Court’s Decision
The Calcutta High Court dismissed a criminal revision petition seeking quashing of proceedings under Sections 420, 406, and 120B of the Indian Penal Code. The Court held that the case involved serious allegations of cheating and criminal breach of trust in relation to a financial transaction involving Rs. 15 lakh, and observed that the matter pertained to disputed facts that warranted adjudication through trial. The Court ruled that “mens rea cannot be scrutinized at this juncture” and clarified that a mini-trial under Section 482 of the Code of Criminal Procedure is impermissible. The petition was found devoid of merit and dismissed accordingly.
Facts
The dispute arose from a complaint filed by the opposite party alleging that the petitioner had taken a short-term loan of Rs. 15 lakh in 2011, repayable within 120 days with 17% interest. The loan was allegedly renewed periodically with issuance of fresh cheques. When three cheques issued by the petitioner were dishonoured for insufficient funds, the opposite party initiated proceedings under the Negotiable Instruments Act, which were later withdrawn after an alleged settlement and payment of Rs. 2,41,200.
However, the principal loan amount remained unpaid. Despite legal notice dated 04.02.2020 and demands, the petitioner refused repayment. Thereafter, a complaint under Sections 406, 420, and 120B IPC was filed. Cognizance was taken by the Magistrate and summons issued. The petitioner sought quashing of proceedings, alleging that no offence was made out and the case was a civil dispute given a criminal colour.
Issues
- Whether the allegations against the petitioner constitute the ingredients of offences under Sections 406, 420, and 120B of the Indian Penal Code.
- Whether the proceedings are liable to be quashed under Section 482 of the Code of Criminal Procedure.
Petitioner’s Arguments
The petitioner contended that the complaint was malicious and intended to harass, given that the loan was taken in 2011 and interest was paid till 2019. It was argued that there was no dishonest intention from the inception, which is essential to constitute cheating under Section 420 IPC. Further, payments of over Rs. 8,27,115 were allegedly made towards loan repayment. The petitioner also cited the amicable settlement and withdrawal of prior NI Act cases, which the complainant allegedly suppressed in the complaint. It was submitted that the dispute was civil in nature, and the criminal proceedings constituted an abuse of process.
Respondent’s Arguments
The opposite party maintained that the petitioner had never repaid the principal amount, despite acknowledging receipt of the loan. The dishonour of cheques and non-payment, even after repeated notices, were said to indicate fraudulent intent. It was argued that the complaint made out a prima facie case of cheating and criminal breach of trust, and whether the payments were towards interest or principal was a factual question unsuitable for decision in revision. It was also urged that the power under Section 482 CrPC could not be used for disputed factual issues.
Analysis of the Law
The Court analysed the statutory ingredients of Sections 420 and 406 IPC. It clarified that under Section 420, there must be deception, dishonest inducement to deliver property, and mens rea from the inception. Section 406 requires dishonest misappropriation of property entrusted to the accused. The Court reiterated that mere breach of contract or inability to repay a loan does not attract these penal provisions unless there is fraudulent intent at the outset.
Precedent Analysis
The petitioner relied on:
- Lalit Chaturvedi v. State of Uttar Pradesh – Criminal proceedings cannot substitute recovery mechanisms.
- Manish v. State of Maharashtra, Vir Prakash Sharma v. Anil Kumar Agarwal, Uma Shankar Gopalika v. State of Bihar – Mere failure to repay does not constitute cheating without initial dishonest intention.
- Satischandra Ratanlal Shah v. State of Gujarat, Delhi Race Club v. State of U.P. – Civil disputes must not be converted into criminal cases.
The opposite party cited:
- Atamjit Singh v. State – Mixed questions of law and fact (e.g., time-barred debt) cannot be addressed in revision.
- Davinder Kaur v. State of West Bengal – Quashing is not appropriate when charge is framed and evidence recorded.
The Court found that the petitioner’s cited cases involved simple non-payment, whereas the present matter involved cheque dishonour, alleged suppression of facts, and non-repayment of principal despite promises.
Court’s Reasoning
The Court held that the key issue—whether payments made were towards interest or principal—was a factual matter requiring trial. It noted that the Court’s jurisdiction under Section 482 CrPC is limited and cannot be invoked for factual assessments. The Court emphasized that quashing is warranted only in exceptional cases where the complaint is manifestly absurd or does not disclose any offence, which was not the case here. It reaffirmed that “to exercise the inherent power under Section 482 CrPC is not the rule but the exception.”
Conclusion
The Court concluded that the complaint disclosed sufficient prima facie material to warrant trial. The allegations could not be held as inherently improbable at this stage, and the proceedings were not liable to be quashed. The petition was dismissed. The Court clarified that its observations were not on merits and directed the trial to be concluded expeditiously.
Implications
This judgment reinforces the principle that criminal proceedings involving disputed facts and allegations of cheating cannot be short-circuited through revision or quashing at the threshold. It also reiterates the need for clear mens rea from the inception to attract criminal charges in civil financial disputes.
FAQs
- Can a criminal case for non-repayment of a loan be quashed if payments were made for interest?
No. The High Court held that whether payments were made for interest or principal is a factual issue to be tried and not to be decided in revision. - Is mens rea from inception necessary to establish cheating under Indian law?
Yes. The Court reiterated that the dishonest intention must exist at the inception of the transaction to constitute an offence under Section 420 IPC. - Can civil disputes be given a criminal colour to pressurize repayment?
Courts disapprove of such tactics. However, where allegations disclose prima facie criminal offences, proceedings cannot be quashed merely because a civil remedy is also available.
