Commercial disputes over variation of rate can’t give rise to offence u/s 405 of IPC without presence of any aggravating factor leading to the substantiation of its ingredients: Supreme Court
Justices Aniruddha Bose & Sanjay Kumar [30-01-2024]

Read Order:  SACHIN GARG v. STATE OF U.P & ANR [SC- CRIMINAL APPEAL NO. 497 OF 2024]

LE Correspondent

New Delhi, February 2, 2024: In a case where the dispute pertained to the revision of rate in an ongoing commercial transaction and the accused-appellant wanted a rate variation, the Supreme Court has held that no case was made out for commission of offence under Section 405/406 of the Indian Penal Code, 1860.

The appellant, in this case, stood posted as the Head of factory of Exide Industries Limited (EIL), a corporate entity, situated in District Rewari, Haryana. The respondent no.2, ran a proprietary concern by the name of Ambika Gases and was the supplier of Dissolved Acetylene Gas (DA Gas), which is used for manufacturing battery in the said factory. The dispute in this case was over a purchase order issued for the supply of the said item. The original purchase order was amended twice on the basis of representations made by the respondent no.2. The first amendment brought an increase in the rate and by the second amendment, the rate per unit was brought down.

An invoice was raised by the respondent no.2 with the aforesaid rates for a total sum of Rs 9.36 lakh. The dispute revolved around the non- payment of the said sum. It was the case of the appellant that EIL, after ascertaining the market price of DA Gas from other vendors, reconciled the accounts by informing respondent no.2 of what it claimed was foul play with respect to revision of rates and appropriated the alleged illegal amounts claimed by the vendor (respondent no.2) from the invoice.

The respondent no.2 instituted a complaint case and the Magistrate upon recording initial deposition of the proprietor of the supplier firm and his father issued summons for trial under Sections 406, 504 and 506 of the Indian Penal Code, 1860.  The appellant’s Criminal Miscellaneous Application filed before the Allahabad High Court under Section 482 of Code of Criminal Procedure, 1973 for quashing the said summons and also the complaint case itself, was dismissed. The main reason for dismissal was that the subject-complaint involved adjudication of disputed questions of fact.

It was the appellant’s case that the complaint made against the appellant didn’t disclose any criminal offence and at best, it was a commercial dispute, which ought to be determined by a Civil Court. On the contrary, relying upon the judgment in Jagdish Ram -vs- State of Rajasthan and Another [LQ/SC/2004/315], the respondent argued that a detailed description of the offending acts need not be disclosed at the stage at which the appellant wanted invalidation of the complaint.

The Division Bench of Justice Aniruddha Bose and Justice Sanjay Kumar noted that neither in the petition of complainant nor in the initial deposition of the two witnesses (that includes the complainant) the ingredients of the offence under Section 405 of the 1860 Code surfaced. Such commercial disputes over variation of rate couldn’t per se give rise to an offence under Section 405 without presence of any aggravating factor leading to the substantiation of its ingredients, it held.

The Bench didn’t find any material to come to a prima facie finding that there was dishonest misappropriation or conversion of any material for the personal use of the appellant in relation to gas supplying work done by the respondent no.2. The said work was done in course of regular commercial transactions. It wasn’t the case that there was misappropriation or conversion of the subject property, being dissolved acetylene gas which was supplied to the factory for the purpose of battery manufacturing at EIL.

The Bench noted that the dispute pertained to the revision of rate per unit in an ongoing commercial transaction and the accused-appellant wanted a rate variation and the entire dispute arose out of such stand of the appellant. On the basis of these materials, there was no evidence for commission of offence under Section 405/406.

The allegation of criminal intimidation against the accused was made in the complaint statements made by the appellant and no particulars thereof had been given. Both in the complaint petition and the initial deposition of one of the witnesses, there was only reproduction of part of the statutory provision giving rise to the offence of criminal intimidation. This, according to the Bench, constituted a mere bald allegation, short of any particulars as regards to the manner in which threat was conveyed.

“While it is true that at the stage of issuing summons a magistrate only needs to be satisfied with a prima facie case for taking cognizance, the duty of the magistrate is also to be satisfied whether there is sufficient ground for proceeding, as has been held in the case of Jagdish Ram (supra)”, the Bench said while also adding, “The learned Magistrates order issuing summons records the background of the case in rather longish detail but reflects his satisfaction in a cryptic manner. At the stage of issue of su1mmons, detailed reasoning as to why a Magistrate is issuing summons, however, is not necessary. But in this case, we are satisfied that the allegations made by the complainant do not give rise to the offences for which the appellant has been summoned for trial. A commercial dispute, which ought to have been resolved through the forum of Civil Court has been given criminal colour by lifting from the penal code certain words or phrases and implanting them in a criminal complaint.”

Noting that the Magistrate failed to apply his mind in issuing summons and the High Court also failed to exercise its jurisdiction under Section 482 of the 1973 Code to prevent abuse of the power of the Criminal Court, the Bench further noted that no case had been made out that would justify invoking the machinery of the Criminal Courts. The dispute was commercial in nature having no element of criminality.

Finally, considering the fact that the perceived wrongdoing in this case had been attributed to the appellant, though the complaint petition acknowledged that the job-work was being done for EIL and the allegation of criminal intimidation was against the appellant directly, the Bench held that the complaint case couldn’t be rejected at the nascent stage on the sole ground of not implicating the company.

Thus, allowing the appeal, the Bench set aside the impugned judgment.