1. The present application has been filed by the applicant – original accused under Section 482 of the Code of Criminal Procedure seeking quashing and setting aside the impugned FIR being I.C.R.No.17 of 2014 registered with Vasai Police Station, Mehsana for the offence punishable under Sections 406, 420 & 114 of the the Indian Penal Code (herein after referred to as the “IPC”).

2. The facts and circumstances giving rise to the filing of the present application are such that on 14.11.2005, a tripartite agreement was entered between M/s.Gyscoal Alloys Limited, M/ s.MSTC Limited, Calcutta and M/s.Transafe Services Limited, whereby M/s.Gyscoal Alloys Limited had shown the willingness to procure the material being H.S.S. and Stainless Steel from Kandla and Mundra Port from the respondent no.2-company. As per the tripartite agreement, the material sold by the respondent no.2 – company to the company of the present applicant was required to be stored at a specified place to be provided by third party to the agreement viz. M/s. Transafe Services Limited. Pursuant to the said agreement, on 17.07.2010, a material of 477.610 Metric Tons worth Rs.9,57,00,000/- was sold by the respondent no.2 – company to the company of the present applicant. Out of which, sum of Rs.1,87,00,000/- was paid by the company of the present applicant and sum of Rs.7,70,00,000/- was outstanding.

2.1 On 27.07.2012, the officers of the respondent no.2 – company visited the company of the present applicant at Village:Ubkhal, Tal:Vijapur and found that the goods sold by the respondent no.2 – company to the company of the present applicant were not present and no proper information as regard the goods was received by them. Since the company of the present applicant did not pay the some due from it to the respondent no.2 – company, the cheques, which were issued by the company of the present applicant, were deposited in the bank account of the respondent no.2 – company which had been dishonoured. The respondent no.2 – company had also issued a notice in that regard under the provisions of Negotiable Instruments Act to the company of the present applicant. Despite the receipt of the said notice, no payment was made by the company of the present applicant and therefore, a complaint being Criminal Case No.13 of 2010 was lodged by the respondent no.2 – company in the Court of Chief Judicial Magistrate, Alipur, Calcutta for the offence punishable under Section 138 of the Negotiable Instruments Act. It was alleged that the company of the present applicant had committed an offence of criminal breach of trust and cheating, as it had not made the payment for the goods supplied to it by the respondent no.2-company.

2.2 The present FIR came to be lodged with the aforesaid facts by respondent no.2 herein before the Vasai Police Station, Dist:Mehsana and on the basis of the same, an offence punishable under Sections 406, 420 and 114 of the IPC came to be registered against the present applicant on 14.03.2014.

2.3 Thereafter, the present applicant had approached this Court by filing present application and this Court, vide order dated 26.03.2014, granted ad-interim relief in favour of the present applicant, whereby the investigation of the offence in question was stayed.

3. Learned advocate for the applicant has submitted that tripartite agreement was entered into between the parties, as mentioned herein above and on the basis of the said tripartite agreement; the said goods were procured by the company of the present applicant from the respondent no.2. In the FIR itself, it has been stated that on the basis of the said tripartite agreement, the company of the present applicant regularly used to procure the material from the respondent no.2 and the company of the present applicant used to make payment for the goods procured from the respondent no.2 within due course of time.

3.1 Learned advocate for the applicant has submitted that the tripartite agreement in question contained an arbitration clause and on the basis of the same, the respondent no.2-company has already invoked the proceedings under the Arbitration and Conciliation Act, 1996 against the company of the present applicant for resolving the dispute in question.

3.2 Learned advocate for the applicant has submitted that the respondent no.2 – company had also deposited the cheques issued by the company of the present applicant towards security for recovering the amount involved in the present transaction and since the said cheques got dishonored, the respondent no.2 – company has also lodged a complaint against the company of the present applicant under the provisions of Section 138 of the Negotiable Instruments Act. Thus, the first informant has already taken recourse to the other remedies available to it for recovery of the amount in question and since respondent no.2 could not yield the desired result in the aforesaid proceedings, the present FIR has been lodged with an ulterior motive to pressurize the present applicant.

3.3 Learned advocate for the applicant has submitted that the tripartite agreement on the basis of which the company of the present applicant had procured goods from respondent no.2, was entered into in the Year – 2006, the goods were procured by the company of the present applicant in the Year-2010 and the present FIR has been lodged in the Year-2014. Thus, the FIR in question has been lodged by the present applicant after considerably long time. The delay caused in lodging the FIR has not been explained satisfactorily by the first informant, and therefore, the said delay would vitiate the entire proceedings.

3.4 Learned advocate for the applicant has submitted that considering the fact that the FIR has been lodged after the period of more than 4 years, would indicate that the same has been lodged as an afterthought and with an ulterior motive.

3.5 Learned advocate for the applicant has submitted that the company of the present applicant was never entrusted with any property nor was there any intention on the part of the company of the present applicant to cheat the first informant from the very inception and therefore, the ingredients for the offence under Sections 406 and 420 of the IPC are not made out. Therefore, he submitted to allow the present application and quash and set aside the impugned FIR.

3.6 Learned advocate for the applicant has relied upon the following judgments in support of his submissions:-

1. Kishan Singh (Dead) Through LRS. Vs. Gurpal Singh & Ors. reported in (2010) 8 SCC 775 [LQ/SC/2010/831 ;] .

2. Manoj Kumar Sharma & Ors. Vs. State of Chhattisgarh & Anr. reported in (2016) 9 SCC 1 [LQ/SC/2016/1055] .

3. Vinod Natesan Vs. State of Kerala reported in 2019(2) SCC 401.

4. R.K.Vijayasarathy Vs. Sudha Seetharam reported in 2019 (16) SCC 739 [LQ/SC/2019/282] .

5. Deepak Gaba & Ors. Vs. State of Uttar Pradesh reported in 2023 (2) SCC 423.

4. The application is opposed by the learned APP inter alia contending that a bare reading of the FIR in question clearly indicates that there was a motive on the part of the company of the present applicant to cheat the respondent no.2 from the very inception and it was in furtherance of the said motive and intention that the company of the applicant had procured the goods from respondent no.2 and did not make any payment for the same. The fact that the cheque issued by the company of the present applicant to respondent no.2 towards the payment of the amount due in the transaction in question to respondent no.2 got dishonored, further indicates the intention on the part of the company of the present applicant to cheat respondent no.2. Thus, the ingredients for the offence punishable under Sections 406 and 420 of the IPC are clearly made out against the present applicant, who happens to be the Director of Company viz. M/s. Gyscoal Alloys Limited. She, therefore, submitted to dismiss the present application.

5. Learned advocate Mr.Sunil Joshi has entered his appearance on behalf of respondent no.2 – company. It is pertinent to note that the present application was listed before this Court on 09.06.2023. Since the learned advocate for the respondent no.2 had filed sick note on the said date, the matter was adjourned to 16.06.2023. On 16.06.2023, the matter was adjourned to 23.06.2023. On 23.06.2023, a request was made by learned advocate Mr.Sunil Joshi to adjourn the matter. At his request, the matter was adjourned to 07.07.2023 giving a last chance to the learned advocate Mr.Sunil Joshi. On 07.07.2023, again a request was made by learned advocate Mr.Sunil Joshi to adjourn the matter and hence, the matter was adjourned to 14.07.2023. Thereafter, the matter was listed before this Court on 04.08.2023. On the said date also, learned advocate Mr.Sunil Joshi had filed sick-note, and therefore, the matter was adjourned to 18.08.2023. Lastly, this matter was listed before this Court on 25.08.2023. On the said date also, learned advocate Mr.Sunil Joshi neither appeared before the Court nor any request was made on his behalf to adjourn the matter and hence, this Court had heard the arguments of learned advocate Mr.Apurva Kapadia appearing for the applicant and learned APP Ms.Krina Calla appearing for the respondent – State. No submissions whatsoever are made on behalf of respondent no.2 – company.

6. Heard learned advocates for the parties and perused the material available on record. The facts emerging from the bare perusal of the FIR indicate that the company of the present applicant and respondent no.2 along with one M/s. Transafe Services Limited had entered into a tripartite agreement, as the company of the present applicant wanted to procure some material from the respondent no.2 – company. On the basis of the said tripartite agreement, as stated in the FIR itself, the company of the present applicant used to procure material from respondent no.2 – company regularly and would also make the payment for the same in due course of time. In the Year – 2010 also, the company of the present applicant had procured goods in question from respondent no.2 – company on the basis of the very same tripartite agreement. Thus, the procurement of goods by the company of the present applicant was in terms of the tripartite agreement entered into between the parties, as mentioned herein above.

7. The applicant herein is alleged to have committed the offence punishable under Sections 406 and 420 of the IPC. Section 406 of the IPC prescribes punishment for criminal breach of trust. The term criminal breach of trust has been defined in Section 405 of the IPC as under:-

“405. Criminal breach of trust :- Whoever, being in any manner entrusted with property, or with any 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 prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits "criminal breach of trust.”

8. As noted herein above, the company of the present applicant had purchased the goods from respondent no.2 on the basis of the tripartite agreement for consideration. The important ingredient to bring in the offence of criminal breach of trust is the entrustment of property by the complainant to the accused. In the present case, when the goods in question were sold by Respondent no.2 to the company of the applicant pursuant to the tripartite agreement, whether the supply of goods thereafter amounts to entrustment or not, requires consideration. The Hon’ble Apex Court was posed with this question in its judgment in case of State OF Gujarat V/S Jaswantlal Nathalal ( AIR 1968 SC 700 [LQ/SC/1967/342] ) wherein the Hon’ble Apex Court has observed that “ The expression entrustment carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another , continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them. A mere transaction of sale cannot amount to an entrustment.” In the present case also, admittedly, the transaction of sale had taken place between the parties whereby, Respondent no. 2 had sold the goods to the company of the applicant. Once respondent no.2 had sold the goods to the company of the applicant, it had no right or dominion over the goods in question and therefore, there was no entrustment of property by Respondent no.2 in favour of the company of the applicant. Thus, the basic ingredient of entrustment is absent in the present case.

Secondly, upon bare perusal of the FIR, it has been mentioned in the same that when the officers of the respondent no.2 – company visited the place of the company of the present applicant where the goods were to be stored, they did not find the material supplied by them to the company of the present applicant on the place and they did not receive any proper information as regard the said goods. There is nothing in the FIR to indicate that the present applicant or the company had dishonestly misappropriated or converted to its own use the property, or had dishonestly used or disposed of that property in violation of any direction of law. Moreover, the FIR itself indicates that the company of the applicant had made part payment towards the procurement of the goods in question. Therefore, the ingredients for the offence punishable under Section 406 of the IPC are not made out upon bare perusal of the FIR in question.

Section 420 of the IPC prescribes punishment for the offence of cheating and dishonestly inducing delivery of property. The cheating has been defined under Section 415 of the IPC 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".”

9. Upon bare perusal of the FIR, there is nothing in the same to indicate that the company of the present applicant had deceived respondent no.2 to deliver the goods in question to it. At the cost of repetition, it is required to be noted that it was on the basis of tripartite agreement entered into between the parties; the company of the present applicant had procured the goods from respondent no.2 regularly and had also made payments for the goods procured. In the Year – 2010 also, the company of the present applicant had procured the goods from respondent no.2 and had made payment in part for the same. For making out an offence of cheating, there has to be an intention to cheat from the very inception. The fact that the tripartite agreement was entered into between the parties and on the basis of the said tripartite agreement, the goods were regularly procured by the company of the present applicant and payments for the same were also made, would indicate that there was no intention on the part of the company of the present applicant to cheat the respondent no.2 from the very inception. The facts also indicate that there was no inducement made by the company of the present applicant to respondent no.2 to deliver the goods to it. Thus, the ingredients for the offence punishable under Section 420 of the IPC are also note made out. The Hon’ble Apex Court in its recent judgment in case of Peethambaran V/S State of Kerala & Another (Criminal Appeal No. 1381 of 2023), in para 24, has discussed the ingredients for the offence of cheating as under:

“(i) The representation made by the person was false.

(ii) The accused had prior knowledge that the representation he made was false.

(iii) The accused made false representation with dishonest intention in order to deceive the person to whom it was made.

(iv) The act where the accused induced the person to deliver the property or to perform or to abstain from any act which the person would have not done or had otherwise committed.”

Having regard to the fact that the parties had entered into an agreement and several transactions took place between the parties pursuant to the said agreement as discussed herein above, none of the above ingredients are present in the present case.

10. The Apex Court in its recent judgment in case of Deepak Gaga (supra) has observed that sine qua non of Section 415of the IPC is “fraudulence”, “dishonesty”, or “intentional inducement”, and absence of these elements would debase the offence of cheating. It is further observed that there is no assertion, much less legal evidence, to submit that JIPL had engaged in dishonesty, fraud, or intentional inducement to deliver a property. It is also not the case of respondent no. 2 that JIPL had tried to deceive them, either by making a false or misleading representation, or by any other action or omission; nor is it their case that JIPL had offered any fraudulent or dishonest inducement to deliver a property In present case also, the observations made by the Apex Court in the said judgment would be squarely applicable.

11. The Apex Court in another judgment in the case of R.K.Vijayasarathy (supra) in Paragraph Nos.13 & 14 has discussed the ingredents of Section 405 and 415 of the IPC. The said Paragraph Nos.13 & 14 read thus:-

“13Section 405of the Penal Code reads thus:

“Section 405.- Criminal breach of trust.- Whoever, being in any manner entrusted with property, or with any 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 prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits “criminal breach of trust”.

A careful reading of Section 405 shows that the ingredients of a criminal breach of trust are as follows:

i) A person should have been entrusted with property, or entrusted with dominion over property;

ii) That person should dishonestly misappropriate or convert to their own use that property, or dishonestly use or dispose of that property or willfully suffer any other person to do so; and

iii) That such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.

Entrustment is an essential ingredient of the offence. A person who dishonestly misappropriates property entrusted to them contrary to the terms of an obligation imposed is liable for a criminal breach of trust and is punished under Section 406 of the Penal Code.

14 Section 415 of the Penal Code reads thus:

“Section 415. Cheating.- Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived 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”.”

The ingredients to constitute an offence of cheating are as follows:

i) there should be fraudulent or dishonest inducement of a person by deceiving him;

ii) (a) the person so induced should be intentionally induced to deliver any property to any person or to consent that any person shall retain any property, or

(b) the person so induced should be intentionally induced to do or to 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) above, the act or omission should be one which caused or is likely to cause damage or harm to the person induced in body, mind, reputation or property.

A fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating.”

12. Thereafter, the Apex Court has gone on to observe as follows:-

"16 A court exercising its inherent jurisdiction must examine if on their face, the averments made in the complaint constitute the ingredients necessary for the offence. The relevant extract of the complaint filed by the first respondent is extracted below:

“The accused person’s son Mr. Rajiv Vijayasarathy Ratnam started to transfer all his monies to different accounts and also transferred some monies belonging to him in the US to his parents accounts in Bangalore, India and he also pleaded his wife i.e. Complainant’s daughter that he also wanted to divert some funds unto Complainant’s account in Bangalore…That Rajiv Vijayasarathy Ratnam diverted some of his monies to Accused No. 1 and 2 and the Complainant…

It is further pertinent to mention that the accident occurred on 05.02.2010 and money was transferred on 17.02.2010, the transfer was due to the insecurity at the behest of Mr. Rajiv Vijayasarathy Rathnam, the money was not sought or required by the complainant.

The Complainant daughter Ms. Savitha Seetharam convinced the Complainant to accept transfer of monies which was for the benefit of the Accused person’s son Mr. Rajiv Vijayasarathy Ratnam and to hold it in trust for him and accordingly the son of the accused transferred monies on 17th February 2010 to the Complainant account Rs. 20,00,000/- (Rupees Twenty Lakhs only) … It is pertinent to mention that the accused person’s son Mr. Rajiv Vijayasarathy Ratnam insisted the Complainant and her husband to pay the said monies by way of cash to the accused person’s including the interest…Mr. Rajiv Vijayasarathy Ratnam sought for the return of the aforesaid monies i.e. of Rs. 20,00,000/-”

“…The said monies were paid in cash as per the dicta of the accused person’s son Mr. Rajiv Vijayasarathy Ratnam has filed a false and frivolous suit…” (Emphasis supplied)

17 The condition necessary for an act to constitute an offence under Section 405 of the Penal Code is that the accused was entrusted with some property or has dominion over property. The first respondent has stated that the disputed sum was transferred by the son of the appellants of his own volition to her. The complaint clearly states that the amount was transferred for the benefit of the son of the appellants and that the first respondent was to hold the amount ‘in trust’ for him. The complaint alleges that the money was transferred to the appellants ‘as per the dicta’ of the son of the appellants. There is on the face of the complaint, no entrustment of the appellants with any property.

18 The condition necessary for an act to constitute an offence under Section 415 of the Penal Code is that there was dishonest inducement by the accused. The first respondent admitted that the disputed sum was transferred by the son of the appellants to her bank account on 17 February 2010. She alleges that she transferred the money belonging to the son of the appellants at his behest. No act on part of the appellants has been alleged that discloses an intention to induce the delivery of any property to the appellants by the first respondent. There is thus nothing on the face of the complaint to indicate that the appellants dishonestly induced the first respondent to deliver any property to them. Cheating is an essential ingredient to an offence under Section 420 of the Penal Code. The ingredient necessary to constitute the offence of cheating is not made out from the face of the complaint and consequently, no offence under Section 420 is made out."

13. In view of the aforesaid observations made by the Apex Court and the facts of the case discussed herein above, the ingredients for offence punishable under Sections 406 and 420 of the IPC are not made out against the present applicant.

14. The facts emerging from the FIR indicate that it was in the Year – 2010 that the company of the present applicant had procured goods worth Rs.9,57,00,000/- out of which sum of Rs.1,87,00,000/- was paid and the sum of Rs.7,70,00,000/- was outstanding. The officers of the respondent no.2 – company visited the site of the company of the present applicant on 27.07.2012 and they found the goods in question to be not present at the site. It was thereafter on 14.03.2014 that the present FIR has been lodged i.e. after the period of more than 4 years from the date of procurement of goods by the company of the present applicant and after the period of almost 2 years from the date of the visit of its officers to the site of the company of the present applicant. It is averred in the FIR that on 27.07.2012, a complaint was given in this regard at Vasai Police Station, however, no action was taken in that regard.

15. Pursuant to the complaint lodged by the respondent no.2- company at Vasai Police Station, the present applicant had submitted his reply to the same to the officer In-charge of the Vasai Police Station denying all the allegations leveled in the complaint. Thereafter, no action whatsoever appears to have taken by the respondent no.2 to see that an offence is registered on the basis of the complaint lodged by it. It appears that upon receipt of the reply filed by the present applicant, the officer of the concerned Police Station must have thought it fit not to register offence on the basis of the said complaint. Therefore, the delay caused in lodging the FIR has not been satisfactorily explained by the first informant either in the FIR or in the present proceedings.

16. The Apex Court in its judgment in case of Kishan Singh (D) Thru Lrs (supra) has observed in Paragraph No.22 as under:-

“22. In cases where there is a delay in lodging a FIR, the Court has to look for a plausible explanation for such delay. In absence of such an explanation, the delay may be fatal. The reason for quashing such proceedings may not be merely that the allegations were an after thought or had given a coloured version of events. In such cases the court should carefully examine the facts before it for the reason that a frustrated litigant who failed to succeed before the Civil Court may initiate criminal proceedings just to harass the other side with mala fide intentions or the ulterior motive of wreaking vengeance on the other party. Chagrined and frustrated litigants should not be permitted to give vent to their frustrations by cheaply invoking the jurisdiction of the criminal court.”

17. The Apex Court in its another judgment in case of Manoj Kumar Sharma (supra) has observed in Paragraph No.30 as under:-

“30. Delay in lodging the FIR often results in embellishment, which is a creature of an afterthought. On account of delay, the FIR not only gets bereft of the advantage of spontaneity, danger also creeps in of the introduction of a coloured version or exaggerated story.”

18. The record indicates that the company of the present applicant did not make the payment for the goods procured, as in its opinion, the goods were of inferior quality. The agreement entered into between the company of the present applicant and the respondent no.2 contended an arbitration clause. As per the said clause, any dispute or difference between the parties relating to the interpretation, construction, fulfillment or otherwise, of the agreement were required to be settled by the process of arbitration. The respondent no.2 appears to have already initiated the process of arbitration for resolution of the dispute in question.

19. Having regard to the facts of the case, the dispute involved in the present case appears to be purely of a civil nature more particularly, in the nature of non-fulfillment of an obligation flowing from an agreement in question. A civil dispute arisen between the parties is sought to be given a criminal color by filing present FIR by respondent no.2.

20. The Apex Court in its judgment in case of Vinod Natesan (supra) has observed as under:-

“The dispute between the parties at the most can be said to be the civil dispute and it is tried to be converted into the criminal dispute. Therefore, we are also of the opinion that continuing the criminal proceedings against the accused will be an abuse of process of law and, therefore, the High Court has rightly quashed the criminal proceedings. Merely because the original accused might not have paid the amount due and payable under the agreement or might not have paid the amount in lieu of one month Notice before terminating the agreement by itself cannot be said to be a cheating and/or having committed offence under Sections 406 and 420 of the IPC as alleged.”

21. The Apex Court, in its recent judgemnt in case of Sarabjit Kaur Vs. State of Punjab reported in 2023 (5) SCC 360, [LQ/SC/2023/216 ;] in Paragraph No.13 has observed that a breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings.

22. It emerges from the record that since the company of the present applicant did not pay the amount due to the respondent no.2, it had deposited the cheques issued by the company of the present applicant in favour of the respondent no.2 in its bank account for clearance and the said cheques were dishonored and respondent no.2 herein has already lodged a complaint in that regard for the offence punishable under Section 138 of the Negotiable Instruments Act before the Court at Calcutta. Thus, the proceedings of criminal nature are already pending, which are arising out of the very same transaction. The record also indicates that the present applicant has approached the High Court at Calcutta for quashing of the proceedings arising out of the said complaint and an interim-relief is operating in favour of the present applicant in the said proceedings.

23. In the result, the present application is allowed. The impugned FIR being I.C.R.No.17 of 2014 registered with Vasai Police Station, Mehsana for the offence punishable under Sections 406, 420 & 114 of the the Indian Penal Code as well as all other consequential proceedings arising out of the aforesaid F.I.R are hereby quashed and set aside. Rule is made absolute to the aforesaid extent.

24.Direct service permitted.