Breach Of Contractual Terms Does Not Ipso Facto Constitute Offence Of Criminal Breach Of Trust Without There Being A Clear Case Of Entrustment: Supreme Court

The Supreme Court observed that a breach of the contractual terms does not ipso facto constitute the offence of the criminal breach of trust without there being a clear case of entrustment.

In this case, the complainant was employed as a Consultant Neurosurgeon by BGS Apollo Hospital, Mysore. His services were terminated for inconsistent and unsatisfactory behavior in terms of the Consultancy Agreement. He filed a complaint before the Magistrate Court alleging that the Hospital management terminated his services with an oblique and ulterior motive of defaming him. The JMFC took cognizance under Sections 120A, 405, 415, 420, 499, and 500 of the Indian Penal Code. The order of the JMFC was set aside by Sessions Judge allowing the revision petition filed by the accused. Later, the , High Court held that the material placed on record prima facie disclosed ingredients of offences under sections 405 and 420 of the IPC.

Thus issue before the Apex Court was whether the ingredients of the offences of cheating and criminal breach of trust have been made out on the face of the complaint?

The bench comprising Justices DY Chandrachud and AS Bopanna first noticed the ingredients of the offence under Section 415:

"Firstly, to constitute cheating, a person must deceive another. Secondly, by doing so the former must induce the person so deceived to (i) deliver any property to any person; or (ii) to consent that any person shall retain any property; or (iii) intentionally induce 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 such an act or omission must cause or be likely to cause damage or harm to that person in body, mind, reputation or property."

The court observed that the grievance of the complainant arises from the termination of his services at the hospital.

"The allegations indicate that there was an improper billing in respect of the surgical services which were rendered by the complainant at the hospital. At the most, the allegations allude to a breach of terms of the Consultancy Agreement by the Appellant, which is essentially in the nature of a civil dispute.The allegations in the complaint are conspicuous by the absence of any reference to the practice of any deception or dishonest intention on behalf of the Appellant. Likewise, there is no allegation that the complainant was as a consequence induced to deliver any property or to consent that any person shall retain any property or that he was deceived to do or omit to do anything which he would have not done or omitted to do if he was not so deceived. The conspicuous aspect of the complaint which needs to be emphasized is that the ingredients of the offence of cheating are absent in the averments as they stand", it observed.

On Section 405, the bench noted that the offence of criminal breach of trust contains two ingredients: (i) entrusting any person with property, or with any dominion over property; and (ii) the person entrusted dishonestly misappropriates or converts to his own use that property to the detriment of the person who entrusted it. Allowing the appeal, the court observed:

"None of the ingredients of the offence of criminal breach of trust have been demonstrated on the allegations in the complaint as they stand. The first respondent alleges that the Appellant caused breach of trust by issuing grossly irregular bills, which adversely affected his professional fees. However, an alleged breach of the contractual terms does not ipso facto constitute the offence of the criminal breach of trust without there being a clear case of entrustment. No element of entrustment has been prima facie established based on the facts and circumstances of the present matter. Therefore, the ingredients of the offence of criminal breach of trust are ex facie not made out on the basis of the complaint as it stands."

Case details

M N G Bharateesh Reddy vs Ramesh Ranganathan | 2022 LiveLaw (SC) 701 | CrA 1273 of 2022 | 18 August 2022 | Justices DY Chandrachud and AS Bopanna

Counsel: Sr. Adv Manan Kumar Misra for appellant, Adv Radhika Gautam for respondent

Headnotes

Indian Penal Code, 1860 ; Section 405 - An alleged breach of the contractual terms does not ipso facto constitute the offence of the criminal breach of trust without there being a clear case of entrustment - The offence of criminal breach of trust contains two ingredients: (i) entrusting any person with property, or with any dominion over property; and (ii) the person entrusted dishonestly misappropriates or converts to his own use that property to the detriment of the person who entrusted it. (Para 20-23)

Indian Penal Code, 1860 ; Section 415,420 - Firstly, to constitute cheating, a person must deceive another. Secondly, by doing so the former must induce the person so deceived to (i) deliver any property to any person; or (ii) to consent that any person shall retain any property; or (iii) intentionally induce 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 such an act or omission must cause or be likely to cause damage or harm to that person in body, mind, reputation or property.

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