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TaxTMI 
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2024 (11) TMI 584
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.... No. 2. 3. Facts in brief, germane, are as follows: A crime comes to be registered before the first respondent - police by the second respondent that the first petitioner - proprietor of one M/s. Iobitcode Interactive, having its office within the jurisdiction of the police station before whom the crime is registered, on the allegation that the first petitioner - company is in evasion of payment of GST, which is to be paid to the government. It is the contention of the second respondent - GST Intelligence that upon certain investigation conducted by them, it is noticed that certain documents reveal that 12 companies registered in different places under different names, were involved in online betting and found to be of certain suspicion that more than ten companies are operating from the said address. Petitioner No. 2 is said to be the Human Resource Manager of the company who has illegally purchased several SIM cards and those SIM cards were linked to different bank accounts, which allegedly facilitated certain fake transactions. Based upon this, the second respondent - GST Intelligence registers the crime before the first respondent. The crime is registered on 04.08.2021. T....
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....ties and have perused the material on record. 8. The afore-narrated facts are not in dispute and requires no reiteration. Petitioner No. 2 - GST Intelligence on investigation and procuring certain documents files a complaint before the jurisdictional police. Since the entire issue has now triggered from the complaint, it reads as follows: "To The Station House Officer, Vivek Nagar Police Station, Bengaluru, Karnataka - 560 047. Sir, Sub: Indulging in suspicious/illegal transactions including betting/gambling by the entities operating https://betstarexch. com; https://khelo24bet.com/; https://bet inexchange.com/-Reg. This office has initiated investigation on the evasion of GST by a group of entities which are engaged in rendering taxable supplies involving games of skill. However, during the search proceedings initiated on one of such business entities i.e M/s lobitcode Interactive located at Alfa Centre, 20, Outer Ring Rd, Venugopal swamy Layout, Bengaluru, Karnataka 560047 on 02/08/2021, it is noticed that a group of entities are operating from the same premises, and the activities rendered by such entitie....
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....ting/ gambling activities undertaken by the group of entities. 4. It is given to understand that betting/gambling are illegal activities as per law in the state of Karnataka. In view of such law in force in the state of Karnataka and having come to notice about such illegal betting being taken place at a location in Bengaluru, it is opined it is more appropriate to hand over the case to Police Department for their further necessary proceedings as deemed fit. 6. Presently, Smt. Shymala N who is one of the crucial persons in the helm of affairs is available this Office i.e Directorate of Goods and Services Tax Intelligence, No. 112, S.P. Enclave Adjacent to Karnataka Bank, K.H Road, Bengaluru - 560 027, in connection with the ongoing investigation against such group of entities." (Emphasis added) The companies that are allegedly run by the petitioners, first petitioner in particular, is projected to be the foundation of the crime. The GST Intelligence suspects that these petitioners are involved in arranging SIM cards, facilitating opening of bank accounts, registration on GST portal of multiple fake entities and arranging for co-working space for non-existing....
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....ingredients under Section 415 of the IPC cannot be met. Interpretation of the offence of cheating under Section 415 of the IPC need not detain this Court for long or delve deep into the matter as the Apex Court in plethora of judgments has elucidated what is necessary for an offence under Section 415 of the IPC, for it to become punishable under Section 420 of the IPC. The Apex Court right from the year 2000 in the case of HRIDAYA RANJAN PRASAD VERMA v. STATE OF BIHAR (2000) 4 SCC 168 has held as follows:- "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 ....
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....GUJARAT (2009) 3 SCC 78 the Apex Court holds as follows: "14. An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied: (i) deception of a person either by making a false or misleading representation or by other action or omission; (ii) fraudulently or dishonestly inducing any person to deliver any property; or to consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit. For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Penal Code can be said to have been made out. 28. A matter which essentially involves dispute of a civil nature should not be allowed to be the subject-matter of a criminal offence, the latter being....
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.... may note that there is nothing either in the complaint or in any material before us, pointing to the fact that any property was entrusted to the appellant at all which he dishonestly converted for his own use so as to satisfy the ingredients of Section 405 punishable under Section 406 IPC. Hence the learned Magistrate committed a serious error in issuing process against the appellant for the said offence. Unfortunately, the High Court also failed to correct this manifest error. 13. Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168: 2000 SCC (Cri) 786].) In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached Respondent 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. Th....
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....hing 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, is said to "cheat"." 16. The ingredients to constitute an offence of cheating are as follows: 16.1. There should be fraudulent or dishonest inducement of a person by deceiving him: 16.1.1. The person so induced should be intentionally induced to deliver any property to any person or to consent that any person shall retain any property, or 16.1.2. The person so induced should be intentionally induced to do or to omit to do anything which he would not do or omit if he were not so deceived; and 16.2. In cases covered by 16.1.2. above, the act or omission should be one which caused or is likely to cause damage or harm to the person induced in body, mind, reputation or property. 17. A fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating. 18. Section 420 of the Penal Code reads thus: "420. Cheating an....
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....to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived 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, is said to "cheat"." 55. The essential ingredients of the offense of cheating are: 1. Deception of any person 2. (a) Fraudulently or dishonestly inducing that person- (i) to deliver any property to any person : or (ii) to consent that any person shall retain any property; or (b) intentionally inducing that person to do or omit to do anything which he would not do or omit if he were no 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. 56. A fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating. 57. Section 420 IPC defines cheating and dishonestly inducing delive....
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....tion to be examined by us is as to whether on the facts disclosed in the petition of the complaint any criminal offence whatsoever is made out much less offences under Section 420/120-B IPC. The only allegation in the complaint petitioner against the accused person is that they assured the complainant that when they receive the insurance claim amounting to Rs. 4,20,000, they would pay a sum of Rs. 2,60,000 to the complainant out of that but the same has never been paid. It was pointed out that on behalf of the complainant that the accused fraudulently persuaded the complainant to agree so that the accused persons may take steps for moving the consumer forum in relation to the claim of Rs. 4,20,0000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases of breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case, it has nowhere been stated that at the very inception that there was intention on behalf of the accused person to cheat which is a condition precedent for an ....
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....o exercise the power under Section 482 Cr.P.C to quash the proceedings." 64. Having gone through the complaint/FIR and even the chargesheet, it cannot be said that the averments in the FIR and the allegations in the complaint against the appellant constitute an offence under Section 405 & 420 Penal Code, 1860. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making promise being absent, no offence under Section 420 IPC can be said to have been made out. In the instant case, there is no material to indicate that Appellants had any mala fide intention against the Respondent which is clearly deductible from the MOU dated 20.08.2009 arrived between the parties." (Emphasis supplied) In the light of the elucidation by the Apex Court as afore-quoted and the facts obtaining in the case at hand, in the considered view of this Court, it would not meet the necessary ingredients of Section 415 of the IPC for it to become punishable under Section 420 of the IPC for permitting further proceedings to continue. Therefore, the offence under Section 420 of the IPC is loo....
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....ategories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised. (1) Where the allegations made in the first information report or 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 a case against the accused. (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156 (1) of the Code except under an order of a Magistrate within the purview of Section 155 (2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accuse....