Holding

Where the complaint does not prima facie disclose the ingredients of the alleged offences, the magistrate’s process is erroneous and the High Court must exercise its inherent power under CrPC § 482 to quash it.

Summary

The appellants, a company and its directors, entered into a consignment stockist agreement with respondent No.2. A dispute over a Rs 15 lakh payment led the respondent to issue a notice invoking an arbitration clause, which was rejected. He then filed a criminal complaint alleging criminal breach of trust, cheating and conspiracy (IPC §§ 406, 420, 120B). The magistrate issued summons against all appellants, but the High Court dismissed their petition under CrPC § 482 seeking quashment. The Supreme Court held that the magistrate had erred in issuing process where the allegations did not prima facie satisfy the elements of the offences, and that the High Court should have exercised its inherent power under § 482 to prevent abuse of process. Consequently, the Court set aside the process against appellants 1‑6 and 8, and against appellant 7 for §§ 406 and 120B, while maintaining the process against appellant 7 for § 420. The appeal was partly allowed.

Issues considered

The magistrate’s power to issue process under CrPC §§ 200‑203 when the complaint does not prima facie establish an offence.
Whether the High Court erred in not exercising its inherent jurisdiction under CrPC § 482 to quash the magistrate’s process.
Whether the civil nature of the dispute and the arbitration clause preclude criminal prosecution under IPC §§ 406, 420, 120B.

Legislation cited

Code of Criminal Procedure, 1973s. 200, s. 201, s. 202, s. 203, s. 482
Indian Penal Code, 1860s. 120B, s. 405, s. 406, s. 415, s. 420

Subjects

CrPC Section 482inherent jurisdictionquashing of criminal processcriminal breach of trustcheatingcriminal conspiracycivil dispute vs criminal prosecutionarbitration clauseabuse of process

Judgment

S.W. PALANITKAR AND ORS. A
v.
.STATE OF BIHAR AND ANR.

OCTOBER 18, 2001

[D.P. MOHAPATRA AND SHIVARAJ V. PATIL, JJ.] B

Code of Criminal Procedure, 1973:
.. .

Ss. 200 to 203 and 482.

Summons issued on a Criminal complaint-Petitionfiletl for quashing of c
Criminal proceeding-Dismissetl by High Court-On appeal, held, be.fore
issuing a process, Magistrate has to consider the provisions of Sel'tions 200 to
203 of the Act and the position of law and to pass on order judiciously and not
mechanically or in a routine manner-When the acts alleged against did not
constitute qffence satisfying 'ingredients, even prima.facie, summons should not D
have been issu·ed.

·Inherent power qf High Court-Section 482-While exercising inherent
power, High Court has to look at the object and purpose .for which such power
is conferred-btherentpower is available to give effect to any order under Code
of Criminal Procedure or to prevent abuse of the process qf any Court or E
otherwise to secure the ends of justice-if no offence is made out there should
be no hesitation in exercising power under Sec. 482 Cr. P.C.-Breach qf Trust,
Sections 405 and 415, /PC.

Pursuant to an agreement between appellant No. 1 (the company)
and respondent.No. 2, he was appointed as a ·consignment stockist of the
F
company subject to certain terms and conditions. Subsequently, respond·
ent no. 2 (complainant) served a notice on the appellant company for
payment of certain amount or in the alternative refer the disputes and
differences to arbitration as per clause 29 of the Agreement. Thereafter

-· the company made certain offer which was rejected by the respondent and
he· filed a complaint alleging offences u/s. 406 and 420 read with Section
G

120B IPC inter alia stating that the accused persons in collusion and
connivance with a wrongful object and motive to squeeze moneys from
him, cheated him and thus committed criminal breach of trust; and that
they had cheated him by using his office and godown premises on the basis H
397
398 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.

A of false assurances without making any farthing.

Judicial Magistrate issued summons against the appellants and they
approached the High Court by filing a petition u/s. 482 Cr.P.C. for quash·
ing the order of the Magistrate. High Court dismissed the petition. Hence
this appeal.
B
It was contended for the appellants that High Court failed to exer·
cise its power u/s. 482 Cr.P.C. in order to prevent abuse of process of the
Court and/or to secure the ends of justice; that the disputes between 'the
appellants and respondents were of purely civil in nature; ~hat.no cause
c was made out to proceed against the appellants on criminal side; and that
the essential ingredients of the offences as alleged were not made out and
the Magistrate committed a serious error in issuing process and the High
Court failed to correct the same.

Partly allowing the appeal, the Court
D
HELD : 1.1. An act of breach of trust involves a civil wrong in
respect of which the person wronged may seek his redress for damages in
civil court but a breach of trust with mens rea gives rise to a criminal
-
prosecution as well. A wrongful act such as criminal breach of trust,
·E cheating or defamation may give rise to action both on civil and criminal
side when it is clear from the complaint and sworn statement that neces·
sary ingredients of constituting an offence are made out. In order to
constitute an offence of cheating the intention to deceive should be in
existence when the inducement was made. It is necessary to show that a
F perso~ had fraudulent·or dishonest intention at the time of making the
promises. A mere failure to keep up promise subsequently canno~ be
presumed as an act leading to cheating. [402-C; 407-B; 407-G-H; 408-A]

Hrideya Ranjan Prasad Venna & Ors. v. State of Bihar & Am:, [2000] 4
SCC 168 and G. V. Rao v. L.H. V. Prasad & Ors., [2000] 3 SCC 693, relied on.
G
1.2. Many a time, complaints are filed u/s. 200 Cr.P.C. by the parties
with an oblique motive or for collateral purpose to harass, to wreck venge·
ance, to pressurise the accused to bring them to their own terms or to
enforce the obligations arising out of breach of contract touching commer-
H .cial transactions instead of approaching civil courts, with a view to realise
S.W. PALANITKAR v. STATE 399
moneys at the earliest. Before issuing a process, a Magistrate has to keep A
this in mind and the scheme contained in the provisions of sections 200-203
Cr.P.C. and then pass an order judiciously and not mechanically or in P
routine manner. (407-F-G; 408-B]

Nirmaljit Singh Hoon v. The State of West Bengal & Am:, (1973] 3 SCC
B
753 and Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi & Ors., (1976] 3
sec 736, relied on.
1.3. In the instant case, the Magistrate, committed a serious error in
issuing the process against appellants 1 to 6 and 8 for offences u/s. 406, 420
and 120B IPC when the acts alleged against them did not constitute these c
offences satisfying their ingredients even prime J'acie; process could have

.. been issued only as against the appellant no. 7 for committing offences u/s.
420 I.P.C. (408-C-D]

Punjab National Bank & Ors. v. Surendra Prasad Sinha, (1993] Supp. 1 D
sec 499, relied on.
2. While exercising power under section 482 Cr.P.C. High Court has
to look at the object and purpose for which such power is conferred on it.
Exercise of inherent power is available to High Court to give eff~t to any E
order under Cr.P.C. or to prevent abuse of the process of any court or
otherwise to secure the ends of justice. In appropriate cases, to prevent
judicial process from being an instrument of oppression or harassment in
the hands of frustrated or vindicative litigants, exercise of power is not
only desirable but necessary also so that the judicial forum of court may
not be allowed to be utilized for any oblique motive. (409-E-G]
F

2.1. Having regard to facts and circumstances of the present cases,
the issue of process against appellants nos. 1 to 6 and 8 as also processes
issued against appellant no. 7 for offences u/s. 406 and 120B I.P.C. are set
aside. However process issued against appellant no. 7 u/s. 420 I.P.C. is G
maintained. (410-A]

Medchi Chemical and Pharma (P) Ltd. v. Biological E. Ltd. & Ors.,
[2000) 3 SCC 269; Madhavrao Jiwajirao Scindia & Ors. v. Sambbajirao
Chandrojirao Angre & Ors., [1988) 1 SCC 692, relied on. H
400 SUPREME COURT REPORTS (2001] SUPP. 4 S.C.R.
A· Trisuns Chemical Industry v. Rajesh Agarwal &: Ors.~· {1999) 8 SCC
686,-distingwshed.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 1072
. of 2001.

J B From the Judgment and Order dated 20.12.2000 of the Patna High Court
in Crl. M. No. 6232 of 1998.

Dushyant Dave, Ms. Hemantika W ahi and Pravesh Singh for the Appel-
hints. .

C Kumar. Rajesh Singh and B.B. Singh for State of Bihar.

L.K. Bajla and Praveen Kumar for t~e Respondent No. 2.

The Judgment of the Court was delivered by

D SlllVARAJ V. PATIL, J. Leave granted.

This appeal is by the accused in Complaint Case No. 1388 of 1997 in
the Court .of· Chief Judicial Magistrate, Patna, aggrieved by the order dated
20.12.2QOO passed by the High Court of Patna in Criminal Misc. No. 6232 of
1998.
E
In brief the facts to the extent relevant and necessary for disposal of this
appeal are as under :-

There was an agreement dated 21.2.1995 between the appellant No. 1
(the company) and the respondent no. 2 under which he was appointed as a
F
consignment stockist of the company subject to certain terms and conditions.

The said agreement was valid till 20.2.1996. By a subsequent agreement
dated 5.5.1997 the same arrangement was extended up to 31.3.1997 on the
same terms and conditions. On 3.10.1997 respondent No. 2 (complainant)
G served a notice on the Manager Mark~ting and Regional Manager of the
company requesting them to make payment of Rs. 15.00 lacs to it within 15
days or in the alternative refer the disputes and differences to arbitration as per
clause 29 of the agreement. Thereafter the parties met and the company offered
to supply Ammonium Sulphate to the respondent for the period 1997-98 on
H certain terms. The respondent rejected the offer finding the terms unreasonable.
S.W. PALANITKAR v. STATE [PATIL, J.] 401
It is thereafter the respondent filed a complaint on 8.12.1997 alleging offences A
under sections 406 and 420 read with Section 120B of the Indian Penal Code
(IPC) inter alia stating "that the accused persons in collusion and connivance
of each other with wrongful objects and motive to wrongfully squeeze money/
gratification from the complainant and in their own benefit used the complain-
ant wrongly and have cheated the coinplaina:nt by practising fraud and have B
acted fraudulently against the complainant and by doing such acts they have
committed criminal breach of trust and put the complainant to wrongful loss
and have gained wrongfully. The accused persons have also cheated the com-
plainant by using the office and godown premises of the complainant on the
basis of false assurances given to the complainant and without making any
farthing for such costly and valuable premises and thus committed criminal
c
breach of trust, fraud and cheating which caused loss of rupees fifteen lacs".

The learned Chief Judicial Magistrate, Patna by his order dated 6.1.1998
issued summons against the appellaµ.ts. The appellants approached the High '
Court by filing a petition under Section 482 Cr.P.C. for quashing-the aforemen- D
tioned order of the learned Magistrate. The High Court by the impugned order
dismissed the said petition. In these circumstances the appellants are before this
Court in appeal.

Shri Dushyant Dave, learned Senior Counsel for the appellants urged
that the High Cou.rt failed to exercise its power under Section 482 Cr.P.C. E
• having regard to the facts and circuinstances of the case in order to prevent
abuse of process of the cou:t and/or to secure the ends of justice; that the
disputes between the appellants and respondent no. 2 were purely of civil
nature arising out of contractual relationship relating to commercial transac-
tion; even looking to the sworn· statements, terms of the agreement and the F
notice dated 3.10.1997, no case is made out to proceed against the appellants
on criminal side, that the essential ingredient of the offence under Section 405
IPC is not made out as the appellants were not entrusted with any property or
with domain over property; similarly the ingredients of the offence under
Section 415 & 120-B IPC also were not satisfied. According to him, the learned 0
Magistrate committed a serious error iri issuing the process; unfortunately, the
High Court, also failed to correct the same, exercising jurisdiction under
Section 482 of the Cr.P.C. Alternatively and lastly, he submitted that at any rate
no case is made out against the appellants 1~6 and 8. Hence, issuing a process
against them is patently illegal and untenable. H

'
-~
402 SUPREME COURT REPORTS . [2001] SUPP. 4 S.C.R.
A Shri L.K. Bajla, learned coun~el for respondent No. 2 made submissions
supporting the impugned judgment of the High Court and justifying the order
passed by the learned Magistrate in issuing the process. More or less, he
reiterated the·submissions that were made before the High Court.
....
Before examining respective contentions oh their relative merits, we
B think it ts appropriate to notice the legal position. Every breach of trust may
notresult in a penal offence of criminal breach of trust unless there is evidence
of a ~ental a~t of fraudulent misappropriation. AD act of breach of trust
involves a ,civil ~rong in r~spect of which the .I>erson wro~ged may seek .his
redress for damages in a civil cqurt but a breach of trust with mens rea gives
c •

rise to a criminal prosecution as well.
• . ~
... .... J.

The ingredients in order to constitute a criminal breach of trust are: (1)
entrusting a person with property or with any dominion over property (ii) that
person entrusted ~a) dishonestly misapprop,riating or converting that property
to his, own use; o,: (b) dishonestly .using or disposing of.µiat property or
D
willfully suffering any other perso·n so to do in violation (i) of any _direction
of law prescribing the mode in which such trust is to be discharged (ii) of any
legal contract made touc~ing the discharge of such trust.

The ingredients of the offence of cheating are: (i) there should be fraudu-
E lent or dishonest inducement of a person by deceiving him, (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. do or omit to do anything which he would
not do or omit if he were not so deceived; and (iii) in cases covered by (ii) (b ),
F the act of omission should be ~ne which causes or is likely to cause damage
or harm .to the person induced In body, mind, reputation or property.

One of us (D.P. Mohap~tra J.) speaking for~Bench, in Hridaya
Ranjan Prasad Ve1ma & Ors. v. State of Bihar & Anr, [2000] 4 SCC 168, on
facts of that case, ~as eipressed thus : .,
G
"In determining the question it has to be kevt'Wli•.1W~d that the distinc-
tion between mere breach of contract a:nd the offe~ce Of cheating is a
fine one. It depends upon the intentfon of the accused at the time of
inducement which may be judged by his subsequent conduct but for
this subsequent conduct is .not the sole test Mere breach of contract
fl
S.W. PALANITKAR v. STATE [PATIL, J.] 403
cannot give rise to criminal prosecution for cheating unless fraudulent A
or dishonest intention is shown right at the beginning of the transac-
tion, that is the time when the offence is said to have been committed.
Therefore it is the intention which is the gist of the offence. To hold
a person guilty of cheating it is necessary to show that he had fraudu-
lent or dishonest intention at the time of making the promise. From his B·
mere failure to keep up promise subsequently such a culpable intention
right at the beginning, that is, when he made the promise cannot be
presumed."

[emphasis supplied]
c
Finding that ingredients of the offence of cheating and itc; allied offences
had not been made out, this Court interfered with the order of the High Court
and quashed the criminal proceedings.

In G. V. Rao v. L.H. V. Prasad & Ors., [2000] 3 SCC 693, this Court in
para 7 has stated thus :-
D

"As mentioned above, Section 415 has two parts. While in the first
part, the person must "dishonestly" or "fraudulently" induce the com-
plainant to deliver any property; in the second part; the person should
intentionally induce the complainant to do or omit to do a thing. That E
is to say, in the first part, inducement must be dishonest or fraudulent.
In the second part, the inducement should be intentional. As observed
by this Court in Jaswantrai Manila/ Akhaney v. State of Bombay, AIR
(1956) SC 575 a guilty intention is an essential ingredient of the
offence of cheating. In order; therefore, to secure conviction of a F
person for the offence of cheating, "mens rea" on the part of that
person, must be established. It was also observed in Mahadeo Prasad
v. State of W.B., AIR (1954) SC 724 that in order to constitute the
offence of cheating, the intention to deceive should be in existence at
the time when the inducement was offered."
G
[emphasis supplied]

lri Irisuns Chemical Industry v. Rajesh Agarwal & Ors., [1999] 8 SCC
.686 dealing with the effect of existence of arbitration clause in the agreement
on criminal prosecution on the ground that civil proceedings are also maintain- H
404 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A able, !his Court has held that quashing of F.l.R. or a complaint exercising power _
under Section 482 Cr.P.C. shOuld be limited to a very extreme exception;,.,
merely because an act has a civil profile is not enough to stop action od the
a
criminal side. It is further held that provision made in the agreement\ for
referring the disputes to arb1trat10n 1s not an effective substitute for a cnmibal
B prosecution when the disputed act constitutes a criminal offence. \

In case of a complaint under Section 200 Cr.P.C. or IPC a Magistrate c~ ·
take cognizance of the offence made out and then has to examine the complain~
ant and his witnesses; if any, to ascertain whether a prima facie case is made
out against the accused to issue process so that the issue of process is prevented
c on a complaint which is either false or vexatious or intended only to harass.
Such examination is provided in order to find out whether there is or not
sufficient ground for proceeding. The words 'sufficient ground', used under
Section 203 have to be construed to mean the satisfaction that a prima facie
case is made out against the ;iccused and not sufficient ground for the purpose
D of conviction.

This Court in Nirmaljit Singh Hoon v. The State of West Bengal & Anr.,
[1973] 3 SCC 753, in P¥a 22, referring to scheme of Sections 200-203 of Cr.
P.C. has explained that ''The section does not say that a regular. trial of
adjudging truth or otherwise of the person complained against should take
E place at that stage, for; such a person can be calle~. upon to answer the
accusation made against him only when a process has been issued and he is
on trial. Section 203 consists of two parts. The first part lays down the materials
which the Magistrate must consider, and .the second .part says that if after
considering those materials the~e is in his judgment no sufficient ground for
F proceeding, he may di~miss the complaint. In Chandra Deo Singh v. Prakash
Chandra Bose, [1964] l SCR 639, where dismissal. of a complaint by the
Magistrate at the stage of Section 202 inquiry was set aside, this Court laid
down that the test was whether there was sufficient ground for proceeding and
not whether there was sufficient ground for conviction, and observed (p. 653)
G that where there was prima facie evidence, even though the person charged of
an· offence in the complaint might have a defence, the matter had to be left to
!Je decided by the appropriate forum at the appropriate stage and issue of a
process could not bd'refused. Unless, therefore, the Magistrate finds that the
evidence led before him is self-contradictory, or intrinsic·any ·untrustworthy,
H: ,. process cannot be refused if that evidence makes out a prima 1acie case"
S.W. PALANITKAR v. STATE [PATIL, J.] 405
In Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi & Ors., [1976] A
3 SCC 736 this Court dealing with the scope of inquiry under Sectfon 202 has
stated that it is extremely limited only to the ascertainment of the truth or
falsehood of the allegations made in the complaint (a) on the materials placed
by the complainant before the court; (b) for the limited purpose of finding out
whether a prima .facie case for issue of process has been made out; (c) for .B
deciding the question purely from the point of view of the complainant without
,at all adverting to any defence that the accused may have. It is also indicated
by way of illustration in which cases an order of the Magistrate issuing process
can be quashed on such case being "where the allegations made in the com-
plaint or the statements of the witnesses recorded in support of the same taken C
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".

Cautioning against issuing of process so that it should not be an instru-
ment in the hands of the private complainant as vendetta to harass the person D
needlessly, this Court in Punjab National Bank & Ors. v. Sureridra Prasad
Sinha, [1993] Supp. (1) SCC 499 has this to say in para 6 :-

"It is also salutary to note that judicial process should not be an
instrument of oppression or needless harassment. The complaint was
laid impleading the Chairman, the Managing Director of the Bank by E
name and a host of officers. There lies responsibility and duty on the
magistracy to find whether the concerned accused should be legally
responsible for the offence charged for. Only on satisfying that the law
casts liability or creates offence against the juristic person or the
persons impleaded then only process would be issued. At that stage the F
court would be circumspect and judicious in exercising discretion and
should take all the relevant facts and circumstances into consideration
before issuing process lest it would be an instrument in the hands of
the, private complaint as vendetta to harass the persons needlessly.
Vindication of majesty of justice and maintenance of law and order in G
the society are the prime objects of criminal justice but it would not
be the means to wreak personal vengeance. Considered from any angle
we find that the respondent had abused the process and laid complaint
against the appellants without any primafacie case to harass them from
vendetta."
H
406 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A ~imilarly in Madhavrao Jiwq.jirao Scindia & Ors. v. Sambhajirao
Chandrojirao Angre & Ors., [1988] 1 SCC 692, this Court has stated that "The
legal position is well settled that when a pros~cution at the initial stage is asked
to be quashed, the test to be applied by the court is as to whether the
uncontr?verted allegations as made prima facie establish the offence. It is also
B for the court to take into consideration any special features which appear in a
particular case to consider whether it is expedient and in the interest of justice
to permit a prosecution to continue. This is so on the basis that the court cannot
be utilized for any oblique purpose and where in the opinion of the .court
chances of an ultimate conviction is bleak and, therefore, no useful purpose is
likely to be served by allowing a criminal prosecution to continue, the court
c may while taking into consideration the special facts of a case also quash the
proceeding even though it may be at a preliminary stage."

Turning to the facts of the case, there is nothing either in the complaint
and/or in the sworn statements of the complainant and the three witnesses that
D any property was entrusted to any of the appellants at all or the appellants .had
domain over any of the properties of respondent no. 2 which they dishonestly
converted to their own use so as to satisfy the ingredients of Section 405 IPC
punishable under Section 406 IPC. Further the agreement also did not require
entrustment of at)y property to the appellants. Taking the complaint and the
E statements of the witnesses as they are, it cannot be said even prima f acie, that
the appellants committed any offence punishable under Section 406 IPC, since
the ingredients of that offence were not satisfied. Hence the learned Magistrate
cammitted a serious error in issuing process against the appellants for the said
offence. Unfortunately, the High Court also failed to correct this manifest error.

F It is clear from the allegations made in the complaint and the sworn
statements that the appellant no. 1 comp,~y entered into an agreement with the
respondent no. 2 on certain terms and conditions. It is alleged that the appellant
no. 7 went to Patna and contracted respondent no. 2 and induced him to enter
·into an agreement assuring him of huge profit. At the time of arriving at such
G ari agreement, none of the other appellants either met the resi:mndent no. 2 or
induced him to enter into any agreement with a view to cheat him. The
agreement was further renewed for a period of one year. It is not the case that
there was no supply of goods at all as it has come. on record that there was
supply of 400 ton of fertilizer, may be it was far less than the required quantity.
H The allegations made against the appellants other than the appellant no. 7 are
S.W. PALANITKAR v. STATE [PATIL, J.] 407
very vague and bald. From the material that was placed before the Magistrate, A
even prima facie, it cannot be said that there was conspiracy or connivance
between the other appellants and the appellant No. 7. If the appellants have
co.rpmitted breach of agreement, it is open to respondent no. 2 to seek redressal ·
in a competent court or forum to recover damages, if permissible in law in case
he had sustained any loss. In order to constitute an offence of cheating, the B
intention to deceive should be in existence at the time when the inducement
was made. It is necessary to show that a person had fraudulent or dishonest
intention at the time of making the promise, to say that he committed an act
of cheating. A mere failure to keep up promise subsequently cannot be pre-
sumed as an act leading to cheating.
c
Looking to the complaint and the grievances made by the complainant
therein and having regard to the agreement, it is clear that the dispuie and
grievances arise out of the said agreement. Clause 29 of the agreement provides
for reference to arbitration in case of disputes or controversy between the
parties and the said clause is wide enough to cover almost all sorts of disputes ,D
arising out of the agreement. As a matter of fact, it is also brough to our notice
that the complainant issued a notice dated 3.10.1997 to the appellants invoking
this. arbitration clause claiming Rs. 15. lacs. It is thereafter the present com-
plaint was filed. For the alleged breach of the agreement in relation to com-
mercial transaction, it is open to the respondent no. 2 to proceed against the E
appellants for his redressal for recovery of money by way of damages for the
loss caused, if any. Merely because there is an arbitration clause in the agree-
ment, that cannot prevent criminal prosecution against the accused if an act
constituting a criminal offence is made out even prime facie.

Many a times, complaints are filed under Section 200 Cr.P.C. by the F
parties with an oblique motive or for collateral purposes to harass, to wreck
vengeance, pressurize the accused to bring them to their own terms or to
enforce the obligations arising out of breach of contract touching commercial
transactions instead of approaching civil courts with a view to realize money
at the earliest. It i!i also to be kept in mind that when parties commit a wrongful G
act constituting a criminal offence satisfying necessary ingredients of an of-
fence, they cannot be allowed to w~lk away with an impression that no action
could be taken against them on cribnal side. A wrongful or illegal act such
as criminal breach of trust, misappropriation, cheating or defamation may give
rise to acti.on both on civil as well as on criminal side when it is clear from the H
408 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A complaint and sworn statements that necessary ingredients of constituting an
offence are made out. May be parties are entitled to proceed on c.ivil side only
in a given situation in the absence of an act constituting an offence but not to ·
. proceed against the accused in a criminal prosecution. Hence before issuing a
process a Magistrate has to essentially keep in mind the scheme con_tained in
B the provisions of Section 200-203 of Cr.P.C. keeping in mind the position of
law stated above and pass an order judiciously and not mechanically or in
routine manner.

The learned Magistrate, in our view, having regard to the facts stated and
the legal position explained ·above, committed a serious error in issuing the
c process against the appellants 1 to 6 and 8 for offences under Sections 406, 420
and 120-B IPC when the acts alleged against them did not constitute these
offences satisfying their ingredients· even prima facie. In the Hglit of the
materiaJ brought on record at that stage process could have been issued only
as against the appellant no. 7 that too for an offence under Section 420 IPC
D only.

The High Court dismissed the petition filed under Section 482 Cr.P.C.
by the impugned order placing reliance, in particular, on two decisions of this
Court, one Trisuns Chemical Industry (supra) and Medchl Chemicals & Phanna
E (P) Ltd. v. Biological E. Ltd. & Ors., [2000] 3 SCC 269. In the first case, this
Court held that the exercise of inherent power should be limited to very
extreme exceptions .. Further it was held that referring the disputes to arbitration
is not an effective substitute for a criminal prosecution when the disputed act
is an offence. It may be noted that the said judgment gets attrac_ted only when
the disputed act is an offence, which the High Court has filed to notice. No
F doubt, exercise of inherent power under .Section 482 Cr.P.C. b}' High Court
should be limited to very extreme exceptions but in a case where ingredients
of alleged offences are not satisfied even prima facie, it cannot be said that
power under Section 482° Cr.P.C. should not be exercised to quash the process
issued by a Magistrate. In the case of Smt. Nagawwa (supra), it is laid down
G that in such a case, power under section 482 Cr.P.C. can be exercised to quash
the process issued by a Magistrate.

In the second case also, this Court has expressed that "exercise of
jurisdiction under the inherent power as envisaged under Sectio!l 482 Cr.P.C.
H to have the complaint or the charge-sheet quashed is an exception rather than
S.W. PALANITKAR v. STATE [PATIL, J.] 409
a rule and the case for quashing at the initial stage must have to be treated as A
rarest of rare so as not to scuttle the prosecution.................... In the event,
however, the court on perusal of the complaint comes to a conclusion that the
allegations leveled in the complaint or charge-sheet on the face of it does not
constitute or disclose any offence as alleged, there ought not to be any hesi-
tation to rise up to the expectation of the people and deal with the situation as B
is required under the law." Even from this case also, it is clear that if no offence
is made out from the allegations made in the complai!]t, there should be no
hesitation in exercising power under Section 482 Cr.P.C. to pass appropriate
order.

In the case on hand, we have already stated above that except against the
c
appellant no. 7, no offence was made out against the remaining appellants as
the ingredients of offences alleged against them were not satisfied. Unfortu-
nately, the High Court failed to exercise jurisdiction under Section 482 Cr.P.C.
to correct manifest error committed by the learned Magistrate in issuing proc-
ess against the appellants 1-6 and 8 when the alleged acts against them did not
D
constitute offences for want of satisfying the ingredients of the offences. The
approach and considerations while exercising power and jurisdiction by a
• process are to be in terms of Sections 200 to
Magistrate at the time of issuing
203 under Chapter XV of Cr.P.C., having due regard to the position of law
explained in various decisions of this Court, and whereas while exercising E
power under Section 482 of Cr.P.C. the High Court has to look at the object
and purpose for which such power is conferred on it under the said provision.
Exercise of inherent power is available to the High Court to give effect to any
order under the Cr.P.C., or to prevent about of the process of any court or
otherwise to secure the ends of justice. This being the position, exercise of F
power under Section 482 Cr.P.C. should be consistent with tlie scope and ambit
of the same in the light of the decisions aforementioned. In appropriate cases,
to prevent judicial process from being an instrument of oppression or harass-
ment in the hands of frustrated or vindictive litigants, exercise of inherent
power is not only desirable but necessary also, so that the judicial forum of G
court may not be allowed to be utilized for any oblique motive. When a person
approaches the High Court under Section 482 Cr.P.C. to quash the very issue
of process, the High Court on the facts and circumstances of a case has to
exercise the powers with circumspection as stated above to really serve the
purpose and object for which they are conferred. H
410 SUPREME COURT REPORTS [2001] SUPP. 4 S.C.R.
A Thus having regard to facts 'and circumstances stated and discussion
made above, the issue of process against appellant nos. 1-6 and 8 is set aside
and the process issued against appellant no. 7 namely, Ainrit Lal Desai@ A.B.
Desai for offences under Sections 406 and 120-B is also set aside. However, • -·f'

the issue of process against him under Section 420 IPC is maintained. ~he order
B of the learned Magistrate and the impugned order are modified to this extent.
Thus, this appeal is partly allowed and stands disposed of in the above terms.

S.K.S. Appeal partly allowed.