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The Supreme Court has held that existence of a civil remedy for breach of contract does not act as a bar from initiation of criminal proceedings.
The Division Bench comprising Justice Indu Malhotra & Justice Ajay Rastogi has observed that the correctness of allegations in the complaint are to be decided on the basis of evidence led during the course of trial while allowing an appeal against acquittal have observed that
“Whether the allegations in the complaint are otherwise correct or not, has to be decided on the basis of the evidence to be led during the course of trial. Simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of the process of the court for exercising inherent powers of the High Court under Section 482 CrPC for quashing such proceedings.”, the Bench noted.
In the present matter, an agreement to sell was executed on December 24, 2011, between the complainant (appellant) & 2nd Respondent for a total sale consideration of Rs. 63,28,50,750/- for 1205.43 sq yds. of the property mortgaged by the 2nd Respondent with the State Bank of Patiala to pay legal dues of Rs 18 crore. The agreement was executed on Respondent no 2’s promise to pay a sum of Rs 25.50 crore to the complaint in case of failure to carry the deal forward. As per clause 3 of the said agreement to sell, the 2nd Respondent had to perform and complete three compulsory requirements, which were mandatory in nature latest by March 24, 2012, before receiving any additional amount from the complainant. Irrespective of a delay in obtaining sanction plans, the complainant vide cheque dated May 23, 2012, made a payment of Rs. 5.40 crores & Respondent no 2 in return handed over post-dated cheques worth Rs. 25.50 crores towards security for performance of the agreement dated December 24, 2011. After that, the 2nd Respondent immediately cleared her outstanding legal liability of State Bank of Patiala and obtained NOC from the bank. The 2nd Respondent getting NOC was disclosed to the complainant for the first time when the post-dated cheques were rendered invalid. Further, vide communication dated January 30, 2013, the 2nd Respondent illegally terminated the agreement.
On September 23, 2015, the complainant filed a private complaint u/s 200 r/w S. 190 CrPC before the learned magistrate took cognizance of the offense committed. After that, the MM directed the concerned Police Station to register the FIR under Section 156(3) CrPC vide Order dated November 15, 2016, that came to be challenged by the 2nd Respondent by the filing of a criminal revision, but that came to be dismissed by the ASJ & Special Judge(NDPS) and thereafter FIR under Section 156(3) CrPC came to be registered against the 2nd Respondent and the broker Mr. Ashok Kumar under Sections 420, 406 and 34 IPC on April 28, 2017. After that, the 2nd Respondent challenged the Order of dismissal of revision petition before the High Court by filing a petition u/s 482 CrPC,1973, which was allowed by the Court as the Court quashed all the criminal proceedings and the orders under challenge therein dated November 15, 2016, and April 24, 2017, and further observed that the observations made shall not be construed to be the expression on merits, in the arbitration proceedings by impugned judgment dated March 15, 2019.
Thus, the de facto complainant approached this Court appealing against the impugned Order dated March 15, 2019, passed by the HC to quash the proceedings by exercising its inherent power u/s 482 CrPC,1973 on the foundation that the allegations made in the complaint/FIR does not constitute offenses u/s 420,406 & 34 of IPC.
The issue that arose for consideration was in what circumstances and categories of cases, a criminal proceeding may be quashed either in exercise of the extraordinary powers of the High Court under Article 226 of the Constitution, or in the exercise of the inherent powers of the High Court under Section 482 CrPC.
The Bench placed reliance on Nagpur Steel & Alloys Pvt Ltd v. P Radhakrishna & Others [1997 SCC(Cri) 1073] to observe that, “It is settled that one is not supposed to dilate on this score, or intend to present that the allegations in the complaint will have to be accepted on the face of it and the truth or falsity of which would not be gone into by the Court at this stage, as noticed above, whether the allegations in the complaint were true is to be decided on the basis of the evidence led at the stage of trial”
Referring to the judgement in Trisuns Chemical Industry Vs. Rajesh Agarwal and Ors [(1999) 8 SCC 686] , the Bench observed that although the facts in the present complaint/charge sheet/FIR revealed the commercial transaction but that was hardly a reason to exclude the offence of cheating from such transaction.
In this context, the Court further said,
“In fact, many times, offence of cheating is committed in the course of commercial transactions and the illustrations have been set out under Sections 415, 418 and 420 IPC.”
Further reliance was also placed on Arnab Manoranjan Goswami Vs. State of Maharashtra and Others 2020 SCC Online SC 964, State of Haryana and Others Vs. Bhajan Lal and Others 1992 Suppl (1) SCC 335 to throw light on the circumstances & the situations which are to be kept in mind by the High Court while exercising powers u/s 482 CrPC. Thereby, with regards to the alleged circumstances ((i) that it was a case of termination of agreement to sell on account of an alleged breach of the contract and (ii) the fact that the arbitral proceedings have been initiated at the instance of the appellants), the Bench noted that the same were unsustainable in law.
Thus, the Bench while allowing the appeal & setting aside the impugned order dated March 15,2019 observed that it could not be said that the complaint did not disclose the commission of offences u/s 406 & 402 IPC.
“The High Court while exercising powers u/s 482 CrPC has to examine the complaint in its entirety based on the allegation made in the complaint/FIR/charge-sheet & is not under an obligation to go into the matter to examine its correctness. Whatever appears on the face of the complaint/FIR/charge-sheet is to be taken into consideration without any”, the Court noted.
Case Title: Priti Saraf v. State of NCT of Delhi
Law Point/Statute Involved: Section 34,406& 420 of the Indian Penal Code, 1860 & Section 190,200 & 482 of the Code of Criminal Procedure,1973.
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