Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 2327 OF 2014

(Arising out of SLP (Crl.) No. 9751/2011)

BINOD KUMAR & ORS. .. Appellant

Versus

STATE OF BIHAR & ANR. ..Respondents

J U D G M E N T

R. BANUMATHI, J.

Leave granted.

2. Whether the charges under Section 406 IPC and the

criminal complaint for criminal breach of trust for allegedly

retaining the bill amount payable to respondent No.2 is liable

to be quashed is the point falling for consideration in this

appeal.

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Page 2 3. Payment of bill pertaining to the contract executed

by the second respondent in Tilka Manjhi Bhagalpur

University had a chequered history. Case of second

respondent is that contract was entered into between him and

K.S.S. College on 4.9.1990 for the construction of building of

K.S.S. College, Lakhisarai, a constituent unit of Tilka Manjhi

Bhagalpur University. According to second respondent, since

money and requisite materials were not given to him in time,

the work was not completed within stipulated period. The

university vide letter dated 9.5.1995, informed the respondent

No.2 that his contract is terminated and all his dues including

final bill, earnest money and security deposit etc. will be

released after consultation with the College Development

Committee. The University Engineer vide letter dated

4.6.1996, addressed to the Principal of the college, informed

that a payment of Rs.48,505/- is payable to the contractor;

but the respondent No.2 was not paid the aforesaid bill

amount. Finally, the respondent was paid Rs.14,000/- vide

cheque No. EMGCO-OP.Z No. 0127627, as per the direction of

the College Development Committee and balance amount of

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Page 3 Rs.34,505/- was not paid to him. Aggrieved by the said non-

payment of entire amount, respondent No.2 filed a criminal

complaint case No.196-C/1997 in the Court of Sub Divisional

Judicial Magistrate, Lakhisarai for criminal breach of trust,

alleging that the amount of Rs.34,505/- was not paid to him

and that the amount was utilized by the appellants in some

other work.

4. The appellants filed an application under

Section 227 Cr.P.C. before the Court of Sub Divisional Judicial

Magistrate, Lakhisarai seeking their discharge from the

criminal case. The Court of Sub Divisional Judicial Magistrate,

Lakhisarai vide its order dated 2.12.2002 dismissed the said

petition and directed the appellants to remain present in the

court on 8.1.2003 for framing of charges under Section

406/120B IPC. The appellants filed petition under Section

482 Cr.P.C. before the Patna High Court for quashing the said

order and by the impugned order dated 18.2.2011, the High

Court dismissed the petition. Aggrieved by the same, the

appellants are before us.

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Page 4 5. Dr. Manish Singhvi, learned counsel appearing for

the appellants, contended that the act of withholding of

payment to the second respondent was as per the direction

issued by the Vice-Chancellor and no case is made out for

misappropriation of funds under Section 406 IPC. It was

contended that the act of the appellants was done in the

discharge of their public duties and there was no dishonest

intention to misappropriate the amount and the essential

ingredients of criminal breach of trust are not made out and

the High Court has not properly appreciated the matter.

6. Ms. Prerna Singh, learned counsel for respondent

No.1 - State of Bihar, submitted that the instant petition

does not relate to any police case and the matter was never

subjected to police investigation. It was, however, submitted

that on examination of four witnesses, Magistrate found that

a prima facie case was made out against the appellants and

therefore, High Court rightly dismissed the petition filed under

Section 482 Cr.P.C.

7. Mr. Rajiv Kumar, learned counsel appearing for the

second respondent contended that the application for

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Page 5 discharge was rightly rejected by the Magistrate as the case

filed by the second respondent is a warrant case instituted

other than on police report and since prima-facie case was

made out, the discharge application was rightly dismissed by

the trial court. It was also contended that as per the terms

and conditions of the contract, the second respondent had

executed the work and the same was also measured and

verified by the University Engineer and while so, the

appellants with malafide intention withheld the second

respondent’s dues and thus, committed criminal breach of

trust and the High Court rightly dismissed the petition filed

under Section 482 Cr.P.C.

8. We have carefully considered the rival contentions

and also perused the impugned order and the materials on

record.

9. In proceedings instituted on criminal complaint,

exercise of the inherent powers to quash the proceedings is

called for only in case where the complaint does not disclose

any offence or is frivolous. It is well settled that the power

under Section 482 Cr.P.C. should be sparingly invoked with

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Page 6 circumspection, it should be exercised to see that the process

of law is not abused or misused. The settled principle of law is

that at the stage of quashing the complaint/FIR, the High

Court is not to embark upon an enquiry as to the probability,

reliability or the genuineness of the allegations made therein.

In Smt. Nagawwa vs. Veeranna Shivalingappa Konjalgi,

(1976) 3 SCC 736, this Court enumerated the cases where an

order of the Magistrate issuing process against the accused

can be quashed or set aside as under:

“(1)where the allegations made in the complaint

or the statements of the witnesses recorded

in support of the same taken at their face

value make out absolutely no case against

the accused or the complainant does not

disclose the essential ingredients of an

offence which is alleged against the

accused;

(2)where the allegations made in the

complaint are patently absurd and

inherently improbable so that no prudent

person can ever reach a conclusion that

there is a sufficient ground for proceeding

against the accused;

(3)where the discretion exercised by the

Magistrate in issuing process is capricious

and arbitrary having been based either on

no evidence or on materials which are

wholly irrelevant or inadmissible; and

(4)where the complaint suffers from

fundamental legal defects such as, want of

sanction, or absence of a complaint by

legally competent authority and the like.”

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Page 7 The Supreme Court pointed out that the cases mentioned are

purely illustrative and provide sufficient guidelines to indicate

contingencies where the High Court can quash the

proceedings.

10. In Indian Oil Corporation vs. NEPC India Ltd. And

Ors., (2006) 6 SCC 736, this Court has summarized the

principles relating to exercise of jurisdiction under Section 482

Cr.P.C. to quash complaints and criminal proceedings as

under:-

“The principles relating to exercise of jurisdiction

under Section 482 of the Code of Criminal Procedure

to quash complaints and criminal proceedings have

been stated and reiterated by this Court in several

decisions. To mention a few— Madhavrao Jiwajirao

Scindia v. Sambhajirao Chandrojirao Angre (1988) 1

SCC 692, State of Haryana v. Bhajan Lal,1992 Supp

(1) SCC 335; Rupan Deol Bajaj v. Kanwar Pal Singh

Gill (1995) 6 SCC 194, Central Bureau of Investigation

v. Duncans Agro Industries Ltd (1996) 5 SCC 591; State

of Bihar v. Rajendra Agrawalla (1996) 8 SCC 164 ,

Rajesh Bajaj v. State NCT of Delhi,(1999) 3 SCC 259;

Medchl Chemicals & Pharma (P) Ltd. v. Biological E.

Ltd(2000) 3 SCC 269 Hridaya Ranjan Prasad Verma v.

State of Bihar (2000) 4 SCC 168, M. Krishnan v. Vijay

Singh (2001) 8 SCC 645 and Zandu Pharmaceutical

Works Ltd. v. Mohd. Sharaful Haque( 2005) 1 SCC 122.

The principles, relevant to our purpose are:

(i) A complaint can be quashed where the

allegations made in the complaint, even if they

are taken at their face value and accepted in

their entirety, do not prima facie constitute any

offence or make out the case alleged against the

accused.

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Page 8 For this purpose, the complaint has to be

examined as a whole, but without examining the

merits of the allegations. Neither a detailed

inquiry nor a meticulous analysis of the material

nor an assessment of the reliability or

genuineness of the allegations in the complaint,

is warranted while examining prayer for

quashing of a complaint.

(ii) A complaint may also be quashed where it is a

clear abuse of the process of the court, as when

the criminal proceeding is found to have been

initiated with mala fides/malice for wreaking

vengeance or to cause harm, or where the

allegations are absurd and inherently

improbable.

(iii) The power to quash shall not, however, be

used to stifle or scuttle a legitimate prosecution.

The power should be used sparingly and with

abundant caution.

(iv) The complaint is not required to verbatim

reproduce the legal ingredients of the offence

alleged. If the necessary factual foundation is

laid in the complaint, merely on the ground that

a few ingredients have not been stated in detail,

the proceedings should not be quashed.

Quashing of the complaint is warranted only

where the complaint is so bereft of even the

basic facts which are absolutely necessary for

making out the offence.

(v) A given set of facts may make out: (a) purely a

civil wrong; or (b) purely a criminal offence; or (c)

a civil wrong as also a criminal offence. A

commercial transaction or a contractual dispute,

apart from furnishing a cause of action for

seeking remedy in civil law, may also involve a

criminal offence. As the nature and scope of a

civil proceeding are different from a criminal

proceeding, the mere fact that the complaint

relates to a commercial transaction or breach of

contract, for which a civil remedy is available or

has been availed, is not by itself a ground to

quash the criminal proceedings. The test is

whether the allegations in the complaint disclose

a criminal offence or not.”

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Page 9 11. Referring to the growing tendency in business

circles to convert purely civil disputes into criminal cases, in

paragraphs (13) and (14) of the Indian Oil Corporation’s case

(supra), it was held as under:-

“13. While on this issue, it is necessary to take notice

of a growing tendency in business circles to convert

purely civil disputes into criminal cases. This is

obviously on account of a prevalent impression that

civil law remedies are time consuming and do not

adequately protect the interests of lenders/creditors.

Such a tendency is seen in several family disputes

also, leading to irretrievable breakdown of

marriages/families. There is also an impression that if

a person could somehow be entangled in a criminal

prosecution, there is a likelihood of imminent

settlement. Any effort to settle civil disputes and

claims, which do not involve any criminal offence, by

applying pressure through criminal prosecution

should be deprecated and discouraged. In G. Sagar

Suri v. State of U.P., (2000) 2 SCC 636 this Court

observed: (SCC p. 643, para 8)

“It is to be seen if a matter, which is

essentially of a civil nature, has been given a

cloak of criminal offence. Criminal proceedings

are not a short cut of other remedies available

in law. Before issuing process a criminal court

has to exercise a great deal of caution. For the

accused it is a serious matter. This Court has

laid certain principles on the basis of which the

High Court is to exercise its jurisdiction under

Section 482 of the Code. Jurisdiction under

this section has to be exercised to prevent

abuse of the process of any court or otherwise

to secure the ends of justice.”

14. While no one with a legitimate cause or grievance

should be prevented from seeking remedies available

in criminal law, a complainant who initiates or persists

with a prosecution, being fully aware that the criminal

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Page 10 proceedings are unwarranted and his remedy lies only

in civil law, should himself be made accountable, at

the end of such misconceived criminal proceedings, in

accordance with law. One positive step that can be

taken by the courts, to curb unnecessary prosecutions

and harassment of innocent parties, is to exercise

their power under Section 250 CrPC more frequently,

where they discern malice or frivolousness or ulterior

motives on the part of the complainant. Be that as it

may.”

12. Coming to the facts of this case, it is no doubt true

that the dispute relates to the non-payment of bill amount of

Rs.34,505/- pertaining to the contract executed by respondent

No.2. It is also pertinent to note that respondent No.2 preferred

CWJC No.5803/1999 wherein an order dated 5.4.2000 was

passed by Patna High Court directing the Vice-Chancellor of

Bhagalpur University to release the balance amount of

Rs.34,505/- with interest at the rate of 18% w.e.f. 1.10.1994 till

the date of payment and pay the interest at the rate of 11% on

the sum of Rs.14,000/- from 1.10.1994 till 9.12.1996.

Aggrieved by the said order, Bhagalpur University preferred LPA

No.716/2000 wherein it was directed that since it was not a

statutory contract, no direction for payment of money could be

issued and the respondent No.2 can pursue other remedies

available in law for the recovery of money. Aggrieved by the

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Page 11 said order, respondent No. 2 filed SLP(C) No. CC 4832/2001

which was dismissed as withdrawn by this Court by Order

dated 30.7.2001 granting him liberty to approach the

appropriate forum. Respondent No.2 thereafter filed Money

Suit No. 2/2002 before the Court of Sub Judge 1

st

Court,

Lakhisarai on 20.4.2002 for recovery of Rs. 69,010/- i.e. double

the amount of Rs.34,505/- and the said suit is pending.

Second appellant representing the university had also filed

Money Suit No.2/2006 before the same Court on 4.2.2006

claiming a sum of Rs.1,44,437/- with interest against the

second respondent-contractor. These acts of the parties show

that the parties have already had recourse to the civil remedies

that are available to them in law.

13. Appellant Nos.1 and 2 were then employed as

Principal and Professor respectively in KSS College, Lakhisarai

and appellant No.3 as Bursar of the said college. The

appellants have stated that they had no intention to cheat or

dishonestly misappropriate the amount of Rs. 34,505/-. The

appellants have stated that there were disputes regarding the

quality of work done and also non-return of some cement bags

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Page 12 by the second respondent. It is stated that in view of the

dispute between the university and the contractor and

stoppage of further construction by the second respondent

and with the direction and approval of the Vice-Chancellor,

contract of the appellant was terminated and his bill was

placed before the College Development Committee. In its

meeting dated 8.12.1995, the Committee considered the claim

of the second respondent and rejected his certain claims and

the same was informed to the Vice-Chancellor. The university

vide letter No. E/243 dated 25.3.1998 directed to stop final

payment to the second respondent and the university

requested the Executive Engineer for verification of quality of

work done. Appellants have stated that the amount of

Rs. 34,505/- has been lying in the account of the university

and only on instruction from the Vice-Chancellor, the amount

was not paid to the second respondent and no dishonest

intention could be attributed to the appellants.

14. At this stage, we are only concerned with the

question whether the averments in the complaint taken at

their face value make out the ingredients of criminal offence

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Page 13 or not. Let us now examine whether the allegations made in

the complaint when taken on their face value, are true and

constitute the offence as defined under Section 406.

15. Section 405 IPC deals with criminal breach of trust.

A careful reading of the Section 405 IPC shows that a criminal

breach of trust involves the following ingredients:

(a) a person should have been entrusted with

property, or entrusted with dominion over

property;

(b) that person should dishonestly misappropriate

or convert to his own use that property, or

dishonestly use or dispose of that property or

wilfully suffer any other person to do so;

(c) 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.

16. Section 406 IPC prescribes punishment for criminal

breach of trust as defined in Section 405 IPC. For the offence

punishable under Section 406 IPC, prosecution must prove:

(i) that the accused was entrusted with property

or with dominion over it and

(ii) that he (a) misappropriated it, or (b) converted

it to his own use, or (c) used it, or (d) disposed

of it.

13

Page 14 The gist of the offence is misappropriation done in a dishonest

manner. There are two distinct parts of the said offence. The

first involves the fact of entrustment, wherein an obligation

arises in relation to the property over which dominion or

control is acquired. The second part deals with

misappropriation which should be contrary to the terms of the

obligation which is created.

17. Section 420 IPC deals with cheating. Essential

ingredients of Section 420 IPC are:- (i) cheating; (ii) dishonest

inducement to deliver property or to make, alter or destroy any

valuable security or anything which is sealed or signed or

is capable of being converted into a valuable security, and

(iii) mens rea of the accused at the time of making the

inducement.

18. In the present case, looking at the allegations in the

complaint on the face of it, we find no allegations are made

attracting the ingredients of Section 405 IPC. Likewise, there

are no allegations as to cheating or the dishonest intention of

the appellants in retaining the money in order to have

wrongful gain to themselves or causing wrongful loss to the

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Page 15 complainant. Excepting the bald allegations that the

appellants did not make payment to the second respondent

and that the appellants utilized the amounts either by

themselves or for some other work, there is no iota of

allegation as to the dishonest intention in misappropriating

the property. To make out a case of criminal breach of trust,

it is not sufficient to show that money has been retained by

the appellants. It must also be shown that the appellants

dishonestly disposed of the same in some way or dishonestly

retained the same. The mere fact that the appellants did not

pay the money to the complainant does not amount to

criminal breach of trust.

19. Even if all the allegations in the complaint taken at

the face value are true, in our view, the basic essential

ingredients of dishonest misappropriation and cheating are

missing. Criminal proceedings are not a short cut for other

remedies. Since no case of criminal breach of trust or

dishonest intention of inducement is made out and the

essential ingredients of Sections 405/420 IPC are missing, the

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Page 16 prosecution of the appellants under Sections 406/120B IPC, is

liable to be quashed.

20. The impugned order of the High Court is set aside

and this appeal is allowed. Parties are at liberty to work out

their remedy in the civil suits which they have already had

recourse to.

……………………… .J.

(T.S. Thakur)

……………………… .J.

(R. Banumathi)

New Delhi;

October 30, 2014

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