IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL    NO. 9 OF 2019    

(ARISING OUT OF SLP (CRL.) NO. 5223 OF 2018)    

SATISHCHANDRA RATANLAL SHAH                         …APPELLANT(s)

VERSUS

STATE OF GUJARAT AND ANOTHER                             … RESPONDENT(S)

JUDGMENT

N. V. RAMANA, J.    

1. Leave granted.

2. The present appeal is preferred against the impugned

judgment, dated 12.04.2018, passed by the  High Court of

Gujarat, in  Criminal  Miscellaneous  Application  No.  4033 of

2012, wherein the High Court has dismissed appellant’s

application seeking quashing of the order framing the charges

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REPORTABLE

dated 04.12.2013 by the Additional Chief Metropolitan

Magistrate in Criminal Case No. 388 of 2012.

3. It is pertinent to note the facts giving rise to the appeal in a

detailed  manner.  The respondent  no. 2­  complainant  is the

director of a money lending company by the name of Dharshan

Fiscal Pvt. Ltd. The appellant, who is a retired bank employee,

approached the complainant’s company in the month of

January 2008 for a loan of Rs. 27,00,000/­. Accordingly, the

respondent no. 2 transferred the funds as a loan, which was to

be repaid by the appellant within a year with interest.

Thereafter, the appellant has not repaid the amount back to

the respondent  no.2. Further, respondent  no.2  alleged that

when he approached the appellant, he was threatened by the

appellant with dire consequences. Thereafter, the respondent

no.2 filed a complaint based on which the FIR bearing I/C.R.

No. 22/2012, dated 25.01.2012, was filed before the Kagdapith

Police Station, Ahmedabad, against the present appellant

under Section 406, 409, 417, 420, 294 (b) and 506 (2) of IPC.

On 23.02.2012, the appellant was enlarged on bail by the High

Court after being arrested on 29.01.2012. The appellant

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preferred an application under Section 482 of the Cr.P.C for

the quashing of the FIR bearing I/C.R No. 22/2012.

4. The charge sheet No. 28 of 2012 dated 01.03.2012, came to be

filed against the appellant under Sections 406, 420 and 417 of

IPC. Pursuant to the same, the Magistrate issued summons.

The appellant alleged that on 04.12.2013, he was given a copy

of the said charge sheet, and that the charges were framed by

the Metropolitan Magistrate on the same day in a blank sheet

without giving him an opportunity of being heard, as the

appellant was unaccompanied by any counsel. The appellant

alleges that the same was in violation of Section 239 of  the

Criminal Procedure Code.

5. In light of the aforesaid developments, the appellant filed an

application seeking amendment of the prayer in Criminal

Miscellaneous Application no. 4033 of 2012 wherein he sought

for the inclusion of prayer seeking to quash and set aside the

charge sheet no. 28/ 2012 in FIR No. I/C.R No.22/2012 and

the charges framed by the Metropolitan Magistrate vide order

dated  04.12.2013  and  all further  proceeding carried  out in

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Criminal  Case no. 388/2012  pending before the  Additional

Metropolitan Magistrate.  

6. It is  pertinent to note that,  simultaneously  respondent no.2

had preferred a summary suit in Summary Civil Suit no.

928/2011 seeking the recovery of Rs.33,46,225/­ which was

inclusive of the interest upon the principal amount. The same

was admitted on 25.04.2011 and  is  still  pending before the

City Civil Judge, Ahmedabad.

7. Vide  order  dated 12.04.2018, the  High Court  dismissed  the

quashing petition preferred by the appellant and directed the

trial court to complete the trial within three months. The High

Court further went on to observe that, prima facie an offence of

cheating  under  Section  420 is  made  out  but charge  under

Section 406 pertaining to criminal breach of trust is not

applicable in the given factual scenario.  However, the  High

Court did not remove the charges under Section 406 and

observed that no case has been made out to get the charge

quashed. Aggrieved by the aforesaid dismissal,  the appellant

has preferred the present Special Leave Petition.

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8. The counsel on behalf of the appellant has urged that a

perusal of the complaint would reveal that the allegations as

contained in the complaint are civil in nature and the requisite

averments so as to make out a case of cheating are absent.

Hence,  prima  facie  does  not  disclose the  commission of the

alleged offence. Moreover, it is pertinent to note that after filing

Summary Suit No.928 of 2011 on 21.04.2011, the complainant

has filed the  written complaint dated 05.01.2012 and has

attempted to give the cloak of a criminal offence to the present

case which is purely civil in nature, just to harass the

appellant.  Lastly, the criminal complaint filed by the

respondent no.2 is initiated after a lapse of more than three

years from the date of offence i.e. 21.03.2008.

9. On  the  contrary, the  counsel  on behalf  of respondent  no.2,

while supporting the judgment of the High Court has stated

that the appellant had fraudulent intention from the beginning

having induced the respondent no.2 to lend the aforesaid

amount of Rs. 27 lacs. Further, the appellant never had the

intention to repay the loan even though multiple requests were

made to him. The counsel pressed that whether the intention

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was to cheat from the inception or not is a question of fact and

the same can only be decided by trial after appreciating the

entire evidence.

10. Before we analyse this case, it is to be noted that the criminal

application preferred by the accused before the High Court was

against the order of the Trial Court at the stage of framing of

charges, wherein it is the duty of the court to apply its judicial

mind to the material placed before it and to come to a clear

conclusion that a prima facie case has been made out against

the accused.  An order for framing of charges is of serious

concern to the accused as it affects his liberty substantially.

Courts must therefore be cautious that their decision at this

stage causes no irreparable harm to the accused.  

11. Coming  to the  aspect  of  quashing of the  charges, it is  well

settled that such exercise needs to be undertaken by the High

Court in exceptional cases. It is also  well settled that the

framing of charges being initial stages in the trial process, the

court therein cannot base the decision of quashing the charge

on the basis of the quality or quantity of evidence rather the

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enquiry must be limited to a prima facie examination. [refer to

State of Bihar vs. Ramesh Singh, 1977 CriLJ 1606].

12. Having observed the background principles applicable herein,

we need to consider the individual charges against the

appellant.  Turning to Section 405 read with 406 of IPC, we

observe that the dispute arises out of a loan transaction

between the parties. It falls from the record that the

respondent no.2 knew the appellant and the attendant

circumstances before lending the loan. Further it is an

admitted fact that in order to recover the aforesaid amount, the

respondent no. 2 had instituted a summary civil suit which is

still pending adjudication. The law clearly recognizes a

difference between simple payment/investment of money and

entrustment of money or property. A mere breach of a promise,

agreement or contract does not,  ipso facto,  constitute the

offence of the criminal breach of trust contained in Section 405

IPC without there being a clear case of entrustment.  

13. In this context, we may note that there is nothing either in the

complaint or in any material before us, pointing to the fact that

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any property was entrusted to the appellant at all which he

dishonestly converted for his own  use so as to satisfy the

ingredients  of  Section 405 punishable  under Section 406 of

IPC. Hence the learned Magistrate committed a serious error in

issuing  process  against the  appellants for the said offence.

Unfortunately, the High Court also failed to correct this

manifest error.

14. Now coming to the charge under Section 415 punishable under

Section 420 of IPC. In the context of contracts, the distinction

between mere breach of contract and cheating would depend

upon the fraudulent inducement and mens rea. (See Hridaya

Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168).

In the case before us, admittedly the appellant was trapped in

economic crisis and therefore, he had approached the

respondent no. 2 to ameliorate the situation of crisis. Further,

in order to recover the aforesaid amount, the respondent no. 2

had  instituted  a  summary civil suit seeking  recovery  of the

loan amount  which is still pending adjudication. The  mere

inability of the appellant to return the loan amount cannot give

rise to a criminal prosecution for cheating unless fraudulent or

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dishonest intention is shown right at the beginning of the

transaction,  as  it is this  mens rea  which  is the crux of the

offence. Even if all the facts in the complaint and material are

taken on their face value, no such dishonest representation or

inducement could be found or inferred.  

15. Moreover, this Court in a number of cases has usually

cautioned against criminalizing civil disputes, such as breach

of contractual  obligations  [refer to  Gian Singh v.  State  of

Punjab, (2012) 10 SCC 303]. The legislature intended to

criminalize only those breaches  which are accompanied by

fraudulent, dishonest or deceptive inducements, which

resulted in involuntary and in­efficient transfers, under

Section 415 of IPC.   

16. However, the High Court appears to have been carried away by

the moral element involved in the breach of promise and made

certain observations. Being a policy consideration, such

suggestions need to be restricted. The aforementioned

observations of the High Court were not only unnecessary for

the adjudication of this matter, but the same could have been

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understood as casting some kind of aspersions on the accused.

This clearly reflected a loaded dice situation against the

appellant herein.

17. In our considered opinion, the High Court should have

maintained judicial restraint and desisted from making such

general observations at this stage of the criminal proceeding,

as  they may have had a bearing on the adjudication of the

trial. Therefore, the observations made in paragraphs 42 and

43 of the impugned judgment stand expunged.

18. In view of the above, we are unable to uphold the impugned

order passed by the  High  Court in  Criminal  Miscellaneous

Application No. 4033 of 2012 and the same is hereby set aside.

The application  filed  by the  appellant  under  Section 482 of

Cr.P.C. is allowed and the proceedings initiated based on the

FIR instituted at the instance of respondent no. 2 are hereby

quashed.

19. The appeal is allowed in the aforesaid terms.  

……………………………..J.

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(N. V. Ramana)

……………………………..J.

(Mohan M. Shantanagoudar)

NEW DELHI,

JANUARY 3, 2019.

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