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Kunstocom Electronics (I) Pvt. Ltd. v. Gilt Pack Ltd. And Another
Factual and Procedural Background
The respondent-company placed two orders in January 1994 on a German supplier, M/s Kunstoplast Chemic GMBH, for 1500 metric tons of “polypropylene brastec.” The appellant acted as the agent/representative in India. An irrevocable letter of credit (LC) covering the full quantity was opened, but only 50 MT were shipped on 9-3-1994 and the LC was encashed to that extent. On 29-4-1994 the appellant informed the respondent that the remaining 1450 MT could not be shipped. The respondent alleged that the appellant and the German company intentionally defaulted to profit from a price rise, causing the respondent a loss of USD 236,250.
A private complaint alleging cheating (Section 420 IPC) was filed before the Chief Judicial Magistrate (CJM), Indore. The CJM took cognizance and issued summons. The appellant sought quashing of the summoning order under Section 482 CrPC before the High Court. On 15-5-1996 the High Court directed the CJM to give a reasoned order on the appellant’s objections. The CJM, by order dated 3-10-1996, maintained the summons. A second Section 482 petition was then filed; the High Court, however, merely observed that objections could be raised at the stage of framing charge and dismissed the petition. The appellant filed the present Special Leave Petition (SLP), which the Supreme Court converted into an appeal after granting leave.
Legal Issues Presented
- Whether the High Court erred in refusing to decide on merits the appellant’s petition under Section 482 CrPC challenging the CJM’s order taking cognizance and issuing process.
- Whether objections to cognizability and maintainability must necessarily be deferred to the stage of framing charges.
Arguments of the Parties
Appellant's Arguments
- The complaint and witness statements, even if accepted at face value, make out only a civil breach of contract, not the offence of cheating under Section 415/420 IPC.
- Police investigation under Section 156(3) CrPC also concluded that no cheating offence was made out.
- The High Court was bound by its earlier direction to examine the matter on merits; refusing to do so amounts to jurisdictional error.
- Cited Supreme Court authority to show that quashing can be considered at the cognizance stage itself.
Respondent's Arguments
- The High Court rightly left the matter to be raised before the trial court at the stage of framing charge, providing adequate opportunity to the appellant.
- Allegations establish dishonest intention from the inception; therefore it is premature to term the dispute purely civil.
- No error was committed by the CJM in taking cognizance and issuing process.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ashok Chaturvedi v. Shitul H. Chanchani, (1998) 7 SCC 698 | An accused may invoke Section 482 CrPC to challenge the very order of cognizance and issuance of process; objections need not wait until framing of charges. | The Court relied on this decision to hold that the High Court should have examined the merits of the appellant’s challenge at the cognizance stage. |
Court's Reasoning and Analysis
The Supreme Court held that the High Court improperly declined to exercise its Section 482 jurisdiction. In its earlier order dated 15-5-1996, the High Court had expressly directed the CJM to consider the appellant’s objections and render a reasoned order. After those objections were overruled by the CJM, the appellant’s second petition presented the High Court with the very question it had reserved for itself. Deferring the same objections to the stage of charge-framing was deemed an “empty formality” because the trial court had already expressed a definitive view.
Referring to Ashok Chaturvedi, the Court reiterated that while Section 482 power must be exercised sparingly, it ought to be invoked where continuation of proceedings would amount to abuse of process and when the complaint on its face does not disclose any offence. Therefore, the High Court was obliged to determine whether the ingredients of cheating were present on the facts pleaded, instead of postponing the decision.
The Supreme Court expressly declined to rule itself on the existence of an offence, considering it more appropriate for the High Court to decide that issue in the first instance.
Holding and Implications
Appeal Allowed; Order of the High Court Set Aside; Matter Remitted to the High Court for Expeditious Decision on Merits.
Immediate Effect: The High Court must now hear MCrC No. 4193 of 1998 on merits and determine whether the criminal complaint should proceed. The Supreme Court expressed no view on whether an offence of cheating is actually made out. No broader precedent was established beyond reinforcing that High Courts should exercise Section 482 jurisdiction where appropriate.
P. Venkatarama Reddi, J.— Leave granted and the appeal heard on merits.
2. The respondent herein filed a private complaint in the Court of Chief Judicial Magistrate, Indore, alleging that the appellant committed an offence of cheating in relation to a transaction of supply of 1500 metric tons of “polypropylene brastec” which is a raw material required for manufacture of HDPE/PP bags. In January 1994 the respondent-Company placed orders on a German company named M/s Kunstoplast Chemic GMBH … for the supply of 1500 metric tons of polypropylene brastec through the media of the appellant in accordance with the price and terms specified in two indents. According to the appellant, it is a business agent of the German company, though according to the respondent, the appellant claimed to be a representative and associate of the German company. Pursuant to the deal, an irrevocable letter of credit was opened in favour of the German company covering the value of entire quantity of 1500 metric tons. Out of that quantity, only 50 MT were shipped on 9-3-1994 and the letter of credit was encashed to that extent. The remaining quantity which was expected to be supplied as per the contract was not shipped and the correspondence and personal talks with the appellant did not evoke any positive response. Finally, on 29-4-1994, the appellant-Company informed the respondent that the remaining 1450 metric tons cannot be shipped due to some unforeseen circumstances. The appellant requested that LC may be treated as cancelled. As a result of non-fulfilment of obligation under the contract, it is claimed by the respondent that it suffered a loss of $ 2,36,250 on account of escalation of prices. It is the case of the complainant that on account of rise in prices during the interregnum, the appellant and the German company deliberately failed to honour the commitment in order to profit themselves at the expense of the respondent. It is alleged that the deceptive intention of the accused from the beginning could be gathered from the initial representations and the subsequent conduct. According to the respondent-complainant, the appellant was trying to gain time on one pretext or the other right from the date of opening the letter of credit in furtherance of its criminal intention to cheat. The complainant also alleged that it was induced to believe by the representation of the appellant that the entire quantity would be supplied within the stipulated period on receipt of irrevocable letter of credit and on the strength of this representation, the contract was entered into.
3. The appellant's case is that even going by the contents of the complaint and the statements of the witnesses recorded by the learned Magistrate, no offence of cheating is made out and it is purely a case of breach of contract arising out of non-supply of remaining quantity of goods. According to the appellant, there was no fraudulent or dishonest intention at the time of entering into the contract nor any deception practised on the contracting party (complainant). It is also averred that the police before whom the complaint was referred to under Section 156(3) CrPC submitted a report that no offence of cheating was made out.
4. Challenging the legality of the summoning order dated 2-9-1995, the appellant filed an application under Section 482 CrPC in the High Court. The petition was disposed of with the following observations on 15-5-1996:
“Looking to the contentions as advanced by the counsel for the petitioner, at this stage, it is not a fit case to entertain this petition. However, it is directed that the learned CJM, Indore, where the matter is pending for disposal in accordance with law on merits, shall consider all the objections raised by the petitioner in this petition and shall pass a reasoned order on the same. The petitioner, if aggrieved, by any adverse orders passed against it, shall have right to challenge the same in accordance with law. With these observations, this petition is finally disposed of in limine, without notice to the other side.”
5. The appellant then filed objections before the CJM, Indore, and sought for dropping the proceedings. By a reasoned order dated 3-10-1996, the CJM, Indore, rejected the application. The learned CJM, held that there were substantial grounds to make out a prima facie case under Section 420 IPC and it will not be proper to drop the proceedings at this stage. The CJM, Indore, accordingly reaffirmed the order of his predecessor in issuing the summons to the accused. Aggrieved thereby, the appellant once again moved the High Court under Section 482 CrPC. The High Court disposed of the petition as follows:
“This matter is pending from 1996. This is a petition under Section 482 CrPC for dropping the proceedings of the private complaint. The appellant has come up against the issue of the process. This petition is disposed of with the observation that the applicant shall have right to raise all the grounds at the time of framing charge.”
6. It is against this order that the present SLP has been filed.
7. Mr Shanti Bhushan, learned Senior Counsel appearing for the appellant vehemently protested against the stance of the High Court in refraining from giving a verdict on merits, despite its earlier order. The learned counsel then took us through the complaint and the statement of the law officer of the respondent-Company and submitted that they do not disclose an offence of cheating within the meaning of Section 415. The learned counsel sought to draw support from certain decisions of this Court. The learned Senior Counsel Mr R.R Misra, for the respondents, contended that there is no case for interference as the High Court has given liberty to the appellant to raise the relevant objections at the time of framing the charges. That apart, it is submitted that it is premature to hold that the appellant did not cheat the respondents and that it is purely in the nature of civil claim. The relevant portions of the complaint were referred to and it was submitted that no error has been committed by the learned CJM, in taking the cognizance and issuing the process to the accused.
8. The High Court, in our opinion, was not justified in declining to exercise its jurisdiction and adjudicating the matter on merits. On an earlier occasion when the appellant moved the High Court, the High Court directed the CJM, Indore, to consider the objections raised by the appellant and to pass a reasoned order. Thereafter, the CJM, Indore, passed an order overruling the objections and decided to proceed with the case. When the appellant approached the High Court again against the speaking order passed by the CJM, the High Court once again declined to decide the petition on merits, but left it to be raised before the trial court at the time of framing the charge. Raising the very same objections at the time of framing the charge would practically be an empty formality as the trial court had already taken a definite view in the matter. The High Court in passing the impugned order has virtually ignored the spirit behind the direction given and observations made in the earlier order. There is no hard-and-fast rule that the objection as to cognizability of offence and maintainability of the complaint should be allowed to be raised only at the time of framing the charge. Such was not the intention of the High Court in passing the order dated 15-5-1996. In any case, we have the authority of the judgment of this Court in the case of Ashok Chaturvedi v. Shitul H. Chanchani (1998) 7 SCC 698 to hold that the determination of the question as regards the propriety of the order of the Magistrate taking cognizance and issuing process need not necessarily wait till the stage of framing the charge. G.B Pattanaik, J. speaking for the Court observed thus:
“This argument, however, does not appeal to us inasmuch as merely because an accused has a right to plead at the time of framing of charges that there is no sufficient material for such framing of charges as provided in Section 245 of the Criminal Procedure Code, he is debarred from approaching the court even at an earlier point of time when the Magistrate takes cognizance of the offence and summons the accused to appear to contend that the very issuance of the order of taking cognizance is invalid on the ground that no offence can be said to have been made out on the allegations made in the complaint petition. It has been held in a number of cases that power under Section 482 has to be exercised sparingly and in the interest of justice. But allowing the criminal proceeding to continue even where the allegations in the complaint petition do not make out any offence would be tantamount to an abuse of the process of court, and therefore, there cannot be any dispute that in such case power under Section 482 of the Code can be exercised.”
9. It may be that in a given case it would be more appropriate and proper to raise objections of this nature at the time of the charge-framing, but this is not a case of that nature, especially looking at the observations made in the earlier order of the High Court dated 15-5-1996. We are, therefore, inclined to set aside the impugned order of the High Court and remit the matter back to the High Court for fresh disposal of the petition — MCrC No. 4193 of 1998 for a decision on merits expeditiously. As the High Court declined to express any view on the crucial question whether the alleged offence has been made out, we do not consider it appropriate and proper to undertake the task of deciding the question which the High Court ought to have decided.
10. The criminal appeal is accordingly allowed and the matter will now go back to the High Court for disposal in the light of the observations made above. There shall be no order as to costs.
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