M/S. Citylife Retail PVT. LTD. And 6 Ors. vs. The State Of Assam

Held

The Court held that the FIR, when read in its entirety along with the tenancy agreement and addendum, did not disclose a prima facie case for offences under Section 420 and Section 406 of the IPC. The Court reasoned that while the addendum stipulated that the petitioner would keep sufficient stocks and undertake marketing activities, no specific benchmarks were provided. The Court found that the mere dissatisfaction of the respondent no. 2 regarding the sufficiency of stocks or marketing efforts, in the absence of defined standards, did not constitute cheating. Furthermore, the Court observed that there was no prima facie indication of entrustment, a necessary ingredient for criminal breach of trust. Consequently, the Court quashed the criminal proceedings and the FIR, allowing the criminal petition and discharging the petitioners of the alleged offences.

Facts

M/s. Citylife Retail Pvt. Ltd. (petitioner no. 1) and its directors (petitioners no. 2-7) filed a criminal petition under Section 482 of the CrPC to quash an FIR registered at Jorhat Police Station Case No. 48/2019. The FIR was lodged by M/s DRB Developers (respondent no. 2) under Sections 406/420 of the IPC. The dispute arose from a tenancy agreement dated 05.06.2017 and an addendum dated 20.04.2018, concerning a commercial premise leased by respondent no. 2 to petitioner no. 1 in Jorhat. Respondent no. 2 alleged cheating and criminal breach of trust due to petitioner no. 1's alleged failure to adhere to the terms of the addendum, specifically regarding maintaining sufficient stock, marketing activities, and payment of rent based on net sales value.

Key Issues

1. Whether the allegations in the FIR disclose a prima facie case for offences under Section 420 (cheating) and Section 406 (criminal breach of trust) of the Indian Penal Code, or if the dispute is purely civil in nature, turning on the interpretation of the tenancy agreement and its addendum. Petitioner's Arguments: The petitioner contended that the entire issue stemmed from a civil dispute arising from a tenancy agreement and its addendum. They argued that the respondent no. 2 had wrongly given criminal colours to a civil matter by alleging cheating and criminal breach of trust. Respondent's Arguments: The respondent argued that the petitioners acted dishonestly from the inception of the agreement, causing wrongful loss. They highlighted that an earlier FIR was lodged, leading to negotiations and the addendum, which the petitioners subsequently failed to adhere to, particularly concerning payment of 7% of net sales, stock retention, and marketing efforts to increase sales.