w w w . L a w y e r S e r v i c e s . i n



M/s. Maneesh Pharmaceuticals Pvt. Ltd. & Others v/s M/s Pharose Remedies Ltd. & Another


Company & Directors' Information:- MANEESH PHARMACEUTICALS LIMITED [Active] CIN = U24230MH1985PLC036952

Company & Directors' Information:- B S P PHARMACEUTICALS LIMITED [Active] CIN = U24231GJ1987PLC009556

Company & Directors' Information:- G P T PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24233TG2009PTC064156

Company & Directors' Information:- PHAROSE REMEDIES LIMITED [Active] CIN = U24239PB1997PLC020673

Company & Directors' Information:- S P C REMEDIES PRIVATE LIMITED [Active] CIN = U24239DL2004PTC125962

Company & Directors' Information:- REMEDIES PHARMACEUTICALS INDIA PRIVATE LIMITED. [Active] CIN = U74899DL1992PTC051039

Company & Directors' Information:- A N PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24233DL2000PTC108617

Company & Directors' Information:- J. B. REMEDIES PRIVATE LIMITED [Active] CIN = U24239UR2007PTC032413

Company & Directors' Information:- P AND B PHARMACEUTICALS LIMITED [Active] CIN = U24230MH1978PLC020846

Company & Directors' Information:- E L C PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24239DL1998PTC097310

Company & Directors' Information:- V C PHARMACEUTICALS (INDIA) PRIVATE LIMITED [Active] CIN = U24230KL2012PTC031429

Company & Directors' Information:- C I PHARMACEUTICALS PVT. LTD [Active] CIN = U24233WB1988PTC045057

Company & Directors' Information:- M J PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24230MH1996PTC101370

Company & Directors' Information:- R. J. PHARMACEUTICALS (INDIA) PRIVATE LIMITED [Under Liquidation] CIN = U24232RJ1994PTC008899

Company & Directors' Information:- R P L (INDIA) PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24239DL2002PTC115402

Company & Directors' Information:- L S K PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24231KA1990PTC011299

Company & Directors' Information:- P P PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24232WB2003PTC096731

Company & Directors' Information:- F C PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24239GJ2007PTC051567

Company & Directors' Information:- G D S J PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24239DL2001PTC109888

Company & Directors' Information:- S S M PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24232RJ1982PTC002502

Company & Directors' Information:- S S PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24231UP1982PTC005587

Company & Directors' Information:- M A S PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U51397PB2004PTC027688

Company & Directors' Information:- A V PHARMACEUTICALS PRIVATE LIMITED [Amalgamated] CIN = U24232DL1999PTC098651

Company & Directors' Information:- M K REMEDIES PRIVATE LIMITED [Strike Off] CIN = U24231UP1997PTC022812

Company & Directors' Information:- P G PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U74899DL1990PTC039757

Company & Directors' Information:- E M PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24239MH1992PTC066216

Company & Directors' Information:- I V A REMEDIES PRIVATE LIMITED [Active] CIN = U24118UP1990PTC011740

Company & Directors' Information:- B D PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24233WB2009PTC132243

Company & Directors' Information:- O R N REMEDIES PRIVATE LIMITED [Active] CIN = U00304DL2005PTC140854

Company & Directors' Information:- A G D PHARMACEUTICALS PVT LTD [Strike Off] CIN = U24231KL1984PTC003885

Company & Directors' Information:- S T PHARMACEUTICALS PVT LTD [Strike Off] CIN = U51909WB1989PTC047031

Company & Directors' Information:- N V K PHARMACEUTICALS PRIVATE LIMITED [Under Process of Striking Off] CIN = U24296UP2016PTC082942

Company & Directors' Information:- G K D PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24231WB1999PTC089334

Company & Directors' Information:- C F PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24231TN1982PTC009598

Company & Directors' Information:- M D PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24232WB2008PTC121471

Company & Directors' Information:- I. S. PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24306KA2016PTC097524

Company & Directors' Information:- A M PHARMACEUTICALS (INDIA) PRIVATE LIMITED [Strike Off] CIN = U24233KL2010PTC026018

Company & Directors' Information:- B. C. PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U51900UP2018PTC109946

Company & Directors' Information:- M M PHARMACEUTICALS LIMITED [Strike Off] CIN = U24231TN1982PLC009714

Company & Directors' Information:- S AND S PHARMACEUTICALS INDIA PVT LTD [Strike Off] CIN = U24232CH1984PTC005799

Company & Directors' Information:- N C PHARMACEUTICALS PVT LTD [Strike Off] CIN = U24239HP1986PTC006997

Company & Directors' Information:- M S D REMEDIES LIMITED [Strike Off] CIN = U24232RJ2001PLC017342

Company & Directors' Information:- S R REMEDIES PRIVATE LIMITED [Active] CIN = U24232DL2004PTC128921

Company & Directors' Information:- A B S REMEDIES PRIVATE LIMITED [Active] CIN = U24232DL1998PTC096360

Company & Directors' Information:- R G PHARMACEUTICALS CO PVT LTD [Strike Off] CIN = U24231HP1978PTC003877

Company & Directors' Information:- B M G PHARMACEUTICALS PVT LTD [Under Liquidation] CIN = U24232WB1974PTC029532

Company & Directors' Information:- M S PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24231UP1995PTC018120

Company & Directors' Information:- B G PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24231OR2002PTC006872

Company & Directors' Information:- H & S REMEDIES PRIVATE LIMITED [Active] CIN = U24232UP2002PTC026801

Company & Directors' Information:- D R P S PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24232UP2004PTC028820

Company & Directors' Information:- K N B PHARMACEUTICALS LIMITED [Strike Off] CIN = U24239CH1996PLC018286

Company & Directors' Information:- J S I PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24232UP1998PTC023778

Company & Directors' Information:- S S REMEDIES PRIVATE LIMITED [Strike Off] CIN = U24231HP1991PTC011595

Company & Directors' Information:- B I PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24231CH1997PTC019728

Company & Directors' Information:- J G PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24231DL1987PTC027452

Company & Directors' Information:- R R REMEDIES PRIVATE LIMITED [Strike Off] CIN = U24231KA1990PTC011480

Company & Directors' Information:- J N PHARMACEUTICALS LIMITED [Strike Off] CIN = U24230TG1996PLC023652

Company & Directors' Information:- J AND J PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24119OR1973PTC000584

Company & Directors' Information:- V S REMEDIES PRIVATE LIMITED [Active] CIN = U51397UP1998PTC023583

Company & Directors' Information:- C W C PHARMACEUTICALS PVT. LTD. [Active] CIN = U24231HR1990PTC030903

Company & Directors' Information:- A J S PHARMACEUTICALS (INDIA) PRIVATE LIMITED [Strike Off] CIN = U24232KA1972PTC002273

Company & Directors' Information:- A C PHARMACEUTICALS PVT LTD [Active] CIN = U51397WB1970PTC027869

Company & Directors' Information:- R K PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24232DL2006PTC154640

Company & Directors' Information:- A. PHARMACEUTICALS PVT LTD [Strike Off] CIN = U24232DL1999PTC100973

Company & Directors' Information:- N G PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24100MH2010PTC202028

Company & Directors' Information:- S V N PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24230MH2005PTC155731

Company & Directors' Information:- S. V. G. PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24297MH2010PTC202540

Company & Directors' Information:- K S R REMEDIES PRIVATE LIMITED [Strike Off] CIN = U74999MH2010PTC210243

Company & Directors' Information:- J. D. REMEDIES PRIVATE LIMITED [Under Process of Striking Off] CIN = U74999UP2014PTC063593

Company & Directors' Information:- K. D. PHARMACEUTICALS PRIVATE LIMITED [Under Process of Striking Off] CIN = U74999UP2016PTC084198

Company & Directors' Information:- D S REMEDIES PRIVATE LIMITED [Active] CIN = U24230CH2005PTC028348

Company & Directors' Information:- G S REMEDIES PRIVATE LIMITED [Active] CIN = U24230CH2005PTC028349

Company & Directors' Information:- Y. R. PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24232CH2011PTC032883

Company & Directors' Information:- A. B. PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U51909AS2012PTC011351

Company & Directors' Information:- N. S. PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U52311JH2007PTC012709

Company & Directors' Information:- J A PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24232DL2005PTC136777

Company & Directors' Information:- S P R PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24232DL2005PTC137405

Company & Directors' Information:- D F L PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U51101DL2014PTC270743

Company & Directors' Information:- A R K PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U74120DL2014PTC266920

Company & Directors' Information:- N N PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U33111BR2012PTC018665

Company & Directors' Information:- G R REMEDIES INDIA PRIVATE LIMITED [Strike Off] CIN = U24100KA2013PTC072184

Company & Directors' Information:- J N REMEDIES PRIVATE LIMITED [Active] CIN = U24100GJ2015PTC083303

Company & Directors' Information:- V AND B PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24290UP2020PTC133785

Company & Directors' Information:- S AND L REMEDIES PRIVATE LIMITED [Active] CIN = U33309DL2021PTC377313

Company & Directors' Information:- M D PHARMACEUTICALS PRIVATE LIMITED [Active] CIN = U24290MH2021PTC360217

Company & Directors' Information:- U V PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U99999MH1998PTC117667

Company & Directors' Information:- J. V. PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24239MH2009PTC189669

Company & Directors' Information:- K R R PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24232TG2008PTC062007

Company & Directors' Information:- A P PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24233TG2008PTC062019

Company & Directors' Information:- C K PHARMACEUTICALS PRIVATE LIMITED [Strike Off] CIN = U24233UP2007PTC033596

    CRMC. No. 43 of 2010 & IA. Nos. 47 of 2010 & 107 of 2011

    Decided On, 24 May 2019

    At, High Court of Jammu and Kashmir

    By, THE HONOURABLE MR. JUSTICE SANJAY KUMAR GUPTA

    For the Petitioners: M/s. Rajneesh Oswal, Achal Sharma, Advocates. For the Respondents: Anuj Dewan Raina, Advocate.



Judgment Text

1. By way of instant petition, petitioners seek quashment of Criminal Complaint No.40 instituted on 21.02.2009 titled “M/s Pharose Remedies Ltd. & anr. Vs. M/s Manish Pharmaceuticals Pvt. Ltd.& ors.” for offences under Sections 406, 418, 420, 420-A, 422 read with Section 120-B RPC pending in the court of learned 1st Addl. Munsiff, Jammu. Petitioners also seek quashing of order dated 21.02.2009 by virtue of which cognizance has been taken in the complaint and subsequent proceedings thereto.

2. The main facts as enumerated in this petition are that on 11th March. 2005, an Agreement has been reached between M/s Pharose Remedies Ltd. and M/s Maneesh Pharmaceutical Private Limited at Mumbai regarding getting pharmaceutical products manufactured by the respondents-company. As per the Agreement necessary raw materials including packing materials required by M/s Pharose Remedies Limited for processing and packaging of the finished products were to be supplied by the petitioners. Fulfilling the part of the agreement, petitioners supplied raw material along with all necessary material to the respondents M/s Pharose Remedies Ltd. Petitioners also supplied machinery to respondents to upgrade the yield and quality of product. However, ownership of the new machinery remains with petitioner No.l. It is necessary to mention here that the ledger copy attached with the complaint shows that the total business transactions to the tune of Rs.5.50 crore had taken place between the petitioners and respondents. The accounts also clarified that petitioner No.2 had already paid Rs.3.00 crore apart from supplying raw material/packaging material worth more than Rs.1.00 crore to the respondents during the said period since the business was running good and smoothly between them. In the mean time, respondents in order to get the undue profit because of the high demand of the product, violated the terms and conditions of the agreement and started manufacturing the said product on their own accord without any intimation to the M/s Maneesh Pharmaceutical Private Limited and thus violated the terms of agreement by purchasing raw material directly from the market and fraudulently selling it in the market which was otherwise marketed through petitioner supplier, namely Division Svizera Healthcare. Respondents were time and again intimated by the petitioners to stop such malpractice and remain strict to the terms and conditions of the agreement, but the respondents kept deaf ear and did not respond to the genuine advice of the petitioners. Since petitioners are dealing with pharmaceutical products and their manufacturing requires certain specification, respondents failed to follow the specifications and manufactured low quality products, consequent thereof, petitioners stopped the supply of raw material and taking the finished products from respondent i.e. M/s Pherose Remedies Limited. Respondent's willful violation and breach of agreement caused huge pecuniary loss to the petitioners. Instead of liquidating the loss occurred to the petitioners, respondents filed complaint in frustration by invoking the jurisdiction of learned court and submitted in the complaint that they have suffered a loss of Rs.74,71,486/-. Instead of approaching the civil court, which is appropriate forum for adjudication of matter, respondents on the one hand preferred shortcut method by initiating criminal proceedings against the petitioners by filing impugned complaint simply to mentally harass and embarrass the petitioners and on the other hand respondents very tactfully escaped the liability of paying Court fee.

3. Feeling aggrieved of the impugned complaint, issuance of process and further proceedings, the petitioners have prayed for quashing of the same, inter alia, on the following grounds:

i. That the impugned complaint and the cognizance taken therein and process issued by the learned court below are a gross misuse of law as such deserves to be quashed.

ii. That it seems that the learned Munsiff Court issued process in a very casual manner. Thus taking cognizance by the Learned Court and issuing process therein without any cogent and reasonable grounds is misuse and abuse of law. On this sole ground the complaint deserves outright dismissal. That the ingredients of offences leveled against the petitioners are patently lacking in the complaint. It is well settled principal of law that if the allegations made in the complaint are taken in the face value and accepted in their entirety do not constitute an offence. The criminal proceedings instituted on the basis of such complaint is nothing but abuse of law. In the instant case, the offence of cheating along with the other offences could not be made out because intention of cheating must be at the inception of the transactions and not on the failure of the parties to honour its commitments to clear the outstanding payable to him. Since there was smooth running of business and fair transactions of raw material and finished had taken place during the course of business as such ingredients of cheating are totally lacking. Moreover, it is the respondents who are misusing the raw material and the machinery supplied to them. As such on this sole ground alsothe proceedings initiated against the petitioners deserves dismissal.

iii. That it is nothing but a pure civil dispute between the petitioners and the respondents on the basis of running transaction between them. Since transactions is purely civil in nature and remedies are available under Remedial Provision of Law. As such issuing process without giving any cogent and reasonable ground on which the cognizance has taken is blatant misuse and abuse of law. It is apt to mention here that there has been already transaction of huge sum of money by and between the parties (i.e. Petitioner and respondents) has taken place. As it is admitted by the respondents that they have spent crores of rupees and at present showing a loss of Rs.74,71,486.00 clearly indicates that there was fair exchange of transaction in the business right from the beginning. It is only the respondents who have committed the breach of trust and have cheated the petitioners by using their machinery and also by violating the terms and conditions of the agreement and have forced the respondents to stop the delivery of raw material. Thus, respondents’ allegations that petitioners were carrying mala fide intention right from the beginning is totally false and frivolous. On these scores the proceedings initiated against the petitioners deserves dismissal.

iv. That the allegations leveled against the petitioners that they have allured the respondents are totally baseless and have no locus standi. That agreement has been signed at Bombay by the respondents so, no question of allurement arose in such situation. Respondents speculated huge profits in the business and have consciously signed the agreement at Bombay.

v. That the allegation of breach of the trust leveled against the petitioners are also false, as the ingredients of the breach of trust are lacking. In the instant case there is neither any entrustment of property nor dishonest misappropriation thereof. The fact is that the petitioners have supplied machinery to the respondents for the production of quality products and the ownership of said machinery remains with petitioner. Till date the said machinery is still in the domain of respondents. On this ground also proceeding initiated against the petitioners deserves dismissal. The copy of the debt note showing the cost of machinery supplied by the respondents is annexed herewith annexure-F, along with the copy showing the nature of the material produced and sold illegally by the respondents.

4. Respondents in their objections have stated that in the month of March 2005, the petitioners induced the respondents for manufacturing the pharmaceutical products of the petitionerscompany. That after completing all the formalities and after obtaining necessary permission from the department concerned, respondents started manufacturing the pharmaceutical products of the petitioners- company and time to time supplied the same to the petitionerscompany. That on 08.06.2005, first consignment was sent to the petitioners-company and thereafter regular consignments were made upto 08.12.2006 as per the requirement made by the petitionerscompany and to that effect respondents maintained the record. That the petitioners with oblique motive and dishonest intention initially agreed with the respondents to get their pharmaceuticals product manufactured from the respondents for the next three years from the date of execution of the agreement dated 11.03.2006 and on the assurance of the petitioners, respondents invested huge amount in making infrastructures for manufacturing the products of petitioners, but in order to achieve their oblique motive petitioners suddenly stopped issuing orders of production after 08.12.2006 thereby causing a wrongful loss to the respondents by cheating and persuading the respondents to invest such a huge amount for manufacturing the pharmaceutical products for the petitioners-company. Petitioner No.5 with dishonest intention destroyed some of the material of the respondents which is lying with the Branch Office, Gandhi Nagar, Jammu as well as industrial premises of the respondents, thereby causing great loss to the respondents. The petitioners do not reserve any right to seek protection under 561-A Cr.P.C. who approached this Hon?ble Court with unclean hands by concealing and suppressing the material facts, as such the petition being devoid of merit based upon false assertions without supporting any material evidence. The respondents had filed a criminal complaint on 21.02.2009 before learned Chief Judicial Magistrate, Jammu under Sections 406, 418, 420, 420-A, 422 read with Sectioin 120-B RPC and the said complaint was transferred to the Court of 1st Additional Munsiff (Forest Magistrate) Jammu, whereby the Court after appreciating the statements and documents placed on record, took cognizance in the matter by issuing process against the accused/petitioners. There was ample evidence on record to show that there was sufficient evidence available against the petitioners, so the Court below was legally justified in taking cognizance in the matter and the petitioners are not legally justified to invoke the jurisdiction of this Court under Section 561-A Cr.P.C., therefore, the petition filed by the petitioners deserves to be dismissed.

5. I have heard learned counsel for the parties, considered their submissions and gone through the petition as well as the scanned record of court below.

6. While entertaining the present petition and issuing notice to the respondents on 31.03.2010, this Court has stayed the proceedings initiated before the court below.

7. It is apt to reproduce the relevant paragraphs No.3 to 6 of the complaint hereunder:-

“3. That in the month of March 2005, the accused Nos.2 to 5 on the behalf of accused No.1 Company, approached the complainant No.2 at Branch Office, Gandhi Nagar, Jammu of the Complainant Company and thereafter inspected the factory premises of the Complainant and showed their willingness and interest to get manufactured their pharmaceutical products through the Complainant. The Complainant were initially not interested to manufacture the pharmaceutical products of the accused No. 1 Company but on the allurement and inducement given by the accused No.2 to 5, the Complainant agreed to manufacture pharmaceutical products of the accused No. 1 Company and the accused Company executed an Agreement dated 11th March, 2005 with the Complainant No. 1 Company.

4.That the Complainants after obtaining the necessary permission and licence from the Competent Authority i.e. Food and Drug Control Organization, Jammu started manufacturing the pharmaceutical products of the accused No. 1 Company and time to time supplied the same by way of different invoices to the accused. It is germane to mention here that at the time of showing their interest for getting their products manufactured through the Complainants, the accused persons all along assured and made the Complainants to believe that time to time payments will be made as per the invoices without any delay and on their allurement and inducement, the Complainants supplied the material to the accused persons, which were manufactured at their request and initially first Consignment was sent on 8th June, 2005 and thereafter, regular production orders were received by the Complainants, which were fully complied with and last supply order was fulfilled on 8th December, 2006. It is submitted that as per the assurance given by the accused persons for timely payment against all invoices, the accused persons did not release the payment in favour of the Complainants despite repeated requests and reminders on the part of the accused. Copy of the Agreement dated 11th March, 2005 and details of the invoices whereby the supplies have been made to the accused persons by way of statements are enclosed herewith. It is submitted that after the manufacture of pharmaceutical products at behest of accused, the same was supplied to the accused through their Marketing Division Svizera Health Care and all time to time billings were made in the said name but the accused all along with dis-honest intention and while committing a criminal breach of trust did not make the payment to the complainants.

5. That at the time when the accused persons showed their intention to get their pharmaceutical products manufactured from the Complainants, the accused also assured that they will make this arrangement continue for three years from the date of execution of Agreement dated 11th March, 2005 and on their inducement and allurement, the Complainants invested huge amount in making the infrastructure for the manufacturing of the products of accused persons but thereafter, the accused suddenly stopped issuing orders for production after 8th December, 2006 and did not choose to release the payment as per the invoices and dishonestly and fraudulent intention withheld an amount of Rs.74,71,486.00 (Rs. Seventy Four Lac Seventy One Thousand Four Hundred Eight Six only) as on 31st March, 2008 of the Complainants. Instead of releasing the aforesaid payment, the accused persons adopted another modus-operandi and again made the Complainant to believe that they will release the entire amount immediately after the return of all pending materials of the accused persons lying in the premises of the Complainants, which infact was required to be used for the manufacturing of Pharmaceutical products of the accused No.1 Company. Thereafter, accused No. 5 came to Jammu and destroyed some of the material lying at branch Office Gandhi Nagar, Jammu as well as at the Industrial premises of Complainants but the accused persons did not choose to release the payment as was assured when they requested for the manufacturing of their products through the Complainants. The accused have committed criminal breach of trust, cheating in asmuchas fraud with the Complainants and have usurped huge amount of the Complainants with dishonest and fraudulent intention right from the very beginning and had well planned conspiracy to cheat the Complainants.

6. That the accused persons right from the very beginning i.e. when request for manufacturing of their pharmaceutical products was made to the Complainants, were aware that they had no intention to make the payment as per invoices and the goods supplied by the Complainants after manufacturing of the products of the accused persons at their request and on allurement, inducement, fraudulent and dishonest intention concealed the real facts and while inducing the Complainants, deceived them to deliver valuable security in the shape of sale of products, which were manufactured by the Complainants at the request of accused persons and no amount has been paid. The accused persons from the date of entering into transaction i.e. 11th March, 2005 as well as last transaction made in December, 2006 till date had the intention to cheat and commit fraud with the Complainants and have committed an offence under Section 406, 418, 420, 420-A, 422 read with Section 120-B of RPC and are liable for prosecution under law. The accused persons have assured for payment of all the invoices to the Complainants at branch office Gandhi Nagar Jammu and part of the material was destroyed at the factory premises in asmuchas branch office of the Complainants at Gandhi Nagar, Jammu, which has given a cause of action to the Complainants to file the present complaint against the accused.

8. Trial court on the basis of this complaint and after recording the statement of complainant and witness took cognizance for offence under Sections 406, 418, 420, 420-A, 422 read with Section 120-B RPC and issued process on 21.02.2009.

9. Law with regard to quashing of criminal proceedings is well settled. In AIR 2017 SUPREME COURT 37 in case titled State of Telangana v Habib Abdullah Jeelani & others, it is held as under:-

“11. Once an FIR is registered, the accused persons can always approach the High Court under Section 482 CrPC or under Article 226 of the Constitution for quashing of the FIR. In Bhajan Lal (supra) the two-Judge Bench after referring to Hazari Lal Gupta v. Rameshwar Prasad[7], Jehan Singh v. Delhi Administration[8], Amar Nath v. State of Haryana[9], Kurukshetra University v. State of Haryana[10], State of Bihar v. J.A.C. Saldanha[11], State of West Bengal v. Swapan Kumar Guha[12], Smt. Nagawwa v. Veeranna Shivalingappa Konjalgi[13], Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre[14], State of Bihar v. Murad Ali Khan[15] and some other authorities that had dealt with the contours of exercise of inherent powers of the High Court, thought it appropriate to mention certain category of cases by way of illustration wherein the extraordinary power under Article 226 of the Constitution or inherent power under Section 482 CrPC could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice. The Court also observed that it may not be possible to lay down any precise, clearly defined and sufficiently channelized and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad cases wherein such power should be exercised. The illustrations given by the Court need to be recapitulated:-

“(1) Where the allegations made in the first information report or 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 a case against the accused.

(2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not 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.

(3) Where the uncontroverted allegations made in the FIR 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 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 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 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 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 and personal grudge.”

It is worthy to note that the Court has clarified that the said parameters or guidelines are not exhaustive but only illustrative. Nevertheless, it throws light on the circumstances and situations where court’s inherent power can be exercised.

11. Firstly, let us see whether offence under section 406 is made out or not. It is necessary to refer to Sections 405 and 406 of the RPC in order to ascertain, whether in the facts and circumstances of the present case, an offence under Section 406 is made out against the petitioners.

12. Section 405 and 406 of the RPC reads as follows: -

“405. Criminal breach of trust.—Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that 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 willfully suffers any other person so to do, commits “criminal breach of trust”.

406. Punishment for criminal breach of trust. Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.”

13. From combined reading of these sections, it is evident that the following essential elements must be present for constituting offence under section 405 RPC; i) the accused was entrusted with property or with dominion over it and (ii) that he (a) misappropriated it, or (b) converted it to his own use, or (c) used it, or (d) disposed of it. The gist of the offence is misappropriation done in a dishonest manner. There are two distinct parts of the said offence. The first involves the fact of entrustment, wherein an obligation arises in relation to the property over which dominion or control is acquired. The second part deals with misappropriation which should be contrary to the terms of the obligation which is created.

14. In present case, as is evident from agreement executed between parties on 11th day of March 2005, the respondent was only to provide necessary manufacturing facilities and space capacity capable of manufacturing products in accordance with petitioners?pharmaceuticals “specification and adequate equipment and competent staff; further necessary raw materials including packing materials required by M/s Pharose Remedies Limited (respondent) for processing and packaging of the finished products were required to be supplied by the petitioners; petitioners supplied raw material along with all necessary material to the respondents M/s Pharose Remedies Ltd.; petitioners also supplied machinery to respondents to upgrade the yield and quality of product. Further, as per agreement ownership of the new machinery remained with petitioner No. l. So question of entrustment of properties to petitioners does not arise; rather it is respondent who has been entrusted with these items. So essential ingredients of section 405 RPC are not made out on these facts of case. The argument of counsel for respondent that petitioners dishonesty and intentionally withheld amount Rs.74,71,486/- and converted the same for their own use is without any merit. By any stretch of imagination, it cannot be held that petitioners misappropriated the amount or dishonestly used the amount contrary to any law or contract. In any case, even if it is considered as true, I find that the dispute has the contour of a dispute of civil nature for which respondent has already filed civil suit and does not constitute a criminal offence.

15. In Indian Oil Corporation v. NEPC India Ltd. and others reported in 2006 (6) SCC 736, the Apex Court observed as follows: -

“13. ….. 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…..”

16. The trial court has taken cognizance of offence under section 420 RPC on the allegations that the accused persons right from the very beginning i.e. when request for manufacturing of their pharmaceutical products was made to the Complainants, were aware that they had no intention to make the payment as per invoices and the goods supplied by the Complainants after manufacturing of the products of the accused persons at their request and on allurement, inducement, fraudulent and dishonest intention concealed the real facts and while inducing the Complainants, deceived them to deliver valuable security in the shape of sale of products, which were manufactured by the Complainants at the request of accused persons and no amount has been paid.

17. The term "cheating" has been defined under Section 415 of the Ranbir Penal Code. The element of cheating must be present in every offence under Section 420 of R.P.C.

18. Section 415 of RPC states that whoever, by deceiving any person, 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 induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to "cheat". Section 24 defines that what is “acting dishonestly”. When the doing of any act or not doing of any act causes wrongful gain of property to one person or a wrongful loss of property to a person, the said act is done dishonestly. The word property may basically be defined as all things which can be measured in terms of money. The said thing should be capable of being possessed by a person for the exclusive use or enjoyment as owner of that thing. Section 25 defines the term "Fraudulently". It says that a person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise. Mens rea is a legal phrase which is used to define the mental state of a person while committing a crime and that should be intentional. It can refer to a general intent to break the law or a specific prearranged plan to commit a particular offense. Complainant to prove that there was an intention to cheat at the time of making the misrepresentation; and this fact is to be proved on the basis of all the subsequent conduct as acts and omissions of the accused. Therefore, all the acts and omissions of the accused must be clearly and legibly set out right from the date of making of false representation, till the filing of the complaint.

19. Section 420 RPC deals with punishment for cheating. In view of the above discussion, for punishing an accused under Section 420 RPC, the essential ingredients are:- (i) cheating; (ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security, and (iii) mens rea of the accused at the time of making the inducement.

20. From bare perusal of allegations and agreement dated 11.03.2005, it is evident that, as per clause 5 representatives of petitioners company have right to inspect, examine, analyse and check the quantity as well as quality/quantity of the raw and packing material, finished products and manufacturing and packing process being used by respondents. As per this clause an obligation was imposed upon respondents to destroy all rejected material at its premise as per standing operating procedure. Further, as per petitioners the respondent-company illegally sold material produced for them, to others. As per agreement, petitioners-Company continued to have ownership rights over the raw material as well manufactured pharmaceuticals. This business 10 arrangement continued for some time, which is evident from Ledger book. As per this book, respondents have received Rs.4,43,60,754.05/- from petitioners- company.

21. As per respondents they received last order and said order was fulfilled on 8th December 2006, but payments were not made. This shows purely civil dispute. Had petitioners the criminal intention of cheating right from start of business, they would not have paid huge amount to respondents.

22. There is quite distinction between mere 'breach of contract' and the 'offence of cheating' Distinction depends upon the intention of the accused at the time of inducement which must be judged by his subsequent act but of which the subsequent act is not the sole standard. 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 intention which is the substance of the offence. It is necessary to show that he had fraudulent or dishonest intention at the time of making the promise to hold a person guilty for the offence of cheating. From his mere failure to keep up promise consequently, such a culpable intention cannot be presumed right at the beginning, that is when he made the promise.

23. In V. P. Shrivastava versus Indian Explosives Limited and others, (2010) 10 Supreme Court Cases 361, criminal proceedings alleging commission of offence under Section 420,406 & 120-B IPC were unsuccessfully challenged before the High Court. The criminal complaint had emanated from a tripartite agreement between the Indian Explosives Limited, M/s Bharat Coking Coal Limited and Fertilizer Corporation of India Limited. The appellants were

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senior employees of Fertilizer Corporation of India Limited which had become a sick company within the meaning of Sick Industrial Companies (Special Provision) Act, 1985. While evaluating the contentions advanced on behalf of the parties, the Hon'ble Supreme Court explained the ingredients of the offence of 'cheating' within the meaning of Section 415 of IPC and of 'criminal breach of trust' as defined under Section 405 of IPC and thereafter in para No. 32 of the judgment concluded that "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 contract by the Fertilizer Corporation of India Limited, but do not constitute an offence of 'Cheating' punishable under Section 420 IPC". Similarly, in para No.38 of the judgment, it was concluded that "there is nothing in the complaint which may even suggest remotely that Indian Explosives Limited had entrusted any property to the appellants or that the appellants had dominion over any of the properties of the Indian Explosives which they dishonestly converted to their own use so as to satisfy the ingredients of Section 405 IPC, punishable under Section 406 IPC". 24. In V. Y. Jose and another versus State of Gujrat and another, (2009) SCC 78, the Hon'ble Supreme Court quashed the proceedings initiated in a case of 'breach of trust' on finding that the case essentially involved a civil dispute and that mere 'breach of trust' does not necessarily involve 'cheating' as there was no culpable intention at the time of the initial promise 25. In view of the above, this court finds that no allegations are made attracting the ingredients of Section 405 RPC. Likewise, there are no allegations as to cheating or the dishonest intention of the accused, excepting the bald allegations that the petitioners did not make payment to the respondents/complainant. There is not an iota of allegation as to the dishonest intention or misappropriation. To make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the accused rather it must be shown that the accused dishonestly retained the same. The mere fact that the accused did not pay the money to the complainant does not amount to criminal breach of trust. In the present case it appears a matter of breach of agreement between the parties hence it cannot be termed as 'cheating' or 'misappropriation'. The respondents-complainant have already filed civil suit for recovery prior to filing of criminal complaint. 26. Even if all the allegations in the complaint are taken at their face value, in my view, the basic essential ingredients of “dishonest misappropriation?and “cheating?are missing. Criminal proceedings are not a short cut for other remedies, the prosecution of the accused persons /petitioners, is liable to be quashed. 27. Accordingly, this petition is allowed. The proceedings in Criminal Complaint No.40 instituted on 21.02.2009 titled “M/s Pharose Remedies Ltd.& anr. Vs. M/s Manish Pharmaceuticals Pvt. Ltd.& ors.” for offences under Sections 406, 418, 420, 420A, 422 read with Section 120-B RPC, pending in the court of learned 1st Addl. Munsiff, Jammu and order dated 21.02.2009 by virtue of which cognizance has been taken in the complaint and subsequent proceedings thereto, are hereby quashed.
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