Holding

The allegations in the complaints are sufficient to constitute offences under Sections 415 and 425 IPC, and the High Court was not justified in quashing those complaints.

Summary

Indian Oil Corporation (IOC) entered into fuel supply contracts with NEPC India Ltd. and its sister company, securing the dues by hypothecating two aircraft. After NEPC defaulted, IOC obtained injunctions and later filed criminal complaints alleging theft, cheating, criminal breach of trust and mischief for the removal of engines and parts from the hypothecated aircraft. The respondents sought quashing of the complaints under Section 482 CrPC, arguing that the matters were purely civil and that the allegations did not constitute offences under Sections 378, 403, 405, 415 or 425 IPC. The Supreme Court held that the existence of civil remedies does not bar criminal proceedings and that, on a face‑value reading, the complaints disclose the offences of cheating (s.415) and mischief (s.425). Consequently, the High Court’s order quashing the complaints in their entirety was set aside in part. The appeals were partly allowed and the criminal proceedings under s.415 and s.425 were directed to continue.

Issues considered

Whether the availability or availing of civil remedies bars the institution of criminal proceedings under Section 200 CrPC.
Whether the allegations in the complaints, taken at face value, constitute offences under IPC Sections 378, 403, 405, 415 and 425.
Whether the High Court was justified in exercising its power under Section 482 CrPC to quash the complaints.

Legislation cited

Code of Criminal Procedure, 1973s. 200, s. 250, s. 482
Indian Penal Code, 1860s. 378, s. 403, s. 405, s. 415, s. 425

Subjects

breach of contractcriminal complaintSection 482 CrPChypothecationcheatingmischiefcriminal breach of trustdual remedycivil remedyIndian Oil CorporationNEPC India

Judgment

A MIS INDIAN OIL CORPORATION
v.
M/S NEPC INDIA LTD. AND ORS.

JULY 20, 2006

B [H.K. SEMA AND R.V. RA VEENDRAN, JJ.]

Code of Criminal Procedure, 1973:

Sections 482 and 200-Disputes arising from breach of contract-
C Existence or availment of civil remedy-Permissibility of simultaneous or
subsequent recourse to remedies under criminal law-Permissibility of-Held:
When civil remedies are available in law and the party had taken recourse
to such remedies, remedy under criminal law is not barred nor the party
estopped from seeking such remedy-Criminal proceedings should not be
D quashed in view of the pendency of civil proceedings-Teo·t is not whether
civil remedy is availed or available, bur whether the allegations in complaint
disclose criminal offence or not.

Section 482-Quashing of complaints and criminal proceedings-
Exercise of jurisdiction--General principles-Stated..
E
Penal Code, 1860: Sections 378, 403, 405, 415 and 425-Dispute
arising from breach of contract-Debtor hypothecating aircrafts in favour of
creditor for securing payment towards Juel supplied to it-Failure to pay
amounts towards fuel-Civil suit for recovery of amount-On the allegation
that debtor removed parts of hypothecated aircrafts, complaint under sections
F 378, 403, 405, 415 and 425-Sustainability of-Held: Allegations in the
complaint sufficient to constitute offences under sections 415 and 425-No
case made out under sections 378, 403 and 405-Thus, order of High Court
quashing the complaint under sections 415 and 425 set aside-Code of
Criminal Procedure, 1973-Sections 482 and 200.
G Judicial deprecation: Civil disputes and claims not involving any
criminal offe11ce-Effort to settle under criminal law-Held: In such cases
criminal prosecution should be deprecated.

Appellant-Indian Oil Corporation entered into a contract with first

H 704
INDIAN OIL CORPORATION v. NEPC INDIA LTD. 705

respondent and its sister company for supply of aviation turbine fuel and A
lubricants. Respondent hypothecated its aircrafts to the appellant to secure
the outstanding amounts under the Hypothecation deed towards payment of
fuel supplied to it. Respondent failed to pay the installments as per the
schedule and also as per the revised payment schedule. However subsequently
appellant resumed supply of aircraft fuel on cash and carry basis.
Apprehending that the respondent may remove hypothecated aircrafts B
appellants sought injunctive reliefs to restrain the respondent from removing
the aircraft. Thereafter, on finding that the respondents had removed engines
and certain other parts from the two hypothecated aircrafts, appellant filed
the complaints against the first respondent and its directors under section
200 Cr.P.C and sections 378, 403, 405, 415 and 425 IPC. Respondents filed C
petition under section 482 Cr.P.C. for quashing the complaints contending
(I) that the complaints related to purely contractual disputes of a civil nature
in respect of which appellant had already sought injunctive reliefs and money
decrees; and that (II) the allegations in the complaints did not constitute any
criminal offence under sections 378, 403, 405, HS and 425 IPC. High Court
quashed the complaints accepting the second ground but rejected the first D
ground. Hence the present appeals.

Partly allowing the appeals, the Court

HELD: The allegations in the complaint are sufficient to constitute
offences under sections 415 and 425 oflPC. High Court was not justified in E
quashing the complaints/criminal proceedings in entirety. Thus, the order of
High Court insofar it quashes the complaint under sections 415 and 425 IPC
is set aside. 1728-A-B]

2. Complaints can be quashed in exercise of power under s.482 Cr.P.C. F
in the following circumstance:

(i) A complaint can be quashed where the allegations made in the
complaint, even if they are taken at their face value and accepted in their
entirety, do not primafacie constitute any offence or make out the case alleged
against the accused. For this purpose, the complaint has to be examined as a G
whole, but without examining the merits of the allegations. Neither a detailed
inquiry nor a meticulous analysis of the material nor an assessment of the
reliability or genuineness of the allegations in the complaint is warranted
while examining prayer for quashing of a complaint. 1714-C-F]

(ii) A complaint may also be quashed where it is a clear abuse of the H
706 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A process of the court, as when the criminal proceeding is found to have been
initiated with ma/ufides/malice for wreaking vengeance or to cause harm, or
where the allegations are absurd and inherently improbable. However, the
power to quash shall not, be used to stifle or scuttle a legitimate prosecution.
The power should be used sparingly and with abundant caution. [714-E-G]

B (iii) The complaint is not required to verbatim reproduce the legal
ingredients of the offence alleged. If the necessary factual foundation is laid
in the complaint, merely on the ground that a few ingredients have not been
stated in detail, the proceedings should not be quashed. Quashing of the
complaint is warranted only where the complaint is so bereft of even the basic
C facts which are absolutely necessary for making out the offence. (714-F-H]

(iv) A given set of facts may make out purely a civil wrong, or purely a
criminal offence or a civil wrong as also a criminal offence. A commercial
transaction or a contractual dispute, apart from furnishing a cause of action
for seeking remedy in civil law, may also involve a criminal offence. As the
D nature and scope of a civil proceedings are different from a criminal
proceeding, mere fact that the complaint relates to a commercial transaction
or breach of contract, for which a civil remedy is available or has been availed,
is not by itself a ground to quash the criminal proceedings. Test is whether
the allegations in the complaint disclose a criminal offence or not. [715-A-C]

E Madhavrao Jiwaji Rao Scindia v. Sambhajirao Chandrojirao Angre,
(1988] l SCC 692; State of Haryana v. Bhajanlal, [1992[ Supp 1 SCC 335;
Rupan Deal Bajaj v. Kanwar Pal Singh Gill, [1995[ 6 SCC 194; Central
Bureau of Investigation v. Duncans Agro Industries Ltd, [1996] 5 SCC 591;
State of Bihar.v. Rajendra Agrawal/a, [1996[ 8 SCC 164; Rajesh Bajaj v. State
F NCT of Delhi, [1999] 3 SCC 259; Medchl Chemicals & Pharma (P) Ltd. v.
Biological E. Ltd, [2000] 3 SCC 269; Hridaya Ranjan Prasad Verma v. State
of Bihar, [2000] 4 SCC 168; M. Krishnan v. Vijay Kumar, [2001] 8 SCC 645
and Zandu Phamaceutical Works ltd. v. Mohd. Sharafi1l Haque, [2005] 1 SCC
122, relied on.

G 3. Any effort to settle civil disputes and claims, which do not involve
any criminal offence, by applying pressure through criminal prosecution
should be deprecated and discouraged. While no one with a legitimate cause
or grievanc~ should be prevented from seeking remedies available in criminal
law, a complainant who initiates or persists with a prosecution, being fully
aware that the criminal proceedings an;.unwarranted and his remedy lies
H
INDIAN OIL CORPORATION v. NEPC INDIA LTD. 707

only in civil law, should himself be made accountable, at the end of such A
misconceived criminal proceedings, in accordance with law. One positive step
that can be taken by the courts, to curb unnecessary prosecutions and
harassment of innocent parties, is to exercise their power under section 250
Cr.P.C. more frequently, where they discern malice or frivolousness or ulterior
motives on the part of the complainant. (715-D-E; G-H; 716-A(
B
G. Sagar Suri v. State of UP, (2000( 2 SCC 636, relied on.

4. Appellant-IOC has initiated several civil proceedings to safeguard
its interests and recover the amounts due. The acts of IOC show that civil
remedies were and are available in law and IOC has taken recourse to such
remedies. But it does not follow therefrom that criminal law remedy is barred C
or IOC is estopped from seeking such remedy. The fact that respondents have
stated that they had no intention to cheat or dishonestly divert or
misappropriate the hypothecated aircraft or any parts thereof. Such defences
are not grounds for quashing the complaint at the threshold.
(716-C-E; 716-Hj D
5. The averments in the complaint clearly show that neither the
aircrafts nor their engines were ever in the possession of IOC. They were in
the possession of first respondent-NEPC India at all relevant times. The
question of NEPC committing theft of something in its own possession does
not arise. Further, with regard to the offence of dishonest misappropriation E
of property under section 403, when NEPC owns/possesses the aircraft, it
obviously cannot 'misappropriate or convert to its own use' such aircraft or
parts thereof. Therefore, sections 378 and 403 IPC are not attracted.
(717-D-E; 717-H; 718-Aj
F
6.1. Possession of the aircraft, neither actual nor symbolic, was delivered
to IOC. NEPC was entitled to use the aircraft and maintain it in good state of
repairs. IOC was given the right to take possession of the hypothecated
aircrafts only in the event of any default as mentioned in the Hypothecation
Deed. It is not the case of the IOC that it took possession of the aircraft in
exercise of the right vested in it under the Deed of Hypothecation. Thus, as G
the possession of the aircraft remained all along with NEPC in its capacity
as the owner and the Deed of Hypothecation merely created a charge over the
aircrafts with a right to take possession in the event of default, there was
neither entrus~ment of the aircrafts nor entrustment of the dominion over

H
708 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A the aircrafts by IOC to NEPC. [722-A-DI

6.2. Duncan Agro 's* case specifically holds that when goods are
hypothecated, the owner does not hold the goods in trust for the creditor which
are contrary to the submission of the appellant. A charge over the hypothecated
goods in favour of the creditor, cannot be said to create a beneficial interest
B in the creditor, until and unless the creditor in exercise of his rights under
the deed, takes possession. The term 'beneficial interest' has a specific
meaning and connotation. When a trust is created vesting a property in the
trustee, the right of the beneficiary against the trustee (who is the owner of
the trust property) is known as the 'beneficial interest'. The trustee has the
power of management and the beneficiary has the right of enjoyment.
C Whenever there is a breach of any duty imposed on the trustee with reference
to the trust property or the beneficiary, he commits a breach of trust. On the
other hand, when the owner of a goods hypothecates a movable property in
favour of a creditor, no 'beneficial interest' is created in favour of the creditor
nor does the owner become a trustee in regard to the property hypothecated.
D The right of the creditor under a deed of hypothecation is the right to enforce
the charge created under the deed of hypothecation in the manner specified
in the deed and by no stretch of imagination can such right be equated to a
beneficial interest of a beneficiary in a property held in trust. Therefore, it
cannot be said that a creditor has a beneficial interest in the hypothecated
property and the owner is in the position of a trustee with reference to the
E creditor. (723-E-H; 724-A-BI

6.3. The sbbmission of the appellant that Duncan Agro 's case dealt with
a hypothecation deed creating a floating charge, whereas the instant case
related to a fixed charge, as such the principle laid down in Duncan Agro will
not apply, cannot be accepted. The principle stated in Duncan Agro will apply
F in regard to all types of hypothecations. It makes no difference whether the
charge created by the deed of hypothecation is a floating charge or a fixed
charge. Where a specific existing property is hypothecated what is created is
a 'fixed' charge. The floating charge refers to a charge created generally
against the assets held by the debtor at any given point of time during the
G subsistence of the deed of hypothecation. The principle in Duncan Agro 's case
is based on the requirement of 'entrustment' and not with reference to the
'floating' nature of the charge. [724-C-Fl

6.4 The basic and very first ingredient of section 405 that is
entrustment, is missing and therefore, even if all the allegations in the
H complaint are taken at their face value as true, no case of 'criminal breach of
INDIAN OIL CORPORATION v. NEPC INDIA LTD. 709
trust' as defined under section 405 IPC can be made out against NEPC India. A
(724-F-G)

Central Bureau of Investigation v. Duncans Agro Industries Ltd.,
Calcutta (199615 SCC 591, relied on.

Che/loor Mankkal Narayan lttiravi Nambudiri v. State of Travancore, B
Cochin, AIR (1953) SC 478; Jaswantrai Manila/ Akhaney v. State of Bombay,
AIR (1956) SC 575 and Gobindram C. Motwani v. Emperor, (1938) 39 Cr.L.J.
509, referred to.

Advanced Law Lexicon by P. Ramanatha Aiyar, (Third (2005) Edition,
Vol.2, 2179-2180 - referred to. C
5. The complaints clearly allege that the accused with fraudulent
intention to cheat and defraud the IOC, had induced IOC to resume supply of
aircraft fuel on cash and carry basis, by entering into a further agreement
and undertaking to clear the outstanding amount within the time stipulated
in the Hypothecation Agreements. The sum and substance of the said allegation D
read with other averments is that NEPC, having committed default in paying
the sum entered into a fresh agreement agreeing to clear the outstanding as
per a fresh schedule, with the dishonest and fraudulent intention of pre-
empting and avoiding any action by IOC in terms of the hypothecation deeds
to take possession of the aircrafts. Though the supplies after the agreement E
were on cash and carry basis, the fraudulent intention is alleged to emanate
from the promise undet the said agreement to make payment, thereby
preventing immediate seizure (taking possession) of the aircrafts by IOC.
Therefore, allegations in the complaint constitute offence within section 415.
(726-G-H; 727-A-C)
F
Rajesh Bajaj v. State NCT of Delhi, (1999) 3 SCC 259 and Hridaya
Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168, referred to.

6. For the purpose of section 425, ownership or possession of the
property are not relevant Even if the property belongs to the accused himself,
ifthe ingredients are made out, mischief is committed. The complaints clearly G
allege that NEPC India removed the engines thereby making a change in the
aircrafts and that such removal has diminished the value and utility of the
aircrafts and affected them injuriously, thereby causing loss and damage to
IOC, which has the right to possess the entire air~raft. The allegations clearly
constitute the offence of 'mischier under section 425. (727-E-GJ H
710 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 834 of
2002.

From the Judgment and Order dated 29.3.2001 of the High Court of
Madras in Criminal O.P. Nos. 2418/1999 and 1563/2000.

B WITH

Criminal Appeal No. 833 of 2002.

L. Nageshwar Rao, H.K. Puri, Uijwal Banerjee, S.K. Puri, Priya Puri and
V.M. Chauhan for the Appellant.
c C.A. Sundaram, Sanjay Sen, S.R. Raghunathan, Rana S. Biswas, Indra
Sawhney and Pramood Dayal for the Respondents.

The Judgment of the Court was delivered by

D RA VEENDRAN, J. These appeals are filed against the common order
dated 29.3.2001 passed by the Madras High Court allowing Crl.O.P. Nos.2418
of 1999 and 1563 of2000. The said two petitions were filed by the respondents
herein under section 482 of Criminal Procedure Code ('Code' for short) for
quashing the complaints filed by the appellant against them in C.C. No.299
of 1999 on the file of Judicial Magistrate No.6, Coimbatore and C.C. No. 286
E of 1998 on the file of Judicial Magistrate, Alandur (Chennai).

2. The appellant (Indian Oil Corporation, for short 'IOC') entered into
two contracts, one with the first respondent (NEPC India Ltd.) and the other
with its sister company Skyline NEPC Limited ('Skyline' for short) agreeing
to supply to them aviation turbine fuel and aviation lubricants (together
F referred to as "aircraft fuel"). According to the appellant, in respect of the
aircraft fuel supplied under the said contracts, the first respondent became
due in a sum of Rs.5,28,23,501.90 and Skyline became due in a sum of
Rs.13, 12, 76,421.25 as on 29.4.1997.

G 3. The first respondent hypothecated its two Fokker F27-500 Aircrafts,
bearing Registration No. VT-NEJ (12684) and VT-NEK (10687) to the appellant
under Deed of Hypothecation dated 1.5.1997, to secure the outstanding
amounts. Clause (2) of the said Deed provided that the two aircrafts with all
parts and accessories stood hypothecated to IOC by way of charge and as
security for payment of the amounts due, with effect from the date of
H hypothecation. Clause (3) read with the schedule set out the instalments
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RAVEENDRAN, J.] 711

schedule for payment of the amount due. Under clause (6), NEPC India A
declared that it would not assign, sell, pledge, charge, underlet or otherwise
encumber or part with the possession, custody or beneficial interest in respect
of the two aircrafts without the previous written consent of IOC. It also
undertook not to do any act which may diminish the value of the hypothecated
property without clearing the entire outstanding amount. Clause (9) provided
that if NEPC India failed to pay any of the instalments with interest within B
the stipulated time, or if any undertaking or assurance given by NEPC India
was found to be false, IOC shall have the "right to take possession of the
hypothecated property" and sell the same by public auction or by private
contract and appropriate the sale proceeds towards the outstanding dues
without recourse to court of law. Clause 12 confirmed that NEPC India had C
handed over the title deeds relating to the aircraft to IOC, and agreed to
receive them back only after paying the amounts due. It is stated that Skyline
also hypothecated its aircraft (VT-ECP) under a separate Hypothecation Detd
dated 14.5.1997. It is further stated that a tripartite agreement dated 6.5.1997
was entered among IOC, NEPC India and Skyline setting out the mode of
payment of the dues and recovery in the event of default. D
4. As NEPC India failed to pay the first two instalments as per schedule,
IOC stopped supply of aircraft fuel on 3.6.1997. However, subsequently, under
a fresh agreement dated 20.9.1997, a revised payment schedule was agreed
and IOC agreed to re-commence supply of aircraft fuel on 'cash and carry' E
basis. Even this arrangement came to an end as the instalments were not paid.

5. Apprehending that NEPC India may remove the hypothecated aircraft
(VT-NEJ) from Coimbatore Airport to a place outside its reach, IOC filed C.S.
No.425of1997 in the Madras High Court seeking a mandatory injunction to
the Airport Authority of India and Director General of Civil Aviation to detain F
the said aircraft stationed at Coimbatore Airport, under section 8 of the
Aircraft Act, 1934, so as to enable it to take possession thereof. The High
Court granted an interim injunction on 16.9.1997 restraining NEPC India from
removing the aircraft (VT-NEJ) from Coimbatore Airport. Jn regard to the other
hypothecated aircraft (VT-NEK) kept at Meenambakkam (Chennai) Airport,
IOC filed a suit (OS No.3327/1998) in the City Civil Court, Chennai for a similar G
mandatory injunction.

6. IOC filed the two complaints against NEPC India and its two Directors
(respondents 2 and 3 herein) in July, 1998 under section 200 of Code of
Criminal Procedure alleging unauthorized removal of the engines and certain
712 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A other parts from the two hypothecated aircraft. They are :
(i) C.C. No. 299of1999 before the Judicial Magistrate No.6, Coimbatore,
regarding Aircraft bearing No. VT-NEJ.

(ii) C.C. No. 286 of 1998 before the Judicial Magistrate, Alandur
B (Chennai) regarding aircraft bearing No. VT • NEK.

The relevant averments in the complaint in C.C. No.299/1999 (Coimbatore
Court) reads as under:-

"The complainant states that on 24.4.98, IOC had come to know that
NEPC India Limited in total disregard to the orders of the Hon. High
c Court, Madras had clandestinely removed both the engines and certain
other parts from the Aircraft VT-NEJ Aircraft SI. No. 10684 (Fokker
F27-500) stationed at the Coimbatore Airport, Coimbatore .................. .

The complainant states that, besides the above, the act ofNEPC India
Limited in removing the engines and certain other parts from the
D
Aircraft VT-NEJ Aircraft SI. No. 10684 (Fokker F27-500) stationed at
the Coimbatore Airport, Coimbatore is against the terms of the
hypothecation deed dated 01.5.1997 and 20.9.1997 will amount to theft,
criminal breach of trust, and cheating which are offences punishable
under section 378 (Theft), 403 (Dishonest Misappropriation of Property),
E 405 (Criminal Breach of Trust), 415 (Cheating), 425 (Mischief) of the
Indian Penal Code. No notice was given to IOC in this regard."

The relevant averments in the complaint in C.C. No.286/1998 (Alandur Court)
read as under :-

F "... With a view to defeat the said right of IOC (that is right to take
possession and sell the aircraft), NEPC India removed the engines of
the Aircraft (VT-NEK) stationed at the Meenambakkam
Airport............................ .

The complainant states that, the act ofNEPC India Limited in removing
G the engines and certain other parts from the Aircraft VT-NEK Aircraft
SI. No. 10687 (Fokker F27-500) stationed at the Meenabakkam Airport,
Chennai is against the terms of the hypothecation deed dated 1.5.1997
as well as the terms of the agreement dated 20.9.1997 and will amount
to offences punishable under section 378 (Theft), 403 (Dishonest
-
Misappropriation of Property), 405 (Criminal Breach of Trust), 415
H
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RA VEENDRAN, J.] 713

(Cheating), 425 (Mischief) of the India Penal Code. No notice was A
given to IOC in this regard."

Both the complaints also contain the following common allegations:

"The complainant states that the accused had with fraudulent intention
to cheat and defraud IOC had induced IOC to resume supply of B
Aircraft fuel on Cash and Carry basis, by undertaking to clear the
outstanding amount of Rs.18 crores approximately within the time
stipulated in the hypothecation agreements. However, the accused
had failed to clear the said outstanding amounts and had breached the
-- tenns of the hypothecation agreements. Subsequently on 20.9.2007,
an agreement was entered into between IOC and Mis NEPC India C
Limited. As per the terms of the i.:bove agreement Mis NEPC India
Limited had agreed to clear the outstanding amount of R:;. I 8 crores
approximately due to IOC from Mis NEPC India Limited and Mis
Skyline NEPC Limited within a time frame. However, Mis NEPC India
Limited had failed to keep up the schedule of payments mentioned in D
the said agreements.

The facts narrated above will clearly show that IOC has got every
right to take possession of the Aircraft VT-NEK as well as VT-NEJ.
Only with a view to defeat the said right of IOC, Mis NEPC India has
removed the engines of the aircraft..... " E
7. The respondents herein filed Crl. O.P. No. I 563 of 2000 and Crl.O.P.
No.2418 of I999 respectively under section 482 of Cr.P.C. for quashing the
said two complaints on the following two grounds :

(i) The complaints related to purely contractual disputes of a civil F
nature in respect of which IOC had already sought injunctive
reliefs and money decrees.
(ii) Even if all the allegations in the complaints were taken as true,
they did not constitute any criminal offence as defined under
sections 378, 403, 405, 415 or 425 IPC.
G
8. The High Court by common judgment dated 23.3.2001 allowed both
the petitions and quashed the two complaints. It accepted the second ground
urged by the Respondents herein, but rejected the first ground. The said
order of the High Court is under challenge in these appeals. On the rival
contentions urged, the following points arise for consideration :
H
714 SUPREME COURT REPORTS [2006) SUPP. 3 S.C.R.

A (i) Whether existence or availment of civil remedy in respect of
disputes arising from breach of contract, bars remedy under
criminal law?

(ii) Whether the allegations in the complaint, if accepted on face
value, constitute any offence under sections 378, 403, 405, 415 or
B 425 JPC?

Re : Point No. (I) :

9. The principles relating to exercise of jurisdiction under Section 482
of the Code of Criminal Procedure to quash complaints and criminal proceedings
C have been stated and reiterated by this Court in several decisions. To mention
a few - Madhavrao Jiwaji Rao Scindia v. Sambhajirao Chandrojirao Angre,
(1988) 1 SCC 692, State of Haryana v. Bhajanlal, (1992) Supp I SCC 335,
Rupan Deol Bajaj v. Kanwar Pal Singh Gill, (1995) 6 SCC 194, Central
Bureau of Investigation v. Duncans Agro Industries Ltd, (1996) 5 SCC 591,
State of Bihar v. Rajendra Agrawal/a, (1996) 8 SCC 164, Rajesh Bajaj v. State
D NCT of Delhi, [1999] 3 SCC 259, Medchi Chemicals & Pharma (P) Ltd v.
Biological E. Ltd, [2000) 3 sec 269, Hridaya Ranjan Prasad Verma v. State
of Bihar, (2000) 4 sec 168, M Krishnan v. Vijay Kumar, (200 I] 8 SCC 645,
and Zandu Phamaceutical Works Ltd v. Mohd. Sharaful Haque, (2005) I sec
122. The principles, relevant to our purpose are :
E (i) A complaint can be quashed where the allegations made in the
complaint, even if they are taken at their face value and accepted
in their entirety, do not prima facie constitute any offence or
make out the case alleged against the accused.
For this purpose, the complaint has to be examined as a whole,
F but without examining the merits of the allegations. Neither a
detailed inquiry nor a meticulous analysis of the material nor an
assessment of the reliability or genuineness of the allegations in
the complaint, is warranted while examining prayer for quashing
of a complaint.
G (ii) A complaint may also be quashed where it is a clear abuse of the
process of the court, as when the criminal proceeding is found
to have been initiated with malafideslmalice for wreaking
vengeance or to cause hmm, or where the allegations are absurd
and inherently improbable.
H (iii) The power to quash shall not, however, be used to stifle or
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RA YEEND RAN, J. ]715

scuttle a legitimate prosecution. The power should be used A
sparingly and with abundant caution.
(iv) The complaint is not required to verbatim reproduce the legal
ingredients of the offence alleged. If the necessary factual
foundation is laid in the complaint, merely on the ground that a
few ingredients have not been stated in detail, the proceedings B
should not be quashe::I. Quashing of the complaint is warranted
only where the comp:aint is so bereft of even the basic facts
which are absolutely necessary for making out the offence.
(v) A given set of facts may make out : (a) purely a civil wrong; or
(b) purely a criminal offence; or (c) a civil wrong as also a criminal C
offence. A commercial transaction or a contractual dispute, apart
from furnishing a cause of action for seeking remedy in civil law,
may also involve a criminal offence. As the nature and scope of
a civil proceedings are different from a criminal proceeding, the
mere fact that the complaint relates to a commercial transaction
or breach of contract, for which a civil remedy is available or has D
been availed, is not by itself a ground to quash the criminal
... proceedings. The test is whether the allegations in the complaint
disclose a criminal offence or not.

I0. While on this issue, it is necessary to take notice of a growing tendency
in business circles to convert purely civil disputes into criminal cases. This E
is obviously on account of a prevalent impression that civil law remedies are
time consuming and do not adequately protect the interests of lenders/
creditors. Such a tendency is seen in several family disputes also, leading to
irretrievable break down of marriages/families. There is also an impression that
if a person could somehow be entangled in a criminal prosecution, there is p
a likelihood of imminent settlement. Any effort to settle civil disputes and
claims, which do not involve any criminal offence, by applying pressure
though criminal prosecution should be deprecated and discouraged. In G.
Sagar Suri v. State of UP, [2000] 2 SCC 636, this Court observed:

"It is to be seen if a matter, which is essentially of civil nature, has G
been given a cloak of criminal offence. Criminal proceedings are not
a short cut of other remedies 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 High Court is to exercise its jurisdiction under H
716 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A Section 482 of the Code. Jurisdiction under this Section has to be
exercised to prevent abuse of the process of any court or otherwise
to secure the ends of justice."

While no one with a legitimate cause or grievance should be prevented from
seeking remedies available in criminal law, a complainant who initiates or
B persists with a prosecution, being fully aware that the criminal proceedings
are unwarranted and his remedy lies only in civil law, should himself be made
accountable, at the encl of such misconceived criminal proceedings, in
accordance with law. One positive step that can be taken by the courts, to
curb unnecessary prosecutions and harassment of innocent parties, is to
C exercise their power under section 250 Cr.P.C. more frequently, where they
discern malice or frivolousness or ulterior motives on the part of the
complainant. Be that as it may.

11. Coming to the facts of this case, it is no doubt true that IOC has
initiated several civil proceedings to safeguard its interests and recover the
D amounts due. It has filed C.S. No.425/1997 in the Madras High Court and 0.S.
No.3327/1998 in the City Civil Court, Chennai seeking injunctive reliefs to
restrain the NEPC India from removing its aircrafts so that it can exercise its
right to possess the Aircrafts. It has also filed two more suits for recovery
of the amounts due to it for the supplies made, that is CS No.998/1999 against
NEPC India (for recovery of Rs.5,28,23,501/90) and CS No.11/2000 against
E Skyline (for recovery of R.s.13, 12,76,421125), in the Madras High Court. IOC
has also initiated proceedings for winding up NEPC India and filed a petition
seeking initiation of proceedings for contempt for alleged disobedience of the
orders of temporary injunction. These acts show that civil remedies were and
are available in law and lOC has taken recourse to such remedies. But it does
F not follow therefrom that criminal law remedy is ban-ed or JOC is estopped
from seeking such remedy.

12. The respondents, no doubt, have stated that they had no intention
to cheat or dishonestly divert or misappropriate the hypothecated aircraft or
any parts thereof. They have taken pains to point out that the aircrafts are
G continued to be stationed at Chennai ai1d Coimbatore Airports; that the two
engines of VT-NEK though removed from the aircraft, are still lying at Madras
Airport; that the two DART 552 TR engines of VT-NEJ were dismantled for
the purpose of overhauling/repairing; that they were fitted to another Aircraft
(VT-NEH) which had been taken on lease from 'Mis Aircraft Financing and
H Trading BV' and that the said Aircraft (VT-NEH) has been detained by the
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RA VEENDRAN, J.)717

lessor for its dues; that the two engines which were meant to be fitted to VT- A
NEJ (in places of the removed engines), when sent for overhauling to Mis
Hunting Aeromotive, U.K., were detained by them on account of a dispute
relating to their. bills; and that in these peculiar circumstances beyond their
control, no dishonest intent could be attributed to them. But these are defences
that will have to be put forth and considered during the trial. Defences that B
may be available, or facts/aspects when established during the trial, may lead
to acquittal, are not grounds for quashing the complaint at the threshold. At
this stage, we are only concerned with the question whether the averments
in the complaint spell out the ingredients of a criminal offence or not.

13. The High Court was, therefore, justified in rejecting the contention C
of the respondents that the criminal proceedings shou Id be quashed in view
of the pendency of several civil proceedings.

Re : Point No. (ii)

14. This takes us to the question whether the allegations made in the D
complaint, when taken on their face value as true and correct, constitute
offences defined under sections 378, 403, 405, 415 and 425 !PC? Learned
counsel for the appellant restricted his submissions only to sections 405, 415
and 425, thereby fairly conceding that the averments in the complaint do not
contain the averments necessary to make out the ingredients of the offence
of theft (section 378) or dishonest misappropriation of property (section 403). E

Section 378

15. Section 378 defines theft. It states : "whoever, intending to take
dishonestly any movable property out of the possession of any person F
without that person's consent, moves that property in order to such taking,
is said to commit theft." The averments in the complaint clearly show that
neither the aircrafts nor their engines were ever in the possession of IOC. It
is admitted that they were in the possession of NEPC India at all relevant
times. The question of NEPC committing theft of something in its own
possession does not arise. The appellant has therefore rightly not pressed the G
matter with reference to section 378.
f
Section 403

16. Section 403 deals with the offence of dishonest misappropriation of
property. It provides that "whoever dishonestly misappropriates or converts H
718 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A to his own use any movable property", shall be punished with imprisonment
of either description for a term which may extend to 2 years or with fine or
both. The basic requirement for attracting the section are : (i) the movable
property in question should belong to a person other than the accused; (ii)
the accused should wrongly appropriate or convert such property to his own
B use; and (iii) there should be dishonest intention on the part of the accused.
Here again the basic requirement is that the subject matter of dishonest
misappropriation or conversion should be someone else's movable property.
When NEPC India owns/possesses the aircraft, it obviously cannot

c
'misappropriate or convert to its own use' such aircraft or parts thereof.
Therefore section 403 is also not attracted. -
Section 405

17. We will next consider whether the allegations in the complaint make
out a case of criminal breach of trust under section 405 which is extracted
below:
D
"405. Criminal breach of trust-Whoever, being in any manner
entrusted with property, or with any dominion over property,
dishonestly misappropriates or converts to his own use that property,
or dishonestly uses or disposes of that property in violation of any
direction of law prescribing the mode in which such trust is to be
E discharged, or of any legal contract, express or implied, which he has
made touching the discharge of such trust, or wilfully suffers any
other person so to do, commits "criminal breach of trust".

A careful reading of th~ section shows that a criminal breach of trust involves
the following ingredients : (a) a person should have been entrusted with
F property, or entrusted with dominion over property; (b) that person should
dishonestly misappropriate or convert to his own use that property, or
dishonestly use or dispose of that property or willfully suffer any other
person to do so; (c) that such misappropriation, conversion, use or disposal
should be in violation of any direction of law prescribing the mode in which
G such trust is to be discharged, or of any legal contract which the person has
made, touching the discharge of such trust. The following are examples
(which include the illustrations under section 405) where there is 'entrustment':

(i) An 'Executor' of a will, with reference to the estate of the deceased
bequeathed to legatees.
H
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RA YEEND RAN, J.] 719

(ii) A 'Guardian' with reference to a property of a minor or person A
of unsound mind.

(iiO A 'Trustee' holding a property in trust, with reference to the
beneficiary.

(iv) A 'Warehouse Keeper' with reference to the goods stored by a
depositor. B
(v) A carrier with reference to goods entrusted for transport belonging
to the consignor/consignee .
....
(vi) A servant or agent with reference to the property of the master
or principal. C
(vii) A pledgee with reference to the goods pledged by the owner/
borrower.

(viii) A debtor, with reference to a property held in trust on behalf of
the creditor in whose favour he has executed a deed of pledge-
cum-trust. (Under such a deed, the owner pledges his movable D
property, generally vehicle/machinery to the creditor, thereby
delivering possession of the movable property to the creditor
and the creditor in tum delivers back the pledged movable property
to the debtor, to be held in trust and operated by the debtor).

18. In Chelloor Mankkal Narayan Jttiravi Nambudiri v. State of E
Travancore, Cochin, AIR (1953) SC 478, this Court held:

" ... to constitute an offence of criminal breach of trust, it is essential
that the prosecution must prove first of all that the accused was
entrusted with some property or with any dominion or power over
it. It has to be established further that in respect of the property so F
entrusted, there was dishonest misappropriation or dishonest
conversion or dishonest use or disposal in violation of a direction of
law or legal contract, by the accused himself or by someone else
which he willingly suffered to do.

It follows almost axiomatically from this definition that the ownership G
or beneficial interest in the property in respect of which criminal
breach of trust is alleged to have been committed, must be in some
person other than the accused and the latter must hold it on account
of some person or in some way for his benefit."
H
720 SUPREME COURT REPORTS [2006) SUPP. 3 S.C.R.

A [Emphasis supplied]

In Jaswantrai Manila/ Akhaney v. State of Bombay, AIR (1956) SC 575, this
Court held reiterated that the first ingredient to be proved in respect of a
criminal breach of trust is 'entrustment'. It, however, clarified:

B " .. But when S. 405 which defines "criminal breach of trust" speaks
of a person being in any manner entrusted with property, it does not
contemplate the creation of a trust with all the technicalities of the law
of trust. It contemplates the creation of a relationship whereby the
owner of prope1ty makes it over to another person to be retained by
him until a certain contingency arises or to be disposed of by him on
c the happening of a certain event."

19. The question is whether there is 'entrustment' in an hyputhecation?
Hypothecation is a mode of creating a security without delivery of title or
possession. Both ownership of the movable property and possession thereof,
D remain with the debtor. The creditor has an equitable charge over the property
and is given a right to take possession and sell the hypothecated movables
to recover his dues (note : we are not expressing any opinion on the question
whether possession can be taken by the creditor, without or with recourse to
a court of law). The creditor may also have the right to claim payment from
the sale proceeds (if such proceeds are identifiable and available). The following
E definitions of the term 'hypothecation' in P. Ramanatha Aiyar's Advanced
Law Lexicon (Third (2005) Edition, Vol.2, Pages 2179 and 2180) are relevant

"Hypothecation : It is the act of pledging an asset as security for
borrowing, without parting with its possession or ownership. The
F borrower enters into an agreement with the lender to hand over the
possession of the hypothecated asset whenever called upon to do so.
The charge of hypothecation is then converted into that of a pledge
and the lender enjoys the rights of a pledgee."

'Hypothecation' means a charge in or upon any movable property,
G existing in future, created by a borrower in favour of a secured creditor,
without delivery of possession of the movable property to such
creditor, as a security for financial assistance and includes floating
charge and crystallization of such charge into fixed charge on movable
property. (Borrowed from secticn 2(n) of Securitisation and
Reconstruction of Financial Assets & Enforcement of Security Interest
H
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RA YEEND RAN, J.] 721

• Act, 2002)" A
But there is no 'entrustment of the property' or 'entrustment of dominion over
the property' by the hypothecatee (creditor) to the hypothecator (debtor) in
an hypothecation. When possession has remained with the debtor/owner and
when the creditor has neither ownership nor beneficial interest, obviously
there cannot be any entrustment by the creditor. B·
20. The question directly arose for consideration in Central Bureau of
Investigation v. Duncans Agro Industries Ltd., Calcutta, [1996) 5 SCC 591. H
related to a complaint against the accused for offences of criminal breach of
trust. It was alleged that a floating charge was created by the accused debtor
on the goods by way of security under a deed of hypothecation, in favour C
of a bank to cover credit facility and that the said goods were disposed of
by the debtor. It was contended that the disposal of the goods amounted to
criminal breach of trust. Negativing the said contention, this Court after
stating the principle as to when a complaint can be quashed at the threshold,
held thus : D
" ..... a serious dispute has been raised by the learned counsel .... as to
whether on the face of the allegations, an offence of criminal breach
of trust is constituted or not. Jn our view, the expression 'entrusted
with property' or 'with any dominion over property' has been used
in a wide sense in Section 405, l.P.C. Such expression includes all E
cases in which goods are entrusted, that is, voluntarily handed over
for a specific purpose and dishonestly disposed of in violation of law
or in violation of contract. The expression 'entrusted' appearing in
Section 405, l.P.C. is not necessarily a term of law. It has wide and
different implications in different contexts. It is, however, necessary F
that the ownership or beneficial interest in the ownership of the
property entrusted in respect of which offence is alleged to have been
committed must be in some person other than the accused and the
latter must hold it on account of some person or in some way for his
benefit. The expression 'trust' in Section 405, l.P.C. is a comprehensive
expression and has been used to denote various kinds of relationship G
like the relationship of trustee and beneficiary, bailor and bailee, master
and servant, pledger and pledgee. When some goods are hypothecated
by a person to another person, the ownership of the goods still
remains with the person who has hypothecated such goods. The
property in respect of which criminal breach of trust can be committed
H
722 SUPREME COURT REPORTS (2006] SUPP. 3 S.C.R.

A must necessarily be the property of some person other than the
accused or the beneficial interest .in or ownership of it must be in
other person and the offende_r must hold such property in trust for
such other person or for his benefit. In a case of pledge, the pledged
articie belongs to some other person but the same is kept in trust by
the pledgee. In the instant case, a floating charge was made on the
B goods by way of security to cover up credit facility. In our view, in
such case for disposing of the goods covering the security against
credit facility, the offence of criminal breach of trust is not committed."
(emphasis supplied) ,...
...
C 21. The allegations in the complaints are that aircrafts and the engines
fitted therein belong to NEPC India, and that a charge was created thereon
by NEPC India, in favour oflOC, by way ofhypothecation to secure repayment
of the amounts due to IOC. The terms of hypothecation extracted in the
complaint show that the ownership and possession of the aircrafts continued
with NEPC India. Possession of the aircraft, neither actual nor symbolic, was
D delivered to IOC. NEPC India was entitled to use the aircraft anJ maintain it
in good state of repairs. IOC was given the right to take possession of the
hypothecated aircrafts only in the event of any default as mentioned in the
Hypothecation Deed. It is not the case of the IOC that it took possession of
the aircraft in exercise of the right vested in it under the Deed of Hypothecation.
E Thus, as the possession of the aircraft remained all alcing with NEPC India
in its capacity as the owner and the Deed of Hypothecation merely created
a charge over the aircrafts with a right to take possession in the event of
default, it cannot be said that there wa.s either entrustment of the aircrafts or
entrustment of the dominion over the aircrafts by IOC to NEPC India. The
very fim requirement of section 405, that is the person accused of criminal
F breach of trust must have been "entrusted with the property" or "entrusted
with any dominion over property" is, therefore, absent.

22. Learned counsel for the appellant, however, sought to distinguish
the decision in Duncan Agro on two grounds. It was pointed out that Duncan
Agro itself recognizes that there can be criminal breach of trust where a
G beneficial interest exists in the other person, and the offender holds the
property in trust for such person. It is submitted that when the deed of
hypothecation was executed by NEPC India in favour of IOC, the hypothecation
created a beneficial interest in the property in favour of IOC, and vis-a-vis
such 'beneficial interest' of IOC, the possession of the property by NEPC
H India was in 'trust'. In support of this contention, reliance was placed on a
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RA YEEND RAN, J.)723

decision of the Sind Judicial Commissioner in Gobindram C. Motwani v. A
Emperor, (1938) 39 Cr.L.J. 509. In that case the complaint was that the accused
had hypothecated the goods in their shop as collateral security against an
advance and had agreed to hold the goods and proceeds thereof in trust and
to pay the proceeds as and when received by them. However, as they did not
pay the proceeds, the complaint was that they committed criminal breach of
trust. The Magistrate took the view that as the hypothecated goods were still B
the property of the accused, they could not commit criminal breach of trust
in respect of their own property. The Judicial Commissioner did not agree. He
held:

"The test in this case appears to me to be whether the owner of the C
goods, the accused, created an equitable charge over the goods in
their possession when they executed the trust receipt. If they did so,
they held the goods as trustees, they were "in some manner entrusted"
with the goods, and if they dealt with them in violation of the terms
of the trust, they committed an offence under this section, provided
they had the necessary criminal intent. I can myself see no reason D
why it should be said that by this trust receipt the accused did not
give a beneficial interest in the goods to the applicant and did not
hold the goods, with which they were entrusted as legal owners in
trust for the applicant. That being so, I think the learned Magistrate
was wrong in his decision that the accused could not be guilty of
criminal breach of trust because the goods were their own property." E
It is evident that the said observations were made on the peculiar facts of that
case where the Commissioner concluded that the goods were held by the
accused in trust as trustee in view of execution of a 'Trust Receipt' by the
accused. The facts were somewhat similar to example (viii) in Para 17 above. F
Further the Judicial Commissioner finally observed that there was so much
room for an honest difference of opinion as to the rights and liabilities of the
parties to the trust receipt that no useful purpose could be served in interfering
with the order of discharge by the Magistrate. The said decision is therefore
of no assistance to the appellant.
G
If the observations reiied on by the appellant are to be interpreted as
holding that the debtor holds the hypothecated goods, in trust for the creditor,
then they are contrary to the decision of this Court in Duncan Agro (supra)
which specifically holds that when goods are hypothecated, the owner does
not hold the goods in trust for the creditor. A charge over the hypothecated
H
724 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A goods in favour of the creditor, cannot be said to create a beneficial interest
in the creditor, until and unless the creditor in exercise of his rights under the
deed, takes possession. The term 'beneficial interest' has a specific meaning
and connotation. When a trust is created vesting a property in the trustee,
the right of the beneficiary against the trustee (who is the ow1.er of the trust
property) is known as the 'beneficial interest'. The trustee has the power of
B management and the beneficiary has the right of enjoyment. Whenever there
is a breach of any duty imposed on the trustee with reference to the trust
property or the beneficiary, he commits a breach of trust. On the other hand,
when the owner of a goods hypothecates a movable property in favour of a
creditor, no 'beneficial interest' is created in favour of the creditor nor does
C the owner become a trustee in regard to the property hypothecated. The right
of the creditor under a deed of hypothecation is the right to enforce the
charge created under the deed of hypothecation in the manner specified in
the deed and by no stretch of imagination can such right be equated to a
beneficial interest of a beneficiary in a property held in trust. Therefore, the
tirst contention that a creditor has a beneficial interest in the hypothecated
D property and the owner is in the position of a trustee with reference to the
creditor is liable to be rejected.

23. The second ground on which learned counsel for the appellant
sought to distinguish Duncan Agro is that the said case dealt with a
-
E hypothecation deed creating a floating charge, whereas the case on hand
related to a fixed charge and therefore, the principle laid down in Duncan
Agro will not apply. This contention is also without basis. The principle
stated in Duncan Agro will apply in regard to all types of hypothecations.
It makes no difference whether the charge created by the deed of hypothecation
is a floating charge or a fixed charge. Where a specific existing property is
F hypothecated what is created is a 'fixed' charge. The floating charge refers
to a charge created generally against the assets held by the debtor at any
given point of time during the subsistence of the deed of hypothecation. For
example where a borrower hypothecates his stock-in-trade in favour of the
Bank creating a floating charge, the stock-in-trade, held by the borrower as
on the date of hypothecation may be sold or disposed of by the debtor
G without reference to the creditor. But as and when new stock-in-trade is
manufactured or received, the charge attaches to such future stock-in-trade
until it is disposed of. The creditor has the right at any given point of time
to exercise his right by converting the hypothecation into a pledge by taking
possession of the stock-in-trade held by the debtor at that point of time. The
H principle in Duncan Agro is based on the requirement of 'entrustment' and
INDIAN OIL CORPORATION v. NEPC !NOIA LTD. [RAVEENDRAN, J.] 725

not with reference to the 'floating' nature of the charge. The second contention A
also has no merit.

24. We accordingly hold that the basic and very first ingredient of
criminal breach of trust, that is entrustment, is missing and therefore, even if
all the allegations in the complaint are taken at their face value as true, no
case of 'criminal breach of trust' as defined under section 405 !PC can be B
made out against NEPC India.

Section 415

25. The essential ingredients of the offence of 'cheating' are : (i)
deception of a person either by making a false or misleading representation C
or by other action or omission (ii) fraudulent or dishonest inducement of that
person to either deliver any property or 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 harm to that person D
in body, mind, reputation or property.

26. The High Court has held that mere breach of a contractual terms
would not amount to cheating unless fraudulent or dishonest intention is
shown right at the beginning of the transaction and in the absence of an
allegation that the accused had a fraudulent or dishonest intention while E
making a promise, there is no 'cheating'. The High Court has relied on several
decisions of this Court wherein this Court has held that dishonest intent at
the time of making the promise,'inducement is necessary, in addition to the
subsequent failure to fulfil the promise. Illustrations (t) and (g) to section 415
makes this position clear :
F
"(f) A intentionally deceives Z into a belief that A means to repay any
money that Z may lend to him aud thereby dishonestly induces Z to
lend him money, A not intending to repay it. A cheats."

"(g). A intentionally deceives Z into a belief that A means to deliver
to Z a certain quantity of indigo plant which he does not intend to G
deliver, and thereby dishonestly induces Z to advance money upon
the faith of such delivery. A cheats; but if A, at the time of obtaining
the money, intends to deliver the indigo plant, and afterwards breaks
his contract and does not deliver it, he does not cheat, but is liable
only to a civil action for breach of contract." H
726 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A 27. In Rajesh Bajaj (supra), this Court held : ..
"It is not necessary that a complainant should verbatim reproduce in
the body of his complaint all the ingredients of the offence he is
alleging. Nor is it necessary that the complainant should state in so
many words that the intention of the accused was dishonest or
B fraudulent. ..

The crux of the postulate is the intention of the person who induces
the victim of his representation and not the nature of the transaction
which would become decisive in discerning whether there was
commission of offence or not. The complainant has stated in the body
c of the complaint that he was induced to believe that respondent
would honour payment on receipt of invoices, and that the complainant
realised later that the intentions of the respondent were not clear. He
also mentioned that respondent after receiving the goods have sold
them to others and still he did not pay the money. Such avennents
would primafacie make out a case for investigation by the authorities."
D
28. In Hridaya Ranjan Prasad Verma (supra), this Court held :

"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 deceived
may be induced to do. In the first place he may be induced fraudulently
E 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 of acts, the inducing
F must be intentional but not fraudulent or dishonest.

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 at the time to
inducement which may be judged by his subsequent conduct but for
G 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 time when the offence is said to have been committed.
Therefore it is the int~ntion which is the gist of the offence. To hold
a person guilty of cheating it is necessary to show that he had
H

0
INDIAN OIL CORPORATION v. NEPC INDIA LTD. [RAVEENDRAN, J.] 727

fraudulent or dishonest intention at the time of making the promise. A
From his mere failure to keep up promise subsequently such a culpable
intention right at the beginning, that is, when he made the promise
cannot be presumed."

29. Jn this case, the complaints clearly allege that the accused with
fraudulent intention to cheat and defraud the IOC, had induced IOC to resume B
supply of aircraft fuel on cash and carry basis, by entering into a further
agreement dated 20.9.1997 and undertaking to clear the outstanding amount
of Rs.18 crores approximately within the time stipulated in the Hypothecation
Agreements. The sum and subst~mce of the said allegation read with other
averments extracted above, is that NEPC India, having committed default in C
paying the sum ofRs.18 crores, entered into a fresh agreement dated 20.9.1997
agreeing to clear the outstanding as per a fresh schedule, with the dishonest
and fraudulent intention of pre-empting and avoiding any action by lOC in
terms of the hypothecation deeds to take possession of the aircrafts. Though
the supplies after 20.9.1997 were on cash and carry basis, the fraudulent
intention is alleged to emanate from the promise under the said agreement to D
make payment, thereby preventing immediate seizure (taking possession) of
the aircrafts by IOC. This allegation made in addition to the allegation relating
to removal of engines, has been lost sight of by the High Court. All that is
to be seen is whether the necessary allegations exist in the complaint to bring
the case within section 415. We are clearly of the view that the allegations
in the complaint constitute such an offence. We are not concerned with the E
proof of such allegations or ultimate outcome of trial at this stage.

Section 425

30. Section 425 IPC provides : "Whoever, with intent to cause, or F
knowing that he is likely to cause, wrongful loss or damage to the public or
to any person, causes the destruction of any property, or any such change
in any property or in the situation thereof as dest.-oys or diminishes its value
or utility, or affects it injuriously, commits "mischief'. The three ingredients
of the Section are : (i) intention to cause or knowledge that he is likely to
cause wrongful loss or damage to the public or to any person; (ii) causing G
destruction of some property or any change in the property or in the situation
thereof; and (iii) the change so made destroying or diminishing the value or
utility or affecting it injuriously. For the purpose of section 425, ownership
or possession of the property are not relevant. Even if the property belongs
to the accused himself, ifthe ingredients are made out, mischief is committed, H
•
728 SUPREME COURT REPORTS [2006] SUPP. 3 S.C.R.

A as is evident from illustrations (d) and (e) to section 425. The complaints
clearly allege that NEPC India removed the engines thereby making a change
in the aircrafts and that such removal has diminished the value and utility of
the aircrafts and affected them injuriously, thereby causing loss and damage
to IOC, which has the right to possess the entire aircraft. The allegations
clearly constitute the offence of 'mischief. Here again, we are not concerned
B with the proof o~ ultimate decision.

Conclusion :

31. In view of the above discussion, we find that the High Court was
not justified in quashing the complaints/criminal proceedings in entirety. The
C allegations in the complaint are sufficient to constitute offences under sections
415 and 425 ofIPC. We accordingly allow these appeals in part and set aside
the order of the High Court insofar it quashes the complaint under sections
415 and 425. As a consequence, the Judicial Magistrate, Coimbatore and the
Judicial Magistrate, Alandur before whom the matters were pending, shall
D proceed with the matters in accordance with law in regard to the complaints
filed by IOC in so far as offences under sections 415 and 425 of IPC. Parties
to bear their respective costs.

N.J. Appeals partly allowed.