MANU/SC/0106/2001 Equivalent Citation: 2001(1)ACR726(SC), AIR2001SC1226, 2001(1)ALD(Cri)551, 2001ALLMR(Cri)446(SC), 2001ALLMR(Cri)446(SC), 2001(1)ALT(Cri)234, 2001(1)CGLJ503, 2001CriLJ1246, JT2001(2)SC588, 2001-2-LW(Crl)676, 2001(2)SCALE75, (2001)3SCC513,

[2001]1SCR1059 IN THE SUPREME COURT OF INDIA Decided On: 16.02.2001 Appellants:Alpic Finance Ltd. vs. Respondent:P. Sadasivan and Anr. Hon'ble Judges/Coram: S. Rajendra Babu and K. G. Balakrishnan, JJ Counsels: For Appellant/Petitioner/Plaintiff: P.S. Mishra, Sr. Adv., Mangal Charan S. Inna, S.R. Setia, Advs For Respondents/Defendant: R. Venkataramani, Sr. Adv., S. Sunil, Satya Mitra Garg, Advs. Subject: Criminal Catch Words Mentioned IN Acts/Rules/Orders: Code of Criminal Procedure, 1973 (CrPC) - Section 93, Code of Criminal Procedure, 1973 (CrPC) Section 200, Code of Criminal Procedure, 1973 (CrPC) - Section 482; Indian Penal Code 1860, (IPC) Section 34, Indian Penal Code 1860, (IPC) - Section 120; Prevention of Corruption Act, 1988 - Section 5(2) Cases Referred: Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi and Others MANU/SC/0173/1976 ; State of Haryana and Ors. v. Bhajan Lal and Others MANU/SC/0115/1992 ; Rupan Deol Bajaj (Mrs.) and Anr. v. Kanwar Pal Singh Gill & MANU/SC/0080/1996 ; Madhavrao Jiwajirao Scindia and Others v. Sambhajirao chandrojirao Angre and Others MANU/SC/0261/1988 ; Trisuns Chemical Industry v. Rajesh Agarwal and Other MANU/SC/0581/1999 ; Pratibha Rani v. Suraj Kumar MANU/SC/0090/1985 Citing Reference:

Discussed 5 Dissented 1 Case Note: (1) Code of Criminal Procedure, 1973 - Section 482 - Criminal proceedingsQuashing Finance by appellant to purchase equipmentsDefault by respondent in repayment Appellant filing complaint on allegation of cheating and misappro-priation under Sections 420, 406, 423, 424 read with Section 120B, I.P.C. Whether Magistrate justified in taking cognizance and issuing process?Held, noAct of civil nature not to decide it of its criminal outfitMain offence alleged being of cheating But no allegation that respondents made any wilful misrepresentationNo allegation of fraud or dishonest inducement on part of respondentsDifficult to discern element of deception in whole transaction Evident that appellant having oblique motive of causing harassment to respondentsSingle Judge of High Court perfectly justified in quashing criminal proceedings. Merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. It is an anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. The two types of actions are quite different in content, scope and import. 1985 (2) SCC 370 and 1999 (8) SCC 686, applied. When somebody suffers injury to his person, property or reputation, he may have remedies both under civil and criminal law. The injury alleged may form basis of civil claim and may also constitute the ingredients of some crime punishable under criminal law. When there is dispute between the parties arising out of a transaction involving passing of valuable properties between them, the aggrieved person may have right to sue for damages or compensation and at the same time, law permits the victim to proceed against the wrongdoer for having committed an offence of criminal breach of trust or cheating. To deceive is to induce a man to believe that a thing is true which is false and which the person practising the deceit knows or believes to be false. It must also be shown that there existed a fraudulent and dishonest intention at the time of commission of the offence. It is trite law and common sense that an honest man entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debt, he does not necessarily evade the debt by deception. There is no allegation that the respondents made any wilful misrepresentation. Even

according to the appellant, parties entered into a valid lease agreement and the grievance of the appellant is that the respondents failed to discharge their contractual obligations. In the complaint, there is no allegation that there was fraud or dishonest inducement on the part of the respondents and thereby the respondents parted with the property. Moreover, the appellant has no case that the respondents obtained the article by any fraudulent inducement or by wilful misrepresentation. Having regard to the facts and circumstances, it is difficult to discern an element of deception in the whole transaction, whereas it is palpably evident that the appellant had an oblique motive of causing harassment to the respondents by seizing the entire articles through magisterial proceedings. Therefore, the single Judge of the High Court was perfectly justified in quashing the criminal proceedings. (2)Code of Criminal Procedure, 1973 - Section 482 - Criminal Proceedings when can be quashed?No case made out or complaint not disclosing essential ingredients of offence allegedAllegations in complaint patently absurd and inherently improbableDiscretion in issuing process being capricious and arbitraryComplaint suffering from fundamental legal defectsComplaint can be quashed on such ground(s). The order of Magistrate issuing process against the accused could be quashed under the following circumstances : (1)Where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused ; (2)Where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused ; (3)Where the discretion exercised by the Magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible ; and (4)Where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of complaint by legally competent authority and the like. 1976 (3) SCC 736, applied. (3)F.I.R./Complaint - When liable to be quashed ? . Power to quash F.I.R. can be exercised where the allegations made in the F.I.R. or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. However, at the stage of quashing F.I.R. or complaint, the High Court is not justified in embarking upon an enquiry as to the probability, reliability or genuineness of the allegations made therein. JUDGMENT Balakrishnan, J. 1. Leave granted. 2. The appellant is a registered company having its head office at Mumbai. It is a non-banking financial institution functioning under the regulation of the Reserve Bank of India. It is carrying on business, inter alia, of leasing and hire purchase. The first respondent is the Chairman and founder trustee of a trust by name 'Visveswaraya Education Trust'. The second respondent, wife of the first respondent is also a trustee. The trust runs a dental college by name Rajiv Gandhi Dental College. The respondents entered into an agreement with the appellant company whereby the appellant agreed to finance the purchase of 100 hydraulically operated dental chairs. The total cost of the chairs was around Rs. 92,50,000/-. The appellant company agreed to finance the respondents for the purchase of these chairs through a lease agreement and as per the agreement, the respondents were liable to pay rentals quarterly. The respondents agreed to pay quarterly a sum of Rs. 7,50,000/- for the first year; Rs. 12,50,000/- for the second year; Rs. 8,00,000/- for the third year and Rs. 6,25,000/- for the fourth year. As per the agreement, the appellant company, the lessors would have sole and exclusive right, title and interest in the dental chairs supplied till the entire hire purchase amount was paid. In accordance with the agreement, the appellant made payments to M/s. United Medico Dental Equipments and they delivered the dental chairs to the respondents. The appellant company alleged that the respondents were not regular in making the payments and committed default in payment of the installments and that the bank had dishonoured certain cheques issued by the respondents. The appellant company also alleged that on physical verification, certain chairs were found missing from the premises of the respondents and thus they have committed cheating and caused misappropriation of the property belonging to the appellant. The appellant company filed a private complaint under Section 200 Cr. P.C. before the Chief Metropolitan Magistrate, Bangalore alleging that the respondents had committed offences under Sections 420 406 and 423 read with Section 120B I.P.C. In that proceedings, the appellant company moved an application under Section 93 Cr. P.C. to issue a search warrant to seize the property in dispute and also to hand over these items to the complainant. The learned Magistrate took cognizance of the alleged complaint and issued summons to the respondents and passed an order on the application filed under Section 93 of the Cr. P.C. to have a search at the premises of the respondents and to take possession of the properties involved in the case. These proceedings were challenged by the respondents under Section482 Cr.P.C. before the learned Single Judge of the Karnataka High Court at Bangalore. The learned Single Judge was pleased to quash the entire proceedings and directed the appellant company to return all the properties seized by the Police pursuant to the warrant issued by the learned Magistrate. Thus, the order of the learned Magistrate taking cognizance and issuing process to the respondents as well as the order of search and the direction for restoration of the property to the appellant company were set aside. Aggrieved by the same, the appellant company has preferred this appeal. 3. We heard the learned counsel on either side. Learned senior Counsel for the appellant company Mr. P.S. Mishra argued in detail and contended that the learned Single Judge has seriously erred in quashing the proceedings under Section 482 Cr. P.C. The learned counsel for the appellant company contended that the allegations in the complaint clearly made out offences punishable under

Section 420 406 423 424 read with Section 120B I.P.C. The learned Counsel for the respondents, on the other hand, contended that the complaint was filed only to harass the respondents and it was motivated by mala fide intention. It was argued that the entire transaction was of civil nature and that the respondents have made a substantial payment as per the hire purchase agreement and the default, if any, was not willful and there was no element of misappropriation or cheating. The respondents also denied having removed any of the items of the disputed property clandestinely to defeat the interest of the appellant. 4. The short question arising for consideration is whether the learned Single Judge was justified in invoking the powers under Section 482 Cr.P.C. in setting aside the proceedings pending before the Magistrate. 5. Contours of the power under Section 482 Cr. P.C. have been explained in series of decisions by this Court. In Smt. Nagawwa vs . Veeranna Shivalingappa Konjalgi and OthersMANU/SC/0173/1976 : 1976CriLJ1533 , it was held that the Magistrate while issuing process against the accused should satisfy himself as to whether the allegations in the complaint, if proved, would ultimately end in the conviction of the accused. It was held that the order of Magistrate issuing process against the accused could be quashed under the following circumstances:-

(1) Where the allegations made in the complaint or the statements of the witnesses recorded in support of the same taken at their face value make out absolutely no case against the accused or the complaint does not disclose the essential ingredients of an offence which is alleged against the accused; (2) Where the allegations made in the complaint are patently absurd and inherently improbable so that no prudent person can ever reach a conclusion that there is sufficient ground for proceeding against the accused; (3) Where the discretion exercised by the magistrate in issuing process is capricious and arbitrary having been based either on no evidence or on materials which are wholly irrelevant or inadmissible; and (4) Where the complaint suffers from fundamental legal defects, such as, want of sanction, or absence of complaint by legally competent authority and the like.

6. In State of Haryana and Ors. vs . Bhajan Lal and Others MANU/SC/0115/1992 : 1992CriLJ527 , a question came up for consideration as to whether quashing of the FIR filed against the respondent Bhajan Lal for the offences under Section 161 & 165 of IPC and Section 5(2) of the Prevention of Corruption Act was proper and legal. Reversing the order passed by the High Court, this Court explained the circumstances under which such power could be exercised. Apart from reiterating the earlier norms laid down by this Court, it was further explained that such power could be exercised where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. However, this court in Rupan Deol Bajaj (Mrs.) and Anr. vs . Kanwar Pal Singh Gill & Anr. MANU/SC/0080/1996 : 1996CriLJ381 , held that "at the stage of quashing FIR or complaint, the High Court is not justified in embarking upon an enquiry as to the probability, reliability or genuineness of the allegations made therein." 7. In a few cases, the question arose whether a criminal prosecution could be permitted when the dispute between the parties is of predominantly civil nature and the appropriate remedy would be civil suit. In one case reported in Madhavrao Jiwajirao Scindia and Others vs . Sambhajirao Chandrojirao Angre and Others MANU/SC/0261/1988 : 1988CriLJ853 , this Court held that if the allegations in the complaint are both of a civil wrong and a criminal offence, there would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence. That was a case relating to a trust. There were three trustees including the settlor. A large house constituted part of the trust property. The respondent and the complainant were acting as Secretary and Manager of the Trust and the house owned by the trust was in the possession of a tenant. The tenant vacated the building and the allegation in the complaint was that two officers of the trust, in conspiracy with one of the trustees and his wife, created documents showing tenancy in respect of that house in favour of the wife of the trustee. Another trustee filed a criminal complaint alleging that there was commission of the offence under Section 406 467 read with Sections 34 and 120B of the Indian Penal Code. The accused persons challenged the proceedings before the High Court under Section 482 of the Code of Criminal Procedure and the High Court quashed the proceedings in respect of two of the accused persons. It was under those circumstances that this court observed :

"Though a case of breach of trust may be both a civil wrong and a criminal offence but there would be certain situations where it would predominantly be a civil wrong and may or may not amount to a criminal offence. The present case is one of that type where, if at all, the facts may constitute a civil wrong and the ingredients of the criminal offences are wanting. Having regard to the relevant documents, including the trust deed as also the correspondence following the creation of the tenancy, the submissions advanced on behalf of the parties, the natural relationship between the settlor and the trustee as mother and son and the fall out in their relationship and the fact that the wife of the co-trustee was no more interested in the tenancy, it must be held that the criminal case should not be continued."
8. In another case recently decided by this Court in Trisuns Chemical Industry vs . Rajesh Agarwal and Other MANU/SC/0581/1999 : 1999CriLJ4325 , the complainant company had alleged that the directors of another company offered to supply "toasted soyabean extractions" for a price higher than the market price. The Complainant Company had to pay the price in advance as demanded by the accused company. Complainant paid the amount through cheques. However, the accused

supplied the commodity, which was of most inferior and sub-standard quality and the complainant suffered a loss of Rs. 17 lakhs. The Complainant alleged that he was induced to pay the price on the representation that the best quality commodity would be supplied. A criminal complaint was filed alleging commission of the offence punishable under Section 420A. The Magistrate forwarded the complaint for investigation under Section 156(3) Cr. PC. The accused directors moved the High Court for quashing the complaint alleging that the dispute was purely of a civil nature and hence no prosecution should have been permitted. The High Court accepted this plea and the complaint was quashed. But this court held in para 8 and 9 of the judgment as follows:

".....merely because an act has a civil profile is not sufficient to denude it of its criminal outfit. ....... .......

We are unable to appreciate the reasoning that the provision incorporated in the agreement for referring the disputes to arbitration is an effective substitute for a criminal prosecution when the disputed act is an offence. Arbitration is a remedy for affording reliefs to the party affected by breach of the agreement but the arbitrator cannot conduct a trial of any act, which amounted to an offence, albeit the same act may be connected with the discharge of any function under the agreement. Hence, those are not good reasons for the High Court to axe down the complaint at the threshold itself. The investigating agency should have had the freedom to go into the whole gamut of the allegations and to reach a conclusion of its own. Pre-emption of such investigation would be justified only in very extreme cases."
9. In Pratibha Rani vs . Suraj Kumar MANU/SC/0090/1985 : 1985CriLJ817 , the question arose that when the civil as well as criminal remedy is available to a party, can a criminal prosecution be completely barred. In this case, the matter related to the Stridhan property. The complainant alleged that her husband, father-in-law and other relatives misappropriated her jewellery and other valuable articles entrusted to them by her parents at the time of marriage. The complainant alleged that these dowry articles were meant for her exclusive use and that the accused misbehaved and maltreated her and ultimately he turned her out without returning the dowry articles. The accused filed a criminal miscellaneous petition under Section 482 for quashing the Criminal proceedings and the High Court quashed the same. The accused contended that the dispute was of a civil nature and no criminal prosecution would lie. Under that circumstance, this court held in paragraph 21 at page 382 as under:-

".. There are a large number of cases where criminal law and civil law can run side by side. The two remedies are not mutually exclusive but clearly coextensive and essentially differ in their content and consequence. The object of the criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect the civil remedies at all for suing the wrongdoer in cases like arson, accidents, etc. It is an anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. The two types of actions are quite different in content, scope and import.."
10. The facts in the present case have to be appreciated in the light of the various decisions of this Court. When somebody suffers injury to his person, property or reputation, he may have remedies both under civil and criminal law. The injury alleged may form basis of civil claim and may also constitute the ingredients of some crime punishable under criminal law. When there is dispute between the parties arising out of a transaction involving passing of valuable properties between them, the aggrieved person may have right to sue for damages or compensation and at the same time, law permits the victim to proceed against the wrongdoer for having committed an offence of criminal breach of trust or cheating. Here the main offence alleged by the appellant is that respondents committed the offence under Section 420 I.P.C. and the case of the appellant is that respondents have cheated him and thereby dishonestly induced him to deliver property. To deceive is to induce a man to believe that a thing is true which is false and which the person practicing the deceit knows or believes to be false. It must also be shown that there existed a fraudulent and dishonest intention at the time of commission of the offence. There is no allegation that the respondents made any willful misrepresentation. Even according to the appellant, parties entered into a valid lease agreement and the grievance of the appellant is that the respondents failed to discharge their contractual obligations. In the complaint, there is no allegation that there was fraud or dishonest inducement on the part of the respondents and thereby the respondents parted with the property. It is trite law and common sense that an honest man entering into a contract is deemed to represent that he has the present intention of carrying it out but if, having accepted the pecuniary advantage involved in the transaction, he fails to pay his debt, he does not necessarily evade the debt by deception. 11. Moreover, the appellant has no case that the respondents obtained the article by any fraudulent inducement or by willful misrepresentation. We are told that respondents, though committed default in paying some installments, have paid substantial amount towards the consideration. 12. Having regard to the facts and circumstances, it is difficult to discern an element of deception in the whole transaction, whereas it is palpably evident that the appellant had an oblique motive of causing harassment to the respondents by seizing the entire articles through magisterial proceedings. We are of the view that the learned judge was perfectly justified in quashing the proceedings and we are disinclined to interfere in such matters. 13. The appeal is dismissed with no order as to costs. Manupatra Information Solutions Pvt. Ltd.

MANU/DE/1607/2012 IN THE HIGH COURT OF DELHI Crl. M.C. No. 4144/2009 & Crl. M.A. 14102/2010 (stay) Decided On: 11.04.2012 Appellants: Sanjay Aggarwal Vs. Respondent: G.S. Tayal & Ors. Hon'ble Judges/Coram: Hon'ble Mr. Justice M.L. Mehta Counsels: For Appellant/Petitioner/Plaintiff: Mr. Sanjay Gupta, Adv. For Respondents/Defendant: Mr. G.S. Tayal in person for himself as well as for other respondents Subject: Criminal Catch Words Mentioned IN Acts/Rules/Orders: Negotiable Instruments Act - Section 138; Indian Penal Code (IPC) - Section 406, Indian Penal Code (IPC) - Section 415, Indian Penal Code (IPC) - Section 420, Indian Penal Code (IPC) - Section 468, Indian Penal Code (IPC) - Section 471; Code of Criminal Procedure (CrPC) - Section 200, Code of Criminal Procedure (CrPC) - Section 300, Code of Criminal Procedure (CrPC) - Section 300(1),Code of Criminal Procedure (CrPC) - Section 482; Constitution of India - Article 227; Code of Civil Procedure (CPC) - Order 37 Cases Referred: Pepsi Foods Ltd. and another v. Special judicial Magistrate and others, (1998) SCC 749; Hridaya Ranjan Prasad Verma and others v. State of Bihar and another, MANU/SC/0223/2000 : (2000) 4 SCC 168; Indian Oil Corpn. v. NEPC India Ltd. and others, MANU/SC/3152/2006 : (2006) 6 SCC 736; Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao & Anr. Criminal Appeal No. 1160/2006; Rajesh Bajaj v. State of NCT of Delhi, MANU/SC/0155/1999 : (1999) 3 SCC 259; State of Haryana v. Bhajan Lal, MANU/SC/0115/1992 : 1992 Supp. (1) SCC 335 Citing Reference:

Discussed 3 Mentioned 3 Disposition: Petition dismissed Case Note: Criminal - Quashing of complaint - Section 406/420 Indian Penal Code, 1860 - Magistrate had taken cognizance and issued summons to Accused-Petitioner under offence punishable under provisions of I.P.C. - Hence, this Petition - Whether, there was any ground for quashing of criminal complaint filed against Petitioner - Held, it was clear that neither detailed inquiry nor meticulous analysis of material nor assessment of reliability or genuineness of allegations of complaint was warranted while examining prayer for quashing of complaint - Complainant was not required to verbatim reproduce legal ingredients of offence alleged - If necessary factual foundation was laid in complaint, merely on ground that few ingredients had not been stated in detail, proceedings could not be quashed Quashing of complaint was warranted only where complaint was bereft of basic facts which were absolutely necessary for making out offence - So power could not be used to stifle or scuttle legitimate prosecution and had to be used sparingly and with abundant caution - Still nature and scope of civil proceedings were different from criminal proceedings and mere fact that complaint related to civil transaction or breach of promise of contract for which civil remedy was available was not ground for quashing of criminal complaint - Thus in present case Petitioner stated that he was in financial difficulty and was unable to repay loan amounts and had no intention to cheat or dishonestly divert loan amount - However these were all defences that would have to be put forth and considered during trial - Hence Defences that might be available or facts when established during trial might lead to acquittal were not grounds for quashing of complaint at threshold - Petition dismissed. Ratio Decidendi

"Mere complaint relates to civil transaction or breach of promise of contract for which civil

remedy is available is not ground for quashing of criminal complaint." JUDGMENT M.L. Mehta, J. 1. This petition is filed under section 482 Cr.P.C. seeking quashing of criminal complaint No. 80/1 of 2005 under section 406/420 IPC and also summoning order dated 18th April 2009 of the ACMM, Rohini District Courts, Delhi. Facts in brief necessary for the disposal of this petition are these: Four complaints under section 138 Negotiable Instruments Act (for short 'the Act') read with section 415 and 420 IPC were filed by G.S. Tayal, his wife Munni Tayal and his sons Kapil

Kumar Tayal and Devendra Kumar Tayal against the petitioners Sanjay Aggarwal, his brother Ajay Aggarwal and their firm M/s. Sanjay Steel Tube Company. These complaints were filed in the year 2005. The summoning orders were passed against the aforesaid accused persons under section 138 of the Act. The complainants filed applications for dropping allegations of sections 415 and 420 IPC stating that they have filed separate complaints against the accused persons under section 420 IPC. Vide order dated 3rd June 2011, the learned Magistrate recorded that since the cognizance was taken in the complaints under section 138 of the Act only, there was no necessity of filing such applications and so he disposed of those applications as having become infructuous.
2. These are the four complaints which were filed by the complainants under section 200 Cr.P.C. for seeking registration of FIRs against the accused persons under section 406, 420 IPC which have given rise to the present petition. In these four complaints, the Magistrate vide the impugned order dated 18th April 2009 has taken cognizance and issued summons to the accused persons including the petitioner under section 420 IPC. In addition, summons have also been issued to the petitioner under section 468 and 471 of IPC. In addition to the aforesaid two brothers and their firm, one Bhagwan Dass has also been added as an accused. The original complaints were filed on the allegations of the accused persons having given cheques in discharge of their liability towards loans taken by them from the complainants and the cheques getting dishonoured on presentation on the ground of 'insufficient funds' and their not making payments of the amounts despite service of legal notice. It was also alleged that the accused persons were knowing fully well that they did not have sufficient funds in their bank account and had deliberately and willfully, with no intention to repay the loan, induced the complainants and thus committed offences under section 415 and 420 IPC. As is noted above, cognizance was taken under section 138 of the Act only and thereafter the allegations of sections 415 and 420 IPC were sought to be deleted by the complainants. 3. In the present complaints the allegations with regard to dishonor of the cheques and non-payment of the amounts despite the legal notices are the same as were in the previous complaints. In addition, it is alleged that the accused persons mischievously issued the aforesaid cheques with the ulterior motives and designs knowing fully well that the said cheques would be dishonoured on account of insufficient funds in their account. It was alleged that they made false representations to the complainants and issued bogus cheques duly signed by accused No. 2 and 3namely Sanjay Aggarwal and Ajay Aggarwal with deliberate and willful intention not to repay the loan amounts to the complainants and falsely induced them to accept the said cheques with the representation that the same shall be honoured on presentation. It was alleged that all the accused were involved in criminal conspiracy and deliberately caused wrongful loss to the complainants and they committed offences under section 405, 406 and 420 IPC. It was on these allegations that the MM took cognizance of the offence under section 420 IPC against all the accused persons including the petitioner and in addition also summoned the petitioner for the offence under section 468 IPC. 4. The petitioner is the only accused who has assailed the impugned order and sought quashing of the complaints. Other accused have not challenged the impugned orders. 5. The contentions of the petitioner are that he is a partner of M/s. Sanjay Steel Tube Company with effect from 1st May 2003 vide partnership deed of this date. It was submitted that the dispute was of civil nature and that the complainants had filed civil suits under Order 37 CPC against the petitioner, his brother and their firm. In the said suits their applications seeking leave to defend were declined and consequently the said suits of the complainants were decreed vide separate judgments dated 5th April 2006 by the ADJ. They challenged the judgments and decrees of the ADJ by filing four Regular First Appeals (RFAs) wherein in pursuance of the orders dated 17th July 2006 and 18th September 2006 of this Court, they have deposited Rs. 16,48,250/- inclusive of interest @ 10% per annum. It was next submitted that the complaints filed against them by the complainants in 2005 under Section 138 of the Act are pending and that allegations in those complaints and in the subsequent complaints under section 406 and 420 IPC are the same and thus, in view of the pendency of the previous complaints no legal action was called for in these subsequent complaints. 6. It was next submitted that there were no ingredients of sections 420, 468 and 471 IPC alleged or pleaded by the complainants in these complaints against the petitioner. In this regard it was submitted that the transactions entered into by the petitioner with the complainants/ respondents were totally legal and it was due to financial difficulty that the petitioner could not repay the loans. It was submitted that the cheques and receipts were executed by the petitioner as security of loans and that the documents were executed by him in his personal capacity or in his capacity as partner of the firm in which he was inducted later on at the relevant time when he executed the documents. 7. On these grounds the petitioner has sought quashing of the complaint and also the impugned summoning orders directed against him. 8. Reliance is placed on the judgments of (i) Pepsi Foods Ltd. and another v. Special judicial Magistrate and others, (1998) SCC 749; (ii) Hridaya Ranjan Prasad Verma and others Vs. State of Bihar and another, MANU/SC/0223/2000 : (2000) 4 SCC 168; (iii) Indian Oil Corpn. Vs. NEPC India Ltd. and others, MANU/SC/3152/2006 : (2006) 6 SCC 736 and (iv) Kolla Veera Raghav Rao Vs. Gorantla Venkateswara Rao & Anr. Criminal Appeal No. 1160/2006 decided on 01.02.2011 by the Supreme

Court. 9. The respondents/complainants filed counter reply to the present petition reiterating the allegations as set out by them in the complaints against the petitioner, his brother and their company. It was submitted that M/s. Sanjay Steel Tube Company was a partnership firm constituted on 28th June 1996. As per the said partnership deed which was submitted with the bank - State Bank of Bikaner and Jaipur, the partners are Shri Ram Swarup, Smt. Antu Aggarwal and Shri Ajay Aggarwal. The petitioner Sanjay Aggarwal was not the partner in the said firm. It is alleged that the partnership deed allegedly created on 1st May 2003 with Sanjay Aggarwal and Ajay Aggarwal as the partners of the firm was a sham document which was never acted upon till date since the firm as per the bank record continued with the same partners having same account No. 12450. It is alleged that when the loan amounts were advanced to the firm in January, 2002, the receipts as also the cheques were signed by Ajay Aggarwal and also the petitioner as partners of the said firm. The contention was that at the time of taking loans in January 2002 and November 2004 petitioner Sanjay Aggarwal was neither a partner of the firm nor authorized signatory, but he dishonestly and fraudulently misrepresented himself to be a partner of the firm and executed the receipts and the cheques from the account of the firm and that he has also manufactured false partnership deed of 1st May 2003 with dishonest intention and thereby committed offences under section 420 and 468 IPC. It was submitted that if at all Sanjay Aggarwal could be said to have become partner of the firm it was only with effect from 1st May 2003 and not prior to that i.e. not at the time of execution of receipts dated 16th January 2002 and 31st January 2002 and also issue of Post Dated Cheques (PDCs) against the said loan amounts. 10. I have heard learned counsel for the petitioner and complainant, G.S. Tayal in person and perused the records. 11. There is no doubt that earlier complaints were filed by the complainants in January 2005 against the petitioner, his brother Ajay Aggarwal and their firm M/s. Sanjay Steel Tube Co. under section138 of the Act read with sections 415 and 420 and that in the said complaints summons were issued against the accused persons including the petitioner under section 138 of the Act only. Though the complainant subsequently filed applications for deletion of the allegations under sections 415 and 420 IPC, but since summons were issued against all the accused persons under section 138 of the Act only, those applications were disposed of as infructuous. In the mean while the complainants had filed four complaints against the accused persons including the present petitioner and one Bhagwan Dass. It is in these complaints that the learned MM after recording the statement of the complainant and the bank official, DD Pandit ordered issue of summons to all the accused persons under Section 420 IPC and in addition to petitioner under Section 468 IPC. 12. There is no dispute with regard to the law relating to exercise of jurisdiction of this Court under section 482 Cr.P.C. for the purpose of quashing of complaints in criminal proceedings. In Pepsi Foods' case (supra), the Hon'ble Supreme Court held that:-

28. 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 under Section 482 of the Code or Article 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.
In the case of Indian Oil Corpn. Ltd. (supra) the principles regarding exercise of jurisdiction under section 482 Cr.P.C. have been reiterated by the Supreme Court as under:

(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. 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 mala fides/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. Quashing of the complaint is warranted only where the complaint is to 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. 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 proceeding 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 of, 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.

13. Relying upon the aforesaid principles, the learned counsel for the petitioner submitted that the allegations in the previous complaints under section 138 of the Act and in the present complaints are same and even if the allegations are taken on their face value and accepted in the entirety, do not prima facie, constitute any offence under sections 420 and 468 IPC against the petitioner. 14. It was also submitted that the transaction between the parties was purely of civil nature and the present complaints are clear abuse of process of the Court. It was submitted that as per above principles (i), (ii) and (v), the present complaints are liable to be quashed. 15. Before proceeding to see as to whether the allegations set out in the complaints, prima facie, make any case, it may be noted that as per the above principles 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 of the complaint is warranted while examining prayer for quashing of a complaint. Further, the complainant 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 cannot be quashed. The quashing of the complaint is warranted only where the complaint is bereft of the basic facts which are absolutely necessary for making out the offence. Further, the power cannot be used to stifle or scuttle a legitimate prosecution and has to be used sparingly and with abundant caution. Still further, the nature and scope of the civil proceedings are different from a criminal proceedings and the mere fact that the complaint relates to civil transaction or breach of promise of contract for which a civil remedy is available or has been availed of, is not a ground for quashing of a criminal complaint. 16. In the case of Indian Oil Corporation Ltd. (supra), the Supreme Court while dealing with the applicability of the ingredients of cheating held as under:

32.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. 33. The High Court has held that mere breach of 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 fulfill the promise. Illustration (f) and (g) to Section 415 make 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 contract and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract. 34. In Rajesh Bajaj Vs. State of NCT of Delhi, MANU/SC/0155/1999 : (1999) 3 SCC 259 this Court held: (SCC pp. 262-63, paras 9 & 11) 9. 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. .... 11. 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 the respondent would honour payment on receipt of invoices, and that the complainant realized later that the intentions of the respondent were not clear. He also mentioned that the respondent after receiving the goods had 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. 35. In Hridaya Ranjan Prasad Verma vs. State of Bihar, MANU/SC/0223/2000 : (2000) 4 SCC 168 this Court held: 14. 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. 15. 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 of 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.
17. It has been noted above that though there are no verbatim ingredients of Sections 415 and 468 IPC in the complaint, but reading the complaint as a whole it would be seen that the complainants have alleged the fraudulent acts of the petitioner in making false representations and having willful and deliberate intention not to pay the loan amount and to cheat the complainants. Based on the allegations in the complaint, as also the statement of complainant G.S. Tayal and the bank official Mr. D.D. Pandit, the MM ordered for issuance of summons to the accused persons. Mr. D.D. Pandit was examined as complainant's witness on 18th July 2008. He produced a copy of the partnership deed dated 28.06.1996, partnership letter dated 17.07.1998 and the extract from the cheque refer register. As per the documents, the partners of the said firm were Ram Sarup, Antu Aggarwal and Ajay Aggarwal till the date of his examination on 18.07.1998. Account opening form also showed the names of these three persons only as partners. The said form is seen to have been signed by the petitioner as introducer. The partnership deed of 28.06.1996 is also seen to have been signed by the petitioner as a witness. From the extract of the cheque refer register it is seen that the cheques of loan amounts were issued by M/s. Sanjay Steel Tube Co. in the names of the complainants and the same were returned. From the two receipts dated 16.01.2002 and one dated 31.01.2002, it is seen that these have been signed both by Ajay Aggarwal and the petitioner, Sanjay Aggarwal on behalf of the firm. The PDCs of the loan amounts are also seen to have been signed by both of them as partners. These cheques were issued from the current account of the firm bearing No. 12450. From all these it appears that petitioner Sanjay Aggarwal was not the partner of the firm when he executed these receipts as also the cheques as partner of the said firm in January 2002. The partnership deed of 1st May 2003 seems to have been created for some ulterior purposes inasmuch as according to bank the said account continued to be operated in the name of the firm of which Sanjay Aggarwal was not the partner. If this firm has been created on 01.05.2003 vide this partnership deed then the same would have found mentioned in the bank record. If at all it is assumed that Sanjay Aggarwal became a partner of the said firm on 1st May 2003, but he was not a partner of the firm when the aforesaid receipts and cheques were issued. These are all triable issues and could only be decided by way of evidence. Prima facie it appears that he was not a partner at the relevant time of execution of receipts and issue of cheques from the account of the firm as partner. 18. Though the complainants had filed suits of recovery under Order 37 of CPC and have received some amount by the orders of this Court, but those proceedings are independent of the allegations as set out in the complaints against the petitioners. These are prima facie established from the testimony of the complainant and bank official. For the purpose of summoning, the allegations in the complaint as also the testimonies, if any, led in support thereof are essentially to be considered. 19. The contention that since the proceedings under section 138 of the Act were subjudice and the allegations in the present complaint are same, no legal action was called for, is untenable. From the testimony of the complainant G.S. Tayal and that of the bank official it is prima facie seen that though the petitioner was not the partner of the said firm, but he had so represented and executed the receipts and also the cheques from the account of the partnership firm. As per Rajesh Bajaj (supra) there was no necessity for the complainant to have verbatim reproduced in the body of the complaint all the ingredients of the complaint. Though it was also not necessary for him to state in so many words that intention of the accused was dishonest and fraudulent, but it is seen from the body of the complaint as a whole that such allegations/averments are specifically stated by the complainant. It has been noted above that the allegations in the previous complaints were confined to section 138 of the Act, whereas in the present complaints there are specific allegations of dishonest and fraudulent acts of the petitioner and his having cheated the complainants. 20. The reliance placed on the case of Kolla Veera Raghav Rao (supra) is highly misplaced. As per the said judgment what was prohibited under section 300 (1) Cr.P.C. was that no one can be tried and convicted for the same offence or even for a different offence but on the same facts, if he was already tried or convicted or acquitted on such facts by some court. In the present case, as noted above, the allegations under section 138 of the Act and under section 420/468 IPC against the petitioner are entirely different. There is no bar of both these cases to be tried simultaneously. The bar of section 300 Cr.P.C. was not attracted in the present case since the case against the petitioner under section 138 of the Act was still pending and he was neither acquitted nor convicted. In the case of

Kolla Veera Raghav Rao (supra) the appellant was earlier convicted under section 138 of the Act and it was in those peculiar circumstances that it was held that he could not be tried on the same facts under section 420 IPC. 21. The petitioner, no doubt, has stated that he was in financial difficulty and was unable to repay the loan amounts and had no intention to cheat or dishonestly divert the loan amount, but, these are all defences that will have to be put forth and considered during trial. The defences that may be available or facts when established during the trial may lead to acquittal are not the grounds for quashing of the complaint at the threshold. At this stage, the only fact relevant is that whether the averments in the complaint expressly, indirectly or impliedly spell out the ingredients of criminal offence or not. And the pleas which have been raised by the petitioner would be tested at the trial and cannot form the basis of quashing of the complaints. 22. The Supreme Court has repeatedly cautioned that the power of quashing a criminal proceeding at the stage of summoning should be exercised very sparingly and with circumspection and that too in the rarest of rare cases. This has been again impressed by the Supreme Court in the case of State of Haryana vs. Bhajan Lal, MANU/SC/0115/1992 : 1992 Supp. (1) SCC 335. From the above discussion, it cannot be said that the allegations made in the complaints, even if they are taken at their face value and accepted in entirety to be correct, do not make out a case against the petitioner under section 420/468 IPC. In such circumstances, I refrain myself from exercising powers under section 482 Cr.P.C. to quash the complaints at threshold. 23. Nothing contained hereinabove shall tantamount to expression of opinion on the merits of the case. The petition has no merit and is hereby dismissed. Manupatra Information Solutions Pvt. Ltd.
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MANU/SC/3152/2006 Equivalent Citation: AIR2006SC2780, 2007(1)ALT(Cri)272, 2006(4)CTC60, 2006GLH(26)753, JT2006(6)SC474, 2007-1-LW(Crl)80, 2006(II)OLR(SC)659, RLW2006(4)SC3380, 2006(7)SCALE286, (2006)6SCC736, [2006]Supp(3)SCR704 IN THE SUPREME COURT OF INDIA Criminal Appeal Nos. 833 and 834 of 2002 Decided On: 20.07.2006 Appellants: Indian Oil Corporation Vs. Respondent: NEPC India Ltd. and Ors. Quashing of criminal proceedings- 2 Hon'ble H. K. Sema and R. V. Raveendran, JJ. Subject: Criminal Catch Words Mentioned IN Acts/Rules/Orders: Aircraft Act, 1934 - Section 8; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 2; Code of Criminal Procedure (CrPC) - Section 200,Code of Criminal Procedure (CrPC) - Section 250, Code of Criminal Procedure (CrPC) - Section 482; Indian Penal Code (IPC) - Section 378, Indian Penal Code (IPC) - Section 403, Indian Penal Code (IPC) Section 405, Indian Penal Code (IPC) - Section 415, Indian Penal Code (IPC) - Section 425 Cases Referred: Madhavrao Jiwaji Rao Scindia v. Sambhajirao Chandrojirao Angre MANU/SC/0261/1988; State of Haryana v. Bhajanlal MANU/SC/0115/1992; Rupan Deol Bajaj v. Kanwar Pal Singh GillMANU/SC/0080/1996; Central Bureau of Investigation v. Duncans Agro Industries Ltd., Calcutta MANU/SC/0622/1996; State of Bihar v. Rajendra Agrawalla MANU/SC/1429/1996; Rajesh Bajaj v. State NCT of Delhi MANU/SC/0155/1999; Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. MANU/SC/0128/2000; Hridaya Ranjan Prasad Verma v. State of Bihar MANU/SC/0223/2000; M. Krishnan v. Vijay Kumar MANU/SC/0630/2001; Zandu Phamaceutical Works Ltd. v. Mohd. Sharaful Haque MANU/SC/0932/2004; G. Sagar Suri v. State of UP MANU/SC/0045/2000; Chelloor Mankkal Narayan Ittiravi Namhudiri v. State of Travancore, Cochin MANU/SC/0091/1952; Jaswantrai Manilal Akhaney v. State of Bombay MANU/SC/0030/1956; Sind Judicial Commissioner in Gobindram C. Motwani v. Emperor (1938) 39 Cr.L.J. 509 Authorities Referred: P. Ramanatha Aiyars Advanced Law Lexicon (Third (2005) Edition, Vol.2, Pages 2179 and 2180) Prior History: From the Judgment and Order dated 29.3.2001 of the High Court of Madras in Criminal O.P. Nos. 2418/1999 and 1563/2000 Citing Reference: Judges/Coram:

Discussed 1 Mentioned 7 Relied On

Case Note: Civil - Contract - Breach - Section 8 of the Aircraft Act, 1934 - Agreements entered into between the appellant and the respondent for supply of aviation fuel - Deed of hypothecation executed by the respondent - Appellant moved the High Court for grant of mandatory injunction on failure to pay installments on the part of the respondents Recovery suits filed for recovery of the amounts due - Criminal complaints filed against the directors Whether existence or availment of civil remedy in respect of disputes arising from breach of contract, bars remedy under criminal law - Held, availability of civil remedies does not mean that criminal law remedy is barred or the appellant was estopped from seeking such remedy - 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 - High Court justified in rejecting the contention of the respondents that the criminal proceedings should be quashed in view of the pendency of several civil proceedings - High Court was not justified in quashing the complaints/criminal proceedings in entirety Appeals disposed of Criminal - Cheating - Default in Payment - Allegation that the respondents induced appellant to resume supply of aircraft fuel on cash and carry basis, by entering into a further agreement - Allegation relating to removal of engines - Held, allegations in the complaint constitute such an offence Criminal - Criminal breach of trust - Hypothecation - Section 405 of the Indian Penal Code, 1860 - Held, hypothecation was a mode of creating a security without delivery of title or possession - When possession had remained with the debtor/owner and when the creditor has neither ownership nor beneficial interest, there could not be any entrustment by the creditor - First requirement of Section 405 absent - No case of criminal breach of trust made out Criminal - Mischief - Section 425 of the Indian Penal Code, 1860 - Complaints alleged that the respondent removed the engines diminishing the value and utility of the aircrafts and affected them adversely, causing loss and damage to the appellant, which had the right to possess the entire aircraft - Held, if the ingredients were made out, mischief is committed Allegations constitute the offence of mischief JUDGMENT 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 under Section 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. VTNEJ (12684) and VT-NEK (10687) to the appellant under Deed of Hypothecation dated 1.5.1997, to secure the outstanding amounts. Clause (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. Clause (3) read with the schedule set out the installments schedule for payment of the amount due. 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. Clause (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. Clause 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. 4. 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. 5. 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, under Section 8 of the Aircraft Act, 1934, so as to enable It to take possession thereof. 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 (Chennal) Airport, IOC filed a suit (OS No. 3327/1998) in the City Civil Court, Chennai for a similar mandatory injunction. 6. IOC filed the two complaints against NEPC India and its two Directors (respondents 2 & 3 herein) in July, 1998 under Section 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.
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 VTNEJ 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 under Section 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.
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 Meenambakkam 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 under Section 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 welt 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....
7. The respondents herein filed Crl. O.P. No. 1563 of 2000 and Crl.O.P. No. 2418 of 1999 respectively under Section 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 425IPC
8. 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) : 9. The principles relating to exercise of jurisdiction under Section 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 MANU/SC/0261/1988 : 1988CriLJ853 , State of Haryana v. BhajanlalMANU/SC/0115/1992 : 1992CriLJ527 , Rupan Deol Bajaj v. Kanwar Pal Singh Gill MANU/SC/0080/1996 : 1996CriLJ381 , Central Bureau of Investigation v. Duncans Agro Industries Ltd.MANU/SC/0622/1996 : 1996CriLJ3501 , State of Bihar v. Rajendra Agrawalla MANU/SC/1429/1996 : 1996CriLJ1372 , Rajesh Bajaj v. State NCT of Delhi MANU/SC/0155/1999 : 1999CriLJ1833 ,Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. MANU/SC/0128/2000 : 2000CriLJ1487 , Hridaya Ranjan Prasad Verma v. State of Bihar MANU/SC/0223/2000 : 2000CriLJ2983 , M. Krishnanv. Vijay Kumar MANU/SC/0630/2001 : 2001CriLJ4705 , and Zandu Phamaceutical Works Ltd. v. Mohd. Sharaful Haque MANU/SC/0932/2004 : 2005CriLJ92 . 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. 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 maladies/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. 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. 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.
10. 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. 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. In G. Sagar Suri v.State of UP MANU/SC/0045/2000 : 2000CriLJ824 , 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 taw. 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 under Section 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.
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 under Section 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. 11. 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. 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. 12. 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. 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), 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. 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. 13. 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) 14. 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 IPC? Learned 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 (Section 378) or dishonest misappropriation of property (Section 403).

Section 378 15. Section 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." 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 Section 378. Section 403 16. Section 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. 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 Section 403 is also not attracted. Section 405 17. We will next consider whether the allegations in the complaint make out a case of criminal breach of trust under Section 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.
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, 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. The following are examples (which include the illustrations under Section 405) where there is 'entrustment':

(i) An 'Executor' of a wilt, 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).
18. In Chelloor Mankkal Narayan Ittiravi Namhudiri v. State Cochin MANU/SC/0091/1952 : AIR1953SC478 , this Court held: of Travancore,

... 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]
In Jaswantrai Manilal Akhaney v. State of Bombay MANU/SC/0030/1956 : 1956CriLJ1116 , 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 Section 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.
19. 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). 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 fender enjoys the rights of a pledgee. 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 Section 2(n) of Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002)
But there is no 'entrustment of the property' or 'entrustment of dominion over the property' by the hypothecate (creditor) to the hypothecator (debtor) is 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. 20. The question directly arose for consideration in Central Bureau of Investigation v. Duncans Agro Industries Ltd. Calcutta MANU/SC/0622/1996 : 1996CriLJ3501 . 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. 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, pledge 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)
21. 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. 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. 22. Learned Counsel for the appellant, however, sought to distinguish the decision in Duncan Agro on two grounds. It was pointed out that Duncan Agro 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-a-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. 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.
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. 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. 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 (supra) which specifically holds that when goods are hypothecated, the owner does not hold the goods in trust for the creditor. 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. 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. 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. 23. The second ground on which learned Counsel for the appellant sought to distinguish Duncan Agro 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 will not apply. This contention is also without basis. The principle stated in Duncan Agro 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. But as and when new stock-in-trade is manufactured or received, the charge attaches to such future stock-intrade 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 is based on the requirement of 'entrustment' and not with reference to the 'floating' nature of the charge. The second contention also has no merits. 24. 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 under Section 405 IPC can be made out against NEPC India. Section 415 25. 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. 26. 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 Section 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.
27. In Rajesh Bajaj (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.
28. In Hridaya Ranjan Prasad Verma (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.
29. 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. 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. 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 Section 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 30. Section 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 Section425. 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 : 31. 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 under Sections 415 and 425 of IPC. We accordingly allow these appeals in part and set aside the order of the High Court insofar it quashes the complaint under Sections 415and 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 under Sections 415 and 425 of IPC. Parties to bear their respective costs.

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