Brief Facts
- The Complainant, a supplier of horse feed, filed a complaint against the Appellants, alleging offences u/s 120B, 406 and 420 of the Indian Penal Code, 1860.
- The Complainant’s firm had been supplying horse feed, barley, and oats to Delhi Race Club (1940) Ltd. since 1990. In 1995, the Complainant was instructed to issue future bills in the name of the Delhi Horse Trainers Association (‘DHTA’).
- Until 2017, the DHTA paid these bills regularly, but subsequent bills amounting to Rs. 9,11,434 remained unpaid. The Complainant claimed that the DHTA’s office bearers had cheated them by dishonestly obtaining goods in bad faith.
- The Trial Court initially took cognizance of the Complaint but postponed the issuance of process and decided to conduct the enquiry under section 202 of the CrPC. On recording the statement of the Complainant and one more witness, the Magistrate Court issued the process to the accused for the offence under section 406 of the IPC.
- The accused/Appellant preferred the Petition u/s 482, CrPC to challenge the order of issuance of process, alleging that the dispute was of civil nature and the alleged offences were not attracted in the instant matter.
- The Allahabad High Court rejected this application, finding prima facie that the accused company’s intention to withhold payment was mala fide.
- Aggrieved by this decision, the accused appealed to the Supreme Court.
Issues
- Scope of Enquiry under section 202 CrPC at the stage of taking the cognizance and issuance of process to the accused.
- Scope of Enquiry by the Magistrate at the stage of exercising jurisdiction under section 156(3) of the CrPC.
- Distinction between criminal breach of trust and cheating.
- Difference between the breach of contract and criminal breach of trust.
- Whether the offence of criminal breach of trust can be made out when the goods have been delivered in furtherance of transaction of sale and there is no entrustment?
Held
- The Supreme Court quashed the order of cognizance as well as the order of the High Court. It was concluded that case of predominantly a civil dispute of recovery of money and continuation of the criminal proceeding would be nothing but abuse of the process of law. It was further held that vicarious liability cannot be automatically fasted on the office bearers of the corporation when there are no specific allegation against such office bearers.
Scope of Enquiry at the stage of proceedings under Section 156(3) of the CrPC
- The power of the Magistrate to order police investigation under Section 156(3) of the CrPC. What is sought to be conveyed in the said decision is that when the Magistrate orders police investigation under Section 156(3) of the CrPC he does not take cognizance upon the complaint. It is only upon receipt of the police report that the Magistrate may take cognizance. If at the stage of pre-cognizance, the Magistrate is expected to be careful or to put it in other words, the Magistrate is obliged to look into the complaint threadbare so as to reach to a prima facie conclusion whether the offence is disclosed or not, then he is expected to be more careful when he is actually taking cognizance upon a private complaint and ordering issue of process.
Scope of Enquiry at the stage of issuance of processes to the accused
- This Court has time and again reminded that 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. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The 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.
Difference between criminal breach of Trust and Cheating
- There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously.
- It is high time that the police officers across the country are imparted proper training in law so as to understand the fine distinction between the offence of cheating viz-a-viz criminal breach of trust. Both offences are independent and distinct. The two offences cannot coexist simultaneously in the same set of facts. They are antithetical to each other. The two provisions of the IPC (now BNS, 2023) are not twins that they cannot survive without each other.
Difference between criminal breach of trust and breach of agreement
- Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well.
- In case of sale of goods, the property passes to the purchaser from the seller when the goods are delivered. Once the property in the goods passes to the purchaser, it cannot be said that the purchaser was entrusted with the property of the seller. Without entrustment of property, there cannot be any criminal breach of trust. Thus, prosecution of cases on charge of criminal breach of trust, for failure to pay the consideration amount in case of sale of goods is flawed to the core. There can be civil remedy for the non-payment of the consideration amount, but no criminal case will be maintainable for it.