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Shanthi v. State - Crl.OP.1592 of 2005 [2007] RD-TN 2654 (10 August 2007)


Dated:- 10.08.2007


The Hon'ble Mr. Justice R.REGUPATHI

Crl.O.P. No.1592 of 2005


Crl.M.P. Nos.712 and 713 of 2005

Shanthi ... Petitioner vs.

1. State, rep. by its

Inspector of Police,

Central Crime Branch,

Tiruppur, Coimbatore District.

2. D. Ravichandran (impleaded

as R-2 as per order of the Court

dated 25.07.2007 made in M.P.

No.411 of 2007 in Crl.O.P. No.1592

of 2005). ... Respondents Petition under Section 482 of the Code of Criminal Procedure to call for the records in C.C. No.90 of 2004 on the file of Judicial Magistrate No.1, Tirpur, and quash all further proceedings against the petitioner. For Petitioner : Mr. Ramesh For R-1 : Mr.Hasan Mohamed Jinnah, Govt. Advocate (Crl. Side) For R-2 : Mr.K.Kalyanasundaram - - - - - - -


The petitioner is A-2 among 6 accused in C.C. No.90 of 2004 on the file of Judicial Magistrate No.1, Tirupur, for offences punishable under Sections 120-B, 409 and 420 IPC. A-1, A-3 and A-6 are her husband, brother and father respectively while A-4 is a Partner of one of the Firms involved, viz., Anu Yarns, and A-5 is the co-brother of A1.

2. The accused were running four Concerns in the name of M/s.Shanthi Mills (P) Limited, M/s.Uma Maheswari Textiles, M/s. Anu Yarns and M/s.G.P.K. Apparels. Petitioner/A-2 is one of the partners of Shanthi Mills (P) Limited. It is the case of the prosecution that on behalf of the Firms, the accused approached the complainant for purchase of cotton yarn and there were regular transactions between the complainant and the accused and during 2001-2002, goods worth Rs.1,90,00,000/- have been supplied. Though Rs.1,30,00,000/- have been received by the complainant, there was an outstanding of Rs.66,35,215/-. In spite of repeated reminders, the accused failed to pay the balance amount, resulting in filing of a complaint before the respondent-police. On completion of the investigation, final report came to be filed before learned Judicial Magistrate-I, Tirupur, whereupon, he took the case on his file as C.C. No.90 of 2004 for the offences punishable under Sections 120-B, 409 and 420 IPC. The petitioner, who is the 2nd accused, alone has preferred this petition to quash the proceedings.

3. Learned counsel for the petitioner, at the first instance, submits that though the petitioner happened to be a partner of Shanthi Mills Private Limited and wife of A-1, she was not at all in charge of the business conducted by A-1 and other accused and that a perusal of the materials available on record would go to show that the allegations against the petitioner are not substantiated; hence, the proceedings pending against her may be quashed. He draws the attention of this Court to the complaint, wherein, after narrating the list of accused and the names of the firms, it is alleged as follows:- " 3. .....

v) The above firms are being managed by the people cited supra. They are in charge of and are responsible for the company and for the conduct of the business of the companies. Hence they are responsible jointly and severally for all the deeds that were done for the company. " Pointing out the other allegations in the complaint to the effect that the accused made false representation knowing fully well it was false so as to induce the complainant to deliver the goods; that, but for their representation, the goods would not have been delivered to them; and that, after committing the offence, the accused, who are close relatives, have vacated their usual place of residence and shifted elsewhere; learned counsel states that, with the above general allegations, the petitioner also has been unnecessarily roped in and that even if those allegations and averments are accepted as true, the ingredients of Sections 120B, 409 and 420 IPC. have not been attracted to proceed against the petitioner herein. According to him, even the other accused, who were in actual charge of the business affairs of the Firms, at best, could be proceeded against through civil court. Referring to the Invoice dated 08.05.2001, wherein, it is mentioned thus:- " Interest will be charged 24 on all overdue payments. All disputes arising out of this transaction will be in the jurisdiction of Tirupur only. Our responsibility ceases absolutely as soon as the goods leave our premises. " , he submitted that a perusal of the invoice and the transaction between the parties would clearly show that once the sale is effected, entrustment of the property ceases and the purchaser becomes the owner of the property. He added that, in such a civil transaction/sale, if the amount is not paid, claim could be raised before civil court; that being so, without even filing a civil suit, directly a criminal complaint has been filed against the accused including the petitioner as well. To substantiate the offence under Section 409 IPC., entrustment of the property with the accused concerned must be proved. The accused must hold and continue to hold the goods on certain terms and conditions. Only if such terms and conditions are violated, the offence under Section 409 would be made out. But, in the instant case, admittedly, goods have already been sold during 2002 and initial payment has also been made. The complaint has been lodged only for the purpose of recovering the balance money. Since the goods have already been sold, ownership of the goods has already been transferred from the hands of the complainant to that of the accused, in such circumstances, ingredients of Section 420 IPC. are not attracted. Learned counsel for the petitioner further submits that the wordings employed in Sections 409 and 420 IPC. viz., "whoever, ......., commits", clearly denote that there must be specific and exclusive personal implication against each and every person accused of the charge. Further, while proceeding under special enactments, if the person accused of is a Partner or Director of a company, initially, the company will be made as the main accused and the person who is in charge of the business affairs of the company will be held responsible on specific allegations. In the instant case, merely because of the reason that the petitioner happened to be a partner of Shanthi Mills Private Limited, she has been proceeded against. On a perusal of the complaint, it could be seen that omnibus allegations have been made against the petitioner along with other accused and no specific allegation is available as regards the role played by the petitioner to draw an inference that she also actively participated along with the other accused in the day to day business affairs of the company in her capacity as a partner of Shanti Mills and she conspired to deceive and commit default in payment of the amount due to the complainant. To substantiate the contentions raised by him, learned counsel for the petitioner relied on the decision reported 2004 (1) MWN (Cr.) 199 (Rajan Taneja v. T.Ram Naresh Tiripathi and another), wherein, it has been held as follows:- " 10. .............., that in a case of goods sold on credit, the moment, the buyer gets the goods, he becomes the owner and the seller looses his title on the goods and if at all, the seller is entitled to only for the money due on it, for that if at all the seller is entitled, to proceed as per the agreement and the said transaction cannot be labelled as "criminal breach of trust".

16. Nowhere, in the complaints, it is stated that the accused had dishonest intention at the commencement of the business transaction, either to commit criminal breach of trust or to cheat him. It is specifically stated that the payments were made promptly by the accused which induced the complainant to supply more and more goods to the accused which is common in the business transaction. In this view, the prompt payments made by the accused then and there as admitted in the complaints would show that there was no dishonest intention, at the inception of the business transaction which should follow the accused had no mens rea or intention to commit criminal breach of trust even as per the averments in the complaints.

26. The supply of goods on credit basis and failure to pay on the due date, would not come within the meaning of Sections 406 and 420 IPC. is the main submission of the learned counsel for the petitioner based upon a decision in A.L.Panian v. State of A.P. 1991 SCC (Cri) 84. In the case involved in the above decision, it appears the mill company promised to pay the amount, but failed to do so, for which a complaint was filed under Sections 406 and 420 IPC. Considering the facts and circumstances of the case, the Apex Court has ruled:- " Mere subsequent promise by petitioners 1 and 2 of the mill company to clear the outstanding by the end of September 1986 and their failure to do so cannot render them liable under Sections 406 or 420 I.P.C. In mercantile transactions consignments are delivered on credit and very often the payment cannot be made on the due date but that does not attract penal consequences. " Here also, even as per the allegations in the complaint at the beginning, it is an ordinary simple transaction for the purchase of cloth and thereafter as admitted by the complainant himself, prompt payments were made by the accused and for the reasons best known to the accused, thereafter he was unable to honour the bills or clear the debt and this would mean only a breach of agreement, not attracting penal consequence. The Apex Court has ruled further, failure to keep this promise cannot convert a purely business transaction into one of a penal nature punishable under Sections 406 and 420, I.P.C.

27. In Hridaya Rajan Prasad Verma v. State of Bihar, 2000 SCC (Cri) 786, the Apex Court has ruled: " In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is show right at the beginning of the transaction that is the time when the offence is said to have been committed. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating, it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is when he made the promise cannot be presumed. Judged on the touchstone of the principles noted above, the present case, in our considered view warrants interference inasmuch as the ingredients of the offence of cheating punishable under Section 420, I.P.C. and its allied offences under Sections 418 and 423 has not been made out. " The complaints do not make out a case of intentional deception on the part of the accused, right at the beginning of the negotiations for the transaction, has neither been expressly stated nor indirectly suggested in the complaint. Thus I find, the main ingredients of dishonest intention, in order to deceive the complainant is absent, even accepting all the averments in the complaint on their face value.

28. The learned counsel for the petitioner further submits, that the allegations levelled in both the complaints would reveal, that the parties were carrying on business for quite sometime, on credit basis and the payments were being made for the supplies effected, even admittedly and thereafter alone, the complainant could not realise the money, for the goods supplied. In this view, he further submits that mere failure to pay the payments along with accrued interest as per the invoice, on the stipulated date, cannot per se make the transaction a dishonest one, so as to attract the penal provisions. In aid, he relied upon a decision in S.W.Palanitkar v. State of Bihar, 2002 SCC (Crl.) 129. In the said decision, the Hon'ble Supreme Court has threadbare analysed the ingredients required under Sections 405, 406 and 420, I.P.C. and in fine concluded: " Every breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person wronged may seek his redress for damages in a Civil Court but a breach of trust with mens rea gives rise to a criminal prosecution as well. " thereby ruling, that if the breach of trust is coupled with mens rea alone, criminal prosecution would lie.

29. The main requirements of Section 415, I.P.C., in order to attract 420, I.P.C. are (1) the person must dishonestly or fraudulently induced the complaint to deliver any property; and (2) the person should intentionally induced the complainant to do or omit to do a thing. Here, even taking the entire averments as such, no prima facie case is made out, so as to say that the accused petitioner would have acted dishonestly or fraudulently, thereby inducing the complainant/respondent to deliver the property. In the above ruling affirming the decision in Hridaya Rajan Prasad Verma's, the Apex Court has ruled that without mens rea there cannot be any breach of trust, resulting in criminal prosecution and in that view, taking cognizance of the offence against some of the accused in that case was quashed.

30. In Alpic Finance Ltd. v. P.Sadasivam, 2001 SCC (Crl.) 565, the Apex Court has ruled, merely because remedy by way of civil suit is available is not an impediment in maintaining a criminal complaint, provided the complaint discloses the ingredients of the offence alleged. It is also the dictum of the Apex Court in that case, that default made by the respondent in payment of instalments by way of repayment of loan advanced by appellant under a lease agreement between the parties for purchase of some article would not disclose element of deception or fraud or dishonest inducement or wilful representation in the entire transaction.

31. By going through both the complaints, I am unable to find out any materials, prima facie, even disclosing the requirements either for Section 406 or 420, I.P.C. Therefore, on the basis of the above rulings relied upon by the learned counsel for the petitioner, I am of the considered opinion, considering the facts and circumstances also, that 'civil profile' outweighs the 'criminal outfit' as held in Medchl Chemicals Pharma (P) Ltd.'s case. Under the above said circumstances, it is to be held that the respondents/complainants had chosen the short circuited way to realise the amount, converting a civil case into a criminal one, thereby abusing the Court process and therefore, invoking the inherent jurisdiction under Section 482, Cr.P.C., the proceedings in both the cases should be quashed. " Next, he relied on the decision reported in 2006(2)SCC(Cri)49 (Uma Shankar Gopalika v. State of Bihar) and the relevant portions are extracted below:- " 6. ..... It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases 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 there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC.

7. In our view petition of complaint does not disclose any criminal offence at all much less any offence either under Section 420 or Section 120-B IPC and the present case is a case of purely civil dispute between the parties for which remedy lies before a ciivl court by filing a properly constituted suit. In our opinion, in view of these facts allowing the police investigation to continue would amount to an abuse of the process of court and to prevent the same it was just and expedient for the High Court to quash the same by exercising the powers under Section 482 Cr.P.C which it has erroneously refused."

He also relied on the decision reported in 2007 AIR SCW 1816 (Thelapalli Raghavaiah v. Station House Officer). Paragraph Nos.13 and 18 of the Judgment are specifically referred to and they are extracted below:- " 13. In support of his submission Mr.Anand referred to an relied on a decision of this Court in Indian Oil Corporation vs. NEPC India Ltd., reported in 2006 (6) SCC page 736, wherein it was held that where civil remedy is availed of in disputes arising from a breach of contract, remedy under the criminal law also is not barred, if the allegations also disclose a criminal offence.

18. We have carefully gone through the complaint made by the petitioner, and are convinced that the same primarily makes out a civil dispute relating to measurement, though an attempt has been made to give the same a criminal flavour. The High Court rightly held that the entire reading of the complaint does not disclose any offence except a civil dispute between the parties." In support of his argument relating to personal liability, learned counsel for the petitioner heavily relied on the ruling in T.G.L.Groundnut Corpn. v. Agrl. Market Committee, Adoni, (1985 The Madras Law Journal Reports (Criminal) 608). Paragraph No.12 is relevant, which runs to the following effect:-

" 12. ...... On a reading of the aforesaid section it is clear from the words "whoever commits" that a person is made personally liable for an offence committed under the Act and the liability cannot be extended to any other person merely by virtue of any office or position he holds in a company or firm. In order to extend the liability for an offence committed under the Act to any individual, it has to be specifically averred in the petition of complaint that particular person is personally guilty of any act of commission or omission which tantamounts to an offence punishable under the Act. " Finally, he placed reliance on the decision reported in 1990 (Supp) Supreme Court Cases 607 (A.L.Panian v. State of A.P.). The relevant portion in para No.6 is quoted here-under:- " 6. ....... In mercantile transactions consignments are delivered on credit and very often the payment cannot be made on the due date but that does not attract penal consequences. In the instant case also it appears a letter was written by the officer of the mill company to the consignor on August 12, 1986 that they will clear all pending bills, one by one, and complete payment before the end of September 1986. Failure to keep this promise cannot convert a purely business transaction into one of a penal nature punishable under Sections 406 and 420 IPC. ....."

4. Per contra, learned counsel for the complainant submits that, during the course of investigation, statements have been recorded from witnesses, who have categorically stated that the petitioner also participated in the business and that the entire family was jointly doing the business. In the First Information Report, a specific allegation has been made against the petitioner that she, along with other family members, was running the business and has committed the offence. Moreover, the fraudulent and dishonest intention could be inferred in view of the reason that she joined the other family members in vacating the usual place of residence along with children. In view of the reason that the petitioner happened to be a partner of Shanthi Mills Private Limited, it must be presumed that she also played an active role and participated in the conduct of the business of the firm. To what extent she participated is a matter that has to be gone into at the time of trial and at this stage, the petitioner need not be excluded from the list of the accused by way of quashing the proceedings pending against her. It is further submitted that though the offence under Section 409 IPC. may not be made out in view of the reason that it is a case of admitted sale and that though it is a continuos transaction which took place between 2001-2002 and initial payment has been made, however, offences under Sections 120B and 420 IPC. will be made out since substantial due is outstanding from the accused including the petitioner herein. He reiterated that the conduct of the petitioner in vacating the usual place of residence and shifting to a different place would only go to show the fraudulent and dishonest intention on her part. The offence alleged is committed in collusion and conspiracy. Since the main accused/A1 and the petitioner are husband and wife, her participation in the alleged act cannot be ruled out. In such circumstances, according to the counsel for the complainant, it may be concluded that the offences under Sections 420 and 120B IPC. are made out as against the petitioner. To substantiate the contentions raised by him, learned counsel for the petitioner relied on the decision reported in M/s.Medchl Chemicals and Pharma Pvt. Ltd. v. M/s.Biological E. Ltd. (AIR 2000 SC 1869), wherein, the Supreme Court ruled thus:-

" 17. On careful reading of the complaint, in our view, it cannot be said that the complaint does not disclose the commission of an offence. The ingredients of the offences under Sections 415, 418 and 420 cannot be said to be totally absent on the basis of the allegations in the complaint. We however, hasten to add that whether or not the allegations in the complaint are otherwise correct has to be decided on the basis of the evidence to be led at the trial in the complaint case but simply because of the fact that there is a remedy provided for breach of contract, that does not by itself clothe the Court to come to a conclusion that civil remedy is the only remedy available to the appellant herein. Both criminal law and civil law remedy can be pursued in diverse situations. As a matter of fact "they are not mutually exclusive but clearly co-extensive and essentially differ in their content and consequence. The object of criminal law is to punish an offender who commits an offence against a person, property or the State for which the accused, on proof of the offence, is deprived of his liberty and in some cases even his life. This does not, however, affect civil remedies at all for suing the wrong doer in cases like arson, accidents etc. It is anathema to suppose that when a civil remedy is available, a criminal prosecution is completely barred. The two types of actions are quite different in content, scope and impart " (Vide Pratiba Rani v. Suraj Kumar (AIR 1985 SC 628 : 1985 Crl LJ 817) (Supra)." He also relied on the case law reported in 2002 SCC (Cri) 19 (M.Krishnan v. Vijay Singh), wherein, it has been held as follows:- " 4. Despite referring to various judgments of this Court relating to the interpretation and scope of Section 482 of the Code and the indictment that the High Court should be slow in interfering with the proceedings at the initial stage, the learned Single Judge of the High Court passed the impugned order. The High Court appears to have been impressed by the fact that as the nature of the dispute was primarily of a civil nature, the appellant was not justified in resorting to the criminal proceedings.

5. Accepting such a general proposition would be against the provisions of law inasmuch as in all cases of cheating and fraud, in the whole transaction, there is generally some element of civil nature. However, in this case, the allegations were regarding the forging of the documents and acquiring gains on the basis of such forged documents. The proceedings could not be quashed only because the respondents had filed a civil suit with respect to the aforesaid documents. In a criminal court the allegations made in the complaint have to be established independently, notwithstanding the adjudication by a civil court. Had the complainant failed to prove the allegations made by him in the complaint the respondents were entitled to discharge or acquittal but not otherwise. ....."

5. I have perused the materials available on record and carefully considered the rival submissions made on either side. On a perusal of the First Information Report, it prima facie appears that the petitioner, just because she happened to be the wife of the main accused/A1, has been implicated in the case even in the absence of valid materials in respect of the specific role played by her as a partner of Shanthi Mills (P) Limited. To put it clear, in the F.I.R., though the name of the petitioner has been mentioned as A-2 along with other accused, nowhere, her role in the day-to-day business affairs of the firm as a partner has been mentioned. Interestingly, in the final report, she has been shown as the Director of Shanthi Mills Private Limited. This conclusion in the final report is said to have been reached on the basis of the statement of witnesses recorded during the course of investigation. One of the witnesses by name Anbazhagan has stated that the petitioner is one of the directors along with A-1. However, no positive material in corroboration of such statement is available in the final report to come to a definite conclusion that the petitioner also acted as one of the Directors along with A-1 in M/s. Shanthi Mills. On a perusal of the entire statement of the witnesses recorded during the course of investigation, I do not find any valid material/ground to connect the petitioner with the crime. Admittedly, the business transaction relates to the period 2001-2002, during which time, purchase has been made for Rs.1,90,00,000/-, subsequent to which, a sum of Rs.1.30 crores has been received by the complainant and the balance outstanding to be received by the complainant, as could be seen from the F.I.R. and the Charge Sheet, is Rs.66,35,215. All the goods have been sold by invoices for sale consideration. In the given set of facts and circumstances, the complainant would have proceeded against those who have actually defaulted, before a civil court and in these admitted sale transactions, the offence under Section 409 IPC. will not be attracted. Coming to the allegation under Section 420 IPC., it is pertinent to note that dishonest intention must be available with each and everyone of the accused from the inception and in the instant case, neither conspiracy with the other accused nor intention of the petitioner to commit the default has been established through substantive materials. Moreover, as pointed out already, the participation of the petitioner in the business of the firm has not been substantiated at all. In respect of her alleged role in M/s.Shanthi Mills private limited as a Director also, no material to substantiate conspiracy under Section 120-B is available and further, the precedents relied on by the learned counsel for the petitioner are squarely applicable to the facts and circumstances of the case on hand; that being so, this Court has no other option but to hold that the proceedings against the petitioner is an abuse of process of court and this is a fit case to quash the proceedings against the petitioner.

6. Accordingly, the petition is ordered and the proceedings against the petitioner pending in C.C. No.90 of 2004 on the file of Judicial Magistrate No.1, Tirupur, are quashed. Connected Miscellaneous Petitions stand closed.

7. It is seen that the case has been initiated during 2002 and it is pending for a long time on the file of Judicial Magistrate-1, Tirupur. The other accused in the case have neither chosen to prefer a discharge petition before the trial court nor a quash petition along with the petitioner herein though they are members of one family. Pointing out the same, learned counsel for the complainant/R2 by states that there is every possibility to protract the trial proceedings and seeks for a direction to the trial court for early disposal of the case. In view of the same, learned Magistrate is directed to proceed against the other accused in accordance with law uninfluenced by the observations made herein and conclude the trial as expeditiously as possible. JI.


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