1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 04TH DAY OF APRIL, 2025 BEFORE THE HON'BLE MR. JUSTICE M. NAGAPRASANNA WRIT PETITION No.11195 OF 2023 (GM – RES) BETWEEN: 1 . RAJKUMAR CHELLAPPAN PILLAI S/O GOPALA PILLAI CHELLAPPAN PILLAI AGED ABOUT 49 YEARS AT ZONTA INFRATECH PVT. LTD., 1ST FLOOR, RELIABLE PHOENIX TOWERS 16 AND 16/1, MUSEUM ROAD BENGALURU – 560 001. 2 . JAYARAM POOJARY S/O NARASIMHA POOJARY AGED ABOUT 50 YEARS AT ZONTA INFRATECH PVT. LTD., 1ST FLOOR, RELIABLE PHOENIX TOWERS 16 AND 16/1, MUSEUM ROAD BENGALURU – 560 001. 3 . SREEJU S. NAIR S/O SURENDRANPILLAI AGED ABOUT 32 YEARS AT ZONTA INFRATECH PVT. LTD., 1ST FLOOR, RELIABLE PHOENIX TOWERS 2 16 AND 16/1, MUSEUM ROAD BENGALURU – 560 001. ... PETITIONERS (BY SRI PRABHULING K.NAVADGI, SR.ADVOCATE A/W SMT.NAYANA TARA B.G., ADVOCATE) AND: 1 . STATE OF KARNATAKA BY THE STATION HOUSE OFFICER CUBBON PARK POLICE STATION BENGALURU – 560 001 REPRESENTED BY SPP HIGH COURT OF KARNATAKA BENGALURU – 560 001. 2 . MR. PATRICK DIETER BAUER S/O HEINZ DIETER BAUER AGED ABOUT 52 YEARS R/A NO.11, DROSSELSTRASSE SUEDLOHN 46354 DE, GERMANY ... RESPONDENTS (BY SRI B.N.JAGADEESHA, ADDL.SPP FOR R-1; SRI R.V.S.NAIK, SR.ADVOCATE FOR SRI NITIN PRASAD, ADVOCATE FOR R-2) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF CR.P.C., PRAYING TO QUASH THE FIRST INFORMATION REPORT AND COMPLAINT IN CRIME NO.34 OF 2023, REGISTERED BY THE CUBBON PARK POLICE STATION, BEFORE THE III ADDITIONAL CHIEF METROPOLITAN MAGISTRATE COURT AGAINST THE PETITIONERS HEREIN WHO ARE LABELLED AS ACCUSED NOS.1 TO 3 RESPECTIVELY, FOR OFFENCES WHICH ARE MADE PENAL U/S 3 420, 409 AND 34 OF THE INDIAN PENAL CODE, WHICH IS PRODUCED AT ANNEXURE-A , A1 AND A2. THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:- CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA CAV ORDER The petitioners, three in number, are knocking at the doors of this Court calling in question registration of a crime in Crime No.34 of 2023 for offences punishable under Sections 409, 420 and 34 of the IPC, pending before the III Additional Chief Metropolitan Magistrate, Bengaluru. 2. Facts adumbrated, are as follows: The three petitioners are office bearers of one Zonta Infratech Private Limited (‘the Zonta Company’ for short). The 1st petitioner/accused No.1 is its Managing Director and petitioners 2 and 3 are employees of the Company. The Zonta Company is not an accused. It is in the business of waste management, water and 4 waste-water management in India and beyond the shores of the Nation and has contracts with several municipal corporations in the country. 3. The 2nd respondent is the complainant and he is the Managing Director of a German Company “Bauer GmBH” (‘the Germany Company’ for short). The Zonta Company and the German Company establish a Joint Venture Company for setting up manufacturing facility at Peenya Industrial Area for production of underground waste containers by entering into a shareholding agreement. On 21-02-2017, Zonta Company and the German company - complainant further enter into equity subscription and debt financing agreement, the second agreement. In furtherance of aforesaid agreements, Zonta Company receives an investment from the complainant through aforesaid agreement dated 21-02-2017, in particular. Zonta Company then avails loan from Axis Bank for expanding business even beyond the shores of the Nation for which, the complainant furnishes a guarantee by way of a stand by letter of credit for 2.28 million Euros. The Nation then engulfed with COVID-19. Several transactions have happened between the 5 parties. On 30-11-2021, Zonta Company holds its Annual General Meeting which confirms certain new orders bagged by it at different places. The father of the complainant who was also a Managing Director of the German company causes a legal notice upon the petitioners demanding certain payment. Disputes on those payments arose. All the parties sit together and enter into a settlement agreement on 06-10-2022. In terms of the settlement agreement, Zonta Company makes part payment of 27,500 Euros to the complainant. Pursuant to the said payment, certain disputes arose with regard to interpretation of what would be the part payment. Alleging violation of the settlement agreement, the impugned complaint comes to be registered on 08-03-2023 in Crime No.34 of 2023. Therefore, the entire issue has now sprung from the breach of agreements. 4. Heard Sri Prabhuling K.Navadgi, learned senior counsel appearing for the petitioners, Sri B.N. Jagadeesha, learned Additional State Public Prosecutor appearing for respondent No.1 and Sri R.V.S. Naik, learned senior counsel appearing for Sri Nitin Prasad, learned counsel for respondent No.2. 6 5. The learned senior counsel appearing for the petitioners would take this Court through the documents appended to the petition and seeks to demonstrate that a seemingly civil dispute is given a colour of crime. The complainant has set the criminal law into motion on two counts – one breach of settlement agreement and the other, recovery of money in terms of settlement agreement. He would, therefore, contend that such misuse should not be permitted and the complainant should be left with remedies available in law. 6. Per contra, the learned senior counsel representing the 2nd respondent would vehemently refute the submissions to contend that a given case can raise both civil and criminal law. Therefore, it is not a case where every crime registered which has a flavour of civil law should be quashed. It is his submission that there is undoubtedly a breach of settlement agreement and huge chunks of Euros has not been paid in terms of the said agreement. He would, therefore, contend that it is a matter of investigation in the least and this Court should not interfere at this stage. 7 7. The learned Additional State Public Prosecutor would also toe the lies of the learned senior counsel appearing for the complainant. 8. I have given my anxious consideration to the submissions made by the respective learned senior counsel and have perused the material on record. 9. The afore-narrated facts are not in dispute. Three agreements are entered into between the Zonta Company and the German Company. First, a Joint Venture Agreement. Certain clauses of the said agreement are germane to be noticed. They read as follows: “…… ….. …. 5.4 The Shareholding of the Parties in the Company shall be as follows: ZHPL 50% (Fifty percent) BAUER 50% (Fifty percent) Any change in Shareholding shall be made in accordance with the provisions of this Agreement. The parties further agree that, subject always to the approval of applicable Government Authorities and in 8 compliance with the Applicable Laws, any further issuance of Shares of Company shall be so made on a rights basis unless otherwise provided for or agreed in an approved Business Plan by the Board of Directors. … … … 14.1 Any dispute, controversy or claim arising out of or in relation to this Agreement or the breach, termination or invalidity thereof, if the same cannot be settled amicably among the Parties concerned, shall be settled by final and binding arbitration in accordance with the Arbitration and Conciliation Act, 1996 by three arbitrators. Each party shall appoint one Arbitrator and the appointed arbitrators shall appoint a third arbitrator who shall act as the presiding arbitrator. The arbitration proceedings shall take place in Bangalore, India and the proceedings shall be conducted in English. The arbitral tribunal shall make a written and reasoned award. The tribunal shall also make an award as to costs.” (Emphasis added) In terms of Clause 5.4 both the parties – Zonta Company and the German Company have equal share holding in the Joint Venture Company. Clause 14.1 mandates resolution of disputes in accordance with the Arbitration and Conciliation Act. The second agreement is on 21-02-2017. Certain clauses of this agreement also assume significance. They read as follows: “4. DEBT FINANCING 4.1 Apart from the subscription of Shares envisaged herein above, the Company is desirous to avail debt financing of 2.5 million (two and a half 9 million) Euros (“Debt Facility”) from the Investor and the Investor has agreed to grant the Debt Facility to the Company. 4.2. The interest rate applicable to the Debt Facility shall be at the rate of 1.5% (one and half percent) on the principal amount outstanding on the date on which the payment of the interest is due. The interest shall be payable on annual basis. … … … 8. BOARD, MANAGEMENT AND RELATED MATTERS 8.1 Composition of the Board. The Board may have up to such number of directors as may be permitted under the Act from time to time. 8.1.1 On and from the Closing Date and till such time the Investor holds at least the Minimum Shareholding, the Investor shall have a right to nominate and maintain 1 (one) Director to the Board of the Company (the “Investor Director”). The Investor shall be entitled to appoint and remove the Investor Director by Notice to the Company. The Company shall following receipt of a Notice from the Investor in this regard complete all corporate and regulatory formalities regarding such appointment, removal or substitution within the time period permitted under the Act. 8.1.2 In the event a vacancy occurs on the Board for any reason, each Shareholder agrees to cause the Company to immediately convene a meeting of the Board and endeavour to cause its representatives to exercise their voting rights so as to appoint a replacement to hold office until the date of the next annual general meeting. The failure to do so shall not constitute a waiver of such right nor shall it prevent the exercise of such right prospectively. Such vacancy shall be filled by an individual who is nominated for appointment by the Shareholder that nominated the appointment of the Person to be replaced. The new appointee shall hold office up to the date on which the director in whose place he is appointed would have held office if it had not been 10 vacated but would be subject to re-appointment on the expiry of his office. 8.2 Investor Alternate Directors. 8.2.1 The Investor having the right to appoint an Investor Director and shall be entitled to appoint, remove and substitute an alternate Director to their Investor Director (“Alternate Director”) from time to time and to act as an alternate Director to their Investor Director during the absence of their Investor Director, as permitted under the Applicable Law. The Board shall ensure that the Person nominated by the relevant Investor is appointed as the Alternate Director immediately upon Notification by the Investor. The Company shall within 10 (ten) days of Notification in this regard complete all corporate and regulatory formalities regarding the appointment, removal or substitution of such Alternate Director.” (Emphasis added) Taking forward the afore-quoted agreements, investment come into Zonta Company. Disputes arose between the two. They sit together and arrive at a settlement agreement on 06-10-2022. Certain clauses of the settlement agreement are as follows: “1) ZIPL shall reimburse the cost of renewal of SBLC amounting to 110263 Euros (Euros One Hundred Ten Thousand Two Sixty Three) in two trenches: a. 27500 Euro will be paid upon signing this Settlement Agreement, being 25% of the outstanding amount whereby ZIPL will file the necessary money transfer documents with SBI on the same day for due transfer. 11 b. The balance 82763 Euro being 75% of the outstanding amount shall be paid on or before 30th November, 2022. … … … 3) ZIPL shall make every endeavour to release the SBLC not later than 30th November, 2022 by pledging the properties of ZIPL or Mr. Rajkumar C Pillai or both provided however Bauer, Patrick & Dennis withdraw all complaints and legal notices filed against ZIPL and its officers to Banks and other authorities immediately upon signing this Agreement and evidence of the same is furnished to ZIPL. In any case it is not the intention of ZIPL to seek renewal of the SBLC. … … … 5) ZIPL has agreed to repay the remaining ECB in tranches not later than 30th September 2023 as defined in Schedule-A annexure hereto. ZIPL has agreed to pay the interest towards the ECB not later than 31st December, 2023. ZIPL has agreed to pay the interest in trenches as defined in Schedule-A1 annexed hereto. Any increase or decrease in the rate of interest mentioned in the Equity Subscription and Debt Financing Agreement dated 21st February 2017 for the outstanding principal of Euro 850,000 (Euros Eight Hundred and Fifty Thousand) shall be intimated in writing by Patrick providing evidence of increase/decrease in rates interest as per European Central Bank rates basis which the ZIPL would adjust and pay the rates of interest in line with the norms of Reserve Bank of India & FEMA Rules. ….. ….. ….. Schedule of Repayment of ECB Interest 12 Date of repayment (MM/DD/YYYY) Interest (in Euro) Repayment (In Euro) Balance (In Euro) Status of payment 30-10-2023 40,000 85158 30-11-2023 40,000 45158 30-12-2023 125158 45150 0 Payable” (Emphasis added) Zonta Company agrees to pay the remaining amount in Euros in separate transactions. The settlement agreement is breached by making short payment. This results in registration of the complaint. Certain paragraphs of the complaint are germane to be noticed. They read as follows: “…. …. …. 4) Thereafter on 6 Oct 2022 a Settlement Agreement was entered between Mr. Bauer GMBH through its Chief Executive Officer Mr. Patrick Bauer And Between Mr. Patrick Bauer And Between M/s Zonta Infratech Private Limited Through its Managing Director Mr. Rajkumar Pillai And Between Mr. Dennis Eapen Pulimittathu. The said Settlement Agreement is attached below as (Annexure B). According to the said Settlement Agreement it was accepted by Managing Director of M/s Zonta Infratech Private Limited, Mr. R Pillai that Mr. Bauer has extended an amount of 2.28 Million Euros (Two Million and Two Hundred Thousand Euros) in the form of Stand By Letter of Credit (SBLC) to enable M/s Zonta Infratech Private Limited to avail credit Mr. R Pillai is the Managing Director of M/s Zonta Private Lhaited (Zonta) a company registered under the Indian Companies Act, 1956/2013 having its registered office at 1st Floor, Reliable Phoenix Tower #16 & 16. 1. Museum Rd, Bengaluru, Karnataka - 560001. M/sZonta is in the business of waste management. Mr. Patrick Bauer is also a shareholder and 13 Director of Zonta Infratech Private Limited. He has also invested an amount of 1.5 million euros as Equity and 2.5 million euros by way of External Commercial Borrowing (ECB) in Zonta. I state that Zonta approached Mr. Patrick Bauer's company in the year 2018 to seek additional finance worth Euros 2.28 million for their upcoming Project in Bengaluru. This 2.28 million euros stand-by letter of credit SBLC was in addition to earlier investment. Mr. Rajkumar acquired trust and induced Mr. Patrick Bauer's company into extending a stand-by letter of credit (SBLC)worth 2.28 million Euros to Zonta. Thereafter on 6-Oct 2022 a Settlement Agreement was entered between Mr. Bauer GMBH through its Chief Executive Officer Mr. Patrick BauerAnd Between Mr. Patrick Bauer And Between M/s Zonta Infratech Private Limited Through its Managing Director Mr. Rajkumar Pillai And Between Mr. Dennis Eapen Pulimittathu. The said Settlement Agreement is attached below as (Annexure B). According to the said Settlement Agreement it was accepted by Managing Director of M/s Zonta Infratech Private Limited, Mr. R Pillai that Mr. Bauer has extended an amount of 2.28 Million Euros (Two Million and Two Hundred Thousand Euros) in the form of Stand By Letter of Credit (SBLC) to enable M/s Zonta Infratech Private Limited to avail credit facilities from State Bank of India. According to the Settlement Agreement dated 6 Oct 2022, 27500 Euros were to be paid by Mr. R Pilla to Mr. Patrick Bauer upon the signing the Settlement Agreement and Balance of 82763 Euros to be paid before 30 November 2022. Along with it 10000 Euros were to be paid to Mr.Patrick Bauer towards travel and accommodation expenses and it was categorically mentioned that M/s Zonta Infratech Private Limited shall make every endeavor to release the SBLC not later than 30 November 2022. It is pertinent to note that the said Settlement Agreement dated 6 Oct 2022 was entered with the sole intention to breach the trust of Mr. Patrick Bauer as it evident through the conduct of Mr. R Pillai. Till today SBLC is not released and he has failed to pay the assured amounts mentioned in Settlement Agreement. Mr. R Pillai gained the trust 14 by entering into a Settlement Agreement with sole intention to breach the trust and to cause wrongful gain to himself and wrongful loss to Mr. Patrick Bauer, thus clearly section 409 is attracted against Mr. R Pillai. Mr Rajkumar Pillai being a director of the company was in a fiduciary relationship with the company as well as other directors. He had dominion over the funds availed from enchashing the SBLC. Mr. Pilla availed loan facility of 32 crores using the said SBLC The SBLC was for Waste bin projects and the 32 crores availed was supposed to be used for bussiness purpose but Mr. R Pilla Used The Said money for personal gain and buying personal propertys thus he misused his position and dominion over the property i.e the money availed against SBLC for his personal gain. He has misappropriated the said funds for his personal gain which is evident from the bank statements, I therefore urge to you on behalf of Mr.Patrick Bauer to register a FIR under section 409 of Indian Penal Code and investigate the offences committed by the Accused Mr.R. Pillai Managing Director of Zonta Company.” (Emphasis added) The allegation in the complaint is that, Zonta Company has not paid back the entire amount and, therefore, the complaint is registered. This complaint becomes a crime in Crime No.34 of 2023 for offences punishable under Sections 409 and 420 of the IPC. The entire issue between the two has sprung only from agreements. Therefore, the criminal law is set into motion for breach of agreements. The breach of agreement has resulted in short payment to the complainant. Therefore, the criminal law is set into 15 motion for yet another fact of recovery of money, both of which are clearly impermissible in law. 10. The criminal justice system should not be put into use for the purpose of recovery of money, unless the facts are glaring and make out a prima facie offence under the criminal law. It becomes germane to notice the law laid down by the Apex Court in entertaining a criminal case for recovery of money or breach of agreements. The offences alleged are the ones punishable under Sections 409 and 420 of the IPC. Section 420 of the IPC reads as follows: “420. Cheating and dishonestly inducing delivery of property.—Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.” Section 420 of the IPC has its ingredients in Section 415 of the IPC to be met. Section 415 of the IPC reads as follows: “415. Cheating.—Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to 16 deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”. Explanation.—A dishonest concealment of facts is a deception within the meaning of this section. Illustrations (a) A, by falsely pretending to be in the Civil Service, intentionally deceives Z, and thus dishonestly induces Z to let him have on credit goods for which he does not mean to pay. A cheats. (b) A, by putting a counterfeit mark on an article, intentionally deceives Z into a belief that this article was made by a certain celebrated manufacturer, and thus dishonestly induces Z to buy and pay for the article. A cheats. (c) A, by exhibiting to Z a false sample of an article, intentionally deceives Z into believing that the article corresponds with the sample, and thereby dishonestly induces Z to buy and pay for the article. A cheats. (d) A, by tendering in payment for an article a bill on a house with which A keeps no money, and by which A expects that the bill will be dishonoured, intentionally deceives Z, and thereby dishonestly induces Z to deliver the article, intending not to pay for it. A cheats. (e) A, by pledging as diamonds articles which he knows are not diamonds, intentionally deceives Z, and thereby dishonestly induces Z to lend money. A cheats. (f) A intentionally deceives Z into a belief that A means to repay any money that Z may lend to him and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats. 17 (g) A intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery, A cheats; but if A, at the time of obtaining the money, intends to deliver the indigo plant, and afterwards breaks his contract and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract. (h) A intentionally deceives Z into a belief that A has performed A's part of a contract made with Z, which he has not performed, and thereby dishonestly induces Z to pay money. A cheats. (i) A sells and conveys an estate to B. A, knowing that in consequence of such sale he has no right to the property, sells or mortgages the same to Z, without disclosing the fact of the previous sale and conveyance to B, and receives the purchase or mortgage money from Z. A cheats.” Section 415 of the IPC punishes a person who dishonestly, right from the inception, lures the victim into a transaction and misappropriates the money. 11. In the case at hand, there is no question of luring each other. It is a business transaction by entering into agreements. Breach of agreements are, therefore, projected to become a crime. 18 In identical circumstances, the Apex Court in the case of VIJAY KUMAR GHAI v. STATE OF WEST BENGAL1 has held as follows: “27. Section 405 IPC defines “criminal breach of trust” which reads as under: “405. Criminal breach of trust.—Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits “criminal breach of trust”.” The essential ingredients of the offence of criminal breach of trust are: (1) The accused must be entrusted with the property or with dominion over it, (2) The person so entrusted must use that property, or; (3) The accused must dishonestly use or dispose of that property or wilfully suffer any other person to do so in violation, (a) of any direction of law prescribing the mode in which such trust is to be discharged, or; (b) of any legal contract made touching the discharge of such trust. 28. “Entrustment” of property under Section 405 of the Penal Code, 1860 is pivotal to constitute an offence under this. The words used are, “in any manner entrusted with property”. So, it extends to entrustments of all kinds whether to clerks, servants, business partners or other persons, provided they are holding a position of “trust”. A person who dishonestly misappropriates property entrusted to them contrary to the terms of an obligation imposed is liable for a criminal breach of 1 (2022) 7 SCC 124 19 trust and is punished under Section 406 of the Penal Code. 29. The definition in the section does not restrict the property to movables or immovables alone. This Court in R.K. Dalmia v. Delhi Admn. [R.K. Dalmia v. Delhi Admn., (1963) 1 SCR 253 : AIR 1962 SC 1821] held that the word “property” is used in the Code in a much wider sense than the expression “movable property”. There is no good reason to restrict the meaning of the word “property” to movable property only when it is used without any qualification in Section 405. 30. In Sudhir Shantilal Mehta v. CBI [Sudhir Shantilal Mehta v. CBI, (2009) 8 SCC 1: (2009) 3 SCC (Cri) 646] it was observed that the act of criminal breach of trust would, inter alia mean using or disposing of the property by a person who is entrusted with or has otherwise dominion thereover. Such an act must not only be done dishonestly but also in violation of any direction of law or any contract express or implied relating to carrying out the trust. 31. Section 415 IPC defines “cheating” which reads as under: “415. Cheating.—Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”.” The essential ingredients of the offence of cheating are: 1. Deception of any person 2. Deception of any person 2. (a) Fraudulently or dishonestly inducing that person— 20 (i) to deliver any property to any person; or (ii) to consent that any person shall retain any property; or (b) intentionally inducing that person to do or omit to do anything which he would not do or omit if he were no so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property. 32. A fraudulent or dishonest inducement is an essential ingredient of the offence. A person who dishonestly induces another person to deliver any property is liable for the offence of cheating. 33. Section 420 IPC defines “cheating and dishonestly inducing delivery of property” which reads as under: “420. Cheating and dishonestly inducing delivery of property.—Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.” 34. Section 420 IPC is a serious form of cheating that includes inducement (to lead or move someone to happen) in terms of delivery of property as well as valuable securities. This section is also applicable to matters where the destruction of the property is caused by the way of cheating or inducement. Punishment for cheating is provided under this section which may extend to 7 years and also makes the person liable to fine. 35. To establish the offence of cheating in inducing the delivery of property, the following ingredients need to be proved: 21 (i) The representation made by the person was false. (ii) The accused had prior knowledge that the representation he made was false. (iii) The accused made false representation with dishonest intention in order to deceive the person to whom it was made. (iv) The act where the accused induced the person to deliver the property or to perform or to abstain from any act which the person would have not done or had otherwise committed. 36. As observed and held by this Court in R.K. Vijayasarathy v. Sudha Seetharam [R.K. Vijayasarathy v. Sudha Seetharam, (2019) 16 SCC 739 : (2020) 2 SCC (Cri) 454] , the ingredients to constitute an offence under Section 420 are as follows: (i) a person must commit the offence of cheating under Section 415; and (ii) the person cheated must be dishonestly induced to: (a) deliver property to any person; or b) make, alter or destroy valuable security or anything signed or sealed and capable of being converted into valuable security. Thus, cheating is an essential ingredient for an act to constitute an offence under Section 420 IPC. 37. The following observation made by this Court in Uma Shankar Gopalika v. State of Bihar [Uma Shankar Gopalika v. State of Bihar, (2005) 10 SCC 336 : (2006) 2 SCC (Cri) 49] with almost similar facts and circumstances may be relevant to note at this stage : (SCC pp. 338-39, paras 6-7) 22 “6. Now the question to be examined by us is as to whether on the facts disclosed in the petition of the complaint any criminal offence whatsoever is made out much less offences under Sections 420/120-BIPC. 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. … 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 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 that there was intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420IPC. 7. In our view petition of complaint does not disclose any criminal offence at all much less any offence either under Section 420 or Section 120- BIPC and the present case is a case of purely civil dispute between the parties for which remedy lies before a civil court by filing a properly constituted suit. 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 to prevent the same it was just and expedient for the High Court to quash the same by exercising the powers under Section 482CrPC which it has erroneously refused.” 38. There can be no doubt that a mere breach of contract is not in itself a criminal offence and gives rise to the civil liability of damages. However, as held by this Court in Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786] , 23 the distinction between mere breach of contract and cheating, which is criminal offence, is a fine one. While breach of contract cannot give rise to criminal prosecution for cheating, fraudulent or dishonest intention is the basis of the offence of cheating. In the case at hand, complaint filed by Respondent 2 does not disclose dishonest or fraudulent intention of the appellants.” (Emphasis supplied) Later, the Apex Court in the case of MITESH KUMAR J.SHA v. STATE OF KARNATAKA2 has held as follows: “Issues 24. Having perused the relevant facts and contentions made by the appellants and the respondents herein in our considered opinion, the following three key issues require determination in the instant case: (i) Whether the necessary ingredients of the offences punishable under Sections 406, 419 and 420 are prima facie made out? (ii) Whether sale of excess flats, even if made, amounts to a mere breach of contract or constitutes an offence of cheating? (iii) Whether the dispute is one of entirely civil nature and therefore liable to be quashed? Whether the necessary ingredients of offences punishable under Sections 406, 419 and 420 are prima facie made out? 25. In order to ascertain the veracity of contentions made by the parties herein, it is 2 (2022)14 SCC 572 24 imperative to firstly examine whether the relevant ingredients of offences which the appellants herein had been charged with, are prima facie made out. The relevant sections read as follows: “405. Criminal breach of trust.—Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or willfully suffers any other person so to do, commits “criminal breach of trust”. Explanation 1.—A person, being an employer of an establishment whether exempted under Section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not who deducts the employee's contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid. Explanation 2.—A person, being an employer, who deducts the employees' contribution from the wages payable to the employee for credit to the Employees' State Insurance Fund held and administered by the Employees' State Insurance Corporation established under the Employees' State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the 25 said contribution in violation of a direction of law as aforesaid. *** 406. Punishment for criminal breach of trust.—Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both. *** 419. Punishment for cheating by personation.—Whoever cheats by personation shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both. 420. Cheating and dishonestly inducing delivery of property.— Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.” 26. In the instant case, the complaint levelled against the appellants herein is one which involves commission of offences of criminal breach of trust and cheating. While a criminal breach of trust as postulated under Section 405 of the Penal Code, 1860, entails misappropriation or conversion of another's property for one's own use, with a dishonest intention, cheating too on the other hand as an offence defined under Section 415 of the Penal Code, 1860, involves an ingredient of having a dishonest or fraudulent intention which is aimed at inducing the other party to deliver any property to a specific person. Both the sections clearly prescribed “dishonest intention”, as a precondition for even prima facie establishing the commission of the said offences. Thus, in order to assess the relevant contentions made by the parties herein, the question whether actions 26 of the appellants were committed in furtherance of a dishonest or fraudulent scheme is one which requires scrutiny. 27. Coming to the facts of the case at hands, the contested contention between the parties is that the builder company had sold four excess flats beyond its share, in terms of the JDA and supplementary agreement entered into between the parties. Respondent 2 contends that builder company which was entitled to sell only 9 flats in its favour, has instead executed sale deed for 13 flats in total. Thus, the company simply could not have sold the flats beyond 9 flats for which it was authorised and resultantly cannot evade criminal liability on a mere premise that a civil dispute is already pending between the parties. 28. The appellants on the other hand contend that in terms of a subsequent MoU dated 19-2-2015, it was mutually agreed between the parties, that partial payment for a loan amount borrowed by Respondent 2 from Religare Finvest Ltd., would be paid out from the sale proceeds of the said development project undertaken by both the parties. Pursuant to this MoU, the appellants had agreed to get an NOC for 15 flats by making payment of Rs 40,00,000 for each flat. 29. The key contention, and also the central point of dispute, made by the appellants is that, it was specifically agreed between the parties that the appellants would be entitled to sell additional flats beyond their share, as adjustments for payment made to Religare Finvest Ltd. on behalf of Respondent 2. It is further contended that Respondent 2 had also agreed to execute a ratification deed to the JDA and GPA eventually, which would have formally authorised the appellants to sell additional apartments. 30. Nonetheless, the ratification deed was never made and Respondent 2 subsequently even revoked the GPA unilaterally, contending that the terms of JDA were not followed. It was only after 27 revocation of GPA that the company filed an application for arbitration seeking interim orders to restrain Respondent 2 from alienating the disputed property. Simultaneously, while this dispute was pending adjudication before the arbitrator Respondent 2 filed a criminal complaint against the appellants. 31. At this juncture, it further becomes pertinent to mention that eventually though both the parties partly succeeded before the arbitrator, in terms of their respective claims, the arbitrator observed that GPA indeed could not have been revoked unilaterally at the instance of Respondent 2. Aggrieved, Respondent 2 thereafter even preferred a challenge to the award passed by the arbitrator. Moreover, pending arbitration proceedings issue regarding selling of excess flats at the instance of the appellants, was also withdrawn by Respondent 2 seeking liberty to pursue his claim with regard to selling of four excess flats in pending civil proceedings. 32. Upon a careful assessment of such facts, by no stretch can it be concluded that the appellants herein have deceptively or intentionally tried to sell excess flats if any, as contended by Respondent 2. Here, it must also be borne in mind that subsequent to the revocation of GPA, it was the appellants herein who had first resorted to arbitration proceedings on 2- 3-2016 for redressal of dispute between the parties, to which Respondent 2 had accordingly filed his statement of objections dated 9-3-2016. It was only on 29-3-2016 that Respondent 2 had filed the FIR in question bearing Crime No. 185/2016 against the appellants. Moreover, it was Respondent 2 who had withdrawn his prayer with respect to selling of four excess flats by the appellants, only to pursue the same in civil proceedings. 33. At this stage, by placing reliance on the judgment of this Court in Priti Saraf v. State (NCT of Delhi) [Priti Saraf v. State (NCT of Delhi), (2021) 16 28 SCC 142 : 2021 SCC OnLine SC 206] and Sri Krishna Agencies v. State of A.P. [Sri Krishna Agencies v. State of A.P., (2009) 1 SCC 69 : (2009) 1 SCC (Civ) 18 : (2009) 1 SCC (Cri) 241] , it has been further submitted by Respondent 2 that the appellants cannot evade a criminal case by merely contending that the person whose property has been sold has filed a civil suit for recovery of the property, or that the dispute had been referred to arbitration. 34. Although, there is perhaps not even an iota of doubt that a singular factual premise can give rise to a dispute which is both, of a civil as well as criminal nature, each of which could be pursued regardless of the other. In the instant case, the actual question which requires consideration is not whether a criminal case could be pursued in the presence of a civil suit, but whether the relevant ingredients for a criminal case are even prima facie made out. Relying on the facts as discussed in previous paragraphs, clearly no cogent case regarding a criminal breach of trust or cheating is made out. 35. The dispute between the parties, could at best be termed as one involving a mere breach of contract. Now, whether and what, is the difference between a mere breach of contract and an offence of cheating has been discussed in the ensuing paragraphs. Whether sale of excess flats even if made amounts to a mere breach of contract? 36. This Court in Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786] , has observed : (SCC p. 177, para 15) “15. … 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 to inducement which may be judged by his subsequent conduct but for this 29 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.” 37. Applying this dictum to the instant factual matrix where the key ingredient of having a dishonest or fraudulent intent under Sections 405, 419 and 420 is not made out, the case at hand, in our considered opinion is a suitable case necessitating intervention of this Court. Whether the dispute is one of entirely civil nature and therefore liable to be quashed? 38. Having considered the relevant arguments of the parties and decisions of this Court we are of the considered view that existence of dishonest or fraudulent intention has not been made out against the appellants. Though the instant dispute certainly involves determination of issues which are of civil nature, pursuant to which Respondent 2 has even instituted multiple civil suits, one can by no means stretch the dispute to an extent, so as to impart it a criminal colour. As has been rightly emphasised upon by this Court, by way of an observation rendered in Indian Oil Corpn. v. NEPC India Ltd. [Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188] , as under : (SCC p. 749, para 14) “14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are 30 unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law.” 39. It was also observed : (Indian Oil Corpn. case [Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188] , SCC pp. 748-49, para 13) “13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. … There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be deprecated and discouraged.” 40. On an earlier occasion, in G. Sagar Suri v. State of U.P. [G. Sagar Suri v. State of U.P., (2000) 2 SCC 636 : 2000 SCC (Cri) 513] , this Court has also observed : (SCC p. 643, para 8) “8. Jurisdiction under Section 482 of the Code has to be exercised with great care. In exercise of its jurisdiction the High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process 31 of any court or otherwise to secure the ends of justice.” 41. Furthermore, in the landmark judgment of State of Haryana v. Bhajan Lal [State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] regarding exercise of inherent powers under Section 482CrPC, this Court has laid down the following categories of instances wherein inherent powers of the Court can be exercised in order to secure the ends of justice. These are : (SCC pp. 378- 79, para 102) “102. … (1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the 32 Act concerned (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the Act concerned, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge.” 42. Applying this dictum to the instant factual matrix, it can be safely concluded that the present case clearly falls within the ambit of first, third and fifth category of the seven categories enlisted in the abovesaid judgment. The case therefore warrants intervention by this Court, and the High Court has erred in dismissing the petition filed by the appellants under Section 482CrPC. We find that there has been attempt to stretch the contours of a civil dispute and thereby essentially impart a criminal colour to it.” (Emphasis supplied) Following the aforesaid judgments, the Apex Court in the case of KUNTI v. STATE OF UTTAR PRADESH3 has held as follows: “…. …. …. 6. Vide the impugned judgment dated 18-10- 2019 [Kunti v. State of U.P., 2019 SCC OnLine All 7183], the learned Single Judge dismissed the application under Section 482CrPC, not accepting the argument on the part of the appellant, that the present Respondent 2 had an alternative remedy in the nature of a civil suit for the execution of the sale agreement. Relying on, in V. Ravi Kumar v. State [V. Ravi 3 (2023) 6 SCC 109 33 Kumar v. State, (2019) 14 SCC 568: (2020) 1 SCC (Cri) 401] , the prayer for quashing has been refused. 7. It has been urged by way of this appeal arising out of SLP, that the agreement to sell was void ab initio, in light of Section 157-A, Uttar Pradesh Zamindari Abolition & Land Reforms Act, 1950, whereby a person belonging to a Scheduled Caste cannot transfer property to any person not of a Scheduled Caste without prior permission of the Collector or District Magistrate concerned. Further it has been urged that the instant FIR has been lodged four years after the slated date of the execution of the sale deed. It is also submitted that the present agreement to sell is forged and in respect thereof, a report to the Senior Superintendent of Police stands filed. 8. We notice that the agreement to sell had been duly registered at the office of the Deputy Registrar, 1st, Office at Bulandshahr, and the complaint filed by the appellant, purporting that the same was forged, was filed on 11-5-2012, which is, incidentally, the same as the date of the reply to the legal notice sent by Respondent 2 herein, dated 8-5-2012, and is also four years from the date of the agreement. 9. However, we do not find the need to engage with the grounds as urged, because a perusal of the record in no uncertain terms reflects the dispute as being of a civil nature. This Court recently, in Sarabjit Kaur v. State of Punjab [Sarabjit Kaur v. State of Punjab, (2023) 5 SCC 360] , observed that : (SCC p. 363, para 13) “13. A breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings.” 10. A two-Judge Bench of this Court in ARCI v. Nimra Cerglass Technics (P) Ltd. [ARCI v. Nimra Cerglass Technics (P) Ltd., (2016) 34 1 SCC 348 : (2016) 1 SCC (Cri) 269] , while deliberating upon the difference between mere breach of contract and the offence of cheating, observed that the distinction depends upon the intention of the accused at the time of the alleged incident. If dishonest intention on the part of the accused can be established at the time of entering into the transaction with the complainant, then criminal liability would be attached. 11. In Vijay Kumar Ghai v. State of W.B. [Vijay Kumar Ghai v. State of W.B., (2022) 7 SCC 124 : (2022) 2 SCC (Cri) 787] , one of us, (Krishna Murari J.) observed in reference to earlier decisions as under : (SCC pp. 139-40, paras 24-25) “24. This Court in G. Sagar Suri v. State of U.P. [G. Sagar Suri v. State of U.P., (2000) 2 SCC 636 : 2000 SCC (Cri) 513] observed that it is the duty and obligation of the criminal court to exercise a great deal of caution in issuing the process, particularly when matters are essentially of civil nature. 25. This Court has time and again cautioned about converting purely civil disputes into criminal cases. This Court in Indian Oil Corpn. [Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188] noticed the prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. The Court further observed that : (Indian Oil Corpn. [Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736: (2006) 3 SCC (Cri) 188] , SCC p. 749, para 13) ‘13. … Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged.’ ” 12. Having regard to the above well- established principles and also noting that the present dispute is entirely with respect to property and more particularly buying and 35 selling thereof, it cannot be doubted that a criminal hue has been unjustifiably lent to a civil natured issue. 13. In view of the above, the impugned judgment and order dated 18-10-2019 [Kunti v. State of U.P., 2019 SCC OnLine All 7183] passed by the High Court of Judicature at Allahabad, refusing to quash the FIR in question and Case No. 6695 of 2012 arising out of Case Crime No. 421 of 2012 under Sections 406, 420, 467, 468, 417 and 418IPC bearing No. 32337 of 2013 is set aside. The appeal is allowed.” (Emphasis supplied) The Apex Court in the case of VIJAY KUMAR GHAI (supra) has held that breach of agreement can never be a subject matter of criminal law set into motion, as such cases would be unjustifiably of a civil nature. In the light of the facts obtaining in the case at hand, as narrated hereinabove and the judgments rendered by the Apex Court quoted supra, if further proceedings are permitted to continue, it would undoubtedly become an abuse of the process of law and result in miscarriage of justice. The issue would be whether a FIR without permitting investigation could be quashed in such cases. This is also answered by the Apex Court in the case of MITESH KUMAR J.SHA (supra) holding that where the dispute is one of entirely civil nature, the crime should not be permitted to be investigated even.” The Apex Court later in the case of LALIT CHATURVEDI v. STATE OF UTTAR PRADESH4 has held as follows: 4 2024 SCC OnLine SC 171 36 “5. This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, non-payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC. Repeated judgments of this Court, however, are somehow overlooked, and are not being applied and enforced. We will be referring to these judgments. The impugned judgment dismisses the application filed by the appellants under Section 482 of the Cr. P.C. on the ground of delay/laches and also the factum that the chargesheet had been filed on 12.12.2019. This ground and reason is also not valid.” (Emphasis supplied) Again, the Apex Court in the case of NARESH KUMAR v. STATE OF KARNATAKA5 has held as follows: “…. …. …. 8. Essentially, the present dispute between the parties relates to a breach of contract. A mere breach of contract, by one of the parties, would not attract prosecution for criminal offence in every case, as held by this Court in Sarabjit Kaur v. State of Punjab, (2023) 5 SCC 360. Similarly, dealing with the distinction between the offence of cheating and a mere breach of contractual obligations, this Court, in Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8 SCC 293, has held that every breach of contract would not give rise to the offence of cheating, and it is required to be shown that the accused had fraudulent or dishonest intention at the time of making the promise. 9. In the case at hand, the dispute between the parties was not only essentially of a civil nature but in this 5 2024 SCC OnLine SC 268 37 case the dispute itself stood settled later as we have already discussed above. We see no criminal element here and consequently the case here is nothing but an abuse of the process. We therefore allow the appeal and set aside the order of the High Court dated 02.12.2020. The criminal proceedings arising out of FIR No. 113 of 2017 will hereby stand quashed.” (Emphasis supplied) The Apex Court in the afore-quoted judgments clearly holds that prosecution should not be permitted on allegations of breach of contract for the purpose of recovery of money. 12. In the light of the afore-quoted judgments, the registration of crime is rendered unsustainable. While it is correct that in a given case, on a given set of facts both civil and criminal laws could be set into motion as there would be common ingredients, which has a flavour of civil law and which has a rigour of criminal law. These judgments are all relied on by the learned senior counsel for the respondents. 13. Today the Apex Court holds that in a petition under Section 482 of the Cr.P.C., this Court is permitted to exercise its 38 jurisdiction by reading the complaint between the lines as abuse of the process of law has become rampant. The Apex Court in the case of MAHMOOD ALI v. STATE OF UTTAR PRADESH6 has held as follows: “…. …. …. 13. At this stage, we would like to observe something important. Whenever an accused comes before the Court invoking either the inherent powers under Section 482 of the Code of Criminal Procedure (CrPC) or extraordinary jurisdiction under Article 226 of the Constitution to get the FIR or the criminal proceedings quashed essentially on the ground that such proceedings are manifestly frivolous or vexatious or instituted with the ulterior motive for wreaking vengeance, then in such circumstances the Court owes a duty to look into the FIR with care and a little more closely. We say so because once the complainant decides to proceed against the accused with an ulterior motive for wreaking personal vengeance, etc., then he would ensure that the FIR/complaint is very well drafted with all the necessary pleadings. The complainant would ensure that the averments made in the FIR/complaint are such that they disclose the necessary ingredients to constitute the alleged offence. Therefore, it will not be just enough for the Court to look into the averments made in the FIR/complaint alone for the purpose of ascertaining whether the necessary ingredients to constitute the alleged offence are disclosed or not. In frivolous or vexatious proceedings, the Court owes a duty to look into many other attending circumstances emerging from the record of the case over and above the averments and, if need be, with due care and circumspection try to read in between the lines. The Court while exercising its jurisdiction under Section 482 of the CrPC or Article 226 of the Constitution need not restrict itself only to the stage of a case but is empowered to take 6 2023 SCC OnLine SC 950 39 into account the overall circumstances leading to the initiation/registration of the case as well as the materials collected in the course of investigation. Take for instance the case on hand. Multiple FIRs have been registered over a period of time. It is in the background of such circumstances the registration of multiple FIRs assumes importance, thereby attracting the issue of wreaking vengeance out of private or personal grudge as alleged. 14. In State of Andhra Pradesh v. Golconda Linga Swamy, (2004) 6 SCC 522, a two-Judge Bench of this Court elaborated on the types of materials the High Court can assess to quash an FIR. The Court drew a fine distinction between consideration of materials that were tendered as evidence and appreciation of such evidence. Only such material that manifestly fails to prove the accusation in the FIR can be considered for quashing an FIR. The Court held:— “5. …Authority of the court exists for advancement of justice and if any attempt is made to abuse that authority so as to produce injustice, the court has power to prevent such abuse. It would be an abuse of the process of the court to allow any action which would result in injustice and prevent promotion of justice. In exercise of the powers court would be justified to quash any proceeding if it finds that initiation or continuance of it amounts to abuse of the process of court or quashing of these proceedings would otherwise serve the ends of justice. When no offence is disclosed by the complaint, the court may examine the question of fact. When a complaint is sought to be quashed, it is permissible to look into the materials to assess what the complainant has alleged and whether any offence is made out even if the allegations are accepted in toto. 6. In R.P. Kapur v. State of Punjab, AIR 1960 SC 866 : 1960 Cri LJ 1239, this Court summarised some categories of cases where inherent power can and should be exercised to quash the proceedings : (AIR p. 869, para 6) (i) where it manifestly appears that there is a legal bar against the institution or continuance e.g. want of sanction; (ii) where the allegations in the first information report or complaint taken at its face value and accepted in their entirety do not constitute the offence alleged; 40 (iii) where the allegations constitute an offence, but there is no legal evidence adduced or the evidence adduced clearly or manifestly fails to prove the charge. 7. In dealing with the last category, it is important to bear in mind the distinction between a case where there is no legal evidence or where there is evidence which is clearly inconsistent with the accusations made, and a case where there is legal evidence which, on appreciation, may or may not support the accusations. When exercising jurisdiction under Section 482 of the Code, the High Court would not ordinarily embark upon an enquiry whether the evidence in question is reliable or not or whether on a reasonable appreciation of it accusation would not be sustained. That is the function of the trial Judge. Judicial process, no doubt should not be an instrument of oppression, or, needless harassment. Court should be circumspect and judicious in exercising discretion and should take all relevant facts and circumstances into consideration before issuing process, lest it would be an instrument in the hands of a private complainant to unleash vendetta to harass any person needlessly. At the same time the section is not an instrument handed over to an accused to short-circuit a prosecution and bring about its sudden death…..” (Emphasis supplied) 15. In the result, this appeal succeeds and is hereby allowed. The impugned order passed by the High Court of Judicature at Allahabad is hereby set aside. The criminal proceedings arising from FIR No. 127 of 2022 dated 04.06.2022 registered at Police Station Mirzapur, Saharanpur, State of U.P. are hereby quashed.” (Emphasis supplied) This Court in the case of PATEL ENGINEERING LIMITED VS. STATE7, following the judgments of the Apex Court, has held as follows: 7 Criminal Petition No.6513 of 2024, disposed on 06th August, 2024 41 “14. ……… The Apex Court holds that when petitions are filed under Section 482 of the Cr.P.C., or under Article 226 of the Constitution to get the FIR quashed, essentially on the ground that it is either frivolous, vexatious or instituted with ulterior motives to wreak vengeance or civil disputes or commercial transactions are projected to be a crime, the Court while exercising its jurisdiction under Article 482 of the Cr.P.C., should not restrict itself only to such of the cases, but is empowered to take into account overall circumstances and answer whether the crime should be permitted to be investigated into or not. 15. In the light of the afore-elucidated law by the Apex Court, I deem it appropriate to exercise the jurisdiction under Section 482 of the Cr.P.C. and obliterate the Damocles sword that hangs on the head of these petitioners, in the light of the fact that a pure commercial transaction or breach of an agreement between the parties is sought to be given a colour of crime; added to the fact that the signatory to all the documents, the 2nd petitioner is no more.” (Emphasis supplied) 14. For the aforesaid reasons, the following: O R D E R (i) Writ Petition is allowed. (ii) FIR in Crime No.34 of 2023, registered by Cubbon Park Police Station, Bengaluru and pending before the III 42 Additional Chief Metropolitan Magistrate, Bengaluru stands quashed. (iii) It is made clear that the observations made in the course of the order are only for the purpose of consideration of the case of petitioners under Section 482 of Cr.P.C. and the same shall not bind or influence the proceedings pending before any other fora between the same parties. Sd/- (M.NAGAPRASANNA) JUDGE nvj CT:MJ