withness or circumstance which the prosecution intends to use against the appellants. From the record it appears that for irregularities in the affairs of the Branch of the Bank, various complaints were lodged with the local police and the CBI against one Abhay Kant Jha in the years 1983, 1985 and 1987. In its report submitted on 30th November, 1987, the CBI recommended prosecution of said Shri Abhay Kant Jha along with Shri Sanjay Kumar Roy, respondent No.2 herein. To counter blast and ward off his involvement, the said Shri Sanjay Kumar Roy filed a complaint in the year 1987 with the Gandhi Maidan Police Station, Patna making accusations only against said Shri Abhay Kant Jha. However, while narrating the facts therein, he submitted that some of the appellants had approached him and his father for amicable payments of the bank's dues. It may be noticed that the CBI, after detailed investigations, addressed a confidential report to the bank recommending prosecution of Shri Abhay Kant Jha and 8 other persons including the aforesaid Sanjay Kumar Roy. None of the appellants was found to be, in any way, connected with the commission of the offences alleged in the complaint. As noticed earlier, the Trial Court on perusal of some paras in the case diary found that there existed evidence by which the appellants could be connected with the commission of the crime with which they were charged. We have perused all those paras and other parts of the case diary and find that the Trial Magistrate was not justified in his observations so far as the appellants are concerned. In paragraph 48 of the case diary the investigation officer has mentioned the fact of his visiting the branch office of the United Bank of India on 29. November 1987 at 11 a.m. where despite notice, the officers of the bank were not present. Thereafter he served notice upon the Assistant Manager asking him to cause the presence of all the officers in the police station on 15 December 1987. A fact is mentioned about the presence of the officers of the bank at the police station. In the statement of appellant No.1 is stated to have been recorded. It is recorded, "diary should be perused because documents of United Bank has not been received and proceedings is being initiated for finding it". It is mentioned that on number of occasions person was sent to the United bank, Bokaro for getting the papers of the case but papers were not received. A mention is made of "documents or papers have been received about which the proceedings should be initiated after the discussion with the ASP City". It mentions the compliance of order of ASP City. It records that the documents received were shown to S/Shri Balakrishna Rai and Ram Kishore Rai who after seeing the papers and documents told that they do not bear the signature of Shri Sanjay Kumar Roy. It is recorded that IO reached the office of the bank at Bokaro and searched Shri Ram Deo Yadav, Branch Manager but what was recovered upon search is not noticed. In paragraphs 112-113, the IO has recorded "I proceeded from Dhanbad in connection with the investigation of other case". On perusal of the other paragraphs of the case diaries we noticed not an iota of evidence against any appellants. We are conscious of the fact that in the normal circumstances, this Court or the High Court while deciding the sufficiency of the evidence would not resort to the perusal of the case diary and sit in appeal over the judgment of the investigating officer but as the Trial Magistrate is apparently shown to have recorded wrongly with respect to the facts allegedly noticed in the case diary, this Court vide order dated 17 July 1998 had no option but to direct the counsel of the respondent-State to produce the documents referred to in the report filed under Section 173 of the Code of Criminal Procedure. On perusal of FIR, the final report under Section 173 of the Code of Criminal Procedure and all other documents accompanying it, we are satisfied that no case is made out against any of the appellants and the pendency of the proceedings against them before the Magistrate is an abuse of process of court. The appeal is allowed and the order of the High Court dated 08 April, 1997 and Magistrate dated 06 July 1996 are quashed and the appellants discharged in terms of Section 239 of the Code of Criminal Procedure.


Rajesh Bajaj v State Nct of Delhi and Others
Supreme Court of India

12 March 1999
Criminal Appeal No. 295 of 1999
The Judgment was delivered by : K. T. Thomas, J.
Leave granted.
1.  Appellant lodged an FIR with the police for the offence under Section 420, Indian Penal Code. A Division Bench of the Delhi High Court quashed the FIR on the premise that the complaint did not disclose the offence. The Division Bench reminded them that jurisdiction under Article 226 of the Constitution or Section 482 of the Code of Criminal Procedure should be exercised sparingly and with circumspection for quashing criminal proceedings. Nevertheless, learned judges found that the case on hand could not pass the test laid down by this Court in State of Haryana vs. Bhajan Lal [1992 Suppl.(1) SCC 335]. 1990 Indlaw SC 91 The appellant is obviously aggrieved by the aforesaid course of action adopted by the High Court and hence he filed the special leave petition. In the complaint filed by the appellant before the police, on the strength of whom the FIR was prepared, the following averments, inter alia, were made. Appellant belongs to a company (M/s Passion Apparel Private Limited) which manufactures and exports readymade garments. On 15.11.1994 fifth respondent (Gagan Kishore Srivastava) Managing Director of M/s Avren Junge Mode Gumbh Haus Der Model approached the complainant for purchase of Readymade garments of various kinds and induced the appellant to believe that 5th respondent would pay the price of the said goods on receiving the invoice. Such payment was promised to be made within fifteen days from the date of invoice of the goods which complainant would despatch to Germany. Appellant believed the aforesaid representation as true and on that belief he despatched goods worth 4, 46,597.25 D.M. (Deutsch Marks). In March/April 1995 respondent on receipt of 37 different invoices got the goods released and sold them to others. But the respondent paid only a sum of 1, 15,194 D.M. Appellant further alleged in the complaint that respondent induced him to believe that he is a genuine dealer, but actually his intentions were not clear.
2.  Appellant also mentioned in the complaint that one of the representatives of appellants company went to Germany in October 1995 for realising the amount on the strength of an understanding reached between them that respondent would pay 2,00,000 D.M. in lieu of the remaining part of the price. However, the respondent did not honour even that subsequent understanding.
3.  Appellant further mentioned in the complaint that he came to know later about the modus operandi which respondent adopted in regard to certain other manufacturers who too were duped by the respondent to the tune of rupees ten crores. Learned Judges of the High Court have put forward three premises for quashing the FIR. First is that the complaint did not disclose commission of any offence of cheating punishable under Section 420 of the Indian Penal Code. Second is that there is nothing in the complaint to suggest that the petitioner had dishonest or fraudulent intention at the time the respondent exported goods worth 4, 46,597.25 D.M.by 37 different invoices. There is also nothing to indicate that the respondent, by deceiving the complainant, induced him to export goods worth4, 48,597.25 D.M. The third is that on the face of the allegations contained in the complaint it is purely a commercial transaction which in a nut-shell is that the seller did not pay the balance amount of the goods received by him as per his assurance.
4.  After quoting Section 415 of IPC learned judges proceeded to consider the main elements of the offence in the following lines:
"A bare reading of the definition of cheating would suggest that there are two elements thereof, namely, deception and dishonest intention to do or omit to do something. In order to bring a case within the first part of Section 415, it is essential, in the first place, that the person, who delivers the property should have been deceived before he makes the delivery; and in the second place that he should have been induced to do so fraudulently or dishonestly. Where property is fraudulently or dishonestly obtained, Section 415 would bring the said act within the ambit of cheating provided the property is to be obtained by deception."
5.  It was thereafter that the High Court scanned the complaint and found out that there is nothing in the complaint to suggest that the accused had dishonest or fraudulent intention at the time of export of goods.
6.  It is not necessary that a complainant should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. Splitting up of the definition into different components of the offence to make a meticulous scrutiny, whether all the ingredients have been precisely spelled out in the complaint, is not the need at this stage. If factual foundation for the offence has been laid in the complaint the court should not hasten to quash criminal proceedings during investigation stage merely on the premise that one or two ingredients have not been stated with details. For quashing an FIR (a step which is permitted only in extremely rare cases) the information in the complaint must be so bereft of even the basic facts which are absolutely necessary for making out the offence. In State of Haryana vs. Bhajan Lal 1990 Indlaw SC 91 (supra) this Court laid down the premise on which the FIR can be quashed in rare cases. The following observations made in the aforesaid decisions are a sound reminder:
"We also give a note of caution to the effect that the power of quashing a criminal proceeding should be exercised very sparingly and with circumspection and that too in the rarest of rare cases; that the court will not be justified in embarking upon an enquiry as to the reliability or genuineness or otherwise of the allegations made in the FIR or the complaint and that the extraordinary or inherent powers do not confer an arbitrary jurisdiction on the court to act according to its whim or caprice."
7.  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, manya cheatings were committed in the course of commercial and also money transactions. One of the illustrations set out under Section 415 of the Indian Penal Code (illustrations f) is worthy of notice now:
"(f) A intentionally deceives Z into a belief that A means to repay any money that Z may lend to him and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats."
8.  The crux of the postulate is the intention of the person who induces the victim of his representation and not the nature of the transaction which would become decisive in discerning whether there was commission of offence or not. The complainant has stated in the body of the complaint that he was induced to believe that respondent would honour payment on receipt of invoices, and that the complainant realised later that the intentions of the respondent were not clear. He also mentioned that respondent after receiving the goods have sold them to others and still he did not pay the money. Such averments would prima facie make out a case for investigation by the authorities.
9.  The High Court seems to have adopted a strictly hyper-technical approach and sieved the complaint through a cullendar of finest gauzes for testing the ingredients under Section 415, IPC. Such an endeavour may be justified during trial, but certainly not during the stage of investigation. At any rate, it is too premature a stage for the High Court to step in and stall the investigation by declaring that it is a commercial transaction simplicitor wherein no semblance of criminal offence is involved.
10.  The appellant is, therefore, right in contending that the FIR should not have been quashed in this case and the investigation should have been allowed to proceed.
We, therefore, allow this appeal and set aside the impugned order.
Appeal allowed


Indian Oil Corporation v NEPC India Limited and Others
Supreme Court of India

20 July 2006
Cr.A. No 834 of 2002
The Judgment was delivered by: R. V. Raveendran, J.
1.  These appeals are filed against the common order dated 29.3.2001 passed by the Madras High Court allowing Crl.O.P. Nos.2418 of 1999 and 1563 of 2000. The said two petitions were filed by the respondents herein u/s. 482 of Criminal Procedure Code ('Code' for short) for quashing the complaints filed by the appellant against them in C.C. No.299 of 1999 on the file of Judicial Magistrate No.6, Coimbatore and C.C. No. 286 of 1998 on the file of Judicial Magistrate, Alandur (Chennai).
2.  The appellant (Indian Oil Corporation, for short 'IOC') entered into two contracts, one with the first respondent (NEPC India Ltd.) and the other with its sister company Skyline NEPC Limited ('Skyline' for short) agreeing to supply to them aviation turbine fuel and aviation lubricants (together referred to as "aircraft fuel"). According to the appellant, in respect of the aircraft fuel supplied under the said contracts, the first respondent became due in a sum of Rs.5,28,23,501.90 and Skyline became due in a sum of Rs.13,12,76,421.25 as on 29.4.1997.
3.  The first respondent hypothecated its two Fokker F27-500 Aircrafts, bearing Registration No. VT-NEJ (12684) and VT-NEK (10687) to the appellant under Deed of Hypothecation dated 1.5.1997, to secure the outstanding amounts. Cl. (2) of the said Deed provided that the two aircrafts with all parts and accessories stood hypothecated to IOC by way of charge and as security for payment of the amounts due, with effect from the date of hypothecation. Cl. (3) read with the schedule set out the instalments schedule for payment of the amount due.
4. Under clause (6), NEPC India declared that it would not assign, sell, pledge, charge, underlet or otherwise encumber or part with the possession, custody or beneficial interest in respect of the two aircrafts without the previous written consent of IOC. It also undertook not to do any act which may diminish the value of the hypothecated property without clearing the entire outstanding amount. Cl. (9) provided that if NEPC India failed to pay any of the installments with interest within the stipulated time,or if any undertaking or assurance given by NEPC India was found to be false, IOC shall have the "right to take possession of the hypothecated property" and sell the same by public auction or by private contract and appropriate the sale proceeds towards the outstanding dues without recourse to court of law. Cl. 12 confirmed that NEPC India had handed over the title deeds relating to the aircraft to IOC, and agreed to receive them back only after paying the amounts due. It is stated that Skyline also hypothecated its aircraft (VT-ECP) under a separate Hypothecation Deed dated 14.5.1997. It is further stated that a tripartite agreement dated 6.5.1997 was entered among IOC, NEPC India and Skyline setting out the mode of payment of the dues and recovery in the event of default.
5.  As NEPC India failed to pay the first two installments as per schedule, IOC stopped supply of aircraft fuel on 3.6.1997. However, subsequently, under a fresh agreement dated 20.9.1997, a revised payment schedule was agreed and IOC agreed to re-commence supply of aircraft fuel on 'cash and carry' basis. Even this arrangement came to an end as the installments were not paid.
6.  Apprehending that NEPC India may remove the hypothecated aircraft (VT-NEJ) from Coimbatore Airport to a place outside its reach, IOC filed C.S. No.425 of 1997 in the Madras High Court seeking a mandatory injunction to the Airport Authority of India and Director General of Civil Aviation to detain the said aircraft stationed at Coimbatore Airport, u/s. 8 of the Aircraft Act, 1934, so as to enable it to take possession thereof.
7. The High Court granted an interim injunction on 16.9.1997 restraining NEPC India from removing the aircraft (VT-NEJ) from Coimbatore Airport. In regard to the other hypothecated aircraft (VT-NEK) kept at Meenambakkam (Chennai) Airport, IOC filed a suit (OS No.3327/1998) in the City Civil Court, Chennai for a similar mandatory injunction.
8.  IOC filed the two complaints against NEPC India and its two Directors (respondents 2 & 3 herein) in July, 1998 u/s. 200 of Code of Criminal Procedure alleging unauthorized removal of the engines and certain other parts from the two hypothecated aircraft. They are:
"(i) C.C. No. 299 of 1999 before the Judicial Magistrate No.6, Coimbatore, regarding Aircraft bearing No. VT-NEJ.
(ii) C.C. No. 286 of 1998 before the Judicial Magistrate, Alandur (Chennai) regarding aircraft bearing No. VT NEK."
9.  The relevant averments in the complaint in C.C. No.299/1999 (Coimbatore Court) reads as under:
"The complainant states that on 24.4.98, IOC had come to know that NEPC India Limited in total disregard to the orders of the Hon. High Court, Madras had clandestinely removed both the engines and certain other parts from the Aircraft VT-NEJ Aircraft Sl.No. 10684 (Fokker F27-500) stationed at the Coimbatore Airport, Coimbatore.
The complainant states that, besides the above, the act of NEPC India Limited in removing the engines and certain other parts from the Aircraft VT-NEJ Aircraft Sl. No. 10684 (Fokker F27- 500) stationed at the Coimbatore Airport, Coimbatore is against the terms of the hypothecation deed dated 01.5.1997 and 20.9.1997 will amount to theft, criminal breach of trust, and cheating which are offences punishable u/s. 378 (Theft), 403 (Dishonest Misappropriation of Property), 405 (Criminal Breach of Trust), 415 (Cheating), 425 (Mischief) of the Indian Penal Code. No notice was given to IOC in this regard."
10.  The relevant averments in the complaint in C.C. No.286/1998 (Alandur Court) read as under :-
" With a view to defeat the said right of IOC (that is right to take possession and sell the aircraft), NEPC India removed the engines of the Aircraft (VT-NEK) stationed at the Meenambakkam Airport
The complainant states that, the act of NEPC India Limited in removing the engines and certain other parts from the Aircraft VT-NEK Aircraft Sl. No. 10687 (Fokker F27-500) stationed at the Meenabakkam Airport, Chennai is against the terms of the hypothecation deed dated 1.5.1997 as well as the terms of the agreement dated 20.9.1997 and will amount to offences punishable u/s. 378 (Theft), 403(Dishonest Misappropriation of Property), 405 (Criminal Breach of Trust), 415 (Cheating), 425 (Mischief) of the India Penal Code. No notice was given to IOC in this regard."
Both the complaints also contain the following common allegations:
"The complainant states that the accused had with fraudulent intention to cheat and defraud IOC had induced IOC to resume supply of Aircraft fuel on Cash and Carry basis, by undertaking to clear the outstanding amount of Rs.18 crores approximately within the time stipulated in the hypothecation agreements. However, the accused had failed to clear the said outstanding amounts and had breached the terms of the hypothecation agreements. Subsequently on 20.9.2007, an agreement was entered into between IOC and M/s NEPC India Limited.
As per the terms of the above agreement M/s NEPC India Limited had agreed to clear the outstanding amount of Rs.18 crores approximately due to IOC from M/s NEPC India Limited and M/s Skyline NEPC Limited within a time frame. However, M/s NEPC India Limited had failed to keep up the schedule of payments mentioned in the said agreements.
The facts narrated above will clearly show that IOC has got every right to take possession of the Aircraft VT-NEK as well as VT-NEJ. Only with a view to defeat the said right of IOC, M/s NEPC India has removed the engines of the aircraft. .."
11.  The respondents herein filed Crl. O.P. No.1563 of 2000 and Crl.O.P. No.2418 of 1999 respectively u/s. 482 of Cr.P.C. for quashing the said two complaints on the following two grounds:
(i) The complaints related to purely contractual disputes of a civil nature in respect of which IOC had already sought injunctive reliefs and money decrees.
(ii) Even if all the allegations in the complaints were taken as true, they did not constitute any criminal offence as defined under sections 378, 403, 405, 415 or 425 IPC.
12.  The High Court by common judgment dated 23.3.2001 allowed both the petitions and quashed the two complaints. It accepted the second ground urged by the Respondents herein, but rejected the first ground. The said order of the High Court is under challenge in these appeals. On the rival contentions urged, the following points arise for consideration :
(i) Whether existence or availment of civil remedy in respect of disputes arising from breach of contract, bars remedy under criminal law?
(ii) Whether the allegations in the complaint, if accepted on face value, constitute any offence under sections 378, 403, 405, 415 or 425 IPC ?
Re : Point No. (i) :
13.  The principles relating to exercise of jurisdiction u/s. 482 of the Code of Criminal Procedure to quash complaints and criminal proceedings have been stated and reiterated by this Court in several decisions. To mention a few - Madhavrao Jiwaji Rao Scindia v. Sambhajirao Chandrojirao Angre [1988 (1) SCC 692], 1988 Indlaw SC 599 State of Haryana vs. Bhajanlal [1992 Supp (1) SCC 335], Rupan Deol Bajaj vs. Kanwar Pal Singh Gill [1995 (6) SCC 194], 1995 Indlaw SC 1896 Central Bureau of Investigation v. Duncans Agro Industries Ltd., [1996 (5) SCC 591], 1996 Indlaw SC 2982 State of Bihar vs. Rajendra Agrawalla [1996 (8) SCC 164], 1996 Indlaw SC 4034 Rajesh Bajaj v. State NCT of Delhi, [1999 (3) SCC 259], 1999 Indlaw SC 447 Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [2000 (3) SCC 269], 2000 Indlaw SC 666 Hridaya Ranjan Prasad Verma v. State of Bihar [2000 (4) SCC 168], 2000 Indlaw SC 248 M. Krishnan vs Vijay Kumar [2001 (8) SCC 645], 2001 Indlaw SC 21143 and Zandu Phamaceutical Works Ltd. v. Mohd. Sharaful Haque [2005 (1) SCC 122]. 2004 Indlaw SC 899 The principles, relevant to our purpose are:
(i) A complaint can be quashed where the allegations made in 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 the case alleged against the accused.
14. For this purpose, the complaint has to be examined as a whole, but without examining the merits of the allegations. Neither a detailed inquiry nor a meticulous analysis of the material nor an assessment of the reliability or genuineness of the allegations in the complaint, is warranted while examining prayer for quashing of a complaint.
(ii) A complaint may also be quashed where it is a clear abuse of the process of the court, as when the criminal proceeding is found to have been initiated with malafides/malice for wreaking vengeance or to cause harm, or where the allegations are absurd and inherently improbable.
(iii) The power to quash shall not, however, be used to stifle or scuttle a legitimate prosecution. The power should be used sparingly and with abundant caution.
(iv) The complaint is not required to verbatim reproduce the legal ingredients of the offence alleged. If the necessary factual foundation is laid in the complaint, merely on the ground that a few ingredients have not been stated in detail, the proceedings should not be quashed.
15. Quashing of the complaint is warranted only where the complaint is so bereft of even the basic facts which are absolutely necessary for making out the offence.
(v) A given set of facts may make out :
(a) purely a civil wrong; or
(b) purely a criminal offence; or
(c) a civil wrong as also a criminal offence.
16. A commercial transaction or a contractual dispute, apart from furnishing a cause of action for seeking remedy in civil law, may also involve a criminal offence. As the nature and scope of a civil proceedings are different from a criminal proceeding, the mere fact that the complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available or has been availed, is not by itself a ground to quash the criminal proceedings. The test is whether the allegations in the complaint disclose a criminal offence or not.
17.  While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. Such a tendency is seen in several family disputes also, leading to irretrievable break down of marriages/families.
18. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be deprecated and discouraged.
19.  In G. Sagar Suri vs. State of UP [2000 (2) SCC 636], 2000 Indlaw SC 603 this Court observed :
"It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which High Court is to exercise its jurisdiction u/s. 482 of the Code. Jurisdiction under this Section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice."
20. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law.One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power u/s. 250 Cr.P.C. more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may.
21.  Coming to the facts of this case, it is no doubt true that IOC has initiated several civil proceedings to safeguard its interests and recover the amounts due. It has filed C.S. No.425/1997 in the Madras High Court and O.S. No.3327/1998 in the City Civil Court, Chennai seeking injunctive reliefs to restrain the NEPC India from removing its aircrafts so that it can exercise its right to possess the Aircrafts. It has also filed two more suits for recovery of the amounts due to it for the supplies made, that is CS No.998/1999 against NEPC India (for recovery of Rs.5,28,23,501/90) and CS No.11/2000 against Skyline (for recovery of Rs.13,12,76,421/25), in the Madras High Court.
22. IOC has also initiated proceedings for winding up NEPC India and filed a petition seeking initiation of proceedings for contempt for alleged disobedience of the orders of temporary injunction. These acts show that civil remedies were and are available in law and IOC has taken recourse to such remedies. But it does not follow therefrom that criminal law remedy is barred or IOC is estopped from seeking such remedy.
23.  The respondents, no doubt, have stated that they had no intention to cheat or dishonestly divert or misappropriate the hypothecated aircraft or any parts thereof.
24. They have taken pains to point out that the aircrafts are continued to be stationed at Chennai and Coimbatore Airports; that the two engines of VT-NEK though removed from the aircraft, are still lying at Madras Airport; that the two DART 552 TR engines of VT-NEJ were dismantled for the purpose of overhauling/repairing; that they were fitted to another Aircraft (VT- NEH) which had been taken on lease from 'M/s Aircraft Financing and Trading BV' and that the said Aircraft (VT-NEH) has been detained by the lessor for its dues; that the two engines which were meant to be fitted to VT-NEJ (in places of the removed engines),
25.  when sent for overhauling to M/s Hunting Aeromotive, U.K., were detained by them on account of a dispute relating to their bills; and that in these peculiar circumstances beyond their control, no dishonest intent could be attributed to them. But these are defences that will have to be put forth and considered during the trial. Defences that may be available, or facts/aspects when established during the trial, may lead to acquittal, are not grounds for quashing the complaint at the threshold.
26. At this stage, we are only concerned with the question whether the averments in the complaint spell out the ingredients of a criminal offence or not.
27.  The High Court was, therefore, justified in rejecting the contention of the respondents that the criminal proceedings should be quashed in view of the pendency of several civil proceedings.
Re : Point No.(ii)
28.  This takes us to the question whether the allegations made in the complaint, when taken on their face value as true and correct, constitute offences defined under sections 378, 403, 405, 415 and 425 IPCLearned counsel for the appellant restricted his submissions only to sections 405, 415 and 425, thereby fairly conceding that the averments in the complaint do not contain the averments necessary to make out the ingredients of the offence of theft (s. 378) or dishonest misappropriation of property (s. 403). Section 378
29.  S. 378 defines theft. It states : "whoever, intending to take dishonestly any movable property out of the possession of any person without that person's consent, moves that property in order to such taking, is said to commit theft."
30. The averments in the complaint clearly show that neither the aircrafts nor their engines were ever in the possession of IOC. It is admitted that they were in the possession of NEPC India at all relevant times. The question of NEPC committing theft of something in its own possession does not arise. The appellant has therefore rightly not pressed the matter with reference to s. 378. Section 403
31.  S. 403 deals with the offence of dishonest misappropriation of property. It provides that "whoever dishonestly misappropriates or converts to his own use any movable property", shall be punished with imprisonment of either description for a term which may extend to 2 years or with fine or both. The basic requirement for attracting the section are:
"(i) the movable property in question should belong to a person other than the accused;
(ii) the accused should wrongly appropriate or convert such property to his own use; and
(iii) there should be dishonest intention on the part of the accused."
32. Here again the basic requirement is that the subject matter of dishonest misappropriation or conversion should be someone else's movable property. When NEPC India owns/possesses the aircraft, it obviously cannot 'misappropriate or convert to its own use' such aircraft or parts thereof. Therefore s. 403 is also not attracted. Section 405
33.  We will next consider whether the allegations in the complaint make out a case of criminal breach of trust u/s. 405 which is extracted below :
"405. Criminal breach of trust. Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits "criminal breach of trust".
34.  A careful reading of the section shows that a criminal breach of trust involves the following ingredients:
"(a) a person should have been entrusted with property, or entrusted with dominion over property;
(b) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so;
(c) that such misappropriation, conversion,"
35. use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.
36.  The following are examples (which include the illustrations u/s. 405) where there is 'entrustment' :
"(i) An 'Executor' of a will, with reference to the estate of the deceased bequeathed to legatees.
(ii) A 'Guardian' with reference to a property of a minor or person of unsound mind.
(iii) A 'Trustee' holding a property in trust, with reference to the beneficiary.
(iv) A 'Warehouse Keeper' with reference to the goods stored by a depositor.
(v) A carrier with reference to goods entrusted for transport belonging to the consignor/consignee.
(vi) A servant or agent with reference to the property of the master or principal.
(vii) A pledgee with reference to the goods pledged by the owner/borrower.
(viii) A debtor, with reference to a property held in trust on behalf of the creditor in whose favour he has executed a deed of pledge-cum-trust. (Under such a deed, the owner pledges his movable property, generally vehicle/machinery to the creditor, thereby delivering possession of the movable property to the creditor and the creditor in turn delivers back the pledged movable property to the debtor, to be held in trust and operated by the debtor)."
37.  In Chelloor Mankkal Narayan Ittiravi Nambudiri v. State of Travancore, Cochin [AIR 1953 SC 478], 1952 Indlaw SC 115 this Court held :
" to constitute an offence of criminal breach of trust, it is essential that the prosecution must prove first of all that the accused was entrusted with some property or with any dominion or power over it. It has to be established further that in respect of the property so entrusted, there was dishonest misappropriation or dishonest conversion or dishonest use or disposal in violation of a direction of law or legal contract, by the accused himself or by someone else which he willingly suffered to do.
It follows almost axiomatically from this definition that the ownership or beneficial interest in the property in respect of which criminal breach of trust is alleged to have been committed, must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit." [Emphasis supplied]
38.  In Jaswantrai Manilal Akhaney v. State of Bombay [AIR 1956 SC 575], 1956 Indlaw SC 16 this Court reiterated that the first ingredient to be proved in respect of a criminal breach of trust is 'entrustment'. It, however, clarified:
" .. But when S. 405 which defines "criminal breach of trust" speaks of a person being in any manner entrusted with property, it does not contemplate the creation of a trust with all the technicalities of the law of trust. It contemplates the creation of a relationship whereby the owner of property makes it over to another person to be retained by him until a certain contingency arises or to be disposed of by him on the happening of a certain event."
39.  The question is whether there is 'entrustment' in an hypothecation? Hypothecation is a mode of creating a security without delivery of title or possession. Both ownership of the movable property and possession thereof, remain with the debtor. The creditor has an equitable charge over the property and is given a right to take possession and sell the hypothecated movables to recover his dues (note : we are not expressing any opinion on the question whether possession can be taken by the creditor, without or with recourse to a court of law). The creditor may also have the right to claim payment from the sale proceeds (if such proceeds are identifiable and available).
40. The following definitions of the term 'hypothecation' in P. Ramanatha Aiyar's Advanced Law Lexicon (Third (2005) Edition, Vol.2, Pages 2179 and 2180) are relevant:
"Hypothecation: It is the act of pledging an asset as security for borrowing, without parting with its possession or ownership. The borrower enters into an agreement with the lender to hand over the possession of the hypothecated asset whenever called upon to do so. The charge of hypothecation is then converted into that of a pledge and the lender enjoys the rights of a pledgee."
41. 'Hypothecation' means a charge in or upon any movable property, existing in future, created by a borrower in favour of a secured creditor, without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallization of such charge into fixed charge on movable property.
(Borrowed from s. 2(n) of Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002)"
42. But there is no 'entrustment of the property' or 'entrustment of dominion over the property' by the hypothecatee (creditor) to the hypothecator (debtor) in an hypothecation. When possession has remained with the debtor/owner and when the creditor has neither ownership nor beneficial interest, obviously there cannot be any entrustment by the creditor.
43.  The question directly arose for consideration in Central Bureau of Investigation v. Duncans Agro Industries Ltd., Calcutta [1996 (5) SCC 591]. 1996 Indlaw SC 2982 It related to a complaint against the accused for offences of criminal breach of trust. It was alleged that a floating charge was created by the accused debtor on the goods by way of security under a deed of hypothecation, in favour of a bank to cover credit facility and that the said goods were disposed of by the debtor.
44. It was contended that the disposal of the goods amounted to criminal breach of trust. Negativing the said contention, this Court after stating the principle as to when a complaint can be quashed at the threshold, held thus:
" .a serious dispute has been raised by the learned counsel as to whether on the face of the allegations, an offence of criminal breach of trust is constituted or not. In our view, the expression 'entrusted with property' or 'with any dominion over property' has been used in a wide sense in Section 405, I.P.C. Such expression includes all cases in which goods are entrusted, that is, voluntarily handed over for a specific purpose and dishonestly disposed of in violation of law or in violation of contract.
The expression 'entrusted' appearing in Section 405, I.P.C. is not necessarily a term of law. It has wide and different implications in different contexts. It is, however, necessary that the ownership or beneficial interest in the ownership of the property entrusted in respect of which offence is alleged to have been committed must be in some person other than the accused and the latter must hold it on account of some person or in some way for his benefit. The expression 'trust' in Section 405, I.P.C. is a comprehensive expression and has been used to denote various kinds of relationship like the relationship of trustee and beneficiary, bailor and bailee, master and servant, pledger and pledgee.
When some goods are hypothecated by a person to another person, the ownership of the goods still remains with the person who has hypothecated such goods.
The property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or the beneficial interest in or ownership of it must be in other person and the offender must hold such property in trust for such other person or for his benefit. In a case of pledge, the pledged article belongs to some other person but the same is kept in trust by the pledgee.
In the instant case, a floating charge was made on the goods by way of security to cover up credit facility. In our view, in such case for disposing of the goods covering the security against credit facility, the offence of criminal breach of trust is not committed." (emphasis supplied)
45.  The allegations in the complaints are that aircrafts and the engines fitted therein belong to NEPC India, and that a charge was created thereon by NEPC India, in favour of IOC, by way of hypothecation to secure repayment of the amounts due to IOC. The terms of hypothecation extracted in the complaint show that the ownership and possession of the aircrafts continued with NEPC India. Possession of the aircraft, neither actual nor symbolic, was delivered to IOC. NEPC India was entitled to use the aircraft and maintain it in good state of repairs.
46. IOC was given the right to take possession of the hypothecated aircrafts only in the event of any default as mentioned in the Hypothecation Deed. It is not the case of the IOC that it took possession of the aircraft in exercise of the right vested in it under the Deed of Hypothecation.
Thus, as the possession of the aircraft remained all along with NEPC India in its capacity as the owner and the Deed of Hypothecation merely created a charge over the aircrafts with a right to take possession in the event of default, it cannot be said that there was either entrustment of the aircrafts or entrustment of the dominion over the aircrafts by IOC to NEPC India. The very first requirement of section 405, that is the person accused of criminal breach of trust must have been "entrusted with the property" or "entrusted with any dominion over property" is, therefore, absent.
47.  Learned counsel for the appellant, however, sought to distinguish the decision in Duncan Agro 1996 Indlaw SC 2982 on two grounds. It was pointed out that Duncan Agro 1996 Indlaw SC 2982 itself recognizes that there can be criminal breach of trust where a beneficial interest exists in the other person, and the offender holds the property in trust for such person. It is submitted that when the deed of hypothecation was executed by NEPC India in favour of IOC, the hypothecation created a beneficial interest in the property in favour of IOC, and vis-'-vis such 'beneficial interest' of IOC, the possession of the property by NEPC India was in 'trust'.
In support of this contention, reliance was placed on a decision of the Sind Judicial Commissioner in Gobindram C. Motwani v. Emperor : (1938) 39 Cr.L.J. 509. In that case the complaint was that the accused had hypothecated the goods in their shop as collateral security against an advance and had agreed to hold the goods and proceeds thereof in trust and to pay the proceeds as and when received by them.
48.  However, as they did not pay the proceeds, the complaint was that they committed criminal breach of trust. The Magistrate took the view that as the hypothecated goods were still the property of the accused, they could not commit criminal breach of trust in respect of their own property.
The Judicial Commissioner did not agree. He held:
"The test in this case appears to me to be whether the owner of the goods, the accused, created an equitable charge over the goods in their possession when they executed the trust receipt. If they did so, they held the goods as trustees, they were "in some manner entrusted" with the goods, and if they dealt with them in violation of the terms of the trust, they committed an offence under this section, provided they had the necessary criminal intent.
I can myself see no reason why it should be said that by this trust receipt the accused did not give a beneficial interest in the goods to the applicant and did not hold the goods, with which they were entrusted as legal owners in trust for the applicant.
That being so, I think the learned Magistrate was wrong in his decision that the accused could not be guilty of criminal breach of trust because the goods were their own property."
49.  It is evident that the said observations were made on the peculiar facts of that case where the Commissioner concluded that the goods were held by the accused in trust as trustee in view of execution of a 'Trust Receipt' by the accused.
50. The facts were somewhat similar to example (viii) in Para 17 above. Further the Judicial Commissioner finally observed that there was so much room for an honest difference of opinion as to the rights and liabilities of the parties to the trust receipt that no useful purpose could be served in interfering with the order of discharge by the Magistrate. The said decision is therefore of no assistance to the appellant.
51. If the observations relied on by the appellant are to be interpreted as holding that the debtor holds the hypothecated goods, in trust for the creditor, then they are contrary to the decision of this Court in Duncan Agro 1996 Indlaw SC 2982 (supra) which specifically holds that when goods are hypothecated, the owner does not hold the goods in trust for the creditor.
52.  A charge over the hypothecated goods in favour of the creditor, cannot be said to create a beneficial interest in the creditor, until and unless the creditor in exercise of his rights under the deed, takes possession.
53. The term 'beneficial interest' has a specific meaning and connotation. When a trust is created vesting a property in the trustee, the right of the beneficiary against the trustee (who is the owner of the trust property) is known as the 'beneficial interest'. The trustee has the power of management and the beneficiary has the right of enjoyment. Whenever there is a breach of any duty imposed on the trustee with reference to the trust property or the beneficiary, he commits a breach of trust.
54.  On the other hand, when the owner of a goods hypothecates a movable property in favour of a creditor, no 'beneficial interest' is created in favour of the creditor nor does the owner become a trustee in regard to the property hypothecated. The right of the creditor under a deed of hypothecation is the right to enforce the charge created under the deed of hypothecation in the manner specified in the deed and by no stretch of imagination can such right be equated to a beneficial interest of a beneficiary in a property held in trust. Therefore, the first contention that a creditor has a beneficial interest in the hypothecated property and the owner is in the position of a trustee with reference to the creditor is liable to be rejected.
55.  The second ground on which learned counsel for the appellant sought to distinguish Duncan Agro 1996 Indlaw SC 2982 is that the said case dealt with a hypothecation deed creating a floating charge, whereas the case on hand related to a fixed charge and therefore, the principle laid down in Duncan Agro 1996 Indlaw SC 2982 will not apply.
56. This contention is also without basis. The principle stated in Duncan Agro 1996 Indlaw SC 2982 will apply in regard to all types of hypothecations. It makes no difference whether the charge created by the deed of hypothecation is a floating charge or a fixed charge. Where a specific existing property is hypothecated what is created is a 'fixed' charge. The floating charge refers to a charge created generally against the assets held by the debtor at any given point of time during the subsistence of the deed of hypothecation. For example where a borrower hypothecates his stock-in-trade in favour of the Bank creating a floating charge, the stock-in-trade, held by the borrower as on the date of hypothecation may be sold or disposed of by the debtor without reference to the creditor.
57.  But as and when new stock-in-trade is manufactured or received, the charge attaches to such future stock- in-trade until it is disposed of. The creditor has the right at any given point of time to exercise his right by converting the hypothecation into a pledge by taking possession of the stock-in-trade held by the debtor at that point of time. The principle in Duncan Agro 1996 Indlaw SC 2982 is based on the requirement of 'entrustment' and not with reference to the 'floating' nature of the charge. The second contention also has no merit.
58.  We accordingly hold that the basic and very first ingredient of criminal breach of trust, that is entrustment, is missing and therefore, even if all the allegations in the complaint are taken at their face value as true, no case of 'criminal breach of trust' as defined u/s. 405 IPC can be made out against NEPC India. Section 415
The essential ingredients of the offence of 'cheating' are:
(i) deception of a person either by making a false or misleading representation or by other action or omission
(ii) fraudulent or dishonest inducement of that person to either deliver any property or to consent to the retention thereof by any person or to intentionally induce that person 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.
59.  The High Court has held that mere breach of a contractual terms would not amount to cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction and in the absence of an allegation that the accused had a fraudulent or dishonest intention while making a promise, there is no 'cheating'. The High Court has relied on several decisions of this Court wherein this Court has held that dishonest intent at the time of making the promise/inducement is necessary, in addition to the subsequent failure to fulfil the promise. Illustrations (f) and (g) to s. 415 makes this position clear:
"(f) A intentionally deceives Z into a belief that A means to repay any money that Z may lend to him and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats."
"(g). A intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery. A cheats; but if A, at the time of obtaining the money, intends to deliver the indigo plant, and afterwards breaks his contact and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract."
In Rajesh Bajaj 1999 Indlaw SC 447 (supra), this Court held:
"It is not necessary that a complainant should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. ..
The crux of the postulate is the intention of the person who induces the victim of his representation and not the nature of the transaction which would become decisive in discerning whether there was commission of offence or not. The complainant has stated in the body of the complaint that he was induced to believe that respondent would honour payment on receipt of invoices, and that the complainant realised later that the intentions of the respondent were not clear.
He also mentioned that respondent after receiving the goods have sold them to others and still he did not pay the money. Such averments would prima facie make out a case for investigation by the authorities."
In Hridaya Ranjan Prasad Verma 2000 Indlaw SC 248 (supra), this Court held :
"On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived.
In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.
In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed.
Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed."
60.  In this case, the complaints clearly allege that the accused with fraudulent intention to cheat and defraud the IOC, had induced IOC to resume supply of aircraft fuel on cash and carry basis, by entering into a further agreement dated 20.9.1997 and undertaking to clear the outstanding amount of Rs.18 crores approximately within the time stipulated in the Hypothecation Agreements.
61. The sum and substance of the said allegation read with other averments extracted above, is that NEPC India, having committed default in paying the sum of Rs.18 crores, entered into a fresh agreement dated 20.9.1997 agreeing to clear the outstanding as per a fresh schedule, with the dishonest and fraudulent intention of pre-empting and avoiding any action by IOC in terms of the hypothecation deeds to take possession of the aircrafts. Though the supplies after 20.9.1997 were on cash and carry basis, the fraudulent intention is alleged to emanate from the promise under the said agreement to make payment, thereby preventing immediate seizure (taking possession) of the aircrafts by IOC.
62. This allegation made in addition to the allegation relating to removal of engines, has been lost sight of by the High Court. All that is to be seen is whether the necessary allegations exist in the complaint to bring the case within s. 415. We are clearly of the view that the allegations in the complaint constitute such an offence. We are not concerned with the proof of such allegations or ultimate outcome of trial at this stage. Section 425
S. 425 IPC provides :
"Whoever, with intent to cause, or knowing that he is likely to cause, wrongful loss or damage to the public or to any person, causes the destruction of any property, or any such change in any property or in the situation thereof as destroys or diminishes its value or utility, or affects it injuriously, commits "mischief". The three ingredients of the Section are :
(i) intention to cause or knowledge that he is likely to cause wrongful loss or damage to the public or to any person;
(ii) causing destruction of some property or any change in the property or in the situation thereof; and
(iii) the change so made destroying or diminishing the value or utility or affecting it injuriously. For the purpose of section 425, ownership or possession of the property are not relevant.
Even if the property belongs to the accused himself, if the ingredients are made out, mischief is committed, as is evident from illustrations (d) and (e) to s. 425.
The complaints clearly allege that NEPC India removed the engines thereby making a change in the aircrafts and that such removal has diminished the value and utility of the aircrafts and affected them injuriously, thereby causing loss and damage to IOC, which has the right to possess the entire aircraft.
The allegations clearly constitute the offence of 'mischief'. Here again, we are not concerned with the proof or ultimate decision."
Conclusion:
63.  In view of the above discussion, we find that the High Court was not justified in quashing the complaints/criminal proceedings in entirety. The allegations in the complaint are sufficient to constitute offences u/ss. 415 and 425 of IPC.
64. We accordingly allow these appeals in part and set aside the order of the High Court insofar it quashes the complaint u/ss. 415 and 425. As a consequence, the Judicial Magistrate, Coimbatore and the Judicial Magistrate, Alandur before whom the matters were pending, shall proceed with the matters in accordance with law in regard to the complaints filed by IOC in so far as offences u/ss. 415 and 425 of IPC. Parties to bear their respective costs.
Appeals allowed.