A) Abstract / Headnote

The case involves a dispute between Sachin Garg and State of Uttar Pradesh & Anr. regarding a commercial transaction that escalated into a criminal complaint. The Supreme Court of India examined whether the criminal proceedings initiated under Sections 406, 504, and 506 of the Indian Penal Code (IPC) against the appellant, Sachin Garg, were justifiable, given the commercial nature of the dispute. The crux of the matter centered around unpaid invoices for the supply of dissolved acetylene gas used in battery manufacturing by Exide Industries Limited (EIL), for whom the appellant served as the factory head. The complainant alleged non-payment, breach of trust, and threats. The Court observed that disputes relating to rates and payments in a commercial transaction do not, by default, constitute criminal offenses without clear evidence of dishonest misappropriation or criminal intimidation. The Court emphasized the importance of preventing the misuse of criminal proceedings for settling commercial disputes. The High Court’s failure to quash the complaint was overruled, and the criminal proceedings were set aside.

Keywords: Commercial Dispute, Criminal Intimidation, Summons, Quashing, Breach of Trust, Non-payment.

B) Case Details

• i) Judgment Cause Title: Sachin Garg v. State of U.P. & Anr.
• ii) Case Number: Criminal Appeal No. 497 of 2024
• iii) Judgment Date: 30 January 2024
• iv) Court: Supreme Court of India
• v) Quorum: Justice Aniruddha Bose and Justice Sanjay Kumar
• vi) Author: Justice Aniruddha Bose
• vii) Citation: [2024] 1 S.C.R. 1134; 2024 INSC 72
• viii) Legal Provisions Involved: Sections 406, 504, and 506 of the Indian Penal Code, 1860; Section 482 of the Code of Criminal Procedure, 1973
• ix) Judgments Overruled by the Case: Not applicable
• x) Case Related to Law Subjects: Criminal Law, Commercial Dispute Resolution

C) Introduction and Background of Judgment

The case’s background arises from a commercial transaction between the appellant’s employer, Exide Industries Limited (EIL), and the respondent, a supplier of dissolved acetylene gas. The dispute pertained to non-payment of invoices following amendments in the rate per unit of gas. The respondent filed a criminal complaint against the appellant, alleging criminal breach of trust, abuse, and threats of harm. The appellant approached the High Court of Allahabad to quash the summons, which the High Court dismissed. Subsequently, an appeal was filed in the Supreme Court to review the justifiability of criminalizing the dispute.

D) Facts of the Case

1. Parties Involved: The appellant, Sachin Garg, headed the factory of EIL in Haryana. The respondent, operating as Ambika Gases, supplied dissolved acetylene gas essential for battery manufacturing at EIL.
2. Transaction Dispute: The appellant and respondent had agreed to rates which were subsequently modified. The dispute primarily involved a purchase order dated 01.04.2019, which was amended twice, impacting the rate.
3. Allegations by Respondent: The respondent alleged that the appellant’s employer did not honor the revised rates, resulting in unpaid invoices amounting to ₹9,36,693.18. Upon repeated requests for payment, the appellant allegedly used abusive language and threatened the respondent.
4. Magistrate’s Decision: The Chief Judicial Magistrate of Ghaziabad issued summons for the trial under Sections 406, 504, and 506 based on initial depositions.
5. High Court’s Dismissal: The High Court dismissed the appellant’s plea under Section 482 CrPC, maintaining that the dispute entailed factual determinations that could only be adjudicated at trial.

E) Legal Issues Raised

• i) Justifiability of Criminal Summons: Whether a purely commercial dispute with no criminal element justifies the issuance of summons under Sections 406, 504, and 506 of IPC.
• ii) Quashing of Criminal Complaint: Whether the High Court should have quashed the complaint on grounds of abuse of process under Section 482 of CrPC, particularly given the commercial context of the dispute.

F) Petitioner’s (Appellant’s) Arguments

1. Lack of Criminal Intent: The appellant argued that the dispute was purely commercial, lacking the essential ingredients of criminal breach of trust, as defined under Section 405 IPC. He referred to Deepak Gaba v. State of Uttar Pradesh to emphasize that commercial non-payment does not constitute criminal misappropriation.
2. Misuse of Criminal Proceedings: The appellant’s counsel argued that criminal law should not serve as a tool for enforcing payments in commercial transactions, as such matters are best resolved in civil courts.
3. Deficiencies in Complaint: The appellant pointed out the absence of specific threats in the respondent’s complaint, rendering the allegations under Sections 504 and 506 unsustainable. The initial deposition did not establish any intention to intimidate.
4. High Court’s Misapplication: The appellant criticized the High Court’s reliance on cases that focused on civil disputes and refused to quash criminal proceedings despite clear precedents that discourage misuse of criminal processes in such contexts.

G) Respondent’s Arguments

1. Cognizable Allegations: The respondent argued that the complaint disclosed sufficient grounds to establish a prima facie case of criminal breach of trust and intimidation. They argued that further investigation could reveal more about the appellant’s conduct.
2. Stage of the Complaint: The respondent asserted that at the stage of issuing summons, the Magistrate’s role is limited to establishing whether there is a prima facie case, and thus, the summons were valid.
3. Alternative Remedy: The respondent pointed out that the appellant retained the right to seek discharge at a later stage, thus contending that the appeal was premature.

H) Related Legal Provisions

• Section 405 IPC: Criminal breach of trust requires proof of dishonest misappropriation of property entrusted to an individual.
• Section 406 IPC: Prescribes punishment for criminal breach of trust, contingent on evidence of misappropriation.
• Section 504 IPC: Pertains to intentional insult with intent to provoke a breach of peace.
• Section 506 IPC: Covers criminal intimidation, requiring specific intent to cause harm or fear.
• Section 482 CrPC: Grants inherent power to High Courts to quash criminal proceedings where necessary to prevent abuse of process or secure justice.

I) Judgment

a. Ratio Decidendi

The Supreme Court observed that commercial disputes do not inherently possess criminal elements unless supplemented by clear evidence of dishonest intention or specific criminal acts. It held that criminal breach of trust cannot be alleged simply because one party defaults on a payment.

b. Obiter Dicta

The Court underscored the potential abuse of criminal proceedings in commercial contexts, cautioning that criminal law should not be invoked for settling civil disputes.

c. Guidelines

1. Commercial Disputes in Criminal Contexts: Criminal proceedings should not be initiated in commercial disputes without cogent evidence of dishonest intent, as such matters fall under the domain of civil courts.
2. Role of Magistrates in Issuing Summons: Magistrates must verify the presence of prima facie criminal elements before issuing summons to prevent misuse of criminal law.

J) Conclusion & Comments

The Supreme Court’s decision in Sachin Garg v. State of U.P. & Anr. reinforces the boundaries between civil and criminal proceedings in commercial matters. This ruling serves as a significant check on the misuse of criminal complaints in payment disputes, affirming that criminal proceedings must not substitute for civil remedies.

References

1. Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra, [2021] 19 SCC 401
2. R.P. Kapur v. State of Punjab, AIR 1960 SC 866
3. State of Haryana v. Bhajan Lal, 1992 SCC (Cr.) 426
4. Deepak Gaba v. State of Uttar Pradesh, (2023) 3 SCC 423
5. Dalip Kaur v. Jagnar Singh, (2009) 14 SCC 696