SATISHCHANDRA RATANLAL SHAH versus STATE OF GUJARAT AND ANOTHER

Citation: [2019] 3 S.C.R. 273 · Decided: 03-01-2019 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SATISHCHANDRA RATANLAL SHAH
v.
STATE OF GUJARAT AND ANOTHER
(Criminal Appeal No. 9 of 2019)
JANUARY 03, 2019
[N. V. RAMANA AND
MOHAN M. SHANTANAGOUDAR, JJ.]
Code of Criminal Procedure, 1973:  s.482 – Quashing of
charge-sheet under ss.406, 420 and 417 IPC –  The case against
the appellant-accused was that he had obtained loan from money
lending company in which respondent no.2 was Director –
Appellant did not repay the amount back and rather threatened
respondent no.2 with dire consequences and as a result
respondent no.2 lodged FIR – Appellant filed petition before High
Court for quashing of FIR – Meanwhile, charge-sheet was filed
against the appellant under ss.406, 420 and 417 IPC – Appellant
filed application seeking amendment of s.482 petition wherein he
sought quashing of charge-sheet also – High Court dismissed the
quashing petition and directed Trial Court to complete the trial and
observed that prima facie an offence of cheating under s.420 was
made out – On appeal, held:  A mere breach of a promise,
agreement or contract does not, ipso facto, constitute the offence of
the criminal breach of trust contained in s.405 IPC without there
being a clear case of entrustment – There is nothing either in the
complaint or in any material pointing to the fact that any property
was entrusted to the appellant which he dishonestly converted for
his own use so as to satisfy the ingredients of s.405 punishable
under s.406 IPC – As regards the charge under s.415, mere
inability of the appellant to return the loan amount would not give
rise to a criminal prosecution for cheating unless fraudulent or
dishonest intention is shown right at the beginning of the
transaction, as it is this mens rea which is the crux of the offence –
There is nothing in the complaint or the material to show that there
was dishonest representation or inducement on part of the
appellant – However, the High Court seemed to be carried away by
the moral element involved in the breach of promise and made
[2019] 3 S.C.R. 273
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SUPREME COURT REPORTS
[2019] 3 S.C.R.
certain observations – These observations are expunged – The
proceedings initiated based on the FIR instituted at the instance of
respondent no. 2 are quashed – Penal Code, 1860 – ss. 405, 406,
415 and 420.
Allowing the appeal, the Court
HELD: 1. The criminal application preferred by the accused
before the High Court was against the order of the Trial Court at
the stage of framing of charges, wherein it is the duty of the court
to apply its judicial mind to the material placed before it and to
come to a clear conclusion that a prima facie case has been made
out against the accused. An order for framing of charges is of
serious concern to the accused as it affects his liberty substantially.
Courts must therefore be cautious that their decision at this stage
causes no irreparable harm to the accused.  In respect to
quashing of the charges, it is well settled that such exercise needs
to be undertaken by the High Court in exceptional cases. The
framing of charges being initial stages in the trial process, the
court therein cannot base the decision of quashing the charge on
the basis of the quality or quantity of evidence rather the enquiry
must be limited to a prima facie examination. [Paras 10, 11]
[278-F-H; 279-A]
State of Bihar v. Ramesh Singh 1977 Cri lJ 1606
– relied on.
2.1  The dispute arose out of a loan transaction between
the parties. Record showed that respondent no.2 knew the
appellant and the attendant circumstances before lending the loan.
Further, admittedly, in order to recover the said amount,
respondent no. 2  had instituted a summary civil suit which is still
pending adjudication. The law clearly recognizes a difference
between simple payment/investment of money and entrustment
of money or property. A mere breach of a promise, agreement or
contract does not, ipso facto, constitute the offence of the criminal
breach of trust contained in Section 405 IPC without there being
a clear case of entrustment.  There is nothing either in the
complaint or in any material pointing to the fact that any property
was entrusted to the appellant at all which he dishonestly converted
for his own use so as to satisfy the ingredients of Section 405
punishable under Section 406 of IPC. Therefore, the Magistrate
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committed a serious error in issuing process against the
appellants for the said offence. Unfortunately, the High Court
also failed t

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