REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 417 OF 2009 [Arising out of Special Leave Petition (Criminal) No. 6769 of 2007]

MAHESH CHOUDHARY      … APPELLANT

VERSUS

STATE OF RAJASTHAN & ANR.       … RESPONDENTS

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. Appellant was a partner of a firm known as M/s Saraswati Exports.

He is also Director of a Company known as ‘Saraswati Exim Pvt. Ltd.’ (for

short, “the company”).  

3. M/s  S.N.Kapur  Exports  is  a  firm  registered  under  the  Indian

Partnership Act, 1932 (for short, “firm”).  The Complainant Vikram Kapoor

(Respondent No.2 herein) is  a partner thereof.  The firm was engaged in

manufacturing, selling and export of carpets, mats, etc.  It developed various

types  of  hand  knotted  new designs  of  carpets  and  acquired  special  skill

therein.   

4. Indisputably,  the  two  firms  entered  into  a  contract  on  or  about

1.4.2001 in terms whereof, inter alia, the firm agreed to help and assist the

appellant  with  regard  to  production,  i.e.,  designing,  colouring,  dyeing,

finishing, etc.  The firm also agreed to provide knowledge and know-how

for the carpet production by the appellant for making their products readily

saleable and more-marketable.  The firm for the said purpose was to receive

10% commission on the invoice value of each and every invoice and total

sales made directly or indirectly by the firm.   

Some of the clauses of the said agreement are as under:

“9. That  the  SECOND PARTY shall  have  an office  provided  by  the  FIRST  PARTY  to carry  out  supervising  of  all  the  work  of designing  etc.  and  auditing/checking  of account records/books.

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14. That the SECOND PARTY shall have right to auditing, checking  of  accounts  books/records  etc.,  through  their auditor  at  any  time  and  the  FIRST  PARTY  will cooperate in this regard.

15. That if the sum due on account of 10% commission is not paid promptly as soon as the sum due becomes Rs. 3 Lacs, the SECOND PARTY shall on the strength of this agreement alone, file a law suit for the recovery of dues and bringing a stay from the law court of the business and its total activity till the full payment has been made along with 15% interest for the period of delay and full cost of law suit has been cleared and paid in full by the FIRST PARTY.

xxx xxx xxx

23. That  the  FIRST PARTY has  an  assurance from SECOND PARTY that  sales  (export sales of Hand Knotted Carpet) will be done with the help of SECOND PARTY.

 24. That the FIRST PARTY is singly taking up

to  produce  only  Hand  Knotted  Carpets without  any  compromise  in  execution  of quality.  Any defective carpets produced by the FIRST PARTY shall be entirely FIRST PARTY’s responsibilities.

25. That neither FIRST PARTY nor SECOND PARTY can enter into such agreement with any one else.”

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5. The said agreement continued till 31.3.2003.  Indisputably again with

effect  from  1.4.2003,  another  agreement  has  been  entered  into  by  and

between the parties thereto whereby and whereunder it was agreed that the

appellant would pay a sum of Rs.17 lakhs per month to the firm for a period

of two years.  It is furthermore not in dispute that whereas the firm claims a

sum of Rs.4,49,85,581/- towards commission payable to it towards export

but only a sum of Rs.3,21,06,910/- has been paid.   

6. Inter  alia  alleging  that  the  appellant  herein  has  committed  the

offences of criminal breach of trust and/or of cheating and forgery, on the

premise that he had made sale of about Rs.9 crores in the year 2002-2003

through a  sister  concern  wherefor  no commission  was paid although the

technical know-how was made available by the firm, a complaint petition

was filed in the court of Judicial Magistrate No. 22, Jaipur City, Jaipur on or

about 13.08.2004.  

7. The  learned  Magistrate  directed  the  officer-in-charge  of  the

Brahmpuri  Police  Station  to  lodge  a  First  Information  Report  (FIR).

Pursuant  thereto  or  in  furtherance  thereof,  a  FIR  was  lodged.   On

completion of investigation, a detailed charge-sheet has been submitted on

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or about 8.1.2007.  In the said charge-sheet, it was, inter alia, opined that no

manipulation in the records has been committed for showing sale of carpet

through the sister concern, stating:

“Even  it  is  assumed  that  the  sale  made  by Saraswati  Exim is  the  indirect  sale  of  Saraswati Export,  yet  no  commission  is  payable  to  Shri Kapoor  on  the  sale  of  tufted  carpets  and  hand knotted carpets  purchased from other  firms.  No such  fact  has  come  into  light  from  the  entire records  of  sale  made  by  Saraswati  Export  and Saraswati  Exim  that  sale  made  by  Saraswati Export  has  been  shown  to  be  the  sale  made  by Saraswati  Exim by committing any manipulation in the records.   

8. Analyzing the terms of the contract, it was stated that the complainant

did  not  raise  any protest  from time to time with regard to  the  purported

breaches thereof on the part  of the appellant  and in any event,  the same

gives rise to a civil dispute.   

9. It was, however, found that different invoices were presented to the

bank showing different amounts and quantities vis-à-vis the firm, stating:

“…Thus, partners of Saraswati Export by showing the amount of commission in the invoices falsely and  wrongly  and  by  deducting  the  amount  of commission from the total sale value in wrong and false  manner  have  shown  the  less  sale  turnover

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and consequently,  an offence under Section 420, 467,  468  IPC  is  found  proved  for  paying  less commission  than  the  actual  due  commission  to Shri Kapoor and commission of breach of trust.  

3. Invoice  No.  1610/23.4.02  which  has  been submitted by Saraswati Export with the bank, rate of carpets is shown at higher rate and the rate of carpet in the invoice given to the complainant is shown lower.   Thus,  no  satisfactory  explanation regarding difference in  the sale  rate  of  carpet  in the copies  of  the  above invoices  is  available  on record.  However, in comparison to the annual sale turnover  of  Saraswati  Export,  difference  of  total sale value of US $ 34096.00 of the above one bill and difference amount 2005 US $ is ignorable, but it  is  proved  that  Shri  Mahesh  Chaudhary  by making the false entry in the invoices has saved the  commission  of  200.5  US  $  payable  to  Shri Kapoor and has not paid the same to Shri Kapoor against  which  offence punishable  under Sections 420, 467, 468 IPC is found proved.”

10. The learned Chief Judicial Magistrate took cognizance of the offences

against the appellant by an order dated 9.1.2007.  Appellant thereafter filed

an application  for  quashing of  the  said  order  before  the  Rajasthan  High

Court which has been dismissed by reason of the impugned judgment.   

11. Mr. Jagdeep Dhankar, learned Senior Counsel appearing on behalf of

the appellant, would submit:

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i) The  transaction  in  terms  of  the  aforementioned  agreement

dated 21.2.1973 having continued upto 31.3.2003 and a sum of

Rs.3,21,06,910/- having been paid by way of commission to the

firm, the charge-sheet even if given face value and taken to be

correct in its  entirely does not constitute offences punishable

under Sections 420, 467 and 468 of the Indian Penal Code.  

ii) The  observations  made  in  the  charge-sheet  against  the

appellant being related to about 200 US $ only, it is absurd to

think that the appellant would commit such an offence.

iii) In any event, the disputes and differences between the parties

being pertaining to breach of contract resulting in civil dispute,

the same should be directed to be resolved through arbitration

or any other dispute resolution mechanism.  

12. Mr.  L.N.  Rao,  learned  Senior  Counsel  appearing  on  behalf  of  the

respondent, on the other hand, would contend:

i) Appellant illegally and wrongfully diverted the business to its

sister concern and, thus, cheated the respondent No.2 of a huge

amount of commission.

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ii) In any event, a charge-sheet having been filed upon arriving at

a finding that the accused had committed an offence of forgery

in respect of invoices, which are valuable security, this Court

should not interfere with the impugned order.  

13. The principle providing for exercise of the power by a High Court

under Section 482 of the Code of Criminal Procedure to quash a criminal

proceeding  is  well  known.   The  court  shall  ordinarily  exercise  the  said

jurisdiction, inter alia, in the event the allegations contained in the FIR or

the Complaint Petition even if on face value are taken to be correct in their

entirety, does not disclose commission of an offence.  

14. It  is  also  well  settled  that  save  and  except  very  exceptional

circumstances, the court would not look to any document relied upon by the

accused in support of his defence.  Although allegations contained in the

complaint petition may disclose a civil dispute, the same by itself may not

be a ground to hold that the criminal proceedings should not be allowed to

continue.  For the purpose of exercising its jurisdiction, the superior courts

are also required to consider as to whether the allegations made in the FIR

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or Complaint Petition fulfill the ingredients of the offences alleged against

the accused.   

15. Indisputably, the question as to whether the complainant was entitled

to  a  higher  amount  of  commission  in  terms  of  the  agreement  dated

21.2.1973 is  essentially a civil  dispute.  The complainant  in terms of the

said agreement was not only entitled to inspect the documents maintained

by the accused but also to get the same audited.  It is, therefore, difficult to

hold as has rightly been opined by the Investigating Officer that a case for

imposing a criminal liability on the accused on that score has been made

out. While saying so, we are not unmindful of the limitations of the court’s

power  under  Section  482  of  the  Code  of  Criminal  Procedure  which  is

primarily for  one  either  to  prevent  abuse  of  the process of  any Court  or

otherwise to secure the ends of justice.  The court at that stage would not

embark upon appreciation of evidence.  The Court shall moreover consider

the materials on record as a whole.   

In Kamaladevi Agarwal vs. State of W.B. & ors. [(2002) 1 SCC 555],

this Court opined:

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“7. This  Court  has  consistently  held  that  the revisional  or  inherent  powers  of  quashing  the proceedings at the initial stage should be exercised sparingly and only where the allegations made in the complaint  or  the FIR, even if  taken it  at  the face value and accepted in entirety, do not prima facie  disclose  the  commission  of  an  offence. Disputed and controversial  facts  cannot be made the basis for the exercise of the jurisdiction.”

It was furthermore observed that the High Court should be slow in

interfering with the proceedings at the initial stage and that merely because

the  nature  of  the  dispute  is  primarily  of  a  civil  nature,  the  criminal

prosecution cannot be quashed because in cases of forgery and fraud there

would always be some element of civil nature.  

This Court in B.Suresh Yadav vs. Sharifa Bee & anr. [(2007) 13 SCC

107] opined as under:

“13. For the purpose of establishing the offence of cheating,  the complainant  is  required to show that  the  accused  had  fraudulent  or  dishonest intention  at  the  time  of  making  promise  or representation.  In  a  case  of  this  nature,  it  is permissible in law to consider the stand taken by a party  in  a  pending  civil  litigation.  We  do  not, however, mean to lay down a law that the liability of a person cannot be both civil and criminal at the same time. But when a stand has been taken in a complaint  petition  which  is  contrary  to  or

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inconsistent with the stand taken by him in a civil suit,  it  assumes  significance.  Had  the  fact  as purported to have been represented before us that the  appellant  herein  got  the  said  two  rooms demolished and concealed the said fact at the time of execution of the deed of sale, the matter might have  been  different.  As  the  deed  of  sale  was executed  on  30.9.2005  and  the  purported demolition  took  place  on  29.9.2005,  it  was expected  that  the  complainant/first  respondent would  come  out  with  her  real  grievance  in  the written  statement  filed  by  her  in  the aforementioned suit. She, for reasons best known to her, did not choose to do so.”

Recently in R. Kalyani vs. Janak C. Mehta & ors. [2008 (14) SCALE

85], this Court laid down the law in the following terms:

“9. Propositions of law which emerge from the said decisions are:

(1) The High Court ordinarily would not exercise its  inherent  jurisdiction  to  quash  a  criminal proceeding and, in particular, a First Information Report  unless  the  allegations  contained  therein, even if given face value and taken to be correct in their entirety, disclosed no cognizable offence.

(2)  For  the  said  purpose,  the  Court,  save  and except  in  very exceptional  circumstances,  would not  look  to  any  document  relied  upon  by  the defence.

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(3)  Such  a  power  should  be  exercised  very sparingly.  If  the  allegations  made  in  the  FIR disclose commission of an offence, the court shall not  go  beyond  the  same  and  pass  an  order  in favour of the accused to hold absence of any mens rea or actus reus.

(4) If the allegation discloses a civil  dispute,  the same by itself may not be a ground to hold that the criminal  proceedings  should  not  be  allowed  to continue.

10. It  is  furthermore well  known that  no  hard and fast rule can be laid down. Each case has to be considered  on  its  own  merits.  The  Court,  while exercising  its  inherent  jurisdiction,  although would  not  interfere  with  a  genuine  complaint keeping in view the purport and object for which the  provisions  of  Sections  482  and  483  of  the Code of Criminal Procedure had been introduced by  the  Parliament  but  would  not  hesitate  to exercise its jurisdiction in appropriate cases. One of the paramount duties of the Superior Courts is to see that a person who is apparently innocent is not  subjected  to  persecution  and  humiliation  on the  basis  of  a  false  and  wholly  untenable complaint.”

16. The charge-sheet, in our opinion, prima facie discloses commission of

offences.  A fair investigation was carried out by the Investigating Officer.

The  charge-sheet  is  a  detailed  one.   If  an order  of  cognizance  has  been

passed relying on or on the basis thereof by the learned Magistrate, in our

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opinion, no exception thereto can be taken.  We, therefore, do not find any

legal infirmity in the impugned orders.   

17. We, however, must place on record that before us Mr. Dhankar stated

that the appellant is ready and willing to get the disputes and differences

between the parties settled.  In that view of the matter and keeping in view

the  peculiar  facts  and  circumstances  of  this  case  and with  a  view to  do

complete  justice  to  the  parties,  we,  in  exercise  of  our  jurisdiction  under

Article 142 of the Constitution of India, direct that in the event the appellant

appears before the learned Magistrate within a period of four weeks from

date and files an application for grant of bail, he shall be released on bail on

such  terms  and  conditions  as  the  learned  Magistrate  may  seem  fit  and

proper.  In the event, the appellant files an application for exemption from

his personal appearance, the same may also be considered on its own merits.

It would be open to the complainant to consider the offer of the appellant.

18. Subject to the aforementioned directions, the appeal is dismissed.  

……………………………….J. [S.B. Sinha]

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..…………………………..…J. [Asok Kumar Ganguly]

NEW DELHI; MARCH 03, 2009

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