Holding

No offence is made out; the order taking cognizance is quashed.

Summary

The appellant, Veer Prakash Sharma, entered into a contract to purchase welding rods from the respondents but failed to pay the full price and issued two cheques that were later dishonoured. The respondents filed a criminal complaint alleging offences under Sections 402, 406, 409 and 417 of the IPC, and a Special Judicial Magistrate took cognizance and issued summons. The appellant sought quashing of the proceedings under Section 482 of the CrPC; the High Court refused, holding the allegations were factual. The Supreme Court examined whether the complaint disclosed any cognizable offence, noting that non‑payment and bounced cheques constitute a civil breach of contract, not cheating or criminal breach of trust, and that the magistrate lacked jurisdiction as the cause of action did not arise within its territorial limits. Consequently, the Court held that no offence was made out, quashed the order taking cognizance and allowed the appeal.

Issues considered

Whether the allegations in the complaint disclose an offence under Sections 402, 406, 409 and 417 IPC.
Whether the dispute is essentially civil and therefore not cognizable.
Whether the Special Judicial Magistrate had jurisdiction to take cognizance and issue summons.
Whether non‑payment and dishonoured cheques amount to cheating or criminal breach of trust.
Whether Section 482 CrPC can be invoked to quash the criminal proceedings.

Legislation cited

Code of Criminal Procedure, 1973s. 482
Indian Penal Code, 1860s. 402, s. 405, s. 406, s. 409, s. 415, s. 417, s. 420
Negotiable Instruments Act, 1881s. 138

Subjects

criminal breach of trustcheatingcivil contract disputequashing of criminal proceedingsjurisdictionSection 482 CrPCbounced cheques

Judgment

A VEERPRAKASHSHARMA
v.
ANIL KUMAR AGARWAL AND ANR.

AUGUST I, 2007
B [S.B. SINHA AND HARJIT SINGH BEDI, JJ.]

Code of Criminal Procedure, 1973-Section 482-,-Breach of contract-
Criminal complaint alleging commission of various offences under Penal
C Code-Quashing of-Held: Allegation in the complaint petition did not
disclose commission of any offence-Dispute between the parties was a civil
dispute--_-Also the Magistrate did not have jurisdiction to issue summons
since nothing on record io show that any part of cause of action arose within
the jurisdiction of the concerned court-Thus, no offence made out-Order
taking cognizance quashed-Penal> Code, 1860.-:-ss 406, 409,402· and 417.
D
Parties entered into contract for sale and purchase ofgoods. It is alleged
that the appellant did not pay some amount due towards the supply of goods
and issued cheques which were dishonoured. First Respondent filed a
complaint under sections 406, 409, 402 and 417 IPC against the appellant.
The court took cognizance· agaiitst the appellant and issued summons.
E Appellant filed application for quashing the criminal proceedings. High Court
held that the proceedings~ould not be quashed since the allegations being
factual in nature, could not be adjudicated in the present application. Hence
the present appeal.

Allowing the appeal, the Court
F
HELD: 1.1. In the facts and circumstances of the case, no offence is
made out. The order taking cognizance is quashed. (Para 11) (752-E)

2.1. The principle underlying exercise of jurisdiction by the High Court
G under section 482 of Code of Criminal Procedure, 1973 is that the allegations
contained in the complaint petition even if given face value and taken to be
correct in its entirety do not disclose an offence or not is the question.
(Para 7) (749-G)

2.2. The dispute betweeh the parties was essentially a civil dispute. Non-
746
VEER PRAKASH SHARMA v. ANILKUMARAGARWAL 747
payment or under-payment of ttie price of the goods by itself does not amount A
to commission of an offence of cheating or criminal breach of trust. No offence,
having r~ard to the definition of criminal breach of trust contained in section
405 IPC can be said to have been made out. Neither any allegation has been
made to show existence of the ingredients of s. 405 IPC nor 1my statement in
that behalf has been made. Ordinarily, bouncing of a cheque constitutes an
offence under section 138 of the Negotiable Icstruments Act. No complaint B
. thereunder had been taken. (Para 811749-H; 750-A, C, DJ

Hridaya Ranjan Pr:::sad Verma and Ors. v. State of Bihar and Anr., (20001
4 SCC 168 and Indian Oil Corpn. v. NEPC India Ltd and Ors., (2006) 6 SCC
736, referred to. C
2.3. No act of inducement on the part of the appellant has been alleged
by the respondent. No allegation has been made that he had an intention to
cheat the respondent from the very inception. What has been alleged in the
complaint petition as also the statement of the i;:omplainant and his witnesses
relate to his subsequent conduct. The date when such statements were D
allegedly made by the appellant had not been disclosed by the witnesses of the
complaints. It is really absurd to opine that any such statement would be made
by the appellant before all of them at the same time and that too in his own
district. Thus, they appear to be wholly unnatural. (Para 9) (751-G-H; 752-Af

2.4. In law, only because he had issued cheques which were dishonoured, E
the same by itself would not mean that he had cheated the complainant.
Assuming that such a statement had been made, the same does not exhibit
that there had been any intention on the part of the appellant to commit an
offence under section 417 IPC. [Para 91 [752-B)

2.5. Admittedly, their residences are in different districts. Cheques were F
admittedly issued by ~he appellant at his place. There is nothing on record to
show that any part of the cause of action arose within the jurisdiction of the
court concerned. Even if such statemen!s had been made, the same admittedly
have been made cnly at the place where the appellant resides. Therefore,
Magistrate, had no jurisdiction to issue the summons. [Para 10] [752-C-D]
. . . G
Mosarq,• Hossain Khan v. Bhagheeratha Engg. Ltd and Ors., [2006) 3
sec 658, relied on.
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 980 of
2001. II
748 SUPREME COURT REPORTS (2007) 8 S.C.R.

A From the Judgment & Order 03.01.2006 of the High Court of Judicature
>--
at Allahabad in Criminal Misc. Application No. 11169 of 1987

Mohan Panday and S.S. Bandyopadhyay for the Appellant

J itendra Mohan Shanna for the Respondents.
B
The Judgment of the Court was delivered by

S.B. SINHA, J. I. Leave granted.

2. The parties hereto entered into a contract for sale and purchase of
C welding rods. Appellant allegedly did not pay some amount due from him
towards supply of the said article. He issued two cheques for a sum of Rs.
3,5591~ and Rs. 3,776/- in the year 1983. The said cheques were dishonoured.
Alleging that by reason of such act, the appellant has committed offences
underSections 406, 409, 402 and 417 of the Indian Penal Code, a complaint
· petition was filed by the First Respondent in the Court of Special Judicial
D Magistrate, Rampur which was marked cc No. 132 of 1986. The principal
allegation made therein against the appellant reads as under:

"That applicant, regarding these cheques and payment of money,
wrote several times to accused and also sent his representative. But
he kept on _making excu~es in making payment. At last he told on
E 19 .12.1985 that he had issued fabricated cheques kno~ingly with an
intention to cheat him and grab his money. He would not pay his
money, he is free to take any action, whatever he likes."

3. In his statement under Section 200 of the Code of Criminal Procedure,
F Respondent No. I alleged:

" .. ,Both the Cheques were, thus, dishonoured. I also wrote to accused
regarding dishonour of Cheques, even I, myself, visited him and also
sent to my Representative, but the accused kept on making excuses
·for making the payment. At last, on 19.12.1985, he told that he had
G · knowingly issued these false and fabricated Cheques only to deceive
and grab his money. He further told that he shall never pay back his
money. You,can do whatever you like, I went t9 lodge the Report, but
Thana Officials did not note down the Report." A...

4. One of the witnesses Shri Rajendra Kumar Saxena in his statement
H alleged:
VEERPRAKASHSHARMAv.ANILKUMARAGARWAL[S.B.SINHA,J.] 749

"I was working as Supervisor in Hira Electronics during 1983. A
Accused Vir Prakash has purchased Electric Rods from the company
worth Rs. 3599.33 P and Rs. 3776.73 P. Money was paid later on
through Bank Cheques both cheques were dishonored by Bank. When
accused was later on asked for the payment of the amount taken
accused refused io pay and said that he had knowingly issued the
fabricated cheques to deceive and grab the money. You can do what B
you like."

5. Another witness A. Khalik also made similar statements which were
recorded in the following terms:

"Stated on oath that I was an employee of Hira Electronics since C
1983. Accused Vir Prakash has purchased articles worth Rs. 3599.33
P and Rs. 3776.73 P. in 1983 for which payment was made through
Bank. Both cheques issued by the accused were dishonored. On
when reminder for paym~nt is made to the accused then he said that
"I have knowingly issueo the fabricated cheques to cheat him and D
grab his money. I will not pay."

6. Cognizance was taken against the appellant. He was summoned. An
application was filed by him on 25.08.1987 for quashing of the said criminal
proceeding before the High Court. A learned Single Judge of the Allahabad
High Court by reason of the impugned order dated 3.01.2006 while refusing E
to exercise his jurisdiction sta~ed:

"As the allegatjons against the applicant are factual in nature, that
cannot be adjudicated in the present application, there is no ground
for quashing criminal proceedings. Stay order, if any, stands vacated.
The trial court is directed to conclude the trial expeditiously." F
7. The principle underlying exercise of jurisdiction by the High Court
under Section 482 of the Code of Criminal Procedure is now well-settled viz.
that the allegations contained in the complaint petition even if given face
value and taken to be correct in its entirety do not disclose an offence or not
is the question. G
8. The dispute between the parties herein is essentially a civil dispute.
Non-payment or under-payment of the price of the goods by itself does not
amount to commission of an offence of cheating or criminal breach of trust

No offence, having regard to the definition of criminal breach of trust H
750 SUPREME COURT REPORTS J. . (2007) 8 S.C.R.

A contained in Section 405 of the Indian Penal Code. can be said to have been
made out in the instant case.

Section 405 of the Indian Penal Code reads, thus:

"Whoever, being in any manner entrusted with property, or with any
B dominion over property, dishonestly misappropriates or converts to
his own use that property, or dishonestly uses or disposes of that
property in violation of any direction of law prescrib'ing the mode in
~-
which such trust is to be discharged, or of an~ legal contract, express
~r implied, which he has made touching the discharge. of such trust,
or wilfully suffers any other person so to do, commits "criminal breach
c of trust"."

Neither any allegation has been made to show existence of the i,ngredients
of the aforementioned provision nor any statement !n that behalf has been
made.

D Ordinarily, bouncing of a cheque constitutes an offence under Section
138 of the Negotiable Instruments Act. No complaint thereunder had been
taken.

9. We are, therefore, left only with the question as to whether in a
E situation of this nature any offence of cheating can be said to have been
made out.

Section 415 of the Indian Penal Code defines cheating to mean:

"Whoever, by deceiving any person, fraudulently or dishonestly
induces the person so deceived to deliver any property to any person,
F 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 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".
G . '
In Hridaya Ranjan Prasad Verma and Ors. v. State of Bihar and Anr.,
[2000) 4 SCC 168, this Court held:

"14: On a reading of the section it is manifest that in the definition
there are set forth two separate classes of acts which the person
H' deceived may be induced to do. In the first place he may be induced
VEERPRAKASHSHARMAv.ANILKUMARAGARWAL(S.B.SINHA,J.] 751

fraudulently or dishonestly to deliver any property to any person. The A
-<.
second class of acts set forth in the section is the doing or omitting
to do anything which the person deceived would not do or omit to
do if he were not so deceived. In the first class of cases the inducing
must be fradulent or dishonest. In the second class of acts, the
inducing must be intentional but not fraudulent or dishonest.
B
15. In determining the question it has to be kept in mind that the
distinction between mere breach of contract and the offence of cheating
is a fine one. It depends upon the intention of the accused at the tim~
to inducement which may be judged by his subsequent conduct but
for this subseqlient conduct is not the sole test. Mere breach of C
contract cannot give rise to criminal prosecution for cheating unless
fraudulent or dishonest intention is shown right at the beginning of
the transaction, that is the time when the offence is said to have been
committed. Therefore it is the intention which is the gist of the offence.
To hold a person guilty of cheating it is necessary to show that he
had fraudulent or dishonest intention at the time of making the promise. D
From his mere failure to keep up promise subsequently such a culpable
intention right at the beginning, that is, when he made the promise
cannot be presumed."

[See also Indian Oil Corpn. v. NEPC India Ltd. and Ors., [2006] 6 SCC
736] E
The ingredients of Section 420 of the Indian Penal Code are as follows:

(i) Deception of any persons;

(ii) Fraudulently or dishonestly inducing any person to deliver any F
property; or

(iii) to consent that any person shall retain any property and finally
intentionally inducing ,that person to do or omit to do anything
which he would not do or omit.

No act of inducement on the part of the appellant has been alleged by G
the respondent. No allegation has been made that he had an intention to
cheat the respondent from the very inception.

What has been alleged in the complaint petition as also the statement
of the complainant and his witnesses relate to his subsequent conduct. The ·
date when such statements were allegedly made by the appellant had not H
752 SUPREME COURT REPORTS (2007) 8 S.C.R.

A been .iisclosed by the witnesses of the complaints.·It is re"lly absurd to opine
that any such statement would be. made by the appellant before all of them
at the same time and that too in his own district. They, thus, appear to be
wholly unnatural.

In law, only because he had issued cheques which were dishonoured,
B the same by itself would not mean that he had cheated the complainant.
Assuming that such a statement had been made, the same, in our opinion,
does not exhibit that there had been any .intention on the part of the appellant • l
herein to commit an offence under Section 417 of the Indian Penal Code. >-- ~

C IO. Furthermore, admittedly, their residences are in different districts.
Whereas the appellant is a resident of the district of Ajamgarh, the respondent
is a resident of the district of Rampur. Cheques were admittedly issued by the
appellant at his place. There is nothing .on record to show that any part of
the cause of action arose within the juris~iction of the court concerned. Even
if such statements had been made, the same admittedly have been made only
D at the place where the appellant resides. The learned Magistrate, therefore,
had no jurisdiction to issue the summons. [See Mosaraf Hossain Khan v.
Bhagheeratha Engg. Ltd and Ors., [2006] 3 SCC 658]

I L For the reasons aforementioned, the impugned judgment is set
aside: The order taking cognizance is quashed. The appeal is allowed. In the .
E facts and circumstances of the case, no offence is made out.

NJ. Appeal allowed.