Holding

The Supreme Court held that the complaint disclosed the commission of an offence and the High Court’s quashing of the complaint under Section 482 was erroneous.

Summary

Medchl Chemicals & Pharma Ltd. entered into a supply agreement with Biological E. Ltd. for raw materials. The respondents allegedly failed to supply as promised, causing a loss of about one crore rupees to the petitioner, and the petitioner filed a criminal complaint under IPC sections 120B, 415, 418, 420 and 34. The Andhra Pradesh High Court, invoking its inherent power under Section 482 of the CrPC, quashed the complaint on the ground that it did not disclose any offence. On appeal, the Supreme Court held that the complaint did disclose the essential ingredients of cheating and criminal conspiracy, and that the High Court had erred in exercising its quashing power. The Court reiterated that Section 482 is to be used sparingly, that the presence of a civil remedy does not bar criminal prosecution, and that guilty intent at the time of the promise is essential for offences under Sections 418 and 420. Consequently, the appeal was allowed, the High Court order set aside and the criminal proceedings restored.

Issues considered

The complaint under Sections 415, 418, 420 and 120B disclosed a cognizable offence.
Whether the High Court could quash the complaint at the preliminary stage under Section 482 CrPC.
Whether the existence of a civil remedy for breach of contract precludes criminal prosecution.
Whether guilty intent at the time of making the promise is an essential ingredient for offences under Sections 418 and 420.

Legislation cited

Code of Criminal Procedure, 1973s. 482
Indian Penal Code, 1860s. 120B, s. 24, s. 34, s. 415, s. 418, s. 420

Subjects

Section 482 CrPCinherent powersquashing of criminal proceedingscheatingcontract breachcivil vs criminal remedyguilty intentIPC 415IPC 418IPC 420criminal conspiracy

Judgment

MIS. MEDCHL CHEMICALS Afl.'D PHARMA PVT. LTD. A
v.
M/S. BIOLOGICAL E. LTD. A"ID ORS.

FEBRt:ARY 25, 2000

B
(G.B. PATTANAIK A."ID UMESH C. BANERJEE, JJ.]

Criminal Procedure Code, 1973 :

Section 482---Criminal proceedings initiated for breach of co11-
tract-f'roceedi11gs quashed by High Court holding that complaint did not C
disclose any offence-On appeal Held, jurisdiction of High Court is limited
and restricted and it must use proper circumspection-Complaint to be ex-
amined in its entirety 011 basis of allegations made--Offence ought to appear
ex f acie-High Court has no jurisdiction to examine its com:ctness--lf 110
offence dfaclvsed there should be no hesitation in quashing proceedings~ln D
the facts and circumstances of the case the complaint did disclose commis-
sion of offence-Hence complaint and prosecution restored.

Indian Penal Code, 186(}-Sections 415, 418 and 42o----Essential in-
gredients--Held, guilty intent at the rime of making promise is an essential E
ingredie/11 and not subsequent failure to fulfil the promise.

Alternative remedies-Availability of-Held, Court cannot conclude
that only civil remedy availabl~ot that when civil remedy is available a
C1iminal prosecution is completely ba"ed.
F
The appellants and respondents had entered into an agreement,
under which the respondents were responsible for consistent supply of raw
materials, so that no hindrance is caused to the appellant's manufacturing
activities. The complainant alleged that proper supplies were not effected,
as per the agreement, which caused huge losses and the same was within G
the knowledge of the accused persons. Criminal proceedings were initiated
under Sections 1208, 418, 415 and 420 read with Section 34 I.l'.C. The High
Court, in exercise of its powers under Section 482 Cr.P.C. quashed the
proceedings holding that the complaint did not disclose any offence having
been committed. Hence this appeal. H
1169
1170 SUPREME r:uL:RT Rr.PORJS l2lXX!J I S.C.R.
A Allowing the appeal and restoring the criminal proceedings, this
Court

HELD: 1. Exercise of jurisdiction under the inherent as envisaged in
Section 482 of the Code of Criminal Procedure, 1973 to have the complaint
or the charge-sheet quashed is an exception rather than a rule and the case
B for quashing at the initial stage must be treated as rarest of of rare so as not
to scuttle the prosecution. The jurisdiction is rather limited and restricted
and its undue expansion is neither practicable nor warranted. If the court on
perusal of the complaint comes to a conclusion that the allegations levelled
in the complaint or charge-sheet on the face of it does not constitute or
disclose any otrence as alleged, there ought not to be any hesitation to rise
c upto the expectation of the people and deal with the situation as is required
under the law. ~·rustrated litigants ought nut to be indulged to gi'l'e vent to
their 'l'indicti'l'eness through a legal process and such Jn investigation ought
not to be allo\\'ed to be continued since the same is opposed to the concept of
justice, which is paramount. j 1172-B-F]
D
2. It being a settled principle of law that to exercise powers under
Section 482 Cr.P.C. the complaint in its entirety shall have to be examined
on the basis of the .. negation made in the complaint and the High Court
at that stage has no authority or jurisdiction to go into the matter or
examine its correctness. Whatever appean on the face of the complaint
E shall be taken into consideration without anJ critical examination but the
olfence ought to appear ex facie 011 the complaint. ! 1180-A-B]
.\
.
Smt. Nagawwa v. Veeran11a Silivali11gappu Ku11jalgi, [1976] 3 SCC 736,
relied 011.

F 3. In order to attract the provisions of Sections 418 and 420, the I
guilty intent at the time of making the promise is a requirement and an
essential ingredient thert'lo and "ubsequent failure to fulfil the promise by
itself would not attract the prm isicms of Section 418 or 420. ,ifcn.1 rea is
one of the essential ingredients of the olfence of cheating under Section
G 420. (1179-C]

Ram fas v. State of U.P., [19701 2 Sl'C 740; Pratibha Rani v. Suraj
Kumar, [1985] SCl' Crl. 180 and L. V. Jadhav v. Shanka"ao Abasaheb
Pawar, I 1983] 4 sec 231, relied cm.

H 4.1. lt is well 'ettled that the allegations in th<!! complaint will have
MEDCHL CHEMICALS AND PHARMA P. LID. v. BIOLOGICAL E. LTD. 1171

·to be accepted on the face of it and the truth or falsity of which would not A
be gone into by the Court at that stage. The evidence led at the trial would
help in deciding whether or not allegations in the complaint were true.
[1181-C]
4.2. In the matter of exercise of High Court's inherent power, the
only requirement is to see whether continuance of the proceeding would be B
a total abuse of the process of Court. The Code contains a detailed
procedure for investigation, charge and trial, and in the event the High
Court is desirous of putting a stop to the known procedure of law, it must
use a proper circumspection and very great care and caution to quash the
complaint. [1181-G-H]
c
Nawur Steel & Alloy Pvt. Ltd. v. P. Radha Krishna, [1997) SCC Crl.
1073 and T1isu11s Chemical I11dusuy v. Rajesh Agarwal & Ors., [1999] 5
SCALE 609, relied on.

5. On a careful reading of the complaint, it cannot be said that it D
does not disclose the commission of an offence. The ingredients of the
offences under Sections 418, 419 and 420 cannot be said to be totally absent
on the basis of the allegations in the complaint. Simply because of the fact
that there is a remedy provided for breach of contract, it does not by itself
clothe the Court to come to a conclusion that civil remedy is the only
remedy available. Both criminal law and civil remedy can be pursued in E
diverse situations and they are not mutually exclusive but clearly co-exten-
sive and essentially differ in their content and consequence. It is anathema
to suppose that when a civil remedy is available, a criminal prosecution is
completely barred as the two types of actions are quite different in content,
scope and impart. [1183-D-G] F

Pratibha Rani v. Suraj Kumm; [1985] SCC Crl. 180 and Dr. Shanna
Nursing Home v. Delhi Admi11istratio11,. [1998] 8 SCC 745, relied on.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
m~~ G
From the Judgment and Order dated 15.2.99 of the Andhra Pradesh
High Court in Crl.P. No. 5386 of 1998.

U.R. Lalit, P.N. Mishra, S. Nanda Kumar, M. Deena Dayalan, N.
Swaminathan, L.K. Pandey and G. Sivabalamurugan for the appellant. H
1172 SUPREME COURT REPORTS (2000) 1 S.C.R.
A P.S. Mishra, R.P. Singh, Chandra Shekhar and Ms. Ritu Singh for
the Respondents.

The Judgment of the Court was delivered by

BANERJEE,J. Leave granted.
B
Exercise of jurisdiction under the inherent power as envisaged in
Section 482 of the Code to have the complaint or the charge-sheet quashed
is an exception rather a rule and the case for quashing at the initial stage
must have to be treated as rarest of rare so as not to scuttle the prosecu-
tion. With the lodgment of First Information Report the ball is set to roll
c and thenceforth the law takes its own course and the investigation ensues
in accordance with the provisions of law. The jurisdiction as such is rather
limited and restricted and its undue expansion is neither practicable nor
warranted. In the event, however, the court on perusal of the complaint
comes to a conclusion that the allegations levelled in the complaint or
D charge-sheet on the face of it does not constitute or disclose any offence
as alleged, there ought not to be any hesitation to rise upto the expectation
of the people and deal with the situation as is required under the law.
Frustrated litigants ought not to be indulged to give vent to their vindic-
tiveness through a legal process and such an investigation ought not to be
E allowed to be continued since the same is opposed to the concept of justice,
which is paramount.

Factual matrix therefore would thus be relevant in the matter of
assessment of the situation as to whether 'civic profile' would outweigh the
'criminal outfit'.
F
It appears that as against the initiation of proceeding on the file of
17th Metropolitan Magistrate, {Iyderabad against the appellant under
Sections 120B, 418, 415 and 420 read with Section 34 Indian Penal Code,
the respondents moved the High Court for quashing of complaint and the
G Learned Single Judge on 15th February, 1999 in Criminal Petition No.5386
of 1998 did quash the complaint and hence the petitioner is in appeal
before this Court. The Learned Single Judge while dealing with the matter
came to a definite conclusion that the complaint does not disclose any
offence having been committed by the accused petitioner and as such
H allowed the petition for quashing of the complaint.
MEDCHL CHEMICALS AND PHARMA P. LTD. v. BIOLOGICAL E LTD. [BANERJEE J.] 1173

The factual score depict that the respondents approached the A
petitioner for the purpose of securing Ethambutol Hydrochloride drug in
bulk for sale and use in various pharmaceutical drugs and products being
manufactured by the respondent Company. It is at this juncture that the
Petitioner has come out with a definite case that by reason of a promise of
maintaining continuous supply of raw materials to the petitioners herein B
for the purpose of manufacturing Ethambutol Hydrochloride and in such
a way so as not to cause any interruption or hindrance to the manufacturing
activity of the Complainant's factory, the Complainant-petitioner entered
into an agreement dated 31st August, 1997 which inter alia records as
below:
c
"It is the responsibility of the party of the 2nd party to maintain
sufficient inventory of the Raw Materials as described in the
Annexure I in order to maintain consistent supplies to the
manufacturer and not to cause any interruption/hindrance with the
manufacturing activity by the manufacturer". D

It is on the basis of the agreement as noticed above and failure to
comply therewith, it is stated that the petitioner herein has lost a substantial
amount of mpney to the extent of about one crore and the sufferance of
loss has been by reason of specific assurance and representation which E
obviously turned out to be false. Misrepresentation on the part of the
respondent accused persons to the Complainant, has been the major
grievance and a definite and specific case has been made out that such a
misrepresentation was intentionally effected since the accused persons
were in the know of things that in the event the supplies are not effected,
F
as per the agreement, the Complainant is likely to suffer a wrongful loss
which as the complaint proceeds, in the interest of the transaction between
the parties, the accused persons were bound to protect. It is on this score
that relevant extracts of the complaint ought to be noticed at this juncture.
The complaint inter alia provides as below:
G
(i) "... Clause 9 of the Agreement dated 31.8.1997 states that the
schedule of supply of raw materials by the party of the 2nd
Part (Al Company) and the delivery of the finished product
by the party of the 1st Part (Complainant) shall be as in
Annexure III (to the Agreement) H
1174 SUPREME COURT REPORTS (2000] 1 S.C.R.

A (ii) Annexure III to the Agreement dated 31.8.1997 would show
that the supply of raw material DL2 Amino Butanol by Al
to the Complainant must be 15,210 Kgs or 15.21 Mts per
month to facilitate and sustain a monthly production of 8500
Kgs. or 8.5 Mts. of the finished product Ethambutol
Hydrochloride per month.
B
(iii) Another main factor being that the Complainant should not
suffer any loss on account of the execution of the agreement
with Al. The Complainant states that it entered into the
Agreement dated 31.8.1997 with Al under which the Com-
c plainant has been converting the raw materials supplied by
Al into the bulk drug Ethambutol Hydrochloride and sup·
plying it back to Al on prescribed conversion charges .... "

(iv) ........The Complainant states that the supply of raw materials,
particularly the principal imported raw material DL2 Amino
D Butanol, by Al was far from regular almost from the begin-
ning of the agreement. This was often being informed to Al
through AZ, A3, A4 and A5. Based on the representations
made by Al through A2 to AS, the Complainant had planned
its production according to the agreement i.e. on the basis of
supply of 15,210 kgs. DLZ Amino Butanol by Al for conver-
E
sion every month, but the Complainant's production plans
were totally dislocated and disrupted on account of Al's
willful failure to supply the raw materials as represented by
them through A2, A3, A4 and A5 ....

F (v) .....The Complainant states that it had to incur a loss of over
Rs. One crore due to the willful defaults committed by the
Accused. These defaults on part of Al were repeatedly
brought to the notice of the Accused through telephonic calls
by the Complainant, more particularly in the fax message of
15.lZ.97 and 10.Z.98 to Al and A3.
G
(vi) The Complainant had a meeting with AZ on 4.4.1998 which
was also attended by A3. At this meeting held on 4.4.98, A2
and A3 agreed with the position stated by the Complainant
and made representations that the supply of raw material by
H Al, particularly the critical raw material DLZ Amino Butanol,
MEDCHLCHEMICALS AND PHARMA P. LTD. v. BIOLOGICAL E. LTD. [BANERJEE, J.] 1175

would be kept up regularly to enable production of 8 MTs of A
the finished product. The Complainant reduced these repre-
sentations by Al through A2 and A3 into writing on the same
. day and wrote the letter dated 4.4.98 to Al through A3. The
contents of this letter have not been rebutted by Al. The
Complainant states that inspite of this, the Accused
deliberately failed to act on their representations made to the
B
Complainant on 4.4.98 and thus continued to inflict huge
losses on the Complainant...

(vii) .....The Complainant states that in its talks and discussions
with the Accused, it had been indicating to A2, A3, A4, AS c
and A6 that in case Al could not keep up to its repre-
sentations which put the Complainant to huge losses, this
clause 15 could be invoked and the agreement terminated by
the Complainant giving 2 month's notice to Al. But the
Accused would, on these occasions, persuade the Com-
plainant not to invoke this provision and make further repre-
D
sentations to the Complaina~t that the supply of raw :naterials
would henceforth be kept at the agreed level. However, these
representations were not acted upon by the Accused while,
on the other hand, believing these representations, the Com-
plainant made schedules of production, but was left without E
materials, holding on to an idle plant carrying idle labour and
thus incurring huge monetary losses ....

(viii) .....The Complainant now understands that the above false
representations were made by the Accused solely with the
F
purpose of putting the Complainant to huge losses and crip-
piing them since the Accused themselves were planning to
manufacture in their own facilities the bulk drug Ethambutol
Hydrochloride and wanted to put the Complainant out of
competition by ruining them by keeping them out of produc-
tion which was achieved by the Accused by making false G
representations of supply of raw material at the agreed levels
and then willfully failing and omitting to act as per these
representations.

(ix) The Complainant was also persuaded by the representations H
1176 SUPREME COURT REPORTS [2000] 1 S.C.R.

A of the Accused to desist from invoking Clause 15 of the
Agreement and revoke it which would have reduced its losses
to some extent. The above acts of the Accused clearly attract
the ingredients of the offence punishable U/Sec. 415 I.P.C. ....

(x) ...... the Accused were having dishonest intention and it was
B with such intention that the Complainant Company was
fraudulently and dishonestly induced to enter into the Agree-
ment dt. 31.8.97. The dishonest intention of the Accused is
further seen from the complaint lodged by A6 on behalf of
Al against three officers of the Complainant.
c (xi) The Accused were fully aware that the Complainant is a
reputed manufacturer of Ethambutol Hydrochloride and they
are having good reputation in Indan and Overseas markets.
The Accused were themselves contemplating entering into
production of Ethambutol Hydrochloride and wanted to
D eliminate the competition from the Complainant who had
established their name in the market. Keeping this in mind,
the Accused, in order to earn wrongful gain and cause wrong-
ful loss to the Complainant, acted in the aforesaid manner,
inducing the Complainant through representations (by the
Accused) to commit to conversion work and consequently
E
schedule its production accordingly and then willfully failing
to act as per the representations thus putting the Complainant
to huge losses.

(xii) The Complainant further states that but for the false repre-
F sentations made by the Accused at the time of entering into
the Agreement dt. 31.8.97, it (Complainant) would not have
entered into this Contract. The aforesaid acts of the Accused
have ruined the finances of the Complainant and it had to
incur huge loss due to these acts of the Accused. The Com-
plainant states that the above said acts of the Accused clearly
G
attract the ingredients of Section 420 LP. C.....

(xiii) ......The preceding paragraphs in this Complaint would clearly
reveal that the Accused who are bound to protect the inter-
ests of the Complainant in the transactions under the Agree-
H ment dt.31.8.97 have not only cheated the Complainant by
MEDCHL CHEMICALS AND PHARMA P. LID. v. BIOLOGICAL E. LTD. [BANERJEE. J.) 1177

causing wrongful loss to it, but have. also failed to protect the A
interests of the Complainants in the transactions. Hence, the
Accused are liable to be punished U/Sec.418 I.P.C ....

(xiv) .......The Complainant states that from whatever has been
stated and set out herein above, it is absolutely clear that Al
to A6 had, in criminal conspiracy with each other and in B
furtherance of the common intention of all have committed
the above offences under Section 415 I.P.C. and 420 I.P.C.
Letter correspondence, the Complaint and the documents
relating to the Agreement dt. 31.8.97 would prove that A2 to
A6 have very much participated in the affairs of Al and in C
particular, those relating to the transactions under the Agree-
ment dt. 31.8.97.

This longish narration could have probably been avoided, but it
cannot be so done by reason of the fact that the Learned Single Judge has
only recorded : D
"It appears that under an agreement the accused were obliged to
supply raw materials for production to the Complainant which they
failed to do. I do not find any allegation whatsoever in the com-
plaint which would disclose a criminal offence".
E
Before proceeding further in the matter, let us now deal with the
offences alleged in the First Information Report. The first offence alleged
is that of 'cheating' within the meaning of Section 415 IPC. For convenience
sake Section 415 reads as below:
F
-~
415. Cheating - Whoever, by deceiving any person, fradulently or
dishonestly induces the person so deceived to deliver any property
to any person, or to consent that any person shall retain any
property, or intentionally induces the person so deceived to do or
omit to do anything which he would not do or omit if he were not G
so deceived, and which act or omission causes or is likely to cause
damage or harm to that person in body, mind, reputation or
property, is said to "cheat"

Explanation - A dishonest concealment of facts is a deception
within the meaning of this section. H
1178 SUPREME COURT REPORTS [2000] 1 $.C.R.

A The Complaint is also said to be under Section 418 I.P.C. which reads
as below:

418. Cheating with knowledge that wrongful loss may ensue to person
whose interest offender is bound to protect. - Whoever cheats with
the knowledge that he is likely thereby to cause wrongful loss to a
B person whose interest in the transaction to which the cheating
relates, he was bound, either by law or by a legal contract, to
protect, shall be punished with imprisonment of either description . ...,
for a term which may extend to three years, or with fine, or with
both.
c
The Complaint also alleges an offence said to have been committed
under Section 420 I.P.C. which reads as below:

420. Cheating and dishonestly inducing delivery of property. -
. Whoever cheats and thereby dishonestly induces the person
D deceived to deliver any property to any person, or to make, alter
or destroy the whole or any part 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
E shall also be liable to fine.

The ingredients require to constitute an offence under Section 415
ha_s been lucidly dealt with by this Court in the Case of Ram fas v. State
of U.P., [1970) 2 SCC 740 wherein this Court observed as below:
F
"The ingredients required to constitute the offence of cheating are-

(i) there should be fraudulent or dishonest inducement of a
perspn by deceiving him;
G
(ii) (a) the person so deceived should be induced to deliver any
property to any person, or to consent that any person shall
retain any property; or

(b) the person so deceived should be intentionally induced to
H do or omit to do anything which he would not do or omit if
MEDCHL CHEMICALS AND PHARMA P. LTD. v. BIOLOGICAL E. LTD. (BANERJEE, J.) 1179

he were not so deceived; and A
(iii) in cases covered by (ii)(b), the act or omission should be one
which causes or is likely to cause damage or harm to the
person induced in body, mind, reputation or property".

While Section 415 is an offence of cheating, Section 418 deals with B
cheating with knowledge that wrongful loss may ensue to a person whose
interest the offender is bound to protect and Section 420 is cheating and
dishonestly inducing delivery of property. In order to attract the provisions
of Sections 418 and 420 the guilty intent, at the time of making the promise
is a requirement and an essential ingredient thereto and subsequent failure C
to fulfil the promise by itself would not attract the provisions of Section
418 or 420. Mens rea is one of the essential ingredients of the offence of
cheating under Section 420. As a matter of fact illustration (g) to Section
415 makes the position clear enough to indicate that mere failure to deliver
in breach of an agreement would not amount to cheating but is liable only D
to a civil action for breach of contract and it is this concept which obviously
has weighed with the Learned Single Judge. But can the factual situation
as narrated above in the longish reproduction of the complaint lend
· support to the observations of the Learned Judge, the answer is pivotal one
but before so doing one other aspect as regards the powers under Section
482 Cr.P.C. ought to be noticed. As noted herein before this power is to E
be exercised with care and caution and rather sparingly and has been so
held on more occasions than one.

In the case of Pratibha Rani v. Suraj Kumar, (1985] SCC Cr!. 180 this
Court pointed out that the High Court should very sparingly exercise its F
discretion under Section 482 Cr.P.C.

In L.V. Jadhav v. Shankarrao Abasaheb Pawar, AIR (1983) SC 1219
(1983] 4 SCC 231 = (1983] SCC Cr!. 813 this Court observed:

"The High Court, we cannot refrain from observing, might well G
have refused to invoke its inherent powers at the very threshold in
order to quash the proceedings, for these powers are meant to be
exercised sparingly and with circumspection when there is reason
to believe that the process of law is being misused to harass a
citizen." H
1180 SUPREME COURT REPORTS [2000] 1 S.C.R.

A Needless to record however and it being a settled principle of law
that to exercise powers under Section 482 of the Code, the complaint in its
entirety shall have to be examined on the basis of the allegation made in
the complaint and the High Court at that stage has no authority or
jurisdiction to go into the matter or examine its correctness. Whatever
B appears on the face of the complaint shall be taken into consideration
without any critical examination of the same. But the offence ought to
appear ex- facie on the complaint. The observation in Smt. Nagawwa v.
Veeranna Shivalingappa Konjalgi, [1976] 3 SCC 736] lend support to the
above statement of law.

c (1) Where the allegations made in the complaint or the state-
ments of the witnesses recorded in support of the same taken
at their face value make out absolutely no case against the
--
accused or the complaint does not disclose the essential
ingredients of an offence which is alleged against the accused;
D
(2) Where the allegations made in the complaint are patently
absurd and inherently improbable so that no prudent person
can ever reach a conclusion that there is sufficient ground for
proceeding against the accused;

E (3) Where the discretion exercised by the Magistrate in issuing
process is capricious and arbitrary having been based either
on no evidence or on materials which are wholly irrelevant
or inadmissible; and

F (4) Where the complaint suffers from fundamental legal defects,
such as, want of sanction, or absence of a complaint by legally
competent authority and the like.

The cases mentioned by us are purely illustrative and provide
sufficient guidelines to indicate contingencies where the High
G Court can quash proceedings.

In the matter under consideration, if we try to analyse the guidelines
as specified in Shivalingappa's case (supra) can it be said that the allega-
tions in the complaint do not make out any case against the accused nor it
H discloses the ingredients of an offence alleged against the accused or the
MEDCHLCHEMICALS AND PHARMA P. LTD. v. BIOLOGICAL E. LTD. [BANERJEE. J.] 1181

allegations are patently absurd and inherently improbable so that no pru- A
dent person can ever reach to such a conclusion that there is sufficient
ground for proceeding against the accused. In the present case, the com-
plaint as noticed above does not, however, lend credence to the questions
posed. It is now well settled and one need not dilate on this score, neither
we intend to do so presently that the allegations in the complaint will have
B
to be accepted on the face of it and truth or falsity of which would not be
gone into by the Court at this earliest stage as noticed above: whether or
not allegations in the complaint were true is to be decided on the basis of
the evidence led at the trial and the observations on this score in the case
of Nagpur Steel & Alloys Pvt. Ltd. v. P. Radhaklishna, [1997] SCC Crl. 1073
ought to be noticed. In paragraph 3 of the report this Court observed: c
"3. We have perused the complaint carefully. In our opinion it
_cannot be said that the complaint did not disclose the commission
of an offence. Merely because the offence was committed during
the course of a commercial transaction, would not be sufficient to D
hold that the complaint did not warrant a trial. Whether or not
the allegations in the complaint were true was to be decided on
the basis oi evidence to be led at the trial in the complaint case.
It certainly was not a case in wii.ich the criminal trial should have
been cut short. The quashing of the complaint has resulted in grave E
miscarriage of justice. We, therefore, without expressing any
opinion on the merits of the case, allow this appeal and set aside
the impugned order of the High Court and restore the complaint.
The learned trial Magistrate shall proceed with the complaint and
dispose of it in accordance with law expeditiously." F

Be it noted that in the matter of exercise of High Court's inherent
power, the only requirement is to see whether continuance of the proceed-
ing would be a total abuse of the process of Court. The Criminal Procedure
Code contains a detailed procedure for investigation, charge and trial, and G
in the event, the High Court is desirous of putting a stop to the known
.....
procedure of law, the High Court must use a proper circumspection and
as noticed above, very great care and caution to quash the complaint m
exercise of its inherent jurisdiction. Recently, this Court in Tlisuns Chemi-
cal Industry v. Rajesh Agarwal and Others, (1999) 5 SCALE 609 observed: H
1182 SUPREME COURT REPORTS [2000] 1 S.C.R.
A "5. Respondent's counsel in the High Court put forward mainly
two contentions. First was that the dispute is purely of a civil nature
and hence no prosecution should have been permitted, and the
:second was that the Judicial Magistrate of First Class, Gandhidham
has no jurisdiction to entertain the complaint. Learned Single
B Judge has approved both the contentions and quashed the com-
plaint and the order passed by the magistrate thereon.

6. On the first count learned Single Judge pointed out that there
was a specific clause in the Memorandum of Understanding ar-
rived between the parties that disputes, if any, arising between
c them in respect of any transaction be resolved through arbitration.
High Court made the following observations:

"Besides supplies of processed soyabean were received by the
complainant company without any objection and the same have
D been exported by the complainant-company, The question whether
the complainant-company did suffer the loss as alleged by it are
the matters to be adjudicated by the Civil Court and cannot be the
subject matter of criminal prosecution."

7. Time and again this Court has been pointing out that the
E quashment of FIR or a complaint in exercise of inherent powers
of the High Court should be limited to very extreme exceptions
(vide State of Haryana v. Bhajan Lal, [1992] Suppl. 1 SCC 335 and
Rajesh Bajaj v. State NCT of Delhi, [1999] 3 SCC 259).

F 8. In the last referred case this court also pointed out that merely
because an act has a civil profile is not sufficient to denude it of
its criminal outfit. We quote. the following observations:

"It may be that the facts narrated in the present complaint
would as well reveal a commercial transaction or money
G
transaction. But that is hardly a reason for holding that the
offence of cheating would elude from such a transaction. In
fact, many a cheatings were committed in t!ie course of
commercial and also money transactions."

H 9. We are unable" to appreciate the reasoning that the provision
I MEDCHL CHEMICALS AND PHARMA P. LTD. v. BIOWGICAL E LTD. [BANERJEE, J. J1183

incorporated in the agreement for referring the disputes to arbitra- A
tion is an effective substitute for a criminal prosecution when the
disputed act is an offence. Arbitration is a remedy for affording
reliefs to the party affected by breach of the agreement but the
arbitrator cannot conduct a trial of any act which amounted to an
offence albeit the same act may be connected with the discharge B
of any function under· the agreement. Hence, those are not good
reasons for the High Court to axe down the complaint at the
threshold itself. The investigating agency should have had the
freedom to go into the whole gamut of the allegations and to reach
a conclusion of its own. Pre-emption of such investigation would C
be justified only in very extreme cases as indicated in State of
Haryana v. Bhajan Lal (Supra)."

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 D
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 E
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 divers situations. As a matter of fact "they are
not mutually exdusive but clearly co-extensive and essentially differ in their
content and consequedce. The object of criminal law is to punish an
offender who cofurnits an offence against a person, property or the State
F
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 wrongdoer in cases like arson, accidents etc.
It is anathema to suppose that when a civil remedy is available, a ctiminal
prosecution is completely barred . The two types of actions are quite G
different in content, scope and impart" vide Pratibha Rani v. Suraj Kumar
(supra).

Mr. Mishra, the learned Senior Advocate for the respondents herein
being the accused persons, strongly relied upon the decisions of this Court H
1184 SUPREME COURT REPORTS [2000) 1 S.C.R.

A in the case of Dr. Sharma Nursing Home v. Delhi Administration, [19981 8
SCC 745 wherein this Court observed: "we find that both the learned courts
have rested their findings on deception only and did not go into the
question whether the complainant and its accompaniments disclosed the
other essential ingredient of the offence under Section 420 IPC namely,
dishonest inducement". Mr. Mishra upon reliance in Dr. Sharma's case
B (supra) also contended that Section 24·of the l.P.C has defined the word
'dishonesty' to mean a deliberate intent to cause wrongful gain or wrongful
loss. It has been the specific case of the complainant that from the begin-
ning of the transaction there was a definite intent on the part of the accused
persons to cause wrongful loss to the complainant. This aspect of the
c matter, however, has not been taken note of by the learned Single Judge.
The decision of this Court in Dr. Shanna's case (supra) thus does not lend
any assistance to Mr. Mishra in support of quashing of the criminal
complaint. Some other decisions have also been cited but we do not feel it
inclined to refer to the same except one noted above since they do not
D advance the case of the respondents in any way whatsoever.

Considering the factual aspect of the matter, we unhesitatingly state,
however, that the issue involved in the matter under consideration is not a
case in which the criminal trial should have been short circuited. We, thus,
without expressing any opinion on the merits of the case allow the Appeal
E and set aside the impugned order of the High Court and restore the
complaint. The learned trial Magistrate shall proceed with the complaint
and dispose of the same in accordance with the law with utmost expedition.
Be it clarified however that observations as above in this judgment be not
taken as an expression of any opinion of ours.

F A.O. Appeal allowed.