M N G BHARATEESH REDDY versus RAMESH RANGANATHAN AND ANOTHER on 18 August 2022

[2022] 6 S.C.R. 1097

M N G BHARATEESH REDDY

v.

RAMESH RANGANATHAN AND ANOTHER

(Criminal Appeal No 1273 of 2022)

AUGUST 18, 2022

[DR DHANANJAYA Y CHANDRACHUD AND

A S BOPANNA, JJ.]

Penal Code, 1860: ss. 120A, 405, 415, 420, 499, 500 – Inthe instant case the first respondent was employed as a ConsultantNeurosurgeon by BGS Apollo Hospital – Consultancy Agreementwas entered into between the first respondent and the hospitalcontaining his terms of engagement – One of the terms of theengagement was that either party may terminate the agreement, withor without cause, by giving a prior notice of thirty days –Differences arose between the first respondent and the managementof the hospital – First respondent wrote a letter to the GeneralManager of the hospital alleging that patients referred to him werebeing diverted to other doctors of the hospital at the enquiry/reception counter – The services of the first respondent wereterminated on 30 May 2014 for inconsistent and unsatisfactorybehavior in terms of the Consultancy Agreement – Aggrieved firstrespondent furnished a representation on 31 May 2014 to theManaging Director of hospital highlighting gross irregularities inthe billing of patients and he also alleged that the General Managerhad been threatening and maligning him – Thereafter first respondentfiled a complaint before Judicial Magistrate – In his complaint, healleged that the General Manager misused his authority andterminated his services with an oblique and ulterior motive ofdefaming him – Magistrate took cognizance under ss.120A, 405,415, 420, 499, and 500 of IPC – Sessions Judge set aside the orderof the Magistrate on the ground that the complaint did not disclosethe ingredients of the offences of defamation or cheating and thatthe Magistrate was not competent to take cognizance of the offencepunishable under s.420 of the IPC – High Court held that no casewas made out against the General Manager under ss.499 and 500of the IPC however, there were material on record which prima faciedisclosed the offences u/ss.405 and 420 of the IPC – Hence instant

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Aappeal – Held: The grievance of the first respondent arose from thetermination of his services at the hospital and the allegationsindicated that there was an improper billing in respect of the surgicalservices which were rendered by the complainant at the hospitalwhich at the most indicated a breach of terms of the ConsultancyAgreement by the General Manager, which was essentially in theBnature of a civil dispute – There was no allegation that thecomplainant was as a consequence induced to deliver any propertyor to consent that any person shall retain any property or that hewas deceived to do or omit to do anything which he would have notdone or omitted to do if he was not so deceived – None of theCingredients of the offence of criminal breach of trust weredemonstrated on the allegations in the complaint as they stand –First respondent alleged that the General Manager caused breachof trust by issuing grossly irregular bills, which adversely affectedhis professional fees but an alleged breach of the contractual termsdoes not ipso facto constitute the offence of the criminal breach ofDtrust without there being a clear case of entrustment – No elementof entrustment was prima facie established based on the facts andcircumstances of the instant matter.

Penal Code, 1860: s.405 and s.415 – Essential ingredients –Discussed.E

Allowing the appeal, the Court held

Conclusion

HELD: 1. The ingredients of the offence under Section 415emerge from a textual reading. Firstly, to constitute cheating, aperson must deceive another. Secondly, by doing so the formerFmust induce the person so deceived to (i) deliver any property toany person; or (ii) to consent that any person shall retain anyproperty; or (iii) intentionally induce the person so deceived todo or omit to do anything which he would not do or omit if hewere not so deceived and such an act or omission must cause orbe likely to cause damage or harm to that person in body, mind,Greputation or property. Section 420 deals with cheating anddishonestly inducing delivery of property. The ingredients ofSections 415 and 420 are not made out in the present case. Thegrievance of the first respondent arises from the termination ofhis services at the hospital. The allegations indicate that thereHwas an improper billing in respect of the surgical services which were rendered by the complainant at the hospital. At the most,the allegations allude to a breach of terms of the ConsultancyAgreement by the Appellant, which is essentially in the nature ofa civil dispute.[Paras 14, 15 and 18][1103-D-F; 1105-E-F]

2. The allegations in the complaint are conspicuous by theabsence of any reference to the practice of any deception ordishonest intention on behalf of the Appellant. Likewise, there isno allegation that the complainant was as a consequence inducedto deliver any property or to consent that any person shall retainany property or that he was deceived to do or omit to do anythingwhich he would have not done or omitted to do if he was not sodeceived. The conspicuous aspect of the complaint which needsto be emphasized is that the ingredients of the offence of cheatingare absent in the averments as they stand. [Para 19][1105-F-H]

3. Section 405 of the IPC deals with criminal breach of trust.The offence of criminal breach of trust contains two ingredients:(i)entrusting any person with property, or with any dominion overproperty; and (ii) the person entrusted dishonestlymisappropriates or converts to his own use that property to thedetriment of the person who entrusted it. None of the ingredientsof the offence of criminal breach of trust have been demonstratedon the allegations in the complaint as they stand. The firstrespondent alleges that the Appellant caused breach of trust byissuing grossly irregular bills, which adversely affected hisprofessional fees. However, an alleged breach of the contractualterms does not ipso facto constitute the offence of the criminalbreach of trust without there being a clear case of entrustment.No element of entrustment has been prima facie establishedbased on the facts and circumstances of the present matter.Therefore, the ingredients of the offence of criminal breach oftrust are ex facie not made out on the basis of the complaint as itstands. There is a patent error on the part of the High Court insetting aside the judgment of the Additional Sessions Judge andby holding that cognizance was correctly taken of the offencepunishable under Sections 405, 415, and 420 of the IPC. [Paras20, 23, 24][1106-A-D; 1107-B-D]

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AHridaya Ranjan Prasad Verma v. State of Bihar (2000)4 SCC 168 : [2000] 2 SCR 859; Dalip Kaur v. JagnarSingh (2009) 14 SCC 696 : [2009] 10 SCR 264; AnwarChand Sab Nanadikar v. State of Karnataka (2003) 10SCC 521; Kumar Ghai v. State of West Bengal (2022)7 SCC 124 – relied on.B

Case Law Reference

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.1273 of 2022.

From the Judgment and Orders dated 12.07.2019 of the HighDCourt of Karnataka at Bengaluru in Criminal Petition No.543 of 2016.

Manan Kumar Mishra, Sr. Adv., H. Chandra Sekhar, Ms. RekhaChandrasekhar, Ms. Anjul Dwivedi, Dr. Ram Sankar, Ms. SujathaBagadhi, A. Leo Gorge Rozorio, Ms. P. Nirmala, Advs. for the Appellant.

EMs. Radhika Gautam, Adv. for the Respondents.

The Judgment of the Court was delivered by

DR DHANANJAYA Y CHANDRACHUD, J.

1. Leave granted.

F2. This appeal arises from a judgment dated 12 July 2019 of aSingle Judge of the High Court of Karnataka.

3. The first respondent was employed by BGS Apollo Hospital,Mysore, the second respondent[1], as a Consultant Neurosurgeon on amonthly guaranteed fee of Rs. 50,000. He worked in that capacity fromGMarch 2004 until June 2014. A contract, styled as a ConsultancyAgreement was entered into between the first respondent and the hospitalon 1 April 2013 containing his terms of engagement. One of the terms ofthe engagement was that either party may terminate the agreement,with or without cause, by giving a prior notice of thirty days. On 3 June H1 “hospital”

2013, the management of the hospital enhanced the emoluments of thefirst respondent by assuring him a guaranteed monthly fee of Rs 4,25,000.

4. Thereafter, differences arose between the first respondent andthe management of the hospital. The first respondent wrote a letter dated9 January 2014 to the Appellant alleging that patients referred to himwere being diverted to other doctors of the hospital at the enquiry andreception counter. Through the said letter, he also requested the Appellantto take action against the erring staff members. The services of the firstrespondent were terminated on 30 May 2014 for inconsistent andunsatisfactory behavior in terms of the Consultancy Agreement.Aggrieved by his termination, the first respondent furnished arepresentation on 31 May 2014 to the Managing Director, Apollo Groupof Medical Sciences highlighting gross irregularities in the billing ofpatients. In this representation, he also alleged that the Appellant hadbeen threatening and maligning him. On 2 June 2014, the first respondentwrote a letter to Director of Medical Services of the hospital requestingpermission to treat patients till 30 June 2014, the end of his notice period.

5. On 10 October 2014, the first respondent filed a complaintunder Section 200 of the Code of Criminal Procedure 1973, being PCRNo 2536 of 2014, before the First Additional Civil Judge (Junior Division)and Judicial Magistrate First Class, Mysore[2]. In his complaint, the firstrespondent alleged that the Appellant misused his authority and terminatedhis services with an oblique and ulterior motive of defaming him. TheJMFC by an order dated 3 March 2015 took cognizance under Sections120A, 405, 415, 420, 499, and 500 of the Indian Penal Code[3]. The orderof the JMFC was challenged in revision under Section 397, Code ofCriminal Procedure 1973 before the IVth Additional Sessions Judge,Mysore.

6. The Additional Sessions Judge by an order dated 16 December2015 set aside the order of the JMFC on the ground that the complaintdid not disclose the ingredients of the offences of defamation or cheating.Moreover, the Additional Sessions Judge held that the JMFC was notcompetent to take cognizance of the offence punishable under Section420 of the IPC.

2 “JMFC”

3 “IPC”

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A7. The order of the Additional Sessions Judge was called intoquestion by the first Respondent before the High Court of Karnataka.The Single Judge by the impugned judgment dated 12 July 2019 held thatno case was made out against the Appellant under sections 499 and 500of the IPC. However, the Court held that the material placed on recordprima facie disclosed ingredients of offences under sections 405 andB420 of the IPC.

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8. Notice was issued in these proceedings on 25 October 2019 inpursuance of which the first Respondent has appeared.

9. We have heard Mr Manan Kumar Misra, senior counsel forCthe Appellant and Ms Radhika Gautam, counsel for the first respondent,who is the contesting party.

10. The issue which presents itself for determination in theseproceedings is whether the ingredients of the offences of cheating andcriminal breach of trust have been made out on the face of the complaint.DFollowing the well settled principle of law, the contents of the complaintwould have to be read in order to deduce as to whether the ingredientsof the offence have been duly established.

11. The complaint filed by the first respondent on 10 October2014 contains a narration of his engagement by the hospital as a ConsultantENeurosurgeon pursuant to an offer dated 16 January 2004 and of hishaving worked between March 2004 to June 2014 by establishing theDepartment of Neurosurgery.

12. Paragraph 6 of the complaint contains a recital that as a resultof the incompetence of the billing staff in the hospital, the fees whichFwere to be charged for the first respondent were wrongly billed anddrastically reduced. The complaint states that he drew this to the attentionof the Chief Operating Officer in October 2011 and thereafter to theAppellant who had recently joined as the General Manager of the hospital.The complainant alleges that he had sustained a loss on the receipt of hisprofessional fees and was verbally assured by the Appellant that theGhospital would reimburse the fees after a thorough enquiry. Further, thereare bald averments in the complaint that the complainant was targetedby the Appellant “along with his henchmen”. The complaint refers tocertain bills which were raised by the hospital on 28 April 2013 and 4November 2013 wrongly showing the surgery charges at Rs 1 and Rs 2.The complainant states that he was removed from the duty rosterH

between 17 May and 31 May 2014 and that he was eventually removedfrom the service of the hospital.

13. The ingredients of the offence of cheating are spelt out inSection 415 of the IPC. Section 415 is extracted below:

“415. Cheating — Whoever, by deceiving any person, fraudulentlyor dishonestly induces the person so deceived to deliver anyproperty to any person, or to consent that any person shall retainany property, or intentionally induces the person so deceived to door omit to do anything which he would not do or omit if he werenot so deceived, and which act or omission causes or is likely tocause damage or harm to that person in body, mind, reputation orproperty, is said to “cheat”.

Explanation — A dishonest concealment of facts is a deceptionwithin the meaning of this section.”

14. The ingredients of the offence under Section 415 emerge froma textual reading. Firstly, to constitute cheating, a person must deceiveanother. Secondly, by doing so the former must induce the person sodeceived to (i) deliver any property to any person; or (ii) to consent thatany person shall retain any property; or (iii) intentionally induce the personso deceived to do or omit to do anything which he would not do or omitif he were not so deceived and such an act or omission must cause or belikely to cause damage or harm to that person in body, mind, reputationor property.

15. Section 420 deals with cheating and dishonestly inducingdelivery of property. It reads as follows:

“420. Cheating and dishonestly inducing delivery ofproperty – Whoever cheats and thereby dishonestly induces theperson deceived to deliver any property to any person, or to make,alter or destroy the whole or any part of a valuable security, oranything which is signed or sealed, and which is capable of beingcapable of converting into a valuable security, shall be punishedwith imprisonment of either description for a term which mayextend to seven years, and shall also be liable to fine.”

16. In Hridaya Ranjan Prasad Verma v. State of Bihar[4], atwo-judge bench of this Court interpreted sections 415 and 420 of IPC

4 (2000) 4 SCC 168

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Ato hold that fraudulent or dishonest intention is a precondition to constitutethe offence of cheating. The relevant extract from the judgment readsthus:

“14. On a reading of the section it is manifest that in the definitionthere are set forth two separate classes of acts which the personBdeceived may be induced to do. In the first place he may be inducedfraudulently or dishonestly to deliver any property to any person.The second class of acts set forth in the section is the doing oromitting to do anything which the person deceived would not door omit to do if he were not so deceived. In the first class of casesthe inducing must be fraudulent or dishonest. In the second classCof acts, the inducing must be intentional but not fraudulent ordishonest.

15. In determining the question it has to be kept in mind that thedistinction between mere breach of contract and the offence ofcheating is a fine one. It depends upon the intention of the accusedDat the time of inducement which may be judged by his subsequentconduct but for this subsequent conduct is not the sole test.Merebreach of contract cannot give rise to criminal prosecutionfor cheating unless fraudulent or dishonest intention isshown right at the beginning of the transaction, that is theEtime 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 showthat he had fraudulent or dishonest intention at the time ofmaking the promise. From his mere failure to keep uppromise subsequently such a culpable intention right at theFbeginning, that is, when he made the promise cannot be”presumed.

17. In Dalip Kaur v. Jagnar Singh[5] a two-judge bench of thisGCourt held that a dispute arising out of a breach of contract would notamount to an offence of cheating under section 415 and 420. The relevantextract is as follows:

“9. The ingredients of Section 420 of the Penal Code are:

M N G BHARATEESH REDDY v. RAMESH RANGANATHANAND ANOTHER [DR DHANANJAYA Y CHANDRACHUD, J.]

“(i) Deception of any persons;

(ii) Fraudulently or dishonestly inducing any person to deliver anyproperty; or

(iii) To consent that any person shall retain any property and finallyintentionally inducing that person to do or omit to do anything whichhe would not do or omit.”

10. The High Court, therefore, should have posed a question as towhether any act of inducement on the part of the appellant hasbeen raised by the second respondent and whether the appellanthad an intention to cheat him from the very inception. If thedispute between the parties was essentially a civil disputeresulting from a breach of contract on the part of the-appellants by nonrefunding the amount of advance the samewould not constitute an offence of cheating. Similar is thelegal position in respect of an offence of criminal breach oftrust having regard to its definition contained in Section405 of the Penal Code.(See Ajay Mitra v. State of M.P. [(2003)3 SCC 11 : 2003 SCC (Cri) 703])”

18. Applying the above principles, the ingredients of Sections 415and 420 are not made out in the present case. The grievance of the firstrespondent arises from the termination of his services at the hospital.The allegations indicate that there was an improper billing in respect ofthe surgical services which were rendered by the complainant at thehospital. At the most, the allegations allude to a breach of terms of theConsultancy Agreement by the Appellant, which is essentially in thenature of a civil dispute.

19. The allegations in the complaint are conspicuous by theabsence of any reference to the practice of any deception or dishonestintention on behalf of the Appellant. Likewise, there is no allegation thatthe complainant was as a consequence induced to deliver any propertyor to consent that any person shall retain any property or that he wasdeceived to do or omit to do anything which he would have not done oromitted to do if he was not so deceived. The conspicuous aspect of thecomplaint which needs to be emphasized is that the ingredients of theoffence of cheating are absent in the averments as they stand.

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[2022] 6 S.C.R.

A20. Section 405 of the IPC deals with criminal breach of trust andreads as follows:

“405. Criminal breach of trust – Whoever, being in any mannerentrusted with property, or with any dominion over property,dishonestly misappropriates or converts to his own use thatBproperty, or dishonestly uses or disposes of that property in anydirection of law prescribing the mode in which such trust is to bedischarged, or of any legal contract, express or implied, which hehas made touching the discharge of such trust, or willfully suffersany other person so to do, commits “criminal breach of trust”.”

CThe offence of criminal breach of trust contains two ingredients:(i) entrusting any person with property, or with any dominion over property;and (ii) the person entrusted dishonestly misappropriates or converts tohis own use that property to the detriment of the person who entrustedit.

21. In Anwar Chand Sab Nanadikar v. State of Karnataka[6] aDtwo-judge bench restated the essential ingredients of the offence ofcriminal breach of trust in the following words:

“7. The basic requirement to bring home the accusations underSection 405 are the requirements to prove conjointly (1)Eentrustment, and (2) whether the accused was actuated by thedishonest intention or not misappropriated it or converted it to hisown use to the detriment of the persons who entrusted it. As thequestion of intention is not a matter of direct proof, certain broadtests are envisaged which would generally afford useful guidancein deciding whether in a particular case the accused had mensFrea for the crime.”

22. In Vijay Kumar Ghai v. State of West Bengal[7] anothertwo-judge bench held that entrustment of property is pivotal to constitutean offence under section 405 of the IPC. The relevant extract reads asfollows:G

“28. ”Entrustment” of property under Section 405 of the PenalCode, 1860 is pivotal to constitute an offence under this. Thewords used are, “in any manner entrusted with property”. So, it 6 (2003) 10 SCC 521H7 (2022) 7 SCC 124

extends to entrustments of all kinds whether to clerks, servants,business partners or other persons, provided they are holding aposition of “trust”. A person who dishonestly misappropriatesproperty entrusted to them contrary to the terms of an obligationimposed is liable for a criminal breach of trust and is punishedunder Section 406 of the Penal Code.”

23. None of the ingredients of the offence of criminal breach oftrust have been demonstrated on the allegations in the complaint as theystand. The first respondent alleges that the Appellant caused breach oftrust by issuing grossly irregular bills, which adversely affected hisprofessional fees. However, an alleged breach of the contractual termsdoes not ipso facto constitute the offence of the criminal breach of trustwithout there being a clear case of entrustment. No element ofentrustment has been prima facie established based on the facts andcircumstances of the present matter. Therefore, the ingredients of theoffence of criminal breach of trust are ex facie not made out on thebasis of the complaint as it stands.

24. In the above view of the matter, there is a patent error on thepart of the High Court in setting aside the judgment of the AdditionalSessions Judge and by holding that cognizance was correctly taken ofthe offence punishable under Sections 405, 415, and 420 of the IPC.

25. We accordingly allow the appeal and set aside the impugnedjudgment and order of the High Court dated 12 July 2019.

26. The order of the IVth Additional Sessions Judge dated 15December 2015 in Criminal Revision Petition No 94 of 2015 shallaccordingly stand restored, for the reasons which have been indicatedabove.

27. Pending applications, if any, stand disposed of.

Devika Gujral

Appeal allowed.

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