TaxTMI 
TaxTMI 
2010 (9) TMI 231
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....he facts, material for the purpose of disposal of these appeals may be stated thus : Both the appellants in these appeals were senior employees of the Fertilizer Corporation of India Ltd. (hereinafter referred to as "FCIL"), a Government company within the meaning of section 617 of the Companies Act, 1956. 4. On April 20, 1992, the FCIL's board of directors passed a resolution to the effect that the company had become a sick company within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "the SICA") and hence a reference should be filed with the Board for Industrial and Financial Reconstruction (hereinafter referred to as "the BIFR"). On November 6, 1992, the FCIL was declared as "sick company" under section 3(1)(o) of the SICA by the BIFR. 5. The complainant, Indian Explosives Ltd. (hereinafter referred to as "IEL"), respondent No. 1 in these appeals, is engaged in the manufacture and sale of industrial explosives. Ammonium nitrate is a major raw material for the manufacture of explosives, and the same was procured by IEL from FCIL. Some time in the year 2001, FCIL entered into a tripartite agreement with M/s. Bharat Coking....
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....0B of the IPC read with sections 540 and 542 of the Companies Act, 1956, against both the appellants and Mr. A. K. Mukherjee. 9. Simultaneously, on May 25, 2003, IEL also filed a Title Suit No. 34 of 2003 before the 4th Civil Judge, Alipore for recovery of the outstanding amount of Rs. 4,20,41,622 along with future and pendente lite interest against FCIL. IEL, on January 23, 2004, obtained and was granted permission by the BIFR to continue with the said civil suit subject to the condition that they will not execute the decree in the suit without the permission of the BIFR. 10. On October 30, 2003, the Chief Metropolitan Magistrate referred the complaint to Metropolitan Magistrate, 8th Court, Kolkata, who issued summons against the appellants and Mr. A. K. Mukherjee. Aggrieved by the order of the Magistrate taking cognizance of the complaint, appellants together with Mr. A. K. Mukherjee preferred the afore-stated petition under section 482 of the Code for quashing of the order summoning them to stand trial, before the Calcutta High Court. 11. As stated above, the High Court, vide its impugned judgment has dismissed the said petition. The High Court has, inter alia, observed that ....
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....garding its moving the BIFR for being declared a sick company was clearly suppression of material facts from IEL with a mala fide intention to induce them to enter into the said agreement with them, knowing fully well that FCIL will not be able to honour its commitment under the arrangement. According to learned counsel, this tantamounts to cheating as also criminal breach of trust within the meaning of sections 415 and 405 of the IPC respectively. Learned counsel thus, contended that the High Court was justified in not analysing and returning a finding on the truthfulness or otherwise of the allegations in the complaint at such a preliminary stage of the proceedings, when only summons have been issued to the appellants to appear in the court and it is always open to the appellants to apply for discharge before the trial court. 15. The question for consideration, therefore, is whether or not in the light of the allegations in the complaint against the appellants, the High Court was correct in law in declining to exercise its jurisdiction under section 482 of the Code ? 16. Before evaluating the contentions advanced on behalf of the parties, it will be useful to briefly notice the....
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....unae are sometimes found in procedural law, the section has been embodied to cover such lacunae wherever they are discovered. The use of extraordinary powers conferred upon the High Court under this section are however required to be reserved, as far as possible, for extraordinary cases." 19. In G. Sagar Suri v. State of UP [2000] 100 Comp Cas 613 ; 2 SCC 636, this court had opined as follows : "Jurisdiction under section 482 of the Code has to be exercised with great care. In exercise of its jurisdiction the High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This court has laid certain principles on the basis of which the 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." 20. Bearing in mind the aforestate....
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.... Ltd. v. Biological E. Ltd. [2000] 3 SCC 269, wherein it was observed that : "In order to attract the provisions of sections 418 and 420 the guilty intent, at the time of making the promise is a requirement and an essential ingredient thereto and subsequent failure to fulfil the promise by itself would not attract the provisions of section 418 or section 420. Mens rea is one of the essential ingredients of the offence of cheating under section 420. As a matter of fact illustration (g) to section 415 makes the position clear enough to indicate that mere failure to deliver in breach of an agreement would not amount to cheating but is liable only to a civil action for breach of contract." 26. It is well-settled that in order to constitute an offence of cheating, it must be shown that the accused had fraudulent or dishonest intention at the time of making the representation or promise and such a culpable intention right at the time of entering into an agreement cannot be presumed merely from his failure to keep the promise subsequently. (Also see : Hira Lal Hari Lal Bhagwati v. CBI [2003] 262 ITR 466 ; 1 RC 369 ; 5 SCC 257). 27. In the instant case, it has been alleged by IEL that a....
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....plosives in their coal mines for mining/procuring coal, and as BCCL supplies coal to the company of the accused person, for the purpose of its manufacturing ammonium nitrate, which would be supplied to the company of the complainant, the accused persons would make arrangements with BCCL so that instead of making payment to the company of the accused persons for supply of ammonium nitrate, the complainant's company would make an advance payment of Rs. 4,20,41,622 by supply of explosives to BCCL and the same would be adjusted for its supply of coal to the company of the accused person against supply of ammonium nitrate of equivalent value by the company of the accused persons to the complainant's company . . . 8. That on such representations the accused persons induced the complainant and the officers of the company to pay a sum of Rs. 4,20,41,622 and equivalent to BCCL between September, 2001 to November, 2001 on the specific representations that the accused persons would supply ammonium nitrate to IEL and the said sum would be adjusted towards the supply of ammonium nitrate . . . 10. That enquiry revealed that the accused persons deliberately and with fraudulent intentions while ....
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....fest from the afore-extracted paragraphs of the complaint that the basis of the complaint is that by deliberately suppressing the fact that FCIL had already been referred to the BIFR after the erosion of its net worth and was likely to be declared a "sick company", the appellants induced IEL to pay Rs. 4,20,41,622 to BCCL and in return did not supply ammonium nitrate to them. In our view, a mere mention of the words "defraud" and "cheat" in paragraph 12 of the complaint, in the setting that these have been used, is not sufficient to infer that the appellants had dishonest intention right at the beginning when, demonstrably, after due deliberations a tripartite agreement was signed, which, under the given circumstances at that juncture, was considered to be in the interest of all the three parties to the agreement. In this regard, it would be useful to advert to the following observations made by this court in Anil Mahajan v. Bhor Industries Ltd. [2005] 10 SCC 228, 231 : "The substance of the complaint is to be seen. Mere use of the expression 'cheating' in the complaint is of no consequence. Except mention of the words 'deceive' and `cheat' in the complaint filed before the Magist....
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....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'. Explanation 1.- A person, being an employer of an establishment whether exempted under section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not who deducts the employee's contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid. Explanation 2.- A person, being an employer, who deducts the employees' contribution from the wages payable to the employee for credit to the Employees' State Insurance Fund held and a....