TaxTMI 
TaxTMI 
2024 (8) TMI 1200
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....rt of Additional Chief Judicial Magistrate, Khurja, Bulandshahar against the appellants herein for the offence punishable under Sections 406, 420 & 120B respectively of the Indian Penal Code, 1860 (for short, "IPC"). The complaint reads thus: "It is most respectful that the Applicant Vipin Kumar Agarwal, son of Late Shri Bhagwat Swaroop Agarwal, who is the owner of a firm Agarwal Udyog, New Mandi, Khurja. The applicant's firm used to supply horse feed, barley and oats to Delhi Race Club 1940 Limited, New Delhi since 1990. In the year 1995, the then head of the Race Club, Shri PS Vedi and the then Secretary Sehgal told the applicant that from now on the bills for the supply of horse grain and oats would be made in the name of Delhi Horse Trainers Association, Race Course Road, New Delhi. And the Head and Secretary of the same association have now been made separate, they will pay you for the goods supplied. Till the year 2017, the payment of the applicant's firm continued to be regular and now at present Delhi Horse Trainers Association President Kazim Ali Khan and Secretary Sanjeev Charan owe a payment of Rs 9,11,434/- to the applicant's firm. Whenever the app....
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....Four) is due and payable to him by the appellants towards the sale of horse grains and oats over a period of time. It is alleged that as the appellants failed to make the payment, he thought fit to file the complaint as according to him he has been cheated by the appellants. (iii) The court concerned initially took cognizance upon the complaint but postponed the issuance of process as it thought fit to initiate magisterial inquiry under Section 202 of the Code of Criminal Procedure, 1973 (for short, "CrPC"). The statement of the complainant recorded by the Additional Chief Judicial Magistrate in the course of the magisterial inquiry under Section 202 of the CrPC reads thus: "Name of the witness Ankit Agarwal S/o Vipin Agarwal aged about 34 years, Occupation-Businessman, resident of 13, Malpura, Subhash Road, Khurja, PS-Khurja Nagar, District Bulandshahar today on 08.3.22 on oath gave statement that:- Vipin Kumar Agarwal is the owner of a firm Agarwal Udyog which is located in New Mandi Khurja. Delhi Race Course Club 1940 Limited has been purchasing horse feed from the above mentioned firm for a long time and payment for the same has been done on time After the yea....
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.... pay for the same. They have used the supplied goods. Certified after reading and listening." (v) At the end of the magisterial inquiry, the court issued process for the offence punishable under Section 406 of the IPC. The order issuing process reads thus: "Date:- 28.02.2023 The file was presented for orders. The complainant has been heard on the question of summons on an earlier date. On behalf of the complainant Vipin Kumar Aggarwal, the above complaint was presented against the opposite parties Delhi Race Club etc. to the effect that the firm of the complainant was supplying horse grain, barley and oats to Delhi Race Club since the year 1990. In the year 1995, the President of the Race Club, Mr. P.S. Vedi and the then Sachin Sehgal ji said that the bill would be made in the name of Delhi Horse Trainers Association, Race Course Road, New Delhi and the Head and Secretary of the same association have now been made separately. They will make the payment for the goods given by you. Till the year 2017, the applicant's firm's payment continued to be regular and now at present the payment of Rs 9,11,434/- is outstanding from the applicant's firm wh....
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....200 CrPC and section 202 CrPC, there is prima facie basis for summoning the opposition parties Delhi Race Course Club, Delhi Race Horse Trainers Association, JS Bedi, HK Uppal, Kazim Ali Khan and Sanjeev Charan for consideration under section 406 IPC. There are sufficient grounds for summoning for trial of a punishable offense under Section 406 IPC. ORDER The opposite parties Delhi Race Course Club, Delhi Race Horse Trainers Association, JS Bedi, HK Uppal, Kazim Ali Khan and Sanjeev Charan are summoned for trial for the offense under section 406 of the Indian Penal Code. The complainant should process the summons against the opposition parties within a week, every summons should be issued along with a copy of the complaint letter, the complainant list should be filed and the witnesses should be filed. The case file be put up on 27.04.2023 for appearance." 3. In such circumstances referred to above, the appellants preferred an application under Section 482 of the CrPC in the High Court, praying for quashing of the summoning order dated 28.02.2023 passed by the Additional Chief Judicial Magistrate, Khurja, Bulandshahar. 4. The High Court rejected the ....
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....tion'. The Company continued to receive supply of Oats made by the complainant even after 1995, whereas invoices were raised in favour of the 'Association'. This direction of the company goes to show that there was some mala fide intention on the part of the Company. The complainant bona fide continued to make supply under the direction of the Company. The invoices were raised by the complainant in similar manner since 1995 to 2017 and thereafter. It appears that there was an oral direction to raise invoices in favour of 'Association' made by the Company, which indicates mala fide of the Company. 19. After hearing the learned counsel for the parties and after perusing the impugned order, this Court is of the opinion that impugned order has been passed on the basis of facts and circumstances of the case after considering the evidence on record. There is no legal infirmity in the impugned orders, which may call for any interference by this Court in exercise of powers conferred under Section 482 Cr.P.C." 5. Thus, according to the High Court, the intention on the part of the company was prima facie mala fide and the payment of Rs. 9,11,434/- could be said to be i....
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....or the limited purpose of finding out whether a prima facie case for issue of process has been made out, and (iii) for deciding the question purely from the point of view of the complainant without at all adverting to any defence that the accused may have. In fact in proceedings under Section 202 of the CrPC, the accused has got absolutely no locus standi and is not entitled to be heard on the question whether the process should be issued against him or not. It is true that in coming to a decision as to whether a process should be issued the Magistrate can take into consideration inherent improbabilities appearing on the face of the complaint or in the evidence led by the complainant in support of the allegations but there appears to be a very thin line of demarcation between a probability of conviction of the accused and establishment of a prima facie case against him. The discretion given to the Magistrate on this behalf has to be judicially exercised by him. Once the Magistrate has exercised his discretion, it is not for the High Court or even the Supreme Court to substitute its own discretion for that of the Magistrate or to examine the case on merits with a view to find out wh....
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....f the Club and the Club used to pay the requisite amount. However, according to the complainant after 2017, the Club stopped making the payment. It is the case of the complainant that an amount of Rs. 9,11,434/- is due and payable by the appellants towards the supply of the consignment of oats. 11. The impugned order passed by the High Court is a fine specimen of total nonapplication of mind. Although the complaint was filed for the offence punishable under Sections 406, 420 and 120B respectively of the IPC yet the Additional Chief Judicial Magistrate thought fit to take cognizance and issue process only for the offence of criminal breach of trust as defined under Section 405 of the IPC and made punishable under Section 406 of the IPC. 12. We are of the view that even if the entire case of the complainant is accepted as true no offence worth the name is disclosed. 13. This Court has time and again reminded that summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into....
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....nstituting vicarious liability. 15. In Legal Remembrancer, West Bengal v. Abani Kumar Banerji reported in AIR 1950 Cal 437, a Division Bench of the Calcutta High Court speaking through Justice K.C. Das Gupta (as he then was) held that a magistrate is not bound to take cognizance of an offence merely because a complaint is filed before him. He is required to carefully apply his mind to the contents of the complaint before taking cognizance of any offence alleged therein. The relevant observations read as under: - "... As I read s. 190 of the Code of Criminal Procedure and the subsequent sections, it seems to me to be clear that a magistrate is not bound to take cognizance of an offence, merely because a petition of complaint is filed before him. Mr. Mukherji's argument is that a magistrate cannot possibly take any action with regard to a petition of complaint, without applying his mind to it, and taking cognizance of the offence mentioned in the complaint necessarily takes place, when the magistrate's mind is applied to the petition. Consequently Mr. Mukherji argues, whenever a magistrate takes the action, say, of issuing search warrant or asking the police to en....
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....nd as a guarantee against frivolous and vexatious investigation. 12. The order of the Magistrate dated 21-6-2010 does not disclose that he has taken cognizance. However, power under Section 156(3) can be exercised by the Magistrate even before he takes cognizance provided the complaint discloses the commission of cognizable offence. Since in the instant case the complaint does not do so, the order of the Magistrate stated above cannot be sustained in law and is accordingly quashed." 18. The aforesaid decision was in context with the power of the Magistrate to order police investigation under Section 156(3) of the CrPC. What is sought to be conveyed in the said decision is that when the Magistrate orders police investigation under Section 156(3) of the CrPC he does not take cognizance upon the complaint. It is only upon receipt of the police report that the Magistrate may take cognizance. If at the stage of pre-cognizance, the Magistrate is expected to be careful or to put it in other words, the Magistrate is obliged to look into the complaint threadbare so as to reach to a prima facie conclusion whether the offence is disclosed or not, then he is expected to be more car....
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....order summoning the accused is maintainable. There cannot be any doubt that once it is held that sine qua non for exercise of the power to issue summons is the subjective satisfaction "on the ground for proceeding further" while exercising the power to consider the legality of a summons issued by a Magistrate, certainly it is the duty of the Court to look into the question as to whether the learned Magistrate had applied his mind to form an opinion as to the existence of sufficient ground for proceeding further and in that regard to issue summons to face the trial for the offence concerned. In this context, we think it appropriate to state that one should understand that 'taking cognizance', empowered under Section 190, CrPC, and 'issuing process', empowered under Section 204, CrPC, are different and distinct. [See the decision in Sunil Bharti Mittal v. C.B.I. : (2015) 4 SCC 609]. 23. In Sunil Bharti Mittal (supra), this Court interpreted the expression "sufficient grounds for proceeding" and held that there should be sufficiency of materials against the accused concerned before proceeding under Section 204 of the CrPC. It was held thus: - "53. However, the words "suffi....
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....onstitute a criminal breach of trust (Section 406 IPC): - 1) There must be entrustment with person for property or dominion over the property, and 2) The person entrusted: - a) dishonestly misappropriated or converted property to his own use, or b) dishonestly used or disposed of the property or willfully suffers any other person so to do in violation of: i. any direction of law prescribing the method in which the trust is discharged; or ii. legal contract touching the discharge of trust (see: S.W.P. Palanitkar (supra). Similarly, in respect of an offence under Section 420 IPC, the essential ingredients are: - 1) deception of any person, either by making a false or misleading representation or by other action or by omission; 2) fraudulently or dishonestly inducing any person to deliver any property, or 3) the consent that any persons shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit (see: Harmanpreet Singh Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009) Cr.L.J. 3462 (SC)) 26. Further, in both the aforesaid s....
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....s to him in the month of December might create civil liability on the respondents for the offence of cheating." 29. To put it in other words, the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case. 30. The distinction between mere breach of contract and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the tim....
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....the materials on record. 33. It has been held in State of Gujarat v. Jaswantlal Nathalal reported in (1968) 2 SCR 408, "The term "entrusted" found in Section 405 IPC governs not only the words "with the property" immediately following it but also the words "or with any dominion over the property" occurring thereafter-see Velji Raghvaji Patel v. State of Maharashtra [(1965) 2 SCR 429]. Before there can be any entrustment there must be a trust meaning thereby an obligation annexed to the ownership of property and a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. But that does not mean that such an entrustment need conform to all the technicalities of the law of trust - see Jaswantrai Manilal Akhaney v. State of Bombay [1956 SCR 483]. The expression "entrustment" carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them. A mere transaction of ....
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....it. In a case of pledge, the pledged article belongs to some other person but the same is kept in trust by the pledgee. [...]" (Emphasis supplied) 35. The aforesaid exposition of law makes it clear that there should be some entrustment of property to the accused wherein the ownership is not transferred to the accused. In case of sale of movable property, although the payment may be deferred yet the property in the goods passes on delivery as per Sections 20 and 24 respectively of the Sale of Goods Act, 1930. "20. Specific goods in a deliverable state. - Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment of the price or the time of delivery of goods, or both, is postponed. xxx xxx xxx 24. Goods sent on approval or "on sale or return". - When goods are delivered to the buyer on approval or "on sale or return" or other similar terms, the property therein passes to the buyer- (a) when he signifies his approval or acceptance to the seller or does any other act adopting the transacti....
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....o force in the sub-continent during the British rule in 1862. The IPC remained in force for almost a period of 162 years until it was repealed and replaced by the Bharatiya Nyaya Sanhita ("BNS") in December 2023 which came into effect on 1st July 2024. It is indeed very sad to note that even after these many years, the courts have not been able to understand the fine distinction between criminal breach of trust and cheating. 42. When dealing with a private complaint, the law enjoins upon the magistrate a duty to meticulously examine the contents of the complaint so as to determine whether the offence of cheating or criminal breach of trust as the case may be is made out from the averments made in the complaint. The magistrate must carefully apply its mind to ascertain whether the allegations, as stated, genuinely constitute these specific offences. In contrast, when a case arises from a FIR, this responsibility is of the police - to thoroughly ascertain whether the allegations levelled by the informant indeed falls under the category of cheating or criminal breach of trust. Unfortunately, it has become a common practice for the police officers to routinely and mechanically proce....