M/S. Modern Asset vs. State Of Karnataka

Heard Sri.Abhinay Y.T., learned counsel appearing for the petitioner, Sri.Seshu V., learned HCGP appearing for respondent No.1, Sri.Amar Correa, learned counsel appearing for respondent No.2. 3. Facts adumbrated are as follows:

The 2nd respondent is the complainant. A contract is entered into between the 2nd respondent and the petitioner for construction of a structure and other civil works ancillary to said construction. The period of completion after the contract HC-KAR NC: 2025:KHC:28737 was entered into on 9.7.2018 was 12 months which would come to an end on 31.8.2019. During the subsistence of the said contract, it transpires that the 2nd respondent communicates plethora of letters seeking permission to dispose the scrap steel which is said to have been later granted by the petitioner. The period of contract then comes to be extended till 31.12.2019. Again, the complainant is said to have requested the petitioner for removal of scaffolding material that was in the said premises for the construction. Permission is granted on 2.12.2019. Certain incidental proceedings had taken place between the 2nd respondent-complainant and other third parties which may not be necessary for this Court to advert to the same in the subject order. The contract between the petitioner and the 2nd respondent-complainant is terminated on 25.2.2020. The petitioner then files its claim before the National Company Law Tribunal. The Interim Resolution Professional is appointed and requests to demobilize the shattering material in the premises. The said permission is said to have been granted. Long thereafter, the petitioner is said to have registered a complaint against the 2nd respondent for offences punishable under sections 465 and 471 inter alia which HC-KAR NC: 2025:KHC:28737 was challenged before this court in Crl.P.No.8838/2023 which comes to be withdrawn on 5.11.2024. After the registration of the crime by the petitioner, the 2nd respondent-complainant registers the subject crime on 15.6.2023 alleging that the petitioner has not returned the steel that was with them that were in the hands of the complainant. This becomes a crime in Crime No.77/2023. The registration of the crime is what has driven the petitioner to this Court in the subject petition.

Learned counsel appearing for the petitioner Sri.Abhinay Y.T., would reiterate the contentions advanced as averments in the petition to contend that the petitioner registers the first crime against the 2nd respondent for stealing of the seals and forging the communications between the two and therefore, the said complaint becomes a crime in Crime No.20/2023, challenge to which is withdrawn. After the crime registered by the petitioner, as a counterblast, the 2nd respondent registers the crime for demand of Rs.3.17 crores worth of steel. Learned counsel further submits that the complaint is registered for recovery of money and nothing else. Learned counsel would submit that a criminal law cannot be set HC-KAR NC: 2025:KHC:28737 into motion for the purpose of recovery of money. He would further add that sections 406 and 420 of IPC cannot go hand in hand, is a settled principle of law.

Learned counsel for the respondents submits that the issue at the first blush look like an offence being civil in nature but it is settled principle of law that a given fact can give rise to both crime and the civil proceedings. He would submit that the perusal at the complaint would nowhere indicate that it is for the purpose of recovery of money. Steel has not been delivered to the complainant and therefore, the complaint is registered. He would admit the fact that the steel was not delivered in the year 2019 and several proceedings had cropped up for over four years and then in 2023, crime comes to be registered against the present petitioner-accused. He would submit that investigation in the least is necessary to be conducted in such a case where there is on the face of it cheating and breach of trust. HC-KAR NC: 2025:KHC:28737

I have given my anxious consideration to the submissions made by learned counsel for the parties and have perused the material on record.

The afore-narrated facts link in the chain of events, are a matter of record. The entire issue revolves around a contract between the petitioner and the 2nd respondent. The contract is for the purpose of construction of a structure and other ancillary constructions to be taken up by the petitioner- accused. The contract is entered into between the two. The contract also contemplates arbitration to be a mode of resolution of any dispute. The dispute which was with regard to return of steel worth Rs.3.17 crores. Therefore, the complainant causes a legal notice upon the accused. Certain paragraphs in the legal notice are germane to be noticed, they read as follows:

Please note that as our Client is an MSME under the MSME Act, you are liable to pay the total of INR 13,97,16,452/- (Indian Rupees Thirteen Crore Ninety Seven Lakh Sixteen Thousand Four Hundred and Fifty Two Only) along with compound interest with monthly rest at three times of the bank rate notified by the Reserve Bank of India, as on date. You are also due rental for our Client's equipment used by you illegally. HC-KAR NC: 2025:KHC:28737

It is evident that irreconcilable disputes have arisen between our Client and you which are solely on account of your illegal actions. Hence, under the instructions from our Client, you are hereby notified that the arbitration clause being Clause No. 19.3 of the CC is hereby invoked by our Client to adjudicate upon their claims against you and thereby resolve the disputes between our Client and you. Our Client hereby most humbly recommend the Hon'ble Mr. I. S. Antin (Retd.) to be appointed as the Ld. Sole Arbitrator in terms of the Clause No. 19.3 of the CC to conduct arbitral proceedings for resolution of all claims and disputes through the mechanism of arbitration. Our Clients hereby, also, call upon you to consent to the appointment of the recommended Ld. Sole Arbitrator and extend cooperation in the speedy resolution of our Client's claims and disputes through arbitration. Should you fail, neglect or refuse to pay our Client's dues and / or participate in the constitution of the Hon'ble Arbitral Tribunal within 30 days from the date of receipt of the present notice, our Clients shall approach the Hon'ble High Court of Karnataka seeking the requisite orders for creating the Hon'ble Arbitral Tribunal and even initiate other appropriate legal actions and proceedings against you - the risks as to the costs and consequences of which shall be borne by you alone."

2023

The Accused awarded the Complainant a contract for carrying out construction work ("Project") at Sy. No. 2/2, Venkatala Village, Yelahanka Hobli, Bengaluru 560 064 ("Project Site") further to a tender floated by them. The Accused issued a Letter of Intent ("LOI") dated 07.05.20218 and a letter of award dated 28.05.2018 ("LOA") to the Complainant. Pursuant to the LOI and LOA, a Contract Agreement dated 09.07.2018 and Conditions of Contract ("CC") were entered into with the HC-KAR NC: 2025:KHC:28737 Complainant and the Accused ("Contract Agreement") with the contract amount being INR 133,68,56,000/-. The LOI, LOA, Contract Agreement and CC are collectively referred to as "Agreement". A copy of the LOI, LOA, Contract Agreement and CC is attached as Document No. 1to 4. 5. Pursuant to the Agreement, the Complainant mobilized various material required for setting up the formwork for the construction. The formwork is the external structure / mold, based on which the concrete structure is put up. For this formwork, the Complainant mobilized at its own cost, scaffolding and shuttering material including - timber, plywood, steel etc. In addition to the same, the Complainant also mobilized heavy machinery to facilitate construction such as tower cranes for lifting and moving material at the Project Site and also laboratory equipment for carrying out certain tests, such as soil tests etc., at the Project Site. This scaffolding and shuttering material used for the formwork as well as the machinery such as tower cranes, lab equipment etc., are the sole and absolute property of the Complainant collectively referred to as "Formwork Material and Machinery"). A list of scaffolding and shuttering material mobilized for the formwork and the machinery and lab equipment mobilized to facilitate the construction is listed in Document No.

In terms of the Agreement, the Formwork Material and Machinery belongs solely to the Complainant. The Complainant kept the Formwork Material and Machinery on the Project Site and was to remove it later after completing of the Project.

The Complainant commenced work at the Project Site and carried out works in terms of the Agreement. Additionally, in terms of the Agreement, the Complainant also furnished Bank Guarantees to the Accused No.

It is relevant to note that the Complainant had completed a substantial portion of the works pursuant to the Agreement. About 95% of the works has been completed. However, the balance works could not be completed under the time period stipulated under the Agreement due to the delays in submission of drawings and changes in BOQ. Hence, the Accused and the Complainant engaged in discussions to arrive at strategy to complete the Project at the earliest.

However, in this background, and with the ulterior motive and design of unjustly, unfairly and illegally enriching themselves at the cost of the Complainant, the Accused illegally terminated the Agreement without making full payments to the Complainant as required under the Agreement. The Accused were well aware that about 95% of the works had been completed and were also aware that a substantial amount of Formwork Material and Machinery, and steel wastage was at the Project Site. Hence, they terminated the Agreement without any cause, as part of their plan to misappropriate the aforesaid materials and machinery belonging to the Complainant at the Project Site, refuse to pay moneys lawfully due and cause wrongful loss to the Complainant.

Consequent to the illegal termination, the Accused committed several illegal and fraudulent actions including encashing bank guarantees etc. Additionally, the Complainant was blatantly denied entry to the Project Site by the Accused to remove the Formwork Material and Machinery. The Complainant repeatedly requested the Accused to permit them to remove Formwork Material and Machinery from the Project Síte. Several emails were sent by the Complainant in this regard. However, the Accused refused to let the Complainant and its representatives enter the Project Site. Further they HC-KAR NC: 2025:KHC:28737 even refused to reply to any of the Complainant's emails. True Copies of the emails issued by the Complainant to the Accused are annexed with this Complaint as Document No. 6. 11. The Accused, by preventing the Complainant from entering the Project Site and taking out their Formwork Material and Machinery, has dishonestly removed a portion of the Formwork Material and Machinery from the Project Site without the knowledge, intimation, or consent of the Complainant.

Further, the Accused has also been using some of the Formwork Material and Machinery belonging to the Complainant for their own use. The Accused has thereby dishonestly misappropriated a portion of the Formwork Material and Machinery and converted the balance portion of the Formwork Material and Machinery for their own use. In terms of the Agreement, the Formwork Material and Machinery brought to the Project Site to enable the Complainant to carry out construction work at the Project Site. The Formwork Material and Machinery was brought to the Project Site by the Complainant under the bona fide belief that the Accused would permit them to remove the said Formwork Material and Machinery either once construction was completed or upon closure of the Agreement. The Complainant trusted the Accused. It was also the understanding under the Agreement that the Complainant would be permitted to remove the Formwork Material and Machinery once construction was completed / on closure of the Agreement. The Accused has dishonestly misappropriated the Formwork Material and Machinery and also converted part of the Formwork Material and Machinery for their own use, in complete contravention to the Agreement as well.

It is relevant to point out that the Accused was insistent and adamant on supplying the steel required by the Complainant to carry out construction for the Project. HC-KAR NC: 2025:KHC:28737 Hence, the Complainant had agreed to purchase steel from the Accused. The Accused also insisted on withholding 2.5% of the amount payable towards steel consumed by the Complainant for the Project from the Running Account (RA) bills towards potential wastage on the express understanding that the same would be reconciled at the time of submission of the final bill. It was agreed and understood under the Agreement that at the time of submission of the final bill, a joint measurement of the steel would be carried out in the presence of the Complainant in order to assess the actual wastage of steel and accordingly reconcile the same.

The wastage of steel generated during the work done by the Complainant was around 283 MT. In terms of the Agreement, it was expressly agreed that the steel wastage would be the property of the Complainant. Hence, the steel wastage of 283 MT was the property of the Complainant. Out of this 283 MT of steel wastage, the Accused approached the Complainant for sale of 165.53 MT of the steel wastage as the Accused had a buyer in mind. However, the Accused surreptitiously and dishonestly misappropriated the 118MT of steel wastage for their own benefit by selling the same without the Complainant's knowledge and express consent. The Accused was fully aware that the steel wastage was the sole property of the Complainant. The Accused has dishonestly misappropriated the steel wastage and has caused huge losses to the Complainant. The Accused has deliberately, dishonestly and illegally sold the steel wastage. The Accused, as part of their dishonest scheme to misappropriate the steel wastage and monies from the sale of the same, deliberately sold the steel with the motive of making unfair gains.

The Accused deceived and fraudulently induced the Complainant into purchasing steel from them for carrying works at the Project. It is evident from their conduct that the Accused neither intended on allowing the Complainant to take back the steel wastage. It is evident that this dishonest and malicious intention of the Accused has been prevalent right from the time of entering into the Agreement with the Complainant. The Accused, with dishonest and malicious intentions, HC-KAR NC: 2025:KHC:28737 fraudulently induced the Complainant to purchase steel from them, with no intention of allowing the Complainant to recover the steel wastage (which is the sole and absolutely property of the Complainant) or releasing the 2.5% of the amount payable towards steel consumed by the Complainant from the RA bills. In furtherance to their illegal device, the Accused sold the steel wastage without the knowledge and consent of the Complainant with the malicious and dishonest intentions of causing severe loss to the Complainant for their benefit.

The Form Work Material and Steel belongs to us and are approximately valued at Rs.3,17,12,482/-. Our property has been misappropriated and stolen for the personal gain of the Accused. Such brazen actions of the Accused are shocking to bona fide business entities such as ours that entrust material to those we work with, in good faith. The Accused have, by way of the Agreement, brought us and our material on site, misused our faith and sold our material without our knowledge or consent. The accused are guilty of theft and ought to be penalized for the same.

Therefore, in light of what has been stated above, the Accused No. 1 through its Partners (particularly the Accused No.1) has committed the offence of theft, dishonest misappropriation of property, criminal breach of trust and cheating. These matters constitute criminal offences committed by the Accused No.1 and the Partners. The Accused No.1 and its Partners are liable to be investigated, charged, prosecuted, convicted and punished for inter-alia theft, dishonest misappropriation of property, criminal breach of trust and cheating.

In view of all the foregoing and more, the Complainant is constrained to approach your good selves to immediately intervene in the matter and protect the interests of the Complainant. It is most respectfully prayed that your good selves be pleased to forthwith register F.I.R., conduct HC-KAR NC: 2025:KHC:28737 investigation and prosecute the Accused for their criminalities. Without your immediate intervention in the matter, it is highly likely that severe harm and irreparable damage shall be suffered by the Complainant.

Pursuant to the investigation, as more information and material comes to light, if it is found that the Accused have committed more offences which are also punishable under other provisions of law, the Complainant requests your good selves to take action accordingly as per law. Şimilarly, pursuant to the investigation, if it is found that there are one or more Accused in addition to the Accused who have committed offences which are punishable under law, the Complainant requests your good selves to take action accordingly as per law.

The Complainant also requests you to seal the Project Site being Sy. No. 2/2, Venkatala Village, Yelahanka Hobli, Bengaluru 560 064 and the building constructed thereon as the Project Site contains property that is stolen / subject to, criminal misappropriation of property and criminal breach of trust.

Please note that the foregoing contents are neither intended nor shall the same be construed as a complete recitation of the facts and events concerning the above- referenced matter. Please further note that the present complaint is being lodged without prejudice to any of the Complainant's rights, remedies, claims, contentions, legal and/or equitable, which I have.

Learned counsel for the petitioner would seriously dispute that the steel is with them and had to be returned to the complainant. Be that as it may. What unmistakably emerges from the notice and the complaint so registered is that the criminal law is set into motion for the purpose of recovery of steel, in turn recovery of money. Whether criminal proceedings could be initiated for the purpose of recovery of money, need not detain this court for long or delve deep into the matter. HC-KAR NC: 2025:KHC:28737

The Apex Court in the case of LALIT CHATURVEDI vs. STATE OF UTTAR PRADESH1, has held as follows:

After the investigation, the police has filed the charge sheet under Section 173 of the Criminal Procedure Code, 1973 (for short “Cr.P.C.), which verbatim reproduces the complaint and, thereupon, refers to the fact that the appellants, namely, Lalit Chaturvedi, Mukesh Sharma and Manoj Chaturvedi have approached the High Court of Judicature at Allahabad and obtained an order granting stay of arrest. Thereafter, it is recorded as under:—

This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, non- payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC. Repeated judgments of this Court, however, are somehow

In “Mohammed Ibrahim v. State of Bihar” (2009) 8 SCC 751, this Court had referred to Section 420 of the IPC, to observe that in order to constitute an offence under the said section, the following ingredients are to be satisfied:— “18. Let us now examine whether the ingredients of an offence of cheating are made out. The essential ingredients of the offence of “cheating” are as follows: (i) deception of a person either by making a false or misleading representation or by dishonest concealment or by any other act or omission; (ii) fraudulent or dishonest inducement of that person to either deliver any property or to consent to the retention thereof by any person or to intentionally induce that person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) such act or omission causing or is likely to cause damage or harm to that person in body, mind, reputation or property.

To constitute an offence under section 420, there should not only be cheating, but as a consequence of such cheating, the accused should have dishonestly induced the person deceived (i) to deliver any property to any person, or (ii) to make, alter or destroy wholly or in part a valuable security (or anything signed or sealed and which is capable of being converted into a valuable security).”

Similar elucidation by this Court in “V.Y. Jose v. State of Gujarat” (2009) 3 SCC 78., explicitly states that a contractual dispute or breach of contract per se should not lead to initiation of a criminal proceeding. The ingredient of ‘cheating’, as defined under Section 415 of the IPC, is existence of a HC-KAR NC: 2025:KHC:28737 fraudulent or dishonest intention of making initial promise or representation thereof, from the very beginning of the formation of contract. Further, in the absence of the averments made in the complaint petition wherefrom the ingredients of the offence can be found out, the High Court should not hesitate to exercise its juri iction under Section 482 of the Cr. P.C. Section 482 of the Cr. P.C. saves the inherent power of the High Court, as it serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years, when no criminal offence is made out. It is one thing to say that a case has been made out for trial and criminal proceedings should not be quashed, but another thing to say that a person must undergo a criminal trial despite the fact that no offence has been made out in the complaint. This Court in V.Y. Jose (supra) placed reliance on several earlier decisions in “Hira Lal Hari Lal Bhagwati v. CBI” (2003) 5 SCC 257, “Indian Oil Corporation v. NEPC India Ltd.” (2006) 6 SCC 736, “Vir Prakash Sharma v. Anil Kumar Agarwal” (2006) 6 SCC 736 and “All Cargo Movers (I) (P) Ltd. v. Dhanesh Badarmal Jain” (2007) 14 SCC 776. 8. Having gone through the complaint, which was registered as an FIR and the assertions made therein, it is quite clear that respondent no. 2/complainant - Sanjay Garg's grievance is regarding failure of the appellants to pay the outstanding amount, in spite of the respondent no. 2/complainant - Sanjay Garg's repeated demands. The respondent no. 2/complainant - Sanjay Garg states that the supplies were made between the period 01.12.2015 and 06.08.2017. The appellants had made the payments from time to time of Rs. 3,76,40,553/- leaving a balance of Rs. 1,92,91,358/-.

We will assume that the assertions made in the complaint are correct, but even then, a criminal offence under Section 420 read with Section 415 of the IPC is not established in the absence of deception by making false and misleading representation, dishonest concealment or any other act or omission, or inducement HC-KAR NC: 2025:KHC:28737 of the complainant to deliver any property at the time of the contract(s) being entered. The ingredients to allege the offence are neither stated nor can be inferred from the averments. A prayer is made to the police for recovery of money from the appellants. The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money.

The chargesheet also refers to Section 406 of the IPC, but without pointing out how the ingredients of said section are satisfied. No details and particulars are mentioned. There are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously [Wolfgang Reim v. State, 2012 SCC OnLine Del 3341]. For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later. In this case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods. The chargesheet does refer to Section 506 of the IPC relying upon the averments in the complaint. However, no details and particulars are given, when and on which date and place the threats were given. Without the said details and particulars, it is apparent to us, that these allegations of threats etc. have been made only with an intent to activate police machinery for recovery of money."

The Apex Court clearly holds that setting criminal law into motion for the purpose of recovery of money should not be permitted and such cases should be nipped in the bud in exercise of juri iction under Section 482 of Cr.P.C. The Apex Court a little earlier in the judgment in the case of Lalith HC-KAR NC: 2025:KHC:28737 Chaturvedi, and in the case of DEEPAK GABA VS. STATE OF UTTAR PRADESH2, has held as follows:

In case of a private complaint, the Magistrate can issue summons when the evidence produced at the pre- summoning stage shows that there is sufficient ground for proceeding against the accused. The material on record should indicate that the ingredients for taking cognizance of an offence and issuing summons to the accused is made out. [Dipakbhai Jagdishchandra Patel v. State of Gujarat, (2019) 16 SCC 547 : (2020) 2 SCC (Cri) 361; Sunil Bharti Mittal v. CBI, (2015) 4 SCC 609 : (2015) 2 SCC (Cri) 687; and Pepsi Foods Ltd. v. Judicial Magistrate, (1998) 5 SCC 749 : 1998 SCC (Cri) 1400. The proviso to Section 200 of the Code is not applicable in the present case.]

In the present case, the trial court did not issue summons under Sections 420 and 471IPC, or for that matter, invoke the provision relating to conspiracy under Section 120-BIPC. Although the summoning order dated 19-7-2018 does not deal with these sections of the IPC, we deem it imperative to examine the ingredients of the aforesaid sections, and Section 406IPC, and whether the allegations made in the complaint attract the penal provisions under the relevant sections of the IPC. We have undertaken this exercise in order to carry out a complete and comprehensive analysis of the factual matrix and the legal provisions, and rule out possibility of an error to the detriment of Respondent 2 complainant.

Section 406IPC [“406. Punishment for criminal breach of trust.—Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.”] prescribes punishment for breach of trust which may extend to three years or with fine or with both, when ingredients of Section 2 (2023) 3 SCC 423, paras 12 to 30 HC-KAR NC: 2025:KHC:28737 405IPC are satisfied. For Section 406IPC to get attracted, there must be criminal breach of trust in terms of Section 405IPC. [“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”.***Illustrations***(b) A is a warehouse- keeper. Z going on a journey, entrusts his furniture to A, under a contract that it shall be returned on payment of a stipulated sum for warehouse room. A dishonestly sells the goods. A has committed criminal breach of trust.(c) A, residing in Calcutta, is agent for Z, residing at Delhi. There is an express or implied contract between A and Z, that all sums remitted by Z to A shall be invested by A, according to Z's direction. Z remits a lakh of rupees to A, with directions to A to invest the same in Company's paper. A dishonestly disobeys the directions and employs the money in his own business. A has committed criminal breach of trust.(d) But if A, in the last illustration, not dishonestly but in good faith, believing that it will be more for Z's advantage to hold shares in the Bank of Bengal, disobeys Z's directions, and buys shares in the Bank of Bengal, for Z, instead of buying Company's paper, here, thought Z should suffer loss, and should be entitled to bring a civil action against A, on account of that loss, yet A, not having acted dishonestly, has not committed criminal breach of trust.***(f) A, a carrier, is entrusted by Z with property to be carried by land or by water. A dishonestly misappropriates the property. A has committed criminal breach of trust.”(Explanations 1 and 2 and Illustrations (a) and (e) to Section 405IPC are excluded, as they are irrelevant.)]

For Section 405IPC to be attracted, the following have to be established: HC-KAR NC: 2025:KHC:28737 (a) the accused was entrusted with property, or entrusted with dominion over property; (b) the accused had dishonestly misappropriated or converted to their own use that property, or dishonestly used or disposed of that property or wilfully suffer any other person to do so; and (c) 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.

Thus, criminal breach of trust would, inter alia, mean using or disposing of the property by a person who is entrusted with or otherwise has dominion. 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. [Sudhir Shantilal Mehta v. CBI, (2009) 8 SCC 1 : (2009) 3 SCC (Cri) 646]

However, in the instant case, materials on record fail to satisfy the ingredients of Section 405IPC. The complaint does not directly refer to the ingredients of Section 405IPC and does not state how and in what manner, on facts, the requirements are satisfied. Pre- summoning evidence is also lacking and suffers on this account. On these aspects, the summoning order is equally quiet, albeit, it states that “a forged demand of Rs 6,37,252.16p had been raised by JIPL, which demand is not due in terms of statements by Shubhankar P. Tomar and Sakshi Tilak Chand”. A mere wrong demand or claim would not meet the conditions specified by Section 405IPC in the absence of evidence to establish entrustment, dishonest misappropriation, conversion, use or disposal, which action should be in violation of any direction of law, or legal contract touching the discharge of trust. Hence, even if Respondent 2 complainant is of the opinion that the monetary demand or claim is incorrect and not payable, given the failure to prove the requirements of Section 405IPC, an offence under the same section is not constituted. In the absence of factual allegations which satisfy the ingredients of the offence under Section 405IPC, a mere dispute on monetary HC-KAR NC: 2025:KHC:28737 demand of Rs 6,37,252.16p, does not attract criminal prosecution under Section 406IPC.

In order to apply Section 420IPC, namely, cheating and dishonestly inducing delivery of property, the ingredients of Section 415IPC have to be satisfied. To constitute an offence of cheating under Section 415IPC, a person should be induced, either fraudulently or dishonestly, to deliver any property to any person, or consent that any person shall retain any property. The second class of acts set forth in the section is the intentional inducement of doing or omitting to do anything which the person deceived would not do or omit to do, if she were not so deceived. Thus, the sine qua non of Section 415IPC is “fraudulence”, “dishonesty”, or “intentional inducement”, and the absence of these elements would debase the offence of cheating. [Iridium India Telecom Ltd. v. Motorola Inc., (2011) 1 SCC 74 : (2010) 3 SCC (Cri) 1201]

Explaining the contours, this Court in Mohd. Ibrahim v. State of Bihar [Mohd. Ibrahim v. State of Bihar, (2009) 8 SCC 751 : (2009) 3 SCC (Cri) 929. This Court, in this case, has cautioned that the ratio should not be misunderstood, to record the clarification, which in the present case, in our opinion, is not of any avail and help to Respondent 2 complainant. We respectfully concur with the clarification as well as the ratio explaining Sections 415, 464, etc. IPC.] , observed that for the offence of cheating, there should not only be cheating, but as a consequence of such cheating, the accused should also have dishonestly adduced the person deceived to deliver any property to a person; or to make, alter, or destroy, wholly or in part, a valuable security, or anything signed or sealed and which is capable of being converted into a valuable security.

In the present case, the ingredients to constitute an offence under Section 420 read with Section 415IPC are absent. The pre-summoning evidence does not disclose and establish the essential ingredients of Section 415IPC. There is no assertion, much less legal evidence, to submit that JIPL had engaged in dishonesty, fraud, or HC-KAR NC: 2025:KHC:28737 intentional inducement to deliver a property. It is not the case of Respondent 2 complainant 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. As such, given that the ingredients of Section 415IPC are not satisfied, the offence under Section 420IPC is not made out.

Section 471IPC [ “471. Using as genuine a forged document or electronic record.—Whoever fraudulently or dishonestly uses as genuine any document or electronic record which he knows or has reason to believe to be a forged document or electronic record, shall be punished in the same manner as if he had forged such document or electronic record.”] is also not attracted. This Section is applicable when a person fraudulently or dishonestly uses as genuine any document or electronic record, which he knows or has reasons to believe to be a forged document or electronic record. This Court in Mohd. Ibrahim [Mohd. Ibrahim v. State of Bihar, (2009) 8 SCC 751 : (2009) 3 SCC (Cri) 929. This Court, in this case, has cautioned that the ratio should not be misunderstood, to record the clarification, which in the present case, in our opinion, is not of any avail and help to Respondent 2 complainant. We respectfully concur with the clarification as well as the ratio explaining Sections 415, 464, etc. IPC.] , has elucidated that the condition precedent of an offence under Section 471IPC is forgery by making a false document or false electronic record or part thereof. Further, to constitute the offence under Section 471IPC, it has to be proven that the document was “forged” in terms of Section 470 [ “470. Forged document.—A false document [or electronic record] made wholly or in part by forgery is designated “a forged document or electronic record”.”] , and “false” in terms of Section 464IPC [ “464. Making a false document.—A person is said to make a false document or false electronic record—First.—Who dishonestly or fraudulently—(a) makes, signs, seals or executes a document or part of a document;(b) makes or transmits any electronic record HC-KAR NC: 2025:KHC:28737 or part of any electronic record;(c) affixes any electronic signature on any electronic record;(d) makes any mark denoting the execution of a document or the authenticity of the electronic signature,with the intention of causing it to be believed that such document or part of a document, electronic record or *[electronic signature] was made, signed, sealed, executed, transmitted or affixed by or by the authority of a person by whom or by whose authority he knows that it was not made, signed, sealed, executed or affixed; or* Substituted for “digital signature” by Act 10 of 2009, Section 51(e) (w.e.f. 27- 10-2009)Secondly.—Who without lawful authority, dishonestly or fraudulently, by cancellation or otherwise, alters a document or an electronic record in any material part thereof, after it has been made, executed or affixed with electronic signature either by himself or by any other person, whether such person be living or dead at the time of such alteration; orThirdly.—Who dishonestly or fraudulently causes any person to sign, seal, execute or alter a document or an electronic record or to affix his electronic signature on any electronic record knowing that such person by reason of unsoundness of mind or intoxication cannot, or that by reason of deception practised upon him, he does not know the contents of the document or electronic record or the nature of the alteration.”] .

Section 470 lays down that a document is “forged” if there is: (i) fraudulent or dishonest use of a document as genuine; and (ii) knowledge or reasonable belief on the part of the person using the document that it is a forged one. Section 470 defines a “forged document” as a false document made by forgery.

As per Section 464IPC, a person is said to have made a “false document”: (i) if he has made or executed a document claiming to be someone else or authorised by someone else; (ii) if he has altered or tampered a document; or HC-KAR NC: 2025:KHC:28737 (iii) if he has obtained a document by practising deception, or from a person not in control of his senses.

Unless the document is false and forged in terms of Sections 464 and 470IPC respectively, the requirement of Section 471IPC would not be met.

In the counter-affidavit filed by Respondent 2 complainant, it is submitted that a few bills were faked/forged, as the goods were not ordered. Reference is made to balance of Rs 79,752 shown on 30-3-2013, which was objected to and thereupon as per the complaint itself the demand/bill was withdrawn. This would not make the bill a forged document or false document, in terms of Sections 470 and 464IPC. The complaint was made in the year 2017, four years after the bill/claim had been withdrawn, reflecting no criminal intent. The bill was not fake or forged, and at best it could be stated that it was wrongly raised. Moreover, the pre-summoning evidence is silent with regard to this bill and mens rea on the part of the accused is not shown and established. Same would be the position with regard to the bill/invoice of Rs 53,215 which was as per the complaint, sent directly to Manav Rachna International at Faridabad. The bill/invoice is not doubted as “forged” or “false” within the meaning of Sections 470 and 464IPC. No doubt, Adhunik Colour Solutions is mentioned as the buyer, and Manav Rachna International as the consignee, albeit the invoice was issued by JIPL. Pre- summoning evidence does not help and make out a case predicated on this bill/invoice. In the counter-affidavit filed before us, it is alleged that since this bill was sent to Faridabad, JIPL had added the GST in the invoice. It is argued that had Respondent 2 complainant supplied the goods, instead of GST, VAT as applicable in Delhi would have been levied, as Respondent 2 complainant was based in Delhi. This argument is rather fanciful and does not impress us to justify summoning for the offence under Section 471IPC. Besides, the assertion is not to be found in the complaint, and cannot be predicated on the pre-summoning evidence.

For completeness, we must record that the appellants have placed on record the dealership HC-KAR NC: 2025:KHC:28737 agreement dated 11-4-2012, which, inter alia states that JIPL has a discretion to establish direct contractual relationship with specific customers, if JIPL feels they can be served better. Further, in such a situation, the dealer, if JIPL agrees, can act as an intermediary. Assuming the bill/invoice had wrongly recorded Respondent 2 complainant as the buyer, it is not doubted that Manav Rachna International was the consignee. At best, Respondent 2 complainant would not be liable, had Manav Rachna International failed to pay. Non-payment is also not alleged in the complaint or the pre- summoning evidence. Reliance on objections vide emails dated 4-7-2014 and 21-7-2014 are of no avail, as they are for the period prior to 31-7-2014, when the bill/invoice was raised.

It is evident from the pre-summoning evidence led and the assertions made in the criminal complaint that the dispute raised by Respondent 2 complainant primarily pertains to settlement of accounts. The allegations are: (i) goods supplied by JIPL were not as per the requirements and demands of Respondent 2 complainant, (ii) goods supplied were different from the order placed, and (iii) goods lying with, and returned by Respondent 2 complainant have not been accounted for. These assertions, even if assumed to be correct, would not fulfil the requirements of Section 405IPC, or for that matter Sections 420 or 471. The material on record does not reflect and indicate that JIPL indeed had the dishonest/culpable intention for the commission of the alleged offences under the IPC. Unless the ingredients of aforesaid Sections of the IPC are fulfilled, the offence under Section 120- BIPC, for criminal conspiracy, would not be made. In fact, a combined reading of the complaint and the pre-summoning evidence does not disclose any element of criminal conspiracy as per Section 120- AIPC. The complaint discloses a civil dispute and grievance relating to the claim made by JIPL. What is challenged by Respondent 2 complainant is the HC-KAR NC: 2025:KHC:28737 demand of Rs 6,37,252.16p raised by JIPL as the amount payable till the year ending 2016. This assertion made by JIPL is questioned as incorrect. The demand, even if assumed to be wrong, would not satisfy the ingredients of Section 405, or Sections 420 or 471IPC, so as to justify the summoning order. As noted above, JIPL had filed a criminal case under Section 138 of the NI Act as two cheques for Rs 1,93,776 and Rs 4,99,610 issued by them, on presentation, were dishonoured on account of “insufficient funds”.

We are, therefore, of the opinion that the assertions made in the complaint and the pre- summoning evidence led by Respondent 2 complainant fail to establish the conditions and incidence of the penal liability set out under Sections 405, 420 and 471IPC, as the allegations pertain to alleged breach of contractual obligations. Pertinently, this Court, in a number of cases, has noticed attempts made by parties to invoke juri iction of criminal courts, by filing vexatious criminal complaints by camouflaging allegations which were ex facie outrageous or pure civil claims. These attempts are not to be entertained and should be dismissed at the threshold. To avoid prolixity, we would only like to refer to the judgment of this Court in Thermax Ltd. v. K.M. Johny [Thermax Ltd. v. K.M. Johny, (2011) 13 SCC 412 : (2012) 2 SCC (Cri) 650] , as it refers to earlier case laws in copious detail.

In Thermax [Thermax Ltd. v. K.M. Johny, (2011) 13 SCC 412 : (2012) 2 SCC (Cri) 650] , it was pointed out that the court should be watchful of the difference between civil and criminal wrongs, though there can be situations where the allegations may constitute both civil and criminal wrongs. The court must cautiously examine the facts to ascertain whether they only constitute a civil wrong, as the ingredients of criminal wrong are missing. A conscious application of the said aspects is required by the Magistrate, as a HC-KAR NC: 2025:KHC:28737 summoning order has grave consequences of setting criminal proceedings in motion.

Even though at the stage of issuing process to the accused the Magistrate is not required to record detailed reasons, there should be adequate evidence on record to set the criminal proceedings into motion. The requirement of Section 204 of the Code is that the Magistrate should carefully scrutinise the evidence brought on record. He/She may even put questions to complainant and his/her witnesses when examined under Section 200 of the Code to elicit answers to find out the truth about the allegations. Only upon being satisfied that there is sufficient ground for summoning the accused to stand the trial, summons should be issued. [Birla Corpn. Ltd. v. Adventz Investments & Holdings Ltd., (2019) 16 SCC 610 : (2020) 2 SCC (Cri) 828 : (2020) 2 SCC (Civ) 713; Pepsi Foods Ltd. [Pepsi Foods Ltd. v. Judicial Magistrate, (1998) 5 SCC 749 : 1998 SCC (Cri) 1400]; and Mehmood Ul Rehman v. Khazir Mohammad Tunda, (2015) 12 SCC 420 : (2016) 1 SCC (Cri) 124.]"

Facts obtaining in the case at hand would not mean that investigation should be permitted to be continued. On the aforesaid factors, of the criminal law being set into motion as a counter blast to what the petitioner had registered against the complainant; for the purposes of recovery of money; above all, the steel "

It is pertinent to note that with regard to the said allegations against the police station concerned, there is nothing on record to suggest that either the said report dated 22-5-2002 or the letter dated 30-9-2006

It is again pertinent to note that, even as per the case of the complainant, the alleged incident of bus theft had taken place in the year 2001, and it was only in 2009 that the substantial complaint was made in the Court of Chief Judicial Magistrate, Alipore. It is just not believable that the Ballygunge Police Station concerned, Kolkata would not have taken any action on the report made in 2002 on behalf of the powerful body like ISKCON, Kolkata, or on the letter dated 30-9-2006 written by the Branch Manager of ISKCON, Kolkata. Respondent 2 complainant also did not take any concrete action for getting the said complaint registered with regard to the alleged theft of bus for a long period of eight years, till the complaint in the court was filed in the year 2009. 15. In the opinion of the Court such an inordinate delay of eight years in filing the complaint in the court itself would be a sufficient ground to quash the proceedings. If the luxury bus owned by ISKCON, Kolkata Branch in 1998 was so precious to them, they would not have sat silent for such a long time of eight years. In our opinion, the criminal machinery set into motion by filing the complaint for the alleged incident which had taken place eight years ago, that act itself was nothing but a sheer misuse and abuse of the process of the court.

That apart, from the bare perusal of the complaint filed before the Court, on the basis of which the FIR was registered at Ballygunge Police Station on 20-2-2009, it is discernible that except bald allegations made in the complaint with regard to the theft of bus in question there was no material or document produced by HC-KAR NC: 2025:KHC:28737 the complainant to substantiate the allegations against the appellants. Even after the investigation of the said complaint, there was no evidence collected by the investigating officer to prima facie satisfy the ingredients constituting the alleged offences under Sections 468, 471, 406 and 120-BIPC. Even if the allegations made in the complaint as well as in the charge-sheet are taken at their face value none of the ingredients constituting the alleged offences are culled out. The learned Senior Counsel Mr Shyam Divan for the appellants had strenuously urged relying upon the documents pertaining to the transfer of ownership and registration of the said bus, that the said documents were executed by the then authorised persons of ISKCON, Kolkata, in our opinion, the said documents could not be considered in these proceedings, the same being not the part of the charge- sheet papers.

In any case, there is nothing to suggest from the other documents on record of the instant appeals that the investigating officer had even bothered to collect any cogent or substantive evidence against the appellants to prosecute them for the alleged offences. There was no expert opinion obtained or scientific evidence collected on the documents allegedly forged to show as to by whom, when and how the theft of vehicle and forgery of documents were committed. Under the circumstances, allowing such prosecution to continue would not only be an empty formality but would be gross wastage of court's precious time.

It cannot be gainsaid that the High Courts have power to quash the proceedings in exercise of powers under Section 482 CrPC to prevent the abuse of process of any court or otherwise to secure the ends of justice. Though the powers under Section 482 should be sparingly exercised and with great caution, the said powers ought to be exercised if a clear case of abuse of process of law is made out by the accused. In State of Karnataka v. L. Muniswamy [State of Karnataka v. L. Muniswamy, (1977) 2 SCC 699 : 1977 SCC (Cri) 404] the Supreme Court had held HC-KAR NC: 2025:KHC:28737 that the criminal proceedings could be quashed by the High Court under Section 482 if the court is of the opinion that allowing the proceedings to continue would be an abuse of the process of the court or that the ends of justice require that the proceedings are to be quashed.

This Court, way back in 1992 in the landmark decision State of Haryana v. Bhajan Lal [State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] , after considering relevant provisions more particularly Section 482CrPC and the principles of law enunciated by this Court relating to the exercise of extraordinary powers under Article 226, had laid down certain guidelines for the exercise of powers of quashing, which have been followed in umpteen number of cases. The relevant part thereof reads as under : (SCC pp. 378- 79, para 102)

In State of A.P. v. Golconda Linga Swamy [State of A.P. v. Golconda Linga Swamy, (2004) 6 SCC 522 : 2004 SCC (Cri) 1805] this Court had observed that the court would be justified to quash the proceedings if it finds that initiation or continuance of such proceedings would amount to abuse of the process of court.

As regards inordinate delay in filing the complaint it has been recently observed by this Court in Hasmukhlal D. Vora v. State of T.N. [Hasmukhlal D. Vora v. State of T.N., (2022) 15 SCC 164 : (2024) 2 SCC (Cri) 632] that though HC-KAR NC: 2025:KHC:28737 inordinate delay in itself may not be a ground for quashing of a criminal complaint, however unexplained inordinate delay must be taken into consideration as a very crucial factor and ground for quashing a criminal complaint."

In so far as the judgments relied on by learned counsel Sri.Amar Correa is concerned, there can be no qualm about the principles so laid down by the Apex Court or this Court in those cases. They are qua the facts obtaining in each of the cases. Therefore, in the light of the judgments of the Apex Court in the case of Lalit Chaturdevi, Deepak Gaba and as also Chanchalpati Das quoted supra, the judgments relied on by the learned counsel for the respondents would not become applicable to the facts of the case and therefore, they are distinguishable without much ado.

In that light, on all the aforesaid scores, permitting further investigation, in the case at hand against the accused would run foul of law, become an abuse of the process of law and result in miscarriage of justice.

For the aforesaid reasons, I pass the following: HC-KAR NC: 2025:KHC:28737 ORDER