Holding

The High Court’s quashing of the FIR was erroneous; the FIR disclosed a prima facie case of criminal breach of trust under Section 406 IPC and the investigation must proceed.

Summary

The appellant, Suryalakshmi Cotton Mills Ltd., and the respondent, Rajvir Industries Ltd., were parties to a demerger scheme after which blank cheques signed by the appellant’s Managing Director were handed to the respondents for business use. A dispute arose in 2005, leading the appellant to allege misuse of the cheques and file a complaint, resulting in an FIR under sections 406, 420 and 463 IPC. The respondents obtained a quashing order of the FIR from the Andhra Pradesh High Court under its inherent powers under s.482 CrPC. The Supreme Court examined whether the High Court correctly exercised its jurisdiction, whether the FIR disclosed a prima facie case of criminal breach of trust, and whether the complaint was an abuse of process intended to pre‑empt civil remedies under the Negotiable Instruments Act. The Court held that the High Court erred: the FIR did disclose a prima facie case of offence under s.406 IPC and the investigation should not have been halted. Consequently, the quashing order was set aside and the investigation was directed to proceed, limited to the charge of criminal breach of trust. The appeal was partly allowed.

Issues considered

Whether the High Court was justified in exercising its inherent jurisdiction under Section 482 of the Criminal Procedure Code to quash the FIR.
Whether the FIR disclosed a prima facie case of offences under Sections 406, 420 and 463 of the Indian Penal Code.
Whether the complaint petition constituted an abuse of process aimed at pre‑empting a civil remedy under the Negotiable Instruments Act.
Whether the defence of the accused can be considered while exercising the power under Section 482 CrPC.
Whether the investigation should be allowed to continue despite the High Court’s quashing order.

Legislation cited

Code of Criminal Procedure, 1973s. 154, s. 155(2), s. 156(1), s. 482
Indian Penal Code, 1860s. 1208, s. 406, s. 415, s. 420, s. 463
Negotiable Instruments Act, 1881s. 138, s. 139, s. 141

Subjects

Section 482 CrPCquashing FIRcriminal breach of trustblank chequesdemergerabuse of processinvestigationcognizable offence

Judgment

[2008] 1 S.C.R 432

A M/S. SURYALAKSHMI COTTON MILLS LTD. +--
II. •
M/S. RAJVIR INDUSTRIES LTD. & ORS.
(Crl. A. No. 62 of 2008)
JANUARY 9, 2008
B
[S.B. SINHA AND HARJIT SINGH BEDI, JJ.]
,,_
Code of Criminal Procedure, 1973 - ss. 482 and 154 -
Inherent powers of High Court- Scope of- FIR - Quashing of
••
c - FIR alleging commission of offence u/ss 406, 420 and 463
/PC - Quashed by High Court- Correctness of- Held: Though
power possessed by High Court u/s 482 is wide, a great deal
of caution is required while exercising the same - Where FIR
prima facie discloses commission of cognizable offence, High
D Court should not interfere with investigation - On facts, FIR
was quashed before commencement of investigation by Police
- Prima facie case for proceeding against accused uls 406
/PC made out - Thus, investigation confined to charge uls
406 - Penal Code, 1860 - ss. 406, 420 and 463.
E The appellant-company had two units. During the
period 2000-2004, the Managing Director of the appellant
company left duly signed blank cheques by him with
respondent nos. 2 and 3, the Directors of the appellant
company, for business purposes. Thereafter, under the
F scheme of arrangement, the units were demerged,
transferred and vested in respondent no. 1. In the year ;.-
2005, disputes arose between the parties. The Managing
Director of the appellant-company requested respondent
nos. 2 and 3 to return the unused blank cheques, but the
same were not returned. The Director then filed a
G
complaint with the police against respondent nos. 2 and
3 alleging conspiracy to misuse the said cheques, but the -i"

complaint was not registered. Thereafter, the respondent
issued a letter as also telegram stating that after demerger,
H 432
M/.S. SURY'ALAKSHMl COTTON "MILLS l TD. v. 433
MIS. RAJVIR INOUSTR1ES LTD. & ORS.

·-\. for the difference of share transfer amount between the A
appellant company and respondent no. 1, a cheque for
Rs. 6.28 crores was drawn by the appellant in favour of
the first respondent which was deposited for collection.
The· appellant filed another complaint under sections 406,
420 and 463 IPC but the same was not registered. The B
appellant then filed ;; complaint petition before the
Additional Chief Metropolitan Magistrate and on being
""(
. ~
directed, the officer-in-charge of the Police Station lodged
an FIR. However, the first respondent issued notices to
the appellant for dishonour of cheques. Thereafter, the c
respondents filed an application under section 482 Cr.P.C .
.'
for quashing of the said FIR. Subsequently, respondent
no. 1 filed a complaint petition under sections 138 and
141 of the Negotiable Instruments Act againstthe appellant
company and also its Chairman and Managing Director.
D
The High Court quashed the FIR. Hence the present
appeal.
,J Partly allowing the appeal, the Court
HELD: 1.1 The parameters of jurisdiction of the High
Court under section 482 Cr. P.C. are now well settled. E
Although it is of wide amplitude, a great deal of caution is
also required in its exercise. What is required is application
of well known legal principles involved in the matter.
[Para 16) [442-B, CJ
F
State of Haryana vs. Bhajan Lal 1992 Supp (1) SCC 335;
....
Janata Dal Vs. H. S. Chowdhary and Ors. 1992 (4) SCC 305;
Rupan Deol Bajaj (Mrs.) and Anr. vs. Kanwar Pal Singh Gill
·and Anr. 1995 (6) SCC 194; Indian Oil Corp. vs. NEPC India
Ltd. and Ors. 2006 (6) SCC 736; All Cargo Movers (I) Pvt. Ltd.
G
and Ors. v. Dhanesh Badarmal Jain and Anr. 2007 (12) SCALE
-~ 391 - relied on.
1.2 Ordinarily, a defence of an accused although
appears to be pla~sible should not be taken into
consideration for exercise of the said jurisdiction. Yet H
434 SUPREME COURT REPORTS [2008] 1 S.C.R.

A again, the High Court at that stage would not ordinarily ....
enter into a disputed question of fact. It, however, does
not mean that documents of unimpeachable character
should not be taken into consideration at any cost for the
purpose of finding out as to whether continuance of the
B criminal proceedings would amount to an abuse of the
process of Court or that the complaint petition is filed for
causing mere harassment to the accused. Although a
large number of disputes should ordinarily be determined
only by the civil courts, but criminal cases are filed only
c for achieving the ultimate goal namely to force the
accused to pay the amount due to the complainant
immediately. The Courts on the one hand should not
encourage such a practice; but, on the other, cannot
also travel beyond its jurisdiction to interfere with the
proceeding which is otherwise genuine. The Courts
0
cannot also lose sight of the fact that in certain matters,
both civil proceedings and criminal proceedings would
be maintainable. [Para 18] [444-F, G; 445-A, B]
2.1 In the instant case, the High Court went into
E various facts including the backdrop of dispute between
the parties. It proceeded on the basis that in view of the
demerger scheme, the conduct of the appellant in keeping
mum for a long time for getting the unused blank cheques
returned is tell tale. It entered into the question as to
F whether the complaint petition was filed only with a view
to pre-empt the respondents to take recourse to the
remedies available to them to initiate a criminal proceeding
under section 138 of the Negotiable Instruments Act or
the complaint petition in effect and substance should be
G permitted to be raised only by way of defence.
Maintainability of a criminal proceeding like the instant one
should not be determined only upon raising a
presumption in terms of section 139 of the Negotiable
lnstr.uments Act, it being a rebuttable ·one, [Para 19]
[445-B, C, b, E] .
H
MIS. SURYALAKSHMI COTTON MILLS LTD. v. 435
M/S. RAJVIR INDUSTRIES LTD. & ORS.

2.2 The High Court should have further taken into A
consideration the fact that in the event, the defence of the
appellant is accepted in the criminal case, it would have
no remedy to prosecute the respondents again. It must
also be borne in mind that commercial expediencies may
lead a person to issue blank cheques. The course of action B
in the aforementioned situation, which could be taken
recourse to was to make an attempt to find out as to
whether the complaint petition even if given face value
and taken to be correct in its entirety constitutes an
offence under section 420, 406, 463 IPC. [Para 20] [445-E, C
F, G; 446-A]
3.1 A bare perusal of section 415 read with section
420 IPC would clearly lead to the conclusion that
fraudulent or dishonest inducement on the part of the
accused must be at the inception and not at a subsequent o
stage. In the instant case, blank cheques were handed
~ over to the accused during the period 2000-2004 for use
thereof for business· purposes but the dispute between
the parties admittedly arose much thereafter i.e. in 2005.
Thereofore, no case for proceeding against the E
respondent under Section 420 IPC is made out. [Paras 21
and 22] [446-D, E; 447-C]
B. Suresh Yadav vs. Sharita Bee 2007 (12) SCALE 364
- referred to.
3.2 Filling up of the blanks in a cheque by itself would F
not amount to forgery. Whereas in the complaint petition,
allegations were made that it was respondent Nos. 2 and
3 who entered into a conspiracy to commit the said
offence, in the counter affidavit, it was alleged that the
employees of the respondent company did so. Although, G
section 1208 of the Code has been added, there does not
exist any averment that respondent Nos. 2 and 3 ·have
entered into any conspiracy with their employees. Thus,
no case for proceeding with the offence of forgery against
the respondents has been made out. [Para 23] [447-D,E,F] H
436 SUF'REME COURT REPORTS (2008] 1 S.C.R

-<f· •
A 3.3 A cheque being a property, the same ~as
entrusted to· the respondents. lf the said property has·
ooen misappropriated or has been used fo'r .a purpose
for which the same had not been lianded over,· a case
under section 406 may be found to have been made out.
B Even in a proceeding under section 138 of the Negotlable
instruments Act, .the appellant could rajse a defence that
the cheques were not meant to. be used towards
discharge of a lawful liability or a debt,·but the same by
itself would not mean that in an ap11ropriate case, a
c complaint petition cannot be allowed to be filed. 'rhus, a
case for proceeding against the respondents under
Section 406 has be(ln made out. [Parct 24] [447-F, G, H;
448-A]
3.4 The respondents were keeping watch over the·
D .matter. As soon as a first information report was lodged,
a notice was immediately sent. A qu.ashing application was
filed within a few day~ of the lodging of the FIR. The
investigation was not allowed to take place at all. Whereas
it would have been the duty of the ·court to Uphold antl/or
E to protect the personal li.berty of. an accused in a ~ase,
but where the first information report prima facie discloses
commission of a cognizable offence, the High Court,
ordinarily, should not have interfered with. investigation
thereof by the statutory authority. The investigation by the
F Officer-in-Charge of ttw Police Station may be ·confined
to the charge under section 4015 IPC. [Paras 24 and 25]
[448-8, C, DJ
CRIMINALAPPELLATE: JURISDICTION: Criminal Appeal
No. 62 of 2008.
G
From the final Judgment and Order dated 27 .12.2006 of
the' High Court of Judicature, Andhra Pradesh at Hyderabad in
Crl. P. No. 5126/2006.
Rakesh Dwivedi,An.nam D.N. Rao, Shantanu Krishna,Amit
H Singh and Mukti Chowdhary for the Appellant.
M/S. $URYALAKSHMI COTTON MILLS LTD. v. 437
MIS. RAJVIR IND. LTD. & ORS. [S.B. SINHA, J]

C.A. Sundaram, Kalyana Rama Krishna, Harikrishna, A
Rohini and Subramoniutn Prasad for 1he Respondents.
The. Judgment of the Court Wa6 delivered by
S.B. SINHA, J. : 1. Leave granted.
2. Private patties herein were the Oirect~xs of the appellant B
Company: They were closely related. It Mad two units. Orie was
known as Mahaboobnagar Unit and the second was a sale$
depot at Tin.ipur. The Managing Director o-f the Company was
Shri L.N. Agarwal. He was stationed at Hyderabad. Allegedly,
pursuant' to negotiations which took place between him on the C
one hand, and .Shri U.K. Agarwal and Ritesh Kumar Agarwal
(Accus.ed Nos. 2 and 3) on the· other, representations were made
that as process for obtaining cheques from. the Managing
Director had been taking considerable tirne, it would be
advisable that signed blank cheques be left in the hands of D
accused Nos. 2 and 3 for efficient management oi
Mahaboobnagar Unit and Tirupur Sales Depot. · · ·
· ·' 3. Relying on or on the basis of the said representation,
signed blank cheques were handed over to them during the
period 2000A.D. to 2004A.D. Di.sputes and difference6 arose E
between the parties in 2905 A.O.
4. A Company Petition was filed before the Andhra
Pradesh High Court.'A Scheme for arrangement submitted by
the parties was approved, pursuant whereto Mahaboobnagar F
-~ . unit was transferred in favour of Rajvir Industries Limited
(Accused No. 1) and Mahaboobnagar Unit to Shri L.N. Agarwal.
For the said purpose, the units were demerged and vested in
.the respondent No. 1. Allegedly, the said Scheme was fully
implemented and the respondent Nos. 2 and 3 by a letter dated
22.4.2005 stated out that they would not make demand of any G
payment in. respect of the said Mahaboobnagar Unit.
5. L.N. Agarwal allegedly made oral requests to the
accused _Nos. 2 and 3 to returl') the unused signed blank cheques,
in his capacity as the Secretary of the appellant Company.
H
438 SUPREME COURT REPORTS [2008] 1 S. C.R.

A 6. However, allegedly on the premise that Respondent Nos. ~- · 1

2 and 3 herein entered into a conspiracy to misuse the said
cheques; an informal complaint was filed on 20.10.2006 and
another complaint was filed on 30.10.2006 with Mahankali
Police Station. An endorsement was made therein that there
B was no role for the police to play at that stage.
7. Respondents herein thereafter issued a letter dated
1.10.2004 as also a telegram dated 20.10.2004 stating that as
the institutional liability of the respondent No. 1 had crossed
13.25 crores, with a view to repay a part of the said amount, a
C cheque of a sum of Rs. 6.28 crores had been drawn by the
appellant in favour of the first respondent being the amount of
difference which had been deposited for collection. In the
telegram, it was stated;
"I HEREBY INFORM YOU THAT AFTER THE
D
DEMERGER M/S. SURYALAKSHMI COTTON MILLS
LIMITED AND M/S. RAJVIR INDUSTRIES LIMITED THE
SHARES WERE TRANSFERRED FROM MY SIDE AND -+·
YOUR SIDE FOR THE DIFFERENCE OF SHARE
TRANSFER AMOUNTS AND AS PER OUR PERSONAL
E UNDERSTANDING TO CLEAR THE DIFFERENCE
AMOUNT OF MY FAMILY HOLDING SHARES YOU HAVE
ISSUED TWO CHEQUES ONE FOR RS. 3,39,12,086.00
DATED 31.07.2006 VIDE CHEQUE BEARING NO.
444842 AND ANOTHER CHEQUES BEARING NO.
F 444841 DATED 31.07.2006 FOR AN AMOUNT OF RS.
3,80,77,646-00, BOTH THE CHEQUES WERE DRAWN ~
ON ANDHRA BANK, TIRUPUR BRANCH, TAMILNADU.
THEREAFTER YOU HAVE REQUESTED ME ORALLY
TO PRESENT THE SAME IN THE 3Ro WEEK OF
G OCTOBER, 2006. AS PER YOUR INSTRUCTIONS I
HAVE DEPOSITED THE SAID CHEQUE FOR
COLLECTION WITH OUR BANK. PLEASE HONOUR
THE SAME."
8. A First Information Report thereafter was lodged by the
H
M/S. SURYALAKSHMI COTTON MILLS LTD. v. 439
M/S. RAJVIR IND. LTD. & ORS. [S.B. SINHA, J]

..-_.,....

I
_
appellant before the Station House Officer of the Police Station A
Mahankali, Hyderabad alleging inter alia that the blank signed
cheques issued in the year 2001-2002 had been fraudulently
used ..
9. F.l.R. thereafter was sought to be lodged.
B
10. On a purported refusal by the Police Station to register
a complaint on the basis thereof, the appellant filed a complaint
-1
_, petition in the Court of XI Additional Chief Metropolitan
Magistrate, Secunderabad. Pursuant to the direction issued by
the learned Magistrate, a First Information Report was lodged c
by the officer-in-charge of the Mahankali Police Station.
11. Legal notices were, however, issued by the first
respondent upon the appellant with regard to dishonour of three
cheques bearing No. 444840 dated 31. 7 .2006 of Rs. 6.28
crores, Cheque No. 444841 dated 31.7.2006 of a sum of Rs. D
3,80,77,646/- and Cheque No. 444842 dated 31.07.2006 of
an amount of Rs. 3,39, 12,086/-.
12. On or about 13.11.2006, an application was filed
before the High Court for quashing of the said First Information
Report.Admittedly, on 6.12.2006, a complaint petition was filed E
by the first respondent herein purported to be under Section
138 and 141 of the Negotiable Instruments Act against the
appellant and also its Chairman and Managing Director. By
reason of the impugned judgment, the said quashing application
filed by the respondents herein has been allowed. F

13. A learned Single judge of the High Court, in his
judgment, not only considered the ingredients for the offences
under Section 406, 420, 463 of the Indian Penal Code but also
the background facts leaving to the dispute between the parties
G
so as to enable it to ascertain whether the ingredients thereof
--~ stood satisfied or not. It was held that the said complaint petition
was filed on the basis whereof the First Information Report was
directed to be lodged only to pre-emt the accused from filing a
complaint petition under Section 138 of the Negotiable
H
440 SUPREME COURT REPORTS [2008] 1 S.C.R.

,
A Instruments Act stating : ~- .
"..... Therefore, even if the allegations in the complaint are
taken as true and correct, at this stage, they do not make
out prima facie case of cheating or criminal breach of
trust or forgery. Therefore, continuation of proceedings
B against the present petitioner is nothing but abuse of
process of Court."
14. Mr. Rakesh Dwivedi, learned senior counsel appearing
on behalf of the appellant would submit that the High Court
c committed a manifest error in quashing the First Information
Report at such an early stage and acted in total disregard of the
)>-

-
parameters of its jurisdiction under Section 482 of the Code of
Criminal Procedure. Taking us through various documents
including the notices served by the parties against each other
and the Scheme of Demerger, it was urged that the purpose for
D
which the cheques are said to have been issued being not
supported by any document or the deed of demerger, it was
pre-mature on the part of the High Court to quash the First _.
Information Report. It was contended that it is not the law that for
the purpose of constitution of an offence under Section 420 of
E the Indian Penal Code, subsequent conduct for the purpose of
ascertaining intention of the accused in regard to making of a
false representation to the complainant cannot be taken into
consideration, more particularly in a case, where blank-cheques
have been issued on good faith and on a representation made
F by the accused. After the Scheme of Demerger was framed in
March, 2001, it was the duty of the respondent to return the ~

cheques which were 'properties', within the meaning of the •
provisions of Section 405 of the Indian Penal Code, and then, it
was contended, a case of criminal breach of trust could be made
G out. Embezzlement and/or conversion thereof, for the purposes
other than for which the same had been entrusted, would also
~-
go to show that the respondents have committed a criminal
breach of trust.
The theory that the accused must have had a bad intention
H
M/S. SURYALAKSHMI COTTON MILLS LTD. v. 441
M/S. RAJVIR IND. LTD. & ORS. [S.B. SINHA, J]

.. -}· at the time of the very inception of the contract would apply only A
to contractual liabilities and not where some valuable documents
are entrusted. In any event, the said principle will have no
application in relation to offences made under Section 406 and
463 of the Indian Penal Code.

15. Mr. C.A. Sundaram, learned senior counsel appearing
B
on behalf of the respondent, on the other hand, submitted;
-'(
~
(i) The question as to whether the First Information
Report in the facts and circumstances of this case
should be treated to be an abuse of process of Court c
or not should be determined having regard to public
policy involved namely as to whether a defaulter who
has failed to make lawful payment of an amount and
thus liable to be prosecuted in respect whereof the
cheque had been issued by it can pre-emt filing of a
D
complaint petition which would be his defence in the
case filed against him under Section 138 of the
Negotiable Instruments Act.
(ii) Prosecution under Section 420 of the Indian Penal
Code would lie only in the event, an allegation is E
made in regard to the existence of an intention on
the part of the accused from the very inception of the
contract and not thereafter.
(iii) In the counter affidavit filed before the High Court, it
has been alleged that the employees of the F
~ respondent No. 1 Company had filled up the blank
cheque which is contradictory to and inconsistent
with the story made out in the complaint petition that
it was respondent Nos. 2 and 3 who did so and,
therefore, no charge can be framed for commission G
~~
of forgery.
(iv) Keeping in view the fact that the cheques were
purported to be issued in the years 2000 to 2004
when allegedly the parties were maintaining excellent
H
442 SUPREME COURT REPORTS · [2008] 1 S.C.R.

A relationship and the dispute between them having i· •
been arisen only in September, 2004, it is wholly
improbable that the memorandum of understanding
would not contain a clause in regard to handing over
of the blank cheques and/or no demand shall be
B niade to return the same.
16. The parameters of jurisdiction of the High Court in
).
exercising its jurisdiction under Section 482 of the Code of
Criminal Procedure is now well settled. Although it is of wide
amplitude, a great deal of caution is also required in its exercise.
"
c What is required is application of well known legal principles
involved in the matter.
17. It is neither feasible nor practicable to lay down
exhaustively as to on what ground the jurisdiction of the High
Court under Section 482 of the Code of Criminal Procedure
D
should be exercised, but some attempts have been made in
that behalf in some of the decisions of this Court as for example
State of Haryana Vs. Bhajan Lal [1992 Supp (1) SCC 335], Jw.
Janata Dal Vs. H.S. Chowdhary and Others [(1992) 4 SCC
305], Rupan Deo/ Bajaj (Mrs.) and Another Vs. Kanwar Pal
E Singh Gill and Another [(19~5) 6 SCC 194], Indian Oil Corp.
Vs. NEPC India Ltd. and Others [(2006) 6 SCC 736].
In Bhajan Lal (supra), this Court held;
"(1) Where the allegations made in the first information
F report or the complaint, even if they are taken at their face
t-
value and accepted in their entirety do not prima facie
constitute any offence or make out a case against the
accused.
(2) Where the allegations in the first information report
G
and other materials, if any, accompanying the FIR do not
"i"'"-
disclose a cognizable offence, justifying an investigation
by police officers under Section 156(1) of the Code except
under an order of a Magistrate Within the purview of Section
155(2) of the Code.
H
M/S. SURYALAKSHMI COTTON MILLS LTD. v. 443
M/S. RAJVIR IND. LTD. & ORS. [S.8. SINHA, J]

(3) Where the uncontroverted allegations made in the FIR A
or complaint and the evidence collected in support of the
same do not disclose the commission of any offence and
make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable 8
offence, no investigation is permitted by a police officer
without an order of a Magistrate as contemplated under
Section 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint c
are so absurd and inherently improbable on the basis of
which no prudent person can ever reach a just conclusion
that there is sufficient ground for proceeding against the
accused.
(6) Where there is an express legal bar engrafted in any D
of the provisions of the Code or the concerned Act (under
which a criminal proceeding is instituted) to the institution
and continuance of the proceedings and/or where there is
a specific provision in the Code or the concerned Act,
providing efficacious redress for the grievance of the E
aggrieved party.
(7) Where a criminal proceeding is manifestly attended
with mala fide and/or where the proceeding is maliciously
instituted with an ulterior motive for wreaking vengeance
on the accused and with a view to spite him due to private F
and personal grudge."
We may also place on record that criminal proceedings
should not be encouraged when it is found to be mala fide or
otherwise abuse of the process of court.
G
In All Cargo Movers (/) Pvt. Ltd. & Ors. v. Dhanesh
Badarmal Jain & Anr. [2007 (12) SCALE 391), it was opined :
"We are of the opinion that the allegations made in the
complaint petition, even if given face value and taken to H
444 SUPREME COURT REPORTS (2008] 1 S.C.R.

-t-·~
A be correct in its entirety, do not disclose an offence. For
the said purpose, This Court may not only take into
consideration the admitted facts but it is also permissible
to look into the pleadings of the plaintiff-respondent No. 1
in the suit. No allegation whatsoever was made agains\
B the appellants herein in the notice. What was contended
was negligence and/or breach of contract on the part of
the carriers and their agent. Breach of contract simplicitor ;.
does not constitute an offence. For the said purpose,
allegations in the complaint petition must disclose the
c necessary ingredients therefor. Where a civil suit is
pending and the complaint petition has been filed one
year after filing of the civil suit, we may for the purpose of
finding out as to whether the said allegations are prima
facie cannot notice the correspondences exchanged by
the parties and other admitted documents. It is one thing
D
to say that the Court at this juncture would not consider the
defence of the accused but it is another thing to say that
for exercising the inherent jurisdiction of this Court, it is
impermissible also to look to the admitted documents.
Criminal proceedings should not be encouraged, when it
E is found to be mala fide or otherwise an abuse of the
process of the Court. Superior Courts while exercising
this power should also strive to serve the ends of justice."
18. Ordinarily, a defence of an accused although appears
F to be plausible should not be taken into consideration for
exercise of the said jurisdiction. Yet again, the High Court at t-
that stage would not ordinarily enter into a disputed question of
fact. It, however, does not mean that documents of
unimpeachable character should not be taken into consideration
at any cost for the purpose of finding out as to whether
G
continuance of the criminal proceedings· would amount to an
abuse of the process of Court or that the complaint petition is
..--
filed for causing mere harassment to the accused. While we
are not oblivious of the fact that although a large number of
disputes should ordinarily be determined only by the civil courts,
H
M/S. SURYALAKSHMI COTTON MILLS LTD. v. 445
M/S. RAJVIR IND. LTD. & ORS. [S.B. SINHA, J]
. -~- but criminal cases are filed only for achieving the ultimate goal A
namely to force the. accused to pay the amount due to the
complainant immediately. The Courts on the one hand should
not encourage such a practice; but, on the other, cannot al~o
travel beyond its jurisdiction to interfere with the proceeding which
is otherwise genuine. The Courts cannot also lose sight of the .B
fact that in certain matters, both civil proceedings and criminal
~ proceedings would be maintainable.
- 19. The High Court, however, in this case went into various
facts including the backdrop of dispute between the parties. It
\. proceeded on the basis that in view of the demerger scheme, c
the conduct of the appellant in keeping mum for a long time for
"i"
getting the unused blank cheques returned is tell tale. It entered
into the question as to whether the complaint petition was filed
only with a view to pre-empt the respondents herein to take
recourse to the remedies available to them to initiate a criminal D
proceeding under Section 138 of the Negotiable Instruments
Act or the complaint petition in effect and substance should be
permitted to be raised only by way of defence. What has failed
to attract the attention of the High Court was that maintainability
of a criminal proceeding like the present one should not be E
determined only upon raising a presumption in terms of Section
139 of the Negotiable Instruments Act, it being a rebuttable one.
20. The High Court, in our opinion, should have further
taken into consideration the fact that in the event, the defence
-f
of the appellant is accepted in the criminal case, it will have no F
remedy to prosecute the respondents again. To contend that
the acquittal of the appellant would have been the springboard
for filing a complaint will not be correct. Nobody knows when
the criminal case would come to an end. In a given situation,
even it may become barred by limitation. It must also be borne G
-1 in mind that commercial expediencies may lead a person to
issue blank cheques. The course of action in the aforementioned
situation, in our opinion, which could be taken recourse to was
to make an attempt to find out as to whether the complaint petition
even if given face value and taken to be correct in its entirety ~
446 SUPREME COURT REPORTS [2008) 1 S.C.R.

A constitutes an offence under Section 420, 406, 463 of the Indian ·l- .•

Penal Code or not.
21. Ingredients of cheating are;
(i) deception of a person either by making a false or
B misleading representation or by other action or
omission; and
(ii) fraudulent or dishonest inducement of that person
to either deliver any property to any person or to
· consent to the retention thereof by any person or to
c 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 t

likely to· cause damage. or harm to that person in
body, mind, reputation or property.
D
A bare perusal of Section 415 read with Section 420 of
the Indian Penal Code would clearly lead to the conclusion that
fraudulent or dishonest inducement on the part of the accused
must be at the inception and not at a subsequent stage.
E 22. For the said purpose, we may only notice that blank
cheques were handed over to the accused during the period
2000-2004 for use thereof for business purposes but the dispute
between the parties admittedly arose much thereafter i.e. in
2005.
F In B. Suresh Yadav Vs. Sharita Bee [2007 (12) SCALE
364], it was held;
"13. For the purpose of establishing the offence of cheating,
the complainant is required to show that the accused had
G fraudulent or dishonest intention at the time of making
promise or representation. In a case of this nature, it is
permissible in law to consider the stand taken by a party ....--
in a pending civil litigation. We do not, however, mean to
lay down a law that the liability of a person cannot be both
civil and criminal at the same time. But when a stand has
H
M/S. SURYALAKSHMI COTTON MILLS LTD. v. 447
MIS. RAJVIR IND. LTD. & ORS. (S.8. SINHA, J]
• --1- been taken in a complaint petition which is contrary to or A
inconsistent with the stand taken by him in a civil suit, it
• assumes significance. Had the fact as purported to have
been represented before us that the appellant herein got
the said two rooms demolished and concealed the said
fact at the time of execution of the deed of sale, the matter B
might tiave been different. As the deed of sale was

... ~ executed on 30.9.2005 and the purported demolition took
place on 29.9.2005, it was expected that the complainant/
first respondent would come out with her real grievance in
the written statement filed by her in the aforementioned c
suit. She, for reasons best known to her, did not choose
to do so."
No cas~ for proceeding against the re~pondent under
Section 420 of the Indian Penal Code is therefore, made out.
D
23. Filling up of the blanks in a cheque by itself would not
amount to forgery. Whereas in the complaint petition, allegations
~ have been made that it was respondent Nos. 2 and 3 who had
entered into a conspiracy to commit the said offence as
indicated hereinbefore, in the counter .affidavit, it has been
alleged that the employees of the Respondent Company did E
so.
Although, Section 1208 of the Code has been added, there
does not exist any averment that the respondent Nos. 2 and 3
have entered into any conspiracy with their employees. No case F
+ for proceeding with the offence of forgery against the
respondents has, thus, also been made out.
24. However, a case for proceeding against the
respondents under Section 406 has, in our opinion, been made
out. A cheque being a propf3rty, the same was entrusted to the G
--t respondents. If the said property has been misappropriated or
has been used for a purpose for which the same had not been
a
handed over, case under Section 406 may be found to have
•
been made out. It may be true that even in a proceeding under
Section 138 of the Negotiable lnstrJ.Jments Act, the appellant H
448 SUPREME COURT REPORTS [2008] 1 S.C.R.

+. •
A could raise a defence that the cheques were not meant to be
used towards discharge of a lawful liability or a debt, but the If>.
same by itself in our opinion would not mean that in an
appropriate case, a complaint petition cannot be allowed to be
filed.
B We cannot also lose sight of the fact that the respondents
were keeping watch over the matter. As soon as a first ~
information report was lodged, a notice was immediately sent. ......
A quashing application was filed within a few days of the lodging
of the first information report. The investigation was not allowed
c to take place at all. Whereas it would have been the duty of the
Court to uphold and/or to protect the personal liberty of an
accused in a case; but where the first information report prima
facie discloses commission of a cognizable offence, the High
Court, ordinarily, shall not have interfered with investigation
D thereof by the statutory authority. We, therefore, allow the appeal
in part.
_.....
25. The investigation by the Officer-in-Charge of Mahankali
Police Station may now be confined to the charge under Section
406 of the Indian Penal Code.
E
26. We hope and trust that the investigation shall be
completed and a final report shall be filed before the appropriate
court at an early date. In the event, any chargesheet is filed and
the cognizance of the offence is taken, both the cases should
F be tried by the same Court, one after the other, and judgment in
both the cases must be delivered at the same time. t
27. This appeal is allowed to the aforementioned extent
and with the aforementioned observations and directions.
N.J. Appeal partly allowed.
G
,.