REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 463 OF 2022

(arising out of S.L.P (Crl.) No. 10951 OF 2019)

VIJAY KUMAR GHAI & ORS. … APPELLANT(S)

VERSUS

THE STATE OF WEST BENGAL & ORS. … RESPONDENT(S)

JUDGMENT

KRISHNA MURARI, J.

Leave granted.

2. This appeal is directed against the judgment and order dated

01.10.2019 passed by the High Court of Calcutta (hereinafter referred to as

“High Court”) in C.R.R No. 731 of 2017 filed by the appellants praying for

quashing of proceedings being G.R. Case No. 1221 of 2013 pending before

the Court of Learned Chief Metropolitan Magistrate, Kolkata and arising out of

Bowbazar Police Station Case No. 168 dated 28.03.2013 under Sections 420,

406 and 120B of the Indian Penal Code, 1860 (hereinafter referred to as

“IPC”). By the said judgment, the High Court dismissed the prayer for

1

quashing of the proceedings and held that continuance of criminal

proceedings against the present appellant/accused would not be an abuse of

the process of the court.

3.Brief facts necessary for the disposal of this appeal are as under:

3.1M/s. Priknit Retails Limited a public limited company having its

registered office at BXXV, 539A, 10, Jalandhar, Bye Pass Road, Ludhiana,

Punjab was incorporated in the year 2002 and subsequently changed its

name to Priknit Apparels in 2007. The company is engaged in the

manufacture and trade of apparels through chain of retail stores under the

brand name and style of Priknit. Appellant No. 1 is the Managing Director of

the Company and Appellant Nos. 2 and 3 are the Directors of the said

Company. The company has been arrayed as proforma Respondent No. 3.

3.2In January 2008, Respondent No. 2 an authorized representative of

SMC Global Securities Ltd, Delhi desired to make an investment on its behalf

with the appellants. It was mutually decided between the parties that

Respondent No. 2 will invest an amount of Rs. 2.5 crore with the company in

lieu of which they will be issued 2,50,000 equity shares of Priknit Apparel Pvt.

Ltd. Subsequently, Respondent No. 2 filed their share application form along

with the cheque of Rs. 2.5 crore.

2

3.3Subsequently, an allotment letter dated 29.03.2008 was issued in favour

of Respondent No. 2 whereby 2,50,000 shares were issued in lieu of the

investment made by him. The proforma respondent no. 3 company and

Respondent No. 2 arrived at an understanding, regarding the investment

made by Respondent No. 2.

3.4Having failed to bring the I.P.O as per memorandum of understanding

dated 20.08.2009, Respondent No. 2 issued a legal notice dated 06.12.2011

to the Appellants, who duly replied to the legal notice denying all the

allegations contained in the legal notice.

3.5That on 06.01.2012, Respondent No. 2 filed a police complaint with PS

Rajender Nagar, New Delhi and the concerned officer of PS Rajender Nagar

apprised Respondent No. 2 that the complaint does not pertain to their

jurisdiction and therefore the same ought to be transferred. On 11.04.2012,

Respondent No. 2 filed a complaint with the Economic Offences Wing

(hereinafter referred to as “EOW”) and the said complaint was transferred to

PS Darya Ganj, New Delhi.

3.6That on 06.06.2012, Respondent No. 2 filed a complaint being CC No.

306/1/12 under Section 156(3) of Cr.P.C before the Tiz Hazari Court, New

Delhi for registration of FIR against the Appellants and their company. On

01.09.2012, Respondent No. 2 also filed another Complaint No. 190 of 12

3

before Tis Hazari Court, New Delhi under Section 68 of the Companies Act

read with Section 200 of Cr.P.C which is pending adjudication.

3.7That the Metropolitan Magistrate (hereinafter referred to as “MM”), Tis

Hazari vide order dated 28.02.2013 observed that the entire dispute raised by

Respondent No. 2 was civil in nature and there was no criminality involved,

thereby turning down the prayer of Respondent No. 2 for registration of an FIR

and posted the case for pre-summoning evidence with regard to the

application under Section 156(3) Cr.P.C filed by Respondent No.2. It is

pertinent to mention here that the order of the MM, Tis Hazari Court, New

Delhi attained finality as it was not put to further challenge.

3.8That on 28.03.2013, Respondent No. 2 filed a second complaint under

Section 406, 409, 420, 468,120B and 34 IPC on the basis of the same cause

of action with the PS Bowbazar at Kolkata, West Bengal and the same was

converted into an FIR bearing No. 168 under Section 406, 420, 120B IPC. A

final closure report dated 04.03.2014 was filed by the concerned Police

Station recommending closure of the case since the entire dispute was found

to be civil in nature.

3.9That Respondent No. 2 filed a protest petition being GR No. 1221/2013

with the Chief Metropolitan Magistrate (hereinafter referred to as “CMM”),

Kolkata against closure report dated 04.03.2014 and vide order dated

4

08.03.2016, the CJM allowed the protest petition and directed for further

investigation.

3.10In the meantime, the authorized representative of Respondent No. 2

made a statement before the MM, Tish Hazari, New Delhi for withdrawing the

complaint case.

3.11Appellant No. 1 received a notice dated 14.11.2016 under Section 41(a)

Cr.P.C for appearance before the Investigation Officer (hereinafter referred to

as “IO”) at PS Bowbazar, Kolkata. In his reply to the said notice, Appellant

No. 1 stated that a complaint has already been filed with the same cause of

action before the Tis Hazari Court and further sought time to produce the

documents sought in the notice. Thereafter, Appellant No. 1 sent a letter with

all the relevant documents required for investigation thereby extending full co-

operation to the IO at PS Bowbazar, Kolkata in connection with Case No. 168.

The IO PS Bowbazar, Kolkata sent another notice under Section 41(a) Cr.P.C

dated 23.12.2016 to Appellant No. 1 and 2 to appear before him with the

relevant documents.

3.12That vide order dated 14.02.2017, the CMM, Calcutta took cognizance

of the offence under Section 406, 420, 120B IPC in connection with Case No.

168 dated 28.03.2013 corresponding to GR Case No. 1221 of 2013 i.e.,

protest petition.

5

3.13Being aggrieved, Appellants herein filed a quashing petition being CRR

No. 731 of 2017 under Section 482 Cr.P.C seeking quashing of FIR No. 168

dated 28.03.2013 and also impugned the proceedings in GR Case No. 1221

of 2013 by invoking Sections 401 and 482 Cr.P.C.

3.14That the High Court vide order dated 06.03.2017 issued notice to the

Respondents and stayed further proceeding of criminal case. Respondent No.

2 filed an application for vacation of the stay order granted by the High Court

but the same was dismissed vide order dated 24.03.2017 while observing that

Respondent No. 2 had also filed a complaint at Delhi on the same allegations,

thus the proceedings at Calcutta were intended to harass the Appellants.

3.15However, the High Court vide impugned judgment and order dated

01.10.2019 dismissed the quashing as well as the revision petition filed by the

Appellants and observed that in order to exercise the power under Section

482 Cr.P.C, the only requirement is to see whether continuance of the criminal

proceedings would be a total abuse of the process of the court and the

continuance of the criminal proceedings against the appellants is in no way an

abuse of the process of the court. The operative portion of the aforesaid

judgment reads as under: -

“In the present case, the allegation in the FIR disclosed the

offences alleged. Moreover, the allegations made in the FIR

disclosed that the petitioner induced the complainant to

purchase share or invest money by willful misrepresentation.

6

It is true that the complaint discloses that there was a

commercial transaction between the parties but at the same

time, it cannot be overlooked that the averments made in the

complaint/FIR prima facie revel the commission of a

cognizable offence.

Moreover, when the complaint discloses that the commercial

transaction between involve criminal offences, then the

question of quashing the complaint cannot be allowed.”

Contentions on behalf of Appellants

4.Ms. Menaka Guruswamy, learned senior advocate appearing on behalf

of the appellants has vehemently submitted that Respondent No.2 indulged in

the practice of forum shopping by filing 2 complaints i.e., a complaint u/s

156(3) Cr.P.C before the Tis Hazari Court, New Delhi on 06.06.2012 and a

complaint which was eventually registered as FIR No. 168 u/s 406, 420, 120B

IPC before PS Bowbazar, Calcutta on 28.03.2013. FIR in connection with PS

Bowbazar, Calcutta was lodged during the pendency of the complaint case at

Tis Hazari Court, New Delhi and the said fact was cleverly supressed by

Respondent No. 2.

4.1It was further submitted that initially police submitted a closure report.

However, Respondent No. 2 filed an application under Section 173(8) of

Cr.P.C for further investigation which was allowed and after further

investigation, charge sheet was filed against the Appellants herein.

7

4.2It was vehemently submitted that the complaint filed in PS Bowbazar

was the exact reproduction of the complaint filed in New Delhi with the only

difference being the place of occurrence. In the complaint lodged at Delhi, the

place of occurrence was shown to be the office at New Delhi and in

subsequent complaint at Calcutta, the place of occurrence was changed to its

office at Calcutta.

4.3It was further submitted that the allegations contained in the FIR are

purely contractual disputes of civil nature but Respondent No. 2 has given a

criminal colour to it and that breach of contract does not come within the

purview of cheating as defined in IPC. In addition to it, it was submitted that

the transaction in question between the parties as revealed from the F.I.R was

purely a sale transaction or what may be called as a commercial transaction,

therefore the question of cheating does not arise at all.

4.4It was further submitted that there are no allegations in the complaint

filed by the Respondent No. 2 about the Appellants having fraudulent or

dishonest intentions at the time of making the representation.

4.5 It was also further submitted that the High Court failed to appreciate that

the two allegations recorded in the complaint against the Appellants being

belated allotment of shares to the complainant company and the Appellant No.

8

1’s failure to bring out an IPO are clearly commercial disputes with no element

of criminality.

4.6It was further submitted that the High Court failed to appreciate that a

mere failure to keep a promise does not create any presumption of a

dishonest intention amounting to a criminal breach of trust under Section 409

IPC or cheating under Section 420 IPC.

4.7Heavy reliance was placed on the decisions of this Court in V.Y.Jose &

Anr. Vs. State of Gujarat & Anr.

1

, Murari Lal Gupta Vs. Gopi Singh

2

; K.

Jayaram and Ors. Vs. Bangalore Development Authority & Ors.

3

; Union

of India and Ors. Vs. Shantiranjan Sarkar

4

.

Contentions on behalf of Respondents

5.Mrs. Anjana Prakash, learned senior advocate appearing on behalf of

the Respondents has vehemently submitted that the allegations contained in

the complaint disclosed all the ingredients of the alleged offences and

moreover, the criminal proceedings have not been initiated with mala fide

intention and that the complaint case filed before the magistrate of Tis Hazari

Court was not decided on merit and as such the complainant cannot be barred

from making a fresh complaint.

1 (2009) 3 SCC 78

2 (2005) 13 SCC 699

3 2021 SCC OnLine SC 1194

4 (2009) 3 SCC 90

9

5.1It was further submitted that the complaint at Kolkata had been filed

only after the prayer u/s 156(3) Cr.P.C was rejected by the Delhi Court on

28.02.2013 in order to avail legal remedies available and when the Calcutta

Court on 08.03.2016 allowed further investigation, the Respondent in order to

avoid multiplicity of proceedings, withdrew the complaint in Delhi on

09.09.2016.

5.2It was further submitted that it is an established proposition of law that

two complaints can co-exist simultaneously if the scope of two complaints are

different. Reliance in support of the contention was placed on the judgment

of this Court in K. Jagadish Vs. Udaya Kumar G.S. & Anr.

5

, wherein it was

reiterated that two remedies ie. civil and criminal are not mutually exclusive

but can co-exist since they essentially differ in their context and consequence.

5.3It was also submitted that the established principle of quashing is that at

the stage of cognizance all that a Court is required to see if prima facie an

offence is made out and courts should restrain itself from throttling legitimate

prosecutions at the threshold and the law should be allowed to take its course.

Substantiating the same, it was submitted that the complainant has made a

specific allegation that on inducement of the accused persons, he had parted

with 2.50 crore on a false promise that they would be allotted shares in the

company. On 29.02.2008, a false statement was made by the accused

persons that the complainant had been allotted the shares, whereas it

5

(2020) 14 SCC 552

10

transpired that the resolution about the allotment of shares was taken only on

23.03.2009 that is one year later.

5.4 Strong reliance was placed on the decisions of this Court in V. Ravi

Kumar Vs. State and Ors.

6

; Indian Oil Corporation Vs. NEPC India Ltd. &

Ors.

7

; A.V. Mohan Rao & Anr. Vs. M Kishan Rao & Anr.

8

; K. Jagadish

(Supra).

6.We have carefully considered the submissions made at the Bar and

perused the materials placed on record.

7.Predominantly, the Indian Judiciary has time and again reiterated that

forum shopping take several hues and shades but the concept of ‘forum

shopping’ has not been rendered an exclusive definition in any Indian statute.

Forum shopping as per Merriam Webster dictionary is:-

“The practice of choosing the court in which to bring an action

from among those courts that could properly exercise

jurisdiction based on determination of which court is likely to

provide the most favourable outcome”

8.The Indian judiciary’s observation and obiter dicta has aided in

streamlining the concept of forum shopping in the Indian legal system. This

Court has condemned the practice of forum shopping by litigants and termed it

6

(2019) 14 SCC 568

7

(2006) 6 SCC 736

8

(2002) 6 SCC 174

11

as an abuse of law and also deciphered different categories of forum

shopping.

9.A two-Judge bench of this Court in Union of India & Ors. Vs. Cipla

Ltd. & Anr.

9

has laid down factors which lead to the practice of forum

shopping or choice of forum by the litigants which are as follows:-

“148. A classic example of forum shopping is when litigant

approaches one Court for relief but does not get the desired

relief and then approaches another Court for the same

relief. This occurred in Rajiv Bhatia Vs. Govt. of NCT of

Delhi and Others

10

. The respondent-mother of a young

child had filed a petition for a writ of habeas corpus in the

Rajasthan High Court and apparently did not get the

required relief from that Court. She then filed a petition in

the Delhi High Court also for a writ of habeas corpus and

obtained the necessary relief. Notwithstanding this, this

Court did not interfere with the order passed by the Delhi

High Court for the reason that this Court ascertained the

views of the child and found that she did not want to even

talk to her adoptive parents and therefore the custody of the

child granted by the Delhi High Court to the respondent-

mother was not interfered with. The decision of this Court is

on its own facts, even though it is a classic case of forum

shopping.

149. In Arathi Bandi v. Bandi Jagadrakshaka Rao &

Ors.

11

this Court noted that jurisdiction in a Court is not

attracted by the operation or creation of fortuitous

circumstances. In that case, circumstances were created by

one of the parties to the dispute to confer jurisdiction on a

particular High Court. This was frowned upon by this Court

by observing that to allow the assumption of jurisdiction in

created circumstances would only result in encouraging

forum shopping.

150. Another case of creating circumstances for the

purposes of forum shopping was World Tanker Carrier

9 (2017) 5 SCC 262

10

(1999) 8 SCC 525

11 (2013) 15 SCC 790

12

Corporation v. SNP Shipping Services Pvt. Ltd. and

others

12

wherein it was observed that the

respondent/plaintiff had made a deliberate attempt to bring

the cause of action namely a collision between two vessels

on the high seas within the jurisdiction of the Bombay High

Court. Bringing one of the vessels to Bombay in order to

confer jurisdiction on the Bombay High Court had the

character of forum shopping rather than anything else.

151. Another form of forum shopping is taking advantage

of a view held by a particular High Court in contrast to a

different view held by another High Court. In Ambica

Industries v. Commissioner of Central Excise (2007) 6 SCC

769 the assesse was from Lucknow. It challenged an order

passed by the Customs, Excise and Service Tax Appellate

Tribunal (the CESTAT) located in Delhi before the Delhi

High Court. The CESTAT had jurisdiction over the States of

Uttar Pradesh, NCT of Delhi and Maharashtra. The Delhi

High Court did not entertain the proceedings initiated by the

assessee for want of territorial jurisdiction. Dismissing the

assessee’s appeal this Court gave the example of an

assessee affected by an assessment order in Bombay

invoking the jurisdiction of the Delhi High Court to take

advantage of the law laid down by the Delhi High Court or

an assessee affected by an order of assessment made at

Bombay invoking the jurisdiction of the Allahabad High

Court to take advantage of the law laid down by it and

consequently evade the law laid down by the Bombay High

Court. It was said that this could not be allowed and

circumstances such as this would lead to some sort of

judicial anarchy.

155. The decisions referred to clearly lay down the

principle that the court is required to adopt a functional test

vis-à-vis the litigation and the litigant. What has to be seen

is whether there is any functional similarity in the

proceedings between one court and another or whether

there is some sort of subterfuge on the part of a litigant. It is

this functional test that will determine whether a litigant is

indulging in forum shopping or not.”

12 (1998) 5 SCC 310

13

10.Forum shopping has been termed as disreputable practice by the courts

and has no sanction and paramountcy in law. In spite of this Court

condemning the practice of forum shopping, Respondent No. 2 filed two

complaints i.e., a complaint u/s 156(3) Cr.P.C before the Tis Hazari Court,

New Delhi on 06.06.2012 and a complaint which was eventually registered as

FIR No. 168 u/s 406, 420, 120B IPC before PS Bowbazar, Calcutta on

28.03.2013. ie., one in Delhi and one complaint in Kolkata. The Complaint

filed in Kolkata was a reproduction of the complaint filed in Delhi except with

the change of place occurrence in order to create a jurisdiction.

11.A two-Judge bench of this Court in Krishna Lal Chawla & Ors. Vs.

State of U.P. & Anr.

13

observed that multiple complaints by the same party

against the same accused in respect of the same incident is impermissible. It

held that Permitting multiple complaints by the same party in respect of the

same incident, whether it involves a cognizable or private complaint offence,

will lead to the accused being entangled in numerous criminal proceedings. As

such he would be forced to keep surrendering his liberty and precious time

before the police and the courts, as and when required in each case.

12.The legality of the second FIR was extensively discussed by this Court

in T.T. Antony Vs. State of Kerala & Ors.

14

. It was held that there can be no

second FIR where the information concerns the same cognisable offence

13 (2021) 5 SCC 435

14 (2001) 6 SCC 181

14

alleged in the first FIR or the same occurrence or incident which gives rise to

one or more cognizable offences. It was further held that once an FIR

postulated by the provisions of Section 154 of Cr.P.C has been recorded, any

information received after the commencement of investigation cannot form the

basis of a second FIR as doing so would fail to comport with the scheme of

the Cr.P.C. The Court further held that barring situations in which a counter-

case is filed, a fresh investigation or a second FIR on the basis of the same or

connected cognizable offence would constitute an "abuse of the statutory

power of investigation" and may be a fit case for the exercise of power either

under Section 482 of Cr.P.C or Articles 226/227 of the Constitution of India

13.A two-Judge bench of this Court in K. Jayaram and Ors. Vs.

Bangalore Development Authority & Ors.

15

observed:

“16. It is necessary for us to state here that in order to

check multiplicity of proceedings pertaining to the same

subject-matter and more importantly to stop the menace of

soliciting inconsistent orders through different judicial

forums by suppressing material facts either by remaining

silent or by making misleading statements in the pleadings

in order to escape the liability of making a false statement,

we are of the view that the parties have to disclose the

details of all legal proceedings and litigations either past or

present concerning any part of the subject-matter of

dispute which is within their knowledge. In case, according

to the parties to the dispute, no legal proceedings or court

litigations was or is pending, they have to mandatorily

state so in their pleadings in order to resolve the dispute

between the parties in accordance with law.”

15 2021 SCC OnLine SC 1194

15

14.The genesis of the present appeal originates from the impugned order

pronounced by the High Court whereby the High Court dismissed the

application filed under Section 482 as well as 401 Cr.P.C. Taking that into

concern, it is necessary to advert to the principles settled by judicial

pronouncements laying down the circumstances under which High Court can

exercise its inherent powers under Section 482 Cr.P.C.

15.This Court in the widely celebrated judgment of State of Haryana &

Ors. Vs. Bhajan Lal & Ors.

16

considered in detail the scope of the High Court

powers under Section 482 Cr.P.C. and/or Article 226 of the Constitution of

India to quash the FIR and referred to several judicial precedents and held

that the High Court should not embark upon an inquiry into the merits and

demerits of the allegations and quash the proceedings without allowing the

investigating agency to complete its task. At the same time, this Court

identified the following cases in which FIR/complaint can be quashed:

“102. (1) Where the allegations made in the first

information report or 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 a case

against the accused.

(2) Where the allegations in the first information report and

other materials, if any, accompanying the FIR do not

disclose a cognizable offence, justifying an investigation by

police officers under Section 156(1) of the Code except

under an order of a Magistrate within the purview of

Section 155(2) of the Code.

(3) Where the uncontroverted allegations made in the FIR

or complaint and the evidence collected in support of the

16 1992 Supp (1) SCC 335

16

same do not disclose the commission of any offence and

make out a case against the accused.

(4) Where the allegations in the FIR do not constitute a

cognizable offence but constitute only a non-cognizable

offence, no investigation is permitted by a police officer

without an order of a Magistrate as contemplated under

Section 155(2) of the Code.

(5) Where the allegations made in the FIR or complaint are

so absurd and inherently improbable on the basis of which

no prudent person can ever reach a just conclusion that

there is sufficient ground for proceeding against the

accused.

(6) Where there is an express legal bar engrafted in any of

the provisions of the Code or the Act concerned (under

which a criminal proceeding is instituted) to the institution

and continuance of the 21 proceedings and/or where there

is a specific provision in the Code or the Act concerned,

providing efficacious redress for the grievance of the

aggrieved party.

(7) Where a criminal proceeding is manifestly attended with

mala fide and/or where the proceeding is maliciously

instituted with an ulterior motive for wreaking vengeance on

the accused and with a view to spite him due to private and

personal grudge.”

16.This Court in R.P. Kapur Vs. State of Punjab

17

summarized categories

of cases where inherent power can and should be exercised to quash the

proceedings:-

(i) Where it manifestly appears that there is a legal bar against the

institution or continuance e.g. want of sanction;

17

(1960) 3 SCR 388

17

(ii) Where the allegations in the first information report or complaint

taken at its face value and accepted in their entirety do not

constitute the offence alleged;

(iii) Where the allegations constitute an offence, but there is no legal

evidence adduced or the evidence adduced clearly or

manifestly fails to prove the charge.

17.This Court in Inder Mohan Goswami & Anr. Vs. State of Uttaranchal

& Ors.

18

observed:-

“27. The powers possessed by the High Court

under Section 482 of the Code are very wide and the very

plenitude of the power requires great caution in its

exercise. The court must be careful to see that its decision

in exercise of this power is based on sound principles. The

inherent power should not be exercised to stifle a

legitimate prosecution. The High Court should normally

refrain from giving a prima facie decision in a case where

all the facts are incomplete and hazy; more so, when the

evidence has not been collected and produced before the

court and the issues involved, whether factual or legal, are

of such magnitude that they cannot be seen in their true

perspective without sufficient material. Of course, no hard

and fast rule can be laid down in regard to cases in which

the High Court will exercise its extraordinary jurisdiction of

quashing the proceedings at any stage”

18.In Indian Oil Corpn. v NEPC India Ltd. & Ors.

19

, a two-judge Bench of

this Court reviewed the precedents on the exercise of jurisdiction under

18

(2007) 12 SCC 1

19 (2006) 6 SCC 736

18

Section 482 of the Code of Criminal Procedure 1973 and formulated guiding

principles in the following terms:

“12. … (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. 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) ..”

19

19.A two-Judge Bench of this Court in State of Madhya Pradesh Vs.

Awadh Kishore Gupta & Ors.

20

made the following observation :-

“11. The powers possessed by the High Court

under Section 482 of the Code are very wide and the very

plenitude of the power requires great caution in its

exercise. Court must be careful to see that its decision in

exercise of this power is based on sound principles. The

inherent power should not be exercised to stifle a legitimate

prosecution. High Court being the highest Court of a State

should normally refrain from giving a prima facie decision in

a case where the entire facts are incomplete and hazy,

more so when the evidence has not been collected and

produced before the Court and the issues involved,

whether factual or legal, are of magnitude and cannot be

seen in their true perspective without sufficient material. Of

course, no hard and fast rule can be laid down in regard to

cases in which the High Court will exercise its extraordinary

jurisdiction of quashing the proceeding at any stage.

In proceeding instituted on complaint, exercise of the

inherent powers to quash the proceedings is called for only

in a case where the complaint does not disclose any

offence or is frivolous, vexatious or oppressive. If the

allegations set out in the complaint do not constitute the

offence of which cognizance has been taken by the

Magistrate, it is open to the High Court to quash the same

in exercise of the inherent powers under Section 482 of the

Code.”

20.This Court in G. Sagar Suri & Anr. Vs. State of UP & Ors.

21

observed

that it is the duty and obligation of the criminal court to exercise a great deal of

caution in issuing the process, particularly when matters are essentially of civil

nature.

20

(2004) 1 SCC 691

21 (2000) 2 SCC 636

20

21.This Court has time and again cautioned about converting purely civil

disputes into criminal cases. This Court in Indian Oil Corporation (Supra)

noticed the prevalent impression that civil law remedies are time consuming

and do not adequately protect the interests of lenders/creditors. The Court

further observed that:-

“13. …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.”

22.At the outset, Respondent No. 2/Complainant alleged that the

Appellants were responsible for the offence punishable under Section 420,

405, 406, 120B IPC. Therefore, it is also imperative to examine the ingredients

of the said offences and whether the allegations made in the complaint, read

on their face, attract those offences under the Penal Code.

23.Section 405 of IPC defines Criminal Breach of Trust which reads 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 wilfully suffers any other person so to do, commits

“criminal breach of trust”.

21

The essential ingredients of the offense of criminal breach of

trust are:-

(1) The accused must be entrusted with the property or with

dominion over it,

(2) The person so entrusted must use that property, or;

(3) The accused must dishonestly use or dispose of that

property or wilfully suffer any other person to do so in violation,

(a) of any direction of law prescribing the mode in which

such trust is to be discharged, or;

(b) of any legal contract made touching the discharge of

such trust.

24.“Entrustment” of property under Section 405 of the Indian Penal Code,

1860 is pivotal to constitute an offence under this. The words used are, ‘in any

manner entrusted with property’. So, it extends to entrustments of all kinds

whether to clerks, servants, business partners or other persons, provided they

are holding a position of ‘trust’. 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.

25.The definition in the section does not restrict the property to movables

or immoveable alone. This Court in R K Dalmia vs Delhi Administration

22

held that the word ‘property’ is used in the Code in a much wider sense than

the expression ‘moveable property’. There is no good reason to restrict the

22 (1963) 1 SCR 253

22

meaning of the word ‘property’ to moveable property only when it is used

without any qualification in Section 405.

26.In Sudhir Shantilal Mehta Vs. CBI

23

it was observed that the act of

criminal breach of trust would, Interalia mean using or disposing of the

property by a person who is entrusted with or has otherwise dominion

thereover. Such an act must not only be done dishonestly but also in violation

of any direction of law or any contract express or implied relating to carrying

out the trust.

27.Section 415 of IPC define cheating which reads 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”.”

The essential ingredients of the offense of cheating are:

1.Deception of any person

2.(a) Fraudulently or dishonestly inducing that person-

(i)to deliver any property to any person: or

(ii)to consent that any person shall retain any property; or

(b) intentionally inducing that person to do or omit to do anything which

he would not do or omit if he were no so deceived, and which act or

23 (2009) 8 SCC 1

23

omission causes or is likely to cause damage or harm to that person in

body,mind,reputation or property.

28.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.

29.Section 420 IPC defines cheating and dishonestly inducing delivery of

property which reads as under: -

“420. Cheating and dishonestly inducing delivery of

property. —Whoever cheats and thereby dishonestly

induces the person deceived to deliver any property to any

person, or to make, alter or destroy the whole or any part

of a valuable security, or anything which is signed or

sealed, and which is capable of being converted into a

valuable security, shall be punished with imprisonment of

either description for a term which may extend to seven

years, and shall also be liable to fine.”

30.Section 420 IPC is a serious form of cheating that includes inducement

(to lead or move someone to happen) in terms of delivery of property as well

as valuable securities. This section is also applicable to matters where the

destruction of the property is caused by the way of cheating or inducement.

Punishment for cheating is provided under this section which may extend to 7

years and also makes the person liable to fine.

24

31.To establish the offence of Cheating in inducing the delivery of property,

the following ingredients need to be proved:-

1.The representation made by the person was false

2.The accused had prior knowledge that the representation he made was

false.

3.The accused made false representation with dishonest intention in order

to deceive the person to whom it was made.

4.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.

32.As observed and held by this Court in the case of Prof. R.K.

Vijayasarathy & Anr. Vs. Sudha Seetharam & Anr.

24

, the ingredients to

constitute an offence under Section 420 are as follows:-

i)a person must commit the offence of cheating under Section 415;

and

ii)the person cheated must be dishonestly induced to;

a) deliver property to any person; or

b) make, alter or destroy valuable security or anything signed or

24

(2019) 16 SCC 739

25

sealed and capable of being converted into valuable security. Thus,

cheating is an essential ingredient for an act to constitute an offence

under Section 420 IPC.

33.The following observation made by this Court in the case of Uma

Shankar Gopalika Vs. State of Bihar & Anr.

25

with almost similar facts and

circumstances may be relevant to note at this stage:-

“6. Now the question to be examined by us is as to

whether on the facts disclosed in the petition of the

complaint any criminal offence whatsoever is made out

much less offences under Section 420/120-B IPC. The

only allegation in the complaint petitioner against the

accused person is that they assured the complainant that

when they receive the insurance claim amounting to Rs.

4,20,000, they would pay a sum of Rs. 2,60,000 to the

complainant out of that but the same has never been

paid. It was pointed out that on behalf of the complainant

that the accused fraudulently persuaded the complainant

to agree so that the accused persons may take steps for

moving the consumer forum in relation to the claim of Rs.

4,20,0000. It is well settled that every breach of contract

would not give rise to an offence of cheating and only in

those cases of breach of contract would amount to

cheating where there was any deception played at the

very inception. If the intention to cheat has developed

later on, the same cannot amount to cheating. In the

present case, it has nowhere been stated that at the very

inception that there was intention on behalf of the

accused person to cheat which is a condition precedent

for an offence under 420 IPC.

“7. In our view petition of complaint does not disclose any

criminal offence at all much less any offence either under

Section 420 or Section 120-B IPC and the present case is

a case of purely civil dispute between the parties for

which remedy lies before a civil court by filing a properly

constituted suit. In our opinion, in view of these facts

25 (2005) 10 SCC 336

26

allowing the police investigation to continue would

amount to an abuse of the process of court and to

prevent the same it was just and expedient for the High

Court to quash the same by exercising the powers under

Section 482 Cr.P.C which it has erroneously refused.”

34.There can be no doubt that a mere breach of contract is not in itself a

criminal offence and gives rise to the civil liability of damages. However, as

held by this court in Hridaya Ranjan Prasad Verma & Ors. Vs. State of

Bihar & Anr.

26

, the distinction between mere breach of contract and cheating,

which is criminal offence, is a fine one. While breach of contract cannot give

rise to criminal prosecution for cheating, fraudulent or dishonest intention is

the basis of the offence of cheating. In the case at hand, complaint filed by the

Respondent No. 2 does not disclose dishonest or fraudulent intention of the

appellants.

35.In Vesa Holdings Pvt. Ltd. & Anr. Vs. State of Kerala & Ors.

27

, this

Court made the following observation:-

“13. It is true that a given set of facts may make out a civil

wrong as also a criminal offence and only because a civil

remedy may be available to the complainant that itself

cannot be ground to quash a criminal proceeding. The real

test is whether the allegations in the complaint disclose the

criminal offence of cheating or not. In the present case,

there is nothing to show that at the very inception there was

any inception on behalf of an accused person to cheat

which is a condition precedent for an offence u/s 420 IPC. In

our view, the complaint does not disclose any criminal

offence at all. Criminal proceedings should not be

26

(2000) 4 SCC 168

27

(2015) 8 SCC 293

27

encouraged when it is found to be mala fide or otherwise an

abuse of the process of the courts. Superior courts while

exercising this power should also strive to serve the ends of

justice. In our opinion, in view of these facts allowing the

police investigation to continue would amount to an abuse of

the process of the court and the High Court committed an

error in refusing to exercise the power under Section 482

Cr.P.C to quash the proceedings.”

36.Having gone through the complaint/FIR and even the chargesheet, it

cannot be said that the averments in the FIR and the allegations in the

complaint against the appellant constitute an offence under Section 405 & 420

IPC, 1860. Even in a case where allegations are made in regard to failure on

the part of the accused to keep his promise, in the absence of a culpable

intention at the time of making promise being absent, no offence under

Section 420 IPC can be said to have been made out. In the instant case,

there is no material to indicate that Appellants had any malafide intention

against the Respondent which is clearly deductible from the MOU dated

20.08.2009 arrived between the parties.

37.The entire origin of the dispute emanates from an investment made by

Respondent No. 2, amounting to Rs. 2.5 crores in lieu of which 2,50,000/-

equity shares were issued in the year 25.03.2008, finally culminating into the

MOU dated 20.08.2009. That based on this MOU respondent No. 2 filed three

complaints, two at Delhi and one at Kolkata. Thus, two simultaneous

proceedings, arising from the same cause of action i.e. MOU dated

28

20.08.2009 were initiated by Respondent No. 2 amounting to an abuse of the

process of the law which is barred. The details of the complaints are as

under:-

1.On 06.06.2012, Respondent No. 2 filed a private complaint u/s 156(3)

Cr.P.C with CJM, Tis Hazari Court Delhi for registration of fir against the

Appellants; which was withdrawn on 19.09.2016.

2.Complaint u/s 68 of the companies act r/w section 200 crpc filed before

the CMM, Tis Hazari Courts at Delhi; which is pending.

3.On 28.03.2013, a complaint was made to the P.S Bowbazar, Central

Division, Kolkata which was eventually registered as FIR No. 168 u/s

406, 420, 120B IPC, 1860.

38.Respondent No. 2 filed a complaint u/s 156(3) Cr.P.C on 06.06.2012,

wherein his prayer for registration of an FIR was rejected vide order dated

28.02.2013 by the MM, Tis Hazari Court, immediately after which he filed his

complaint on 28.03.2013 at P.S Bowbazar, Calcutta. The timeline of filing

complaints clearly indicates the malafide intention of Respondent No. 2 which

was to simply harass the petitioners so as to pressurise them into shelling out

the investment made by Respondent No. 2.

Malafide intention of Respondent No. 2 is culled out from following facts:-

1.At the time of filing of complaint dated 31.03.2013 at PS Bowbazar,

Respondent No. 2 did not disclose about the filing of two complaints at

Delhi against the appellants.

29

2.After filing of closure report by the IO Bowbazar PS dated 04.03.2014,

Respondent No. 2 filed a protest petition before the CMM, Kolkata

where the material fact of two complaints was completely suppressed.

39.In the complaint no. 306/1/2012 dated 06.06.2012 registered before the

MM, Tis Hazari Court, New Delhi, Respondent No. 2/complainant stated that:-

“(c) That, thereafter Mr. Vijay Kumar Ghai and Mr. Mohit

Ghai started visiting the office of the complainant company

every now and then in order to persuade the complainant

company to invest in their company. It is pertinent to

mention herein that they stated the complainant company

that the retail business of the apparels under the PRIKNIT

brand through a network of exclusive brank outlets was

witnessing a growth..”

10. That it is submitted that this court has jurisdiction to try

and entertain the matter as the complainant company is

situated within the jurisdiction of this court. Moreover, all

the business activities/transactions are being

regulated and controlled at Delhi. Furthermore, the

complaints filed by the complainant company are lying

before the concerned police station, which also falls within

the jurisdiction of this Hon’ble Court.”

This clearly demonstrates that the jurisdiction has been created in Delhi as the

Appellants used to visit Respondent No. 2 in order to persuade them to invest

in their company and special emphasis can be laid on the fact that

Respondent No. 2 himself accepted/agreed to the fact that all the transactions

took place in Delhi. Therefore, registering a complaint in Kolkata is way of

harassing the appellant as a complaint has already been filed in Delhi with all

the necessary facts, apart from the jurisdictional issue at Kolkata.

30

40.The MM, Tis Hazari while dismissing the application under Section

156(3) Cr.P.C categorically observed that:-

“….In case the complainant had suffered any loss on

account of the same, the necessary civil remedy lied in the

form of damages, compensation and recovery. In case of

breach of any term or condition of the contract, the

necessary proceedings for injunction or specific

performance can be initiated. But that by itself would not

mean that the accused had misappropriated the amount of

complainant for a year. There is nothing to show any

conversion or misappropriation of money as the shares

had been allotted subsequently. The parties have

themselves agreed on clauses as to failure to honor their

commitments providing for levy of interest on delayed

payments.

There is no prima facie element of deception or dishonest

inducement or misappropriation or conversion or

entrustment or forgery in this case.

There is no requirement of police interference in this case.

Even otherwise, the evidence in the present case is well

within the reach of the complainant itself and it is well

aware of the identity of accused persons and no

investigation of technical nature is required which could

warrant police intervention. The necessary record is

withing the possession of the complainant itself and the

same can always be proved on record by examining the

witnesses. There is no necessity of any custodial

interrogation at this stage and nothing identifiable is to be

recovered from anyone.

In these circumstances, I do not deem it appropriate to

exercise my discretion and get the FIR registered against

the accused persons, especially when there is no

necessity for police interference. The present application

under Section 156(3) Cr.P.C is thus dismissed.”

41.It is pertinent to mention that Application under Section 156(3) Cr.P.C

filed before the MM, Tis Hazari Court, Delhi was dismissed and there was no

31

further challenge against the same. Instead, Respondent No. 2 chose to file a

complaint with the same cause of action in Bowbazar PS, Calcutta and to

further clarify, the Complaint filed in Bowbazar PS was the exact reproduction

of the complaint filed before Tis Hazari Court, New Delhi with the only

difference or what may be termed as ‘Jurisdictional improvement’ being in

point (c) of the facts. It is reproduced in bold below:-

“(c) That, thereafter Mr. Vijay Kumar Ghai and Mr. Mohit

Ghai started visiting the office and regional office of the

complainant company every now and then in order to

persuade the complainant company to invest in their

company...”

10. That the facts mentioned above clearly disclose the

commission of cognizable offences under Sections of the

Indian Penal Code mentioned herein. That the accused

persons approached the regional office too to

persuade the head office for the aforesaid purposes

therefore the cause of action also arose the local

jurisdiction.”

42. The order of the High Court is seriously flawed due to the fact that in

its interim order dated 24.03.2017, it was observed that the contentions put

forth by the Appellant vis-à-vis two complaints being filed on the same cause

of action at different places but the impugned order overlooks the said aspect

and there was no finding on that issue. At the same time, in order to attract the

ingredients of Section of 406 and 420 IPC it is imperative on the part of the

complainant to prima facie establish that there was an intention on part of the

petitioner and/or others to cheat and/or to defraud the complainant right from

the inception. Furthermore it has to be prima facie established that due to

32

such alleged act of cheating the complainant (Respondent No. 2 herein) had

suffered a wrongful loss and the same had resulted in wrongful gain for the

accused(appellant herein). In absence of these elements, no proceeding is

permissible in the eyes of law with regard to the commission of the offence

punishable u/s 420 IPC. It is apparent that the complaint was lodged at a very

belated stage (as the entire transaction took place from January 2008 to

August 2009, yet the complaint has been filed in March 2013 i.e., after a delay

of almost 4 years) with the objective of causing harassment to the petitioner

and is bereft of any truth whatsoever.

43.In view of the above facts and circumstances, the impugned order dated

01.10.2019 passed by the High Court is set aside. The impugned FIR No. 168

dated 28.03.2013 and proceedings in the file of CMM, Kolkata, West Bengal in

pursuance of charge sheet dated 14.02.2017 against the appellants for the

offences under Section 406, 420, 120B IPC stands quashed.

44.As a result, appeal stands allowed.

.................................J.

(S. ABDUL NAZEER)

...............................J.

(KRISHNA MURARI)

NEW DELHI;

22

nd

MARCH, 2022

33