BRIEF:

In commercial transactions when one party fails to fulfil its obligations, disputes arise
disputes are generally civil in nature and are ordinarily resolved through civil suits,
arbitration, or recovery proceedings. However, parties frequently attempt to give a criminal
colour to these disputes by alleging offences such as cheating, criminal breach of trust,
forgery, or conspiracy.

The offence of cheating is attracted only when the accused had a dishonest or fraudulent
intention from the very beginning of the transaction. Mere failure to keep a promise or
perform a contract does not amount to cheating. The Supreme Court has repeatedly held that
every breach of contract is not a criminal offence. The crucial test is whether there was an
intention to deceive at the inception of the transaction.

Similarly, criminal breach of trust requires proof of entrustment of property and its dishonest
misappropriation. Mere non-payment of money or failure to return amounts due under a
contract is not sufficient. Unless there is clear entrustment and dishonest conversion of
property, the offence is generally not made out.

The High Courts possess the power to quash FIRs and criminal proceedings where the
allegations do not disclose the essential ingredients of cheating, criminal breach of trust, or
other offences. If the dispute is essentially contractual and lacks any allegation of dishonest
intention from the beginning, continuation of criminal proceedings may amount to abuse of
the process of law.

Even after the filing of charges, an accused may seek discharge by demonstrating that the
material on record does not disclose a prima facie criminal case. If the court finds that the
dispute is purely civil in nature and the ingredients of the alleged offences are absent, it may
discharge the accused without requiring a full-fledged criminal trial.

PROVISIONS USED IN THE NOTES:

1. Section 120B. Punishment of criminal conspiracy.—(1) Whoever is a party to a

criminal conspiracy to commit an offence punishable with death, 1[imprisonment for life]
or rigorous imprisonment for a term of two years or upwards, shall, where no express
 provision is made in this Code for the punishment of such a conspiracy, be punished in
the same manner as if he had abetted such offence.
(2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to
commit an offence punishable as aforesaid shall be punished with imprisonment of
either description for a term not exceeding six months, or with fine or with both.]

2. Section 405. Criminal breach of trust.—Whoever, being in any manner entrusted with
property, or with any dominion over property, dishonestly misappropriates or converts to his
own use that property, or dishonestly uses or disposes of that property in violation of any
direction of law prescribing the mode in which such trust is to be discharged, or of any legal
contract, express or implied, which he has made touching the discharge of such trust, or
wilfully suffers any other person so to do, commits “criminal breach of trust”. 1

[2[Explanation 1].—A person, being an employer 3[of an establishment whether exempted

under section 17 of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
(19 of 1952) or not] who deducts the employee’s contribution from the wages payable to the
employee for credit to a Provident Fund or Family Pension Fund established by any law for
the time being in force, shall be deemed to have been entrusted with the amount of the
contribution so deducted by him and if he makes default in the payment of such contribution
to the said Fund in violation of the said law, shall be deemed to have dishonestly used the
amount of the said contribution in violation of a direction of law as aforesaid.]

[Explanation 2.—A person, being an employer, who deducts the employees’ contribution
from the wages payable to the employee for credit to the Employees’ State Insurance Fund
held and administered by the Employees’ State Insurance Corporation established under the
Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted
with the amount of the contribution so deducted by him and if he makes default in the
payment of such contribution to the said Fund in violation of the said Act, shall be deemed to
have dishonestly used the amount of the said contribution in violation of a direction of law as
aforesaid.]

3. Section 406. Punishment for criminal breach of trust.—Whoever commits criminal

breach of trust shall be punished with imprisonment of either description for a term which
may extend to three years, or with fine, or with both.
4. Section 415 Cheating.—Whoever, by deceiving any person, fraudulently or dishonestly
induces the person so deceived to deliver any property to any person, or to consent that
 any person shall retain any property, or intentionally induces the person so deceived to do
or omit to do anything which he would not do or omit if he were not so deceived, and
which act or omission causes or is likely to cause damage or harm to that person in body,
mind, reputation or property, is said to “cheat”.
Explanation.—A dishonest concealment of facts is a deception within the meaning of this
section.
5. Section 420. Cheating and dishonestly inducing delivery of property.—Whoever
cheats and thereby dishonestly induces the person deceived to deliver any property to any
person, or to make, alter or destroy the whole or any part of a valuable security, or
anything which is signed or sealed, and which is capable of being converted into a
valuable security, shall be punished with imprisonment of either description for a term
which may extend to seven years, and shall also be liable to fine.
6. Section 463. Forgery.—3[Whoever makes any false document or false electronic record
or part of a document or electronic record, with intent to cause damage or injury], to the
public or to any person, or to support any claim or title, or to cause any person to part
with property, or to enter into any express or implied contract, or with intent to commit
fraud or that fraud may be committed, commits forgery.
7. Section 464. Making a false document.—3[A person is said to make a false document or
false electronic record— First.—Who dishonestly or fraudulently— (a) makes, signs,
seals or executes a document or part of a document; (b) makes or transmits any electronic
record or part of any electronic record; (c) affixes any 4[electronic signature] on any
electronic record; (d) makes any mark denoting the execution of a document or the
authenticity of the 4 [electronic signature], with the intention of causing it to be believed
that such document or part of document, electronic record or 4[electronic signature] was
made, signed, sealed, executed, transmitted or affixed by or by the authority of a person
by whom or by whose authority he knows that it was not made, singed, sealed, executed
or affixed; or Secondly.—Who without lawful authority, dishonestly or fraudulently, by
cancellation or otherwise, alters a document or an electronic record in any material part
thereof, after it has been made, executed or affixed with 4[electronic signature] either by
himself or by any other person, whether such person be living or dead at the time of such
alteration; or Thirdly.—Who dishonestly or fraudulently causes any person to sign, seal,
execute or alter a document or an electronic record or to affix his 4[electronic signature]
on any electronic record knowing that such person by reason of unsoundness of mind or
 intoxication cannot, or that by reason of deception practised upon him, he does not know
the contents of the document or electronic record or the nature of the alteration.]
8. Section 465 Punishment for forgery.—Whoever commits forgery shall be punished
with imprisonment of either description for a term which may extend to two years, or
with fine, or with both.
9. Section 467. Forgery of valuable security, will, etc.—Whoever forges a document
which purports to be a valuable security or a will, or an authority to adopt a son, or which
purports to give authority to any person to make or transfer any valuable security, or to
receive the principal, interest or dividends thereon, or to receive or deliver any money,
movable property, or valuable security, or any document purporting to be an acquittance
or receipt acknowledging the payment of money, or an acquittance or receipt for the
delivery of any movable property or valuable security, shall be punished with
4[imprisonment for life], or with imprisonment of either description for a term which may
extend to ten years, and shall also be liable to fine.
10. Section 468. Forgery for purpose of cheating.—Whoever commits forgery, intending
that the 3[document or electronic record forged] shall be used for the purpose of cheating,
shall be punished with imprisonment of either description for a term which may extend to
seven years, and shall also be liable to fine.
11. Section 471. Using as genuine a forged document or electronic record.—Whoever
fraudulently or dishonestly uses as genuine any 5[document or electronic record] which
he knows or has reason to believe to be a forged 5[document or electronic record], shall
be punished in the same manner as if he had forged such 5[document or electronic
record].
12. Section 384. Punishment for extortion.—Whoever commits extortion shall be punished
with imprisonment of either description for a term which may extend to three years, or
with fine, or with both.

CrPC:
13. Section 227 Discharge.—If, upon consideration of the record of the case and the
documents submitted therewith, and after hearing the submissions of the accused and the
prosecution in this behalf, the Judge considers that there is not sufficient ground for
proceeding against the accused, he shall discharge the accused and record his reasons for
so doing.
14. Section 482 Saving of inherent powers of High Court.—Nothing in this Code shall be
deemed to limit or affect the inherent powers of the High Court to make such orders as
may be necessary to give effect to any order under this Code, or to prevent abuse of the
process of any Court or otherwise to secure the ends of justice.
15. Section 438. Direction for grant of bail to person apprehending arrest.—(1) When
any person has reason to believe that he may be arrested on an accusation of having
committed a non-bailable offence, he may apply to the High Court or the Court of Session
for a direction under this section; and that Court may, if it thinks fit, direct that in the
event of such arrest, he shall be released on bail.
(2) When the High Court or the Court of Session makes a direction under sub-section (1),
it may include such conditions in such directions in the light of the facts of the particular
case, as it may think fit, including—
(i) a condition that the person shall make himself available for interrogation by a police
officer as and when required;
(ii) a condition that the person shall not, directly or indirectly, make any inducement,
threat or promise to any person acquainted with the facts of the case so as to dissuade him
from disclosing such facts to the Court or to any police officer;
(iii) a condition that the person shall not leave India without the previous permission of
the Court;
(iv) such other condition as may be imposed under sub-section (3) of section 437, as if the
bail were granted under that section. (3) If such person is thereafter arrested without
warrant by an officer in charge of a police station on such accusation, and is prepared
either at the time of arrest or at any time while in the custody of such officer to give bail,
he shall be released on bail; and if a Magistrate taking cognizance of such offence decides
that a warrant should be issued in the first instance against that person, he shall issue a
bailable warrant in confirmity with the direction of the Court under sub-section (1).
2[(4) Nothing in this section shall apply to any case involving the arrest of any person on
accusation of having committed an offence under sub-section (3) of section 376 or section
376AB or section 376DA or section 376DB of the Indian Penal Code (45 of 1860).]

Negotiable Instruments Act

16. Section 138. Dishonour of cheque for insufficiency, etc., of funds in the account.—
Where any cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person from out of that account for the
 discharge, in whole or in part, of any debt or other liability, is returned by the bank
unpaid, either because of the amount of money standing to the credit of that account is
insufficient to honour the cheque or that it exceeds the amount arranged to be paid from
that account by an agreement made with that bank, such person shall be deemed to have
committed an offence and shall, without prejudice to any other provision of this Act, be
punished with imprisonment for [a term which may be extended to two years’], or with
fine which may extend to twice the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply unless—
(a) thecheque has been presented to the bank within a period of six months from the date
on which it is drawn or within the period of its validity, whichever is earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes a
demand for the payment of the said amount of money by giving a notice; in writing, to the
drawer of the cheque, 5 [within thirty days] of the receipt of information by him from the
bank regarding the return of the cheque as unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of money to
the payee or, as the case may be, to the holder in due course of the cheque, within fifteen
days of the receipt of the said notice. Explanation.—For the purposes of this section,
“debt of other liability” means a legally enforceable debt or other liability.

 Bhikhubhai Govindbhai Patel & Anr. v. State of Gujarat & Anr.

Court: Supreme Court

Date: 22/05/2026

Bench/Judges: Division Bench (Justice Sanjay Karol and Justice Vipul M. Pancholi)

Citation: 2026 INSC 532

Relevant Provisions: Sections 420, 463, 464, 465, 467, 468, 471, 384, 120-B IPC and Section
482 CrPC

Facts:

1. The dispute concerned ownership and title over Survey No. 157 situated at Village
Panas, Surat, Gujarat.
2. The parties belonged to branches of the same family and had been engaged in civil
litigation regarding the property since 2000. The appellants claimed a ⅓ share in the
property on the basis of proceedings under the Urban Land Ceiling Act and related
revenue entries, whereas Respondent No. 2 asserted exclusive ownership based on
earlier compromise decrees.
3. During the pendency of the civil dispute the appellants filed Special Civil Suit No.
377 of 2000 seeking declaration of their share.

4. Injunction orders were operating in their favour.

5. Respondent No. 2 participated in the civil proceedings but did not allege extortion,
forgery, criminal intimidation, or conspiracy.
6. In 2009, respondent No. 2 lodged FIR No. I-CR No. 504/2009 alleging offences under
Sections 420, 465, 467, 468, 471, 504, 120-B, 384, 511 and 114 IPC. Significantly, an
earlier complaint filed on 21.05.2009 did not contain allegations of extortion or
demand for money. Such allegations appeared for the first time in the FIR dated
31/12/2009.
7. The appellants approached the Gujarat High Court under Section 482 CrPC seeking
quashing of the FIR. The High Court refused. The matter then reached the Supreme
Court.

Held:

1. The court found that

i. The first complaint did not mention extortion.
ii. The second complaint introduced a demand of Rs. 1.5 crores after seven
months.

“the subsequent introduction of allegations of extortion, demand of money and

intimidation in the second complaint materially alters the nature and complexion
of the dispute and supports the contention of the appellants that the criminal
proceedings are an afterthought intended to give criminal colour to a longstanding
civil dispute. Though respondent No. 2 contended that the subsequent FIR merely
elaborated upon earlier allegations, we find that the allegation of extortion, which
is one of the grave accusations in the FIR, was absent in the first complaint and
surfaced only subsequently. Thus, such material improvements cannot be ignored
while examining whether the criminal process is being abused or not.” (para 40)
2. The Court held that the delay of nearly 8–9 years was highly suspicious.
“The delay in registration of the FIR is another circumstance which cannot be
ignored. The incidents in question pertain to the year 2001 whereas the FIR came
to be registered only on 31.12.2009 after a delay of nearly eight to nine years. The
High Court accepted the explanation offered by respondent No. 2 that a
Government Circular dated 23.07.2003 discouraged registration of FIRs involving
civil disputes. In our view, the said explanation is not wholly satisfactory. The
circular itself cannot explain the inaction by respondent No. 2 between 2001 and
2009, particularly when respondent No. 2 was actively litigating before competent
courts throughout the said period and had access to all legal remedies including
under Sections 154(3), 156(3) and 200 of the CrPC.” (para 41)
3. The Court held that merely executing a document asserting one's claim over
property does not amount to making of a false document
“Insofar as offences under Sections 465, 467, 468 and 471 of the IPC are
concerned, the principal allegation relates to the execution of the Power of
Attorney dated 01.11.2001 by accused Nos. 1 to 5 in favour of accused No. 6. The
High Court proceeded on the premise that since accused Nos. 1 to 5 lacked title
over the property, execution of the Power of Attorney and institution of civil
proceedings amounted to forgery. In our opinion, the approach of the High Court
is legally unsustainable. The essential ingredient of forgery under Section 463 of
the IPC is the making of a “false document” within the meaning of Section 464 of
the IPC. It is not the case of respondent No. 2 that the signatures appearing on the
Power of Attorney were forged or fabricated and it is not alleged that the
executants were impersonated or that the document was fabricated by someone
pretending to be another person. On the contrary, the execution of the document
by accused Nos. 1 to 5 is admitted. The consistent case of the appellants has been
that they possessed a subsisting claim and share in the ancestral property pursuant
to the ULC Act proceedings and related revenue entries. Whether such a claim is
ultimately sustainable in law or not is a matter for adjudication before the
competent civil court. Therefore, the High Court erred in equating a disputed
claim of title with the making of a false document.” (para 44)
For this the court relies on the case of Mohd. Ibrahim v. State of Bihar, which says
that when a person executes a document claiming property as his own, there is no
 making of a false document merely because the claim is ultimately found to be
incorrect. (para 45)
4. The Court observed that:
i. No property or money was delivered due to deception.
ii. No dishonest intention at inception was shown.
Therefore, Section 420 IPC was not applicable.

“Similarly, the ingredients of the offence of cheating punishable under Section 420 of the IPC
are also absent, i.e. to constitute the offence of cheating, there must exist deception,
fraudulent inducement and consequential delivery of property coupled with dishonest
intention at the inception of the transaction. There is no allegation in the FIR that respondent
No. 2 delivered any property, money or valuable security to the appellants pursuant to
deception or inducement and importantly, the material on record does not disclose dishonest
intention at inception. The High Court in the impugned judgment observed that “false
representation” was made by the accused persons despite knowing that they had no title.
However, the foundation of the pending civil suit is the claim of the appellants that they
possessed ⅓rd share in the property pursuant to the ULC Act proceedings and related revenue
records and thus, a disputed civil claim cannot automatically be treated as fraudulent
representation so as to attract Section 420 of the IPC.” (para 46)

5. The Court found that:

i. No specific date, place, or circumstances of demand were stated.
ii. No money or property was actually delivered.

“The allegations regarding extortion under Section 384 of the IPC are also
unsustainable. In the FIR, respondent No. 2 alleges that accused No. 6 demanded
Rs.1.5 crores or alternatively partnership in the property. However, the FIR
neither specifies the date, place or circumstances of such demand nor there is an
allegation that respondent No. 2 actually delivered any property or money
pursuant to such threat, which as an essential ingredient of extortion.” (para 47)

6. The Court found allegations under Sections 504 and 506 IPC vague because:
i. No exact words were attributed.
ii. Nature of threat was unspecified.
 iii. Since substantive offences failed, conspiracy under Section 120-B IPC
also failed.

“The High Court in the impugned judgment further observed that the accused
persons “tried” to extort money and therefore Section 511 of the IPC would
apply. However, we are unable to accept such reasoning. The allegations under
Sections 504 and 506 of the IPC are also vague in nature. The FIR does not
disclose the exact words uttered, the nature of the threat administered or the
surrounding circumstances constituting intimidation. (para 48)

49. Once the substantive offences themselves are not made out, the allegations
of conspiracy under Section 120-B of the IPC necessarily fails in the present
case.”(para 49)

7. The Supreme Court set aside the Gujarat High Court's order and quashed FIR No.
504/2009 along with all consequential proceedings against the appellants. However,
the Court clarified that the pending civil proceedings regarding title and ownership
would continue independently and would not be affected by the judgment.

 Inderjeet Singh & Anr. v. The State of UP & Anr.

Court: Supreme Court

Date: 09/18/2025

Bench/Judges: Division Bench (Justice Sanjay Karol and Justice Prashant Kumar Mishra)

Citation: Criminal Appeal No. 1889-1890 of 2024

Relevant Provisions: Sections 156(3), 190(1)(b), and 482 CrPC, Sections 395 (Dacoity),
120B (Criminal Conspiracy), 420 (Cheating), 406 (Criminal Breach of Trust), and 506
(Criminal Intimidation) IPC

Facts:

1. A motor vehicle was sold by the complainant to the appellant for Rs. 4lakh. Part of the
payment was cleared, but a commercial disagreement arose between the parties
 regarding the balance amount and the handover of possession. The complainant
initiated criminal proceedings, registering an FIR under sections 420 & 406 of IPC
2. The accused approach Allahabad High Court to quash the proceedings under section
482 of CrPC saying it was a civil matter. But HC dismissed the petition.

Held:

The SC reversed HC order and quashed the criminal proceeding by saying dispute is
predominately civil in nature and essential ingredients of crime (dishonest intention) is
absent.

“Continuance of a dispute pertaining to payment of money and handing over of possession of

a motor vehicle, in the realm of criminal laws, would be unfortunate as also an abuse of
process of law.” (Para 5)

 Vandana Jain v. State of UP

Court: Supreme Court

Date: 25/02/2026

Bench/Judges: Division Bench (Justice Pamidighantam Sri Narasimha and Justice Manoj
Misra)

Citation: 2026 INSC 192/ Criminal Appeal No. 1127 of 2026

Relevant Provisions: Sections 406, 420, 467, 468, 471 and 464

Facts:

1. The dispute arose out of JVA dated 16 August, 2010 entered between appellants
(owners of land) and complainant Motor General Sales Ltd. (developer).
2. Under the agreement, the appellants contributed the land for development while the
complainant company undertook to construct residential apartments at its own cost.
Both parties were entitled to equal share in the project. The complainant also paid Rs.
1 crore to the appellants as security.
3. The project never materialised and dispute arose between parties.
 4. After 10 years in 2021 the complainant lodged FIR alleging that appellants
dishonestly retained the security deposit, concealed the information regarding pending
litigation to the property and used forged documents concerning title of the property.
5. Based on these allegations, offences under sections 406, 420, 467, 468, and 471 IPC
were registered
6. The appellants challenged FIR before Allahabad HC but HC refused the claim.

Held:

1. The SC observed that while examining a petition for quashing, the allegation in the
FIR are ordinarily taken at face value. However, where the dispute is fundamentally
civil in nature the court must ascertain whether matter civil in nature given cloak of
criminal offence.

“At the outset, we may observe that while considering a prayer to quash an FIR, ordinarily
the allegations made therein are to be taken at their face value to assess whether prima facie
commission of a cognizable offence is made out or not. However, where the cause espoused
in the FIR is essentially of a civil nature, while addressing a quashing petition, the Court must
have regard to the attending circumstances and assess whether it has been given cloak of
criminal offence6 and whether proceeding further on the FIR would amount to the abuse of
the process of the court/law. In making such assessment, the Court may consider not only the
contents of the FIR but also the admitted facts / documents recited therein” (para 15)

2. The complainant had also alleged that appellants had relied upon forged revenue
authority letter to support their title. SC found this argument unsustainable.

“In our view, merely because a document is not traceable in the records after several years of
its issuance, it cannot be said that the document is forged. It is a matter of common
knowledge that certificate/letters, such as the one in question, are not maintained in
perpetuity. Therefore, if, after 10 or 1 1 years, merely because the office reports that such
letter/ certificate is not traceable in the records of the office, it cannot be said that it is forged.
A document would be considered forged document only when the allegations are to the effect
that it is a false document within the meaning of section 464 of the I.P.C.” (para 24)

3. The SC also said that

“Insofar as the allegation regarding non-fulfillment of contractual obligations is concerned.

recourse to appropriate civil remedy was required. Moreover, this is not a case where
something emerged quickly after the agreement to indicate that dishonest intention existed
from the beginning. The JVA is dated 16th August 2010 whereas the FIR was lodged in 2021.
If there was something stark about the dishonest intention on part o one of the parties to the
agreement, it would have been reported promptly and not after 10 years. This clearly
indicates that the dispute between the parties was purely of a civil nature.” (para 25)

4. “As far as non-fulfillment of contractual obligations are concerned, recourse can be

had to civil remedies. On facts, recourse to criminal proceedings, in our view, is
nothing but abuse of the process of law/ court. More so, when there is nothing to show
that the accused had harbored a dishonest intention from inception.
There is no criminal breach of trust because the security amount was not refundable,
rather it was adjustable against the share of the first party derived from sale proceeds.
Thus, in the event of breach of any of the conditions of the agreement, the appropriate
course was to take recourse to civil remedies.
For the foregoing reasons, we are of the considered view that dispute between the
parties is essentially of a civil nature arising from the JVA. Further, a complete
reading of the FIR along with admitted documents, does not disclose commission of
offence of either cheating or criminal breach of trust much less creation or using of a
false document.” (para 27,28,29)

 Narayana Health & Ors. v. State of West Bengal & Ors.

Court: Supreme Court

Date: 12/05/2026

Bench/Judges Name: Division Bench (Justice Pamidighantam Sri Narasimha and Justice
Alok Aradhe)

Citation: 2026 INSC 481

Relevant Provisions: Sections 405, 406, 420, 120B IPC; Section 482 CrPC; Section 34 of the
West Bengal Clinical Establishments (Registration, Regulation and Transparency) Act, 2017

Facts:

1. The case arose from the treatment of the complainant's mother, Smt. Bina Sen, at
Narayana Multispecialty Hospital, Barasat, Kolkata. She was admitted on 13 February
 2021 for treatment of a fractured femur and successfully underwent surgery on 15
February 2021. She was discharged on 19 February 2021.
2. At discharge, the complainant paid ₹1,71,130 towards hospital charges out of a total
bill of approximately ₹1,94,307.84 after discounts. Subsequently, he raised objections
regarding:
i) Alleged discrepancies in the hospital bill;
ii) Delay in supply of medical records;
iii) Conduct of certain hospital employees.
3. The hospital later discovered that an HRCT test costing ₹2,500 had been mistakenly
included in the bill even though the test had never been conducted. On 23 February
2021, the hospital revised the bill and offered a refund of ₹2,500. Emails were sent
requesting the complainant to either collect the refund or provide bank details for
transfer.
4. Despite this, The complainant filed Complaint Case No. C-533 of 2021. The
Magistrate recorded statements under Section 200 CrPC and issued process against
the accused persons on 11 March 2021.
5. On the basis of these allegations, offences under Sections 406, 420 and 120B of the
Indian Penal Code, 1860 (“IPC”), along with Section 34 of the West Bengal Clinical
Establishments (Registration, Regulation and Transparency) Act, 2017 (“2017 Act”),
were invoked against the first appellant, the company running the hospital; the second
appellant, the hospital; the third appellant, being the Chairman of the company; the
fourth appellant, being the representative attached with the hospital; and the third
respondent, being the former employee of the hospital.
6. The accused challenged the summoning order under Section 482 CrPC.
7. The High Court:
i) Set aside the summons;
ii) Remanded the matter to the Magistrate;
iii) Directed reconsideration regarding the involvement of the company and its
Chairman.
iv) Observed that an offence appeared to have been made out and even referred to
Section 504 IPC despite the complaint not invoking it.
8. The appellants reached the Supreme Court and argued No criminal offence was
disclosed; At best, the dispute concerned billing and service deficiencies. Criminal
law was being misused for a civil grievance.
 Held:

1. The SC held that Section 405 requires

i. Entrustment of property;
ii. Fiduciary obligation;
iii. Dishonest misappropriation or conversion.

The court observed that:

i. The ₹2,500 formed part of a hospital bill.

ii. It was not entrusted to the hospital for any fiduciary purpose.
iii. There was no allegation of misappropriation.
iv. The hospital had already offered a refund.

“In the absence of entrustment, dishonest misappropriation, or violation of a fiduciary

obligation, foundational ingredients of the offence of criminal breach of trust as enshrined
in Section 405, IPC are not satisfied.” (para 11)

2. The SC held that section 420 requires:

i. Deception from the very beginning;
ii. Fraudulent or dishonest inducement;
iii. Dishonest intention at the inception of the transaction.

The court observed that:

i. Only one incorrect billing entry was alleged.

ii. The hospital corrected the mistake.
iii. A refund was immediately offered.

“The discrepancy in billing appears to be more of an inadvertence, than a case of dishonest

intention on part of the hospital. We are of the opinion that the allegation of cheating is
completely misplaced. “ (para 12)

3. The SC held that section 120B requires:

i. Prior agreement;
ii. Meeting of minds;
 iii. Common plan to commit an unlawful act

The court observed that:

The complaint:

i. Did not disclose any agreement;

ii. Did not show any concerted action;
iii. Did not indicate a common criminal design.

Since the principal offences themselves failed, the conspiracy allegation also collapsed.

“Moreover, where the foundational offences are not disclosed, a charge of conspiracy
premised upon those offences ordinarily cannot stand independently.7 Since the allegations
regarding offences of criminal breach of trust and cheating are virtually non-existent, the
incidental allegation of criminal conspiracy is unsustainable. Furthermore, the complaint
named not just the hospital and its staff but also the corporate entity running it and its
Chairman. There is nothing in the complaint indicating a prior agreement, concerted plan, or
meeting of minds among the accused persons to commit an unlawful act.” (para 13)

4. The High Court had independently observed that allegations could disclose an
offence under Section 504 IPC. The Supreme Court disagreed with the High Court's
stance.

The Court held that:

i. Neither the complaint nor the Magistrate's order invoked Section 504 IPC.
ii. The High Court could not elevate vague allegations into a new offence and then
use that as a basis to sustain criminal proceedings.

5. The SC reiterated “Having considered the matter in detail, we are of the opinion that
this is a fit case for exercising jurisdiction under Section 482 of CrPC to quash the
criminal complaint and we are equally of the opinion that the High Court has failed
to exercise such a power. In this view of the matter, we allow these appeals and set
aside the judgement and order passed by the High Court in C.R.R. No. 967 of 2021
with CRAN No. 1 of 2021, dated 16.05.2023 and quash the Complaint Case No. C-
533 of 2021.
 21. Quashing of the above referred criminal complaint will have no bearing on the
civil or statutory remedies that the complainant may exercise in accordance with
law.”

 V. Ganesan v. State Rep by the sub-inspector of Police & Anr.

Court: Supreme Court

Date: 19/03/2026

Bench/Judges name: Division Bench (Justice Manoj Misra and Justice P.S. Narasimha)

Citation: 2026 SCC OnLine SC 444

Relevant Provisions: Sections 406, 415, 420 IPC; Section 482 CrPC; Section 138
Negotiable Instruments Act

Facts:

1. Accuse was producing a movie but he ran short of money while doing it.
2. He asked complainant for financial help on assurance that it would be returned by
share of profits to the extent 30% & later, further 17% share in profits making total of
47%.
3. To satisfy the complainant's concerns, the appellant issued two post-dated cheques of
₹24 lakhs each towards repayment of the principal amount.
4. But the cheques were dishonoured due to insufficient funds.
5. Complainant launched a criminal complaint alleging Criminal Breach of Trust (s. 406
IPC) & Cheating (s. 420 IPC).
6. The appellant approached the Madras High Court seeking quashing of the
proceedings.
7. The HC quashed the section 406 IPC proceedings but refused to quash the section 420
IPC proceedings

“All the above facts, disclose that at every stage, the representation has been made to
the de-facto complainant to induce him to part with money. The allegations prima
facie disclose the offence under Section 420 IPC. In the facts of the instant case, the
 question whether it was only a breach of promise or cheating has to be adjudicated
only during trial. Therefore, this Court is not inclined to quash the impugned final
report in so far as the offence under Section 420 IPC. Hence, the impugned final
report is quashed only in respect of offence under Section 406 IPC. However, the
learned Metropolitan Magistrate may try the case on the basis of evidence adduced
before him without being influenced by any of the observations made in this order.
The learned Metropolitan Magistrate (CCB and CBCID, Metro Cases), Egmore,
Chennai - 600 008 may conduct the trial as expeditiously as possible”

8. The appellant approached the Supreme Court.

Held:

1. The Court referred to the decision in Iridium India Telecom Ltd. v. Motorola Inc. and
reiterated that:

a. Deception is an essential ingredient.

b. The deception must induce delivery of property.
c. Dishonest intention must exist when the promise is made.

“It is necessary to show that a person had fraudulent or dishonest intention at the time of
making the promise. Mere failure to keep the promise subsequently cannot be the sole
basis to presume that dishonest intention existed from the very beginning.” (para 13)

2. The court relied upon the case of Vesa Holdings Private Limited v. State of Kerala
and reiterated that

“this court held that every breach of contract would not give rise to an offence of
cheating. Only in those cases breach of contract would amount to cheating where
there was any deception played at the very inception. If the intention to cheat has
developed later, the same cannot amount to cheating. In other words, for the purpose
of constituting an offence of cheating, the complaint is required to show that the
accused had fraudulent or dishonest intention at the time of making promise or
representation. Even in a case where allegations are made about failure on part of the
accused to keep his promise, in absence of a dishonest intention at the time of making
the initial promise, no offence under Section 420 of IPC is made out.” (para 14)
3. The court says whether non-fulfilment of promise/commitment by the accused is a
reflection of his or her dishonest intention at the time of making the promise is
ordinarily a matter of trial but courts may quash proceedings when surrounding
circumstances clearly indicate absence of initial fraudulent intent.

“Whether non-fulfilment of promise/commitment by the accused is a reflection of his

or her dishonest intention at the time of making the promise is ordinarily a matter of
trial. However, in our view, where the transaction between the parties is such that
fulfilment of the promise is not entirely in the control of the promisor, or there is an
inherent risk in fulfilment of the promise, the High Court may, in exercise of its
inherent powers under the Code, or under Article 226 of the Constitution, as the case
may be, upon consideration of the attending circumstances, take a decision whether
the dishonest intention existed or not at the time of making the promise. And, if it
comes to the conclusion that the alleged conduct of the parties does not reflect a
dishonest intention of the accused from the very beginning, it may quash the criminal
complaint/proceedings and relegate the aggrieved party to civil remedies.” (para 15)

4. The SC says that HC fails to consider the commercial nature of the contract, the initial
payment of money by the de-facto complainant to the appellant was for a movie
project on promise of a share in profits. Since there is no denial about the completion
of the movie and its ultimate release, what is clear is that the promise to make a movie
was not false. Therefore, it cannot be said the appellant made a false promise that he
would make a movie with the aid of funds received by him. Therefore, from the
allegations made in the complaint it cannot be said that there was any dishonest
intention of the appellant in making the promise which remained unfulfilled. Supreme
Court further says if one agrees to share profits in lieu of his investment in a movie,
he takes the risk of a possible zero return.

“The aforesaid facts would indicate that the initial payment of money by the de-facto
complainant to the appellant was for a movie project on promise of a share in profits.
Additional money was paid later for its completion under a promise of an enhanced
share in the profits. Thereafter, post-dated cheques were issued to return the principal
amount because of an objection taken by the de facto complainant to the release of the
movie. Since there is no denial about the completion of the movie and its ultimate
release, what is clear is that the promise to make a movie was not false. Therefore, it
 cannot be said the appellant made a false promise that he would make a movie with
the aid of funds received by him. Insofar as promise qua sharing of profits is
concerned, there are no allegations that the movie earned profits. Therefore, from the
allegations made in the complaint it cannot be said that there was any dishonest
intention of the appellant in making the promise which remained unfulfilled. In our
view, the High Court overlooked that movie making is a high risk business. No one
can be sure whether a movie would earn profits or would be a flop. If one agrees to
share profits in lieu of his investment in a movie, he takes the risk of a possible zero
return. Thus, the nature of transaction between the parties was a crucial factor in
determining whether the investor party should be allowed to bring in a criminal action
or pursue civil remedies. Unfortunately, the High Court overlooked this vital aspect.”
(para 17)

5. The Court held that the cheques were issued:

i. After the money had already been advanced.

ii. To discharge an existing liability.
iii. Not as inducement for obtaining money.

Therefore, their dishonour could not retrospectively establish cheating.

“Insofar as dishonour of those two cheques are concerned, it is clear that those were post-
dated cheques issued not as an inducement to obtain delivery of money from the de facto
complainant but to discharge an existing obligation at a future date. Thus, in essence,
those cheques were not by way inducement to lend money or invest money in the
proposed movie. Therefore, dishonour of those cheques, though may give right to initiate
proceeding under Section 138 of the Negotiable Instruments Act, 1881, would not ipso
facto amount to an offence of cheating, inasmuch as for an offence of cheating dishonest
intention must exist from the very beginning. Ordinarily, post-dated cheques are issued
either by way of security to discharge an existing or future liability or to discharge the
liability at some point of time in future. It is quite possible that at the time of issuance of a
post-dated cheque, the drawer may have reason to believe that he would have sufficient
balance in his account by the date of the cheque. Therefore, in our view, dishonour of a
post-dated cheque by itself is not sufficient to presume existence of a dishonest intention
on part of its drawer.” (para 18)
 6. The court finally said that in absence of allegations that movie made profits, in our
view, the complaint and the supporting materials failed to indicate that the appellant
harboured a dishonest intention from inception. In conclusion, the allegations only
disclosed a civil cause of action and the High Court fell in error in not quashing the
criminal proceedings.

“in absence of allegations that movie made profits, in our view, the complaint and the
supporting materials failed to indicate that the appellant harboured a dishonest
intention from inception. In conclusion, the allegations only disclosed a civil cause of
action and the High Court fell in error in not quashing the criminal proceedings.”
(para 20)

7. The Supreme Court:

i. Allowed the appeal.
ii. Set aside the High Court judgment insofar as it retained Section 420 IPC
proceedings.
iii. Quashed the criminal proceedings under Section 420 IPC.

 S.N. Vijayalakshmi & Ors. v. State of Karnataka & Anr.

Court: Supreme Court

Date: 31/07/2025

Bench/Judges name: Division Bench (Justice Sudhanshu Dhulia and Justice Ahsanuddin
Amanullah)

Citation: 2025 INSC 917

Relevant Provisions: Sections 120B, 406, 420 IPC read with Sections 120A, 405 and 415 IPC

Facts:

1. The disputed property situated in Bhoopasandra Village, Bengaluru, consisted of land

in Survey Nos. 20 and 21. The predecessors of the accused family, namely K.V.
Jayalakshmamma, K.V. Srinivasa Murthy, and K.V. Prabhakar, claimed ownership
rights over the land. Their title was not free from dispute and was the subject of
 various proceedings from the 1960s onwards. A sale deed had been executed in 1967,
and later litigation was initiated to establish the true ownership of the property. The
family eventually succeeded in obtaining favourable decrees and occupancy rights
from the Land Tribunal.
2. The Bangalore Development Authority (BDA) initiated acquisition proceedings over
the land. A preliminary notification was issued in 1978 and a final notification
followed in 1982. After acquisition, BDA allotted portions of the land to various third-
party allottees.
3. However, in 1992, the Government de-notified the acquired land. This de-notification
was challenged by the allottees who had already been allotted sites by BDA. A series
of writ petitions, appeals, and, eventually, proceedings before the Supreme Court
followed. Ultimately, the challenge to the de-notification succeeded, and the matter
travelled through several judicial forums until 2015.
4. During the litigation of the disputed property the accused family sought assistance
from one Ravishankara Shetty. The accused allegedly represented that if he helped
them in resolving the legal disputes and clearing the title, they would eventually sell
the property to him. Trusting these assurances, Ravishankara Shetty allegedly invested
considerable time, effort, and money in pursuing the litigation on behalf of the family.
5. On 30th November, 2015 the accused executed an Agreement to Sell (ATS) in favour
of the complainant, who was acting as the nominee of Ravishankara Shetty. The
agreed sale consideration was ₹3.5 crore. On the same day, the accused also executed
a General Power of Attorney (GPA) authorising the complainant to take necessary
steps concerning the property, including facilitating its eventual sale. A token amount
of ₹2 lakh was paid. Importantly, the ATS did not contain a strict time limit because
the parties were uncertain as to when the title disputes would finally be resolved.
6. In 2016, writ petitions filed by them challenging aspects of the acquisition
proceedings succeeded. Appeals filed by BDA were withdrawn, and the legal position
of the land improved considerably. Around the same period, a Memorandum of
Understanding was entered into with a developer, M/s Legacy Global Realty, under
which substantial amounts of money were paid to members of the accused family. The
complainant later relied heavily on these transactions to argue that the accused had
benefitted financially from efforts undertaken by him and Ravishankara Shetty.
7. In 2020, a conversion order was issued in respect of the land, making development
and sale more feasible. The complainant asserted that once the title issues had
 substantially been resolved, he approached the accused to complete the transaction
and pay the remaining consideration. According to him, the accused refused to honour
the Agreement to Sell despite repeated requests.
8. The accused family revoke the GPA executed in favour of complainant. The accused
family has done a registered a sale deed in favour of another family. The complainant
alleged that these sale deed was done to defeat his right under Agreement to sell.
9. The complainant filed a civil suit for specific performance of the ATS and challenged
the later transfers of the property. The suit remained pending.
10. He also filed a private criminal complaint under Section 200 CrPC.
11. The Magistrate referred the complaint for investigation under Section 156(3) CrPC.
12. FIR No. 260/2023 was registered for offences under Sections 405, 406, 415, 417, 418,
420, 504, 506, 384 and 120B IPC.
13. The accused approached the Karnataka High Court under Section 482 CrPC seeking
quashing of the FIR.
14. The High Court refused to quash the FIR.
15. The accused then appealed to the Supreme Court.

Held:

1. “From a bare reading of Section 405 of the IPC, criminal breach of trust would arise
only in a situation where the accused in any manner has been entrusted with property,
or with any dominion over property and dishonestly misappropriates or converts the
same to his own use, or dishonestly uses or disposes of that property. Here, it is not a
case where the accused were entrusted with the subject property. The subject property
belongs to them and they had rights over it as owners with title. Thus, the very
foundation for invoking Section 406 of the IPC falls to the ground.” (para 39)
2. On section 420 court noted that the complainant's own version contained
contradictions. He claimed possession had been handed over to Ravishankara Shetty
in 1996. However, the ATS itself stated that possession would be delivered only upon
execution of the sale deed. The Court found this inconsistency significant. It
concluded that the facts did not show dishonest inducement resulting in delivery of
property as required under Section 415 IPC. (para 40)
3. On para 42, Court said that Civil and criminal proceedings can coexist. However,
criminal proceedings cannot continue where the allegations do not disclose
 criminality. The Court emphasized that merely because a dispute has arisen from a
contractual relationship does not mean every breach becomes a criminal offence.
“In the absence of the element of criminality, if both civil and criminal cases are
allowed to continue, it will definitely amount to abuse of the process of the Court,
which the Courts have always tried to prevent by putting a stop to any such criminal
proceeding, where civil proceedings have already been instituted with regard to the
same issue, and the element of criminality is absent. If such element is absent, the
prosecution in question would have to be quashed.” (para 42)
4. The SC held that Ingredients of Sections 406 and 420 IPC were absent. The dispute
was essentially contractual and civil. Criminal proceedings amounted to abuse of
process. Accordingly, FIR No. 260/2023 was quashed. Chargesheet dated 28 August
2024 was quashed. Cognisance order dated 30 August 2024 was quashed.

 Jay Shri & Anr. v. State of Rajasthan

Court: Supreme Court
Date: 19/01/2024
Bench/Judges Name: Division Bench (Justice Sanjiv Khanna and Justice Dipankar Datta)
Citation: 2024 INSC 48
Relevant Provisions: Sections 420, 406, 120B IPC; Section 438 CrPC
Facts:
1. An FIR No. 0220/2022 dated 26.08.2022 was registered at Police Station Osiyan,
District Jodhpur Rural, Rajasthan. The appellants, Jay Shri and Hitesh Kela, were
accused of offences under Sections 420 and 120B of IPC. The dispute essentially
arose out of a contractual/commercial transaction.
2. The appellants sought anticipatory bail, but their request was rejected by the High
Court, prompting them to approach the Supreme Court.

Held:

1. “Prima facie, in our opinion, mere breach of contract does not amount to an offence
under Section 420 or Section 406 of the Indian Penal Code, 18601, unless fraudulent
or dishonest intention is shown right at the beginning of the transaction.2 This Court
has time and again cautioned about converting purely civil disputes into criminal
cases. Any effort to settle civil disputes and claims, which do not involve any criminal
 offence, by applying pressure through criminal prosecution should be deprecated and
discouraged.” (para 3)
2. They were directed to comply with the conditions under Section 438(2) CrPC.
“In addition, the appellants – Jay Shri and Hitesh Kela shall comply with the
conditions mentioned in Section 438(2) of the Code of Criminal Procedure, 1973.
Recording the aforesaid, the impugned judgment/order is set aside and the appeal is
allowed” (para 5, 6)
3. The impugned order refusing anticipatory bail was set aside.

 Ubaidur Rahman v. State (NCT of Delhi) & Anr.

Court: High Court of Delhi

Date: 12/03/2026

Bench/Judges Name: Single Bench (Justice Girish Kathpalia)

Citation: Bail APPLN. 2666/2025

Relevant Provisions: Sections 420, 406, and 34 IPC

Facts:

1. The complainant and the applicant entered into a commercial arrangement under
which the applicant (Ubaidur Rahman) was responsible for manufacturing and
facilitating export of products to buyers in Saudi Arabia.

2. Payments received from Saudi Arabian clients were to be shared between the parties.
The business initially functioned smoothly. Advance payments were also received and
utilized for manufacturing activities.

3. Subsequently, the Saudi clients failed to make further payments.

4. As a result, the complainant alleged that the applicant had cheated him and committed
criminal breach of trust, leading to registration of FIR No. 263/2025 under Sections
420/406/34 IPC.
5. The anticipatory bail application was first heard on 21 July 2025. The matter was
adjourned before different benches. On 15 December 2025, the Court granted interim
protection from arrest to the applicant.
Held:

1. The court held that “At the outset, one has to keep in mind the legal position that not
every failed business transaction can be treated as a case of cheating and/or criminal
breach of trust.”
2. “The litmus test to distinguish what is only a civil transaction and what is a case of
cheating, is to probe for existence of dishonest intention, if any, at the time of
inception of the transaction. That can be done by way of full dress trial. But for the
present purposes of deciding on liberty of an individual, this court cannot ignore
certain vital aspects which have been submitted on behalf of complainant de facto.
Those aspects are that the accused/applicant and the complainant de facto commenced
their transactions by executing a written MoU; that no payment was to be made by the
accused/applicant insofar as the job of the accused/applicant was only to ensure that
the product manufactured by him gets exported to the Saudi client and payment is
received; that some of the payments received by the complainant de facto were
advance payments; and that it is not just the complainant de facto, but even the
accused/applicant who did not receive his share of profits in the last consignments. Of
course, I must add a cautious rider that further analysis on these aspects shall be done
by the trial court taking independent view.” (para 8)

3. While considering the request for anticipatory bail, the Court found several
circumstances significant:

First, the parties had entered into a formal written MoU, suggesting a legitimate
business arrangement rather than a fraudulent scheme from the outset.

Secondly, the applicant's role was primarily to facilitate exports and obtain payments
from foreign buyers. He was not himself the purchaser of the goods.

Thirdly, the Court took note of the fact that advance payments had actually been
received during the initial phase of the business relationship. This demonstrated that
the arrangement had operated successfully for some time.
 Most importantly, the Court observed that even the applicant had not received his own
share of profits from the final consignments. This circumstance weakened the
allegation that he had dishonestly orchestrated the non-payment for personal gain.

4. “The anticipatory bail application is allowed and it is directed that in the event of his
arrest, the accused/applicant shall be released on bail, subject to his furnishing a
personal bond in the sum of Rs. 10,000/- with one surety in the like amount to the
satisfaction of the IO/SHO concerned. The accompanying applications stand disposed
of.” (para 10)

 Ashok Kumar v. State & Anr.

Court: Delhi High Court

Date: 31/07/2025

Bench/Judges Name: Single Bench (Justice Arun Monga)

Citation: 2025 SCC OnLine Del 7475

Relevant Provisions: Sections 405 & 406 IPC, Sections 138 & 139 of the Negotiable
Instruments Act, 1881, Section 156(3) CrPC, Section 397 CrPC, and Section 420 IPC.

Facts:

1. Respondent no. 2 filed a complaint under Section 138 NI Act against the petitioner,
alleging a financial loan of Rs. 21,55,000/-. The petitioner contends that the cheque in
question, issued between 1999-2002, was misused after 11 years and was originally
given as security for a chit fund operated by the respondent.
2. On 22 May 2013, Respondent No. 2 filed a complaint under Section 138 of the
Negotiable Instruments Act alleging dishonour of those cheques.
3. After receiving the NI Act complaint, the petitioner filed an application under Section
156(3) CrPC alleging misuse of the security cheques. The Magistrate directed
registration of an FIR.
Consequently:
iv. FIR No. 98/2014 was registered on 11 February 2014.
 v. Investigation resulted in a chargesheet under Sections 406/420 IPC.
4. The Metropolitan Magistrate found sufficient material to proceed. Held that the
respondent had allegedly misappropriated the security cheques. Framed charge under
Section 406 IPC.
5. Respondent No. 2 challenged the charge order before the Sessions Court.

The Sessions Court:

i. Set aside the order framing charge.
ii. Discharged Respondent No. 2.
6. The petitioner then approached the Delhi High Court challenging the discharge order.

Held:

1. The Court highlighted the most important ingredient of Section 406 IPC:
“14. Moreover, qua merits of the culpability, as alleged, I am of the opinion that the
essential ingredient for constituting an offence under Section 406 IPC is the existence
of dishonest intention at the time of entrustment. In the present case, the cheques were
given as security for a chit fund nearly a decade earlier. There is no evidence to
suggest that, at the time of entrustment, the respondent no. 2 had any dishonest
intention to misappropriate them. Subsequent presentation of the cheques in a
disputed financial transaction does not automatically establish the requisite mens rea
for criminal breach of trust.
15. Thus, under Section 406 IPC, mere entrustment of signed blank cheques as
security is not unlawful, and allegation of filling in details by the payee at a later stage
does not by itself constitute forgery or breach of trust under criminal law. Therefore,
even otherwise, the essential elements of Section 406 IPC are not satisfied, and
continuation of the proceedings before the learned MM would have been wholly
unjustified. (para 14, 15)

2. The Delhi High Court:

i. Upheld the Sessions Court's discharge order.

ii. Held that the ingredients of Section 406 IPC were absent.
iii. Found no reason to interfere with the discharge.
iv. Dismissed the petition.
  Mahender Singh v. State (Govt. of NCT of Delhi) & Anr.

Court: Delhi High Court

Date: 23/02/2026

Bench/Judges Name: Single Bench (Justice Neena Bansal Krishna)

Citation: CRL.M.C. 2499/2018

Relevant Provisions: Sections 406, 409, 420, 120B IPC; Section 200 CrPC; Section 482
CrPC.

Facts:

1. A Complaint under Section 190 Cr.P.C read with Section 200 Cr.P.C was filed under
Sections 406/409/420/120B/34 IPC by the Complainant.
2. The complainant, Suresh Goel, was the Managing Director/Authorised Representative
of M/s Cosco Sales & Services Pvt. Ltd. and M/s Cosco Blossoms Pvt. [Link]
companies had availed overdraft facilities from the Central Bank of India. Due to
financial difficulties, the loan accounts became Non-Performing Assets (NPAs)
around 1999–2000.
3. The Bank initiated proceedings before the Debt Recovery Tribunal (DRT). Recovery
Certificates were eventually issued in favour of the Bank. By 2013, the total
recoverable amount was approximately ₹13 crores.
4. In early 2013, discussions took place regarding a One-Time Settlement. The
complainant had already deposited ₹10 lakhs in a "No Lien Account". On 8 February
2013, relying on assurances from bank officials, he deposited an additional ₹48 lakhs
and submitted a One Time Settlement (OTS) proposal.
5. The Bank issued a sanction letter dated 27 February 2013:

a) Total settlement amount: ₹6 crores.

b) ₹58 lakhs already deposited was to be adjusted.
c) Balance ₹5.42 crores was payable by 31 March 2013.
d) In case of default:
 i. OTS would automatically stand cancelled.
ii. All concessions would be withdrawn.
iii. Recovery certificates would remain enforceable.

6. The complainant failed to pay the remaining ₹5.42 crores within the stipulated period.
Consequently, the OTS automatically stood cancelled according to its terms.
7. On 26 April 2013, the complainant requested refund of the ₹58 lakhs deposited
during the OTS process. Instead, the Bank informed him that the debt had been
assigned to UV Asset Reconstruction Company Ltd. (UVARCL).
8. The complainant alleged that:
i. The Bank wrongfully retained ₹58 lakhs.
ii. The assignment agreement was fabricated and ante-dated.
iii. Bank officials and UVARCL officials acted in conspiracy.
iv. The assignment was undertaken to grab his properties and cause wrongful
loss.
v. The conduct constituted offences under Sections 406, 409, 420 and 120B IPC.
9. Complaints were made to the police but no FIR was registered. The complainant filed
a private complaint under Section 200 CrPC. After recording pre-summoning
evidence, the Magistrate summoned the Bank and its officials for offences under
Sections 420, 409 and 120B IPC on 28 June 2017. The accused approached the Delhi
High Court under Section 482 CrPC seeking quashing of the complaint and
summoning order.

Held:
1. The court held that the complainant himself defaulted under the OTS and therefore
the original debt became enforceable again.
“The Complainant himself stated that the terms of the Sanction Letter, could not be
adhered to and the balance payment of Rs.5,42,00,000/- could not be paid, as agreed
upto 31.03.2013. Once the OTS fails, as per the averments of the Complainant, the
liability of the two Companies, who were being represented by the Complainant, got
revived under the Recovery Certificates.” (para 50)
2. The court says money pursuant to contractual terms does not amount to cheating or
criminal breach of trust.
“First and foremost, admittedly, OTS failed on account of non adherence of the terms
by the Complainant. Secondly, though this amount of Rs.58 lakhs was lying in ‘No
 lien’ account, the Bank, in case of default, was well within its right to adjust the said
amount towards outstanding amount. It cannot be held to be a case of criminal breach
of trust or of cheating.” (para 53)
3. “It was contended on behalf of the Bank that due adjustment of this amount has been
done in the loan account of the Complainant. Even if it is not correct, it is merely a
case of recovery of Rs.58 lakhs, to which the Complainant is making a claim, which
is purely a civil dispute, for which he has already invoked civil remedy by filing a
Civil Suit, which is pending trial.” (para 54)
4. The court held that there is no dishonest intention at inception.
“At best, the dispute relates to adjustment or refund of money arising out of
contractual terms. There is no material to indicate any fraudulent or dishonest
intention at the inception of the transaction, a sine qua non for constituting the
offence of cheating under Section 420 IPC. Thus, it does not disclose any criminal
offence, as is sought to be made out by the Complainant.” (para 55)
5. The court says commercial and banking decisions cannot automatically be treated as
criminal acts.
“But the Bank was well within its right to assign its debts to the Company. This was
an Agreement entered into by the Bank with UVARCL in its business wisdom and
there is nothing to show that it was intended to cheat the Complainant of his Rs.58
lakhs. Even if the account got assigned along with other NPA Accounts, it is merely
a business venture in which no element of cheating can even prima facie presumed.
The Bank and Petitioner have stated that this amount has been given due adjustment
in the Assessment Deed.” (para 59)
6. The court says civil remedies, not criminal prosecution, are the proper course.
“In any case, if there is any challenge of the Complainant to his entitlement to
Rs.58lakhs, he has his own civil remedy. No offence of cheating or criminal breach
of trust has made out, merely because the Petitioners and Central Bank of India
entered into Assessment Agreement with UVARCL, which was formalised on
20.04.2013. Parties may have chosen to purchase the Stamp Paper in July, 2013 and
may have got it registered on 12.08.2013, but it was only a legal formality that got
completed subsequently.” (para 60)
7. The court says that there are no sufficient material to show conspiracy.
“Such negotiations, even if assumed to be true, do not disclose ingredients of
criminal conspiracy under Section 120B IPC in the absence of material indicating an
 Agreement to commit an illegal act. No connivance or conspiracy can be even prima
facie presumed, from these assertions made by the Complainant.” (para 63)
“If the entire content of the Complaint is admitted to be correct and true in toto, even
then, it does not disclose any criminal offence of cheating or of criminal breach of
trust or any other criminal offence.” (para 64)
8. The court finally held that
“In these circumstances, the Complaint under Section 200 of Cr.P.C. along with the
Summoning Order date 28.06.2017 and all proceedings emanating therefrom, is
quashed.” (para 65)