Criminal Law Can't Be Used For 'Recovery Of Money' Unless Offence Of Cheating/ Criminal Breach Of Trust Is Established: Karnataka High Court

A single judge bench of Justice M Nagaprasanna allowed the petition filed by one Amit Garg and quashed the proceedings initiated against him under sections 419 and 420 of the IPC and Sections 66C and 66D of the Information Technology Act, 2000.

The bench said,

"The contract between the parties or supply of inferior quality would undoubtedly come within the realm of civil proceedings of whatever nature the complainant would seek to initiate, but not registration of a crime. It is trite law that criminal law cannot be set into motion for recovery of money unless the offence of cheating or even criminal breach of trust is established."

Garg had approached the court seeking to quash the FIR dated August 2, 2021, registered against him by one Neeraj Kukreja, Director of M/S Pegasi Spirits Pvt Ltd, for allegedly supplying inferior quality of N95 face masks.

The petitioner contended that the entire issue is in the realm of contract. There was no cheating on the part of the petitioner and there was no dishonest intention at the inception.

Further, without waiting for the report to come on the quality of the mask sample which was supplied by the petitioner, the complainant/respondent insisted that delivery be made immediately and, therefore, the complainant cannot now contend that what was supplied was not what was promised. The entire intention of registering the crime against the petitioner is recovery of money.

The complainant refuted the submissions by saying though the dispute lies in the realm of contract, the dishonest intention of the petitioner to cheat was there right from the inspection i.e, when the supply was made and he would contend that the entire consignment of masks could not be put into use as they were of poor quality. In the bargain the complainant has lost Rs.47/- lakhs which he has paid and has registered the crime on the ground that the petitioner had cheated the complainant by supplying poor quality masks.

Court findings:

The bench relied on Section 415 of IPC and said, "It mandates that whoever by deceiving any person fraudulently or dishonestly induces the person so deceived to deliver any property is said to cheat."

Following which it said,

"In the case at hand, finding the petitioner-Company to be well equipped for production and delivery of masks to be marketed in the name of the complainant-Company, it had placed a purchase order and purchased masks. This is found to be of poor quality at a later point in time. This cannot amount to cheating or deception at the inception of the contract, as masks were needed; they were supplied after supplying samples. If the complainant could not wait for the samples to be checked by the appropriate laboratories, the offence of cheating cannot be laid against the petitioner."

It added, "Therefore, none of the ingredients of Section 415 of the IPC is seen to be existing in the dispute between the petitioner and the complainant, which is a contract and the allegation is breach of contract."

Further the court held, "There was no cheating in the case at hand and the offence under Section 419 of the IPC also cannot be laid against the petitioner."

As regards inclusion of Sections 66C and 66D of the Information Technology Act the bench said,

"These provisions of the Act are reckless inclusions in the crime as the facts narrated hereinabove would not even remotely touch upon Sections 66C and 66D of the Act. Therefore, those offences also cannot be laid against the petitioner."

Relying on the Supreme Court judgment in the case of Sushil Sethi v. State of Arunachal Pradesh, (2020) 3 SCC 240 wherein the court considered the entire spectrum of law with regard to interplay between the contract and cheating, the bench said,

"The case at hand involves both incurable infirmities for setting criminal law in motion – one it is initiated for breach of contract and the other it is initiated for recovery of money. Therefore, further proceedings if permitted to continue against the petitioner, it would degenerate into harassment and result in miscarriage of justice, for which the case at hand becomes a fit case for exercise of jurisdiction of this Court under Section 482 of the Cr.P.C. and obliterate the impugned proceedings."

The bench clarified, "This Court has not pronounced upon any right of the complainant to initiate civil proceedings for recovery of money. If such proceedings are instituted, the observations made in the course of this order would not influence any judicial fora on merit of the said claim."

Case Title: AMIT GARG v. STATE OF KARNATAKA

Case No: CRIMINAL PETITION NO.4856 OF 2021

Citation: 2022 LiveLaw (Kar) 298

Date of Order: 26TH DAY OF JULY, 2022

Appearance: Advocate BHARATH KUMAR V for petitioner; HCGP K.P.YASHODHA, FOR R1; Advocate D.VIJAY RAJ, FOR R2

Click Here To Read/Download Order