In CRIMINAL PETITION NO. 4346 OF 2022-KAR HC- Criminal law cannot be set in motion for recovery of money except in cases where ingredients of Sections 406 & 420 of IPC are present: Karnataka HC Justice M.Nagaprasanna [15-07-2022]

Read Order: SRI. VILAS DEORE v. STATE OF KARNATAKA 

Mansimran Kaur

Bengaluru, July 23, 2022: The Karnataka High Court has recently opined that merely because civil proceedings would take a greater length of time for their conclusion, it cannot mean that the easier route of setting the criminal law in motion, for recovery of money can be entertained.

The Single Judge Bench of Justice M.Nagaprasanna allowed the instant petition preferred by the petitioner in the present case, calling for an exception to registration of a crime for offences punishable under Sections 406, 409 , 418, 420 of the Indian Penal Code.  The Bench was of the view that there  was absolutely no inducement with a dishonest intention by the petitioner right from the inception. Therefore, the ingredients of Section 415 of the IPC which are deception, fraudulent or dishonest inducement for delivery of any property to the detriment of the victim were not at all present in the case at hand. 

Facts necessary for adjudication of the present petition were that the petitioner was the Managing Director of one M/s Shri Ganesh Textiles and Infrastructure (India) Private Limited.  The complainant was the Vice-President of M/s Himatsingka Company. Both M/s Shri Ganesh Textiles and Infrastructure (India) Private Limited and M/s Himatsingka Company were incorporated under the provisions of Companies Act, 1956. 

In the year 2021, the petitioner and the second respondent/complainant entered into a certain understanding with regard to supply of cotton and the petitioner agreed to convert such supplied cotton into yarn. They had consensus ad-idem over the fact that the complainant would supply a certain chunk of cotton bales for the petitioner to convert them into yarn and supply them back. However, certain disputes arose between the petitioner and the complainant with regard to the yarn being produced and them not being lifted from the premises of the petitioner. 

Consequently, a  legal notice was sent by the complainant to the petitioner invoking the provisions of the  Insolvency and Bankruptcy Code, 2016  indicating that proceedings under the Code would be initiated and a corporate resolution process would be put into force, if the amount that is indicated in the notice would not be paid. Since no understanding was reached between the two, the complainant registered a complaint against the petitioner alleging that an amount of Rs.9, 01, 07,640.43 with respect to 519.80 tonnes of cotton fiber was yet to be made good by the petitioner.

On the same day, a complaint was made to the Officer-in-charge of the jurisdictional police station for offences punishable under Sections 406, 409, 418, 420 of the IPC.In pursuance of the same, the petitioner preferred the instant petition to call into question the registration of the alleged crime. 

After considering the submissions of the parties at length, the Court noted that the question that was posed for consideration before this Court was whether the transaction between the parties was  purely civil in nature or the petitioner was prima facie guilty of criminal breach of trust and cheating as was alleged. 

After going through the correspondence and the factsheet, the Court noted that the relief sought in the crime registered and the notice issued under the Insolvency Code were the same as the demand of the complainant was to recover the money. At this stage reliance was placed on a catena of decisions with respect to complainants wanting to set the criminal law in motion in a purely civil liability, breach of agreement between the parties and for recovery of money. Reliance was also placed on the judgment of the Apex Court in  Hridaya ranjan prasad verma v. state of bihar, Uma shankar gopalika v. state of Bihar  and V.Y.Jose v. state of gujarat .

In view of the aforesaid precedents, the Court noted that for an offence to be punishable under Section 406 of the IPC which deals with criminal breach of trust, the ingredients as obtaining in Section 405 of the IPC should necessarily be present such as the accused must be entrusted with the property or with any dominion over it. The person so entrusted must use that property dishonestly and dispose of that property which would result in willful suffering to the other person upon whom a legal contract is made in discharge of such trust. Entrustment or dishonest misappropriation of property which is entrusted to the accused is the soul of the said provision, added the Bench.

Applying the said ingredients in the instant case, the Court observed that the allegation against the petitioner was that he had sold the yarn which was kept in trust with the petitioner by the complainant with a dishonest intention and had misappropriated the same.  The contention of the complainant on the face of it was unacceptable, as the petitioner had clearly indicated in the mails that if the yarn is not lifted and payment is not made, they would sell it in the open market to meet their contingencies. It is only after the said communication, the auction sale to meet their contingencies was taken up by the petitioner, the Court observed. 

 Therefore, there can be no case of misappropriation with a dishonest intention which would result in breach of trust, as the complainant was very well aware of their default and the action that the petitioner would take if the yarn is not lifted, the Court noted.  The Court further clarified that with respect to the alleged offense under Section 420 of IPC there was absolutely no inducement with a dishonest intention by the petitioner right from the inception. Therefore, the ingredients of Section 415 of the IPC which are deception, fraudulent or dishonest inducement for delivery of any property to the detriment of the victim are not at all present in the case at hand, the Court stated.  In light of the above mentioned observations, the criminal petition was allowed.