Rakesh Kainthla, Judge
1. The present petitions are directed against the order dated 28.5.2015, passed by learned Sessions Judge, Shimla (learned Revisional Court), vide which the order passed by learned Additional Chief Judicial Magistrate, Court No.2, Shimla (learned Trial Court) was upheld and the revision preferred by the petitioner (accused before learned Trial Court) were dismissed. (The parties shall hereinafter be referred to in the same manner in which they are arrayed before the learned Trial Court for convenience).
2. Briefly stated, the facts giving rise to the present petition are that the police presented a challan before the learned Trial Court against the accused for the commission of offences punishable under Sections 406, 420, 467, 468, 471 and 120-B of the Indian Penal Code (IPC). It was asserted that the informant was one of the Directors of M/s Umak Investment Company Pvt. Ltd. M/s Umesh Phalpher and Harmeet Ghai contacted the informant regarding the sale of land measuring 70 bighas adjoining Hotel Shillon Resorts, Shimla. The informant entered into a memorandum of understanding (MOU)/Agreement with M/s U.G. Hotels, Mr. Umesh Phalpher and Harmeet Ghai for the purchase of Hotel Shillon Resorts by way of transfer of equity of the company on 27.4.2006. Mr. Harmeet Ghai assured that the owners of the land measuring 70 bighas adjoining Shillon Resorts would also sell their land to the informant. The agreements were valid for 90 days and were extended by another 60 days on 24.7.2006. The agreements were terminated on 24.9.2006. Mr Harmeet Ghai and Umesh Phalpher introduced the informant to Laiq Ram. The company entered into an MOU/agreement on 28.12.2006 regarding the purchase of the land measuring 70 bighas with Mr Laiq Ram, who claimed himself to be the General Power of Attorney of the owners of the land. The sale price was fixed and a cheque of ₹100.00 lacs was issued in favour of Laiq Ram which was encashed by him. The original Power of Attorney was not given to the Company despite demands. Laiq Ram could not be found after the encashment of the cheque. The company found that the Power of Attorney stated to be executed in favour of Laiq Ram was forged and the owners never authorized him to enter into any agreement/MOU with the Company. Some of the executants had expired. Laiq Ram misappropriated the money and transferred it to Harmeet Ghai and Umesh Phalpher. The police registered the FIR and conducted the investigation. The statements of the owners were recorded and they said that they had never executed any Power of Attorney in favour of Laiq Ram. General Power of Attorney was stated to be attested by Surinder Kumar Notary Public, who stated that he had not attested any Power of Attorney. The cheque of ₹1.00 Crore was encashed by Laiq Ram out of which ₹90.00 lacs were transferred to Kamaljeet Kaur wife of Harmeet Ghai and the sum of ₹9,50,000/- was transferred to the account of Umesh Phalpher. Hence, the police filed a charge sheet before the Court.
3. The accused filed an application under Section 177 of Cr.P.C. asserting that the documents were not executed within the jurisdiction of Courts at Shimla. The Court has no jurisdiction to try the case as no part of the cause of action had occurred with the territorial jurisdiction of Courts at Shimla.
4. The learned Trial Court held that the property, about which the agreement/MOU was executed, is located within the jurisdiction of the Court at Shimla, hence, the Court has jurisdiction under Section 181(4) of the Criminal Procedure Code.
5. Being aggrieved from the order, the accused filed revisions which were decided by learned Sessions Judge, Shimla (learned Revisional Court). Learned Revisional Court held that the land regarding which the General Power of Attorney was executed is located within the territorial jurisdiction of the learned Trial Court. The property is to be accounted for at Shillon Bag and the Court has jurisdiction in view of Section 181(4) of Cr.P.C. Hence the revisions were dismissed.
6. Being aggrieved from the order passed by learned Courts below, the petitioners/accused have filed the present petitions asserting that learned Courts below erred in holding that the Courts at Shimla had jurisdiction to hear and entertain the present matters. The allegations in the FIR show that the documents were executed in Delhi. Money was transferred at Delhi and no part of the cause of action had arisen at Shimla. It was wrongly held that the Courts at Shimla have territorial jurisdiction to try the present matters. The proper place for inquiry and trial is not at Shimla. Therefore, it was prayed that the present petitions be allowed and the orders passed by learned Courts below be set aside.
7. I have heard Mr. Ajay Kumar, learned Senior Counsel assisted by Mr. Rohit, learned counsel for the petitioners/accused, Mr. Ajit Sharma, learned Deputy Advocate General, for the respondent-State and Mr. Ajay Kochhar, learned Senior Counsel assisted by Ms. Swati Sharma, learned counsel for the respondent No.2/informant.
8. Mr. Ajay Kumar, learned Senior Counsel for the petitioners/accused submitted that the learned Courts below erred in holding that the Courts at Shimla have jurisdiction because the property is located at Shimla. As per the allegations in the FIR, the immovable property was not misappropriated and Section 181(4) of Cr.P.C. did not apply to the present case. The charge sheet was filed for the commission of offences punishable under Sections 420, 406, 467, 468, 471 and 120-B of IPC. As per the FIR, the informant was induced to deliver ₹1.00 crore which was the subject matter of the trial. Learned Courts below wrongly took the immovable property as subject matter. The documents were forged in Delhi. As per the FIR money was transferred at Delhi and conspiracy was hatched at Delhi. No part of the cause of action arose at Shimla. Therefore, he prayed that the present petitions be allowed and the orders passed by learned Courts below be set aside.
9. Mr. Ajit Sharma, learned Deputy Advocate General for the respondent-State submitted that the memo of understanding/agreement was regarding the property located at Shimla. Therefore, learned Courts below had rightly held that the Courts at Shimla had territorial jurisdiction to hear and entertain the present matter. Hence, he prayed that the present petitions be dismissed.
10. Mr. Ajay Kochhar, learned Senior Counsel for respondent No.2/informant submitted that the immovable property can be the subject matter of criminal breach of trust and it is not correct to say that the offence punishable under Section 406 of Cr.P.C. can be committed regarding the movable property alone. The learned Courts below had rightly held that since the property is located at Shimla, therefore, the Courts at Shimla have jurisdiction to hear and entertain the dispute. He fairly submitted that the offences punishable under Sections 420 and 406 of IPC cannot be committed in respect of the same transaction and the allegations in the FIR show that the cheating was committed in respect of immovable property located at Shimla. The petitioners had filed a revision petition before the learned trial Court and the second revision at their instance are not maintainable. Therefore, he prayed that the present petition be dismissed. He relied upon the judgments titled Gunananda Dhone Vs. Lala Santi Prakash Nandy, 1925 0 AIR (Cal) 613, Damodara Panicker and another Vs. State of Kerala 2019 SCC Online Ker 1789, Radhey Shyam Gupta and others Vs. State of U.P. and another, 2020 SCC OnLine All 914 and Asit Bhattacharjee Vs. Hanuman Prasad Ojha and others, 2007 STPL 10907 SC in support of his submission.
11. I have given considerable thought to the submissions made at the bar and have gone through the records carefully.
12. The complainant had filed a revision petition before the learned Revisional Court, which was dismissed. It was laid down by the Hon’ble Supreme Court in Krishnan Vs. In Krishnaveni (1997) 4 SCC 241 that the High Court can intervene under Section 482 of CrPC (corresponding to Section 528 of BNSS) when there is a grave miscarriage of justice or abuse of the process of the Court. It was observed:
“10. Ordinarily, when revision has been barred by Section 397(3) of the Code, a person — accused/complainant — cannot be allowed to take recourse to the revision to the High Court under Section 397(1) or inherent powers of the High Court under Section 482 of the Code since it may amount to circumvention of the provisions of Section 397(3) or Section 397(2) of the Code. It is seen that the High Court has suo motu power under Section 401 and continuous supervisory jurisdiction under Section 483 of the Code. So, when the High Court on examination of the record finds that there is a grave miscarriage of justice or abuse of the process of the courts or the required statutory procedure has not been complied with or there is failure of justice or order passed or sentence imposed by the Magistrate requires correction, it is but the duty of the High Court to have it corrected at the inception lest grave miscarriage of justice would ensue. It is, therefore, to meet the ends of justice or to prevent abuse of the process that the High Court is preserved with inherent power and would be justified, under such circumstances, to exercise the inherent power and in an appropriate case even revisional power under Section 397(1) read with Section 401 of the Code. As stated earlier, it may be exercised sparingly to avoid needless multiplicity of procedure, unnecessary delay in trial and protraction of proceedings. The object of a criminal trial is to render public justice, to punish the criminal and to see that the trial is concluded expeditiously before the memory of the witness fades out. The recent trend is to delay the trial and threaten the witness or to win over the witness by promise or inducement. These malpractices need to be curbed, and public justice can be ensured only when the trial is conducted expeditiously.
11. In Madhu Limaye v. State of Maharashtra [(1977) 4 SCC 551: 1978 SCC (Cri) 10], a three-judge Bench was to consider the scope of the power of the High Court under Section 482 and Section 397(2) of the Code. This Court held that the bar on the power of revision was put to facilitate expedient disposal of the cases, but in Section 482, it is provided that nothing in the Code, which would include Section 397(2) also, shall be deemed to limit or affect the inherent powers of the High Court. On a harmonious construction of the said two provisions on this behalf, it was held that though the High Court has no power of revision in an interlocutory order, still the inherent power will come into play when there is no provision for redressal of the grievance of the aggrieved party. In that case, when allegations of defamatory statements were published in the newspapers against the Law Minister, the State Government decided to prosecute the appellant for an offence under Section 500 IPC. After obtaining the sanction, on a complaint made by the public prosecutor, cognizance of the commission of the offence by the appellant was taken to trial in the Sessions Court. Thereafter, the appellant filed an application to dismiss the complaint on the ground that the court had no jurisdiction to entertain the complaint. The Sessions Judge rejected all the contentions and framed the charges under Section 406. The Order of the Sessions Judge was challenged in revision in the High Court. On a preliminary objection raised on maintainability, this Court held that the power of the High Court to entertain the revision was not taken away under Section 397 or inherent power under Section 482 of the Code.
12. In V.C. Shukla v. State through CBI [1980 Supp SCC 92: 1980 SCC (Cri) 695: (1980) 2 SCR 380] (SCR at p. 393) a four-judge Bench per majority had held that sub-section (3) of Section 397, however, does not limit at all the inherent powers of the High Court contained in Section 482. It merely curbs the revisional power given to the High Court or the Sessions Court under Section 397(1) of the Code. In the Rajan Kumar Machananda case [1990 Supp SCC 132: 1990 SCC (Cri) 537], the case related to the release of a truck from attachment, obviously on the filing of an interlocutory application. It was contended that there was a prohibition on the revision by operation of Section 397(2) of the Code. In that context, it was held that it was not revisable under Section 482 in the exercise of inherent powers by operation of sub-section (3) of Section 397. On the facts in that case, it was held that by provisions contained in Section 397(3), the revision is not maintainable. In the Dharampal case [(1993) 1 SCC 435: 1993 SCC (Cri) 333], which related to the exercise of power to issue an order of attachment under Section 146 of the Code, it was held that the inherent power under Section 482 was prohibited. On the facts, in that case, it could be said that the learned Judges would be justified in holding that it was not revisable since it was a prohibitory interim order of attachment covered under Section 397(2) of the Code but the observations of the learned Judges that the High Court had no power under Section 482 of the Code were not correct in view of the ratio of this Court in Madhu Limaye case [(1977) 4 SCC 551: 1978 SCC (Cri) 10] as upheld in V.C. Shukla case [1980 Supp SCC 92: 1980 SCC (Cri) 695 : (1980) 2 SCR 380] and also in view of our observations stated earlier. The ratio in the Deepti case [(1995) 5 SCC 751: 1995 SCC (Cri) 1020] is also not apposite to the facts in the present case. To the contrary, in that case, an application for discharge of the accused was filed in the Court of the Magistrate for an offence under Section 498-A IPC. The learned Magistrate and the Sessions Judge dismissed the petition. In the revision at the instance of the accused, on a wrong concession made by the counsel appearing for the State that the record did not contain allegations constituting the offence under Section 498-A, the High Court, without applying its mind, had discharged the accused. On appeal, this Court, after going through the record, noted that the concession made by the counsel was wrong. The record did contain the allegations to prove the charge under Section 498-A IPC. The High Court, since it failed to apply its mind, had committed an error of law in discharging the accused, leading to the miscarriage of justice. In that context, this Court held that the order of the Sessions Judge operated as a bar to entertain the application under Section 482 of the Code. In view of the fact that the order of the High Court had led to the miscarriage of justice, this Court had set aside the order of the High Court and confirmed that of the Magistrate.
13. The ratio of the Simrikhia case [(1990) 2 SCC 437: 1990 SCC (Cri) 327] has no application to the facts in this case. Therein, on a private complaint filed under Sections 452 and 323 IPC, the Judicial Magistrate, First Class had taken cognizance of the offence. He transferred the case for inquiry under Section 202 of the Code to the Second-Class Magistrate, who, after examining the witnesses, issued a process to the accused. The High Court, exercising the power under Section 482, dismissed the revision. But subsequently, on an application filed under Section 482 of the Code, the High Court corrected it. The question was whether the High Court was right in reviewing its order. In that factual backdrop, this Court held that the High Court could not exercise inherent power for the second time. The ratio therein, as stated above, has no application to the facts in this case.
14. In view of the above discussion, we hold that though the revision before the High Court under sub-section (1) of Section 397 is prohibited by sub-section (3) thereof, inherent power of the High Court is still available under Section 482 of the Code and as it is paramount power of continuous superintendence of the High Court under Section 483, the High Court is justified in interfering with the order leading to miscarriage of justice and in setting aside the order of the courts below. It remitted the case to the Magistrate for a decision on the merits after consideration of the evidence. We make it clear that we have not gone into the merits of the case. Since the High Court has left the matter to be considered by the Magistrate, it would be inappropriate at this stage to go into that question. We have only considered the issue of power and jurisdiction of the High Court in the context of the revisional power under Section 397(1) read with Section 397(3) and the inherent powers. We do not find any justification warranting interference in the appeal.”
13. This position was reiterated in Rajinder Prasad v. Bashir, (2001) 8 SCC 522, wherein it was held:
“…though the power of the High Court under Section 482 of the Code is very wide, the same must be exercised sparingly and cautiously, particularly in a case where the petitioner is shown to have already invoked the revisional jurisdiction under Section 397 of the Code. Only in cases where the High Court finds that there has been failure of justice or misuse of judicial mechanism or procedure, sentence or order was not correct, the High Court may, in its discretion, prevent the abuse of the process or miscarriage of justice by exercise of jurisdiction under Section 482 of the Code. It was further held, “Ordinarily, when revision has been barred by Section 397(3) of the Code, a person - accused/complainant - cannot be allowed to take recourse to the revision to the High Court under Section 397(1) or inherent powers of the High Court under Section 482 of the Code since it may amount to circumvention of provisions of Section 397(3) or Section 397(2) of the Code.”
14. A similar view was taken in Kailash Verma v. Punjab State Civil Supplies Corporation, (2005) 2 SCC 571, and it was held:
“5. It may also be noticed that this Court in Rajathi v. C. Ganesan [(1999) 6 SCC 326: 1999 SCC (Cri) 1118] said that the power under Section 482 of the Criminal Procedure Code has to be exercised sparingly and such power shall not be utilised as a substitute for second revision. Ordinarily, when a revision has been barred under Section 397(3) of the Code, the complainant or the accused cannot be allowed to take recourse to revision before the High Court under Section 397(1) of the Criminal Procedure Code, as it is prohibited under Section 397(3) thereof. However, the High Court can entertain a petition under Section 482 of the Criminal Procedure Code when there is a serious miscarriage of justice and abuse of the process of the court or when mandatory provisions of the law are not complied with and when the High Court feels that the inherent jurisdiction is to be exercised to correct the mistake committed by the revisional court.”
15. This position was reiterated in Shakuntala Devi v. Chamru Mahto, (2009) 3 SCC 310: (2009) 2 SCC (Cri) 8: 2009 SCC OnLine SC 292, wherein it was observed: -
“24. It is well settled that the object of the introduction of sub-section (3) in Section 397 was to prevent a second revision to avoid frivolous litigation, but, at the same time, the doors to the High Court to a litigant who had lost before the Sessions Judge were not completely closed and in special cases, the bar under Section 397(3) could be lifted. In other words, the power of the High Court to entertain a petition under Section 482 was not subject to the prohibition under sub-section (3) of Section 397 of the Code and was capable of being invoked in appropriate cases. Mr Sanyal's contention that there was a complete bar under Section 397(3) of the Code debarring the High Court from entertaining an application under Section 482 thereof does not, therefore, commend itself to us.
25. On the factual aspect, the Magistrate came to a finding that the appellants were entitled to possession of the disputed plot. It is true that while making such a declaration under Section 145(4) of the Code, the Magistrate could have also directed that the appellants be put in possession of the same.
26. The question which is now required to be considered is whether the High Court was right in quashing the order passed by the Magistrate, which was confirmed by the Sessions Judge, on the ground that the application made by the appellants under Section 145(6) of the Code was barred firstly by limitation under Article 137 of the Limitation Act and also by virtue of Section 6 of the Specific Relief Act, 1963."
16. Delhi High Court also took a similar view in Surender Kumar Jain v. State, ILR (2012) 3 Del 99 and held: —
“5. The issue regarding the filing of a petition before the High Court after having availed the first revision petition before the Court of Sessions has come up before the Supreme Court and this Court repeatedly. While laying that section 397(3) Cr. P.C. laid the statutory bar of the second revision petition, the courts have held that the High Court did enjoy inherent power under section 82 (sic) Cr. P.C. as well to entertain petitions even in those cases. But that power was to be exercised sparingly and with great caution, particularly when the person approaching the High Court has already availed remedy of first revision in the Sessions Court. This was not that in every case the person aggrieved by the order of the first revision court would have the right to be heard by the High Court to assail the same order which was the subject matter of the revision before the Sessions Court. It all depends not only on the facts and circumstances of each case but as on whether the impugned order brought about a situation that is an abuse of the process of the court, there was a serious miscarriage of justice or the mandatory provisions of law were not complied with. The power could also be exercised by this Court if there was an apparent mistake committed by the revisional court. Reference in this regard can be made to the judgments of the Supreme Court in Madhu Limave v. State of Maharashtra (1977) 4 SCC 551, State of Orissa v. Ram Chander Aggarwal, (1979) 2 SCC 305: AIR 1979 SC 87, Rai Kapoor v. State (Delhi Administration) 1980 Cri LJ 202, Krishnan v. Krishnaveni and Kailash Verma v. Punjab State Civil Supplies Corporation (2005) 2 SCC 571.”
17. Therefore, the Court can rectify a serious miscarriage of justice or breach of a mandatory provisions of law while exercising the jurisdiction under Section 528 of BNSS.
18. Both the Courts below proceeded on the premise that since the immovable property, regarding which the Memorandum of Understanding was executed was located at Shimla, therefore, the Courts at Shimla had the jurisdiction. This premise is not correct. The allegations in the FIR show that the accused had represented to the informant that Laiq Ram had a General Power of Attorney to sell the land and they induced the informant to enter into an agreement regarding the sale/purchase of the land measuring 70 bighas for a consideration of ₹250.00 lacs out of which ₹100.00 lacs were paid to Laiq Ram by means of cheque.
19. The police added Sections 406 and 420 of IPC based on these allegations. It was rightly submitted by Mr. Ajay Kochhar, learned Senior Counsel for respondent No.2/complainant that both these sections cannot co-exist as they require different mens rea. It was laid down by the Hon’ble Supreme Court in Lalit Chaturvedi v. State of U.P., 2024 SCC OnLine SC 171 that the same act of transaction cannot result in an offence of cheating and criminal breach of trust. It was observed:
"10. The chargesheet also refers to Section 406 of the IPC, but without pointing out how the ingredients of said section are satisfied. No details and particulars are mentioned. There are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously. Wolfgang Reim v. State, 2012 SCC OnLine Del 3341; Mahindra and Mahindra Financial Services Ltd. v. Delta Classic (P.) Ltd., (2011) 6 Gau LR 604; Mukesh Sharma v. State of Himachal Pradesh, 2024: HHC: 35. For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later. In this case, entrustment is missing, in fact, it is not even alleged. It is a case of sale of goods. The chargesheet does refer to Section 506 of the IPC relying upon the averments in the complaint. However, no details and particulars are given, when and on which date and place the threats were given. Without the said details and particulars, it is apparent to us, that these allegations of threats etc. have been made only with an intent to activate police machinery for the recovery of money."
20. This position was reiterated in Delhi Race Club (1940) Ltd. v. State of U.P., (2024) 10 SCC 690 and was held that an offence of cheating and criminal breach of trust are independent and distinct. They cannot coexist similarly in the same sets of facts. It was observed: -
“43. There is a distinction between criminal breach of trust and cheating. For cheating, the criminal intention is necessary at the time of making a false or misleading representation i.e. since inception. In a criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in the case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both offences cannot co- exist simultaneously.
55. It is high time that police officers across the country are imparted proper training in law so as to understand the fine distinction between the offence of cheating vis- à-vis criminal breach of trust. Both offences are independent and distinct. The two offences cannot coexist simultaneously in the same set of facts. They are antithetical to each other. The two provisions of IPC (now BNS, 2023) are not twins and they cannot survive without each other.”
21. Therefore, it has to be determined whether there was a breach of trust or cheating to determine the question of territorial jurisdiction.
22. The ingredients of cheating were explained by the Hon’ble Supreme Court in S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241 as under:
“10. The ingredients of an offence of cheating are: (i) there should be fraudulent 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), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property.
11. One of us (D.P. Mohapatra, J.), speaking for the Bench, in HridayaRanjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168: 2000 SCC (Cri) 786] on facts of that case, has expressed thus: (SCC p. 177, para 15)
“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 time of inducement, which may be judged by his subsequent conduct, but this subsequent conduct is not the sole test. Mere breach of 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. 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.” (emphasis supplied)
12. Finding that the ingredients of the offence of cheating and its allied offences had not been made out, this Court interfered with the order of the High Court and quashed the criminal proceedings.
13. In G.V. Rao v. L.H.V. Prasad [(2000) 3 SCC 693: 2000 SCC (Cri) 733], this Court in para 7 has stated thus: (SCC pp. 696-97)
“7. As mentioned above, Section 415 has two parts. While in the first part, the person must ‘dishonestly’ or ‘fraudulently’ induce the complainant to deliver any property; in the second part, the person should intentionally induce the complainant to do or omit to do a thing. That 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 Manilal Akhaney v. State of Bombay [AIR 1956 SC 575: 1956 Cri LJ 1116], a guilty intention is an essential ingredient of the offence of cheating. In order, therefore, to secure the conviction of a 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: 1954 Cri LJ 1806] that in order to constitute the oflence of cheating, the intention to deceive should be in existence at the time when the inducement was oflered.”(emphasis supplied)
14. In Trisuns Chemical Industry v. Rajesh Agarwal [(1999) 8 SCC 686: 2000 SCC (Cri) 47] dealing with the effect of existence of arbitration clause in the agreement on criminal prosecution on the ground that civil proceedings are also maintainable, this Court has held that quashing of FIR or a complaint exercising power under Section 482 CrPC should be limited to a very extreme exception; merely because an act has a civil profile is not enough to stop action on the criminal side. It is further held that a provision made in the agreement for referring the disputes to arbitration is not an effective substitute for a criminal prosecution when the disputed act constitutes a criminal offence.
23. A similar view was taken in G.V. Rao v. L.H.V. Prasad, (2000) 3 SCC 693 as under:
“4. “Cheating” is defined in Section 415 of the Penal Code, 1860, which provides as under:
“415. Cheating.—Whoever, by deceiving any person, fraudulently 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 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.”
5. The High Court quashed the proceedings principally on the ground that Chapter XVII of the Penal Code, 1860 deals with the offences against properties and, therefore, Section 415 must also necessarily relate to the property which, in the instant case, is not involved and, consequently, the FIR was liable to be quashed. The broad proposition on which the High Court proceeded is not correct. While the first part of the definition relates to property, the second part does not necessarily relate to property. The second part is reproduced below:
“415. … 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’.”
6. This part speaks of intentional deception, which must be intended not only to induce the person deceived to do or omit to do something but also to cause damage or harm to that person in body, mind, reputation or property. The intentional deception presupposes the existence of a dominant motive of the person making the inducement.
Such inducement should have led the person deceived or induced to do or omit to do anything which he would not have done or omitted to do if he were not deceived. The further requirement is that such an act or omission should have caused damage or harm to body, mind, reputation or property.
7. As mentioned above, Section 415 has two parts. While in the first part, the person must “dishonestly” or “fraudulently” induce the complainant to deliver any property; in the second part, the person should intentionally induce the complainant to do or omit to do a thing. That 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 Manilal Akhaney v. State of Bombay [AIR 1956 SC 575: 1956 Cri LJ 1116: 1956 SCR 483], a guilty intention is an essential ingredient of the offence of cheating. In order, therefore, to secure the conviction of a 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: 1954 Cri LJ 1806] 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.
8. Thus, so far as the second part of Section 415 is concerned, “property”, at no stage, is involved. Here, it is the doing of an act or omission to do an act by the complainant as a result of intentional inducement by the accused, which is material. Such inducement should result in the doing of an act or omission to do an act as a result of which the person concerned should have suffered or was likely to suffer damage or harm in body, mind, reputation or property. In an old decision of the Allahabad High Court in Empress v. Sheoram [(1882) 2 AWN 237], it was held by Mahmood, J.:
“That to palm off a young woman as belonging to a caste different to the one to which she really belongs, with the object of obtaining money, amounts to the offence of cheating by personation as defined in Section 416 of the Penal Code, 1860, which must be read in the light of the preceding Section 415.”
24. The ingredients of criminal breach of trust were explained in Delhi Race Club (supra) which is as under: -
"35. This Court in its decision in S.W. Palanitkar v. State of Bihar [S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241: 2002 SCC (Cri) 129] expounded the difference in the ingredients required for constituting of an offence of criminal breach of trust (Section 406 IPC) vis-à-vis the offence of cheating (Section 420). The relevant observations read as under: (SCC p. 246, paras 9-10)
“9. The ingredients in order to constitute a criminal breach of trust are : (i) entrusting a person with property or with any dominion over property; (ii) that person entrusted : (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person 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, touching the discharge of such trust.
10. The ingredients of an offence of cheating are : (i) there should be fraudulent 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), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property.”
25. The ingredients of both these offences were explained as under:-
"36. What can be discerned from the above is that the offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients:
In order to constitute a criminal breach of trust (Section 406 IPC)
(1) There must be entrustment with a person for property or dominion over the property, and
(2) The person entrusted:
(a) Dishonestly misappropriated or converted property to his own use, or
(b) Dishonestly used or disposed of the property or wilfully suffers any other person so to do in violation of:
(i) Any direction of law prescribing the method in which the trust is discharged; or
(ii) Legal contract touching the discharge of trust (see: S.W. Palanitkar [S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241: 2002 SCC (Cri) 129] ).
Similarly, in respect of an oflence under Section 420IPC, the essential ingredients are:
(1) Deception of any person, either by making a false or misleading representation or by other action or by omission;
(2) Fraudulently or dishonestly inducing any person to deliver any property, or
(3) The 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 (see: Harmanpreet Singh Ahluwalia v. State of Punjab [Harmanpreet Singh Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009) 3 SCC (Cri) 620] ).
37. Further, in both the aforesaid sections, mens rea i.e. intention to defraud or the dishonest intention must be present, and in the case of cheating it must be there from the very beginning or inception."
26. In the present case, it was specifically asserted in para-3 of the complaint that Harmeet Ghai and Umesh Phalpher introduced the informant to Laiq Ram stating that he had influence over the owners of the land measuring 70 bighas. The company entered into an agreement with Mr. Laiq Ram to purchase the land for ₹250.00 lacs on this inducement, allurement, and the representation. On the basis of the representation, a sum of ₹100.00 lacs was advanced by means of a cheque. Hence, the informant is quite specific in saying that a representation was made to the Company that Laiq Ram is General Power of Attorney, which representation was found to be incorrect because the owners denied that they had executed any such Power of Attorney. Hence, this representation was false from the very beginning. The complainant also says that the Company was made to execute the MOU/agreement on the inducement/allurement and representation. It was further stated that on the basis of all these representations, a sum of ₹100.00 lacs was advanced by cheque. Thus, the Company was made to deliver ₹100.00 lacs based on the representation. These allegations satisfy the ingredients of Section 420 of IPC rather than Section 406 of IPC because they show that the money was paid based on representation and not that the money was entrusted to Laiq Ram. Hence, the present case is one of cheating and not a criminal breach of trust.
27. The inducement was made at Delhi, ₹100.00 lacs were transferred at Delhi, General Power of Attorney shown to the informant was stated to have been executed at Delhi, therefore, all the ingredients of Sections 420, 465, 467, 468, 471 and 120-B of IPC existed at Delhi and not at Shimla.
28. Learned Courts below proceeded on the basis that Section 181(4) conferred jurisdiction upon them. This Section deals with criminal misappropriation or criminal breach of trust. Hence, this Section does not apply to the present case. Moreover, the property should have been received or retained or was required to be returned or accounted for by the accused persons within the jurisdiction of the Court. It is nobody’s case that immovable property located at Shimla was received or retained by the accused within the territorial jurisdiction of Shimla. Rather the case is that an amount of ₹100.00 lacs was received. Since the immovable property located at Shimla was not received, therefore, it was not required to be returned or accounted for by the accused and Section 181(4) does not apply to the present case.
29. The judgments cited at bar by Mr. Ajay Kochhar, learned Senior Counsel regarding the applicability of Section 406 of IPC to the immovable property do not apply to the present case because it has been found out above that the present case does not involve criminal breach of trust but cheating.
30. Therefore, both the learned Courts below had gravely erred in relying upon Section 181(4) and holding that the immovable property located at Shimla was the subject matter of the proceedings and the present case is one of criminal breach of trust. Hence, the orders passed by learned Courts below cannot be sustained.
31. Consequently, the present petitions are allowed and the charge-sheet is ordered to be returned to the police for presentation to the appropriate Court having jurisdiction.
32. The observation made herein before shall remain confined to the disposal of the instant petitions and will have no bearing, whatsoever, on the merits of the case.
