Holding

The dispute is purely civil; the criminal complaint is untenable and the order taking cognizance under the IPC sections is quashed.

Summary

The appellants, senior officials of Tata Construction & Projects Ltd, were sued criminally by Singh Construction Co. for allegedly misappropriating payment received from Bokaro Steel Plant for contract work. The complaint invoked IPC sections 403, 406, 420 and 1208, alleging dishonest conversion of money. The Chief Judicial Magistrate took cognizance and issued summons, which the appellants challenged. The High Court dismissed the petition to quash the summons. On appeal, the Supreme Court held that the dispute centered on a civil claim for unpaid contract money, that the essential ingredients of the alleged offences—dishonesty and misappropriation—were absent, and that the magistrate lacked jurisdiction. Consequently, the orders of both the magistrate and the High Court were quashed.

Issues considered

Whether a dispute over non‑payment under a contract can give rise to a criminal complaint under IPC sections 403, 406, 420 and 1208.
Whether the elements of dishonesty and misappropriation required under Section 403 IPC are satisfied in the present facts.
Whether the Chief Judicial Magistrate had jurisdiction to take cognizance of the alleged offences.

Legislation cited

Indian Penal Code, 1860s. 1208, s. 403, s. 406, s. 420

Subjects

civil contract disputecriminal complaintmisappropriationIndian Penal Codejurisdictionquash ordercivil vs criminal

Judgment

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THE STATE OF JHARKHAND AND ANR.
'' • ~' II !

' '" '' 1jANUARY 20 , ·2003"'. ,, .. "" 1"
':··' ,: ..". . .. fl '

·' lo.' ·" • [M.B.' SHAH AND ARUN'KUMAR, 'JJ:J I"'" '· ·' t>. B
'
·1i _41'.UJO 1_f, i.111 ,··.:,:. f~·tr11; ,rt t1· ·11·1:: _.,.!t ·~,h ~· "'.~t! J~1.,:f'"\;; ·11'. ;
"'" ,·i Pena{{:ode, .1860-,Sections,40J,: 406,' 420 and.1208._,cognizance of
.offence under Section~Justificqtiortof....Complainantfillng c'"iminal complatnt
againstca company ofl'.ilccount of non payment: qfmoney for; .work done.under C
·ccnttact...Court, taking.. cognizance· and i.Suing, summons~Aggrieved .party
filing petiticmfor,quashing iof.order-;Jfigh·-Court .dismissing ·the .same-On
.appeal held, ;since.the dispute,.between ..parties is.ofcMl nature and basic
.ingredient, of alleged,offence .are ·not :-satisfied,. no. clls<hmade out far .the
alleged 'ojfence~Hence· order of Magistrate as well asBigh Court quashed.
·11 ''·'.·l~"1-;J/.jt.~il··L'.·,jr, I !If ·,o-·1JtJ-.4~oJU'•' uP •.,lfl: i-.· .. :. ~·'· D
Bokarp..S!e~I ~lant ~~t.l'¥'te<J .ere.ct\o\I ,part of.c9ntraft for certain
works to appellant's company who in turn awarded the work to
coin'plaimlnt-compalty. After cb'mpleting the work complainant-company
did not receive the payment for the work done under the contract. They
filed a criminal complaint against appellant's company under Sections 403,
. 406; 420 and 1208 IPC 'alleging t~_at it~pellant's company had already E
received money from the Steel plant a"lid had mis-appropriated the sam'e
for its own use. Judicial Magistrate took cognizance ofthe alleged offence
and issued summons to appellants. Appellants filed, petition for quashing
the order. High Court dismissed the petition. Hence the present appeal.
,q,.

Appellants contended that complaint relates to purely a civil dispute F
regarding payment of money and· no case for criminal complaint for the
alleged offen·cesis made oul.i · ,,

Allowing the appeals, the Court ·

'"'HELD: ·ti. The dispute of Cllmplahiant even a'ssufuing to be correct, G
is regarding recovery of money due under the contract which is or'civil
nature. [449-G; 450-BJ
'' •I

1.2.
, ·
Courts
,,_, .
below
• • ,:J
overlooked the fact that the contract regarding
i. 'o " , I _~ '.' ~

execu.ti.~.n o,r_ c~rta.i11 .~orks ~~t447n the parties ~r~ separate an.d H
448 SUPREME COURT REPORTS [2003) I S.C.R.

A independent of each other and also their contractual obligations are separate,
thus payment under one has no relevance qua the other. (450-C, Fl
~
1.3. The words 'dishonestly' and 'misappropriate' are necessary
ingredients of an offence under Section 403 IPC. It cannot be said that -.
there is any dishonest intention on the part of appellants nor it can be
B said that appellant's company or appellants have misappropriated or
converted the movable property of the complainant to their own use. Even
if Steel Plant has made the payment to appellant's company under its
contract with the latter, it will not give rise to plea of misappropriation i-
of money because that money is not money or movable property of the
complainant. Since the basic ingredients of the relevant Settion in the
c Penal Code are not satisfied, the order taking cognizance of the offence
as well as the issue of summons to appellants is wholly uncalled for. Such
an order brings about serious repercussions. Thus when no case is made
out for the alleged offences even as per the complaint filed by complainant,
there is no reason to permit appellants to be subjected to trial for the
+
alleged offences. Hence the impugned orders of Chief Judicial Magistrate "I
D
as well as High Court are quashed. (450-D, E, G, H; 451-AI
~
CRIMINAL APPELLATE JURISDICTION ; Criminal Appeal No. .__
70 of 2003. .-
~

From the Judgment and Order dated 3.5.2002 of the High Court of ~
'
E Jharkhand in Crl. M.P. No. 4780 of 2001. .
•
WITH
Criminal Appeal No. 7112003.

R.K. Jain and M.K. Dua for the Appellants.
F
S.K. Dholakia, Gopa Prasad, M.P. Jha, Ram Ekbal Roy, Sanjeev Mishra
and· Anil Kumar Chopra and Anil K. Jha, for the Respondent. ~

The Judgment of the Court was delivered by

G ARUN KUMAR, J. Crl.A.No. 70 of 2003 @ SLP(Crl)No.2654 of
2002.

Leave granted.
y
This Appeal is filed by U. Dhar, Managing Director and Mr. Asis Ray,
Vice President (Operation), both of Tata Construction & Project Ltd. against
H
U. DHAR v. STATE OF JHARKHAND [ARUN KUMAR,!.) 449
an order dated 3rd May, 2002 passed by the High Court of Jharkhand in A
~ Crl.M.P. No.4780/2001 whereby the High Court dismissed the petition filed
by the appellant herein for quashing an order dated 19th June, 200 I whereby
cognizance was taken of offence against the appellants under Sections 403,
406, 420 and 1208 of Indian Penal Code by the learned Chief Judicial
Magistrate, Bokaro.
B
Briefly, the facts are that Bokaro Steel Plant, a unit of Steel Authority
of India Limited (for short, SAIL) awarded a contract to Mis. Tata Iron &
Steel Co. Ltd. (for short, TISCO), Growth Shop for certain works. TISCO
growth shop completed supply part of the work and erection part of the work
was entrusted by it to M/s. Tata Construction & Projects Ltd. (for short
TCPL). TCPL in tum issued Tender Enquiry and awarded the work to Mis.
c
Singh Construction Co., the complainant. According to the complainant after
+ completing the work it demanded payment of the balance amount under the
contract from TCPL. The appellants herein are the Managing Director and
President (Operations) of TCPL. When the complainant failed to receive the
payment for the work done, they filed a complaint on 11th January, 200 I D
under Sections 403, 406, 420 and 1208 IPC at Bokaro. The concerned
Magistrate took cognizance of the alleged offences and issued summons vide
order dated 19.6.2001 to the appellants. The appellants challenged the said
order by filing a Crl.M.P.478012001 in the High Court of Jharkhand at Ranchi.
The impugned order was passed by the High Court dismissing the said petition
on 3rd May, 2002.
E

The present appeal has been filP-d against the said order of the High
Court whereby the High court refused to quash the order of the learned Chief
Judicial Magistrate taking cognizance of the alleged offences against the
appellants. The learned counsel for the appellants argued that a perusal of the F
f complaint would show that no case is made out against the appellants for the
alleged offences, and, therefore, the order passed by the learned Chief Judicial
Magistrate is wholly without jurisdiction. According to the learned counsel
for the appellants, the controversy relates to purely a civil dispute regarding
payment of money and no case for criminal complaint for the alleged offences
is made out. We have been taken through the complaint as well as our G
attention has been drawn to the impugned order passed by the Chief Judicial
Magistrate and the confirming order of the High Court. After careful
consideration of the facts placed on record, it appears to us that the dispute
between the parties is of a purely civil nature. The grievance of the complainant
is about the failure of TCPL to pay the balance amount under the contract H
450 SUPREME COURT REPORTS (2003] I S.C.R.
. .
A even though according to it the work stands completed. The appellants have
disputed this.

In our view, what is relevant is that the contract between TCPL and the
complainant is an independent contract regarding execution of certain works
and even assuming the case of the complainant to be correct, at best it is a
B matter of recovery of money on account of failure t>f TCPL to pay the
amount said to be due urider the contract. The complainant has alleged that
TCPL has already received the money from SAIL for the work in question
and it has misappropriated the same for its own use instead of paying it to
the complainant and it is for this reasori that the offences are alleged under
C Sections 403, 406 and 420 etc. The courts. below have overlooked the fact
that the contract between Bokaro Steel (a unit of. SAIL) and TCPL is a
separate and independent .contract. The contract between complainant and
_ TCPL is altogether a different .contract. The contractual obligations under
both the contracts are separate and independent of each other. The rights and
obligations of the parties i.e. the complainant and TCPL are to be governed
D . by the contract between them for which the contract between TCPL and .
Bokaro Steel· (SAIL) .has no relevance, Therefore, even if Bokaro Steel has
made the paymentto TCPL under. its contract with the latter, it will not give
rise to plea of misappropriation of money because that money. is not money
or movable property of the complainant. Further Section 403 uses the words
E 'dishonestly' and 'misappropriate'. These are necessary ingredients of an
offence under Section 403, IPC. Neither of these ingredients are satisfied in
the facts and circumstance of the case. In para 14 of the complaint,the
complainant has stated as under:

" ...... Release of payments to complainant was never depended ·on the I
F ·payment released by Bolqtro Steel Plant a Unit of SAIL to TISCO "
·growth sh~p and TCPL'. 1• . . . . ·. ·. · ., ·..~ · · ·

1..
U. DHAR v. STATE OF IHARKHAND [ARUN KUMAR, J.) 451
out for the alleged offences even as per the complaint filed by the complainant, A
.A there _is_ no reason_ to permit the appellants to be subjected to trial for the
alleged offences. Hence, the appeal is allowed. The impugned orders of the
High Court as well as of Chief Judicial Magistrate are hereby ordered to be
quashed.

CRIMINAL APPEAL NO. 71 OF 2003@ SLP(CRL)N0.269812002: B
Leave granted.

In view of the above judgment, this appeal is also allowed.

N.J. Appeal allowed. C

. ,I..