V.P. SHRIVASTAVAversusINDIAN EXPLOSIVES LTD. & ORS.

                      [2010] 11 S.C.R. 788

                                                            I
A                     V.P. SHRIVASTAVA
                               v.
              INDIAN EXPLOSIVES LTD. & ORS.
              (Criminal Appeal No. 1843 of 2010)
                     SEPTEMBER 24, 2010
B
               [D.K. JAIN AND H.L. DATTU, JJ.]

        Penal Code, 1860 - ss. 405, 415, 420, 406 and 120-8 -
  Cheating and dishonestly inducing delivery of property,
C criminal breach of trust and criminal conspiracy - Company
  in which appellants were senior functionaries entering into
  tripartite agreement with complainant company and another
  company "'- Complainant alleging suppression of the fact by
  appellants that the company was likely to be declared a sick
o company - Criminal complaint u/ss. 420, 406 and 1208 /PC
  and ss. 540 and 542 of the Companies Act - Issuance of
  summons to appellants - Petition uls. 482 Cr. P. C. -
  Dismissed by High Court - On appeal, held: No prima facie
  case made out against appellants in respect of alleged
E offences u/ss. 420, 406 and 1208 - High Court should have
  quashed the complaint exercising its jurisdiction u/s. 482
  Cr. P. C. - Thus, order of High Court set aside and order of
  magistrate taking cognizance in complaint case quashed -
  Code of Criminal Procedure, 1973- s. 482 - Companies Act,
  1956 - ss. 540 and 542.
F
       Respondent no. 1 Company (IEL) was engaged in
  the manufacture and sale of industrial explosives. They
  used to buy raw materials from 'FCIL'. 'FCIL' entered into
  a tripartite agreement with respondent no. 1 and 'BCCL'.
G In terms of the agreement, 'FCIL' supplied raw materials
  to respondent no. 1. The same was stopped due to
  breakdown of gas compressor and financial difficulties.
  'FCIL' wa~ declared a sick company by the BIFR.

H                             788
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. & 789
                      ORS.
Thereafter, the BIFR directed winding up of 'FCIL'.            A
Respondent no. 1 filed a criminal complaint against the
appellants and 'M'-senior functionaries of 'FCIL for
offences punishable under Sections 420, 406 and 1208
IPC. Respondent no. 1 also filed a suit for recovery of
certain amount. The magistrate took cognizance of the          B
complaint and issued summons against the appellants
and 'M'. Aggrieved, the appellants and 'M' filed petition
under section 482 of the Code of Criminal Procedure,
1973 for quashing the order of summoning them. The
High Court dismissed the petition. Therefore, the              c
appellants filed the instant appeals.

    Allowing the appeals, the Court

     HELD: 1.1 It is plain from a bare reading of Section
415 IPC that to hold a person guilty of cheating, as           D
defined in Section 415 IPC, it is necessary to show that
at the time of making the promise he had a fraudulent or
dishonest intention to retain the property or to induce the
person so deceived to do something which he would not
otherwise do. Such a culpable intention right at the time      E
of entering into an agreement cannot be presumed
merely from his failure to keep the promise subsequently.
[Paras 21 and 24] [801-C; 80' "E]

     Ram Jas vs. State of UP (1970) 2 SCC 740; Hridaya
Ranjan Prasad Verma and Ors. vs. State of Bihar and Anr.
                                                               F
(2000) 4 SCC 168; S. W Palanitkar and Ors. vs. State ofBihar
and Anr. (2002) 1 sec 241; Kuriachan Chacko and Ors. VS.
State of Kera/a (2008) 8 SCC 708; Medical Chemicals and
Pharma (P) Ltd. vs. Biological E. Ltd. and Ors. (2000) 3 SCC
267; Hira Lal Hari Lal Bhagwati vs. CBI, New Delhi (2003) 5    G
sec 257, referred to.
   1.2. In the instant case, a bare reading of the
complaint would show that there was not even a whisper
                                                               H
    790     SUPREME COURT REPORTS              [2010] 11 S.C.R.


A let alone a specific averment that the appellants had
  dishonestly 'induced' 'IEL' to enter into the said
  agreement/arrangement. On the contrary, the complaint
  clearly revealed that 'IEL' was fully conscious of·the
  precarious financial health of 'FCIL' at the time they had
B decided to enter into contract with 'FCIL' and 'BCCL' to
  ensure a regular supply of their basic raw material from
  'FCIL' so that their production of explosives did not
  suffer. It is manifest from the complaint that the basis of
  the complaint was that by deliberately suppressing the
c fact that 'FCIL' had already been referred to the BIFR after,
  the erosion of its net worth and was likely to be declared
  a 'sick company', the appellants induced 'IEL' to pay
  Rs.4,20,41,622/- to 'BCCL' and in return did not su.pply
  ammonium nitrate to them. A mere mention of the words
  'defraud' and 'cheat' in the complaint, in the setting that
0
  these were used, is not sufficient to infer that the
  appellants had dishonest intention right at the beginning
  when, demonstrably, after due deliberations a tripartite
  agreement was signed, which, under the given
  circumstances at that juncture, was considered to be in
E the interest of all the three parties to the agreement. [Para
  25 and 26] [802-F-G; 803-A-B; 806-E-G]

      1.3 At best, the instant case was of breach of contract
  on the part of 'FCIL', for which the company is already
F defending a civil suit filed by 'IEL'. The averment strikes
  atthe root of the allegation that at the time of entering into
  the agreement, the appellants had fraudulent intention to
  somehow induce 'IEL' to enter into the said agreem~nt
  and part with a huge sum of money .. On their own
G showing 'IEL' was fully aware of the financial health of
  'FCIL' at the time the contract was entered into, as also
  the reason why 'FCIL' was unable to continue the
  production of ammonium nitrate. In order to constitute an
  offence of 'cheating', the intention to deceive should be
H
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. & 791
                      ORS.
in existence at the time when the alleged inducement was       A
made. In the instant case, such an intention cannot be
inferred from the allegations in the complaint and
averments in the plaint. Therefore, even if the allegations
made in the complaint are taken to be correct on their
face value, they may amount to breach of terms of              s
contract by 'FCIL' but do not constitute an offence of
'cheating', punishable under Section 420 IPC. [Paras 27
and. 28] [807-C; F-H; 808-A]

   Anif Mahajan vs. Bhor Industries Ltd. and Anr. (2005) 10    C
sec 228, referred to.
                               '
     2.1. In relation to the offence under Section 405 IPC,
the first ingredient that needs to be established is
entrustment. However, it must be borne in mind that
Section 405 IPC does not contemplate the creation of a         D
trust with all the technicalities of the law of trust. It
contemplates the creation of a relationship whereby the
owner of property makes it over to another person to be
retained by him until a certain contingency arises or to
be disposed of by him on the happening of a certain            E
event. [Paras 32 and 33] [809-G-H; 810-C-E]

    Jaswantrai Manila/ Akhan / vs. State of Bombay AIR
1956 SC 575; Indian Oil Corpn. vs. NEPC India Ltd. and Ors.
(2006) 6 sec 736; relied on.
                                                               F
     Onkar Nath Mishra and Ors. vs. State (NCT of Delhi) and
Anr. (2008) 2 SCC 561; Common Cause, A Registere,d
Society vs. Union of India and Ors. (1999) 6 SCC 667 -
referred to.
                                                               G
    2.2. In the instant case, there is nothing in the
complaint which would suggest remotely that the 'IEL'
had entrusted any property to the appellants or that the
appellants had dominion over any of the propertie& of the
                                                               H
    792      SUPREME COURT REPORTS            (2010] 11 S.C.R.

A 'IEL', which they dishonestly converted to their own use
  so as to satisfy the ingredients of Section 405 IPC,
  punishable under Section 406 IPC. [Para 34) [810-E-F]

       3.1. Having come to the conclusion that no prima
  facie case had been made out against the appellants in
8
  respect of the alleged offences under Sections 420 and
  406 IPC, the question of alleged conspiracy between the
  appellants does not arise. Nevertheless, in order to bring
  home the charge of conspiracy within the ambit of
  Section 1208 IPC, it is necessary to establish that there
C was an agreement between the appellants for doing an
  unlawful act. The complaint lacks any such substance.
  [Para 35) (810-G; 811-A]

      3.2. No prima facie case was made out against the
D appellants in respect of alleged offences under Sections
  420, 406 and 1208 IPC and, it was a fit case where the
  High Court should have exercised its jurisdiction under
  Section 482 of the Code quashing the complaint against
  the appellants. Thus, the impugned order is set aside and
E the order of the magistrate taking cognizance in the
  complaint case is quashed. [Paras 36 and 37) (811-8-0)

      All Cargo Movers (India) Private Limited and Ors. vs.
  Dhanesh Badarmal Jain and Anr. (2007) 14 SCC 776; R.P.
  Kapur vs. State of Punjab AIR 1960 SC 866; Dinesh Dutt
F Joshi vs. State of Rajasthan and Anr. (2001) 8 SCC 570; G.
  Sagar Suri and Anr. vs. State of UP. and Ors. (2000) 2 sec
  636, referred to.
                        Case Law Reference:
G         (2007) 14 sec 776    Referred to.         Para 12
          AIR 1960 SC 866      Referred to.         Para 16
          (2001 > 8 sec 570    Referred to.          Para 17

H
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. '& 793
                      ORS.
    (2000) 2 sec 636             Referred to.    Para 18    A

    (1970) 2 sec 140             Referred to.    Para 22
    (2000) 4 sec 168             Referred to.    Para 22
    (2002) 1 sec 241             Referred to.    Para 22    B
    (2008) 8 sec 108             Referred to.    Para 22
    (2000) 3 sec 269             Referred to.    Para 23
    (2003) 5 sec 257             Referred to.    Para 24
                                                            c
    (2005) 1o sec 228            Referred to.    Para 26
    (2008) 2 sec 561             Referred to.    Para 31
    (1999) 6 sec 667             Referred to.    Para 32
    AIR 1956 SC 575              Relied on.      Para 33    D

    (2006) 6 sec 736             Relied on.      Para 33
    CRIMINAL APPELLATE JURISDICTION: Civil Appeal No.
1843 of 2010.
                                                            E
    From the Judgment & Order dated 28.2.2007 of the High
Court of West Bengal at Calcutta in CRR No. 2898 of 2004.

    WITH

   · Crl. A. No. 1844 of 2010.                              F

    Jaideep Gupta, Shweta Bharti, Ahanthem Henry, Saurabh
Raj Sinha, Ghanshyam Joshi, Oipak Kumar Jena, Sanjoy
Ghosh, Avijit Bhattacharjee for the appearing parties.
                                                            G
    The Judgment of the Court was delivered by

    D.K. JAIN, J. 1. Leave granted.

    2. These appeals, by special leave, arise out of the
                                                            H
    794      SUPREME COURT REPORTS                [201 O] 11 S.C.R.


A judgment and order dated 28th February 2007, delivered by the
  High Court of Calcutta in CRR No.2898 of 2004 in a common
  petition filed by the two appellants herein and one Mr. A.K.
  Mukherjee, who i!'; now deceased, under. Section 482 of the
  Code of Criminal Procedure, 1973 (in short "the Code"). By the
B impugned judgment, the High Court has declined to quash a
  private complaint filed by respondent No.1 company against
  the appellants and Mr. A.K. Mukherjee for offences under
  Sections 420, 406 and 120B of the Indian Penal Code, 1860
  (for short "the IPC').
c       3. Shorn of unnecessary details, the facts, material for the
    purpose of disposal of these appeals may be stated thus:

       Both the appellants in these appeals were senior
  employees of the Fertilizer Corporation of India Limited
D (hereinafter referred to as "FCIL"), a government company
  within the meaning of Section 617 of the Companies Act, 1956.

       4. On 20th April 1992, the FCIL's Board of Directors
  passed a resolution to the effect that the company had become
E a sick company within the meaning of the Sick Industrial
  (Special Provision) Companies Act, 1985 (hereinafter referred
  to as "SICA") and hence a reference should be filed with the
  Board of Industrial and Financial Reconstruction (hereinafter
  referred to as "BIFR"). On 6th November 1992, FCIL was
F declared a "sick company" under Section 3(1 )(o) of the SICA
  by the BIFR.

       5. The complainant - Indian Explosives Limited
  (hereinafter referred to as "IEL"), respondent No.1 in these
  appeals, is engaged in the manufacture and sale of industrial
G explosives. Ammonium nitrate is a major raw material for the
  manufacture of explosives, and the same was procured by IEL
  from FCIL. Some time in the year 2001, FCIL entered into a
  tripartite agreement with M/s Bharat Coking Coal Limited
  (hereinafter referred to as "BCCL") and IEL. As per the
H arrangement under the agreement, it was agreed that FCIL
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. &                 795
               ORS. [D.K. JAIN, J.]
would supply ammonium nitrate to IEL and against this supply,         A
IEL would supply explosives of an equivalent value to BCCL,
which in turn would supply coal of equivalent value to FCIL. It is
an undisputed fact that pursuant to the said arrangement
ammonium nitrate was supplied by FCIL to IEL for some time.
However, due to the breakdown of a synchronized gas                   B
compressor and other financial difficulties, FCIL stopped
supplies of ammonium nitrate to IEL.

      6. On 2nd November 2001, BIFR formed its final opinion
recommending winding up of FCIL and forwarded the same to
the High Court of Delhi. Some time in December 2001, FCIL             C
aggrieved by the opinion of the BIFR, preferred a statutory
appeal under Section 25 of SICA before the Appellate Authority
for Industrial and Financial Reconstruction (hereinafter referred
to as "AAIFR"). However, on 16th April 2002, the AAIFR
dismissed the said appeal and confirmed the order of the Bl FR        D
for the winding up of FCIL. In June 2002, FCIL and its
employees preferred a Writ Petition (CWP No.3298 of 2002)
before the High Court of Delhi challenging the said order of the
AAIFR. The writ petition was disposed of by the High Court by
its order dated 26th November 2002, whereby it remitted the           E
matter back to BIFR for fresh consideration on the revival of
the closed units of FCIL. BIFR, upon receiving the reference,
directed the winding up of FCIL, except the JMO unit and on
2nd April 2004 sent its opinion to the High Court for confirmation.
                                                                      F
     7. During the pendency of the writ petition before the High
Court, the Government of India, on 30th July 2002, issued a
memorandum for closing of all the units of FCIL except the
Sindhri and JMO units. On 10th September 2002, the
Government of India issued yet another memorandum directing
closure of the Sindhri unit as well. It was further directed that     G
FCIL shall implement Voluntary Suppression Scheme in all its
units, and all the employees shall be discharged of their
employment. The appellants herein availed of the Voluntary
Suppression Scheme and were discharged from the service
of FCIL.                                                              H
     796     SUPREME COURT REPORTS                [201 O] 11 S.C.R.


,A       8. On 22nd May 2003, 1EL instituted a criminal complaint
     (Case No. 2560/2003) in the court of Chief Metropolitan
     Magistrate, Kolkata under Sections 406, 420 and 1208 of the
     IPC read with Sections 540 and 542 of the Companies Act,
     1956 against both the appellants and Mr. A.K. Mukherjee.
B      9. Simultaneously, on 25th May 2003, IEL also filed a Title
  Suit No. 34 of 2003 before the 4th Civil Judge, Alipore for
  recovery of the outstanding amount of Rs.4,20,41,622/- along
  with future and pendelite interest against FCIL. IEL, on 23rd
  January 2004, obtained and was granted permission by the
C BIFR to continue with the said civil suit subject to the condition
  that they will not execute the decree in the suit without the
  permission of the BIFR.

         10. On 30th October 2003, the Chief Metropoiitan
 o Magistrate referred the complaint to Metropolitan Magistrate, ·
   8th Court, Kolkata, who issued summons against the appellants
   and Mr. A.K. Mukherjee. Aggrieved by the order of the
   Magistrate taking cognizance of the complaint, appellants
   together with Mr. A.K. Mukherjee preferred the afore-stated
 E petition under Section 482 of the Code for quashing of the order
   summoning them to stand trial, before the Calcutta High Court.

        11. As stated above, the High Court, vide its impugned
   judgment has dismissed the said petition. The High Court has
   inter alia, observed that if the fact that FCIL, of which the
 F accused were senior functionaries, had become sick and the
   question of its winding up was under consideration by the BIFR
   was made known to the complainant company, it would not have
   agreed to the proposal of the accused persons. According to
   the High Court, in order to arrive at a conclusion whether or not
 G on the available materials the accusation against the appellants
   would be sustained or not, a detailed enquiry by appreciation
   of the evidence would be required and such an exercise, being
   entirely a matter of trial, cannot be undertaken in proceedings
   under Section 482 of the Code.
 H
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES l TD. & 797
               ORS. [D.K. JAIN, J.]
      Hence the present appeals.                                      A

      12~ Mr. Jaideep Gupta, learned senior counsel appearing
 for the appellants strenuously urged that the complaint deserves
 to be quashed as it ex-facie lacks the basic ingredients of
 Sections 420 or 406 IPC. It was argued that in the complaint it      8
 is not even averred that the accused had a fraudulent or
 dishonest intention to induce the complainant to enter into the
 tripartite agreement. Similarly, there is no allegation that the
·appellants herein had dishonestly misappropriated or converted
 to their use any property of IEL, which had been entrusted to        C
 them. Further, from a bare perusal of the complaint, it is evident
 that the complainant was aware of the financial health of FCIL
 and, therefore, it cannot be said that the appellants had
 suppressed the fact that FCIL was likely to be declared as a
 sick company. To buttress the plea, learned senior counsel
 referred to the plaint in the suit. Relying on the decision in A//   D
 Cargo Movers (India) Private Limited & Ors. Vs. Dhanesh
 Badarmal Jain & Anr. 1 , it was submitted that the averments and
 the documents in the civil suit could be taken into consideration
 to find out as to whether the allegations in the complaint were
 correct. Additionally, learned senior counsel argued that the        E
 disputes between FCIL and IEL were essentially civil in nature,
 and the complaint only against the erstwhile employees of FCIL
 was mala fide and an abuse of the process of court and,
 therefore, deserves to be quashed.
                                                                      F
     13. Per contra, Mr. Sanjoy Ghosh, learned counsel
appearing on behalf of the IEL, supported the impugned
judgment and argued that the appellants had only disclosed to
the IEL that FCIL was going through a financial crunch and,
therefore, withholding of material information regarding its          G
moving the BIFR for being declared a sick company was clearly
suppression of material facts from IEL with a mala fide intention
to induce them to enter into the said agreement with them,


1.   (2007) 14 sec 776.                                               H
     798      SUPREME COURT REPORTS                  [2010] 11 S.C.R.


A knowing fully well that FCIL will not be able to honour its
  commitment under the arrangement. According to the learned
  counsel, this tantamounts to cheating as also criminal breach
  of trust within the meaning of Sections 415 and 405 I PC
  respectively. Learned counsel thus, contended that the High
B Court was justified in not analyzing and returning a finding on
  the truthfulness or otherwise of the allegations in the complaint
  at such a preliminary stage of the proceedings, when only
  summons have been issued to the appellants to appear in the
  court and it is always open to the appellants to apply for
c discharge before the trial court.
          14. The question for consideration, therefore, is whether
     or not in the light of the allegations in the complaint against the
     appellants, the High Court was correct in law in declining to
     exercise its jurisdiction under Section 482 of the Code?
D       /
         15. Before evaluating the contentions advanced on behalf
  of the parties, it will be useful to briefly notice the scope and
  ambit of the inherent powers of the High Court under Section
  482 of the Code. The section itself envisages three
E circumstances under which the inherent jurisdiction may be
  exercised, namely; (i) to give effect to an order under the Code;
  (ii) to prevent an abuse of the process of court; and (iii) to
  otherwise secure the ends of justice. Nevertheless, it is neither
  possible nor desirable to lay down any inflexible rule which
F would govern the exercise of inherent jurisdiction of the Court.
  Undoubtedly, the power possessed by the High Court under the
  said provision is very wide but is not unlimited. It has to be
  exercised sparingly, carefully and cautiously, ex debito justitiae
  to do real and substantial justice for which alone the court exists.
G It needs little emphasis that the inherent jurisdiction does not
  confer an arbitrary power on the High Court to act according
  to whim or caprice. The power exists to prevent abuse of
  authority and not to produce injustice.


-H
     V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. & 799
                   ORS. [D.K. JAIN, J.]
    16. In one of the earlier cases, in R.P. Kapur Vs. State of        A
Punjab 2 this Court had summarised some of the categories of
cases where the inherent power under Section 482 of the Code
could be exercised by the High Court to quash criminal
proceedings against the accused. These are:
                                                                       B
       (i) where it manifestly appears that there is a legal bar
       against the institution or continuance of the proceedings
       e.g. want of sanction;

       (ii) where the allegations in the first information report or
       the complaint taken at its face value and accepted in their     C
       entirety do not constitute the offence alleged;

       (iii) where the allegations constitute an offence, but there
       is no legal evidence adduced or the evidence adduced
       clearly or manifestly fails to prove the charge.                0
     17. In Dinesh Dutt Joshi Vs. State of Rajasthan & Anr. 3 ,
while dealing with the inherent powers of the High Court, this
Court has observed thus: (SCC p. 573, para 6)

       "6 .... The principle embodied in the section is based upon     E
       the maxim: quando lex aliquid alicui concedit, concedere
       videtur et id sine quo res ipsae esse non potest i.e. when
       the law gives anything to anyone, it gives also all those
       things without which the thing itself would be unavailable.
       The section does not confer any new power, but only             F
       declares that the High Court possesses inherent powers
       for the purposes specified in the section. As lacunae are
       sometimes found in procedural law, the section has been
       embodied to cover such lacunae wherever they are
       discovered. The use of extraordinary powers conferred           G
       upon the High Court under this section are however
       required to be reserved, as far as possible, for
       extraordinary cases."
2.    AIR 1960 SC 866.
3.    (2001 > s sec s7o.                                               H
    800       SUPREME COURT REPORTS                   [201 OJ 11 S.C.R.


A       18. In G. Sagar Suri & Anr. Vs State of UP. & Ors. 4 , this
    Court had opined as follows:

          "Jurisdiction under Section 482 of the Code has to be
          exercised with great care. In exercise of its jurisdiction the
          High Court is not to examine the matter superficially. It is
B
          to be seen if a matter, which is essentially of a civil nature,
          has been given a cloak of criminal offence. Criminal
          proceedings are not a short cut of other remedies
          available in law. Before issuing process a criminal court
          has to exercise a great deal of caution. For the accused
c         it is a serious matter. This Court has laid certain principles
          on the basis of which the High Court is to exercise its
          jurisdiction under Section 482 of the Code. Jurisdiction
          under this section has to be exercised to prevent abuse
          of the process of any court or otherwise to secure the ends
D         of justice."

         19. Bearing in mind the aforestated legal position in regard
    to the scope and width of power of the High Court under
    Section 482 of the Code, we shall now advert to the facts at
E   hand.

         20. As noted above, the complaint against the appellant
    alleges commission of offences by them of cheating and
    dishonestly inducing delivery of property; criminal breach of trust
    and of criminal conspiracy punishable respecti_vely under
F   Sections 420, 406 and 120B of the IPC.

          21. Section 415 IPC deals with "cheating" and reads as
    follows:

          "415. Cheating.-Whoever, by deceiving any person,
G
          fraudulently or dishonestly induces the person so deceived
          to deliver any property to any person, or to consent that
          any person shall retain any property, or intentionally


H 4.   (2000) 2 sec 636.
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTO; & 801
               ORS. [D.K. JAIN, J.]
      induces the person so deceived to do or omit to do              A
      anything which he would not do or omit if he were not so
      deceived, and which act or omission causes or is likely to
      cause damage or harm to that person in body, mind,
      reputation or property, is said to "cheat".
                                                                      B
      Explanation.-A dishbnest concealment of facts is a
      deception within the meaning of this section."

It is plain from a bare reading of the Section that to hold a
person guilty of cheating, as defined in Section 415 of the IPC,
it is necessary to show that at the time of making the promise        C
he had fraudulent or dishonest intention to retain the property
or to induce the person so deceived to do some thing which
he would not otherwise do.

     22. The ingredients required to constitute an offence of         o
cheating have been succinctly laid down in Ram Jas Vs. State
of U.P. 5 , as follows:

      "(i) there should be fraudulent or dishonest inducement of
      a person by deceiving him;
                                                                      E
      (ii)(a) the person so deceived should be induced to deliver
      any property to any person, or to consent that any person
      shall retain any property; or

      (b) the person so deceived should be intentionally induced
                                                                      F
      to do or omit to do anything which he would not do or omit
      if he were not so deceived; and

      (iii) in cases covered by (ii)(b}, the act or omission should
      be one which causes or is likely to cause damage or harm
      to the person induced in body, mind, reputation or              G
      property." (Hridaya Ranjan Prasad Verma & Ors. Vs.
      State of Bihar & Anr. 6 , S. W Palanitkar & Ors. Vs. State

s.   (1970) 2 sec 740.
6.   (2000) 4 sec 168.                                                H
    802       SUPREME COURT REPORTS                  [2010] 11 S.C.R.


A         of Bihar & Anr. 7 , Kuriachan Chacko & Ors. Vs. State of
          Kerala 8 )

        23. Similar views were echoed in Medchl Chemicals &
    Pharma (P) Ltd. Vs. Biological E. Ltd. & Ors. 9 , wherein it was
    observed that:
8
           "In order to attract the provisions of Sections 418 and 420
           the guilty intent, at the time of making the promise is a
           requirement and an essential ingredient thereto and
           subsequent failure to fulfil the promise by itself would not
C          attract the provisions of Section 418 or Section 420. Mens
           rea is one of the essential ingredients of the offence of
           cheating under Section 420. As a matter of fact Illustration
           (g) to Section 415 makes the position clear enough to
           indicate that mere failure to deliver in breach of an
D          agreement would not amount to cheating but is liable only
         · to a civil action for breach of contract."

       24. It is well settled that in order to constitute an offence
  of cheating, it must be shown that the accused had fraudulent
E or dishonest intention at the time of making the representation
  or promise and such a culpable intention right at the time of
  entering into an agreement cannot be presumed merely from
  his failure to keep the promise subsequently. (Also see: Hira
  Lal Hari Lal Bhagwati Vs. CBI, New Delhi10 ).

F        25. In the instant case, it has been alleged by IEL that at
   the time of entering into the tripartite agreement, the appellants,
   by having suppressed the fact that FCIL was likely to be
   declared a sick company and was, in fact, declared to be so
   by the BIFR, had dishonest intention to induce IEL to enter into
G. the said agreement, which amounted to cheating. A bare

    7.         sec 241.
         (2002) 1
  8. (2008) 8 sec 708.
  9. (2000) 3 sec 269.
H 10. (2003) 5 sec 257.
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. & 803
               ORS. [D.K. JAIN, J.]
reading of the complaint would show that there is not even a         A
whisper let alone a specific averment that the appellants had
dishonestly "induced" IEL to enter into the said agreemenU
arrangement. On the contrary, the complaint clearly reveals that
IEL was fully conscious of the precarious financial health of FCIL
at the time they had decided to enter into contract with FCIL        B
and BCCL to ensure a regular supply of their basic raw material
from FCIL so that their production of explosives did not suffer.
At this juncture it would be apposite to extract relevant portions
of the complaint:

    "6. That the complainant Company approached the C
    accused persons at their office at 41, Chowringhee Road,
    Kolkatta-700 071 to supply a large quantity of
    Ammonium Nitrate and at last the accused persons had
    agreed to such proposal. The complaint had been to the
    office of the accused persons on several occasions and D
    had several discussions with this regard with some terms
    and conditions.

    7. That the accused persons supplied Ammonium Nitrate
    to the complaint Company for some time. The accused              E
    persons who were officers-in-charge of (sic) and were
    responsible for the supply of ammonium nitrate to the
    complainant's company made the following
    representations to the complainant and other officers of the
    complainant's Company:-                                          F

            (a) That it would not be possible for the accused
            persons to maintain regular supply of Ammonium
            Nitrate to the complainant's company due to acute
            shortage of funds the Company of the accused
            persons was not in position to lift coal from MIS        G
            Bharat Coking Cog_Lltd. hereinafter referred as
            "BCCL" which is one of the subsidiaries of Coal
            India Ltd. and unless regular supply of coal is
            received by the company of the accused persons
            from BCCL, the manufacture of Ammonium Nitrate           H
    804      SUPREME COURT REPORTS               [2010] 11 S.C.R.


A               would be hampered and consequently the company
                of the accused person would not be able to supply
                the same to the company of the complainant.

                (b) That it was represented by the accused persons
                that as BCCL purchases huge industrial explosives
B
                from the complainants company, for using
                explosives in their coal mines for mining/procuring
                coal, and as BCCL supplies coal to the company
                of the accused person, for the purpose of its
                manufacturing Ammonium Nitrate, which would be
c               supplied to the Company of the complainant, the
                accused persons would make arrangements with
                BCCL so that instead of making payment to the
                company of the accused persons for supply of
                ammonium nitrate, the Complainant's Company
D               would make an advance payment of Rs.
                4,20,41,622/- by supply of explosives to BCCL and
                the same would be adjusted for its supply of coal
                to the company of the accused person against
                supply of Ammonium nitrate of equivalent value by
E               the company of the accused persons to the
                complainant's company.




F




G
          8. That on such representations the accused persons
          induced the complainant and the officers of the company
          to pay a sum of Rs.4,20,41,622/- and equivalent to BCCL
          between September 2001 to November 2001 on the
          specific representations that the accused persons would
H
V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. &              805
              ORS. [D.K. JAIN, J.]
  supply ammonium nitrate to IEL and the said sum would          A
  be adjusted towards the supply of ammonium nitrate.




  10. That enquiry revealed that the accused persons             B
  deliberately and with fraudulent intentions while making the
  aforesaid representations to the complainant and other
  officers of IEL for dishonestly inducing them to pay
  Rs.4,20,41,622/- and or equivalent to and the said amount
  an or equivalent was entrusted to BCCL in the false            C
  representation of the accused persons and the said
  entrustment was made to BCCL on the behalf of the
  accused persons. The accused persons deliberately
  suppressed that FCIL was already declared to be a "Sick
  Company" and was referred to BIFR after eroding its net        D
  worth and became a 'sick company". The accused persons
  also suppressed the fact that BIFR was considering
  winding up of FCIL by recommending to the Hon'ble High
  Court at Delhi.
                                                                 E
  11. That it was further learned that the accused persons
  with deceptive and fraudulent intentions deliberately
  suppressed that a huge arr.~:mt was already due to various
  other suppliers of raw materials and other creditors, that
  the complainant would have not parted with such a huge
                                                                 F
  amount of Rs.4,20,41,622/- and or equivalent to BCCL if
  they were not deceived by the false and fraudulent
  representation of the accused persons and induced to part
  with the said sum.

  12. That the accused persons had therefore acted in            G
  collusion and connivance with each other in order to
  defraud and cheat the company of the complainant to
  make entrustment of the said sum of Rs.4,20,41,622/- and
  or equivalent to BCCL for and on the behalf of the
  company of the accused persons.                                H
    806       SUPREME COURT REPORTS                  (2010] 11 S.C.R.


A         13. That the accused persons were party to a criminal
          conspiracy and criminal design they were in collusion to
          each other intentionally deceived the complainant and
          officers of IEL and by their false and fraudulent
          re·presentation made the company of the complainant to
B         believe that they would supply ammonium nitrate to IEL of
          Rs.4,20,41,622/- and or equivalent is paid by IEL to BCCL
          and by such representation induced the complainant and
          other officers of IEL to pay a sum of Rs.4,20,41,622/- and
          or equivalent to BCCL knowing it fully well th.at the
c         representations made by them were false and they would
          not supply ammonium nitrate to IEL in respect of the said
          sum advanced by IEL to BCCL on their behalf and thus
          they have committed offences rendering themselves liable
          to be prosecuted under the provisions of the Section
          1208/420/406 of the Indian Penal Code and also under
D
          Section 540/542 of the Companies Act, 1956."
                                                                       ,
                                          (Emphasis supplied by us)

          26. It is manifest from the afore-extracted paragraphs of
E   the complaint that the basis of the complaint is that by
    deliberately suppressing the fact that FCIL had already been
    referred to the BIFR after the erosion of its net worth and was
    likely to be declared a "sick company", the appellants induced
    IEL to pay Rs.4,20,41,622/- to BCCL and in return did not
F   supply ammonium nitrate to them. In our view, a mere mention
    of the words "defraud" and "cheat" in para 12 of the complaint,
    in the setting that these have been used, is not sufficient to infer
    that the appellants had dishonest intention right at the beginning
    when, demonstrably, after due deliberations a tripartite
G   agreement was signed, which, under the given circumstances
    at that juncture, was considered to be in the interest of all the
    three parties to the agreement. In this regard, it would be useful
    to advert to the following observations made by this Court in
    Anil Mahajan Vs. Bhor Industries Ltd. & Anr. 11 :

H   11. (2005) 10 sec 22a.
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. & 807
               ORS. [D.K. JAIN, J.]
     "The substance of the complaint is to be seen. Mere use             A
     of the expression 'cheating' in the complaint is of no
     consequence. Except mention of the words 'deceive' and
     'cheat' in the complaint filed before the Magistrate and
     'cheating' in the complaint filed before the police, there is
     no averment about the deceit, cheating or fraudulent                B
     intention of the accused at the time of entering into MoU
     wherefrom it can be inferred that the accused had the
     intention to deceive the complainant to pay."

      27. In our opinion, in the present case, at best, it was a         C
case of breach of contract on the part of FCIL, for which the
said company is already defending a civil suit filed by IEL. In
this behalf, it is also pertinent to note that in para 5 of the plaint
filed by IEL it is averred that:

     "While the aforesaid arrangement was continuing and the             D
     defendant no.1 supplied various quantities of Ammonium
     Nitrate malt to the plaintiff in the years 2000-2001, the
     defendant no. 1 ran into serious difficulties in continuing
     its production due to breakdown of synchronized gas
     compressor and the other financial problems .... "                  E

      28. In our view, the averment strikes at the root of the
allegation that at the time of entt1 .ng into the agreement some
time in the year 2001, the appellants had fraudulent intention
to somehow induce IEL to enter into the said agreement and
part with a huge sum of money. It bears repetition that on their         F
own showing IEL was fully aware of the financial health of FCIL
at the time the said contract was entered into, as also the
reason why FCIL was unable to continue the production of
ammonium nitrate. It needs little emphasis that in order to
constitute an offence of "cheating", the intention to deceive            G
should be in existence at the time when the alleged inducement
was made. In the instant case, such an intention cannot be
inferred from the aforenoted allegations in the complaint and
averments in the plaint. In our opinion, therefore, even if the
allegations made in the complaint are taken to be correct on             H
    808      SUPREME COURT REPORTS                   [201 O] 11 S.C.R.

A   their face value, may amount to breach of terms of contract by
    FCIL but do not constitute an offence of "cheating", punishable
    under Section 420 of the IPC.

         29. We may now consider whether the allegations in the
    complaint make out a case of criminal breach of trust, as
8
    defined in Section 405 of the IPC, the Section reads as follows:

          "405. Criminal breach of trust-Whoever, being in any
          manner entrusted with property, or with any dominion over
          property, dishonestly misappropriates or converts to his
c         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 discharged, or of any
          legal contract, express or implied, which he has made
          touching the discharge of such trust, or wilfully suffers any
D         other person so to do, commits "criminal breach of trust".

          Explanation 1.-A person, being an employer of an
          establishment whether exempted under section 17 of the
          Employees' Provident Funds and Miscellaneous
          Provisions Act, 1952 (19 of 1952), or not who deducts the
E
          employee's contribution from the wages payable to the
          employee for credit to a Provident Fund or Family Pension
          Fund established by any law for the time being in force,
          shall be deemed to have been entrusted with the amount
          of the contribution so deducted by him and if he mf!kes
F         default in the payment of such contribution to the said Fund
          in violation of the said law, shall be deemed to have
          dishonestly used the amount of the said contribution in
          violation of a direction of law as aforesaid.

G         Explanation 2.-A person, being an employer, who
          deducts the employees' contribution from the wages
          payable to the employee for credit to the Employees' State
          Insurance Fund held and administered by the Employees'
          State Insurance Corporation established under the
H         Employees' State Insurance Act, 1948 (34 of 1948), shall
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD .. & 809
               ORS. [D.K. JAIN, J.]
    be deemed to have been entrusted with the amount of the        A
    contribution so deducted by him and if he makes default
    in the payment of such contribution to the said Fund in
    violation of the said Act, shall be deemed to have
    dishonestly used the amount of the said contribution in
    violation of a direction of law as aforesaid."                 B

     30. According to the Section, a criminal breach of trust
involves the following ingredients:

    "(a) a person should have been entrusted with property, or
    entrusted with dominion over property;                         C

    (b) that person should dishonestly misappropriate or
    convert to his own use that property, or dishonestly use or
    dispose of that property or wilfully suffer any other person
    to do so; and                                                  D
    (c) that such misappropriation, conversion, use or disposal
    should be in violation of any direction of law prescribing
    the mode in which such trust is to be discharged, or of any
    legal contract which the person has made, touching the
    discharge of such trust."                                      E

    31. In Onkar Nath Mishra & Ors. Vs. State (NCT of Delhi)
& Anr. 12 , a bench of two Judges of this Court, in which one of
us (D.K. Jain, J.) was a member, had observed that two distinct
parts were involved in the commission of the offence of criminal   F
breach of trust. The first part consists of the creation of an
obligation in relation to the property over which dominion or
control is acquired by the accused. The second is the
misappropriation or dealing with the property dishonestly and
contrary to the terms of the obligation created.                   G
    32. Therefore, in relation to the offence under Section 405,
IPC, the first ingredient that needs to be established is


12. (200B) 2 sec 561.                                              H
    810          SUPREME COURT REPORTS             [2010] 11 S.C.R.


A   "entrustment." In Common Cause, A Registered Society V~.
    Union of India & Ors. 13 , this Court held that:

          "A trust contemplated by Section 405 would arise only
          when there is an entrustment of property or dominion over
          property. There has, therefore, to be a property belonging
B
          to someone which is entrusted to the person accused of
          the offence under Section 405. The entrustment of property
          creates a trust Which is only an obligation annexed to the
          ownership of the property and arises out of a confidence
          reposed and accepted by the owner."
c
       33. However, it must be borne in mind that Section 405,
  IPC 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 property makes it over to
D another person to be retained by him until a certain contingency
  arises or to be disposed of by him on the happening .of a
  certain event. (See: Jaswantrai Manila/ Akhaney Vs. State of
  Bombay 14 and Indian Oil Corpn. Vs. NEPC India Ltd. &
    Ors. 15 .)
E
         34. In the instant case, there is nothing in the complaint
    which may even suggest remotely that the IEL had entrusted
    any property to the appellants or that the appellants had
    dominion over any of the properties of the IEL, which they
    dishonestly converted to their own use so as to satisfy the
F   ingredients of Section 405 of the IPC, punishable under Section
    406 IPC.

         35. Having come to the conclusion that no prima facie case
    had been made out against the appellants in respect of the
. G alleged offences under Sections 420 and 406 IPC, the question
    of alleged conspiracy between the appellants does not arise.

    13. (1999) 6 sec 667.
    14. AIR 1956 SC 575.
H   15. (2006) 6 sec 736.
 V.P. SHRIVASTAVA v. INDIAN EXPLOSIVES LTD. &                 811
               ORS. [D.K. JAIN, J.]
Nevertheless, in order to bring home the charge of conspiracy        A
within the ambit of Section 1208 of the IPC, it is necessary to
establish that there was an agreement between the appellants
for doing an unlawful act. The complaint lacks any such
substance.
                                                                     B
     36. The upshot of the foregoing discussion is that no prima
facie case is made out against the appellants in respect of
alleged offences under Sections 420, 406 and 1208 of the IPC
and, in our opinion, it was a fit case where the High Court should
have exercised its jurisdiction under Section 482 of the Code        C
quashing the complaint against the appellants.

     37. For the aforegoing reasohs, the appeals are allowed;
the impugned order is set aside and the order of the Magistrate
taking cognizance in Complaint Case No.2560 of 2003 is
quashed.                                                             D

N.J.                                          Appeals allowed.