Supriya APL-396-2018.doc S IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL APPLICATION 396 OF 2018 1. Dr. Jaising Krishnarao Shinde Age-63 years, Occ:-Doctor R/at:- Harmony Housing Society, ICS Colony, University Road, Pune-411005 … Applicant V/s. 1. The State of Maharashtra (At the instance of Faraskhane Police Station, Pune.) 2. Surya Hospital Medical Store Through its Partner Mr. Ajit Vinayak Ghate Age-64 years, Occ:- Business R/o-14C, Sitaram Mansion 326, Shaniwar Peth, Pune-411030 … Respondents WITH CRIMINAL WRIT PETITION NO. 1035 OF 2018 1. Dr. Prasad Narayan Honap, Age-63 years, Occ:-Medical Practitioner, R/at:- A-101, Amod Ankur, Dahanukar Colony-A, Kothrud, Pune 411038. ICS Colony, University Road, Pune-411005 … Petitioner V/s. 1. The State of Maharashtra 2. Surya Hospital Medical Store, Partnership Firm Through 1/18 SUPRIYA PRAMOD JAWARE Digitally signed by SUPRIYA PRAMOD JAWARE Date: 2026.08.10 15:23:05 +0530 Supriya APL-396-2018.doc Its Partner Shri. Ajit Vinayak Ghate, Age-64 years, Occ:- Business R/o-14C, Sitaram Mansion 326, Shaniwar Peth, Pune-411030 … Respondents ______________________ Mr. Manoj Mohite a/w Mr. Chaitanya Pendse for Applicant in APL No. 396 of 2018. Mr. V. P. Vaze for Petitioner in WP No. 1035 of 2018. Mrs. Megha Bajoria, A.P.P. for Respondent No.1-State. Mr. Aniket Nikam a/w Mr. Nihal Mansuri for Respondent No.2. Mr. S. K. Gore, PSI, Faraskhana Police Station is present. ______________________ CORAM : RANJITSINHA RAJA BHONSALE, J. DATE : 27th JULY 2026 ORAL JUDGMENT :- 1) Rule. Rule made returnable forthwith. 2) By the present Application, under Section 482 of the Code of Criminal Procedure, 1973 (For short ‘CrPC’) (now 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023), the Applicant seek to challenge (i) the Order dated 9th April 2015 passed by the learned JMFC, 2nd Court, Pune in RCC No. 4439 of 2010 whereby the Application seeking discharge filed under section 239 of CrPC was rejected and (ii) the Order dated 1st February 2018 passed by Additional Sessions Judge, Pune in Criminal Revision Application No.300 of 2015 confirming the Order dated 9th April 2015. This Court by Order dated 10th July 2018 was pleased to grant ad-interim reliefs in terms of prayer clause (b). 2/18 Supriya APL-396-2018.doc 3) Heard Mr. Manoj Mohite, learned Senior Counsel appearing for the Applicant in Criminal Application No. 396 of 2018, Mr. V. P. Vaze for Petitioner in Writ Petition No. 1035 of 2018, Mrs. Megha Bajoria, A.P.P for Respondent -State, Mr. Aniket Nikam for Respondent No.2. Perused the entire record. 4) Briefly stated the allegations in the FIR are as under: 4.1) The Respondent No.2/original complainant Surya Hospital Medical Store is a partnership firm registered on 17th November 1986. That, Mr. Ajit V. Ghate, Sanjiv Jamdar, M/s Surya Hospital were the partners of the firm with a profit sharing ratio of 55%, 35% and 10% respectively. Dr. Prasad N. Honap (Petitioner in Writ Petition No. 1035 of 2018) is the original accused No. 3 and Managing Director of Surya Hospital Pvt. Ltd. 4.2) That, the Respondent No. 2 firm carried out the business of Medical Shop in the premises of Surya Hospital Pvt. Ltd. i.e. Accused No. 1 from the year 1986 to 2002. The Respondent No. 2 firm was engaged to supply medicines. From the inception of the partnership i.e. from the year 1986 till 2002, the transactions were carried out with sincerity and honesty. That, till the year 2002, the Accused No.1 cleared all the bills as raised by the Respondent No. 2. 4.3) That, for the period of 2003 to 2006, the accused failed to pay the bills. That, the Applicants informed that, they were facing financial crisis and did not have sufficient profit. It was therefore decided to implement the 3/18 Supriya APL-396-2018.doc Central Government Scheme. The Central Government Scheme was implemented as per alleged understanding and the Respondent No.2 firm provided the required medicines from the year 2002. 4.4) That, for the period 2003 to 2006 the bills remained outstanding and the payments were not given by the Accused to the Respondent No.2 firm for having provided medicines under the C.G.H.S schemes. According to the Respondent No.2 firm the amount outstanding was to the tune of Rs. 29,20,406/-. The main allegation is that, despite of receiving the amounts from the scheme under the Central Government, the Accused No.1 did not pay the aforesaid money. On the basis of these allegations, the complaint came to be filed before the learned JMFC, 2nd Court, Pune. The Applicant preferred discharge Application which was rejected, by an Order dated 9th April 2015. The Applicants Criminal Revision Application No. 300 of 2015 has also been rejected on 1st February 2018 whereby the Order dated 9th April 2015 was confirmed. 5) Mr. Manoj Mohite, learned Senior Counsel appearing for the Applicant in Criminal Application No. 396 of 2018, submits that:- 5.1) The present dispute is allegedly over an unpaid amount of Rs. 29,20,406/- for the period of 2003 to 2006. This clearly establishes that, the complaint is related to the settlement of accounts interse between the partners of the Respondent No.2 firm. 5.2) A Civil Suit No. 929 of 2012 is also filed by the Respondent No.2 4/18 Supriya APL-396-2018.doc against the Accused for the recovery of said amount of Rs.29,20,406/-. That, in the said suit the Respondent No.2 firm has claimed an amount of Rs. 98,39,894/-. 5.3) The dispute essentially arose because the Respondent No.2 firm failed to finalize its own accounts. During the course of the inquiry, statements from two Chartered Accountants confirmed that the Respondent No.2 firm had not rendered it’s accounts. A due diligence report and statement by C.A. Prasant Deo indicated that, while an outstanding amount was shown in the books of Accused No. 1’s hospital, income from the partnership firm could not be recognized in the Company’s books specifically for want of accounts of the firm. Similarly, an Audit Report submitted by C.A. Limaye, who was appointed by the Company Law Board, clearly disclosed that the Respondent No.2 firm had not rendered its accounts. 5.4) That, the amount of Rs. 29,20,406/- was due towards the payment of medicines and the same could not be paid as the accounts had not been settled. Therefore, there was no intention to cheat Respondent No.2 from the inception of the partnership or otherwise. That, the dispute is purely of a civil nature and that of settlement of accounts. 5.5) The true nature of dispute is brought out in the plaint wherein the plaintiff has pleaded that, Surya Hospitals Pvt. Ltd. is not entitled to have its profits out of its dual position as partner in firm at one end and owner at other end. The perusal of the complaint indicates that, no offence under 5/18 Supriya APL-396-2018.doc Section 420 of IPC is made out. 5.6) Learned Advocate Mr. V.P. Vaze appearing for the Petitioner/original accused No. 3 in Writ Petition No. 1035 of 2018, adopted the arguments advanced by Mr. Manoj Mohit, the learned senior counsel appear for the Applicant in Criminal Application No. 396 of 2018. 6) Mr. Aniket Nikam, learned Advocate appearing for Respondent No.2 in Criminal Application No. 396 of 2018 and Writ Petition No. 1035 of 2018 submits that:- 6.1) That, the contentions and grounds raised by the Petitioner in the present Application are improbable, incorrect, and denied in totality. The accused demonstrated dishonest and fraudulent intention by deliberately omitting Respondent No. 2’s claim and outstanding dues from the hospital’s 2006-2007 balance sheet, as is obtained from the Registrar of Companies. The outstanding of the Respondent No.2 firm is not reflected in the audited accounts. Furthermore, Respondent No. 2 was never called or consulted by Accused No. 1 or Mr. G.Y. Limaye during the finalization of these accounts. 6.2) The Applicant intentionally misled the court by claiming that the same Chartered Accountant audited the accounts of both parties. In reality, the audit for Surya Hospital was conducted by one partner of the firm “Yerwadekar and Ranade,” while the medical store’s audit was conducted by another partner of the same firm. 6.3) The Complainant and Applicants had a longstanding business 6/18 Supriya APL-396-2018.doc relationship since 1986, with transaction and volumes increasing substantially from 2002 onwards. The accused gained the Respondent No.2’s confidence over time but failed to clear the substantial outstanding dues despite receiving funds under the concerned Government Scheme. Only clearing a small portion of the outstanding amount does not absolve the Accused of their liability for the remaining balance. 6.4) The complaint and material on record disclose a clear prima facie case of cheating and dishonest intention. Consequently, the Trial Court directed an investigation under Section 156(3) of the Code of Criminal Procedure, which has already led to the police filing a charge sheet against the accused. 6.5) That, there is enough material in the chargesheet to demonstrate a prima facie case against the Applicant. That, the offence of cheating is prima facie and clearly made out. Ms. Megha Bajoria, the learned APP appearing for the Respondent-State supports the case of the Respondent No. 2. 7) Before proceeding to consider the matter on merits it would be necessary to refer certain Judgments of the Hon’ble Supreme Court which are relevant for the issues in the present matter:- 7.1) The Hon’ble Supreme Court in the case of Union of India Vs. Prafulla Kumar Samal, reported in AIR 1979 SC 366 in paragraph 10 has observed that:- "10. Thus, on a consideration of the authorities mentioned above, the 7/18 Supriya APL-396-2018.doc following principles emerge: (1) That the Judge while considering the question of framing the charges under section 227 of the Code has the undoubted power to sift and weigh the evidence for the limited purpose of finding out whether or not a prima facie case against the accused has been made out: (2) Where the materials placed before the Court disclose grave suspicion against the accused which has not been properly explained the Court will be, fully justified in framing a charge and proceeding with the trial (3) The test to determine a prima facie case would naturally depend upon the facts of each case and it is difficult to lay down a rule of universal application. By and large however if two views are equally possible and the Judge is satisfied that the evidence produced before him while giving rise to some suspicion but not grave suspicion against the accused, he will be fully within his right to discharge the accused (4) That in exercising his jurisdiction under section 227 of the Code the Judge which under the present Code is a senior and experienced Judge cannot act merely as a Post office or a mouth-piece of the prosecution, but has to consider the broad probabilities of the case, the total effect of the evidence and the documents produced before the Court, any basic infirmities appearing in the case and so on. This however does not mean that the Judge should make a roaming enquiry into the pros and cons of the matter and weigh the evidence as if he was conducting a trial" 7.2) The Hon’ble Supreme Court in the case of R.S. Nayak vs. A.R. Antulay and Anr. Reported in AIR 1986 SC 2045, while analyzing provisions of Sections 227, 239 and 245 of Cr.P.C., in unequivocal terms in Para 44 has held as under:- "The Code contemplates discharge of the accused by the Court of Sessions under Section 227 in a case triable by it; cases instituted upon a police report are covered by Section 239 and cases instituted otherwise than on police report are dealt with in Section 245. The 8/18 Supriya APL-396-2018.doc three sections contain some what different provisions in regard to discharge of the accused. Under Section 227, the trial Judge is required to discharge the accused if he 'considers that there is not sufficient ground for proceeding against the accused.’ Obligation to discharge the accused under Section 239 arises when "the Magistrate considers the charge against the accused to be groundless." The power to discharge is exercisable under Section 245(1) when "the Magistrate considers, for reasons to be recorded, that no case against the accused has been made out which, if unrebutted, would warrant his conviction.” It is a fact that Sections 227 and 239 provide for discharge being ordered before the recording of evidence and the consideration as to whether charge has to be framed or not is required to be made on the basis of the record of the case, including documents and oral hearing of the accused and the prosecution or the police report, the documents sent along with it and examination of the accused and after affording an opportunity to the two parties to be heard. The stage for discharge under Section 245, on the other hand, is reached only after the evidence referred to in Section 244 has been taken. Notwithstanding this difference in the position there is no scope for doubt that the stage at which the Magistrate is required to consider the question of framing of charge under Section 245(1) is a preliminary one and the test of “prima facie” case has to be applied. In spite of the difference in the language of the three sections, the legal position is that if the trial Court is satisfied that a prima facie case is made out, charge has to be framed." 7.3) The Hon’ble Supreme Court in the case of Manish v. State of Maharashtra, reported in 2025 SCC OnLine SC 707 has observed that:- “10. The trajectory of events narrated earlier would reveal a continuing business transaction between 2015 and 2017 between parties. During this period, the 2nd non-applicant supplied coal in tranches under various invoices with a credit limit of 15 days. Though the appellant had breached the credit limit and failed to pay the 2nd non-applicant, the latter continued to supply coal irrespective of such breach. A sum of Rs. 76,82,883/- became due and payable. 9/18 Supriya APL-396-2018.doc 14. There is no cavil that in some cases a commercial dispute may give rise to a criminal offence in addition to a civil cause of action. The test to determine whether a case would attract penal consequences is as follows:— “Did the offending party make dishonest representation at the inception of the transaction and induce the other party to part with property, or act in a manner which but for such representation, the latter would not have done.” 19. On the contrary, appellant had clarified he had suffered continuous business setbacks. Due to losses, he was unable to pay the 2nd non-applicant. He had sold the coal to a brick manufacturer and suffered losses thereto. Vicissitudes in the commercial market are well known. Failure to pay due to unfortunate business losses cannot be clothed with culpability and the process of criminal law utilized to recover outstanding dues.” 7.4) The Hon’ble Supreme Court in the case of Uma Shankar Gopalika v. State of Bihar, reported in (2005) 10 SCC 336 has observed that:- “6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of complaint any criminal offence whatsoever is made out much less offences under Sections 420/120-B IPC. The only allegation in the complaint petition against the accused persons is that they assured the complainant that when they receive the insurance claim amounting to Rs 4,20,000, they would pay a sum of Rs 2,60,000 to the complainant out of that but the same has never been paid. Apart from that there is no other allegation in the petition of complaint. It was pointed out on behalf of the complainant that the accused fraudulently persuaded the complainant to agree so that the accused persons may take steps for moving the Consumer Forum in relation to the claim of Rs 4,20,000. It is well settled that every breach of contract would not give rise to an offence of cheating and only in those 10/18 Supriya APL-396-2018.doc 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 the present case it has nowhere been stated 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.” 7.5) The Hon’ble Supreme Court in the case of Vesa Holdings (P) Ltd. v. State of Kerala, reported in (2015) 8 SCC 293 has observed that:- “12. 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 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 Penal Code, 1860 can be said to have been made out. 13. 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. The criminal proceedings should not be encouraged when it is found to 11/18 Supriya APL-396-2018.doc be mala fide or otherwise an abuse of the process of the court. The 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 the court and the High Court committed an error in refusing to exercise the power under Section 482 of the Criminal Procedure Code to quash the proceedings.” 7.6) The Hon’ble Supreme Court in the case of Hridaya Ranjan Prasad Verma v. State of Bihar, reported in (2000) 4 SCC 168 has observed that:- “15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.” 8) I have perused the complaint. Perusal of the complaint indicates that certain amounts remained to be paid towards the supply of medicines. The Respondent No.2 and the Accused were partners in the firm. The main crux of the allegation is that, despite receiving the money under the Government scheme, the amounts were not paid. Pertinent to note that, in the complaint there is specific reference made to the fact that, the hospital was 12/18 Supriya APL-396-2018.doc facing certain financial crisis and therefore it ventured to implement the Central Government Scheme. In the entire complaint, I find that, there is no allegation of any misrepresentation and/or dishonest inducement at the inception, even alleged. 8.1) A bare perusal of the complaint would prima facie indicate that, the dispute is mainly regarding to the accounts of the partnership firm. It is an interse dispute between the partners of and for settlement of the accounts. Perusal of the audit report would also indicate that, what is in dispute is a settlement of accounts between the partners interse. 8.2) Perusal of the Order dated 9th April 2015 passed by the learned JMFC, 2nd Court, Pune indicates that, the discharge application (Order below Exhibit 20) was rejected on the ground that, the Respondent No.2 had paid an amount of Rs.4,50,000/- on the representation that the hospital was running in loss and Rs.2,00,000/- for purchase of shares. In the Order the learned Magistrate has observed that, the applicant failed to repay the amount and also failed to provide the promised shares, and therefore a prima facie case of cheating was made out. The learned Magistrate further observed that the prosecution mainly revolved around the amount of Rs.4,50,000/- and 2,00,000/- for the purchase of shares and that these two facts are also not denied by the Accused. In my view, the said order dated 9th April 2015 is totally misdirected. 13/18 Supriya APL-396-2018.doc 8.3) Perusal of the complaint would indicate that the main allegation in the complaint is in respect of the offence of cheating with specific regard to non-payment of an amount of Rs.29,20,406.55/- for the period of 2003 to 2006. The complaint proceeds on the basis that, the Respondent No.2 was not paid the amount due for the medicine supplied though the same amount was received by the accused. The record indicates that, the firm had also not submitted its accounts as is evident from the Audit report. In my view, it is thus clearly an issue of settlement of accounts by and between the partners of a firm interse or a simple case of non-payment under a commercial transaction. I have noted that, the Respondent No.2 has initiated civil proceedings in respect of the said amount wherein the amounts have been claimed along with interest. Prima facie it is a case of settlement of partnership accounts. The allegations in the complaint, even if accepted as it is, only show non-payment of money arising out of the partnership transactions. Mere non-payment of money or breach of the terms of a contract does not by itself amount to the offence of cheating. Even otherwise, I find that there is no allegation of dishonest inducement much less an allegation of dishonest inducement at the very inception. On the contrary, the Respondent No. 2 in fact admits that, there were no issue in the partnership business till the year 2004 and that all transactions were conducted honestly and with sincerity. I have also noted that, the Respondent No.2 has also made a grievance that, the said medical shop has now been shut down and that the 14/18 Supriya APL-396-2018.doc hospital has started it’s own medical shop. This probably was the reason to initiate the present criminal proceedings. 8.4) Perusal of the Order passed by the Additional Sessions Judge dated 1st February 2018 indicates that, the Order proceeds on the basis that, there was a prima facie evidence as the Applicant and co-accused induced the complainant to provide/deliver medicines by showing a rosy picture of permission obtained by them to provide medicines to government servants. The order proceeds to record that, believing the accused the Respondent No.2 started providing medicines, but did not get funds/payment for the said transactions. That, the said non-payment of money, amounts to practicing deception and an intention to cheat. The order fails to consider the pleadings in the complaint that due to financial crisis at the hospital, Accused met with the Respondent No.2 in January 2001 to discuss the C.G.H.S. scheme. During this meeting, it was orally agreed that the Respondent No.2 would supply medicines for government and corporate patients and the Accused would pay for the medicines as soon as the hospital received the corresponding funds from C.G.H.S. or the respective companies. I am of the opinion that, it is not the case of the Respondent No.2 that any inducement was offered, much less any dishonest inducement at the time of inception. The Respondent No.2 admits of being informed of the financial crisis. Prima facie, the averments and observations do not show that the accused had dishonest intention at the very beginning of the transaction, which is an essential ingredient of the 15/18 Supriya APL-396-2018.doc offence under Section 420 of the Indian Penal Code. 8.5) From a perusal of the complaint and facts of the matter, it is clear that the dispute is essentially regarding the accounts of the partnership firm and settlement of accounts between the parties. 8.6) Perusal of the financial due diligence review dated 20th January 2007, would prima facie of indicate that, for the want of accounts of the firm i.e. Surya Hospital Medical Store for the past few years the income from the partnership firm had not been recognized in the books of the Hospital. I have noted that, the report further specifically records that, the accused company i.e. Surya Hospital Pvt. Ltd. would continue to be liable for the acts of the firm. Further, the auditor's report dated 22nd October 2007 also reiterates that of the firm Surya Hospital Medical Store has not rendered any statement of account and in the absence thereof, companies share in the profit or loss of the firm could not be considered in the accounts. Here also a specific observation is made that the company remains liable for the acts of the firm. 8.7) I have noted that, the observations are of independent third parties. The said observation negate the allegations of cheating. The same makes it clear that, the dispute is only in respect of settlement of accounts interse between the parties. It is also not in dispute that the complainant has already initiated appropriate proceedings before the competent Court for recovery of the alleged dues. In the aforestated facts, in my view, no case 16/18 Supriya APL-396-2018.doc under Section 420 of the IPC is made out against the Applicant. The dispute is purely of a civil nature and arising out of partnership transactions and settlement of accounts. Their is no allegation of dishonest inducement at the very inception. The allegation appears to be groundless and totally misconceived. Perusal of the complaint would indicate that no cases made out against the accused. 9) In view of the aforesaid discussion and applying the principles laid down by the Hon'ble Supreme Court in the case of State of Haryana & Ors. v. Bhajan Lal & Ors., reported in 1992 Supp (1) SCC 335, I am of the considered opinion that the present case squarely falls within the parameters enunciated therein. Allowing the prosecution to continue for the alleged offence punishable under Section 420 read with Section 34 of the IPC would result in an abuse of the process of the Court, particularly when the allegations, viewed in their entirety, do not disclose the commission of the alleged offences and the dispute is essentially civil in nature. 10) Considering the facts of the present case and for the aforestated reasons, I am of the considered view that the Applicants have made out a fit case for this Court to exercise its inherent powers under Section 482 of the CrPC. The twin conditions for invoking the said jurisdiction stand fully satisfied, and it becomes imperative to interdict and quash the proceedings to prevent the abuse of the process of law and to secure the ends of justice. 17/18 Supriya APL-396-2018.doc 11) I am of the prima facie opinion that, no case is made out under Section 420 of the IPC. In view of the aforesaid facts and circumstances, I am inclined to allow the Application. 12) Hence, I pass the following Order:- i) The Criminal Application No. 396 of 2018 is allowed in terms of prayer clause (a). ii) Writ Petition No. 1035 of 2018 is allowed in terms of prayer clause (a). (RANJITSINHA RAJA BHONSALE, J.) 18/18