# Delhi Race Club (1940) Ltd. & Ors v. State of Uttar Pradesh & Anr

- **Citation:** 2024 INSC 626
- **Court:** Supreme Court of India
- **Decided:** 2024-08-23
- **Case number:** Criminal Appeal No. 3114 of 2024
- **Bench:** J.B. Pardiwala, Manoj Misra
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/delhi-race-club-1940-ltd-ors-v-state-of-uttar-pradesh-anr-37859
- **Pages:** 30

## Headnote

High Court, if justified in declining to quash and set aside the
summoning order passed by the Magistrate, against the appellantscompany and its office bearers, for offence punishable u/ss. 406
and 420 IPC.
Headnotes†
Penal Code, 1860 - ss.406, 420 and 120B - Criminal breach of
trust and cheating - Private complaint filed by the respondent
No. 2 in the court of Magistrate against the appellants for
the offence punishable u/ss.406, 420 and 120B, alleging that
certain amount was due and payable to him by the appellants
towards the sale of horse grains and oats over a period of
time - Trial court issued process for the offence punishable
u/s.406 - Application u/s.482 CrPC by the appellants seeking
quashing of the summoning order passed by the Additional
Chief Judicial Magistrate - Rejected by the High Court -
Correctness:
Held: There was total non-application of mind by the High Court -
Magistrate failed to pose unto himself the correct question as to
whether the appellant Nos. 2 and 3-office bearers of the appellant
No. 1 Company, were personally liable for any offence - Penal
Code does not contain any provision for attaching vicarious
liability on the part of the appellant Nos. 2 and 3 - Vicarious
liability of the office bearers would arise provided any provision
exists in that behalf in the statute - Furthermore, at the stage of
pre-cognizance, the Magistrate is obliged to look into the complaint
threadbare so as to reach to a prima facie conclusion whether
the offence is disclosed or not, then he is expected to be more
careful when he is actually taking cognizance upon a private
complaint and ordering issue of process - High Court completely
* Author
[2024] 8 S.C.R.
671
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
lost sight of the said aspect while rejecting the application u/s.482
CrPC - Issuance of summons is a serious matter and, thus,
should not be done mechanically and it should be done only upon
satisfaction on the ground for proceeding further in the matter
against a person concerned based on the materials collected
during the inquiry - Plain reading of the complaint fails to spell
out any of the ingredients of ss. 406 and 420 - At the most, the
Magistrate could have issued process for the offence punishable
u/s.420-cheating but in any circumstances no case of criminal
breach of trust made out, because there was no entrustment of
any property - Not even the case of the complainant that any
property was lawfully entrusted to appellants and that the same
has been dishonestly misappropriated - Case of the complainant
is that the price of the goods sold by him has not been paid -
Once there is a sale, s. 406 goes out of picture - Even if the
Magistrate would have issued process for the offence punishable
u/s.420-cheating the same would have been liable to be quashed
and set aside, as none of the ingredients to constitute the
offence of cheating disclosed from the materials on record - If
it is the case of the complainant that a particular amount is due
and payable to him then he should have filed a civil suit for
recovery of the amount against the appellants - But he could
not have gone to the court of the Judicial Magistrate by filing a
complaint of cheating and criminal breach of trust - Till date, the
complainant has not filed any recovery suit - Continuation of the
criminal proceeding nothing but abuse of the process of law -
Thus, the impugned order passed by the High Court as also the
order passed by the Additional Chief Judicial Magistrate taking
cognizance upon the complaint, set aside. [Paras 11, 12, 14, 18,
19, 21, 26, 27, 31, 32, 39, 40, 45]
Penal Code, 1860 - u/ss.406, 420 - Criminal breach of trust
and cheating - Specific ingredients - Difference between:
Held: In both the sections, ss. 406 and 420, mens rea-intention to
defraud or the dishonest intention must be present, and in the case
of cheating it must be there from the very beginning or inception -
Distinction between mere breach

## Text

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[2024] 8 S.C.R. 670 : 2024 INSC 626
Delhi Race Club (1940) Ltd. & Ors.
v.
State of Uttar Pradesh & Anr.
(Criminal Appeal No. 3114 of 2024)
23 August 2024
[J.B. Pardiwala* and Manoj Misra, JJ.]
Issue for Consideration
High Court, if justified in declining to quash and set aside the
summoning order passed by the Magistrate, against the appellantscompany and its office bearers, for offence punishable u/ss. 406
and 420 IPC.
Headnotes†
Penal Code, 1860 - ss.406, 420 and 120B - Criminal breach of
trust and cheating - Private complaint filed by the respondent
No. 2 in the court of Magistrate against the appellants for
the offence punishable u/ss.406, 420 and 120B, alleging that
certain amount was due and payable to him by the appellants
towards the sale of horse grains and oats over a period of
time - Trial court issued process for the offence punishable
u/s.406 - Application u/s.482 CrPC by the appellants seeking
quashing of the summoning order passed by the Additional
Chief Judicial Magistrate - Rejected by the High Court -
Correctness:
Held: There was total non-application of mind by the High Court -
Magistrate failed to pose unto himself the correct question as to
whether the appellant Nos. 2 and 3-office bearers of the appellant
No. 1 Company, were personally liable for any offence - Penal
Code does not contain any provision for attaching vicarious
liability on the part of the appellant Nos. 2 and 3 - Vicarious
liability of the office bearers would arise provided any provision
exists in that behalf in the statute - Furthermore, at the stage of
pre-cognizance, the Magistrate is obliged to look into the complaint
threadbare so as to reach to a prima facie conclusion whether
the offence is disclosed or not, then he is expected to be more
careful when he is actually taking cognizance upon a private
complaint and ordering issue of process - High Court completely
* Author
[2024] 8 S.C.R.
671
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
lost sight of the said aspect while rejecting the application u/s.482
CrPC - Issuance of summons is a serious matter and, thus,
should not be done mechanically and it should be done only upon
satisfaction on the ground for proceeding further in the matter
against a person concerned based on the materials collected
during the inquiry - Plain reading of the complaint fails to spell
out any of the ingredients of ss. 406 and 420 - At the most, the
Magistrate could have issued process for the offence punishable
u/s.420-cheating but in any circumstances no case of criminal
breach of trust made out, because there was no entrustment of
any property - Not even the case of the complainant that any
property was lawfully entrusted to appellants and that the same
has been dishonestly misappropriated - Case of the complainant
is that the price of the goods sold by him has not been paid -
Once there is a sale, s. 406 goes out of picture - Even if the
Magistrate would have issued process for the offence punishable
u/s.420-cheating the same would have been liable to be quashed
and set aside, as none of the ingredients to constitute the
offence of cheating disclosed from the materials on record - If
it is the case of the complainant that a particular amount is due
and payable to him then he should have filed a civil suit for
recovery of the amount against the appellants - But he could
not have gone to the court of the Judicial Magistrate by filing a
complaint of cheating and criminal breach of trust - Till date, the
complainant has not filed any recovery suit - Continuation of the
criminal proceeding nothing but abuse of the process of law -
Thus, the impugned order passed by the High Court as also the
order passed by the Additional Chief Judicial Magistrate taking
cognizance upon the complaint, set aside. [Paras 11, 12, 14, 18,
19, 21, 26, 27, 31, 32, 39, 40, 45]
Penal Code, 1860 - u/ss.406, 420 - Criminal breach of trust
and cheating - Specific ingredients - Difference between:
Held: In both the sections, ss. 406 and 420, mens rea-intention to
defraud or the dishonest intention must be present, and in the case
of cheating it must be there from the very beginning or inception -
Distinction between mere breach of contract and the offence of
criminal breach of trust and cheating is a fine one - In case of
cheating, the intention of the accused at the time of inducement
should be looked into which may be judged by a subsequent
conduct, but for this, the subsequent conduct is not the sole test -
672
[2024] 8 S.C.R.
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Mere breach of contract cannot give rise to a criminal prosecution
for cheating unless fraudulent or dishonest intention is shown right
from the beginning of the transaction i.e. the time when the offence
is said to have been committed - Thus, it is this intention, which
is the gist of the offence - Whereas, for the criminal breach of
trust, the property must have been entrusted to the accused or
he must have dominion over it - Said property must be either of
some person other than the accused or beneficial interest in or
ownership' of it must be of some other person - Accused must hold
that property on trust of such other person - Although the offence
of breach of trust and cheating involve dishonest intention, yet they
are mutually exclusive and different in basic concept - There is
a distinction between criminal breach of trust and cheating - For
cheating, criminal intention is necessary at the time of making
a false/misleading representation since inception - In criminal
breach of trust, mere proof of entrustment is sufficient - Thus,
in case of criminal breach of trust, offender is lawfully entrusted
with the property, and he dishonestly misappropriates the same,
whereas, in case of cheating, offender fraudulently or dishonestly
induces a person by deceiving him to deliver any property - In
such a situation, both the offences cannot co-exist simultaneously.
[Paras 25, 26, 30]
Code of Criminal Procedure, 1973 - s.202 - Magistrate
issuing process - Inquiry under - Scope and ambit of -
Discussed. [Paras 6, 7]
Judicial deprecation - Offences of criminal breach of trust
and cheating - Courts below not been able to understand the
fine distinction between criminal breach of trust and cheating:
Held: IPC remained in force for almost a period of 162 years until
it was repealed and replaced by the Bharatiya Nyaya Sanhita-BNS
in December 2023 which came into effect on 01.07.24 - Even
after these many years, the courts below have not been able to
understand the fine distinction between criminal breach of trust
and cheating - Casual approach has been adopted by the courts
below - In contrast, when a case arises from a FIR, responsibility is
of the police to thoroughly ascertain whether the allegations levelled
by the informant indeed falls under the category of cheating or
criminal breach of trust - Unfortunately, it has become a common
practice for the police officers to routinely and mechanically proceed
[2024] 8 S.C.R.
673
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
to register FIR for both the offences, criminal breach of trust and
cheating on a mere allegation of some dishonesty or fraud, without
any proper application of mind - Police officers across the country
to be imparted proper training in law so as to understand the
fine distinction between the offence of cheating viz-a-viz criminal
breach of trust - Both offences are independent and distinct - Two
offences cannot coexist simultaneously in the same set of facts -
They are antithetical to each other - Two provisions of the IPC
(now BNS, 2023) are not twins that they cannot survive without
each other. [Paras 41-43]
Case Law Cited
D.N. Bhattacharjee v. State of West Bengal [1972] 3 SCR 973;
(1972) 3 SCC 414 : AIR 1972 SC 1607 : (1972) Cri LJ 1037;
Smt. Nagawwa v. Veeranna Shivalingappa Kanjalgi [1976] Supp.
1 SCR 123 : (1976) 3 SCC 736; Pepsi Foods Ltd. v. Special
Judicial Magistrate [1997] Supp. 5 SCR 12 : (1998) 5 SCC 749;
Mehmood Ul Rehman v. Khazir Mohammad Tunda [2015] 4 SCR
841 : (2015) 12 SCC 420; Sunil Bharti Mittal v. C.B.I. [2015] 1 SCR
377 : (2015) 4 SCC 609; S.W. Palanitkar & Ors. v. State of Bihar
& Anr. [2001] Supp. 4 SCR 397 : (2002) 1 SCC 241; Harmanpreet
Singh Ahluwalia v. State of Punjab [2009] 7 SCR 563 : (2009) 7
SCC 712 : (2009) Cr.L.J. 3462 (SC); Lalit Chaturvedi and Others
v. State of Uttar Pradesh and Another, 2024 SCC OnLine SC
171 - relied on.
Mideast Integrated Steels Ltd. (MESCO Steel Ltd.) and Others v.
State of Jharkhand and Another, 2023 SCC OnLine Jhar 301 -
approved.
Legal Remembrancer, West Bengal v. Abani Kumar Banerji, AIR
1950 Cal 437; R.R. Chari v. State of U.P [1951] 1 SCR 312:
AIR 1951 SC 207; Tilak Nagar Industries Ltd. & Ors. v. State of
A.P. (2011) 15 SCC 571; Bhushan Kumar v. State (NCT of Delhi)
[2012] 2 SCR 696 : (2012) 5 SCC 424; Hari Prasad Chamaria
v. Bishun Kumar Surekha & Ors. (1973) 2 SCC 823; State of
Gujarat v. Jaswantlal Nathalal [1968] 2 SCR 408; Velji Raghvaji
Patel v. State of Maharashtra; [1965] 2 SCR 429; Jaswantrai
Manilal Akhaney v. State of Bombay [1956] 1 SCR 483; Central
Bureau of Investigation, SPE, SIU(X), New Delhi v. Duncans Agro
Industries Ltd., Calcutta [1996] Supp. 3 SCR 360 : (1996) 5 SCC
591 - referred to.
674
[2024] 8 S.C.R.
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List of Acts
Penal Code, 1860; Code of Criminal Procedure, 1973.
List of Keywords
Summoning order by Magistrate; Criminal breach of trust; Cheating;
Quashing of summoning order; Vicarious liability; Pre-cognizance
stage; Entrustment of property; Abuse of the process of law; Mens
rea; Bharatiya Nyaya Sanhita.
Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.3114
of 2024
From the Judgment and Order dated 03.04.2024 of the High Court
of Judicature at Allahabad in A482 No. 15453 of 2023
Appearances for Parties
Suhail Dutt, Sr. Adv., Sankalp Goswami, Azhar Alam, Ms. B.
Vijayalakshmi Menon, Advs. for the Appellants.
Rajat Singh, Neeraj Kumar Sharma, Sarthak Chandra, Raghav Garg,
Advs. for the Respondents.
Judgment / Order of the Supreme Court
Judgment
J.B. Pardiwala, J.
1.
This appeal arises from the order passed by the High Court of
Judicature at Allahabad dated 03.04.2024 in Application No. 15453
of 2023 filed by the appellant herein by which, the High Court
rejected the same and thereby declined to quash and set aside the
summoning order dated 28.02.2023 passed by the Additional Chief
Judicial Magistrate, Khurja, Bulandshahar in Complaint Case No.
547 of 2021.
2.
Facts giving rise to this appeal may be summarised as under:
(i)
The respondent No. 2 herein is the original complainant. He
lodged a private complaint in the court of Additional Chief Judicial
Magistrate, Khurja, Bulandshahar against the appellants herein
for the offence punishable under Sections 406, 420 & 120B
respectively of the Indian Penal Code, 1860 (for short, "IPC").
[2024] 8 S.C.R.
675
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
The complaint reads thus:
"It is most respectful that the Applicant Vipin Kumar
Agarwal, son of Late Shri Bhagwat Swaroop Agarwal,
who is the owner of a firm Agarwal Udyog, New
Mandi, Khurja. The applicant's firm used to supply
horse feed, barley and oats to Delhi Race Club 1940
Limited, New Delhi since 1990. In the year 1995, the
then head of the Race Club, Shri PS Vedi and the
then Secretary Sehgal told the applicant that from
now on the bills for the supply of horse grain and oats
would be made in the name of Delhi Horse Trainers
Association, Race Course Road, New Delhi. And the
Head and Secretary of the same association have
now been made separate, they will pay you for the
goods supplied. Till the year 2017, the payment of
the applicant's firm continued to be regular and now
at present Delhi Horse Trainers Association President
Kazim Ali Khan and Secretary Sanjeev Charan owe
a payment of Rs 9,11,434/- to the applicant's firm.
Whenever the applicant makes demands, they keep
evading when the applicant tried to talk to the current
President of the Race Club, J. S. Vedi and the current
Secretary about this. Then the Secretary GS Vedi
said that you should demand your dues from Delhi
Horse Trainers Association only, we have no relation
with them, then the applicant tried to meet Kazim Ali
Pradhan along with Manish Kumar Sharma, son of
Mahesh Kumar Sharma, resident of Nawalpura Khurja
and Chirag Agarwal, son of Vijay Agarwal, resident
of Malpura, Khurja but they refused to talk to the
applicant and threatened that if he came here again, it
would be very bad and started a scuffle. The applicant
feels that both the above mentioned officials of Delhi
Race Club 1940 Limited, New Delhi and Delhi Horse
Trainers Association, in connivance with each other,
cheated the applicant and dishonestly obtained the
goods from the applicant's firm in bad faith and they
used it for their club and association and now they do
not want to pay for the goods given by the applicant.
676
[2024] 8 S.C.R.
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All of them under conspiracy want to grab the money
of the applicant's firm, after which the applicant had
given a legal notice to the above mentioned people
through his advocate on 18th June 2020 but even
after receiving the notice, the above people neither
gave any reply to the notice nor was the applicant's
outstanding amount paid. In this context, the applicant
gave an application to Inspector-in-charge of Kotwali
Khurja Nagar on 25.07.2021 and on 06.08.2021, an
application letter was sent to SSP Sir Bulandshahar
through postal registry, but till date no action has been
taken nor has the applicant's report been registered.
Therefore, it is prayed that after the investigation,
please summon the accused along with evidence to
the court and punish them for the crime committed
by them.
Date 27.08.2021"
(ii) The plain reading of the complaint would indicate that the
appellant No. 1 is a legal entity. The appellant No. 2 is the
Secretary of the appellant No. 1 Company, and the appellant
No. 3 is the Honorary President and Non-Executive Director of
the appellant No. 1 Company. They used to purchase grains
and oats from the complainant meant to be fed to the horses
maintained by the appellant No. 1 Company. According to
the complainant, an amount of Rs. 9,11,434/- (Rupees Nine
Lakh Eleven Thousand Four Hundred Thirty Four) is due and
payable to him by the appellants towards the sale of horse
grains and oats over a period of time. It is alleged that as the
appellants failed to make the payment, he thought fit to file
the complaint as according to him he has been cheated by
the appellants.
(iii) The court concerned initially took cognizance upon the complaint
but postponed the issuance of process as it thought fit to initiate
magisterial inquiry under Section 202 of the Code of Criminal
Procedure, 1973 (for short, "CrPC"). The statement of the
complainant recorded by the Additional Chief Judicial Magistrate
in the course of the magisterial inquiry under Section 202 of
the CrPC reads thus:
[2024] 8 S.C.R.
677
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
"Name of the witness Ankit Agarwal S/o Vipin Agarwal
aged about 34 years, Occupation-Businessman,
resident of 13, Malpura, Subhash Road, Khurja, PSKhurja Nagar, District Bulandshahar today on 08.3.22
on oath gave statement that:- Vipin Kumar Agarwal is
the owner of a firm Agarwal Udyog which is located
in New Mandi Khurja. Delhi Race Course Club 1940
Limited has been purchasing horse feed from the
above mentioned firm for a long time and payment
for the same has been done on time After the year
2017, Delhi Horse Trainers Association President
Kazim Ali and Secretary Sanjeev Charan kept paying
the goods. Since thereafter, the above mentioned
people owe Rs 9,11,434/- to the above firm. After
repeated requests, both the above mentioned firms
have been telling to make payment to each other but
the opposite party has also not made the payment.
Delhi Race Course Club President JS Bedi and
Secretary HK Uppal are delaying the payment of
horse feed purchased by them. The people of the
above two firms have colluded with each other and do
not want to pay for the goods taken. Vipin Agarwal,
proprietor of Agarwal Udyog, is my father hence I
am aware of the entire matter"
(iv) The Magistrate also recorded the statement of one Manish
Kumar in course of the inquiry under Section 202 of the CrPC.
The statement reads thus:
"Witness name Manish Kumar Sharma father's
name aged 33 years occupation labourer resident
of Nawalpura, Khurja Police Station Khurja Nagar
District Bulandshahar today on 08.03.22 on oath
gave statement that:-
I have been working as a bookkeeper for the last 17
years at Vipin Kumar Agarwal's firm Agarwal Udyog,
which is located in New Mandi Khurja. From the above
mentioned firm, Delhi Race Course Club 1940 Limited
which is a New Delhi based firm. Have been buying
678
[2024] 8 S.C.R.
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horse grain and oats. President of this firm J S Bedi
and Secretary H K Uppal have been coming to our
firm to buy horse feed and oats and the firm has been
paying for the purchased goods. It was said by the
above two that now the bills for horse feed and oats
will be made in the name of Delhi Horse Trainers
Association Delhi and the Head of this firm, Kazim
Ali and Secretary Sanjeev Charan will pay it. On the
request of the above people, horse grain and oats
continued to be supplied from our firm. The above
mentioned people owes Rs. 9,11,434/- to our firm,
upon being repeatedly asked for payment, the above
mentioned people are evading. Once Chirag Agarwal
and I went to their office in New Delhi, they refused
to talk to Vipin Agarwal and us and they threatened
that if they come here again, it will be very bad and
they started scuffle. The outstanding amount of Rs.
9,11,434/- has not yet been paid by the officials of
the above two firms. The above mentioned people
have fraudulently obtained the goods from our firm
in bad faith and do not want to pay for the same.
They have used the supplied goods. Certified after
reading and listening."
(v) At the end of the magisterial inquiry, the court issued process
for the offence punishable under Section 406 of the IPC. The
order issuing process reads thus:
"Date:- 28.02.2023
The file was presented for orders. The complainant
has been heard on the question of summons on an
earlier date.
On behalf of the complainant Vipin Kumar Aggarwal,
the above complaint was presented against the
opposite parties Delhi Race Club etc. to the effect
that the firm of the complainant was supplying horse
grain, barley and oats to Delhi Race Club since the
year 1990. In the year 1995, the President of the
Race Club, Mr. P.S. Vedi and the then Sachin Sehgal
[2024] 8 S.C.R.
679
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
ji said that the bill would be made in the name of
Delhi Horse Trainers Association, Race Course Road,
New Delhi and the Head and Secretary of the same
association have now been made separately. They
will make the payment for the goods given by you.
Till the year 2017, the applicant's firm's payment
continued to be regular and now at present the
payment of Rs 9,11,434/- is outstanding from the
applicant's firm when the applicant talked about this
to the current President of the Race Club, J.S. Vedi
and the current Secretary then the secretary said
that you should demand your dues from Delhi Horse
Trainers Association only. Then the applicant tried to
meet Kajim Ali but he refused to talk to the applicant
and got into a scuffle. The above two associations
and officials unanimously cheated the applicant and
obtained goods from the applicant's firm and do not
want to pay for the goods given by the applicant.
The applicant had given a legal notice to the above
people through his advocate on 18 June 2020 but
even after receiving the notice, the above people
neither gave any reply to the notice nor paid the
outstanding amount of the applicant. In this context,
the applicant gave an application to Khurja Nagar
police station and on 06.08.2021 an application was
given to SSP Bulandshahar but no action has been
taken till date.
On behalf of the complainant, he got himself examined
under Section 200 of the Code of Criminal Procedure
and under Section 202 CrPC, the statement of
witnesses Ankit Aggarwal as PW-1 and Manish
Kumar Sharma as PW-2 was recorded. In which they
supported the statements mentioned in the complaint.
One copy of the application sent by the complainant to
the Senior Superintendent of Police as documentary
evidence in support of his statements, a photocopy
of the registry receipt, one copy of the net receipt
postal registry, five copies of the bill book, one true
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[2024] 8 S.C.R.
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copy of the remaining balance, one copy of receipt
of goods, one copy of remaining balance, one copy
of legal notice were filed per receipt.
The complainant has stated in his statement under
Section 200 CrPC, "after five years of 1990, these
people said that we will not make the payment. A
separate organization has been formed for payment,
which will do it. An organization named Delhi Trainers
Association has been formed. Now I owe these people
nine lakh eleven thousand four hundred thirty-four
rupees. When we asked for money several times,
we did not receive it. The President of Delhi Race
Course is not ready to talk. I am suffering from cancer.
Business is seen by children only. We also gave them
legal notice but nothing happened."
Perused the entire evidence material available on file.
On the basis of the evidence presented by the
complainant under section 200 CrPC and section
202 CrPC, there is prima facie basis for summoning
the opposition parties Delhi Race Course Club, Delhi
Race Horse Trainers Association, JS Bedi, HK Uppal,
Kazim Ali Khan and Sanjeev Charan for consideration
under section 406 IPC. There are sufficient grounds
for summoning for trial of a punishable offense under
Section 406 IPC.
ORDER
The opposite parties Delhi Race Course Club, Delhi
Race Horse Trainers Association, JS Bedi, HK Uppal,
Kazim Ali Khan and Sanjeev Charan are summoned
for trial for the offense under section 406 of the
Indian Penal Code. The complainant should process
the summons against the opposition parties within a
week, every summons should be issued along with
a copy of the complaint letter, the complainant list
should be filed and the witnesses should be filed.
The case file be put up on 27.04.2023 for appearance."
[2024] 8 S.C.R.
681
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
3.
In such circumstances referred to above, the appellants preferred an
application under Section 482 of the CrPC in the High Court, praying
for quashing of the summoning order dated 28.02.2023 passed by
the Additional Chief Judicial Magistrate, Khurja, Bulandshahar.
4.
The High Court rejected the application filed by the appellants herein,
observing as under:
"15. On the basis of averments made in the complaint, it
is a case of the complainant who was regularly supplying
Oats, used for horses. In the year 1995, the complainant
was asked to raise invoice in favour of the 'Association'.
The complainant agreed and continued to raise invoice in
favour of the 'Association'. After 2017, an amount of Rs.
9,11,434/- became due upon the applicants. He contacted
Delhi Race Club (1940) Ltd. and he was directed to contact
the 'Association'. The applicant Delhi Race Club (1940)
Ltd. and 'Association' are not separate legal entity. The
applicants and the 'Association' were in collusion and
committed fraud with complainant. The goods supplied by
complainant were received but its payment was not made.
16. Admittedly, no civil proceedings are pending for the
amount in question between the parties. It is not the
case of the applicants that transaction was a commercial
transaction whereas the case of opposite party No. 2 is for
the supply made by him. He is bound to raise his payment
on the direction of the Delhi Race Club (1940) Ltd. He
raised invoices in favour of the 'Association' from 1995.
There is no change in the manner of raising invoices by
the complainant. Delhi Race Club (1940) Ltd. continued
to make payment upto the year 2017. The complainant
was not being paid Rs. 9,11,434/- by the applicants who
instead transferred their responsibility to the 'Association'.
17. Suffice to mention here that the copies of the invoices
are brought on record through counter affidavit by the
complainant and the same are not controverted by the
applicants. Prima facie, it reflects that the invoices were
raised by complainant in accordance with the advice
received by him and he continued to receive payment on
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[2024] 8 S.C.R.
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the basis of such invoices and when the payment of Rs.
9,11,434/- was not paid to the complainant he contacted
Delhi Race Club (1940) Ltd. which averted him to the
'Association'. It appears that Delhi Race Club (1940) Ltd.
and the 'Association' are not separate entity.
18. On the face of record, it appears that originally
complainant was supplying oats to the 'Company'. In the
year 1995, the complainant was directed to raise invoices
in favour of the 'Association'. The Company continued to
receive supply of Oats made by the complainant even
after 1995, whereas invoices were raised in favour of the
'Association'. This direction of the company goes to show
that there was some mala fide intention on the part of the
Company. The complainant bona fide continued to make
supply under the direction of the Company. The invoices
were raised by the complainant in similar manner since
1995 to 2017 and thereafter. It appears that there was an
oral direction to raise invoices in favour of 'Association'
made by the Company, which indicates mala fide of the
Company.
19. After hearing the learned counsel for the parties and
after perusing the impugned order, this Court is of the
opinion that impugned order has been passed on the basis
of facts and circumstances of the case after considering
the evidence on record. There is no legal infirmity in the
impugned orders, which may call for any interference by
this Court in exercise of powers conferred under Section
482 Cr.P.C."
5.
Thus, according to the High Court, the intention on the part of the
company was prima facie mala fide and the payment of Rs. 9,11,434/-
could be said to be intentionally withheld.
SCOPE OF INQUIRY UNDER SECTION 202 OF THE CRPC
6.
It is by now well settled that at the stage of issuing process it is not
the duty of the Court to find out as to whether the accused will be
ultimately convicted or acquitted. The object of consideration of the
merits of the case at this stage could only be to determine whether
there are sufficient grounds for proceeding further or not. Mere
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683
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
existence of some grounds which would be material in deciding
whether the accused should be convicted or acquitted does not
generally indicate that the case must necessarily fail. On the other
hand, such grounds may indicate the need for proceeding further
in order to discover the truth after a full and proper investigation.
If, however, a bare perusal of a complaint or the evidence led in
support of it shows essential ingredients of the offences alleged
are absent or that the dispute is only of a civil nature or that there
are such patent absurdities in evidence produced that it would be
a waste of time to proceed further, then of course, the complaint is
liable to be dismissed at that stage only. What the Magistrate has
to determine at the stage of issue of process is not the correctness
or the probability or improbability of individual items of evidence on
disputable grounds, but the existence or otherwise of a prima facie
case on the assumption that what is stated can be true unless the
prosecution allegations are so fantastic that they cannot reasonably
be held to be true. [See : D.N. Bhattacharjee v. State of West
Bengal : (1972) 3 SCC 414 : AIR 1972 SC 1607 : (1972 Cri LJ 1037)].
7.
Further it is also well settled that at the stage of issuing process
a Magistrate is mainly concerned with the allegations made in the
complaint or the evidence led in support of the same and he is
only to be prima facie satisfied whether there are sufficient grounds
for proceeding against the accused. It is not the province of the
Magistrate to enter into a detailed discussion of the merits or demerits
of the case nor can the High Court go into this matter in its inherent
jurisdiction which is to be sparingly used. The scope of the inquiry
under Section 202 of the CrPC is extremely limited - only to the
ascertainment of the truth or falsehood of the allegations made in
the complaint - (i) on the materials placed by the complainant
before the Court (ii) for the limited purpose of finding out whether
a prima facie case for issue of process has been made out, and
(iii) for deciding the question purely from the point of view of the
complainant without at all adverting to any defence that the accused
may have. In fact in proceedings under Section 202 of the CrPC, the
accused has got absolutely no locus standi and is not entitled to be
heard on the question whether the process should be issued against
him or not. It is true that in coming to a decision as to whether a
process should be issued the Magistrate can take into consideration
inherent improbabilities appearing on the face of the complaint or
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in the evidence led by the complainant in support of the allegations
but there appears to be a very thin line of demarcation between a
probability of conviction of the accused and establishment of a prima
facie case against him. The discretion given to the Magistrate on this
behalf has to be judicially exercised by him. Once the Magistrate
has exercised his discretion, it is not for the High Court or even the
Supreme Court to substitute its own discretion for that of the Magistrate
or to examine the case on merits with a view to find out whether or
not the allegations in the complaint, if proved, would ultimately end
in the conviction of the accused. These considerations are totally
foreign to the scope and ambit of an inquiry under Section 202 of
the CrPC which culminates into an order under Section 204. [See :
Smt. Nagawwa v. Veeranna Shivalingappa Kanjalgi : (1976) 3
SCC 736]. It is no doubt true that in this very decision this Court has
enumerated certain illustrations as to when the order of Magistrate
issuing process against the accused can be quashed or set aside.
These illustrations are as under :-
"(1) Where the allegations made in the complaint or the
statement of the witnesses recorded in support of the same
taken at their face value make out absolutely no case
against the accused or the complaint does not disclose
the essential ingredients of an offence which is alleged
against the accused.
(2) Where the allegations made in the complaint are
patently absurd and inherently improbable so that no
prudent person can ever reach a conclusion that there
is sufficient ground for proceeding against the accused.
(3) Where the discretion exercised by the Magistrate in
issuing process is capricious and arbitrary having been
based either on no evidence or on materials which are
wholly irrelevant or inadmissible; and
(4) Where the complaint suffers from fundamental legal
defects, such as want of sanction or absence of a complaint
by legally competent authority and the like."
8.
Each Penal Section of the Indian Penal Code or of the other laws can
be subjected to an analysis by posing and answering the following
questions: -
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685
Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
I.
What is the overt act stipulated in the Section, which overt act
has resulted in an injury?
II.
What is the state of mind stipulated in respect of the accused
and which state of mind must precede or accompany the act
of the accused?
ANALYSIS
9.
Having heard the learned counsel appearing for the parties and
having gone through the materials on record, the only question that
falls for our consideration is whether the High Court committed any
error in passing the impugned order.
10. The case at hand is one of an unpaid seller. It is the case of the
complainant that he used to regularly supply consignments of grains
& oats meant for horses at the Delhi Race Club. The complainant
used to raise invoices in favour of the Club and the Club used to
pay the requisite amount. However, according to the complainant
after 2017, the Club stopped making the payment. It is the case of
the complainant that an amount of Rs. 9,11,434/- is due and payable
by the appellants towards the supply of the consignment of oats.
11. The impugned order passed by the High Court is a fine specimen of
total non- application of mind. Although the complaint was filed for the
offence punishable under Sections 406, 420 and 120B respectively
of the IPC yet the Additional Chief Judicial Magistrate thought fit to
take cognizance and issue process only for the offence of criminal
breach of trust as defined under Section 405 of the IPC and made
punishable under Section 406 of the IPC.
12. We are of the view that even if the entire case of the complainant is
accepted as true no offence worth the name is disclosed.
13. This Court has time and again reminded that summoning of an
accused in a criminal case is a serious matter. Criminal law cannot
be set into motion as a matter of course. It is not that the complainant
has to bring only two witnesses to support his allegations in the
complaint to have the criminal law set into motion. The order of
the Magistrate summoning the accused must reflect that he has
applied his mind to the facts of the case and the law applicable
thereto. He has to examine the nature of allegations made in the
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complaint and the evidence both oral and documentary in support
thereof. It is not that the Magistrate is a silent spectator at the time of
recording of preliminary evidence before summoning of the accused.
The Magistrate has to carefully scrutinise the evidence brought on
record and may even himself put questions to the complainant and
his witnesses to elicit answers to find out the truthfulness of the
allegations or otherwise and then examine if any offence is prima
facie committed by all or any of the accused. [See: Pepsi Foods
Ltd. v. Special Judicial Magistrate : (1998) 5 SCC 749]
14. Where a jurisdiction is exercised on a complaint petition filed in
terms of Section 156(3) or Section 200 of the CrPC, the Magistrate
is required to apply his mind. The Penal Code does not contain any
provision for attaching vicarious liability on the part of the appellant
Nos. 2 and 3 respectively herein who are none other than office
bearers of the appellant No. 1 Company. When the appellant No. 1
is the Company and it is alleged that the company has committed
the offence then there is no question of attributing vicarious liability to
the office bearers of the Company so far as the offence of cheating
or criminal breach of trust is concerned. The office bearers could
be arrayed as accused only if direct allegations are levelled against
them. In other words, the complainant has to demonstrate that he
has been cheated on account of criminal breach of trust or cheating
or deception practiced by the office bearers. The Magistrate failed
to pose unto himself the correct question viz. as to whether the
complaint petition, even if given face value and taken to be correct
in its entirety, would lead to the conclusion that the appellant Nos.
2 and 3 herein were personally liable for any offence. The appellant
No. 1 is a body corporate. Vicarious liability of the office bearers
would arise provided any provision exists in that behalf in the statute.
Statutes indisputably must contain provision fixing such vicarious
liabilities. Even for the said purpose, it is obligatory on the part of
the complainant to make requisite allegations which would attract
the provisions constituting vicarious liability.
15. In Legal Remembrancer, West Bengal v. Abani Kumar Banerji
reported in AIR 1950 Cal 437, a Division Bench of the Calcutta High
Court speaking through Justice K.C. Das Gupta (as he then was)
held that a magistrate is not bound to take cognizance of an offence
merely because a complaint is filed before him. He is required to
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Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr.
carefully apply his mind to the contents of the complaint before taking
cognizance of any offence alleged therein. The relevant observations
read as under: -
"... As I read s. 190 of the Code of Criminal Procedure and
the subsequent sections, it seems to me to be clear that a
magistrate is not bound to take cognizance of an offence,
merely because a petition of complaint is filed before him.
Mr. Mukherji's argument is that a magistrate cannot possibly
take any action with regard to a petition of complaint,
without applying his mind to it, and taking cognizance of
the offence mentioned in the complaint necessarily takes
place, when the magistrate's mind is applied to the petition.
Consequently Mr. Mukherji argues, whenever a magistrate
takes the action, say, of issuing search warrant or asking
the police to enquire and to investigate, he has taken
cognizance of the case. In my judgment, this is putting a
wrong connotation on the words "taking cognizance". What
is "taking cognizance" has not been defined in the Code of
Criminal Procedure, and I have no desire now to attempt
to define it. It seems to me clear, however, that before it
can be said that any magistrate has taken cognizance of
any offence under s. 190(1)(a) of the Code of Criminal
Procedure, he must not only have applied his mind to the
contents of the petition, but he must have done so for the
purpose of proceeding in a particular way as indicated in
the subsequent provisions of this Chapter,-proceeding
under s. 200, and thereafter sending it for enquiry and
report under s. 202. When the magistrate applies his mind
not for the purpose of proceeding under the subsequent
sections of this Chapter, but for taking action of some other
kind, e.g., ordering investigation under s. 156(3), or issuing
a search warrant for the purpose of the investigation, he
cannot be said to have taken cognizance of the offence.
My conclusion, therefore, is that the learned magistrate
is wrong in thinking that the Chief Presidency Magistrate
was bound to take cognizance of the case as soon as the
petition of complaint was filed."
(Emphasis supplied)
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16. The aforesaid observation of the Calcutta High Court was referred
to and relied upon with approval by this Court in its decision in R.R.
Chari v. State of U.P. reported in AIR 1951 SC 207.
17. In Tilak Nagar Industries Ltd. & Ors. v. State of A.P. reported in
(2011) 15 SCC 571, this Court held that the power under Section
156(3) of the CrPC can be exercised by a magistrate even before he
takes cognizance provided the complaint discloses the commission of
cognizable offences and if the complaint does not disclose commission
of cognizable offences, such an order of the magistrate directing
investigation is liable to be quashed. The relevant observations
read as under: -
"11. After considering the rival submissions, we are of the
view that the contentions of Mr Luthra are correct in view
of Section 155(2) of the Code as explained in Bhajan
Lal [1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426] .