HC quashes criminal proceedings under Sections 418 and 420 IPC finding commercial dispute civil in nature

The HC quashed criminal proceedings against petitioners charged under Sections 418 and 420 IPC, finding the dispute civil in nature concerning defective products and replacements. The court held essential ingredients for criminal offenses were absent - no dishonest inducement, delivery of property, or fraudulent intention was established. The magistrate erred in dismissing the Section 205 CrPC application for personal appearance requirements. Despite available arbitration clause, complainant chose criminal proceedings to pressure petitioners in what was essentially a commercial dispute. Following Mitesh Kumar J. Sha precedent, the court found no prima facie case for criminal liability, allowing the revisional application to prevent abuse of process.

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Issues Involved:
1. Invocation of inherent powers under Section 401 read with Section 482 Cr.P.C.
2. Quashing of proceedings in C/28190/2019.
3. Setting aside of orders dated 22.03.2022, 25.04.2022, and 11.05.2022.
4. Applicability of Section 205 Cr.P.C. regarding exemption from personal appearance.
5. Nature of the dispute: civil vs. criminal.

Detailed Analysis:

1. Invocation of Inherent Powers under Section 401 read with Section 482 Cr.P.C.:
The petitioners sought to invoke the inherent powers of the High Court to recall and quash the proceedings in C/28190/2019 and set aside the orders dated 22.03.2022, 25.04.2022, and 11.05.2022. The petitioners contended that the orders were against the weight of the materials on record and were bad in law. The Court held that the inherent jurisdiction under Section 482 Cr.P.C. is designed to achieve a salutary purpose and that criminal proceedings ought not to be permitted to degenerate into a weapon of harassment.

2. Quashing of Proceedings in C/28190/2019:
The Court examined whether the allegations in the complaint, if accepted at face value, constituted any offense under Sections 406/418/420 read with Section 120B IPC. The Court found that the dispute was essentially civil in nature, related to a distributor agreement, and did not prima facie constitute any criminal offense. The Court relied on the Supreme Court's judgment in M/s. Indian Oil Corporation vs. M/s Nepc India Ltd. & Ors., which emphasized that civil disputes should not be given a criminal color to pressurize the parties. Consequently, the proceedings were quashed.

3. Setting Aside of Orders Dated 22.03.2022, 25.04.2022, and 11.05.2022:
The Court found that the orders issuing warrants of arrest against the petitioners were contrary to the law laid down by the Supreme Court and were an abuse of the process of the court. The orders were set aside as they were passed mechanically and without application of judicial mind. The Court emphasized that the discretion of the Magistrate in refusing exemption from personal appearance was not exercised judiciously.

4. Applicability of Section 205 Cr.P.C. Regarding Exemption from Personal Appearance:
The Court held that Section 205 Cr.P.C. allows the Magistrate to dispense with the personal attendance of the accused and permit them to appear through their pleader. The Magistrate's refusal to consider the applications for exemption from personal attendance on the ground that the petitioners had to appear before him first was found to be incorrect. The Court referenced the Supreme Court's ruling in Bhaskar Industries Ltd. vs. Bhiwani Denim & Apparels Ltd., which clarified that personal appearance is not mandatory for seeking exemption under Section 205 Cr.P.C.

5. Nature of the Dispute: Civil vs. Criminal:
The Court concluded that the dispute was purely civil in nature and related to a commercial transaction governed by a distributor agreement. The Court noted that the arbitration clause in the agreement had not been invoked by the parties, and the criminal proceedings were initiated to pressurize the petitioners. The Court relied on the Supreme Court's judgments, which discourage converting civil disputes into criminal cases to settle scores or exert pressure. The Court found that the ingredients required to constitute the alleged criminal offenses were absent.

Conclusion:
The High Court allowed the criminal revisional application, quashed the proceedings in C/28190/2019, and set aside the orders dated 22.03.2022, 25.04.2022, and 11.05.2022. The Court emphasized that criminal proceedings should not be used as instruments of harassment and that civil disputes should not be given a criminal color. The Court directed that a copy of the judgment be sent to the learned Trial Court for necessary compliance.

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