In Crl.O.P.Nos.10985 & 8958 of 2015-MAD HC- Breach of contract will not give rise to offence of cheating; No offence u/s 420 IPC is made out in absence of questionable intention at time of making initial promise: Madras HC Justice G.Chandrasekharan [26-05-2022]

Read Order: South India Music Companies Association And Ors v. Gemini Audio & Gemini Entertainment Mobile India Services

Tulip Kanth

Chennai, May 30, 2022: The Madras High Court has recently quashed proceedings on the file of the Metropolitan Magistrate as in order to settle a civil dispute the respondent Company had converted such dispute into a criminal case. The High Court also deprecated such practice and termed it as an abuse of process of law.

Observing that there is a growing tendency in business circle to convert a purely civil dispute into criminal case, the Bench of Justice G.Chandrasekharan said, “…the breach of contract would not give rise to an offence of cheating. Intention to cheat must be present at the time of making promise or representation. In the absence of questionable intention at the time of making initial promise, no offence under Section 420, said to be made out.”

In this matter, the Respondent (Gemini Audio and Gemini Entertainment Mobile India Service) filed the private complaint against the petitioners u/s 200 Cr.P.C. r/w sec.190 (1) for the offences under Sections 420 and 506 (ii) I.P.C. As a genuine business proposal, with the approval of the present President of the first accused company namely Sudha Raghunathan, it was agreed that the first accused company would give their license of the members content exclusive to Gemini Auto to digitize and deploy across all mobile platforms worldwide for a period of three years.

Thus, the accused parties entered into an agreement with the complainant. A sum of Rs 2.7 crore was paid in September, 2012. After receiving the money, the accused coerced complainant’s company’s joint managing director to sign an agreement with frivolous and fictitious content. Later, it was found out that the accused cheated the complainant’s company with an intention to defraud the complainant’s company with full of false and frivolous database and the first accused also had existing arrangements with an external party. So, when the complaint raised by the respondent was taken on the file of the Metropolitan Magistrate, this quash petition was filed in order to challenge the said complaint.

The Bench was of the opinion that the dispute between the parties was only purely a civil dispute. There was a breach of contract which resulted in the failure of the respondent to pay a minimum guaranteed amount as agreed to be paid by him in the agreement. The circumstances were such that the first accused refused to pay the money paid by him i.e. Rs.2.7 crores, on the ground that respondent exploited the musical contents of first accused members. Hence, the respondent had given this complaint but the same was  bereft of details with regard to the dates on which the accused persons had said to have threatened him in connection with the agreement, criminally intimidated him etc., noted the Bench.

Not only this, but the Bench also asserted that it was the respondent who was responsible for the breach of the contract and no grounds were made out for taking cognizance for the offence under Section 420 and 506 (ii) I.P.C. It was also highlighted by the Court that the Magistrate has to carefully scrutinize the evidence brought on record before summoning an accused in a criminal case and only because the civil remedy may be available to the complainant, that itself cannot be a ground to quash the criminal proceeding.

Thus, considering that asking the petitioner to appear before the Court to face the trial would cause harassment to them as no offence was made out, the Bench allowed the petition and quashed the proceedings against the petitioners.