M N G BHARATEESH REDDYversusRAMESH RANGANATHAN AND ANOTHER

                       [2022] 6 S.C.R. 1097                            1097


                 M N G BHARATEESH REDDY                                A
                                 v.
          RAMESH RANGANATHAN AND ANOTHER
                 (Criminal Appeal No 1273 of 2022)
                        AUGUST 18, 2022                                B
        [DR DHANANJAYA Y CHANDRACHUD AND
                 A S BOPANNA, JJ.]
       Penal Code, 1860: ss. 120A, 405, 415, 420, 499, 500 – In
the instant case the first respondent was employed as a Consultant
                                                                       C
Neurosurgeon by BGS Apollo Hospital – Consultancy Agreement
was entered into between the first respondent and the hospital
containing his terms of engagement – One of the terms of the
engagement was that either party may terminate the agreement, with
or without cause, by giving a prior notice of thirty days –
Differences arose between the first respondent and the management      D
of the hospital – First respondent wrote a letter to the General
Manager of the hospital alleging that patients referred to him were
being diverted to other doctors of the hospital at the enquiry/
reception counter – The services of the first respondent were
terminated on 30 May 2014 for inconsistent and unsatisfactory
                                                                       E
behavior in terms of the Consultancy Agreement – Aggrieved first
respondent furnished a representation on 31 May 2014 to the
Managing Director of hospital highlighting gross irregularities in
the billing of patients and he also alleged that the General Manager
had been threatening and maligning him – Thereafter first respondent
filed a complaint before Judicial Magistrate – In his complaint, he    F
alleged that the General Manager misused his authority and
terminated his services with an oblique and ulterior motive of
defaming him – Magistrate took cognizance under ss.120A, 405,
415, 420, 499, and 500 of IPC – Sessions Judge set aside the order
of the Magistrate on the ground that the complaint did not disclose
                                                                       G
the ingredients of the offences of defamation or cheating and that
the Magistrate was not competent to take cognizance of the offence
punishable under s.420 of the IPC – High Court held that no case
was made out against the General Manager under ss.499 and 500
of the IPC however, there were material on record which prima facie
disclosed the offences u/ss.405 and 420 of the IPC – Hence instant     H
                                 1097
1098            SUPREME COURT REPORTS                        [2022] 6 S.C.R.


 A     appeal – Held: The grievance of the first respondent arose from the
       termination of his services at the hospital and the allegations
       indicated that there was an improper billing in respect of the surgical
       services which were rendered by the complainant at the hospital
       which at the most indicated a breach of terms of the Consultancy
       Agreement by the General Manager, which was essentially in the
 B
       nature of a civil dispute – There was no allegation that the
       complainant was as a consequence induced to deliver any property
       or to consent that any person shall retain any property or that he
       was deceived to do or omit to do anything which he would have not
       done or omitted to do if he was not so deceived – None of the
 C     ingredients of the offence of criminal breach of trust were
       demonstrated on the allegations in the complaint as they stand –
       First respondent alleged that the General Manager caused breach
       of trust by issuing grossly irregular bills, which adversely affected
       his professional fees but an alleged breach of the contractual terms
       does not ipso facto constitute the offence of the criminal breach of
 D
       trust without there being a clear case of entrustment – No element
       of entrustment was prima facie established based on the facts and
       circumstances of the instant matter.
            Penal Code, 1860: s.405 and s.415 – Essential ingredients –
       Discussed.
 E
             Allowing the appeal, the Court held
             HELD: 1. The ingredients of the offence under Section 415
       emerge from a textual reading. Firstly, to constitute cheating, a
       person must deceive another. Secondly, by doing so the former
 F     must induce the person so deceived to (i) deliver any property to
       any person; or (ii) to consent that any person shall retain any
       property; or (iii) intentionally induce 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 such an act or omission must cause or
       be likely to cause damage or harm to that person in body, mind,
 G     reputation or property. Section 420 deals with cheating and
       dishonestly inducing delivery of property. The ingredients of
       Sections 415 and 420 are not made out in the present case. The
       grievance of the first respondent arises from the termination of
       his services at the hospital. The allegations indicate that there
 H     was an improper billing in respect of the surgical services which
 M N G BHARATEESH REDDY v. RAMESH RANGANATHAN                          1099
                 AND ANOTHER

were rendered by the complainant at the hospital. At the most,         A
the allegations allude to a breach of terms of the Consultancy
Agreement by the Appellant, which is essentially in the nature of
a civil dispute.[Paras 14, 15 and 18][1103-D-F; 1105-E-F]
       2. The allegations in the complaint are conspicuous by the
absence of any reference to the practice of any deception or           B
dishonest intention on behalf of the Appellant. Likewise, there is
no allegation that the complainant was as a consequence induced
to deliver any property or to consent that any person shall retain
any property or that he was deceived to do or omit to do anything
which he would have not done or omitted to do if he was not so
deceived. The conspicuous aspect of the complaint which needs          C
to be emphasized is that the ingredients of the offence of cheating
are absent in the averments as they stand. [Para 19][1105-F-H]
      3. Section 405 of the IPC deals with criminal breach of trust.
The offence of criminal breach of trust contains two ingredients:(i)
entrusting any person with property, or with any dominion over         D
property; and (ii) the person entrusted dishonestly
misappropriates or converts to his own use that property to the
detriment of the person who entrusted it. None of the ingredients
of the offence of criminal breach of trust have been demonstrated
on the allegations in the complaint as they stand. The first           E
respondent alleges that the Appellant caused breach of trust by
issuing grossly irregular bills, which adversely affected his
professional fees. However, an alleged breach of the contractual
terms does not ipso facto constitute the offence of the criminal
breach of trust without there being a clear case of entrustment.
No element of entrustment has been prima facie established             F
based on the facts and circumstances of the present matter.
Therefore, the ingredients of the offence of criminal breach of
trust are ex facie not made out on the basis of the complaint as it
stands. There is a patent error on the part of the High Court in
setting aside the judgment of the Additional Sessions Judge and        G
by holding that cognizance was correctly taken of the offence
punishable under Sections 405, 415, and 420 of the IPC. [Paras
20, 23, 24][1106-A-D; 1107-B-D]


                                                                       H
1100                SUPREME COURT REPORTS                      [2022] 6 S.C.R.


 A              Hridaya Ranjan Prasad Verma v. State of Bihar (2000)
                4 SCC 168 : [2000] 2 SCR 859; Dalip Kaur v. Jagnar
                Singh (2009) 14 SCC 696 : [2009] 10 SCR 264; Anwar
                Chand Sab Nanadikar v. State of Karnataka (2003) 10
                SCC 521; Kumar Ghai v. State of West Bengal (2022)
                7 SCC 124 – relied on.
 B
                                Case Law Reference
       [2000] 2 SCR 859                     relied on               Para 16
       [2009] 10 SCR 264                    relied on               Para 17

 C     (2003) 10 SCC 521                    relied on               Para 21
       (2022) 7 SCC 124                     relied on               Para 22
             CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
       1273 of 2022.
             From the Judgment and Orders dated 12.07.2019 of the High
 D
       Court of Karnataka at Bengaluru in Criminal Petition No.543 of 2016.
            Manan Kumar Mishra, Sr. Adv., H. Chandra Sekhar, Ms. Rekha
       Chandrasekhar, Ms. Anjul Dwivedi, Dr. Ram Sankar, Ms. Sujatha
       Bagadhi, A. Leo Gorge Rozorio, Ms. P. Nirmala, Advs. for the Appellant.
 E              Ms. Radhika Gautam, Adv. for the Respondents.
                The Judgment of the Court was delivered by
                DR DHANANJAYA Y CHANDRACHUD, J.
                1. Leave granted.
 F           2. This appeal arises from a judgment dated 12 July 2019 of a
       Single Judge of the High Court of Karnataka.
             3. The first respondent was employed by BGS Apollo Hospital,
       Mysore, the second respondent1, as a Consultant Neurosurgeon on a
       monthly guaranteed fee of Rs. 50,000. He worked in that capacity from
 G     March 2004 until June 2014. A contract, styled as a Consultancy
       Agreement was entered into between the first respondent and the hospital
       on 1 April 2013 containing his terms of engagement. One of the terms of
       the engagement was that either party may terminate the agreement,
       with or without cause, by giving a prior notice of thirty days. On 3 June
       1
 H         “hospital”
    M N G BHARATEESH REDDY v. RAMESH RANGANATHAN                                1101
    AND ANOTHER [DR DHANANJAYA Y CHANDRACHUD, J.]

2013, the management of the hospital enhanced the emoluments of the             A
first respondent by assuring him a guaranteed monthly fee of Rs 4,25,000.
       4. Thereafter, differences arose between the first respondent and
the management of the hospital. The first respondent wrote a letter dated
9 January 2014 to the Appellant alleging that patients referred to him
were being diverted to other doctors of the hospital at the enquiry and         B
reception counter. Through the said letter, he also requested the Appellant
to take action against the erring staff members. The services of the first
respondent were terminated on 30 May 2014 for inconsistent and
unsatisfactory behavior in terms of the Consultancy Agreement.
Aggrieved by his termination, the first respondent furnished a
representation on 31 May 2014 to the Managing Director, Apollo Group            C
of Medical Sciences highlighting gross irregularities in the billing of
patients. In this representation, he also alleged that the Appellant had
been threatening and maligning him. On 2 June 2014, the first respondent
wrote a letter to Director of Medical Services of the hospital requesting
permission to treat patients till 30 June 2014, the end of his notice period.   D
       5. On 10 October 2014, the first respondent filed a complaint
under Section 200 of the Code of Criminal Procedure 1973, being PCR
No 2536 of 2014, before the First Additional Civil Judge (Junior Division)
and Judicial Magistrate First Class, Mysore2. In his complaint, the first
respondent alleged that the Appellant misused his authority and terminated      E
his services with an oblique and ulterior motive of defaming him. The
JMFC by an order dated 3 March 2015 took cognizance under Sections
120A, 405, 415, 420, 499, and 500 of the Indian Penal Code 3. The order
of the JMFC was challenged in revision under Section 397, Code of
Criminal Procedure 1973 before the IVth Additional Sessions Judge,
Mysore.                                                                         F

       6. The Additional Sessions Judge by an order dated 16 December
2015 set aside the order of the JMFC on the ground that the complaint
did not disclose the ingredients of the offences of defamation or cheating.
Moreover, the Additional Sessions Judge held that the JMFC was not
competent to take cognizance of the offence punishable under Section            G
420 of the IPC.


2
    “JMFC”
3
    “IPC”                                                                       H
1102             SUPREME COURT REPORTS                           [2022] 6 S.C.R.


 A            7. The order of the Additional Sessions Judge was called into
       question by the first Respondent before the High Court of Karnataka.
       The Single Judge by the impugned judgment dated 12 July 2019 held that
       no case was made out against the Appellant under sections 499 and 500
       of the IPC. However, the Court held that the material placed on record
       prima facie disclosed ingredients of offences under sections 405 and
 B
       420 of the IPC.
             8. Notice was issued in these proceedings on 25 October 2019 in
       pursuance of which the first Respondent has appeared.
             9. We have heard Mr Manan Kumar Misra, senior counsel for
 C     the Appellant and Ms Radhika Gautam, counsel for the first respondent,
       who is the contesting party.
              10. The issue which presents itself for determination in these
       proceedings is whether the ingredients of the offences of cheating and
       criminal breach of trust have been made out on the face of the complaint.
 D     Following the well settled principle of law, the contents of the complaint
       would have to be read in order to deduce as to whether the ingredients
       of the offence have been duly established.
             11. The complaint filed by the first respondent on 10 October
       2014 contains a narration of his engagement by the hospital as a Consultant
 E     Neurosurgeon pursuant to an offer dated 16 January 2004 and of his
       having worked between March 2004 to June 2014 by establishing the
       Department of Neurosurgery.
              12. Paragraph 6 of the complaint contains a recital that as a result
       of the incompetence of the billing staff in the hospital, the fees which
 F     were to be charged for the first respondent were wrongly billed and
       drastically reduced. The complaint states that he drew this to the attention
       of the Chief Operating Officer in October 2011 and thereafter to the
       Appellant who had recently joined as the General Manager of the hospital.
       The complainant alleges that he had sustained a loss on the receipt of his
       professional fees and was verbally assured by the Appellant that the
 G     hospital would reimburse the fees after a thorough enquiry. Further, there
       are bald averments in the complaint that the complainant was targeted
       by the Appellant “along with his henchmen”. The complaint refers to
       certain bills which were raised by the hospital on 28 April 2013 and 4
       November 2013 wrongly showing the surgery charges at Rs 1 and Rs 2.
       The complainant states that he was removed from the duty roster
 H
    M N G BHARATEESH REDDY v. RAMESH RANGANATHAN                                 1103
    AND ANOTHER [DR DHANANJAYA Y CHANDRACHUD, J.]

between 17 May and 31 May 2014 and that he was eventually removed                A
from the service of the hospital.
      13. The ingredients of the offence of cheating are spelt out in
Section 415 of the IPC. Section 415 is extracted below:
         “415. Cheating — Whoever, by deceiving any person, fraudulently
         or dishonestly induces the person so deceived to deliver any            B
         property to any person, or to consent that any person shall retain
         any property, or intentionally induces the person so deceived to do
         or omit to do anything which he would not do or omit if he were
         not so deceived, and which act or omission causes or is likely to
         cause damage or harm to that person in body, mind, reputation or        C
         property, is said to “cheat”.
         Explanation — A dishonest concealment of facts is a deception
         within the meaning of this section.”
       14. The ingredients of the offence under Section 415 emerge from
a textual reading. Firstly, to constitute cheating, a person must deceive        D
another. Secondly, by doing so the former must induce the person so
deceived to (i) deliver any property to any person; or (ii) to consent that
any person shall retain any property; or (iii) intentionally induce 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 such an act or omission must cause or be          E
likely to cause damage or harm to that person in body, mind, reputation
or property.
      15. Section 420 deals with cheating and dishonestly inducing
delivery of property. It reads as follows:
         “420. Cheating and dishonestly inducing delivery of                     F
         property – Whoever cheats and thereby dishonestly induces the
         person deceived to deliver any property to any person, or to make,
         alter or destroy the whole or any part of a valuable security, or
         anything which is signed or sealed, and which is capable of being
         capable of converting into a valuable security, shall be punished
                                                                                 G
         with imprisonment of either description for a term which may
         extend to seven years, and shall also be liable to fine.”
      16. In Hridaya Ranjan Prasad Verma v. State of Bihar4, a
two-judge bench of this Court interpreted sections 415 and 420 of IPC
4
    (2000) 4 SCC 168                                                             H
1104               SUPREME COURT REPORTS                            [2022] 6 S.C.R.


 A     to hold that fraudulent or dishonest intention is a precondition to constitute
       the offence of cheating. The relevant extract from the judgment reads
       thus:
                “14. On a reading of the section it is manifest that in the definition
                there are set forth two separate classes of acts which the person
 B              deceived may be induced to do. In the first place he may be induced
                fraudulently or dishonestly to deliver any property to any person.
                The second class of acts set forth in the section is the doing or
                omitting to do anything which the person deceived would not do
                or omit to do if he were not so deceived. In the first class of cases
                the inducing must be fraudulent or dishonest. In the second class
 C              of acts, the inducing must be intentional but not fraudulent or
                dishonest.
                15. In determining the question it has to be kept in mind that the
                distinction between mere breach of contract and the offence of
                cheating is a fine one. It depends upon the intention of the accused
 D              at the time of inducement which may be judged by his subsequent
                conduct but for this subsequent conduct is not the sole test. Mere
                breach of contract cannot give rise to criminal prosecution
                for cheating unless fraudulent or dishonest intention is
                shown right at the beginning of the transaction, that is the
 E              time when the offence is said to have been committed.
                Therefore it is the intention which is the gist of the offence.
                To hold a person guilty of cheating it is necessary to show
                that he had fraudulent or dishonest intention at the time of
                making the promise. From his mere failure to keep up
                promise subsequently such a culpable intention right at the
 F              beginning, that is, when he made the promise cannot be
                presumed.”
                                                                (emphasis supplied)
                                                       5
             17. In Dalip Kaur v. Jagnar Singh a two-judge bench of this
 G     Court held that a dispute arising out of a breach of contract would not
       amount to an offence of cheating under section 415 and 420. The relevant
       extract is as follows:
                “9. The ingredients of Section 420 of the Penal Code are:

       5
 H         (2009) 14 SCC 696
 M N G BHARATEESH REDDY v. RAMESH RANGANATHAN                                  1105
 AND ANOTHER [DR DHANANJAYA Y CHANDRACHUD, J.]

      “(i) Deception of any persons;                                           A
      (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 which
      he would not do or omit.”                                                B

      10. The High Court, therefore, should have posed a question as to
      whether any act of inducement on the part of the appellant has
      been raised by the second respondent and whether the appellant
      had an intention to cheat him from the very inception. If the
      dispute between the parties was essentially a civil dispute              C
      resulting from a breach of contract on the part of the
      appellants by non-refunding the amount of advance the same
      would not constitute an offence of cheating. Similar is the
      legal position in respect of an offence of criminal breach of
      trust having regard to its definition contained in Section               D
      405 of the Penal Code. (See Ajay Mitra v. State of M.P. [(2003)
      3 SCC 11 : 2003 SCC (Cri) 703])”
                                                      (emphasis supplied)
      18. Applying the above principles, the ingredients of Sections 415
and 420 are not made out in the present case. The grievance of the first       E
respondent arises from the termination of his services at the hospital.
The allegations indicate that there was an improper billing in respect of
the surgical services which were rendered by the complainant at the
hospital. At the most, the allegations allude to a breach of terms of the
Consultancy Agreement by the Appellant, which is essentially in the            F
nature of a civil dispute.
       19. The allegations in the complaint are conspicuous by the
absence of any reference to the practice of any deception or dishonest
intention on behalf of the Appellant. Likewise, there is no allegation that
the complainant was as a consequence induced to deliver any property
                                                                               G
or to consent that any person shall retain any property or that he was
deceived to do or omit to do anything which he would have not done or
omitted to do if he was not so deceived. The conspicuous aspect of the
complaint which needs to be emphasized is that the ingredients of the
offence of cheating are absent in the averments as they stand.
                                                                               H
1106               SUPREME COURT REPORTS                          [2022] 6 S.C.R.


 A           20. Section 405 of the IPC deals with criminal breach of trust and
       reads as follows:
                “405. Criminal breach of trust – Whoever, being in any manner
                entrusted with property, or with any dominion over property,
                dishonestly misappropriates or converts to his own use that
 B              property, or dishonestly uses or disposes of that property in any
                direction of law prescribing the mode in which such trust is to be
                discharged, or of any legal contract, express or implied, which he
                has made touching the discharge of such trust, or willfully suffers
                any other person so to do, commits “criminal breach of trust”.”
 C             The offence of criminal breach of trust contains two ingredients:
       (i) entrusting any person with property, or with any dominion over property;
       and (ii) the person entrusted dishonestly misappropriates or converts to
       his own use that property to the detriment of the person who entrusted
       it.

 D           21. In Anwar Chand Sab Nanadikar v. State of Karnataka6 a
       two-judge bench restated the essential ingredients of the offence of
       criminal breach of trust in the following words:
                “7. The basic requirement to bring home the accusations under
                Section 405 are the requirements to prove conjointly (1)
 E              entrustment, and (2) whether the accused was actuated by the
                dishonest intention or not misappropriated it or converted it to his
                own use to the detriment of the persons who entrusted it. As the
                question of intention is not a matter of direct proof, certain broad
                tests are envisaged which would generally afford useful guidance
                in deciding whether in a particular case the accused had mens
 F              rea for the crime.”
             22. In Vijay Kumar Ghai v. State of West Bengal7 another
       two-judge bench held that entrustment of property is pivotal to constitute
       an offence under section 405 of the IPC. The relevant extract reads as
       follows:
 G
                “28. ”Entrustment” of property under Section 405 of the Penal
                Code, 1860 is pivotal to constitute an offence under this. The
                words used are, “in any manner entrusted with property”. So, it

       6
           (2003) 10 SCC 521
       7
 H         (2022) 7 SCC 124
 M N G BHARATEESH REDDY v. RAMESH RANGANATHAN                                   1107
 AND ANOTHER [DR DHANANJAYA Y CHANDRACHUD, J.]

       extends to entrustments of all kinds whether to clerks, servants,        A
       business partners or other persons, provided they are holding a
       position of “trust”. A person who dishonestly misappropriates
       property entrusted to them contrary to the terms of an obligation
       imposed is liable for a criminal breach of trust and is punished
       under Section 406 of the Penal Code.”
                                                                                B
       23. None of the ingredients of the offence of criminal breach of
trust have been demonstrated on the allegations in the complaint as they
stand. The first respondent alleges that the Appellant caused breach of
trust by issuing grossly irregular bills, which adversely affected his
professional fees. However, an alleged breach of the contractual terms
does not ipso facto constitute the offence of the criminal breach of trust      C
without there being a clear case of entrustment. No element of
entrustment has been prima facie established based on the facts and
circumstances of the present matter. Therefore, the ingredients of the
offence of criminal breach of trust are ex facie not made out on the
basis of the complaint as it stands.                                            D
       24. In the above view of the matter, there is a patent error on the
part of the High Court in setting aside the judgment of the Additional
Sessions Judge and by holding that cognizance was correctly taken of
the offence punishable under Sections 405, 415, and 420 of the IPC.
     25. We accordingly allow the appeal and set aside the impugned             E
judgment and order of the High Court dated 12 July 2019.
      26. The order of the IVth Additional Sessions Judge dated 15
December 2015 in Criminal Revision Petition No 94 of 2015 shall
accordingly stand restored, for the reasons which have been indicated
above.                                                                          F
       27. Pending applications, if any, stand disposed of.


Devika Gujral                                                 Appeal allowed.
                                                                                G




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