Holding

Non‑supply of Form IX‑C under the Bihar Sales Tax Rules does not constitute a criminal offence and the complaint fails to show the requisite intention to deceive.

Summary

The appellant, an authorised dealer of Hindustan Lever Ltd, was alleged to have failed to furnish Form IX‑C required under the Bihar Sales Tax Rules to the purchaser, who filed a criminal complaint alleging offences under IPC sections 427, 384 and 420/34, claiming a malafide intention. A Judicial Magistrate took cognizance of the complaint and summons were issued; the High Court dismissed the appellant's application for quashing the proceedings. On appeal, the Supreme Court held that the non‑supply of Form IX‑C is a regulatory breach governed by the Bihar Sales Tax Act and Rules and does not, by itself, constitute a criminal offence. The Court further observed that the complaint did not disclose any representation or deception by the appellant that would satisfy the essential ingredients of cheating under IPC 420. Accordingly, the appropriate remedy for the failure to furnish the form is civil, under the sales‑tax statutes, not criminal prosecution. The appeal was allowed and the High Court order sustaining the criminal proceedings was set aside.

Issues considered

Whether the failure to furnish Form IX‑C under the Bihar Sales Tax Rules can give rise to a criminal offence under IPC sections 420, 384 and 427.
Whether the complaint establishes the requisite intention to deceive (mens rea) for an offence of cheating.
Whether the appropriate remedy for non‑issuance of Form IX‑C is civil under the Bihar Sales Tax Act and Rules rather than criminal prosecution.

Legislation cited

Code of Criminal Procedures. 482
Indian Penal Code, 1860s. 23, s. 24, s. 34, s. 384, s. 415, s. 420, s. 427

Subjects

Sales TaxForm IX-CCheatingIPC 420Criminal proceedingQuashing of proceedingsIntent to deceiveCivil remedy

Judgment

ANIL RITOLLA@ A.K. RITOLIA A
v.
STATE OF BIHAR & ANR.

SEPTEMBER 18, 2007

(S.B. SINHA AND HARJIT SINGH BEDI, JJ.J B

Penal Code, 1860-s. 420-Commercial transaction between ageflt of
company and Purchaser-Non-furnishing of Form IX-C under Sales Tax
Rules by the agent-Complaint by purchaser alleging malafide in non- C
furnishing of the Form-Criminal proceedings on the basis of complaint-
Application for quashing the proceedings dismissed by High Court-On
appeal, held: Non-supply of Form IX-C cannot give rise to any offence-If the
agent violated the provisions of Sales Tax Rules, the person could have
recourse thereunder-In the facts of the case, no case has been made out to
form an opinion that the agent had the requisite intention to deceive the D
purchaser-Bihar Sales Tax Rules.

.., Appellant was an authorized dealer of a Company. He was carrying on
commercial transaction with respondent No. 2. Second respondent filed a
complaint petition against the appellant alleging commission of offence u/s
427, 384 and 420/34 IPC as the appellant had not furnished him Form IX-C E
under Bihar Sales Tax Rules, with ma/a fide and dishonest intention; and
that appellant compelled him to continue the business for the year 1998-99
despite non-supply of Forum IX-C in the earlier years. Judicial Magistrate
found existence of prima facie case for taking cognizance u/s 420 IPC.
Summons were directed to be issued. An application u/s 482 Cr. P.C. for F
quashing the criminal proceedings was dismissed by High Court. Hence the
present appeal.

Allowing the appeal, the Court

HELD: 1. Payment of sales tax, is governed by the provisions of Bihar G
Sales Tax Act and Rules framed thereunder. Rule 14 of the Rules prescribes
procedure required to be taken in the even of non-receipt of Form IX-C. The
transactions between the parties were for supply of goods. Admittedly, and
except supply of Form IX-C other terms and conditions of the contract had
been complied by them. Per se, supply or non-supply of Form IX- C of the
1091 H
1092 SUPREME COURT REPORTS [2007] 9 S.C.R.

A Bihar Sales Tax Rules had nothing to do with the transactions for which the
parties had entered into a contract. Non-issuance of the said form ex-facie
cannot give rise to commission of any offence. If the appellant-agent or their
principal were obligated to act under a statute and failed to perform their
duties, as the statute itself provides for a remedy, ordinarily the same is
required to be taken recourse to.
B [Paras 7 and 10) f1094-F, G; 1095-G; 1096-A)

2. It is correct that an offence can be committed even if the parties had
entered into a commercial transaction. But it is equally well settled that the
allegations contained in the complaint petition must, prima facie, show
C inducement of the victim by the accused by making a representation. In a case
of this nature, no case has been made out to form an opinion that the appellant
had the requisite iittention. Till the financial year 1998-99 despite non-supply
of Form IX-C prescribed under the Bihar Sales Tax Rules, the complainant
raised no grievance. Only in the complainant petition, a purported statement
had been made that the appellant compelled him to continue the business for
D the year 1998-99 despite non-supply of Form IX-C in the earlier years. It is
not a case where the appellants can be said to have induced the respondent to
enter into a transaction so as to deceive them with a view to cause unlawful
losses to them and to make unlawful gain for themselves.
[Paras 10, 6 and 11) [1096-B, C, F; 1094-E, F)
E Indian Oil Corporation v. NEPC India Ltd & Ors., f2006J 6 SCC 736,
relied on.

CRIMINAL APPELLAT~ JURISDICTION: Criminal Appeal No. 1250 of
2007.

F From the Judgment and Order dated 4.12.2006 of the High Court of
Judicature at Patna in Criminal Misc. No. 13360 of2005.

Siddarth Luthra and Gaurav Agrawal for the Appellant.

S.B. Upadhyay, Mohit Kumar Shah, Gopal Singh, Shiv Mangal Sharma,
G funeet Parihar and Rajan Kumar for the Respondents.
The Judgment of the Court was delivered by

S.B. SINHA, J. I. Leave granted.

2. Parties hereto admittedly had been carrying on commercial transactions. ..._
H Appellant herein was an authorised dealer of Hindustan Lever Limited. ln
"r

ANIL RITOLLA@A.K. RITOLIA v. STATE [SINHA, J.) 1093
connection with the said business transactions, appellant allegedly was required A
to deliver to the second respondent Form IX-C prescribed in tenns of Bihar
Sales Tax Rules. The Second respondent herein filed a complaint petition
alleging commission of offence under Section 427, 384 and 420/34 of the
Indian Penal Code, inter alia, holding :

"That it is not out of place to mention here that the company at the B
time of agreement so took place between complainant and Hindustan
Levar got signed of the complainant over certain plain and printed
papers saying that there are the formality of the organization, w~ich
is required to be fulfilled as such if the company try to take any
advantage from the said papers the same would not be binding upon C
the complainant, as the complainant was not made aware from the
contents of the alleged documents and the signatures of the
complainant do not come within the definition of execution.
That as per the requirement <if the law stipulated by the rule 12 of sub-
rule (2) (sic) of Bihar Finance Act, 1981 it is the obligatory duty of the
selling dealer to furnish a declaration in writing to the purchasing D
dealer known as form IX-C obtained from prescribed authority for the
exemption of the sales tax over the tum over of the purchasing dealer.
xxx xxx xxx
That the conduct of the accused of this case put complainant in great E
inconvenience, mental agony and financial despair and caused damage
to his business reputation.

xxx xxx xxx
That the accused always kept proposal before the complainant to
continue business with the company and as the complainant refused F
to join with them after 1999 and as such the accused did not supply
the said form IX-C to the complainant only with the ma/a fide and
dishonest intention which caused damage to the complainant."

3. A Judicial Magistrate, Madhepura, upon examining the complaint on
oath and upon taking statements of the witnesses purported to have found G
existence of a prima facie case for taking cognizance under Section 420 of
the Indian Penal Code against the appellants herein. Summons were directed
to be issued. They filed an application for quashing of the said criminal
proceedings before the High Court of Judicature at Patna in terms of Section
482 of the Code of Criminal Procedure. By reason of the impugned judgment, H
1094 SUPREME COURT REPORTS [2007] 9 S.C.R.

A a learned Single Judge of the said Court dismissed the said petition opining:
-L.
"Admittedly, the petitioners were the carrying and forwarding agents
of the Company and in that capacity they perhaps were instrumental
in forwarding the articles to the complainant. They cannot escape
from the liability of undergoing criminal proceedings.
B So far as the Petitioners' contention on the dispute being a civil one
is concerned, I am unable to agree with the assertions since from the
facts made out a definite criminal liability is made out."
4. Mr. Siddarth Luthra, learned counsel appearing on behalf of the
appellant in support of this appeal, submitted that no case for issuance of
C summons had been made out even ifthe allegations contained in the complaint
petition are given their face value and taken to be correct in its entirety.

5. Mr. S.B. Upadhyay,.learned senior counsel appearing on behalf of the
second respondent, on the other hand, took us through the entire complaint
petition a!ld contended that from the statements contained in paragraph 14
D of the complaint petition, it is evident that the appellants herein had intention
to cause a wrongful loss to the complainant by practicing deceit within the
meaning of Sections 23, 24 and 415 of the Indian Penal Code. Strong reliance
in this behalf was placed on a decision of this Court in Rajesh Bajaj v. State
NCT of Delhi & Ors., [1999] 3 SCC 259.
E 6. It is not in dispute that the appellant is one of the Redistribution
Stockiest of Hindustan Lever Ltd. It is furthermore not in dispute that the
parties had been carrying on commercial transactions for a long time. Till the
financial year I 998-99 despite non-supply of Form IX-C prescribed under the
Bihar Sales Tax Rules, the complainant raised no grievance. Only in paragraph
p 14 of the complainant petition, a purported statement had been made that the
appellant compelled him to continue the business for the year 1998-99 despite
non-supply of Form IX-C in the earlier years.

7. Payment of sales tax, admittedly, is governed by the provisions of
Bihar Sales Tax Act and Rules framed thereunder. Rule 14 of the Rules
G prescribes procedure required to be taken in the event of non-receipt of Form
IX-C. It is not in dispute that a dealer who had not been supplied with the
prescribed form by the supplier may take recourse to the remedies provided
for under the Rules.

8. Section 23, 24 and 415 of the Indian Penal Code read as under :
H Section 23-Wrongful gain
,....
!

ANILRITOLLA@A.K. RITOLIA v. STATE [SINHA, J.) 1095
"Wrongful gain" is gain by unlawful means of property which the A
person gaining is not legally entitled.

"Wrongful Joss".--"Wrongful Joss" is the loss by unlawful means of
property to which the person losing it is legally entitled.

Gaining wrongfully, losing wrongfully.--A person is said to gain
wrongfully when such person retains wrongfully, as well as when B
such person acquires wrongfully. A person is said to Jose wrongfully
when such person is wrongfully kept out of any property, as well as
when such person is wrongfully deprived of property.

Section 24 - Dishonestly
Whoever does anything with the intention of causing wrongful gain
c
to one person or wrongful loss to another person, is said to do that
thing "dishonestly".

Section 415 - Cheating
Whoever, by deceiving any person, fraudulently or dishonestly induces D
the person so deceived to deliver any property to any person, or to
consent that any person shall retain any property, or intentionally
induces the person so deceived to do or omit to do anything which
he would not do or omit if he were not so deceived, and which act
or omission causes or is likely to cause damage or harm to that person E
in body, mind, reputation or property; is said to "cheat".

Explanation,--A dishonest concealment of facts is a deception within
the meaning of this section."

9. Ingredients of Section 420 of the Indian Penal Code are as under :

(i) Deception of any person;
F
(ii) Fraudulently or dishonestly inducing any person to deliver any
property; or
(iii) To consent that any person shall retain any property and finally
intentionally inducing that person to do or omit to do anything G
which he would not do or omit.
I 0. The transactions between the parties were for supply of goods.
Admittedly, ___ and except supply of Form IX-C other terms and
conditions of the contract had been complied with by them. Per se, supply
or non-supply of Form IX-C of the Bihar Sales Tax Rules had nothing to do H
~I

1096 SUPREME COURT REPORTS [2007) 9 S.C.R.

A with the transactions for which the parties had entered into a contract. Non-
issuance of the said fonn ex-facie cannot give rise to commission of any
offence. If the appellant or their principal were obligated to act under a statute
and failed to perfonn their duties as indicated hereinbefore, as the statute
itself provides for a remedy, ordinarily the same is required to be taken
B recourse to. In any event, the second Respondent could have filed a suit for
damages.,

There cannot be any doubt or dispute whatsoever that an offence can
be committed even if the parties had entered into a commercial transaction.
In Rajesh Bajaj (supra) this Court held so. But it is equally well settled that
C the allegations contained in the complaint petition must, prima facie, show
inducement of the victim by the accused by making a representation. In a case
of this nature, we are of the opinion that no case has been made out to fonn
an opinion that the appellant had the requisite intention.

11. The question came up for consideration before this Court recently
D in Indian Oil Corporation v. NEPC Indian Ltd & Ors., [2006) 6 SCC 736
wherein, upon consideration of a large number of decisions, it was held :

"The essential ingredients of the offence of "cheating" are : (i)
deception of a person either by making a false or misleading
representation or by other action or omission, (ii) fraudulent or
dishonest inducement of that person to either deliver any property or
E to consent to the retention thereof by any person or to intentionally
induce that person to do or omit to do anything which he would not
do or omit if he were not so deceived and which act or omission
causes or is likely to cause damage or hann to that person in body,
mind, reputation or property."
F It is not a case where the appellants can be said to have induced the
respondent to enter into a transaction so as to deceive them with a view to
cause unlawful losses to them and to make unlawful gain for themselves.

12. For the reasons aforementioned, in our opinion, the High Court has
committed an error in not interfering with the order of the learned Magistrate
G taking cognizance of the offence. The impugned judgment cannot be sustained.
It is set aside accordingly. The appeal is allowed. However, in the facts and
circumstances of the case, there shall be no order as to costs.

KK.T. Appeal allowed.