# 14 (ADDL.) S.C.R. 154 M/S THERMAX LTD. & ORS v. K.M. JOHNY & ORS

- **Citation:** [2011] 14 S.C.R. 154
- **Court:** Supreme Court of India
- **Decided:** 2011-09-27
- **Case number:** Criminal Appeal No. 1868 of 2011
- **Bench:** P. Sathasivam, Dr. B. S. Chauhan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/14-addl-s-c-r-154-m-s-thermax-ltd-ors-v-k-m-johny-ors-27379
- **Pages:** 33

## Headnote

Code of Criminal Procedure, 19,73: s.156(3) -
Investigation in cognizable offence - Complaint before crime
C branch u/ss.405, 406, 420 rlw s.34, /PC alleging non-payment
of dues by appellant-company - Cognizance of offence not
taken by crime branch - Application u/s. 156(3) - Magistrate
issued direction for investigation - Criminal proceedings
initiated - High Court refused to interfere - On appeal, held:
D Three complaints containing similar a/legations were
investigated previously and all were closed as the alleged
claim was found to be of civil nature - In those circumstances,
it did not lie for complainant to have approached the
Magistrate again with the same subject complaint - Inasmuch
E as the dispute arose out of a contract and a constituted
remedy was only before a civil court, the Magistrate ought to
have appreciated that complainant was attempting to use the
machinery of the criminal courts for exerting unjust, undue
and unwarranted pressure on the appellants - Apart from the
F fact that the complaint lacked necessary ingredients of ss. 405,
406, 420 rlw ~· 34 /PC, no specific allegation was made
against any person - Complaint was filed in 2002 when the
alleged disputes pertained to the period from 1993-1995 -
Courts below ought to have appreciated that complainant was
G trying to circumvent the jurisdiction of the civil courts which
estopped him from proceeding on account of the law of
/imitation - In view of the infirmities and in the light of s.482,
High Court ought to have quashed those proceedings to
safeguard the rights of the appellants - Complaint quashed
H
154
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
155
- Penal Code, 1860 - ss.405, 406, 420 rlw s. 34 - Contract -
A
De/ayllaches.
On 26.05.1995, the appellant-company placed a
purchase order on respondent no.1 for designing and
manufacturing stationary storage tanks. It also placed
8
two purchase orders for the supply of consumables and
other accessories to said tanks. On 20.6.1995,
respondent no.1 informed the appellant-company about
their inability to procure the requisite material and
requested it to supply the same and to deduct the
material cost from the final bill. Respondent no.1 was
C
provided the material by the appellant-company.
However, respondent no.1 failed to carry out the work as
per the schedule. The appellant-company cancelled the
order placed w.e.f. from 26.5.1995 i.e. from the date when
the order was placed.
D
Respondent no.1 filed three complaints with crime
branch, one in 2000 and two in 2001 alleging that they
had carried out several fabrication job works for the
appellant-company and huge amount was ou~tanding till
E
date despite several requests. The Crime Branch did not
take any cognizance. Respondent no.1 made a complaint
before the Magistrate. By order dated 30.5.2002, the
Magistrate issued a direction under Section 156(3),
Cr.P.C. and referred the same to Crime Branch
(respondent no.2) for investigation. Pursuant to the same,
respondent no.2 registered an offence and initiated
proceedings thereunder against the appellant-company.
The appellant-company moved the High Court for
quashing and setting aside the order dated 30.5.2002.
G
The High Court remitted the matter to Magistrate for
reconsideration of entire prayer and to decide the case
afresh. Pursuant to the same, the appellant~company filed
F
an application under Section 91, Cr.P.C. praying for
direction to the Assistant Commissioner of Police, Crime
H
156 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A Branch to produce all the records and proceedings of the
complaint. The Magistrate called for a report under
Section 156(2) from respondent no.2. Aggrieved
appellant-company filed writ petition before the High
Court which was dismissed.
B
The question which arose for consideration in the
instant appeal was whether the ingredients of Sections
405, 420 read with Section 34 were made out from the
complaint; whether the Magistrate was justified in calling
for a report under Secti

## Text

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A
B
[2011] 14 (ADDL.) S.C.R. 154
M/S THERMAX LTD. & ORS.
v.
K.M. JOHNY & ORS.
(Criminal Appeal No. 1868 of 2011)
SEPTEMBER 27, 2011
[P. SATHASIVAM AND DR. B. S. CHAUHAN, JJ.]
Code of Criminal Procedure, 19,73: s.156(3) -
Investigation in cognizable offence - Complaint before crime
C branch u/ss.405, 406, 420 rlw s.34, /PC alleging non-payment
of dues by appellant-company - Cognizance of offence not
taken by crime branch - Application u/s. 156(3) - Magistrate
issued direction for investigation - Criminal proceedings
initiated - High Court refused to interfere - On appeal, held:
D Three complaints containing similar a/legations were
investigated previously and all were closed as the alleged
claim was found to be of civil nature - In those circumstances,
it did not lie for complainant to have approached the
Magistrate again with the same subject complaint - Inasmuch
E as the dispute arose out of a contract and a constituted
remedy was only before a civil court, the Magistrate ought to
have appreciated that complainant was attempting to use the
machinery of the criminal courts for exerting unjust, undue
and unwarranted pressure on the appellants - Apart from the
F fact that the complaint lacked necessary ingredients of ss. 405,
406, 420 rlw ~· 34 /PC, no specific allegation was made
against any person - Complaint was filed in 2002 when the
alleged disputes pertained to the period from 1993-1995 -
Courts below ought to have appreciated that complainant was
G trying to circumvent the jurisdiction of the civil courts which
estopped him from proceeding on account of the law of
/imitation - In view of the infirmities and in the light of s.482,
High Court ought to have quashed those proceedings to
safeguard the rights of the appellants - Complaint quashed
H
154
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
155
- Penal Code, 1860 - ss.405, 406, 420 rlw s. 34 - Contract -
A
De/ayllaches.
On 26.05.1995, the appellant-company placed a
purchase order on respondent no.1 for designing and
manufacturing stationary storage tanks. It also placed
8
two purchase orders for the supply of consumables and
other accessories to said tanks. On 20.6.1995,
respondent no.1 informed the appellant-company about
their inability to procure the requisite material and
requested it to supply the same and to deduct the
material cost from the final bill. Respondent no.1 was
C
provided the material by the appellant-company.
However, respondent no.1 failed to carry out the work as
per the schedule. The appellant-company cancelled the
order placed w.e.f. from 26.5.1995 i.e. from the date when
the order was placed.
D
Respondent no.1 filed three complaints with crime
branch, one in 2000 and two in 2001 alleging that they
had carried out several fabrication job works for the
appellant-company and huge amount was ou~tanding till
E
date despite several requests. The Crime Branch did not
take any cognizance. Respondent no.1 made a complaint
before the Magistrate. By order dated 30.5.2002, the
Magistrate issued a direction under Section 156(3),
Cr.P.C. and referred the same to Crime Branch
(respondent no.2) for investigation. Pursuant to the same,
respondent no.2 registered an offence and initiated
proceedings thereunder against the appellant-company.
The appellant-company moved the High Court for
quashing and setting aside the order dated 30.5.2002.
G
The High Court remitted the matter to Magistrate for
reconsideration of entire prayer and to decide the case
afresh. Pursuant to the same, the appellant~company filed
F
an application under Section 91, Cr.P.C. praying for
direction to the Assistant Commissioner of Police, Crime
H
156 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A Branch to produce all the records and proceedings of the
complaint. The Magistrate called for a report under
Section 156(2) from respondent no.2. Aggrieved
appellant-company filed writ petition before the High
Court which was dismissed.
B
The question which arose for consideration in the
instant appeal was whether the ingredients of Sections
405, 420 read with Section 34 were made out from the
complaint; whether the Magistrate was justified in calling
for a report under Section 156(3), Cr.P.C. from the Crime
C Branch; and whether the High Court was justified in
confirming the action of the Magistrate and thereby failed
. to exercise its power and jurisdiction under Section 482,
Cr.P.C.
o
Allowing the appeal, the Court
HELD: 1. For proceedings under Section 156(3),
Cr.P .C., the complaint must have disclosed relevant
material ingredients of Sections 405, 406, 420 read with
Section 34, IPC. If there is a flavour of civil nature, the
E same cannot be agitated in the form of criminal
proceeding. If there is huge delay in order to avoid the
period of limitation, it cannot be resorted to a criminal
proceeding. It is seen from the materials placed that three
complail')ts containing similar allegations were
F investigated previously and all were closed as the alleged
claim was found to be of civil nature. In those
circumstances, it did not lie for respondent no.1-the
complainant to approach the Magistrate with the same
subject complaint. Inasmuch as the dispute arose out of
G a contract and a constituted remedy is only before a civil
court, the Magistrate ought to have apprecillted that
respondent No.1 was attempting to use the machinery of
the criminal courts for private gains and for exerting
unjust, undue and unwarranted pressure on the
H
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
157
appellants in order to fulfill his illegal demands and
A
extract undeserving monetary gains from them. [Paras
16, 17] [181-C-H]
Suresh v. Mahadevappa Shivappa Danannava & Anr.
(2005) 3 SCC 670: 2005 (2) SCR 131; Madhavrao Jiwajirao
B
Scindia & Ors. v. Sambhajirao Chandrojirao Angre & Ors.
(1988) 1 SCC 692: 1988 (2) SCR 930; A/pie Finance Ltd. v.
P. Sadasivan & Anr. (2001) 3 SCC 513: 2001 (1) SCR 1059;
Nagawwa v. Veeranna Shivalingappa Konjalgi (1976) 3 SCC
736: 1976 Suppl. SCR 123; State of Haryana v. Bhajan Lal C
1992 Sup,J (1) SCC 335: 1990 (3) Suppl. SCR 259; Anil
Mahajan v. Bhor Industries Ltd. & Anr. (2005) 10 SCC 228;
S.K. Alagh v. State of Uttar Pradesh & Ors. (2008) 5 SCC 662:
2008 (2) SCR 1088; Maharashtra State Electricity Distribution
Company Limited & Anr. v. Datar Switchgear Limited & Ors.
(201 O) 1 o sec 479: 201 o (12) SCR 551 - relied on.
D
2. The courts below failed to appreciate that Ex. 61
was a reply filed by the Crime Branch-II and Ex. 63 was
the statement of the official which categorically stated that
the complaint preferred by respondent No.1 was civil in
E
nature. Even if it is accepted thaf the records were·
destroyed and notwithstanding such destruction, it was
a matter of record that the complaint preferred by
respondent No.1 was indeed investigated and
categorized as civil in nature. This aspect was not · F
considered either by the Magistrate or by the High Court.
[Para 18) [182-A-B]
3. It is settled law that the essential ingredients for an
offence under Section 420, IPC is that there has to be
dishonest intention to deceive another person. No such
G
dishonest intention can be seen or even inferred from the
allegations in the complaint inasmuch as the entire
dispute pertained to contractual obligations between the
parties. Since the very ingredients of Section 420 were
not attracted, the prosecution initiated is wholly · H
158
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
<\ untenable. Even assuming that allegations in the
complaint do make out a dispute, still it ought to be
considered that the same is merely a breach of contract
and the same cannot give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is
B shown right from the beginning .1of the transaction.
Inasmuch as there are number of documents to show that
appellant-Company had acted in terms of the agreement
and in a bona fide manner, it cannot be said that the act
of the appellant-Company amounted to a breach of
c contract. [Para 19] [182-C-F]
4. Though respondent No.1 had roped all the
appellants in a criminal case without their specific role or
participation in the alleged offence with the sole purpose
of settling his dispute with appellant-Company by
D initiating the criminal prosecution, it was pointed out that
appellant nos. 2 to 8 were the Ex-Chairperson, ExDirectors and Senior Managerial Personnel of appellant
No:l-Company, who did not have any personal role in the
allegations and claims of respondent No.1. There was
E also no specific allegation with regard to their role. Apart
from the fact that the complaint lacked necessary
ingredients of Sections 405, 406, 420 read with Section
34 IPC, it is to be noted that the concept of 'vicarious
liability' is unknown to criminal law. There was no specific
F allegation made against any person but the members of
the Board and senior executives were joined as the
persons looking after the management and business of
the appellant-Company. The offence alleged in the
criminal complaint filed by respondent no.1 is under
G Sections 405 and 420 IPC whereunder no specific liability
is imposed on the officers of the company, if the alleged
offence is by the Company. In the absence of specific
details about the same, no person other than appellant
no.1-Company can be prosecuted under the alleged
H complaint. The courts below failed to appreciate an
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
159
important aspect that the complaint came to be filed in A
the year 2002 when the alleged disputes pertained to the
period from 1993-1995. The courts below ought to have
appreciated that respondent no.1 was trying to
circumvent the jurisdiction of the civil courts which
estopped him from proceeding on account of the law of B
limitation. Respondent no.1 had previously filed three
complaints which were concluded after exhaustive
enquiry with the respective police authorities. Pursuant
to the first complaint with the Crime Branch-II, Pune, the
appellants were summoned and exhaustive enquiry was c
conducted by the Crime Branch-II and after recording the
statements and perusal of documents and after
undertaking an extensive interrogation, the Crime
Branch-II closed the case. The said closure of the case
was informed to respondent No.1 by the police 0
authorities. The materials placed further showed that
notwithstanding the first complaint which was closed by
the Crime Branch-II, another complaint on the same facts,
was filed by respondent No.1 at the Bhosari Police
Station. The appellant and its officers attended the E
Bhosari Police Station, thereafter the said complaint was
also closed after the facts were placed before the officers
of the Bhosari Police Station. Apart from these
complaints, respondent No.1 once again filed a third
complaint at the Commissioner's Office, Crime Branch,
F
Pune. The officers of appellant-Company appeared before
the Crime Branch, who after perusing the documents and
the written statements of appellant No.1, informed the
appellants that the matter was closed. [Para 20-26] [182G-H; 183-A-H; 184-A-G]
5. At the stage of issuance of direction to the police
for submission of report under Section 156(3), Cr.P.C., the
accused has no role and need not be heard. However,
in view of specific direction of the High Court disposing
G
of the cases by remitting the matter back to the Magistrate
H
160 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A for reconsideration of the entire prayer as made by the
complainant and to pass fresh orders, after giving
adequate opportunity of hearing to both the sides, and
decide afresh the application seeking direction under
Section 156(3) by giving cogent reasons for coming to
8 such conclusion, the procedure adopted by the
Magistrate cannot be faulted with. Though the appellant
Company/accused has no right to be heard at this stage
in view of the direction of the High Court, no exception
be taken to the order of the Magistrate hearing the
complainant and the appellant Company/accused even
C at the stage of calling for a report under Section 156(3)
of the Code. [Para 28] [185-B-E]
6. The entire analysis of the complaints and the
ingredients of Sections 405, 406, 420 read with Section
D 34 IPC clearly showed that there was inordinate delay
and laches, the complaint itself was inherently
improbable contained the flavour of civil nature and
taking note of the closure of earlier three complaints that
too after thorough investigation by the police, the
E Magistrate committed a grave error in calling for a report
under Section 156(3), Cr.P.C. from the Crime Branch,
Pune. In view of those infirmities and in the light of
Section 482 of the Code, the High Court ought to have
quashed those proceedings to safeguard the rights of the
F appellants. The complaint filed by respondent no.1 is
quashed. [Para 29] [185-F-H; 186-A-B]
G
Case Law Reference:
2005 (2) SCR 131
1988 (2) SCR 930
referred to
Para 10
referred to
Para 11
2001 (1) SCR 1059
referred to
Para 12
1976 Suppl. SCR 123
referred to
Paras 12, 13
H
1990 (3) Suppl. SCR 259 referred to
Para 12
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
161
(2005) 1 o sec 228
2008 (2) SCR 1088
2010 (12) SCR 551
.referred to
Para 13
referred to
Para 14
referred to
Para 15
A
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
B
No. 1868 of 2011.
From the Judgment and Order dated 11.01.2008 of the
High Court of Bombay in Criminal Writ Petition No. 1622 of
2007.
.
Dr. A.M. Singhvi and C.S. Vaidyanathan, Kavin Gulati,
Shrikant Doijode, Jaiveer Shergill, S.K. Jain, Brij Kishor Sah
and Shivaji M. Jadhav for the Appellants.
c
Shankar Chillarge, AG, KTS Tulsi, Susmita Lal, Maheen
D
Pradhan, Ravinder Singh, Asha Gopalan Nair and Pratik
Bombarde for the Respondents.
The Judgment of the Court was delivered by
P. SATHASIVAM, J. 1. Leave granted.
2. This appeal is directed against the final judgment and
order dated 11.01.2008 passed by the High Court of
Judicature at Bombay in Criminal Writ Petition No. 1622 of
2007 wherein the Division Bench of the High Court dismissed
the writ petition filed by the appellants herein as misconceived.
3. Brief Facts:
E
F
(a) Mis Thermax Ltd.-the appellant-Company, is a Public
Limited Company having its registered office at Chinchwad,
G
Pune and is engaged in the field of energy and environment
-management. Mr. K.M. Johny-the original complainant,
Respondent No. 1. herein, is the proprietor of M/s Rini
-Engineers and Mis Sherly Engineers, which are small-scale
H
162
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A industries undertaking fabrication job work for the appellant
Company for the past several years.
(b) On 26.05.1995, the appellant-Company placed three
Purchase Orders on Respondent No.1 being Order No. 260062
8 for designing and manufacturing two numbers of stationary
L.P.G. Storage Tanks and Order Nos. 260063 and 260064
were for the supply of consumables and other accessories to
the said Tanks. On 01.06.1995, Mis Unique Engineering
Services, the Consultants of the appellant Company addressed
C a letter specifying that they had assessed the companies of the
Respondent No. 1 and in their opinion even though they have
not made any static bullets and have made quite a few mobile
L.P.G. Tanks, however, they were capable of manufacturing the
same, but needed design help.
D
(c) On 20.06.1995, Respondent No. 1 informed the
appellant-Company their inability to procure the material (steel)
and requested to supply the same and to deduct the material
cost from the final bill. On 04.08.1995, the Respondent No. 1
was provided with the necessary steel of the technical
E specification. On 06.08.1995, an Engineer of the appellantCompany visited the company of the Respondent No. 1 and
submitted a report stating that Respondent No. 1 had carried
out certain work using the material purchased from the
appellant-Company. It was also pointed out in the report that
F Respondent No. 1 agreed that they would send the material to
Mis Bureau Veritas for checking. The report also stated that
Respondent No. 1 had not ordered for consumables and no
rectification and drawings had been carried out.
(d) By letter dated 10.08.1995, the Consultants informed
G the appellant-Company that there was no progress in the work
status for the last 45 days and it was observed that Respondent
No. 1 was not interested in executing the assignment. In
pursuance of the same, a meeting was held betWeen the
officials of both the Companies and the Respondent N_o. 1
agreed to complete the job by all means by 22.09.1995. Since
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
163
[P. SATHASIVAM, J.)
Respondent No. 1 failed to carry out the work as per the
A
Schedule, the appellant-Company, vide letter dated 13.09.1995
cancelled the order placed and it was made effective from
26.05.1995 i.e., from the date when the order was placed.
(e) On 06.05.2000, Respondent No. 1 filed a complaint with
B
the Crime Branch, Pune alleging that they had carried out
several fabrication job works for the appellant-Company and
huge amount of Rs. 91,95,054/- was outstanding till date
despite several requests. In the said complaint, it was further
alleged that the appellant-Company also placed Purchase
Order being No. 240307 dated 22.03.1993 for Rs. 8,00,000/-
C
for fabrication and erection of Tower Support Structural etc., for
the Mehasana District Taluka Sanstha (Gujarat) Project and also
represented that they will hire the machinery of the Respondent
No. 1 for the said job at the rate of Rs. 2,400/- per day and
believing the same the Respondent No. 1 allegedly purchased
D
brand new machinery worth Rs. 5,80,000/- specially for the said
project and dispatched the same to the Mehasana site.
Respondent No. 1 completed the said job according to
schedule and to the satisfaction of the appellant-Company and
also carried out additional work at the site as per their request.
E
It was alleged that balance outstanding for the said work of
Rs.2,47,570/- was still receivable from the appellant-Company.
An amount of Rs.58,32,000/- towards hiring charges for the
machinery is yet to be paid by the appellant-Company.
Therefore, a total sum of Rs.68,79,750/- became due from the· F
appellant-Company to respondent No.1 and the same was not
paid till date. Since the Crime Branch did not take any
cognizance, the said complaint was filed in the Court of Judicial
Magistrate, First Class, Pimpri being RCC No. 12 of 2002 and
by order dated 30.05.2002, the Judicial Magistrate issued a
G
direction under Section 156(3) of the Code of Criminal
Procedure, 1973 (in short 'the Code') and referred the same
to Crime Branch, Pune, Respondent No. 2 herein, for
investigation. Pursuant to the same, Respondent No. 2
registered an offence being C.R. No. 91/2002 and initiated
H
164 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A proceedings thereunder against the appellant-Company.
(f) Aggrieved by the said order, the appellant-Company
filed two separate Criminal Writ Petitions being Nos. 209 and
443 of 2003 before the Bombay High Court for quashing and
8 setting aside the order dated 30.05.2002 passed by the
Judicial Magistrate, First Class, Pimpri. Vide order dated
10.06.2003, the High Court set aside the order dated
30.05.2002 and remitted the matter back to the Judicial
Magistrate for reconsideration of the entire prayer and to decide
C the case afresh, after giving adequate opportunity of hearing
to both the sides. Pursuant to the same, the appellant Company
preferred an application dated 16.07.2003 under Section 91
of the Code before the Judicial Magistrate praying that the
Assistant Commissioner of Police, Crime Branch, Pune City
be directed to produce all the records and proceedings of the
D complaint dated 06.05.2000. After hearing the respective
parties, the Judicial Magistrate, vide order dated 11.08.2003
rejected the said application.
(g) Aggrieved by the same, the appellant-Company
E preferred Criminal Application No. 3666 of 2003 before the
High Court. The High Court, vide order dated 18.10.2006,
issued rule and interim relief by directing the Assistant
Commissioner of Police, Crime Branch-II, Pune city to produce
the documents within six weeks in the Court of Judicial
F Magistrate, Pimpri. Pursuant to the said direction, Shri S.B
Oahal, Inspector of Police, submitted a reply dated 12·.03.2007
stating that the records and proceedings in respect of Crime
Register No. 11 of 2000 were destroyed. Pursuant to the same,
the Judicial Magistrate, vide order dated 20.08.2007, called for
G a report under Section 156(3) of the Code from the Respondent
No. 2.
(h) Being aggrieved, the appellant-Company preferred
Criminal Writ Petition being No. 1622 of 2007 before the High
Court. The High Court, vide order dated 11.01.2008, dismissed
H the Writ petition as misconceived on the ground that the
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
165
[P. SATHASIVAM, J.]
Magistrate has adhered to the directions and has given
A
reasons for coming to his conclusion. Aggrieved by the said
decision, the appellant-Company has preferred this appeal
before this Court by way of special leave petition.
4. Heard Dr. A.M. Singhvi and Mr. C.S. Vaidyanathan,
learned senior counsel for the appellant-Company and Mr.
K.T.S. Tulsi, learned senior counsel for the respondent No.1.
Contentions:
B
5. Dr. A.M. Singhvi, learned senior counsel for the
C
appellant/accused, after taking us through all the earlier
complaints including the last complaint and earlier orders
closing those complaints, the order of the Judicial Magistrate,
First Class, Pimpri dated 20.08.2007 in Criminal Case No. 12
of 2002 and the impugned order of the High Court dated o
11.01.2008, at the outset, submitted that the courts below ought
to have considered that the dispute arose out of a contract and
a constituted remedy is only before a civil court. He further
contended that similar claim on earlier occasions were indeed
investigated and finally categorized as civil in nature, while such
E .
is the position, the direction of the Magistrate calling for a report
under Section 156(3) of the Code from the Crime Branch, Pune
is not sustainable. He further submitted that the High Court
ought to have intervened and quashed the same. According to
him, the complaint and the allegations made therein do not
disclose any offence and, therefore, the direction under Section
156(3) of the Code is untenable. He further pointed out that the
essential ingredients for an offence under Sections 405 and
F
420 of the Indian Penal Code, 1860 (in short 'IPC') have not
been made out, no such dishonest intention can be seen or
even inferred inasmuch as the entire dispute pertains to
G
contractual obligations between the parties. In any event,
according to him, in view of long delay, namely, filing of the
complaint in the year 2002 with reference to the alleged
disputes which pertain to the period from 1993-1995, that is,
after nine years, cannot be maintained as it amounts to abuse
H
166
SUPREME COURT REPORTS (2011] 14 (ADDL.) $.C.R.
A of process of law. He finally submitted that roping in of appellant
Nos. 2-8 in the alleged offence on the hidden principle of
vicarious liability is untenable. Mr. C.S. Vaidyanathan, learned
senior counsel for the appellant also reiterated the same
contentions.
B
6. On the other hand, Mr. K".T.S. Tulsi, learned senior
counsel for the Respondent No. 1/complainant submitted that
interference by the court at the stage of passing orders under
Section 156 (3) of the Code is not warranted. He further pointed
out that the accused has no right to address at this stage and
C the High Court is right in refusing to entertain the petition filed
under Section 482 of the Code.
Discussion:
0
7. In order to understand the rival contentions, it is useful
to refer the complaint of the Respondent No. 1 dated
30.05.2002 which was made before the Judicial Magistrate,
First Class, Pimpri in Regular Criminal Case No. 12 of 2002.
Respondent No. 1 herein is the complainant and all the
E appellants herein have been shown as accused. The said
criminal complaint was made for the offences under Sections
420, 406 read with 34 IPC. The complaint proceeds that
complainant is the Proprietor of Mis Rini Engineers and M/s
Sherly Engineers which are small-scale industries doing
F fabrication job work for various industries, namely, TELCO, Ion
Exchange Ltd., etc. The following averments in the complaint
are relevant for our consideration:
"(a) The complainant has been doing the said business in
Maharashtra since last more than 27 years. The accused
G
No. 1 is a company and accused No. 2 is the Chairperson
of the Accused No. 1. Accused No. 3 was the Managing
Director and the Accused Nos. 4 to 15 was doing service
as Manager of Accused No. 1 at the relevant time. The
Accused No. 1 has its office at the above address. The
H
Accused Nos. 2 to 15 were looking after the management
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
167
[P. SATHASIVAM, J.]
and business of Accused No. 1.
A
(b) The complainant was doing fabrication job work for the
Accused for several years. The accused placed purchase
order No. 260062 dated 24.04.1995 of Rs. 3,20,000/- for
designing and manufacturing two numbers stationary LPG
B
Storage Tanks. The complainant has been granted the
necessary licenses by the Explosives Department for
manufacturing LPG Storage Tanks and LPG Storage .
Tankers. The said job is a specialized job and requires
Best quality material as it involves high risks. At the
relevant time, the requifed material was not available in the .. C
market. Therefore, the complainant requested the Accused
for the supply of material for the said order and to debit
the material cost from the final bill. The accused initially
agreed for the same. However, subsequently insisted for
payment before delivery of material. Therefore,
D
complainant paid Rs. 1, 14,098/- by pay order dated
31.07.1995 drawn on the Sadgur'u Jangli Maharaj Bank,
Chinchwad. The Company issued material after receipt of
pay order, vide excise gate Pass No. 1328 and ·175713
dated 04.08.1995. The complainant received the material
E
and was surprised to see that the accused had supplied
scrap material for the manufacturing of LPG Storage Tanks
and same was useless for the job. The complainant
immediately contacted the accused and informed about
the same. The complainant requested the accused to take
F
the scrap material back and issue genuine material.
However, accused refused to do so, the complaint has
spent the amount of Rs. 60,000/- for drawing and approval
etc. and Rs. 1, 14,098/- by pay order for the material to the
accused. Thus, the accused have cheated the complainant
G
and there by caused wrongful loss to the complainant.
(c) The accused placed Purchase Order No. 240307
·dated 22.03.1993 for Rs. 8,00,000/- for the fabrication and
erection of Tower Support Structural etc. for the Mehasana
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B
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D
E
F
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168 SUPREME COURT REPORTS (2011] 14 (ADDL.) S.C.R.
(Gujarat) Project. The accused also represented that they
will hire the machinery of the complainant for the said job
at the rate of Rs. 2,400/- per day. Believing the same, the
complainant purchased brand new machinery of Rs.
5,80,000/- specially for the said project and dispatched the
same to Mehasana site. The complainant has completed
the said job according to schedule and to the satisfaction
of the accused. The complainant also carried out additional
work at the site as per the request of the accused. The
balance outstanding for the said work is Rs. 2,47,570/-
and is still receivable from the accused. The amount
towards the hiring charges for the machinery is Rs.
58,32,000/- is yet to be paid by the accused. The accused
have not returned the machinery of the complainant till the
date and have been using the same for their other jobs also.
Thus the accused owe the complainant Rs. 68,79,750/-
and the same is not paid till the date.
·
(d) The complainant states that he has carried out several
fabrication job for the accused and huge amount of Rs.
91,95,054 is outstanding from the accused till the date. In
spite of several requests of the complainant, since the
accused are very influential, no body has taken
cognizance of the complaints of the complainant. The
complainant .has also filed complaint dated 15.09.1998
with Pimpri Police Station against the accused but all in
vain.
(e) Thereafter the complainant filed complaint dated
06.05.2000 with Crime Branch, Pune against the accused,
however, till the date police have not taken any cognizance
of the same in spite of the positive opinion of the police
prosecutor attached to the Officer Commissioner of
Police, Pune. The accused are very influential and the
complainant has no other option but to file the present
complaint in Hon'ble Court.
·
· THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
169
[P. SATHASIVAM, J.]
(f) The complainant is filing herewith all the relevant
A
documents in support of this complaint and submits that
the present case warrants detailed investigation under
Section 156(3) of Cr.P.C. There is a separate cell of
economic offences at Crime Branch, Pune and it is
necessary to send the present complaint to Crime Branch,
B
Pune for investigation under Section 156(3) of Cr.P.C The
complainant therefore prays that:-
(i)The complaint be sent to Crime Branch, Pune for
investigation u/s 156(3) of Cr.P.C. and;
(ii) After receipt of the report of investigation, the accused
be dealt with severally according to law and punished as
per prrovision of law'."
c
. 8. For our purpose, we are conc~rned with Sections 405,
D
406, 420 and 34 IPC which read thus:
"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
E
that property in violation pf 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 al}y
other person so to do, commits "criminal breach of trust".
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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.
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420. Cheating and dishonestly inducing delivery of
property.- Whoever cheats ;:ind thereby dishonestly
induces the per5on deceived to deliver any property to any
person, or to make, alter or destroy the whole or any part
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B
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170
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
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. Acts done by several persons in furtherance of
common intention.· When a criminal act is done by
several persons in furtherance of the common intention of
all, each of such persons is liable for that act in the same
manner as if it were done by him alone.·
9. Now, we have to find out whether the ingredients of
Sections 405, 420 read with Section 34 have been made out
from the complaint and whether the Magistrate is justified in
calling for a report under Section 156(3) of the Code from the
D Crime Branch, Pune. Simultaneously, we have to see whether
the High Court is justified in confirming the action of the
Magistrate and failed to exercise its power and jurisdiction
under Section 482 of the Code.
E
10. Before considering the validity or acceptability of the
complaint and the consequential action taken by the Judicial
Magistrate under Section 156(3) of the Code, let us advert to
various decisions on this aspect. In Suresh vs. Mahadevappa
Shivappa Danannava & Anr., (2005) 3 SCC 670, this Court,
on the ground of delay/laches in filing the complaint and the
F dispute relates to civil nature finding absence of ingredients of
alleged offence of cheating under Section 420 IPC, set aside
the order of the Magistrate and that of the High Court. In that
case, the alleged agreement to sell was executed on
25.12.1988. A legal notice was issued to the appellant therein
G on 11.07.1996 calling upon him to execute the sale deed in
respect of the premises in question. Thus, the complaint was
submitted after a gap of 7% years of splendid silence from the
date of the alleged agreement to sell i.e. 25.12.1988. The
appellant therein responded to the legal notice dated
H 11.07.1996 by his reply dated 18.07.1996 through his lawyer
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
171
[P. SATHASIVAM, J.J
specifically denying the alleged agreement and the payment of A
Rs 1,25,000/- as advance. Nothing was heard thereafter and
the complainant after keeping quiet for nearly 3 years filed
private complaint under Section 200 of the Code before the IVth
Additional CMM, Bangalore on 17.05.1999. The Magistrate, on
the same date, directed his office to register the case as PCR
B
and referred the same to the local police fqr investigation and
to submit a report as per Section 156(3) of the Code. A chargesheet was filed on 04.08.2000 by the police against the
appellant-Accused No. 1 only for offence under Section 420
IPC. The Magistrate took cognizance of the alleged offence c
under Section 190(1)(b) of the Code and issued summons to
the accused-appellant therein. Aggrieved by the aforesaid
process order dated 04.08.2000 passed by the Magistrate, the
appellant-accused preferred the criminal revision which was
dismissed by the High Court. The order of the High Court was
0
under challenge in that appeal. It was contended that as per
the averments in the complaint, even as per the police report,
no offence is made out against Accused Nos. 2-4 therein.
Despite this, the Magistrate issued process against Accused
Nos. 2-4 as well which clearly shows the non-application of mind
E
by the Magistrate. It was further pointed out that a perusal of
the complaint would only reveal that the allegations as contained
in the complaint are of civil nature and do not prima facie
disclose commission of alleged criminal offence under Section
420 IPC. After finding that inasmuch as the police has given a
clean chit to Accused Nos. 2-4, this Court concluded that the
F
Magistrate ought not to have taken cognizance of the alleged
offence against Accused No.1 and that the complaint has peen
made to harass him to come to terms by resorting to criminal
process. Regarding the delay, this Court pointed out that the
complaint was filed on 17.05.1999, after a lapse of 10% years
G
and, therefore, the private complaint filed by respondent No.1
therein is not at all maintainable at this distance of time. It was
further observed that it is also not clearly proved that to hold a
person guilty of cheating, it is necessary to show that he had a
fraudulent or dishonest intention at the time of making the
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172 SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A promise and finding that the order of the Magistrate and of the
High Court requiring Accused No.1 /appellant therein to face trial
would not be in the interest of justice, set aside the order of
the High Court and of the Magistrate. It is clear that in view of
inordinate delay and laches ori the part of the complainant and
B of the fact that the complaint does not disclose any ingredients
of Section 420 IPC and also of the fact that at the most it is
the dispute of civil nature, this Court quashed the orders of the
Magistrate and the High Court.
C
11. In Madhavrao Jiwajirao Scindia & Ors. vs.
Sambhajirao Chandrojirao Angre & Ors. (1988) 1 SCC 692,
this Court, after pointing out the grounds on which the criminal
proceedings be quashed under Section 482 of the Code at
preliminary stage by the High Court highlighted that a case of
0 breach of trust is both a civil wrong and a criminal offence. While
elaborating the same, this Court further held that there would
be certain situations where it would predominantly be a civil
wrong and may or may not amount to criminal offence. Based
on the materials in that case, the Court concluded that the case
is one of that type where, if at all, the facts may constitute a
E civil wrong and the ingredients of the criminal offences are
wanting.
12. In A/pie Finance Ltd. vs. P. Sadasivan & Anr. (2001)
3 SCC 513, this Court highlighted the grounds on which criminal
F proceedings are to be quashed under Section 482 of the Code
and noted the ingredients of Section 420 IPC. In that case, the
appellant was a registered company having its head office at
Mumbai. It was a non-banking financial institution functioning
under the regulations of Reserve Bank of India. It was carrying
G on business, inter alia, of leasing and hire purchase. The first
respondent therein was the Chairman and founder-trustee of a
trust by name "Visveswaraya Education Trust". The second
respondent was wife of the first respondent, and was also a
Trustee. The Trust runs a dental college by name Rajiv Gandhi
H Dental College. The respondents therein entered into an
THERMAX LTD. & ORS. v. K.M. JOHNY & ORS.
173
[P. SATHASIVAM, J.]
agreement with the appellant-Company therein whereby the
A
appellant agreed to finance the purchase of 100 hydraulicallyoperated dental chairs. The total cost of the chairs was around
Rs.92,50,000/-. The appellant-Company agreed to finance the
respondents for the purchase of these chairs through a lease
agreement and as per the agreement, the respondents were
8
liable to pay rentals quarterly. The respondents agreed to pay
quarterly a sum of Rs 7,50,000/- for the first year; Rs 12,50,000/
- for the second year; Rs 8,00,000/- for the third year and Rs
6,25,000/- for the fourth year. As per the agreement, the
appellant-Company, the lessors would have sole and exclusive c
right, title and interest in the dental chairs supplied till the entire
hire-purchase amount was paid. In accordance with the
agreement, the appellant made payments to M/s United Medico
Dental Equipments and they delivered the dental chairs to the
respondents: The appellant-Company ~lleged that the · D
respondents were not regular in making the payments and
committed default in payment of the instalments and that the
bank had dishonoured certain cheques issued by the
respondents. The appellant-Company also alleged that on
physical verification, certain chairs were found missing from the
E
premises of the respondents and thus they have committed
cheating and caused misappropriation o_f the property
belonging to the appellant. The appellant- Company filed a
private complaint under Section 200 of the Code before the
Chief Metropolitan Magistrate, Bangalore alleging that the
respondents had committed offences under Sections 420, 406
F
and 423 read with Section 120-B IPC. In that proceeding, the
appellant-Company moved an application Linder Section 93 of
the Code to issue a search warrant to seize the property in
dispute and also to hand over these items to the complainant.
The Magistrate took cognizance of the alleged complaint and
G
issued summons to the respondents and passed an order on
the application filed under Section 93 of the Code to have a
search at the premises of the respondents and to take
possession of the properties involved in the case. These
proceedings were challenged by the respondents under
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174
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A Section 482 of the Code before the learned Single Judge of
the Karnataka High Court at Bangalore. The learned Single
Judge was pleased to quash the entire proceedings and
directed the appellant-Company to return all the properties
seized by the police pursuant to the warrant issued by the
B Magistrate. Thus, the order of the Magistrate taking cognizance
and issuing process to the respondents as well as the order of
search and the direction for restoration of the property to the
appellant Company were set aside.