The Supreme Court of India, in a significant ruling on the scope of Section 420 of the Indian Penal Code (IPC), has held that vague allegations concerning faulty goods supplied in a business transaction do not prima facie constitute the offence of cheating. The Court also delivered a stern message against the misuse of criminal proceedings, stating that the law cannot be used as an “instrument of harassment or for seeking private vendetta.”
A bench of Justice B.V. Nagarathna and Justice R. Mahadevan, while allowing an appeal against a Himachal Pradesh High Court order, concluded that the criminal proceedings were “manifestly attended with mala fide” and initiated with an ulterior motive. Consequently, the court set aside FIR No.11/2023 and all subsequent proceedings against the appellants, Paramjeet Singh and Sarabjit Singh.
Background of the Case
The dispute originated from a sale and purchase agreement dated December 12, 2017, between M/s Soma Stone Crusher (the complainant) and M/s Saini Engineering Works, a proprietorship of Sarabjit Singh. The agreement was for the purchase of a ‘sand ruula machine’ and other structures for a consideration of Rs.9,12,912.
Pursuant to the agreement, the complainant issued a cheque for Rs.5,00,000 as an advance payment. However, the cheque was returned by the bank with the remark ‘Stop Payment’. This led M/s Saini Engineering Works, through Special Power of Attorney holder Paramjeet Singh, to file a complaint under Section 138 of the Negotiable Instruments Act, 1881, in April 2018.
Nearly five years later, on February 14, 2023, the proprietor of M/s Soma Stone Crusher, Kushal K. Rana, lodged FIR No.11/2023, accusing the appellants of cheating under Section 420 of the IPC. The FIR alleged that the supplied machine did not meet the promised specifications regarding its weight (12 tons instead of 14 tons) and output (500 feet per hour instead of 1000-1200). The FIR stated that due to the failure to replace the allegedly faulty machine, the complainant suffered a loss of Rs. 50 lakhs.
Following an investigation, a final police report was submitted, charging both appellants under Section 420 read with Section 120B of the IPC. A petition to quash the FIR was dismissed by the Himachal Pradesh High Court, prompting the appeal to the Supreme Court.
Court’s Analysis and Observations
The Supreme Court conducted a thorough analysis and found that the core ingredient of cheating—a fraudulent or dishonest intention at the time of making the promise—was absent.
Citing its judgment in Inder Mohan Goswami vs. State of Uttaranchal, (2007) 12 SCC 1, the Court reiterated, “To hold a person guilty of cheating it is necessary to show that he had a fraudulent or dishonest intention at the time of making the promise. From his mere failure to subsequently keep a promise, one cannot presume that he all along had a culpable intention to break the promise from the beginning.”
Applying this principle, the bench found the allegations regarding the faulty machine to be vague and insufficient to establish criminal intent. The judgment reads, “Mere vague allegations by the complainant/respondent No.3 that the appellants failed to provide a product of a particular specification and failed to replace the faulty machines do not satisfy the test of dishonest inducement to deliver a property… as enshrined under Section 420 IPC.”
The Court strongly deprecated the use of criminal law to settle civil disputes. It observed, “Criminal law ought not become a platform for initiation of vindictive proceedings to settle personal scores and vendettas.” The bench also noted that the five-year delay in filing the FIR raised “suspicion about the bona fides of the complainant.”
Referring to the landmark case of State of Haryana vs. Bhajan Lal, 1992 Suppl (1) SCC 335, the Court concluded that the proceedings were maliciously instituted and fell into the categories of cases that warrant quashing to prevent abuse of the court’s process.
Decision
Based on its findings, the Supreme Court held that allowing the criminal proceedings to continue would amount to undue harassment, as no prima facie case under Section 420 IPC was made out. The Court set aside the High Court’s order and quashed the FIR and all subsequent proceedings.
