The Supreme Court has observed that mere filing of the suits for recovery of the money and complaint filed under Section 138 of the N.I. Act by itself is not a ground to quash the proceedings against the accused in a criminal breach of trust/cheating case.
In this case, the High Court had quashed the proceedings against the accused in a cheating/breach of trust case mainly on the ground that in view of the agreement entered between the parties, there is a novation of the contract between the parties. Another ground for allowing the petition filed by the accused was that, the complainant had already filed a civil suit for recovery of advance paid by him for a sum of Rs.9 crores (Rupees Nine crores) and that he has filed complaint for offence under Section 138 of the Negotiable Instruments Act, 1881.
While allowing the appeal [Dr. Lakshman vs. State of Karnataka], the bench comprising Justice R. Banumathi and Justice R. Subhash Reddy observed that whether there is novation of contract or not and the effect of such entering into the contract is a matter which is required to be considered only after trial but not at the stage of considering the application under Section 482, Cr.P.C. It further observed:
Further, as the contract is for the purpose of procuring the land, as such the same is of civil nature, as held by the High Court, is also no ground for quashing. Though the contract is of civil nature, if there is an element of cheating and fraud it is always open for a party in a contract, to prosecute the other side for the offences alleged. Equally, mere filing of a suit or complaint filed under Section 138 of the N.I. Act, 1881 by itself is no ground to quash the proceedings. While considering the petition under Section 482 of Cr.P.C., we are of the view that the High Court also committed an error that there is a novation of the contract in view of the subsequent agreement entered into on 08.11.2012. Whether there is novation of contract or not and the effect of such entering into the contract is a matter which is required to be considered only after trial but not at the stage of considering the application under Section 482, Cr.P.C.
The bench also observed that breach of trust with mens rea gives rise to a criminal prosecution as well. It said:
"In a given case, whether there is any mens rea on the part of the accused or not is a matter which is required to be considered having regard to the facts and circumstances of the case and contents of the complaint etc."
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