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REPORTABLE                                  IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.2341  OF 2011

Vesa Holdings P. Ltd. & Anr.     …      Appellants  

versus

State of Kerala & Ors.              …      Respondents

With

CRIMINAL APPEAL NOS.2342-2344  OF 2011

J U D G M E N T

C. NAGAPPAN, J.  

1. All these appeals are filed challenging the impugned  

common order dated 28.1.2011 passed by the High Court  

of Kerala at Ernakulam in Criminal Misc. Nos.220 to 222 of  

2011 whereby  the petition filed by the appellants under  

Section 482 of Criminal Procedure Code seeking to quash

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the  FIR  in  Crime  No.1461/2010  registered  by  

Changanasserry  Police  Station  against  the  appellants  

under  Sections  417,  418,  420,  120B  and  34  IPC  was  

dismissed.

2. The  undisputed  facts  in  brief  are  as  follows:   The  

appellant in Criminal Appeal No.2341 of 2011 is a Limited  

company of  which  appellants  Venkataraman in  Criminal  

Appeal  No.2344  of  2011  and  appellant  Mani  Prasad  in  

Criminal Appeal No.2343 of 2011 were Directors and the  

appellant Chandrasekhran in Criminal Appeal No.2342 of  

2011 was the promoter.  The Company availed a loan from  

the Industrial  Investment  Bank of  India  and respondent  

No.3 herein/complainant as the AGM of the said bank at  

the  relevant  time,  dealt  with  their  loan  application and  

had  sanctioned  the  same.  The  company  defaulted  in  

repayment and wanted to settle the loan amount. The 3rd  

respondent on retirement from the bank  agreed to act as  

a Consultant of the company in settling the loan and the  

company issued a letter dated 6.8.2008 stating that the  

settlement  of  the  Company  dues  should  be  at  Rs.8.25

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crores and the acceptance letter from the IIBI should be  

obtained on or before 30.10.2008 and it was also agreed  

that Rs.75 lakhs would be given towards consultancy fees  

for  the  above  settlement,  out  of  which  Rs.5  lakhs  was  

given in advance to the 3rd respondent and the balance  

amount to be paid on the completion of the assignment.  

The Company also issued a cheque dated 6.8.2008 for a  

sum of Rs.30 lakhs drawn on HDFC Bank Limited and the  

same  was  agreed  to  be  presented  to  the  bank  after  

obtaining  the  acceptance  letter  from  IIBI  on  or  before  

30.10.2008 or otherwise the cheque should be returned to  

the company. The 3rd respondent made an endorsement in  

writing in the said letter  agreeing to the said terms  and  

signed it.   The 3rd respondent  filed a  private complaint  

dated 13.10.2010 against the company, its Directors and  

Promoter  in  the  Court  of  Judicial  First  Class  Magistrate  

Changanasserry   and  the  same  was  forwarded  to  the  

police for investigation under Section 156(3) of the Code  

of Criminal Procedure and the Police registered a case in  

Crime  No.1461  of  2010  for  the  alleged  offences  under

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Sections 417, 418, 420, 120B and 34 IPC.  It is alleged in  

the complaint that the loan transaction of the company  

with  IIBI  was  settled  with  the  efforts  of  the  

complainant/respondent  No.3  herein  but  the  company,  

Directors and Promoter did not pay him the consultancy  

fee as promised and they conspired together to deceive  

the complainant and committed offences as alleged. The  

company and its  Directors  filed  petitions  under  Section  

482 Criminal  Procedure Code in  Criminal  M.C.No.220 to  

222 of 2011 on the file of  the High Court of Kerala at  

Ernakulam  contending  that  the  understanding  between  

the  company  and  the  complainant  was  that  the  

settlement  with  the  IIBI  should  be  completed  by  

30.10.2008 and the complainant was not able to settle the  

loan before the said date and hence he could not present  

the cheque in the light of the condition imposed on him in  

the  letter  dated  6.8.2008  and  the  settlement  was  

completed  only  on  5.1.2009  due  to  the  efforts  of  the  

company itself and not at the instance of the complainant  

and at any rate it can only be breach of contract for which

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no criminal liability can be fastened against the company  

and its Directors.  The High Court dismissed the petitions  

by holding that  the truth of  the allegations  have to  be  

ascertained by the investigating agency.  Challenging the  

said order the present appeals have been preferred.

3. The learned senior counsel Mr. A. Ramesh appearing  

for the appellants contended that the contract under letter  

dated 6.8.2008 was time bound and there was no element  

of fraud or dishonest intention in it and nothing fructified  

on  the  side  of  the  complainant  and  due  to  continued  

efforts of the appellants the loan was settled by making  

payment of Rs.10.50 crores in total and the 3rd respondent  

to  enrich  himself  illegally  has  resorted  to  criminal  

prosecution and it is liable to be quashed.  It is his further  

contention that the allegation in the complaint does not  

disclose the commission of offence of cheating and only  

discloses  the civil  dispute at  best  and the  complaint  is  

nothing but  an abuse of  process  to  harass   and extort  

money  from  the  appellants  and  the  High  Court  

erroneously  refused  to  quash  the  same.   In  support  of

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submissions he relied on the following decisions -  Uma  

Shankar Gopalika  Vs.   State of Bihar and Another  

[(2005)  10  SCC  336];  All  Cargo  Movers  (India)  

Private Limited and others  Vs.  Dhanesh Badarmal  

Jain and Another [(2007) 14 SCC 776];  and V.Y. Jose  

and  Another   Vs.  State  of  Gujarat  and  another  

[(2009)3 SCC 78].

4. Per  contra  the  learned  counsel  appearing  for  

respondent No.3 contended that there is no merit in the  

contention of the appellants that the FIR discloses only a  

civil  case or  that  there is  no allegation making out  the  

criminal offence of cheating.  It is his further contention  

that the facts in the present case may make out a civil  

wrong as  also a criminal offence and only because a civil  

remedy may also be available to the complainant that by  

itself  cannot  be  a  ground  to  quash  the  criminal  

proceedings.  In support of his submission he relied on the  

decision of this Court in Vijayander Kumar and others  

Vs.  State of Rajasthan and another   [(2014) 3 SCC  

389]

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5. We  also  heard  the  learned  counsel  for  the  State  

namely respondent Nos. 1 and 2.   

6. We have been taken through the complaint petition  

in its  entirety.   The letter  dated  6.8.2008 contains the  

offer  of the appellants as well as the acceptance made by  

3rd respondent, and it reads thus :

“August 6, 2008

Mr. K.G.S. Nair Keezhoot, Changanasserry  Kerala.

Dear Sir, Sub: Settlement of IIBI dues at Rs.8.25 Crores.

Please refer to the discussion we had on the above  subject.  As discussed we are agreeable to pay you  a  lump  sum  amount  of  Rs.  75  lacs  towards  consultancy fee for the above settlement,  out of  this amount Rs.5 lacs will be paid upfront for out of  pocket  expenses  and the  balance amount  Rs.70  lacs will be paid on completion of the assignment.  

We  enclose  herewith  a  cheque  bearing  number  47025  for  Rs.30,00,000  (Thirty  lacs  only)  dated  06.08.2008  drawn  on  HDFC  Bank  Ltd,  which  as  agreed, this cheque should be presented to bank  only after obtaining acceptance letter from IIBI on  or  before  30th October  2008  or  otherwise  the  cheque should be returned to us.  Please note that

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company  should  be  informed  before  presenting  the said cheque.   If it  is  agreeable you may return the duplicate of  this letter, duly signed in token of acceptance of  the offer.   Thanking you,

Yours faithfully, For Vesa Holdings Private Limited  

Director  I Accord my consent to this assignment. (K.G.S. Nair)”

7.  It is also  not in dispute that the IIBI did not issue  

any  acceptance  letter  on  or  before  30.10.2008  with  

regard to the settlement of  disputes of  the appellant  

company.  The 3rd respondent also did not present the  

cheque  dated  6.8.2008  issued  by  the  appellant  

company for encashing a sum of Rs.30 lakhs.  Due to  

the efforts of the appellant company  IIBI finally agreed  

and issued letter of acceptance dated 5.1.2009.  One  

year  later,  the  3rd respondent  sent  a  letter  dated  

6.3.2010  to  the  appellant  company  demanding  the

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balance  amount  of  Rs.70  lakhs   towards  the  

consultancy fee.  No allegation whatsoever was made  

against the appellants herein in the said letter.  It was  

only mentioned in it that the consultation fee remains  

unpaid and the company is delaying the payment on  

one pretext or the other.  In this context it is relevant to  

point out that after the expiry of the validity period of  

the cheque dated 6.8.2008, the 3rd respondent did not  

ask for re-issue of the same.

8. From  the  decisions  cited  by  the  appellant,  the  

settled  proposition  of  law  is  that  every  breach  of  

contract would not give rise to an offence of cheating  

and  only  in  those  cases  breach  of  contract  would  

amount  to  cheating  where  there  was  any  deception  

played at the very inception.  If the intention to cheat  

has  developed later  on,  the  same cannot  amount  to  

cheating.  In other words for the purpose of constituting  

an offence of cheating, the complainant is required to  

show  that  the  accused  had  fraudulent  or  dishonest  

intention  at  the  time  of  making  promise  or

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representation.  Even  in  a  case  where  allegations  are  

made in regard to failure on the part of the accused  to  

keep his promise, in the absence of a culpable intention  

at the time of making initial promise being absent, no  

offence under Section 420 of the Indian Penal Code can  

be said to have been made out.

9. It is true that a given set of facts may make out a  

civil wrong as also a criminal offence and only because  

a civil remedy may be available to the complainant that  

itself  cannot  be  a  ground  to  quash  a  criminal  

proceeding.  The real test is whether the allegations in  

the complaint disclose the criminal offence of cheating  

or not.  In the present case there is nothing to show  

that at the very inception there was any intention on  

behalf  of  the  accused  persons  to  cheat  which  is  a  

condition precedent for an offence under Section 420  

IPC.  In our view the complaint does not disclose any  

criminal offence at all.  Criminal proceedings should not  

be  encouraged  when  it  is  found  to  be  malafide  or  

otherwise  an  abuse  of  the  process  of  the  court.

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Superior courts while exercising this power should also  

strive to serve the ends of  justice.  In  our  opinion,  in  

view of these facts allowing the police investigation to  

continue would amount to an abuse of the process of  

court and the High Court committed an error in refusing  

to  exercise  the  power  under  Section  482  Criminal  

Procedure Code to quash the proceedings.

10. Accordingly  all  the  appeals  are  allowed  and the  

impugned order dated 28.1.2011 rendered by the High  

Court  is  set  aside  and  the  complaint  and  the  

proceedings in Crime No. 1461/2010 of Changanasserry  

Police  Station  against  the  appellants  are  hereby  

quashed.

…….…………………...J.                                            (V. Gopala Gowda)

                                               .…………………………J.

                                                (C. Nagappan)

New Delhi; March 17, 2015

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ITEM NO.1B-For Judgment     COURT NO.9               SECTION IIB                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS Criminal Appeal  No(s).  2341/2011 VESA HOLDINGS P.LTD.& ANR                          Appellant(s)                                VERSUS STATE KERALA & ORS.                               Respondent(s) WITH Crl.A. No. 2342/2011 Crl.A. No. 2343/2011 Crl.A. No. 2344/2011 Date : 17/03/2015 These appeals were called on for pronouncement  of JUDGMENT today. For Appellant(s)  Mr. A. Ramesh, Sr. Adv.

Mr. R.Anand Padmanabhan, Adv.  Mr. R. Pathak, Adv.  Ms. Amritha S., Adv.

                    Mr. Shashi Bhushan Kumar,Adv.                       For Respondent(s)                      Mr. Devashish Bharuka,Adv.                                        Mr. Jogy Scaria,Adv.

Hon'ble  Mr.  Justice  C.  Nagappan  pronounced  the  judgment  of  the  Bench  comprising  Hon'ble  Mr.  Justice  V.Gopala Gowda and His Lordship.

The  appeals  are  allowed  in  terms  of  the  signed   Reportable Judgment.

     (VINOD KR.JHA)  (TAPAN KUMAR CHAKRABORTY)

COURT MASTER COURT MASTER  (Signed Reportable Judgment is placed on the file)