Alleged Breach Of Contractual Terms Does Not Ipso Facto Constitute Offence On Criminal Breach Of Trust - SC

Senior Counsel Manan Kumar Misra appeared for the Appellant and Counsel Radhika Gautam appeared for the first Respondent.

In this case, the first Respondent was employed by BGS Apollo Hospital. The second Respondent was employed as a Consultant Neurosurgeon on a monthly guaranteed fee of Rs. 50,000. He worked in that capacity from March 2004 until June 2014.

A contract styled as a Consultancy Agreement was entered into between the first respondent and the hospital containing his terms of engagement. One of the terms of the engagement was that either party may terminate the agreement, with or without cause, by giving a prior notice of thirty days.

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

Differences arose between the first Respondent and the management of the hospital. The first Respondent wrote a letter to the Appellant alleging that patients referred to him were being diverted to other doctors of the hospital at the enquiry and reception counter. Through the letter, he also requested the Appellant to take action against the erring staff members.

The services of the first Respondent were terminated for inconsistent and unsatisfactory behaviour in terms of the Consultancy Agreement. Aggrieved by his termination, the first Respondent furnished a representation to the Managing Director, Apollo Group of Medical Sciences highlighting gross irregularities in the billing of patients. In this representation, he also alleged that the Appellant had been threatening and maligning him. The first Respondent also requested permission to treat patients until the end of his notice period.

The first Respondent then filed a complaint under Section 200 of the Code of Criminal Procedure 1973 before the First Additional Civil Judge (Junior Division) and Judicial Magistrate First Class (JMFC). In his complaint, he alleged that the Appellant misused his authority and terminated his services with an oblique and ulterior motive of defaming him.

The JMFC took cognizance under Sections 120A, 405, 415, 420, 499, and 500 of the IPC. The order of the JMFC was challenged in revision under Section 397, Code of Criminal Procedure 1973 before the IVth Additional Sessions Judge.

The Additional Sessions Judge set aside the order of the JMFC on the ground that the complaint did not disclose the ingredients of the offences of defamation or cheating. Moreover, the Additional Sessions Judge held that the JMFC was not competent to take cognizance of the offence punishable under Section 420 of the IPC.

The order of the Additional Sessions Judge was called into question by the first Respondent before the High Court of Karnataka. The Single Judge held that no case was made out against the Appellant under sections 499 and 500 of the IPC. However, the Court held that the material placed on record prima facie disclosed ingredients of offences under sections 405 and 420 of the IPC.

The Appellant then approached the Supreme Court.

The issue presented before the Supreme Court was whether the ingredients of the offences of cheating and criminal breach of trust have been made out on the face of the complaint. In that context, the Court held that "Following the well settled principle of law, the contents of the complaint would have to be read in order to deduce as to whether the ingredients of the offence have been duly established."

The Court perused the facts of the case and the relevant applicable sections in detail, after which the Court opined that the ingredients of Sections 415 and 420 were not made out in the case. In that context, it observed that "The allegations in the complaint are conspicuous by the absence of any reference to the practice of any deception or dishonest intention on behalf of the Appellant. Likewise, there is no allegation that the complainant was as a consequence induced to deliver any property or to consent that any person shall retain any property or that he was deceived to do or omit to do anything which he would have not done or omitted to do if he was not so deceived. The conspicuous aspect of the complaint which needs to be emphasized is that the ingredients of the offence of cheating are absent in the averments as they stand."

While holding that there was a patent error on part of the High Court in setting aside the judgment of the Additional Sessions Judge, the Supreme Court held that "None of the ingredients of the offence of criminal breach of trust have been demonstrated on the allegations in the complaint as they stand. The first respondent alleges that the Appellant caused breach of trust by issuing grossly irregular bills, which adversely affected his professional fees. However, an alleged breach of the contractual terms does not ipso facto constitute the offence of the criminal breach of trust without there being a clear case of entrustment. No element of entrustment has been prima facie established based on the facts and circumstances of the present matter. Therefore, the ingredients of the offence of criminal breach of trust are ex facie not made out on the basis of the complaint as it stands."

Accordingly, the appeal was allowed and the order of the High Court was set aside.