2010 (9) TMI 231 - SC - Companies Law

Supreme Court quashes charges under IPC sections, emphasizes High Court's jurisdiction under Section 482

The Supreme Court allowed the appeals, setting aside the High Court's decision and quashing the order of the Magistrate taking cognizance in the ... 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’? Issues Involved:1. Whether the High Court was correct in declining to exercise its jurisdiction under Section 482 of the Code of Criminal Procedure, 1973.2. Whether the complaint against the appellants constituted offences under Sections 420, 406, and 120B of the Indian Penal Code, 1860.Issue-wise Detailed Analysis:1. Jurisdiction under Section 482 of the Code of Criminal Procedure, 1973:The inherent powers of the High Court under Section 482 of the Code are to be exercised sparingly and cautiously to prevent abuse of the process of court and to secure the ends of justice. The Supreme Court reiterated that the power is not unlimited and should be used to prevent injustice. Citing precedents, the Court emphasized that the High Court should exercise its jurisdiction under Section 482 to quash proceedings where it is evident that the allegations do not constitute an offence, or where there is no legal evidence to support the charges.2. Offence of Cheating under Section 420 of the Indian Penal Code, 1860:Section 415 of the IPC defines cheating and requires fraudulent or dishonest intention at the time of making a promise. The Court noted that the complaint lacked specific averments of dishonest inducement by the appellants at the time of entering into the tripartite agreement. The complaint revealed that IEL was aware of FCIL's financial difficulties, which contradicted the claim of being deceived. The Court concluded that the allegations might amount to a breach of contract but did not constitute cheating under Section 420 of the IPC.3. Offence of Criminal Breach of Trust under Section 406 of the Indian Penal Code, 1860:Section 405 of the IPC defines criminal breach of trust, requiring entrustment of property and dishonest misappropriation or conversion of that property. The Court found no evidence in the complaint suggesting that IEL had entrusted any property to the appellants or that the appellants had dominion over IEL's property. Therefore, the ingredients of Section 405 were not satisfied.4. Offence of Criminal Conspiracy under Section 120B of the Indian Penal Code, 1860:To establish a charge of conspiracy under Section 120B, there must be an agreement between the parties to commit an unlawful act. The Court observed that the complaint lacked any substantive allegations of an agreement between the appellants to commit an unlawful act. Consequently, the charge of conspiracy could not be sustained.Conclusion:The Supreme Court held that no prima facie case was made out against the appellants for the alleged offences under Sections 420, 406, and 120B of the IPC. The High Court should have exercised its jurisdiction under Section 482 of the Code to quash the complaint. The appeals were allowed, the impugned order was set aside, and the order of the Magistrate taking cognizance in the complaint was quashed.