Supreme Court of India
M/S THERMAX LTD. & ORS.versusK.M. JOHNY & ORS.
- Citation
- 2011 INSC 716
- Decided
- 27 September 2011
- Bench
- P SATHASIVAM
Holding
The complaint lacks the essential ingredients of the alleged offences and is a civil dispute; therefore, the magistrate’s order under Section 156(3) and the High Court’s refusal to quash were erroneous, and the proceedings must be quashed.
Summary
Thermax Ltd. entered into purchase orders with K.M. Johny’s firms for storage tanks and consumables. The contracts fell apart and Johny alleged non‑payment of large sums, filing three earlier complaints that were closed as civil matters. In 2002 he lodged another complaint before a magistrate alleging offences under Sections 405, 406, 420 and 34 IPC. The magistrate, invoking Section 156(3) CrPC, directed the Crime Branch to investigate; the High Court upheld this order. The Supreme Court held that the complaint did not disclose the essential ingredients of the alleged offences, was essentially a contractual dispute, suffered inordinate delay, and the earlier complaints showed it was a civil claim. Consequently, the magistrate’s direction and the High Court’s refusal to quash were erroneous. The Court exercised its power under Section 482 CrPC to quash the criminal proceedings, setting aside the lower orders.
Issues considered
- Whether the complaint disclosed the material ingredients of offences under Sections 405, 406, 420 read with Section 34 of the IPC.
- Whether the magistrate was justified in issuing a direction under Section 156(3) CrPC for investigation of a complaint that is essentially civil.
- Whether the High Court erred in not exercising its inherent power under Section 482 CrPC to quash the proceedings.
- Whether the alleged participation of company officers can be imputed by vicarious liability in the offences alleged.
- Whether the delay and limitation considerations bar the criminal prosecution.
Legislation cited
- Code of Criminal Procedure, 1973s. 156(3), s. 482, s. 91
- Indian Penal Code, 1860s. 34, s. 405, s. 406, s. 420
- Industrial Disputes Act, 1947s. 32
- Negotiable Instruments Act, 1881s. 141
Subjects
Criminal ProcedureSection 156(3)Section 482Civil disputeCheatingCriminal breach of trustLimitationVicarious liabilityContract disputeQuash
Judgment
[2011] 14 (ADDL.) S.C.R. 154
A M/S THERMAX LTD. & ORS.
v.
K.M. JOHNY & ORS.
(Criminal Appeal No. 1868 of 2011)
SEPTEMBER 27, 2011
B
[P. SATHASIVAM AND DR. B. S. CHAUHAN, JJ.]
Code of Criminal Procedure, 19,73: s.156(3) -
Investigation in cognizable offence - Complaint before crime
C branch u/ss.405, 406, 420 rlw s.34, /PC alleging non-payment
of dues by appellant-company - Cognizance of offence not
taken by crime branch - Application u/s. 156(3) - Magistrate
issued direction for investigation - Criminal proceedings
initiated - High Court refused to interfere - On appeal, held:
D Three complaints containing similar a/legations were
investigated previously and all were closed as the alleged
claim was found to be of civil nature - In those circumstances,
it did not lie for complainant to have approached the
Magistrate again with the same subject complaint - Inasmuch
E as the dispute arose out of a contract and a constituted
remedy was only before a civil court, the Magistrate ought to
have appreciated that complainant was attempting to use the
machinery of the criminal courts for exerting unjust, undue
and unwarranted pressure on the appellants - Apart from the
F fact that the complaint lacked necessary ingredients of ss. 405,
406, 420 rlw ~· 34 /PC, no specific allegation was made
against any person - Complaint was filed in 2002 when the
alleged disputes pertained to the period from 1993-1995 -
Courts below ought to have appreciated that complainant was
G trying to circumvent the jurisdiction of the civil courts which
estopped him from proceeding on account of the law of
/imitation - In view of the infirmities and in the light of s.482,
High Court ought to have quashed those proceedings to
safeguard the rights of the appellants - Complaint quashed
H 154
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 155
- Penal Code, 1860 - ss.405, 406, 420 rlw s. 34 - Contract - A
De/ayllaches.
On 26.05.1995, the appellant-company placed a
purchase order on respondent no.1 for designing and
manufacturing stationary storage tanks. It also placed
8
two purchase orders for the supply of consumables and
other accessories to said tanks. On 20.6.1995,
respondent no.1 informed the appellant-company about
their inability to procure the requisite material and
requested it to supply the same and to deduct the
material cost from the final bill. Respondent no.1 was C
provided the material by the appellant-company.
However, respondent no.1 failed to carry out the work as
per the schedule. The appellant-company cancelled the
order placed w.e.f. from 26.5.1995 i.e. from the date when
the order was placed. D
Respondent no.1 filed three complaints with crime
branch, one in 2000 and two in 2001 alleging that they
had carried out several fabrication job works for the
appellant-company and huge amount was ou~tanding till E
date despite several requests. The Crime Branch did not
take any cognizance. Respondent no.1 made a complaint
before the Magistrate. By order dated 30.5.2002, the
Magistrate issued a direction under Section 156(3),
Cr.P.C. and referred the same to Crime Branch
F
(respondent no.2) for investigation. Pursuant to the same,
respondent no.2 registered an offence and initiated
proceedings thereunder against the appellant-company.
The appellant-company moved the High Court for
quashing and setting aside the order dated 30.5.2002. G
The High Court remitted the matter to Magistrate for
reconsideration of entire prayer and to decide the case
afresh. Pursuant to the same, the appellant~company filed
an application under Section 91, Cr.P.C. praying for
direction to the Assistant Commissioner of Police, Crime
H
156 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A Branch to produce all the records and proceedings of the
complaint. The Magistrate called for a report under
Section 156(2) from respondent no.2. Aggrieved
appellant-company filed writ petition before the High
Court which was dismissed.
B The question which arose for consideration in the
instant appeal was whether the ingredients of Sections
405, 420 read with Section 34 were made out from the
complaint; whether the Magistrate was justified in calling
for a report under Section 156(3), Cr.P.C. from the Crime
C Branch; and whether the High Court was justified in
confirming the action of the Magistrate and thereby failed
. to exercise its power and jurisdiction under Section 482,
Cr.P.C.
o Allowing the appeal, the Court
HELD: 1. For proceedings under Section 156(3),
Cr.P .C., the complaint must have disclosed relevant
material ingredients of Sections 405, 406, 420 read with
Section 34, IPC. If there is a flavour of civil nature, the
E same cannot be agitated in the form of criminal
proceeding. If there is huge delay in order to avoid the
period of limitation, it cannot be resorted to a criminal
proceeding. It is seen from the materials placed that three
complail')ts containing similar allegations were
F investigated previously and all were closed as the alleged
claim was found to be of civil nature. In those
circumstances, it did not lie for respondent no.1-the
complainant to approach the Magistrate with the same
subject complaint. Inasmuch as the dispute arose out of
G a contract and a constituted remedy is only before a civil
court, the Magistrate ought to have apprecillted that
respondent No.1 was attempting to use the machinery of
the criminal courts for private gains and for exerting
unjust, undue and unwarranted pressure on the
H
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 157
appellants in order to fulfill his illegal demands and A
extract undeserving monetary gains from them. [Paras
16, 17] [181-C-H]
Suresh v. Mahadevappa Shivappa Danannava & Anr.
(2005) 3 SCC 670: 2005 (2) SCR 131; Madhavrao Jiwajirao B
Scindia & Ors. v. Sambhajirao Chandrojirao Angre & Ors.
(1988) 1 SCC 692: 1988 (2) SCR 930; A/pie Finance Ltd. v.
P. Sadasivan & Anr. (2001) 3 SCC 513: 2001 (1) SCR 1059;
Nagawwa v. Veeranna Shivalingappa Konjalgi (1976) 3 SCC
736: 1976 Suppl. SCR 123; State of Haryana v. Bhajan Lal C
1992 Sup,J (1) SCC 335: 1990 (3) Suppl. SCR 259; Anil
Mahajan v. Bhor Industries Ltd. & Anr. (2005) 10 SCC 228;
S.K. Alagh v. State of Uttar Pradesh & Ors. (2008) 5 SCC 662:
2008 (2) SCR 1088; Maharashtra State Electricity Distribution
Company Limited & Anr. v. Datar Switchgear Limited & Ors.
(201 O) 1o sec 479: 201 o (12) SCR 551 - relied on. D
2. The courts below failed to appreciate that Ex. 61
was a reply filed by the Crime Branch-II and Ex. 63 was
the statement of the official which categorically stated that
the complaint preferred by respondent No.1 was civil in E
nature. Even if it is accepted thaf the records were·
destroyed and notwithstanding such destruction, it was
a matter of record that the complaint preferred by
respondent No.1 was indeed investigated and
categorized as civil in nature. This aspect was not · F
considered either by the Magistrate or by the High Court.
[Para 18) [182-A-B]
3. It is settled law that the essential ingredients for an
offence under Section 420, IPC is that there has to be
dishonest intention to deceive another person. No such G
dishonest intention can be seen or even inferred from the
allegations in the complaint inasmuch as the entire
dispute pertained to contractual obligations between the
parties. Since the very ingredients of Section 420 were
not attracted, the prosecution initiated is wholly · H
158 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
<\ untenable. Even assuming that allegations in the
complaint do make out a dispute, still it ought to be
considered that the same is merely a breach of contract
and the same cannot give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is
B shown right from the beginning .1of the transaction.
Inasmuch as there are number of documents to show that
appellant-Company had acted in terms of the agreement
and in a bona fide manner, it cannot be said that the act
of the appellant-Company amounted to a breach of
c contract. [Para 19] [182-C-F]
4. Though respondent No.1 had roped all the
appellants in a criminal case without their specific role or
participation in the alleged offence with the sole purpose
of settling his dispute with appellant-Company by
D initiating the criminal prosecution, it was pointed out that
appellant nos. 2 to 8 were the Ex-Chairperson, Ex-
Directors and Senior Managerial Personnel of appellant
No:l-Company, who did not have any personal role in the
allegations and claims of respondent No.1. There was
E also no specific allegation with regard to their role. Apart
from the fact that the complaint lacked necessary
ingredients of Sections 405, 406, 420 read with Section
34 IPC, it is to be noted that the concept of 'vicarious
liability' is unknown to criminal law. There was no specific
F allegation made against any person but the members of
the Board and senior executives were joined as the
persons looking after the management and business of
the appellant-Company. The offence alleged in the
criminal complaint filed by respondent no.1 is under
G Sections 405 and 420 IPC whereunder no specific liability
is imposed on the officers of the company, if the alleged
offence is by the Company. In the absence of specific
details about the same, no person other than appellant
no.1-Company can be prosecuted under the alleged
H complaint. The courts below failed to appreciate an
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 159
important aspect that the complaint came to be filed in A
the year 2002 when the alleged disputes pertained to the
period from 1993-1995. The courts below ought to have
appreciated that respondent no.1 was trying to
circumvent the jurisdiction of the civil courts which
estopped him from proceeding on account of the law of B
limitation. Respondent no.1 had previously filed three
complaints which were concluded after exhaustive
enquiry with the respective police authorities. Pursuant
to the first complaint with the Crime Branch-II, Pune, the
appellants were summoned and exhaustive enquiry was c
conducted by the Crime Branch-II and after recording the
statements and perusal of documents and after
undertaking an extensive interrogation, the Crime
Branch-II closed the case. The said closure of the case
was informed to respondent No.1 by the police 0
authorities. The materials placed further showed that
notwithstanding the first complaint which was closed by
the Crime Branch-II, another complaint on the same facts,
was filed by respondent No.1 at the Bhosari Police
Station. The appellant and its officers attended the E
Bhosari Police Station, thereafter the said complaint was
also closed after the facts were placed before the officers
of the Bhosari Police Station. Apart from these
complaints, respondent No.1 once again filed a third
complaint at the Commissioner's Office, Crime Branch, F
Pune. The officers of appellant-Company appeared before
the Crime Branch, who after perusing the documents and
the written statements of appellant No.1, informed the
appellants that the matter was closed. [Para 20-26] [182-
G-H; 183-A-H; 184-A-G]
G
5. At the stage of issuance of direction to the police
for submission of report under Section 156(3), Cr.P.C., the
accused has no role and need not be heard. However,
in view of specific direction of the High Court disposing
of the cases by remitting the matter back to the Magistrate H
160 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A for reconsideration of the entire prayer as made by the
complainant and to pass fresh orders, after giving
adequate opportunity of hearing to both the sides, and
decide afresh the application seeking direction under
Section 156(3) by giving cogent reasons for coming to
8 such conclusion, the procedure adopted by the
Magistrate cannot be faulted with. Though the appellant
Company/accused has no right to be heard at this stage
in view of the direction of the High Court, no exception
be taken to the order of the Magistrate hearing the
complainant and the appellant Company/accused even
C at the stage of calling for a report under Section 156(3)
of the Code. [Para 28] [185-B-E]
6. The entire analysis of the complaints and the
ingredients of Sections 405, 406, 420 read with Section
D 34 IPC clearly showed that there was inordinate delay
and laches, the complaint itself was inherently
improbable contained the flavour of civil nature and
taking note of the closure of earlier three complaints that
too after thorough investigation by the police, the
E Magistrate committed a grave error in calling for a report
under Section 156(3), Cr.P.C. from the Crime Branch,
Pune. In view of those infirmities and in the light of
Section 482 of the Code, the High Court ought to have
quashed those proceedings to safeguard the rights of the
F appellants. The complaint filed by respondent no.1 is
quashed. [Para 29] [185-F-H; 186-A-B]
Case Law Reference:
2005 (2) SCR 131 referred to Para 10
G 1988 (2) SCR 930 referred to Para 11
2001 (1) SCR 1059 referred to Para 12
1976 Suppl. SCR 123 referred to Paras 12, 13
H 1990 (3) Suppl. SCR 259 referred to Para 12
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 161
(2005) 1o sec 228 .referred to Para 13 A
2008 (2) SCR 1088 referred to Para 14
2010 (12) SCR 551 referred to Para 15
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal B
No. 1868 of 2011.
From the Judgment and Order dated 11.01.2008 of the
High Court of Bombay in Criminal Writ Petition No. 1622 of
2007. .
c
Dr. A.M. Singhvi and C.S. Vaidyanathan, Kavin Gulati,
Shrikant Doijode, Jaiveer Shergill, S.K. Jain, Brij Kishor Sah
and Shivaji M. Jadhav for the Appellants.
Shankar Chillarge, AG, KTS Tulsi, Susmita Lal, Maheen D
Pradhan, Ravinder Singh, Asha Gopalan Nair and Pratik
Bombarde for the Respondents.
The Judgment of the Court was delivered by
P. SATHASIVAM, J. 1. Leave granted. E
2. This appeal is directed against the final judgment and
order dated 11.01.2008 passed by the High Court of
Judicature at Bombay in Criminal Writ Petition No. 1622 of
2007 wherein the Division Bench of the High Court dismissed
the writ petition filed by the appellants herein as misconceived.
F
3. Brief Facts:
(a) Mis Thermax Ltd.-the appellant-Company, is a Public
Limited Company having its registered office at Chinchwad, G
Pune and is engaged in the field of energy and environment
-management. Mr. K.M. Johny-the original complainant,
Respondent No. 1. herein, is the proprietor of M/s Rini
-Engineers and Mis Sherly Engineers, which are small-scale
H
162 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A industries undertaking fabrication job work for the appellant
Company for the past several years.
(b) On 26.05.1995, the appellant-Company placed three
Purchase Orders on Respondent No.1 being Order No. 260062
for designing and manufacturing two numbers of stationary
8
L.P.G. Storage Tanks and Order Nos. 260063 and 260064
were for the supply of consumables and other accessories to
the said Tanks. On 01.06.1995, Mis Unique Engineering
Services, the Consultants of the appellant Company addressed
C a letter specifying that they had assessed the companies of the
Respondent No. 1 and in their opinion even though they have
not made any static bullets and have made quite a few mobile
L.P.G. Tanks, however, they were capable of manufacturing the
same, but needed design help.
D (c) On 20.06.1995, Respondent No. 1 informed the
appellant-Company their inability to procure the material (steel)
and requested to supply the same and to deduct the material
cost from the final bill. On 04.08.1995, the Respondent No. 1
was provided with the necessary steel of the technical
E specification. On 06.08.1995, an Engineer of the appellant-
Company visited the company of the Respondent No. 1 and
submitted a report stating that Respondent No. 1 had carried
out certain work using the material purchased from the
appellant-Company. It was also pointed out in the report that
F Respondent No. 1 agreed that they would send the material to
Mis Bureau Veritas for checking. The report also stated that
Respondent No. 1 had not ordered for consumables and no
rectification and drawings had been carried out.
(d) By letter dated 10.08.1995, the Consultants informed
G the appellant-Company that there was no progress in the work
status for the last 45 days and it was observed that Respondent
No. 1 was not interested in executing the assignment. In
pursuance of the same, a meeting was held betWeen the
officials of both the Companies and the Respondent N_o. 1
agreed to complete the job by all means by 22.09.1995. Since
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 163
[P. SATHASIVAM, J.)
Respondent No. 1 failed to carry out the work as per the A
Schedule, the appellant-Company, vide letter dated 13.09.1995
cancelled the order placed and it was made effective from
26.05.1995 i.e., from the date when the order was placed.
(e) On 06.05.2000, Respondent No. 1 filed a complaint with B
the Crime Branch, Pune alleging that they had carried out
several fabrication job works for the appellant-Company and
huge amount of Rs. 91,95,054/- was outstanding till date
despite several requests. In the said complaint, it was further
alleged that the appellant-Company also placed Purchase
Order being No. 240307 dated 22.03.1993 for Rs. 8,00,000/- C
for fabrication and erection of Tower Support Structural etc., for
the Mehasana District Taluka Sanstha (Gujarat) Project and also
represented that they will hire the machinery of the Respondent
No. 1 for the said job at the rate of Rs. 2,400/- per day and
believing the same the Respondent No. 1 allegedly purchased D
brand new machinery worth Rs. 5,80,000/- specially for the said
project and dispatched the same to the Mehasana site.
Respondent No. 1 completed the said job according to
schedule and to the satisfaction of the appellant-Company and
also carried out additional work at the site as per their request. E
It was alleged that balance outstanding for the said work of
Rs.2,47,570/- was still receivable from the appellant-Company.
An amount of Rs.58,32,000/- towards hiring charges for the
machinery is yet to be paid by the appellant-Company.
Therefore, a total sum of Rs.68,79,750/- became due from the· F
appellant-Company to respondent No.1 and the same was not
paid till date. Since the Crime Branch did not take any
cognizance, the said complaint was filed in the Court of Judicial
Magistrate, First Class, Pimpri being RCC No. 12 of 2002 and
by order dated 30.05.2002, the Judicial Magistrate issued a G
direction under Section 156(3) of the Code of Criminal
Procedure, 1973 (in short 'the Code') and referred the same
to Crime Branch, Pune, Respondent No. 2 herein, for
investigation. Pursuant to the same, Respondent No. 2
registered an offence being C.R. No. 91/2002 and initiated H
164 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A proceedings thereunder against the appellant-Company.
(f) Aggrieved by the said order, the appellant-Company
filed two separate Criminal Writ Petitions being Nos. 209 and
443 of 2003 before the Bombay High Court for quashing and
setting aside the order dated 30.05.2002 passed by the
8
Judicial Magistrate, First Class, Pimpri. Vide order dated
10.06.2003, the High Court set aside the order dated
30.05.2002 and remitted the matter back to the Judicial
Magistrate for reconsideration of the entire prayer and to decide
C the case afresh, after giving adequate opportunity of hearing
to both the sides. Pursuant to the same, the appellant Company
preferred an application dated 16.07.2003 under Section 91
of the Code before the Judicial Magistrate praying that the
Assistant Commissioner of Police, Crime Branch, Pune City
be directed to produce all the records and proceedings of the
D complaint dated 06.05.2000. After hearing the respective
parties, the Judicial Magistrate, vide order dated 11.08.2003
rejected the said application.
(g) Aggrieved by the same, the appellant-Company
E preferred Criminal Application No. 3666 of 2003 before the
High Court. The High Court, vide order dated 18.10.2006,
issued rule and interim relief by directing the Assistant
Commissioner of Police, Crime Branch-II, Pune city to produce
the documents within six weeks in the Court of Judicial
F Magistrate, Pimpri. Pursuant to the said direction, Shri S.B
Oahal, Inspector of Police, submitted a reply dated 12·.03.2007
stating that the records and proceedings in respect of Crime
Register No. 11 of 2000 were destroyed. Pursuant to the same,
the Judicial Magistrate, vide order dated 20.08.2007, called for
G a report under Section 156(3) of the Code from the Respondent
No. 2.
(h) Being aggrieved, the appellant-Company preferred
Criminal Writ Petition being No. 1622 of 2007 before the High
Court. The High Court, vide order dated 11.01.2008, dismissed
H the Writ petition as misconceived on the ground that the
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 165
[P. SATHASIVAM, J.]
Magistrate has adhered to the directions and has given A
reasons for coming to his conclusion. Aggrieved by the said
decision, the appellant-Company has preferred this appeal
before this Court by way of special leave petition.
4. Heard Dr. A.M. Singhvi and Mr. C.S. Vaidyanathan,
B
learned senior counsel for the appellant-Company and Mr.
K.T.S. Tulsi, learned senior counsel for the respondent No.1.
Contentions:
5. Dr. A.M. Singhvi, learned senior counsel for the C
appellant/accused, after taking us through all the earlier
complaints including the last complaint and earlier orders
closing those complaints, the order of the Judicial Magistrate,
First Class, Pimpri dated 20.08.2007 in Criminal Case No. 12
of 2002 and the impugned order of the High Court dated o
11.01.2008, at the outset, submitted that the courts below ought
to have considered that the dispute arose out of a contract and
a constituted remedy is only before a civil court. He further
contended that similar claim on earlier occasions were indeed
investigated and finally categorized as civil in nature, while such E.
is the position, the direction of the Magistrate calling for a report
under Section 156(3) of the Code from the Crime Branch, Pune
is not sustainable. He further submitted that the High Court
ought to have intervened and quashed the same. According to
him, the complaint and the allegations made therein do not
F
disclose any offence and, therefore, the direction under Section
156(3) of the Code is untenable. He further pointed out that the
essential ingredients for an offence under Sections 405 and
420 of the Indian Penal Code, 1860 (in short 'IPC') have not
been made out, no such dishonest intention can be seen or
even inferred inasmuch as the entire dispute pertains to G
contractual obligations between the parties. In any event,
according to him, in view of long delay, namely, filing of the
complaint in the year 2002 with reference to the alleged
disputes which pertain to the period from 1993-1995, that is,
after nine years, cannot be maintained as it amounts to abuse H
166 SUPREME COURT REPORTS (2011] 14 (ADDL.) $.C.R.
A of process of law. He finally submitted that roping in of appellant
Nos. 2-8 in the alleged offence on the hidden principle of
vicarious liability is untenable. Mr. C.S. Vaidyanathan, learned
senior counsel for the appellant also reiterated the same
contentions.
B
6. On the other hand, Mr. K".T.S. Tulsi, learned senior
counsel for the Respondent No. 1/complainant submitted that
interference by the court at the stage of passing orders under
Section 156 (3) of the Code is not warranted. He further pointed
out that the accused has no right to address at this stage and
C the High Court is right in refusing to entertain the petition filed
under Section 482 of the Code.
Discussion:
0 7. In order to understand the rival contentions, it is useful
to refer the complaint of the Respondent No. 1 dated
30.05.2002 which was made before the Judicial Magistrate,
First Class, Pimpri in Regular Criminal Case No. 12 of 2002.
Respondent No. 1 herein is the complainant and all the
E appellants herein have been shown as accused. The said
criminal complaint was made for the offences under Sections
420, 406 read with 34 IPC. The complaint proceeds that
complainant is the Proprietor of Mis Rini Engineers and M/s
Sherly Engineers which are small-scale industries doing
F fabrication job work for various industries, namely, TELCO, Ion
Exchange Ltd., etc. The following averments in the complaint
are relevant for our consideration:
"(a) The complainant has been doing the said business in
Maharashtra since last more than 27 years. The accused
G No. 1 is a company and accused No. 2 is the Chairperson
of the Accused No. 1. Accused No. 3 was the Managing
Director and the Accused Nos. 4 to 15 was doing service
as Manager of Accused No. 1 at the relevant time. The
Accused No. 1 has its office at the above address. The
H Accused Nos. 2 to 15 were looking after the management
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 167
[P. SATHASIVAM, J.]
and business of Accused No. 1. A
(b) The complainant was doing fabrication job work for the
Accused for several years. The accused placed purchase
order No. 260062 dated 24.04.1995 of Rs. 3,20,000/- for
designing and manufacturing two numbers stationary LPG B
Storage Tanks. The complainant has been granted the
necessary licenses by the Explosives Department for
manufacturing LPG Storage Tanks and LPG Storage .
Tankers. The said job is a specialized job and requires
Best quality material as it involves high risks. At the
relevant time, the requifed material was not available in the .. C
market. Therefore, the complainant requested the Accused
for the supply of material for the said order and to debit
the material cost from the final bill. The accused initially
agreed for the same. However, subsequently insisted for
payment before delivery of material. Therefore, D
complainant paid Rs. 1, 14,098/- by pay order dated
31.07.1995 drawn on the Sadgur'u Jangli Maharaj Bank,
Chinchwad. The Company issued material after receipt of
pay order, vide excise gate Pass No. 1328 and ·175713
dated 04.08.1995. The complainant received the material E
and was surprised to see that the accused had supplied
scrap material for the manufacturing of LPG Storage Tanks
and same was useless for the job. The complainant
immediately contacted the accused and informed about
the same. The complainant requested the accused to take F
the scrap material back and issue genuine material.
However, accused refused to do so, the complaint has
spent the amount of Rs. 60,000/- for drawing and approval
etc. and Rs. 1, 14,098/- by pay order for the material to the
accused. Thus, the accused have cheated the complainant G
and there by caused wrongful loss to the complainant.
(c) The accused placed Purchase Order No. 240307
·dated 22.03.1993 for Rs. 8,00,000/- for the fabrication and
erection of Tower Support Structural etc. for the Mehasana H
168 SUPREME COURT REPORTS (2011] 14 (ADDL.) S.C.R.
A (Gujarat) Project. The accused also represented that they
will hire the machinery of the complainant for the said job
at the rate of Rs. 2,400/- per day. Believing the same, the
complainant purchased brand new machinery of Rs.
5,80,000/- specially for the said project and dispatched the
B same to Mehasana site. The complainant has completed
the said job according to schedule and to the satisfaction
of the accused. The complainant also carried out additional
work at the site as per the request of the accused. The
balance outstanding for the said work is Rs. 2,47,570/-
c and is still receivable from the accused. The amount
towards the hiring charges for the machinery is Rs.
58,32,000/- is yet to be paid by the accused. The accused
have not returned the machinery of the complainant till the
date and have been using the same for their other jobs also.
Thus the accused owe the complainant Rs. 68,79,750/-
D
and the same is not paid till the date. ·
(d) The complainant states that he has carried out several
fabrication job for the accused and huge amount of Rs.
91,95,054 is outstanding from the accused till the date. In
E spite of several requests of the complainant, since the
accused are very influential, no body has taken
cognizance of the complaints of the complainant. The
complainant .has also filed complaint dated 15.09.1998
with Pimpri Police Station against the accused but all in
F vain.
(e) Thereafter the complainant filed complaint dated
06.05.2000 with Crime Branch, Pune against the accused,
however, till the date police have not taken any cognizance
of the same in spite of the positive opinion of the police
G
prosecutor attached to the Officer Commissioner of
Police, Pune. The accused are very influential and the
complainant has no other option but to file the present
complaint in Hon'ble Court. ·
H
· THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 169
[P. SATHASIVAM, J.]
(f) The complainant is filing herewith all the relevant A
documents in support of this complaint and submits that
the present case warrants detailed investigation under
Section 156(3) of Cr.P.C. There is a separate cell of
economic offences at Crime Branch, Pune and it is
necessary to send the present complaint to Crime Branch, B
Pune for investigation under Section 156(3) of Cr.P.C The
complainant therefore prays that:-
(i)The complaint be sent to Crime Branch, Pune for
investigation u/s 156(3) of Cr.P.C. and;
c
(ii) After receipt of the report of investigation, the accused
be dealt with severally according to law and punished as
per prrovision of law'."
. 8. For our purpose, we are conc~rned with Sections 405, D
406, 420 and 34 IPC which read thus:
"405. Criminal breach of trust.- Whoever, being in any
manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his
own use that property, or dishonestly uses or disposes of E
that property in violation pf 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 willfully suffers al}y
other person so to do, commits "criminal breach of trust". F
406. Punishment for criminal breach of trust.- Whoever
commits criminal breach of trust shall be punished with
imprisonment of either description for a term which may
extend to three years, or with fine, or with both. G
420. Cheating and dishonestly inducing delivery of
property.- Whoever cheats ;:ind thereby dishonestly
induces the per5on deceived to deliver any property to any
person, or to make, alter or destroy the whole or any part
H
170 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A of a valuable security, or anything which is signed or
sealed, and which is capable of being converted into a
valuable security, shall be punished with imprisonment of
' either description for a term which may extend to seven
years, and shall also be liable to fine."
B
34. Acts done by several persons in furtherance of
common intention.· When a criminal act is done by
several persons in furtherance of the common intention of
all, each of such persons is liable for that act in the same
manner as if it were done by him alone.·
c
9. Now, we have to find out whether the ingredients of
Sections 405, 420 read with Section 34 have been made out
from the complaint and whether the Magistrate is justified in
calling for a report under Section 156(3) of the Code from the
D Crime Branch, Pune. Simultaneously, we have to see whether
the High Court is justified in confirming the action of the
Magistrate and failed to exercise its power and jurisdiction
under Section 482 of the Code.
E 10. Before considering the validity or acceptability of the
complaint and the consequential action taken by the Judicial
Magistrate under Section 156(3) of the Code, let us advert to
various decisions on this aspect. In Suresh vs. Mahadevappa
Shivappa Danannava & Anr., (2005) 3 SCC 670, this Court,
on the ground of delay/laches in filing the complaint and the
F dispute relates to civil nature finding absence of ingredients of
alleged offence of cheating under Section 420 IPC, set aside
the order of the Magistrate and that of the High Court. In that
case, the alleged agreement to sell was executed on
25.12.1988. A legal notice was issued to the appellant therein
G on 11.07.1996 calling upon him to execute the sale deed in
respect of the premises in question. Thus, the complaint was
submitted after a gap of 7% years of splendid silence from the
date of the alleged agreement to sell i.e. 25.12.1988. The
appellant therein responded to the legal notice dated
H 11.07.1996 by his reply dated 18.07.1996 through his lawyer
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 171
[P. SATHASIVAM, J.J
specifically denying the alleged agreement and the payment of A
Rs 1,25,000/- as advance. Nothing was heard thereafter and
the complainant after keeping quiet for nearly 3 years filed
private complaint under Section 200 of the Code before the IVth
Additional CMM, Bangalore on 17.05.1999. The Magistrate, on
the same date, directed his office to register the case as PCR B
and referred the same to the local police fqr investigation and
to submit a report as per Section 156(3) of the Code. A charge-
sheet was filed on 04.08.2000 by the police against the
appellant-Accused No. 1 only for offence under Section 420
IPC. The Magistrate took cognizance of the alleged offence c
under Section 190(1)(b) of the Code and issued summons to
the accused-appellant therein. Aggrieved by the aforesaid
process order dated 04.08.2000 passed by the Magistrate, the
appellant-accused preferred the criminal revision which was
dismissed by the High Court. The order of the High Court was
0
under challenge in that appeal. It was contended that as per
the averments in the complaint, even as per the police report,
no offence is made out against Accused Nos. 2-4 therein.
Despite this, the Magistrate issued process against Accused
Nos. 2-4 as well which clearly shows the non-application of mind E
by the Magistrate. It was further pointed out that a perusal of
the complaint would only reveal that the allegations as contained
in the complaint are of civil nature and do not prima facie
disclose commission of alleged criminal offence under Section
420 IPC. After finding that inasmuch as the police has given a
clean chit to Accused Nos. 2-4, this Court concluded that the F
Magistrate ought not to have taken cognizance of the alleged
offence against Accused No.1 and that the complaint has peen
made to harass him to come to terms by resorting to criminal
process. Regarding the delay, this Court pointed out that the
complaint was filed on 17.05.1999, after a lapse of 10% years G
and, therefore, the private complaint filed by respondent No.1
therein is not at all maintainable at this distance of time. It was
further observed that it is also not clearly proved that to hold a
person guilty of cheating, it is necessary to show that he had a
fraudulent or dishonest intention at the time of making the H
172 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A promise and finding that the order of the Magistrate and of the
High Court requiring Accused No.1 /appellant therein to face trial
would not be in the interest of justice, set aside the order of
the High Court and of the Magistrate. It is clear that in view of
inordinate delay and laches ori the part of the complainant and
B of the fact that the complaint does not disclose any ingredients
of Section 420 IPC and also of the fact that at the most it is
the dispute of civil nature, this Court quashed the orders of the
Magistrate and the High Court.
C 11. In Madhavrao Jiwajirao Scindia & Ors. vs.
Sambhajirao Chandrojirao Angre & Ors. (1988) 1 SCC 692,
this Court, after pointing out the grounds on which the criminal
proceedings be quashed under Section 482 of the Code at
preliminary stage by the High Court highlighted that a case of
breach of trust is both a civil wrong and a criminal offence. While
0 elaborating the same, this Court further held that there would
be certain situations where it would predominantly be a civil
wrong and may or may not amount to criminal offence. Based
on the materials in that case, the Court concluded that the case
is one of that type where, if at all, the facts may constitute a
E civil wrong and the ingredients of the criminal offences are
wanting.
12. In A/pie Finance Ltd. vs. P. Sadasivan & Anr. (2001)
3 SCC 513, this Court highlighted the grounds on which criminal
F proceedings are to be quashed under Section 482 of the Code
and noted the ingredients of Section 420 IPC. In that case, the
appellant was a registered company having its head office at
Mumbai. It was a non-banking financial institution functioning
under the regulations of Reserve Bank of India. It was carrying
G on business, inter alia, of leasing and hire purchase. The first
respondent therein was the Chairman and founder-trustee of a
trust by name "Visveswaraya Education Trust". The second
respondent was wife of the first respondent, and was also a
Trustee. The Trust runs a dental college by name Rajiv Gandhi
H Dental College. The respondents therein entered into an
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 173
[P. SATHASIVAM, J.]
agreement with the appellant-Company therein whereby the A
appellant agreed to finance the purchase of 100 hydraulically-
operated dental chairs. The total cost of the chairs was around
Rs.92,50,000/-. The appellant-Company agreed to finance the
respondents for the purchase of these chairs through a lease
agreement and as per the agreement, the respondents were 8
liable to pay rentals quarterly. The respondents agreed to pay
quarterly a sum of Rs 7,50,000/- for the first year; Rs 12,50,000/
- for the second year; Rs 8,00,000/- for the third year and Rs
6,25,000/- for the fourth year. As per the agreement, the
appellant-Company, the lessors would have sole and exclusive c
right, title and interest in the dental chairs supplied till the entire
hire-purchase amount was paid. In accordance with the
agreement, the appellant made payments to M/s United Medico
Dental Equipments and they delivered the dental chairs to the
respondents: The appellant-Company ~lleged that the · D
respondents were not regular in making the payments and
committed default in payment of the instalments and that the
bank had dishonoured certain cheques issued by the
respondents. The appellant-Company also alleged that on
physical verification, certain chairs were found missing from the E
premises of the respondents and thus they have committed
cheating and caused misappropriation o_f the property
belonging to the appellant. The appellant- Company filed a
private complaint under Section 200 of the Code before the
Chief Metropolitan Magistrate, Bangalore alleging that the
respondents had committed offences under Sections 420, 406 F
and 423 read with Section 120-B IPC. In that proceeding, the
appellant-Company moved an application Linder Section 93 of
the Code to issue a search warrant to seize the property in
dispute and also to hand over these items to the complainant.
The Magistrate took cognizance of the alleged complaint and G
issued summons to the respondents and passed an order on
the application filed under Section 93 of the Code to have a
search at the premises of the respondents and to take
possession of the properties involved in the case. These
proceedings were challenged by the respondents under H
174 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A Section 482 of the Code before the learned Single Judge of
the Karnataka High Court at Bangalore. The learned Single
Judge was pleased to quash the entire proceedings and
directed the appellant-Company to return all the properties
seized by the police pursuant to the warrant issued by the
B Magistrate. Thus, the order of the Magistrate taking cognizance
and issuing process to the respondents as well as the order of
search and the direction for restoration of the property to the
appellant Company were set aside. Aggrieved by the same,
the appellant-Company preferred appeal before this Court.· It
c was contended on behalf of the appellant that the learned Single
Judge has seriously erred in quashing the proceedings under
Section 482 of the Code. It was further contended that the
allegations in the complaint clearly made out offences
punishable under Sections 420, 406, 423, 424 read with
0 Section 120-B IPC. On behalf of the respondents, it was
contended that the complaint was filed only to harass the
respondents and it was motivated by mala fide intention. It was
further argued that the entire transaction was of civil nature and
that the respondents have made a substantial payment as per
the hire-purchase agreement and the default, if any, was not
E wilful and there was no element of misappropriation or cheating.
The respondents also denied having removed any of the items
of the disputed property clandestinely to defeat the interest of
the appellant. After considering the power under Section 482
of the Code and adverting to series of decisions including
F Nagawwa vs. Veeranna Shivalingappa Konja/gi, (1976) 3
SCC 736 and State of Haryana vs. Bhajan Lal, 1992 Supp
(1) SCC 335, this Coort concluded thus:
"7. In a few cases, the question arose whether a criminal
G prosecution could be permitted when the dispute between
the parties is of predominantly civil nature and the
appropriate remedy would be a civil suit. In one case
reported in Madhavrao Jiwajirao Scindia v. Sambhajirao
Chandrojirao Angre this Court held that ifthe allegations
H in the complaint are both of a civil wrong and a criminal
THERMAX LTD. & ORS. v. K.M. JOHNY & o~s. 175
[P. SATHASIVAM, J.]
offence, there would be certain situations where it would A
predominantly be a civil wrong and may or may not amount
to a criminal offence. That was a case relating to a trust.
There were three trustees including the settlor. A large
house constituted part of the trust property. The respondent
and the complainant were acting as Secretary and B
Manager of the Trust and the house owned by the Trust was
in the possession of a tenant. The tenant vacated the
building and the allegation in the complaint was that two
officers of the Trust, in conspiracy with one of the trustees
and his wife, created documents showing tenancy in c
respect of that house in favour of the wife of the trustee.
Another trustee filed a criminal complaint alleging that
there was commission of the offence under Sections 406,
467 read with Sections 34 and 120-B of the Indian Penal
Code. The accused persons challenged the proceedings 0
before the High Court under Section 482 of the Code of
Criminal Procedure and the High Court quashed the
proceedings in respect of two of the accused persons. It
was under those circumstances that this Court observed:
(SCC Headnote)
E
"Though a case of breach of trust may be both a
civil wrong and a criminal offence but there would
be certain situations where it would predominantly
be .a civil wrong and may or may not amount to a
criminal offence. The present case is one of that F
type where, if at all, the facts may constitute a civil
wrong and the ingredients of the criminal offences
are wanting. Having regard to the relevant
documents including the trust deed as also the
correspondence following the creation of the G
tenancy, the submissions advanced on behalf of the
parties, the natural relationship between the settlor
and the trustee as mother and son and the fall out
in their relationship and the fact that the wife of the
co-trustee was no more interested ill1herenancy, . H
176 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A it must be held that the criminal case should not be
continued."
10........ The injury alleged may form the basis of civil claim
and may also constitute the ingredients of some crime
punishable under criminal law. When there is dispute
B
between the parties arising out of a transaction involving
passing of valuable properties between them, the
aggrieved person may have· a right to sue for damages
or compensation and at the same time, law permits the
victim to proceed against the wrongdoer for having
c committed an offence of criminal breach of trust or
cheating. Here the main offence alleged by the appellant
is that the respondents committed the offence under
Section 420 IPC and the case of the appellant is that the
respondents have cheated him and thereby dishonestly
D induced him to deliver property. To deceive is to induce a
man to believe that a thing is true which is false and which
the person practising the deceit knows or believes to be
false. It must also be shown that there existed a fraudulent
and dishonest intention at the time of commission of the
E offence. There is no allegation that the respondents made
any wilful misrepresentation. Even according to the
appellant, the parties entered into a valid lease agreement
and the grievance of the appellant is that the respondents
failed to discharge their contractual obligations. In the
F complaint, there is no allegation that there was fraud or
dishonest inducement on the part of the respondents and
thereby the respondents parted with the property. It is trite
law and common sense that an honest man entering into
a contract is deemed to represent that he has the present
G intention of carrying it out but if, having accepted the
pecuniary advantage involved in the transaction, he fails
to pay his debt, he does not necessarily evade the debt
by deception."
After finding so, this Court concluded that the learned Judge
H of the High Court was perfectly justified in quashing the
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 177
[P. SATHASIVAM, J.]
proceedings and disinclined to interfere in such matters A
dismissed the appeal.
13. In Anil Mahajan vs. Bhor Industries Ltd. & Anr., (2005)
1O SCC 228, again, a three·Judge Bench of this Court
considered the issuance of process by a Magistrate for an B
offence under Sections 415, 418 and 420 IPC. This Court also
analysed the difference between breach of contract and
cheating. The appellant therein was the accused in a complaint
filed against him by the respondent·Company for offence under
Sections 415, 418 and 420 IPC. Based on the averments in C
the complaint, the Magistrate, by order dated 25.06.2001,
issued the process against the accused. The order of the
Magistrate notfces that the complainant has filed the documents
on record in which the accused promised to pay the amount
but has not paid with the intent to deceive the complainant and,
therefore, the complainant has made out a case to issue D
process against the accused under Sections 415, 418 and 420
IPC. The said order of the Magistrate was challenged before
the Court of Sessions. The learned Additional Sessions Judge,
Pune by order dated 19.10.2001, set aside the order of the
Magistrate issuing process. The order of the learned Additional E
Sessions Jµdge was set aside by ttie High Court. This Court,
in paragraphs 8 & 9 of the judgment, observed as under:
"8. The substance of the complaint is to be seen. Mere
use of the expression "cheating" in the complC!lint is of no F
consequence. Except mention of the words."deceive" and
"cheaf' in the complaint filed before the Magistrate and
"cheating" in the complaint filed before the police, there is
no averment about the deceit, cheating or fraudulent
intention of the accused at the time of entering into MOU G
wherefrom it can be inferred that the accused had the
intention to deceive the complainant to
.pay..................... ."
"9. In A/pie Finance Ltd. v. P. Sadasivan, (2001) 3 SCC
513, this Court was considering a case where the H
178 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A complainant had alleged that the accused was not regular
in making payment and committed default in payment of
instalments and the bank had dishonoured certain cheques
issued by him. Further allegation of the complainant was
that on physical verification certain chairs were found
B missing from the premises of the accused and thus it was
alleged that the accused committed cheating and caused
misappropriation of the property belonging to the
complainant. Noticing the decision in the case of Nagawwa
v. Veeranna Shiva/ingappa Konja/gi, (1976) 3 SCC 736,
c wherein it was held that the Magistrate while issuing
process should satisfy himself as to whether the allegations
in the complaint, if proved, would ultimately end in the
conviction of the accused, and the circumstances under
which the process issued by the Magistrate could be
quashed, the contours of the powers of the High Court
D
under Section 482 CrPC were laid down and it was held:
(SCC p. 520, paras 10-11)
"10. The facts in the present case have to be
appreciated in the light of the various decisions of
E this Court. When somebody suffers injury to his
person, property or reputation, he r:nay have
remedies both under civil and criminal law. The
injury alleged may form the basis of civil claim and
may also constitute the ingredients of some crime
F punishable under criminal law. When there is
dispute between the parties arising out of a
transaction involving passing of valuable properties
between them, the aggrieved person may have a
right to sue for damages or compensation and at
G the same time, law permits the victim to proceed
against the wrongdoer for having committed an
offence of criminal breach of trust or cheating. Here
the main offence alleged by the appellant is that
the respondents committed the offence under
H Section 420 /PC and the case of the appellant is
_- THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 179
[P. SATHASIVAM, J.)
that the respondents have cheated him and A
thereby dishonestly induced him to deliver
properly. To deceive is to induce a man to believe
that a thing is true which is false and which the
person practising the deceit knows or believes to
be false. It must also be shown that there existed s
a fraudulent and dishonest intention at the time of
commission of the offence. There is no allegation
that the respondents made any wilful
misrepresentation. Even according to the appellant,
the parties entered into a valid lease agreement c
and the grievance of the appellant is that the
respondents failed to discharge their contractual
_obligations. In the complaint, there is no a/legation
that•there was fraud or dishonest inducement on
the part of the respondents and thereby the
0
respondents parled with the properly. It is trite law
and common sense that an honest man entering
into a contract is deemed to represent that he has
the present intention of carrying it out but if, having
accepted the pecuniary advantage involved in the E
transaction, he fails to pay his debt, he does not
necessarily evade the debt by deception.
11. Moreover, the appellant has no case that
the respondents obtained the article by any
fraudulent inducement or by wilful F
misrepresentation. We are told that the
respondents, though committed default in paying
some instalments, have paid substantial amount
towards the consideration."
G
(Emphasis supplied)
3y applying the above principles, this Court examined the
::omplaint and concluded that it is clear from its substance that
>resent is a simple case of civil disputes between the parties.
ll"his Court further held that the requisite averments so as to H
180 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A make out a case of cheating are absolutely absent. It further
held that the principles laid down in A/pie Finance Ltd. 's case
(supra) were rightly applied by the learned Additional Sessions
Judge and it cannot be said that the ratio of the said decision
was wrongly applied and on due consideration, the learned ,
B Additional Sessions Judge had rightly set aside the order of
the Magistrate issuing process to the appellant. After holding
so, this Court set aside the impugned judgment of the High Court
and restored that of the Additional Sessions Judge.
14. In S.K. Alagh vs. State of Uttar Pradesh & Ors., (2008)
C 5 SCC 662, this Court considered the ingredients of Sections
405 and 406 IPC - Criminal breach of trust and vicarious
liability. In the said decision, after finding that the complaint
petition did not disclose necessary ingredients of criminal
breach of trust as mentioned in Section 405 IPC ·and also
D pointing out the ingredients of offence under Section 406 IPC,
interfered with the order passed by the High Court.
15. In Maharashtra State Electricity Distribution Company
Limited & Anr. vs. Datar Switchgear Limited & Ors., (2010) 10
E SCC 479, after perusal of the complaint, allegations therein,
role of the directors mentioned therein and applicability of
Section 34 IPC, this Court in paragraph 35 concluded as
under:
"35. It is manifest that common intention refers to a prior
F concert or meeting of minds, and though it is not necessary
that the existence of a distinct previous plan must be
proved, as such common intention may develop on the
spur of the moment, yet the meeting of minds must be prior
to the commission of offence suggesting the existence of
G a prearranged plan. Therefore, in order to attract Section
34 IPC, the complaint must, prima facie, reflect a common
prior concert or planning amongst all the accused."
After saying so, verifying the complaint, this Court concluded
H that the complaint does not indicate the existence of any
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 181
[P. SATHASIVAM, J.]
prearranged plan whereby Appellant No. 2 had, in collusion with A
the other accused decided to fabricate the document i·n
question and adduce it in evidence before the Arbitral Tribunal.
This Court further concluded that there is not even a whisper in
the complaint indicating any participation of Appellant No.2 in
the acts constituting the offence, and that being the case, B
concluded that Section 34 IPC is not attracted .. After saying so,
allowed the appeal in relation to Appellant,No.2 and quashed
the order of the Magistrate taking cognizance against appellant
No.2 in Complaint No. 476 of 2004.
16. The principles enunciated from the above-quoted C
·decisions clearly show that for proceedings under Section
156(3) of the Code, the complaint must disclose relevant
material ingredients of Sections 405, 406, 420 read with
Section 34 IPC. If there is a flavour of civil nature, the same
cannot be agitated in the form of criminal proceeding. If there D
is huge delay and in order to avoid the period of limitation, it
cannot be resorted to a criminal proceeding.
17. Dr. A.M. Singhvi, learned senior counsel for the
appellant/accused contended that not only material facts were E
suppressed from the Magistrate but the previous three
complaints to various police authorities and their closure reports
were kept away from the Magistrate so as to mislead the Court.
It is seen from the materials placed that three complaints
containing similar allegations have been investigated previously F .
and all were closed as the alleged claim was found to be of
civil nature. In those circumstances, it did not lie for Respondent
No.1-the complainant to approach the Magistrate with the same
subject Complaint. Inasmuch as the dispute arose out of a
contract and a constituted remedy is only before a Civil Court, G
the Magistrate ought to have appreciated that Respondent No.1
was attempting to use the machinery of the criminal courts for
private gains and for exerting unjust, undue and unwarranted
pressure on the appellants in order to fulfill his illegal demands
and extract undeserving monetary gains from them.
H
182 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A 18. The Courts below failed to appreciate that Ex. 61 is a
reply filed by the Crime Branch-II and Ex. 63 is the statement
of Shri V.B. Kadam, which categorically stated that the
complaint preferred by Respondent No.1 registered at Crime
Register No. 11/2000 was filed as being civil in nature. Even if
B we accept that the records were destroyed and notwithstanding
such destruction, it was a matter of record that the complaint
preferred by Respondent No.1 was indeed investigated and
categorized as civil in nature. This aspect has not been
considered either by the Magistrate or by the High Court.
c 19. It is settled law that the essential ingredients for an
offence under Section 420, which we have already extracted,
is that there has to be dishonest intention to deceive another
person. We have already quoted the relevant allegations in the
complaint and perusal of the same clearly shows that no such
D dishonest intention can be seen or even inferred inasmuch as
the entire dispute pertains to contractual obligations between
the parties. Since the very ingredients of Section 420 are not
attracted, the prosecution initiated is wholly untenable. Even if
we admit that allegations in the complaint do make out a
E dispute, still it ought to be considered that the same is merely
a breach of contract and the same cannot give rise to criminal
prosecution for cheating unless fraudulent or dishonest intention
is shown right from the beginning of the transaction. Inasmuch
as there are number of documents to show that appellant-
F Company had acted in terms of the agreement and in a bona
fide manner, it cannot be said that the act of the appellant-
Company amounts to a breach of contract.
20. Though Respondent No.1 has roped all the appellants
G in a criminal case without their specific role or participation in
the alleged offence with the sole purpose of settling his dispute
with appellant-Company by initiating the criminal prosecution,
it is pointed out that appellant Nos. 2 to 8 are the Ex-
Chairperson, Ex-Directors and Senior Managerial Personnel 1
H of appellant No.1-Company, who do not have any personal role
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 183
[P. SATHASIVAM, J.]
in the allegations and claims of Respondent No.1. There is also A.
no specific allegation with regard to their role.
21. Apart from the fact that the complaint lacks necessary
ingredients of Sections 405, 406, 420 read with Section 34 IPC,
it is to be noted that the concept of 'vicarious liability' is
8
unknown to criminal law. As observed earlier, there is no
specific allegation made against any person but the members
of the Board and senior executives are joined as the persons
looking after the management and business of the appellant-
Company.
c
22. It is useful to demonstrate certain examples, namely,
Section 141 of the Negotiable Instruments Act, 1881 which
specifically provides that if the person committing an offence
under Section 138 is a company, every person who, at the time
the offence was committed, was in charge of, and was D
responsible to, the company for the conduct of the business of
the company, as well as the company, shall be deemed to be
guilty of the offence and shall be liable to be proceeded against
and punished accordingly. Likewise, Section 32 of the Industrial
Disputes Act, 1947 provides that where a person committing E
an offence under this Act is a company, or other body corporate,
or an association of persons, every director, manager,
secretary, agent or other officer or person concerned with the
management thereof shall, unless he proves that the offence
was committed without his knowledge or consent, be deemed F
to be guilty of such offence.'We have already noted that the
offence alleged in the criminal complaint filed by respondent
No.1 is under Sections 405 and 420 IPC whereunder no
specific liability is imposed on the officers of the company, if
the alleged offence is by the Company. In the absence of G
specific details about the same, no person other than appellant
No.1-Company can be prosecuted under the alleged complaint.
23. The Courts below failed to appreciate an important
aspect that the complaint came to be filed in the year 2002
when the alleged disputes pertain to the period from 1993- H
184 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A 1995. As rightly pointed out, the Courts below ought to have
appreciated that respondent No.1 was trying to circumvent the
jurisdiction of the Civil Courts which estopped him from
proceeding on account of the law of limitation.
B. 24. We have already pointed out that respondent No.1 had
previously filed three complaints which were concluded after
exhaustive enquiry with the respective police authorities. The
first complaint was on 06.05.2000 being Javak No. 974/2000
with the Crime Branch-II, Pune which registered the same in
its Criminal Register No. 11/2000. Pursuant thereto, the
C appellants were summoned and exhaustive enquiry was
conducted by the Crime Branch-II and after recording the
statements and perusal of documents and after undertaking an
extensive interrogation, the Crime Branch-II closed the case.
The said closure of the case was informed to respondent No.1
D by the police authorities by their letter dated 28.07.2000.
25. The materials placed further show that notwithstanding
the complaint dated 06.05.2000 which was closed by the Crime
Branch-II, another complaint on ·the same facts, was filed by
E respondent No.1 at the Bhosari Police Station being Javak No.
3142/2001. It is pointed out that the appellant and its officers
attended the Bhosari Police Station, thereafter the said
complaint was also closed after the facts were placed before
the officers of the Bhosari Police Station.
F 26. Apart from these complaints, respondent No.1 once
again filed a third complaint at the Commissioner's Office,
Crime Branch, Pune being Javak No. 100/2001. The officers
of appellant-Company appeared before the Crime Branch, who
after perusing the documents and the written statements of
G appellant No.1, informed the appellants that the matter was
closed.
27. It is the grievance of the appellants that without
disclosing these material facts and suppressing the fact that
1-1 the complainant had previously filed three different complaints
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS. 185
[P. SATHASIVAM, J.]
to various police authorities and that the said complaints were A
closed on being classified as civil disputes, the complainant
had filed the aforesaid criminal complaint before the Magistrate ·
being RCC No. 12 qf 2002.
28. Mr. K.T.S. Tulsi, learned senior counsel for respondenr
8
No.1 has pointed out that at this stage, namely, issuance of
direction to the police for submission of report under Section
156(3) of the Code; the accused has no role and need not be
heard. The said coPltention is undoubtedly in consonance with
the procedure prescribed. However, in view of specific direction C
of the Division Bench of the High Court by a common order
dated 10.06.2003, disposing off the cases by remitting the
matter back to the Magistrate for reconsideration of the entire
prayer as made by the complainant and to pass fresh orders,
after giving adequate opportunity of hearing to both the sides,
and decide afresh the application seeking direction under D
Section 156(3) by giving cogent reasons for coming to such
conclusion, the procedure adopted by the Magistrate cannot be
faulted with. Though the appellant Company/accused has no
right to be heard at this stage in view of the direction of the High
Court, no exception be taken to the order of the Magistrate E
hearing the Complainant and the appellant Company/accused
even at the stage ofcalling for a report under Section 156(3)
of the Code.
29. The entire analysis of the complaints with reference to F
the principles enunciated above and the ingredients of Sections
405, 406, 420 read with Section 34 IPC clearly show that there
was inordinate delay and laches, the complaint itself is
inherently improbable contains the flavour of civil nature and
taking note of the closure of earlier three complaints that too G
after thorough investigation by the police, we are of the view
that the Magistrate committed a grave error in calling for a
report under Section 156(3) of the Code from the Crime
Branch, Pune. In view of those infirmities and in the light of
Section 482 of the Code, the High Court ought to have quashed
H
186 SUPREME COURT REPORTS [201'1] 14 (ADDL.) S.C.R.
A those proceedings to safeguard the rights of the appellants. For
these reasons, the order passed by the Judicial Magistrate First
Class, Pimpri in CC No. 12 of 2002 on 20.08.2007 and the
judgment of the High Court dated 11.01.2008 in Criminal Writ
Petition No. 1622 of 2007 are set aside. The complaint filed
B by Respondent No.1 herein is quashed.
30. For the reasons stated above, the appeal is allowed.
D.G. Appeal allowed.
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