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Judgment
I.A. No.14916 of 2026
Heard the parties.
This interlocutory application has been filed with the prayer for early hearing of this criminal miscellaneous petition.
Since, hearing of this criminal miscellaneous petition is taken up today, hence, this interlocutory application is disposed of being infructuous.
Cr.M.P. No. 2954 of 2025
Heard the parties.
This Criminal Miscellaneous Petition has been filed invoking the jurisdiction of this Court under Section 528 of B.N.S.S., 2023 with the prayer to quash the entire criminal proceeding including the order dated 23.06.2025 passed by the learned Judicial Magistrate 1st Class, Dhanbad in connection with Complaint Case No. 10242 of 2024, whereby and where under, the learned Judicial Magistrate 1st Class, Dhanbad has found prima facie case of the offences punishable under Sections 406 and 417 of the Indian Penal Code and passed the summoning order against the petitioners.
The allegation against the petitioners is that the petitioner no.2 being the Secretary of petitioner no.1; in 2011 came to the office of the complainant to enter into a partnership with the complainant. The complainant entered into a partnership having 25% share to carry out the work of mechanised coach cleaning of Indian Railways for Dhanbad Railway site. The complainant invested Rs.19,50,000/- towards labour payment, Rs.13,50,000/-towards materials and Rs.3,76,000/- as security deposit but the petitioners did not pay back the said amount.
Relying upon the judgment of this Court in the case of Bimal Kumar Agarwal @ Vimal Kumar Agarwal @ Vimal Kumar Agawal & Anr. vs. The State of Jharkhand reported in (2026:JHHC:15233), it is submitted by the learned counsel for the petitioners that this Court relying upon the judgment of the Hon’ble Supreme Court of India in the case of Uma Shankar Gopalika vs. State of Bihar & Anr. reported in (2005) 10 SCC 336, paragraph no. 6 of which reads as under :-
6.Xxxx xxxx xxxx It is well settled that every breach of contract would not give rise to an offence of cheating and 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 on, the same cannot amount to cheating. In the present case it has nowhere been stated that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC.” (Emphasis supplied) wherein the Hon’ble Supreme Court of India has reiterated the settled principle of law that every breach of contract would not give rise to an offence of cheating and in order to constitute the offence of cheating, the accused must play deception since the beginning of the transaction between the parties and if the intention to cheat has developed later on, the same cannot amount to cheating.
It is next submitted by the learned counsel for the petitioners that in that case, this Court also relied upon the judgment of the Hon’ble Supreme Court of India in the case of Satishchandra Ratanlal Shah vs. State of Gujarat & Anr. reported in (2019) 9 SCC 148, paragraph nos.11 and 13 of which reads as under:-
“11.Having observed the background principles applicable herein, we need to consider the individual charges against the appellant. Turning to Section 405 read with Section 406 IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that Respondent 2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognises a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.
13.Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168: 2000 SCC (Cri) 786]) In the case before us, admittedly the appellant was trapped in economic crisis and therefore, he had approached Respondent 2 to ameliorate the situation of crisis. Further, in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit seeking recovery of the loan amount which is still pending adjudication. The mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all the facts in the complaint and material are taken on their face value, no such dishonest representation or inducement could be found or inferred.” (Emphasis supplied) wherein the Hon’ble Supreme Court of India has reiterated the settled principle of law that a mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust and the ineligibility to pay the loan amount taken cannot give rise to criminal prosecution of cheating.
Learned counsel for the petitioners next relied upon the judgment of this Court in the case of Ruchika Kakar vs. The State of Jharkhand & Anr. reported in (2024:JHHC:18770) wherein, this Court relied upon the judgment of the Hon’ble Supreme Court of India in the case of Binod Kumar & Others vs. State of Bihar & Another reported in (2014) 10 SCC 663, paragraph-18 of which reads as under :-
“18.In the present case, looking at the allegations in the complaint on the face of it, we find that no allegations are made attracting the ingredients of Section 405 IPC. Likewise, there are no allegations as to cheating or the dishonest intention of the appellants in retaining the money in order to have wrongful gain to themselves or causing wrongful loss to the complainant. Excepting the bald allegations that the appellants did not make payment to the second respondent and that the appellants utilised the amounts either by themselves or for some other work, there is no iota of allegation as to the dishonest intention in misappropriating the property. To make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the appellants. It must also be shown that the appellants dishonestly disposed of the same in some way or dishonestly retained the same. The mere fact that the appellants did not pay the money to the complainant does not amount to criminal breach of trust.” Emphasis supplied).” Emphasis supplied) wherein, the Hon’ble Supreme Court of India has held that to make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the accused persons. It must also be shown that the accused persons dishonestly disposed of the same in some way or dishonestly retained the same.
It is next submitted by the learned counsel for the petitioners that as in this case, there is no allegation against the petitioners of playing deception since the beginning of the transaction between the parties hence, even if the entire allegations made against the petitioners are considered to be true, in its entirety, still, the offence punishable under Section 417 of the Indian Penal Code is not made out.
So far as the offence punishable under Section 406 of the Indian Penal Code is concerned, it is submitted by the learned counsel for the petitioners that as has been observed by this Court in the case of Ruchika Kakar vs. The State of Jharkhand & Anr (supra), the essential ingredients to constitute the offence punishable under Section 406 of the Indian Penal Code is that there must be entrustment and there must be dishonest misappropriation of the entrusted property or conversion of the entrusted property to one’s own use, or use in violation of a legal direction. It is next submitted by the learned counsel for the petitioners that since admittedly the money was invested by the petitioners in a partnership business, it cannot be said that the petitioners being the other partners were entrusted with any money and in the absence of any entrustment, the question of dishonest misappropriation of the entrusted property does not arise and in the absence of the same, the offence punishable under Section 406 of the Indian Penal Code is also not made out. Hence, it is submitted that the prayer as prayed for by the petitioners in this criminal miscellaneous petition be allowed.
Learned Special Public Prosecutor and the learned counsel for the opposite party no.2 on the other hand vehemently opposes the prayer of the petitioners and submits that if the allegations made against the petitioners are considered to be true in its entirety, then all the offences in respect of which the learned Judicial Magistrate 1st Class, Dhanbad has found prima facie case is in fact, being made out against them. Hence, it is submitted that this criminal miscellaneous petition being without any merit be dismissed.
Having heard the rival submissions made at the Bar and after carefully going through the materials available in the record, it is pertinent to mention here that it is a settled principle of law as has been held by the Hon’ble Supreme Court of India in the case of Velji Raghavji Patel vs. State of Maharashtra reported in 1964 SCC OnLine SC 185 wherein, in para-07, it has been reiterated by the Hon’ble Supreme Court of India that every partner has dominion over property by reason of the fact that he is a partner. This is a kind of dominion which every owner of property has over his property, but it is not dominion of this kind which satisfies the requirements of Section 405 of the Indian Penal Code and it was also held that in order to establish “entrustment of dominion” over property to an accused, the mere existence of that person’s dominion over the property is not enough. It must be further shown that his dominion was the result of entrustment.
Now coming to the facts of the case, it is the admitted case of the complainant that the petitioner invested money in partnership business with 25% share. It is also the admitted case of the complainant that the partnership entity still exists. So, under such circumstances, this Court is of the considered view that even if the entire allegations made against the petitioners are considered to be true, in its entirety, still, the investment of the money in the partnership by the complainant will not amount to entrusted property as the word ‘entrusted’ has been used under Section 405 of the Indian Penal Code, the punishment of which has been provided for under Section 406 of the Indian Penal Code. Hence, this Court is of the considered view that even if the entire allegations made against the petitioners are considered to be true, in its entirety, still, the offence punishable under Section 406 of the Indian Penal Code is not made out against the petitioners.
So far as the offence punishable under Section 417 of the Indian Penal Code is concerned, as has been reiterated by the Hon’ble Supreme Court of India in the case Uma Shankar Gopalika vs. State of Bihar & Anr. (supra), in order to constitute the offence of cheating the accused playing deception since the beginning of the transaction is a sine-qua-non.
Now coming to the facts of the case, there is no allegation against the petitioners of having playing any deception since the beginning of the transaction between the parties.
Under such circumstances, this Court is of the considered view that even if the entire allegations made against the petitioners are considered to be true, in its entirety, still, the same is insufficient to constitute the offence punishable under Section 417 of the Indian Penal Code.
In view of the discussions made above, as neither the offence in respect of which prima facie case has been found by the learned Judicial Magistrate 1st Class, Dhanbad is in fact, being made out even if the entire allegations made against the petitioners are considered to be true, in its entirety; therefore, continuation of the criminal proceeding against the petitioners will amount to abuse of process of law and this is a fit case where the entire criminal proceeding including the order dated 23.06.2025 passed by the learned Judicial Magistrate 1st Class, Dhanbad in connection with Complaint Case No. 10242 of 2024 be quashed and set aside qua the petitioners.
Accordingly, the entire criminal proceeding including the order dated 23.06.2025 passed by the learned Judicial Magistrate 1st Class, Dhanbad in connection with Complaint Case No. 10242 of 2024 is quashed and set aside qua the petitioners.
In the result, this criminal miscellaneous petition is allowed.
In view of the disposal of this criminal miscellaneous petition interlocutory applications, if any, is disposed of being infructuous.