Holding

A breach of contract alone does not constitute an offence and the complaint failed to disclose the requisite ingredients of offences under Sections 406 and 420 of the IPC, warranting the setting aside of the summons.

Summary

All Cargo Movers (I) Pvt. Ltd. and related companies entered into a contract of carriage to deliver consignments to Kenya. The goods were allegedly delivered without the original Bills of Lading, leading the consignee to claim breach of contract and file a civil suit in the Bombay High Court. More than a year later, the consignee filed a criminal complaint alleging breach of trust, cheating and other offences under Sections 406, 420, 34 and 114 of the Indian Penal Code. The Gujarat High Court dismissed the petition to quash the summons issued to the appellants, holding that the complaint prima facie disclosed an offence. On appeal, the Supreme Court held that a mere breach of contract does not constitute a criminal offence and that the complaint failed to allege the essential ingredients of the alleged IPC offences; it also emphasized that the court may examine the pleadings and documents of the pending civil suit to determine abuse of process. Consequently, the order issuing summons was set aside and the appeal was allowed.

Issues considered

Whether the allegations in the criminal complaint disclose the essential ingredients of offences under Sections 406 and 420 of the Indian Penal Code.
Whether a breach of contract, without more, can give rise to criminal liability for breach of trust or cheating.
Whether the High Court erred in dismissing the petition for quashing the summons on the ground that the complaint prima facie disclosed an offence.
Whether the Supreme Court may invoke its inherent jurisdiction under Section 482 of the Code of Criminal Procedure to set aside criminal proceedings that constitute an abuse of process.

Legislation cited

Code of Criminal Procedure, 1973s. 190, s. 482
Indian Penal Code, 1860s. 114, s. 34, s. 406, s. 407, s. 420
Negotiable Instruments Acts. 138

Subjects

breach of contractcriminal complaintSection 482 CrPCabuse of processIndian Penal Codebreach of trustcheatingcivil suitjurisdictioncriminal proceedings

Judgment

ALL CARGO MOVERS (I) PVT. LTD. & ORS. A
v.
DHANESH BADARMAL JAIN AND ANR.

OCTOBER 12, 2007
B
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.)

Code ofCriminal Procedure, 1973:
ss. I 90 and 482-Exercise of power under-Dispute between C
parties arising out ofa contract ofcarriage-Suit with regard to the
said dispute pending before High Court-Criminal complaint filed
alleging breach of trust-Magistrate issuing summons-Petition for
quashing summons dismissed by High Court-HELD: Breach of
contract simplicitor does not constitute an offence-Allegations in D
complaint petition must also disclose necessary ingredients of the
offence-On facts, complaint petition does not disclose any averment
with regard to ingredients ofoffences u/ss 406 and 420 !PC-Where
duringpendency ofa civil suit, a criminal complaint is filed, court may,
for ascertaining correctness ofallegations, notice, besides the pleadings
in the suit, correspondence exchanged between parties and other. E
admitted documents-Criminal proceedings should not be encouraged
when it is found to be malafide or otherwise an abuse ofprocess of
court-Superior Courts while exercising this power should strive to
serve ends ofjustice-Impugned orders set aside-Penal Code, I 860-
ss. 406 and 420-Administration ofCriminal Justice. F

Respondent no. 1 entered into a contract of carriage with the
appellant for delivery of certain consignments to a company, namely,
'UA', in Kenya. Appellant asked 'MN', its agent in Kenya, to
arrange the delivery of the said consignments. The goods said to G
have been delivered by the agent or the appellant to the original
consignee were allegedly rejected by the latter as being inferior in
quality. The goods were then said to have been delivered to another
company. Respondent no. 1 issued a notice to the appellant and
271 H
272 SUPREME COURT REPORTS [2007] 11 S.C.R.

A others stating that they effected delivery of the consignments without
production of original Bills of Lading and committed a breach of
contract of carriage and acted in violation thereof. A suit was tiled
by respondent no. 1 in this regard in the Bombay High Court. More
than a year thereafter, respondent no. 1 filed a criminal complaint
B against the appellants alleging commission of offence of criminal
breach of trust by them for effecting delivery of consignments in
connivance and causing criminal misappropriation of valuable
property of the complainant. The accused filed a petition for quashing
the order issuing summons to them, which was dismissed by the High
c Court observing that the allegations made in the complaint, prima
facie, disclosed the offence of breach of trust. Aggrieved, the accused
filed the instant appeal.
Allowing the appeal, the Court
D HELD: 1.1. Breach of contract simplicitor does not constitute
an offence; Allegations in the complaint petition must disclose the
necessary ingredients of the offence. In the instant case, the
allegations made in the complaint petition, even if given face value
and taken to be correct in its entirety, do not disclose an offence. A
E bare perusal of the complaint petition would show that it did not
contain any averment in regard to the ingredients of the offence
under Sections 406 and 420 of the Indian Penal Code.
[Para 14 and 17] (279-B, C, D; 278-D]
1.2. Where a civil suit is pending and the complaint petition has
F been filed after filing of the civil suit, the Court may, for the purpose
of finding out as to whether the said allegations are prima facie
correct, notice the correspondences exchanged by the parties and
other admitted documents. Further, the Court may not only take into
consideration the admitted facts but may also look into the pleadings
G in the suit. No allegation whatsoever was made against the
appellants in the notice. What was contended was negligence and/
or breach of contract on the part of the carriers and their agent.
[Para 17 and 18] [279-B, C, D]
1.3. Criminal proceedings should not be encouraged, when it is
H
ALLCARGOMOVERS(I)PVT.LTD.v.DHANESH 273
BADARMALJAIN [SINHA,J.]
found to be mala fide or othenvise an abuse of the process of court. A
Superior Courts while exercising this power should also strive to
serve the ends of justice. The impugned judgment cannot be
sustained and is set aside. [Para 17 and 22] [279-F; 281-E]
G. Sagar Suri & Anr. v. State of UP. & Ors., [2000] 2 SCC 636; B
Anil Mahajan v. Bhor Industries Ltd & Anr., (2005} 10 SCC 228; Hira
Lal Hari Lal Bhagwati v. CBI, New Delhi, [2003] 5 SCC 257; Hira
Lal Hari Lal Bhagwati v. CBI, New Delhi, [2005} 3 SCC 670 and Indian
Oil C01poration v. NEPC India Ltd. & Ors., [2006} 6 SCC 736, relied
on.
c
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1443 of 2007.
From the Judgment and final Order dated 19.01.2007 of the High
Court of Gujarat in Miscellaneous Criminal Application No. 3585of1998.
D
F.S. Nariman and Siddharth Luthra, Sanjiv Sen, RN. Karanjawala,
Nandini Gore, Pragya Singh Baghel, Simran Brar and Manik Karanjawala
for the Appellant.
P.H. Parekh, Lalit Chauhan, Swnit Goel, Arjun Garg, Pallavi (for
P.H. Parekh & Co.), Hemantika Walu and Pinky for the Respondents. E
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
2. The parties hereto entered into a contract of carriage. First F
Respondent approached the appellants which are companies registered
and incorporated under the Indian Companies Act for delivery of six
consignments valued at US$ 98,715.29 to the original consignee, MJs.
Universal Apparels (EPZ), Mombassa, Kenya. By reason of a fax
message, Appellants asked their counterparts in Mombassa, Kenya G
(Walford Meadows) to confirm delivery of consignment asking it to see
that the cargo is delivered only against presentation of original Bills of
Lading. The goods in question were said to have been delivered by the
agent of the petitioner to the original consignee but the same allegedly was
rejected on the ground of being inferior in quality. Goods are said to have H
274 SUPREME COURT REPORTS [2007) 11 S.C.R.

A been delivered to ·Mfs. Fashionette Industries Ltd. Complainant-··
Respondent issued a notice to the accused persons as also the
aforementioned Walford Meadows and Mis. Universal Apparels stating·

·· ''That with utter disregard to the procedures and practice prevalent
B internationally, and being fully conscious of the consequences of
delivering the consignments without production of the Bills of
Lading, you Mis. Walford Meadows Ltd., as agents of the Carrier
at Mombassa Ltd. effected delivery of the consignments covered
under the aforesaid original bills of lading to the consignees, mthout
c their producing the Bills of Lading. That my clients are shocked at
your act of negligence, which is contrary, violative and in breach
of your duties under the Contract and Law."
4. Negligence was, thus, attributed to the agencies in delivering the
D cargo Without the original Bill of Lading. It was also alleged that the
carriers and their agent have committed a breech of cani,'ige and acted
in violation of their contract and obligation. A claim for a sum of US$
84,353.31 was made. In the said notice, it was stated:
''That you, Mis. Walford Meadows, sent a fax dated 19.9.1996
E . to Mis Universal Apparels, copy of which was faxed to my clients .
by you Mis All Cargo Movers (India) Pvt. Ltd. By the said fax,
you Mis Walford Meadows Ltd. have clearly pointed out the
procedures to be followed in respect of Through. Bills of Lading
or House Bills of Lading and have admitted that no cargo should
F be released to the importer mthout the presentation of the original
Bills of Lading. That you, Mis. Walford have gone one step further
and stated that you had delivered the consignments to Universal
Apparels as a favour, since Universal Apparels were your regular
· customers etc. etc. and lodged a claim for the value of the said · ·
consignments being the amount they have been debited v.ith you,
Mis. All Cargo."
........
5. On or about 14.9.1996, Mahabir Apparels in a letter addressed
to the petitioner company, lodged a statement of claiin stating:
ALLCARGOMOVERS(I)PVT.LTD. v. DHANESH 275
BADARMAL JAIN [SINHA, J.]
"PLEASE TREAT THIS AS OUR FORMAL CLAIM FOR A
RS.27,87,795/- INVOLVED ON THIS CONSIGNMENT.
YOU ARE HEREBY ADVISED TO LOOK INTO THE
MATTER AND GIVE US THE EXACT STATUS OF THE
ABOVE CARGOES IMMEDIATELY."
6. Yet again by a fax message dated 19.9.1996 sent by Darius B
Macharo to the Universal Apparels, it was stated :
"The above shipments were realeased and delivered to you without
your showing to us the original Bills of Lading.
The procedure of the through bills oflading or house bills oflading C
(illegible) should be released to the importer without presentation
of the original bill oflading. However, this favour was extended to
you because
I. You are our regular customer. D
2. To save you for heavy post storage charges which you would
((illegible) you were to wait until you got the original bill from
your supplier.
3. You needed the material very urgently as you were out of stock. E
We have now been advised by our Principals, All Cargo that your
supplier Mahavir Apparels is demanding US Dollar 84,353.31 from
us as we released the goods in absence of the original BIL.
(illegible)
F
Please revert now as we have to advise our Principal in India before
close of business today.
-
/
In the meantime we are holding all your shipments until this matter.
is resolved."

7. A copy of the said fax message was sent to the appellant herein G
stating:
"CC : All Cargo India, Mumbai.
Attn : Vevek Kele
H
276 SUPREME COURT REPORTS [2007] 11 S.C.R.

A We shall come back to you with full details upon receiving reply
from Universal Apparels. Cargo was released without Bank
Guarantee."
8. A bare perusal of the aforementioned letters/notices would clearly
indicate that no allegation had bten made at the material time that it was
8
the appellant who had caused delivery of the goods.
9. It is furthermore not in dispute that a suit has been filed by the
respondent herein in the Original Side of the Bombay high Court which
has been marked as suit No.1861 of 1997.
c 10. In the said suit, the following have been arrayed as defendants

"l. ACE Lines Ltd. a company Incorporated under Foreign Laws,
Having its office at ?.9 Bis Mere Bathelemy Street, Port Louis,
D Mauritius.
2. All Cargo Container Lines Ltd. A company incorporated under
;,._
Foreign laws having its office at 29, Bis Mere, Bathelemy
Street, Port Louis Mauritius.
_,.., All Cargo Movers (India) Pvt. Ltd. A company incorporated
E
in India Under the Companies Act, 1956 And having its office
at 204, National Insurance Building, Dr. D.N. Road, Bombay
-- 400001.
4. Mis Walford Meadows Limited, A company incorporated
F under Foreign Laws having its office at 1st American Bank
Building, 2nd Floor, No. l Avenue, Mombassa." ~

11. Whereas defendant Nos.1 to 3 are alleged to be inter-related/
sister companies, the fourth defendant is said to be their agent. In the said
suit, neither the aforementioned Mis. Walford Meadows Ltd. nor Mis.
G Universal Apparels have been implicated as parties. Plaintiff in the said
suit averred that entrustrnent of the six consignments have been made to
Mahabir Apparels. The case made out in the plaint by the first -r~

respondents. is as under :

H "The respective ships carrying the said six consignments sailed from
i

ALL CARGO MOVERS (I) PVT.LTD. v. DHANESH 277
BADARMAL JAIN [SINHA, J.]
the Port of Bombay on different dates and arrived at Mombassa. A
The 3rd Defendants addressed 2 fax messages dated 30.8.1996
and 2. 9.1996 to the 4th Defendant specifically instructing them to
deliver the said six consignments only against presentation of original
Bills of Lading. The Plaintiff is crave leave to refer to and rely upon
the aforesaid correspondence. B
xxx xxx xxx
The plaintiff immediately addressed a fax dated 11. 9. 1996 to the
3rd Defendant (with a copy to Mis. Harilal Bhawm*) questioning
the legality, propriety in giving delivery of the cargo without C
production of the Bills of Lading. The plaintiff also pointed out that
they had not given any writter1 :;.:~mission to give delivery of the
cargo \\'ithout production of the Bills of Lading. The Plaintiff whilst
emphasizing that the m:ttter was very serious informed the 3rd
Defendant to inform their Mombassa Agents not to release the D
goods without production of the original Bills of Lading in respect
of their consignments. Th_e plaintiff craves leave to refer to and rely
upon the said correspondence when produced.
12. The said suit is still pending. More than one year after filing of
the said suit, i.e., on or about 6.5.1998, a complaint petition was filed E
wherein, inter aila, it was alleged :
''Thereafcer in and subsequent to September, 1996, the complainant
was shocked to learn that the accused have delivered away the
goods materials of the complainant's above described 6 F
consigmnents without - presentation of and securing the original 6
Bills of Lading, which were till with the complainant and not
negotiated i.e. paid off by the purchasing party and thus the
accused in abetment of each other and acting in common concern
have committed criminal breach of Trust by causing criminal G
misappropriation of the valuable property of the complainant and
have committed offences punishable u/s.407, 34 and 114 ofl.P.
Code.
By issuing their said Bills of Lading in acceptance and compliance
of the complainants invoices, the accused represented, assured and H
t

278 SUPREME COURT REPORTS [2007] 11 S.C.R.

A induced the complainant to believe that the complainant's goods -
material delivered to the accused by the complainant would be
delivered by the accused to the receiving party only "TO ORDER"
i.e. only on the presentation of original bills of Lading to the party
receiving the delivery of the goods material. If the accused had not
B to represented assured and induced the complainant, he would not
have risked his gods material of the value of US$ 98,715.29 (i.e.
Rs.38,49,896.31 at dollar rate about Rs.39/-) to be delivered to
the accused. Thus, the accused have in abetment and concert of
each other, cheated the complainant and committed offences u/s
c 420, 34 and 114 ofl.P. Code."
13. Agent of the Kenyan counterpart of the petitioner, namely Mis.
Walford Meadows Ltd. against whom allegations have been made that it
had delivered the consignments to the assignee without original bills of
lading had not been made an accused.
D
14. A bare perusal of the complaint petition would show that it did
not contain any averment in regard to the ingredients of the offence under
Sections 406 and 420 of the Indian Penal Code. There is no allegation
that it was the petitioner who had delivered the goods.
E 15. An application for quashing of the order issuing summons to the
appellant by the learned Metropolitan Magistrate has been dismissed by
the High Court of Gujarat by reason of the impugned judgment dated
19.1.2007 holding:

F "Perusing the complaint in light of the above arguments and legal
propositions, it was clear that the allegations made therein, prima
facie, disclosed the offence of breach of trust and the important
averments were substantiated by the statement on oath of the
complainant. There is no reason to examine the documents and
defences of the petitioner at this stage to find out whether the
G
complainant was likely to result in conviction. It is not established
though alleged, either that the complainant did not disclose any
offence or that the criminal proceedings were a gross abuse of the
process oflaw, instead, it appears from the record that hearing of
the present petition is unduly delayed after grant of ex-parte interim
H
+
I

-$
ALL CARGO MOVERS (I) PVT.LTD. v. DHANESH 279
_. ( BADARMAL JAIN [SINHA, J.]
relief on 1. 9.1998. Therefore, petition is dismissed, Rule is A
discharged and interim relief is vacated with no order as to costs.
16. Mr. P.H. Parekh, learned counsel appearing on behalf of the
respondents, has drawn our attention to several documents to show that
it had all along been contended by the first respondent that the appellant
B
was also guilty of violating the terms of the Bill of Lading.
~
17. We are of the opinion that the allegations made in the complaint
petition, even if given face value and taken to be correct in its entirety,
do not disclose an offence. For the said purpose, This Court may not
only take into consideration the admitted facts but it is also pennissible c
to look into the pleadings of the plaintiff-respondent No. I in the suit. No
allegation whatsoever was made against the appellants herein in the notice.
What was contended was negligen~e and/or breach of contract on the
pait of the l.'.arriers and their agent. Breach of contract simplicitor does
not constitute an offence. For the said purpose, allegations in the complaint D
petition must disclose the necessary ingredients therefor. Where a civil suit
_).
is pending and the complaint petition has been filed one year after filing
of the civil suit, we may for the purpose of finding out as to whether the
said allegations are prima facie cannot notice the correspondences
exchanged by the parties and other admitted documents. It is one thing E
to say that the Comt at this juncture would not consider the defence of
the accused but it is another thing to say that for exercising the inherent
jurisdiction of this Court, it is impermissible also to look to the admitted
documents. Criminal proceedings should not be encouraged, when it is
found to be mala fide or otherwise an abuse of the process of the Court. F
-< Superior Courts \Vhile exercising this power should also strive to serve
~ the ends ofjustice.
18. In G. Sagar Suri & Anr. v. State of UP. & Ors., [2000] 2
SCC 636, this Court opined :
G
"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 a civil nature, has been given a cloak of criminal
offence. Criminal proceedings are not a short cut of other remedies H
t
280 SUPREME COURT REPORTS [2007] 11 S.C.R.

A 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
B prevent abuse of the process of any court or otherwise to secure
the ends of justice.
19. Therein also, having regard to the fact that a criminal complaint
under Section 138 of the Negotiable Instruments Act had already been
pending, a criminal complaint under Section 406/420 was initiated which
C was found to be an abuse of the due process oflaw.
20. In Anil Mahajan V. Bhor Industries Ltd. & Anr., [2005] 10
SCC 228, this Court held :
"8. The substance of the complaint is to be seen. Mere use of the
D expression "cheating" in the complaint is of no consequence. Except
mention of the words "deceive" and "cheat" in the complaint filed
before the Magistrate and "cheating" in the complaint filed before
the police, there is no averment about the deceit, cheating or
fraudulent intention of the accused at the time of entering into MOU
E wherefrom it can be inferred that the accused had the intention to
deceive the complainant to pay. According to the complainant, a
sum of Rs.3,05,39,086 out of the total amount of Rs.3,38,62,860
was paid leaving balance ofRs.33,23,774. We need not go into
the question of the difference of the amounts mentioned in the
F complaint which is much more than what is mentioned in the notice
and also the defence of the accused and the stand taken in reply
to notice because the complainant's own case is that over rupees
three crores was paid and for balance, the accused was giving
reasons as above-noticed. The additional re~n for not going into
G these aspects is that a civil suit is pending inter se the parties for
the amounts in question."
21. In Hira Lal Hari Lal Bhagwati v. CBI, New Delhi, [2003] 5
SCC 257, this Court opined:
H "It is settled law, by a catena of decisions, that for establishing the
ALLCARGOMOVERS(I)PVT.LTD. v. DHANESH 281
BADARMALJAIN [SINHA,J.]
offence of cheating, the complainant is required to show that the A
accused had fraudulent or dishonest intention at the time of making
promise or representation. From his making failure to keep promise
subsequently, such a culpable intention right at the beginning that
is at the time when the promise was made cannot be presumed. It
is seen from the records that the exemption certificate contained B
necessary conditions which were required to be complied with after
importation of the machine. Since the GCS could not comply with
it, therefore, it rightly paid the necessary duties without taking
advantage of the exemption certificate. The conduct of the GCS
clearly indicates that there was no fraudulent or dishonest intention c
of either the GCS or the appellants in their capacities as office-
bearers right at the time of making application for exemption
. As there was absence of dishonest and fraudulent intention, the
question of commi_tting offence under Section 420 of the Indian
Penal Code does not arise." D
{See also Hira Lal Hari Lal Bhagwati v. CBI, New Delhi, [2005]
3 SCC 670 and Indian Oil Corporation v. NEPC India Ltd. & Ors.,
[2006] 6 sec 736}.
22. For the reasons aforementioned, the impugned judgment cannot E
be sustained. It is set aside accordingly. Appeal is allowed and the order
taking cognizance against the appellant is set aside.
RP. Appeal allowed.