Bombay High Court
Pratik S/O Kanhaiyalal Bansal And … vs The State Of Mha. Thr. Pso Shegaon … on 16 January, 2025
2025:BHC-NAG:541 Judgment 341 apl1687.22 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH, NAGPUR CRIMINAL APPLICATION (APL) NO.1687 OF 2022 1. Shri Pratik s/o Kanhaiyalal Bansal, aged about 40 years, occupation: service, ICICI Lombard, r/o 101, Diamond Trade Centre, Dr.R.S.Bhandari Marg, Indore (Madhya Pradesh). 2. ICICI Lombard General Insurance Co. Ltd., having registered office at Zenith House, Keshaorao Khade Marg, Mahalaxmi, Mumbai. authorized officer. ..... Applicants. :: V E R S U S :: 1. The State of Maharashtra, through its Police Station Officer, Shegaon, district: Buldhana. 2. Shri Gajanan Cotspin, a partnership firm through its Partner-Devendra Madhusudan Bhattad, aged about major, occupation: business, r/o Shegaon, taluka Shegaon, district: Buldhana. ..... Non-applicants. ============================== Ms.Ashwini Athalye, Counsel for Applicants. Shri C.A.Lokhande, Additional Public Prosecutor for Non- applicant No.1/State. Shri S.N.Bhattad, Counsel for Non-applicant No2. ============================== .....2/- Judgment 341 apl1687.22 2 CORAM : URMILA JOSHI-PHALKE, J. CLOSED ON : 08/01/2025 PRONOUNCED ON : 16/01/2025 JUDGMENT
1. This application is filed by applicants under
Section 482 of the Code of Criminal Procedure for
quashing of criminal proceeding of Regular Criminal Case
No.101/2009 pending before learned Judicial Magistrate
First Class, Shegaon, district Buldhana.
2. Brief facts necessary for disposal of the
application are as under:
Non-applicant No.2 (the complainant) filed a
complaint under Sections 420 and 468 of the Indian Penal
Code contending that applicant No.1 is authorized
signatory of applicant No.2 – ICICI Lombard General
Insurance Company Limited which deals in General
Insurance Business. The complainant had insured its stock
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worth of Rs.50.00 lacs of Raw Cotton, Cotton Lint, F.P.
Bells, and Cotton Seeds stored and kept in open godown in
the complainant’s factory at Shegaon and had paid
insurance premium of Rs.23142/- vide cheque No.132955
dated 21.4.2005. On receipt of the cheque,
acknowledgement dated 21.4.2005 was issued by
applicant No.1. It was informed to the complainant that
the policy would be issued in due course. It was further
communicated that the liability of the company would be
subject to the realization of the cheque. It was further
communicated that if the amount is less than premium
quoted or revised as per changes in the sum proposed for
insurance or covered desired risk by proposal. It was
agreed that the proposal shall be accepted for
consideration for reducing the sum appropriated premium
and the policy shall be finalized. Accordingly, premium
was accepted and an acknowledgement was issued on
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24.4.2005. As per the contention of the complainant, the
communication issued shows policy document would be
issued having accepted the premium. Thus, the contract
of insurance is completed. The ICICI Lombard Office
informed the complainant that he had taken the Special
and Fire Perils Policy of Rs.50.00 lacs for which the
premium was paid. Though the cheque was put for
clearance on 22.4.2005, the policy was not issued. On
23.4.2005, at about 12 O’clock noon, the fire broke out in
the godown and after due efforts, it could not be
controlled and the damage was caused to the stock,
building, and cotton bells etc. The surveyor of applicant
No.1-company visited the spot and assessed the damage.
Authorized signatory of applicant No.2 had also visited the
spot on 25.4.2005 along with one Gaurav Arora and
continuously they have visited from 25.4.2005 to
28.4.2005. The complainant filed a claim for damage
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sustained on account of the fire, but with dishonest
intention a cheque issued towards premium was sent to
the complainant on 18.5.2005. The applicant No.2-
company also issued anti-dated letter mentioning date
25.4.2005 by courier which was received by the
complainant on 12.5.2005. It was dishonestly informed
that risk for the amount of Rs.50.00 lacs is not covered.
The complainant has not accepted the cheque and sent
back with notice dated 11.6.2005. As per the contention
of the complainant, authorized officer of the applicant
No.2 was personally present on the spot on 25.4.2005 and
with an intention to defraud the complainant, a false
document dated 25.4.2005 was prepared.
3. With these contentions, the complainant filed a
complaint in the court of learned JMFC, Shegaon. Learned
Magistrate took the cognizance and issued process by
passing order on 9.11.2009. The applicants put their
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appearance and filed the discharge application which came
to be rejected on 2.11.2015. Against the said order, the
applicants have filed a revision bearing Criminal Revision
No.70/2015 and the same was dismissed by order dated
11.7.2022.
4. By this application, the applicants are seeking
quashing of the proceedings as well as the discharge.
5. Learned counsel Ms.Ashwini Athalye for
applicants submitted that as far as factual aspect, that the
applicant No.1 is the authorized signatory of the applicant
No.2- company which deals in General Insurance Business,
is not disputed. It is also not disputed that there was a
proposal from the complainant for insuring his stock
worth of Rs.50.00 lacs and cheque of premium of
Rs.23142/- vide cheque No.132955 dated 21.4.2005 was
issued. It is also not disputed that the acknowledgement
as to the receipt of cheque was issued by the applicant
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No.1. However, the contention of the complainant, that
the applicant No.2 informed the complainant that he had
taken Special and Fire Perils Policy of Rs.50.00 lacs for
which the premium was paid, is not admitted. It is also
not admitted that the authorized officer of the applicant
No.2 has visited the spot and was present at Shegaon from
25.4.2005 to 28.4.2005. It is also denied that with a
dishonest intention a cheque issued towards premium was
sent to the complainant and the policy was cancelled. She
submitted that in fact, there was no concluded contract
between the present applicants and the complainant.
Mere retention of the cheque towards premium is not
sufficient to show that it was a concluded contract. She
submitted that at the most the case of the complainant
would be a breach of the contract. As far as ingredients of
Sections 420 and 406 of the Indian Penal Code are
concerned, the same are not made out. A breach of
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contract does not give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is shown
right at the beginning of the transaction. Merely on the
allegation of failure to keep up promise will not be enough
to initiate criminal proceedings. The applicants have
already filed Special Civil Suit No.29/2009 for damages
and compensation. The said suit was dismissed. Against
the said suit, first appeal was filed and the same was
allowed and the second appeal is pending before this
court. As far as dishonest intention is concerned, nothing
is on record to show that there was any dishonest
intention on the part of the present applicants.
6. In support of her contentions, learned counsel for
applicants placed reliance on following decisions:
1. Birla Corporation Limited vs. Adventz
Investments and Holdings Limited and ors,
reported in (2019) 16 SCC 610;
…..9/-
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2. Anil Mahajan vs. Bhor Industries and anr,
reported in (2005)10 SCC 228;
3. Samir Sahay alias Sameer Sahay vs. State of
Uttar Pradesh and anr, reported in (2018)14
SCC 223;
4. Sarabjit Kaur vs. State of Punjab and anr,
reported in (2023)5 SCC 360, and
5. Oriental Fire and General Insurance Co. vs.
Panvel Industries Cooperative, reported in
1992 ACJ 503.
7. Per contra, learned Additional Public Prosecutor
Shri C.A.Lokhande for the State supported the order
passed by learned Magistrate, Shegaon as well as learned
Additional Sessions Judge, Khamgaon.
8. Learned Counsel Shri S.N.Bhattad for the
complainant submitted that the applicants had taken two
stands that at one breath they are saying there was no
policy and on the second breath they are saying that there
was no concluded contract. In fact, the documents on
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record show that premium was accepted. The
communication dated 21.4.2005 sufficiently shows that
cheque of premium was accepted. The communication
further shows that it was informed that if the amount is
less than premium quoted or revised as per changes in the
sum proposed for insurance or covered desired risk by
proposal, it was agreed that the proposal shall be accepted
for consideration for reducing the sum appropriated
premium and the policy shall be finalized accordingly. The
claim of the applicants is not maintainable as in a first
appeal decree passed by learned Civil Judge Senior
Division is reversed by RCA No.56/2015. There is prima
facie no merits in the contentions of the applicants and,
therefore, the application deserves to be rejected.
9. After hearing both the sides, it reveals that the
contention of the complainant that applicant No.1 is the
authorized signatory and applicant No.2 is General
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11
Insurance Company is not disputed. It is also not disputed
that the applicant No.2 had proposed to insure its stock
worth of Rs.50.00 lacs of Raw Cotton, Cotton Lint, F.P.
Bells, and Cotton Seeds with the applicant No.2 and also
issued cheque bearing No.132955 dated 21.4.2005
towards the premium. Applicant No.2 has also issued
acknowledgement signed by applicant No.1 on 21.4.2005.
Admittedly, no insurance policy was issued. Though the
cheque was put for clearance on 22.4.2005, the policy was
not issued. As far as unfortunate incident dated 23.4.2005
is concerned, the same is also not disputed. It is also not
disputed that the cheque of premium was sent to the
complainant on 18.5.2005, but the complainant has not
accepted the cheque and sent back with notice dated
11.6.2005. The contention of the complainant that the
authorized signatory of the applicant No.2 visited the spot
from 25.4.2005 to 28.4.2005 is denied by the applicants.
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12
10. Before adverting to the issue, it has to be seen
whether there was a concluded contract between the
applicants and the complainant.
11. The normal principle regarding conclusion of the
contract is laid down under Section 7 of the Indian
Contract Act, which reads thus:
“7. Acceptance must be absolute.– In order to
convert a proposal into a promise the
acceptance must –
(1) be absolute and unqualified;
(2) be expressed in some usual and reasonable
manner, unless the proposal prescribes the
manner in which it is to be accepted. If the
proposal prescribes a manner in which it is to
be accepted, and the acceptance is not made in
such manner, the proposer may, within a
reasonable time after the acceptance is
communicated to him, insist that his proposal
shall be accepted in the prescribed manner,
and not otherwise; but, if he fails to do so, he
accepts the acceptance.”
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13
12. A contract of insurance, like any other contract, is
created where there has been an unqualified acceptance by
one party of an offer made by the other. So long as the
matter is still under negotiation there is no contract,
although it is open to the parties, pending conclusion of
the negotiations, to enter into an interim contract of a
limited nature, for example in the form of a cover-note. If
the contract is created otherwise than by acceptance of a
written proposal it must be shown that there has been
agreement on the fundamentals of the insurance proposed,
namely, the subject-matter of the insurance, the amount of
the insurance unless this is unlimited, the nature of the
risks insured against, the period for which the insurance is
to last and the rate of premium to be charged, although
the exact amount may have to be calculated. The Hon’ble
Apex Court in the case of Life Insurance Corporation of
India vs. Raja Vasireddy Komalavalli Kamba and ors,
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14
reported in AIR 1984 SC 1014 dealt with this issue and it
is held that the contract of insurance will be concluded
only when the party to whom an offer has been made
accepts it unconditionally and communicates his
acceptance to the person making the offer. Though in
certain human relationships silence to a proposal might
convey acceptance but in the case of insurance proposal
silence does not denote consent and no binding contract
arises until the person to whom an offer is made says or
does something to signify his acceptance. Mere delay in
giving an answer cannot be construed as an acceptance,
as, prima facie, acceptance must be communicated to the
offeror. Similarly, The mere receipt and retention of
premium until after the death of the applicant or the mere
preparation of the policy document is not acceptance.
While dealing with the situation, it is further observed in
paragraph No.13, which is reproduced as under:
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15
When an insurance policy becomes effective is
well-settled by the authorities but before we
note the said authorities, it may be stated that
it is clear that the expression “underwrite”
signifies accept liability under’. The dictionary
meaning also indicates that. (See in this
connection The Concise oxford Dictionary Sixth
Edition p. 1267.) It is true that normally the
expression “underwrite” is used in Marine
insurance but the expression used in Chapter
III of the Financial powers of the Standing
order in this case specifically used the
expression “underwriting and revivals” of
policies in case of Life Insurance Corporation
and stated that it was the Divisional Manager
who was competent to underwrite policy for Rs
50,000 and above. The mere receipt and
retention of premium until after the death of
the applicant or the mere preparation of the
policy document is not acceptance. Acceptance
must be signified by some act or acts agreed on
by the parties or from which the law raises a
presumption of acceptance. See in this
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16
connection the statement of law in Corpus Juris
Secundum, Vol. XLV page 986 wherein it has
been stated as:-
“The mere receipt and retention of
premiums until after the death of
applicant does not give rise to a contract,
although the circumstances may be such
that approval could be inferred from
retention of the premium. The mere
execution of the policy is not an
acceptance; an acceptance, to be
complete, must be communicated to the
offeror, either directly, or by some definite
act, such as placing the contract in the
mail. The test is not intention alone.
When the application so requires, the
acceptance must be evidenced by the
signature of one of the company’s
executive officers.”
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17
13. Thus, mere retention of the amount of premium
will not mean acceptance of the contract of insurance.
Some more actions are required on the part of the insurer
to indicate that there was acceptance of the contract of
insurance.
14. In the present case, only cheque towards the
premium was accepted, but the cheque was not cleared
and the amount was not received by the insurance
company towards the premium and insurance certificates
were also not issued. The general rule is that the contract
of insurance will be concluded only when the party to
whom an offer has been made accepts it unconditionally
and communicates his acceptance to the person making
the offer. Whether the final acceptance is that of the
assured or insurers, however, depends simply on the way
in which negotiations for an insurance have progressed.
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18
15. Thus, it means that it is not necessary that in
every contract of insurance, the proposal has to come from
assurer and the insurer has to accept it unconditionally to
convert it into a contract.
16. The similar view is expressed by this court in the
case of Oriental Fire and General Insurance Co. vs. Panvel
Industries Cooperative supra that mere payment of
premium amount and its acceptance by agent cannot
amount to a concluded contract of insurance. In order to
convert a proposal into a promise the acceptance must be
(1) be absolute and unqualified, and (2) be expressed in
some usual and reasonable manner, unless the proposal
prescribes the manner in which it is to be accepted. If the
proposal prescribes a manner in which it is to be accepted,
and the acceptance is not made in such manner, the
proposer may, within a reasonable time after the
acceptance is communicated to him, insist that his
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proposal shall be accepted in the prescribed manner, and
not otherwise; but, if he fails to do so, he accepts the
acceptance.
17. Thus, it is a consistent view that mere receipt and
retention of premium even for a long time is not
acceptance and cannot give rise to a contract.
18. By applying the same principle, if facts of the
present case are considered, it is the allegation that though
the cheque was put for clearance on 22.4.2005, the policy
was not issued. Admittedly, there is no document on
record to show that it was at any time communicated by
the applicants to the complainant that his proposal was
accepted and premium of Rs.23142/- was accepted against
the said policy. On the contrary, communication dated
25.4.2005 shows that cheque was returned and the
company shown its inability to cover risk for the amount of
sum insured of Rs.50.00 ab initio.
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20
19. The contents of the complaint show that with a
dishonest intention, the anti-dated letter was prepared and
the cheque was returned. The contents of the complaint
do not describe as to how at the inception the element of
cheating was existed.
20. Here, the main offence alleged by the complaint is
that the applicants committed the offence under Sections
420 and 468 of the Indian Penal Code and the case of the
complainant is that the applicants cheated him.
21. To deceive is, to induce a man to believe that a
thing is true which is false, and which the person
practising the deceit knows or believes to be false. It must
also be shown that there exists a fraudulent or dishonest
intention at the time of commission of the offence. As far
as present complaint is concerned, there is no allegation
that the applicants made any willful representation to the
complainant.
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22. It has to be seen, whether the contents of the
complaint are sufficient to show that since inception there
was intention and with that intention the cheque was
accepted towards the premium and subsequently liability
to issue insurance policy and to cover the risk are denied.
23. It is well settled that summoning of accused in
criminal case is a serious matter. The criminal law cannot
be set into motion as a matter of course. It is not that the
complainant has to bring only two witnesses to support his
allegations in the complaint to have criminal law set into
motion, but the nature of the allegations made in the
complaint and the material either in the nature of formal
statement of documents are to be produced to establish
the charge against the accused. Whether mere breach of
promise would constitute an offence?
24. The Hon’ble Apex Court in the case of Anil
Mahajan vs. Bhor Industries and anr supra distinguished
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breach of contract and cheating and held that mere use of
expression “cheating” in the complaint is of no
consequence.
25. A breach of contract does not give rise to criminal
prosecution for cheating unless fraudulent or dishonest
intention is shown right at the beginning of the
transaction. Merely on the allegation of failure to keep up
promise will not be enough to initiate criminal
proceedings. From the facts available on record, it is
evident that the complainant had proposed to ensure his
stock worth of Rs.50.00 lacs and issued the cheque of
Rs.23142/- towards premium. The said cheque was
accepted and acknowledgement was issued. As far as the
intention of the applicants since inception is concerned,
except the bare words of the complainant that he was
cheated, nothing is on record to show that since inception
there was an intention to cheat the complainant. It is a
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general principle of criminal law that a crime is not
committed unless a person committing it has mens rea.
The maxim ‘actus non facit reum, nisi mens sit rea ‘, it
means that the intention and act must both to constitute
the crime. For commission of every offence the requisite
thing is mens rea unless the statute expressly excludes it.
So far as the offence of cheating is concerned it does
require the mens rea to deceive.
26. According to Section 415 of the Indian Penal
Code, the inducement must be fraudulent and dishonest
which depends upon the intention of the accused at the
time of inducement.
27. The Hon’ble Apex Court considered Sections 415
and 420 of the Indian Penal Code in the case of Hridaya
Rangan Pd. Verma and ors vs. State of Bihar and anr,
reported in (2000)4 SCC 168 and observe in paragraph
Nos.14 and 15 as under:
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24
“14. On a reading of the section it is manifest
that in the definition there are set forth two
separate classes of acts which the person
deceived may be induced to do. in the first
place he may be induced fraudulently or
dishonestly to deliver any property to any
person. The second class of acts set forth in
the section is the doing or omitting to do
anything which the person deceived would not
do or omit to do if he were not so deceived. In
the first class of cases the inducing must be
fraudulent or dishonest. In the second class of
acts, the inducing must be intentional but not
fraudulent or dishonest.
15. In determining the question it has to be
kept in mind that the distinction between
mere breach of contract and the offence of
cheating is a fine one. It depends upon the
intention of the accused at the time to
inducement which may be judged by his
subsequent conduct but for this subsequent
conduct is not the sole test. Mere breach of…..25/-
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contract cannot give rise to criminal
prosecution for cheating unless fraudulent or
dishonest intention is shown right at the
beginning of the transaction, that is the time
when the offence is said to have been
committed. Therefore it is the intention which
is the gist of the offence. To hold a person
guilty of cheating it is necessary to show that
he had fraudulent or dishonest intention at the
time of making the promise. From his mere
failure to keep up promise subsequently such a
culpable intention right at the beginning, that
is, when he made the promise cannot be
presumed.”
28. Thus, the question which I posed myself is,
whether any act of inducement on the part of applicants
has been raised by the complainant and whether the
applicants had an intention to cheat him from very
inception. If the facts of the case are considered, at the
most, it would be a civil dispute resulting from a breach of
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26
contract on the part of applicants by non issuing the
insurance policy after accepting the cheque and returning
the same to the complainant.
29. In order to constitute an offence of cheating, the
intention to deceive should be in existence at the time
when the inducement was made. It is necessary to show
that a person had fraudulent or dishonest intention at the
time of making the promise, to say that he committed an
act of cheating. A mere failure to keep up promise
subsequenlty cannot be presumed as an act leading to
cheating.
30. The applicants filed an application under Section
482 of the Code of Criminal Procedure as their discharge
application has been rejected and prayed for quashing of
the proceeding.
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27
31. It is a settled principle of law at the stage of
considering an application for discharge the court must
proceed on the assumption that the material which has
been brought on the record by the prosecution is true and
evaluate the material in order to determine whether the
facts emerging from the material, taken on its face value,
disclose the existence of the ingredients necessary to
constitute the offence.
32. What needs to be considered is, whether there is a
ground that the offence has been committed or not and
whether a ground for convicting the accused has been
made out.
33. In the case of Union of India vs. Prafulla Kumar
Samal and anr, reported in (1973)3 SCC 4, the Hon’ble
Apex Court considered the scope of Section 227 of the
Code of Criminal Procedure. After adverting to the various
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decisions, the Hon’ble Apex Court has enumerated the
following principles:
“(1) That the Judge while considering the question
of framing the charges under section 227 of the
Code has the undoubted power to sift and weigh
the evidence for the limited purpose of finding out
whether or not a prima facie case against the
accused has been made out.
(2) Where the materials placed before the Court
disclose grave suspicion against the accused which
has not been properly explained the Court will be,
fully justified in framing a charge and proceeding
with the trial.
(3) The test to determine a prima facie case would
naturally depend upon the facts of each case and it
is difficult to lay down a rule of universal
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29
application. By and large however if two views are
equally possible and the Judge is satisfied that the
evidence produced before him while giving rise to
some suspicion but not grave suspicion against the
accused, he will be fully within his right to
discharge the accused.
(4) That in exercising his jurisdiction under section
227 of the Code the Judge which under the present
Code is a senior and experienced Judge cannot act
merely as a Post office or a mouth-piece of the
prosecution, but has to consider the broad
probabilities of the case, the total effect of the
evidence and the documents produced before the
Court, any basic infirmities appearing in the case
and so on. This however does not mean that the
Judge should make a roving enquiry into the pros
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30
and cons of the matter and weigh the evidence as if
he was conducting a trial.”
34. In the light of the well settled principles as to the
consideration of discharge application as well as inherent
jurisdiction under Section 482 of the Code of Criminal
Procedure, the facts of the case and recital of the
complaint nowhere disclose that since inception there was
an intention and with that intention cheque of premium
was accepted and subsequently the policy was denied.
The contentions of the complainant do not describe as to
how at the inception the element of cheating existed.
35. In the present case, the main offence alleged by
the complainant is that the applicants have committed an
offence under Section 420 of the Indian Penal Code and to
attract the offence, it must have been shown that
fraudulent or dishonest intention was existed at the time
of commission of the offence. There is no allegation that
…..31/-
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the applicants made any willful or deceptive
representations.
36. It is well settled that inherent jurisdiction under
Section 482 of the Code of Criminal Procedure is designed
to achieve salutary purpose that criminal proceedings
ought not to be permitted to degenerate into weapon of
harassment. When the Court is satisfied that criminal
proceedings amount to an abuse of process of law or that
it amounts to bringing pressure upon the accused, in
exercise of inherent powers, such proceedings can be
quashed.
37. In the facts and circumstances of the above case,
intention is the gist of the offence. It is the intention of the
applicants which must determine whether at the time of
accepting the proposal and premium, dishonest intention
exists which is an essential ingredient of the offence and
…..32/-
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whether dishonest intention was in existence in causing
wrongful loss to the complainant.
38. On examination of the complaint and the
documents, at the most, it can be said that it is a simple
case of civil dispute only to the extent of breach of
contract. Requisite averments so as to make out a case of
cheating and fabrication of documents are absolutely
absent. A breach of contract does not give rise to criminal
prosecution for cheating unless fraudulent or dishonest
intention is shown right at the beginning. At the most,
allegation of failure to keep up promise will not be enough
to initiate criminal proceedings.
39. In this view of the matter, in my opinion, the
applicants have made out a case for quashing of the
proceedings and, therefore, continuation of the criminal
proceeding would be abuse of process of law.
…..33/-
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33
40. In the result, I pass following order:
ORDER
(1) The Criminal Application is allowed.
(2) The order dated 2.11.2015 passed by learned Judicial
Magistrate First Class, Shegaon in Misc.Criminal Case
No.101/2009 and order dated 11.7.2022 passed by learned
Additional Sessions Judge, Khamgaon in Criminal Revision
Application No.70/2015 are hereby quashed and set aside.
(3) The criminal proceeding against the applicants bearing
Misc.Criminal Case No.101/2009 is hereby quashed and set
aside and the applicants are discharged of offences under
Sections 420 and 468 of the Indian Penal Code.
The application stands disposed of.
(URMILA JOSHI-PHALKE, J.)
!! BrWankhede !!
Signed by: Mr. B. R. Wankhede
…../-
Designation: PS To Honourable Judge
Date: 18/01/2025 13:22:09