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Gujarat High Court · body

2025 DIGILAW 1164 (GUJ)

Nayan Dineshbhai Shah v. State of Gujarat

2025-10-01

J.C.DOSHI

body2025
ORDER : J. C. Doshi, J. 1. In paragraph 11 of the present petition, the petitioner has prayed for the following substantive reliefs:– “A) to admit and allow this petition; (B) to pass appropriate orders / directions quashing the complaint dated 12.04.2014 registered as Criminal Case No. 139/2015 in the court of learned Addl. Chief Judicial Magistrate, Bardoli and also further proceeding, if any, pursuant thereto; (C) To pass appropriate orders/directions quashing and setting aside the order dated 23.01.2015 passed by the learned Additional Chief Judicial Magistrate, Bardoli directing to register the FIR u/s 406 & 420 of I.P.C. and to issue summons to the petitioner; D) Pending admission, hearing and final disposal of this petition, Your Lordship may be pleased to stay further proceedings of the Criminal Case No.139/2015 pending in the court of learned Judicial Magistrate, First Class, Bardoli pursuant to the complaint dated 12.04.2014;” 2. Brief facts of the case are as under:- 2.1. The respondent No.2 filed a private criminal complaint under Sections 406 and 420 of the INDIAN PENAL CODE , 1860 (for short, “IPC” ) before the learned J.M.F.C., Bardoli, alleging that the petitioner, who was engaged in construction business under the name “Krishna Developers,” had entered into an oral agreement with the complainant for supply of labourers. It was alleged that the petitioner paid Rs.11,00,000/- by cheque and executed a compromise deed on 16.04.2010 for the balance amount. The complainant further alleged that upon visiting the petitioner’s residence at Baroda on 27.03.2014, he was abused and threatened, following which he filed a written complaint with Bardoli Police Station on 28.03.2014, and subsequently, a private complaint before the learned Magistrate. 2.2. Pursuant to the said complaint, the learned Magistrate, by order dated 12.04.2014, directed the Police Inspector, Bardoli, to investigate and submit a report within 30 days. During the investigation, the petitioner’s statement was recorded, wherein he stated that he had paid Rs.11,26,000/- by cheque and Rs.16,00,000/- in cash to the complainant for the labour work, and that the balance Rs.1,79,000/- was settled by cheque on 27.05.2010. He further contended that the allegations of threat were false as he was in Australia from 14.03.2014 to 15.04.2014. The Investigating Officer verified the petitioner’s passport and call details of the complainant and, upon completion of inquiry, submitted a report on 17.09.2014 opining that no offence was made out. 2.3. He further contended that the allegations of threat were false as he was in Australia from 14.03.2014 to 15.04.2014. The Investigating Officer verified the petitioner’s passport and call details of the complainant and, upon completion of inquiry, submitted a report on 17.09.2014 opining that no offence was made out. 2.3. The learned Magistrate, however, did not accept the said report and directed an inquiry under Section 202 Cr.P.C., recording the statements of two witnesses on 02.01.2015. Thereafter, by order dated 23.01.2015, the learned Magistrate directed registration of the FIR and issued summons under Sections 406 and 420 IPC against the petitioner. The petitioner, upon receipt of summons, appeared before the Court and sought relevant documents. The petitioner submits that the complaint, filed after an inordinate delay of nearly five years, is a gross abuse of the process of law, as neither the ingredients of the alleged offences are satisfied nor is there any material to justify continuation of criminal proceedings. Hence, the present petition. 3. Heard learned advocate appearing for the petitioner, learned advocate for the private respondent, and learned APP for the respondent -State. 4. Learned advocate for the petitioner has meticulously taken this Court through the contents of the FIR and submitted that the impugned complaint is, in substance, nothing but a cleverly drafted civil dispute artfully cloaked in the garb of criminality, instituted with the oblique motive of recovering the amount allegedly outstanding against the petitioner. It is firstly contended that the complaint suffers from gross and unexplained delay of nearly five years, which constitutes a significant impediment to the maintainability of the proceedings—an aspect the learned Trial Court failed to duly appreciate. 4.1. It is further urged that, ex facie, the complaint delineates a purely civil transaction between the parties, ingeniously dressed up as a criminal offence. Learned advocate invited the attention of this Court to the fact that subsequent to lodging of the criminal complaint, the complainant himself instituted a civil suit for recovery (see page 46). In paragraph 16 of the said plaint, the complainant has, in unequivocal terms, admitted that the petitioner has taken a stand in the present petition that the dispute is purely civil in nature, and, in light thereof, he has instituted the civil proceedings for recovery of the alleged outstanding amount. 4.2. In paragraph 16 of the said plaint, the complainant has, in unequivocal terms, admitted that the petitioner has taken a stand in the present petition that the dispute is purely civil in nature, and, in light thereof, he has instituted the civil proceedings for recovery of the alleged outstanding amount. 4.2. Learned advocate further submitted that the petitioner preferred an application under Order VII Rule 11 of the Code of Civil Procedure, 1908, before the learned Trial Court seeking rejection of the plaint on the ground of limitation. The said application, however, came to be dismissed, whereupon the petitioner preferred Civil Revision Application No. 393 of 2017 before this Court. The Coordinate Bench, vide order dated 10.10.2017, after considering the prima facie case, was pleased to stay further proceedings of the said civil suit till further orders. 4.3. Reliance has been placed upon the recent pronouncement of the Hon’ble Supreme Court in Arshad Neyaz Khan v. State of Jharkhand & Another , reported in 2025 INSC 1151 , wherein it has been categorically held that the offences punishable under Sections 406 and 420 of the IPC are mutually exclusive and cannot co-exist on the same factual substratum. It was further observed therein that disputes of a purely civil complexion cannot be permitted to be converted into criminal prosecutions for the alleged offences under Sections 406 and 420 IPC. 4.4 Upon the aforesaid submissions, learned advocate for the petitioner has fervently urged that the impugned proceedings are a gross abuse of the process of law and deserve to be quashed in exercise of the inherent powers of this Court under Section 482 of the Code of Criminal Procedure. 5. Per contra, the learned advocate appearing for the respondent No.2 submitted that the petitioner cannot be permitted to approbate and reprobate in the same breath. On the one hand, it is contended by the petitioner that the dispute partakes the character of a civil nature and, ergo, the criminal proceedings are not maintainable; while on the other hand, it is simultaneously urged that in view of the pendency of the criminal proceedings, the civil suit cannot be proceeded with. Such inconsistent and mutually destructive stands, it is submitted, are impermissible in law. 5.2. Such inconsistent and mutually destructive stands, it is submitted, are impermissible in law. 5.2. The learned advocate for the private respondent further submitted that a compromise agreement came to be duly executed inter se between the parties, which unequivocally records the petitioner’s acknowledgment of his liability to the tune of Rs.28,00,000/- (Rupees Twenty-Eight Lakhs only) towards the complainant. It is further submitted that despite such acknowledgment, the petitioner has failed to honour the said commitment as stipulated in the compromise deed, and such deliberate default squarely attracts, at the very least, the penal provisions contained under Section 406 of the IPC. In the aforesaid premises, it is fervently urged that the present petition, being devoid of merit, deserves to be dismissed in limine. 6. Learned APP for the respondent-State submitted that since it is a private dispute between the parties, necessary order may be passed. 7. I have heard the learned advocates appearing for the respective parties at considerable length and have meticulously perused the material placed on record. I have also bestowed my anxious consideration upon the rival submissions advanced across the Bar. 7.1. The private complaint, in the considered opinion of this Court, is required to be examined in the context of the essential ingredients constituting the offences punishable under Sections 406 and 420 of the IPC, inasmuch as the learned Trial Court has been pleased to issue process for the said offences. To appreciate the true import and amplitude of the allegations levelled in the complaint, it becomes apposite to advert to the statutory definitions embodied under Sections 405 and 415 of the IPC, which delineate the offences of criminal breach of trust and cheating respectively, and are reproduced hereinbelow for ready reference:- “ 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”. xxx 415. xxx 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.” 8. Section 405 of the IPC postulates that an offence of criminal breach of trust is committed when a person, to whom property has been entrusted or over whom dominion of such property has been conferred, dishonestly misappropriates or converts the same to his own use, or dishonestly disposes of or deals with such 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 undertaken touching the discharge of such trust. In essence, the gravamen of the offence lies in the dishonest misappropriation or conversion of the property entrusted, coupled with a breach of the fiduciary obligation reposed in the accused. 8.1. Likewise, Section 415 of the INDIAN PENAL CODE defines cheating as an act wherein any person, by practising deception upon another, 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 such person 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. The substratum of this offence, therefore, is the element of deception practised with a fraudulent or dishonest intent at the very inception of the transaction. 9. The private complaint filed before the learned Trial Court alleges the dates of occurrence as 16.04.2010, 12.04.2011, and 27.03.2014. In paragraph 3 of the complaint, it is averred that the accused was carrying on business in the name and style of Krishna Developers. 9. The private complaint filed before the learned Trial Court alleges the dates of occurrence as 16.04.2010, 12.04.2011, and 27.03.2014. In paragraph 3 of the complaint, it is averred that the accused was carrying on business in the name and style of Krishna Developers. In paragraph 4, it is further stated that the accused had undertaken construction work in Bhavesh Rambagh Society, Bardoli, and that he approached the complainant to assist in the said project by making a monetary investment. 9.1. In paragraph 5, it is alleged that pursuant to the proposal made by the accused, the complainant entered into an oral agreement and invested certain funds. However, the complaint is conspicuously silent as to the exact quantum of the amount allegedly invested. It is further stated that the accused had promised to pay back 50% of the profit arising from the said venture. Significantly, the complaint does not disclose either the date on which the alleged investment was made or the mode through which the said amount was advanced. 9.2. In paragraph 7 of the complaint, it is alleged that upon completion of the project, the complainant demanded repayment of his investment as well as the share of profit, whereupon a sum of Rs.11,00,000/- was paid by the accused–petitioner, who thereafter purportedly promised to pay an additional sum of Rs.28,00,000/- by executing a compromise deed. The said compromise deed, produced at Annexure–G, is notably unsigned by the petitioner. A perusal of the typed document reveals that the figure Rs.36,71,000/- and certain dates are inserted in handwriting, though without any signature at the commencement or conclusion of the handwritten portion. 9.3. The complaint further alleges that since the petitioner–accused failed to adhere to the terms of the purported compromise and did not pay the amount mentioned therein, the present complaint came to be instituted. The tenor and texture of the complaint unmistakably indicate that the same has been filed with the predominant object of recovering the alleged sum of Rs.28,00,000/-. Curiously, even this figure of Rs.28,00,000/- does not find concordance with the figure mentioned in the alleged compromise deed, assuming arguendo that such document is genuine. The complainant has not offered any plausible explanation for this glaring inconsistency. 9.4. Curiously, even this figure of Rs.28,00,000/- does not find concordance with the figure mentioned in the alleged compromise deed, assuming arguendo that such document is genuine. The complainant has not offered any plausible explanation for this glaring inconsistency. 9.4. The factual canvas thus reveals, in no uncertain terms, that the complaint is nothing but a device employed to exert pressure and to recover the disputed amount, which is further substantiated by the filing of Special Civil Suit No. 62 of 2015 (referable at page 46 of the compilation). The petitioner has categorically asserted that the dispute is purely civil in nature, and, in the considered view of this Court, such assertion carries substantial merit. Ergo, it can be safely concluded, without any hesitation, that the initiation of the present criminal proceedings is nothing short of a gross abuse of the process of law. 9.5. Recently, in Arshad Neyaz Khan (supra) , the Hon’ble Supreme Court had the occasion to meticulously analyse the issue of converting purely civil disputes into criminal proceedings. The relevant observations contained in paragraphs 16 to 21 of the said judgment are reproduced hereinbelow for ready reference:- “16. The contents of the complaint as well as the FIR would have to be read in light of the ingredients of Sections 406 and 420 IPC and the law settled by this Court through various judicial dicta. On perusal of the complaint dated 29.01.2021, it is noted that the complainant/respondent No.2 has filed the said complaint invoking Sections 406 , 420 and 120B IPC. For ease of reference, the aforesaid Sections are extracted as under: 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. xxx 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. xxx 120B. xxx 120B. Punishment of criminal conspiracy.— (1)Whoever is a party to a criminal conspiracy to commit an offence punishable with death, 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. 17. In Inder Mohan Goswami vs. State of Uttaranchal, (2007) 12 SCC 1 ("Inder Mohan Goswami"), while dealing with Section 420 IPC, this Court observed thus: "42. On a reading of the aforesaid section, it is manifest that in the definition there are two separate classes of acts which the person deceived may be induced to do. In the first class of acts he may be induced fraudulently or dishonestly to deliver property to any person. The second class of acts is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases, the inducement must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but need not be fraudulent or dishonest. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had a fraudulent or dishonest intention at the time of making the promise. From his mere failure to subsequently keep a promise, one cannot presume that he all along had a culpable intention to break the promise from the beginning." 18. In light of the facts and circumstances of the present case, we find that the complainant/respondent No.2 has failed to make out a case that satisfies the basic ingredients of the offence under Section 420 IPC. We fail to understand as to how the allegations against the appellant herein could be brought within the scope and ambit of the aforesaid section. We fail to understand as to how the allegations against the appellant herein could be brought within the scope and ambit of the aforesaid section. On a bare perusal of the FIR as well as the complaint, we do not find that the offence of cheating as defined under Section 420 IPC is made out and we do not find that there is any cheating and dishonest inducement to deliver any property or a valuable security involved in the instant case. 19. It is settled law that for establishing the offence of cheating, the complainant/respondent No.2 was required to show that the appellant had a fraudulent or dishonest intention at the time of making a promise or representation of not fulfilling the agreement for sale of the said property. Such a culpable intention right at the beginning when the promise was made cannot be presumed but has to be made out with cogent facts. In the facts of the present case, there is a clear absence of dishonest and fraudulent intention on the part of the appellant during the agreement for sale. We must hasten to add that there is no allegation in the FIR or the complaint indicating either expressly or impliedly any intentional deception or fraudulent/dishonest intention on the part of the appellant right from the time of making the promise or misrepresentation. Nothing has been said on what the misrepresentations were and how the appellant intentionally deceived the complainant/respondent No.2. Mere allegations by the complainant/respondent No.2 that the appellant failed to execute the agreement for sale and failed to refund the money paid by the complainant/respondent No.2 does not satisfy the test of dishonest inducement to deliver a property or part with a valuable security as enshrined under Section 420 IPC. 20. On perusal of the allegations contained in the complaint, in light of the ingredients of Section 406 IPC, read in the context of Section 405 IPC, do not find that any offence of criminal breach of trust has been made out. It is trite law that every act of breach of trust may not result in a penal offence unless there is evidence of a manipulating act of fraudulent misappropriation of property entrusted to him. It is trite law that every act of breach of trust may not result in a penal offence unless there is evidence of a manipulating act of fraudulent misappropriation of property entrusted to him. In the case of criminal breach of trust, if a person comes into possession of the property and receives it legally, but illegally retains it or converts it to its own use against the terms of contract, then the question whether such retention is with dishonest intention or not and whether such retention involves criminal breach of trust or only a civil liability would depend upon the facts and circumstances of the case. In the present case, the complainant/respondent No.2 has failed to establish the ingredients essential to constitute an offence under Section 406 IPC. The complainant/respondent No.2 has failed to place any material on record to show us as to how he had entrusted property to the appellant. Furthermore, the complaint also omits to aver as to how the property, so entrusted to the appellant, was dishonestly misappropriated or converted for his own use, thereby committing a breach of trust. 21. Furthermore, it is pertinent to mention that if it is the case of the complainant/respondent No.2 that the offence of criminal breach of trust as defined under Section 405 IPC, punishable under Section 406 IPC, is committed by the accused, then in the same breath it cannot be said that the accused has also committed the offence of cheating as defined in Section 415, punishable under Section 420 IPC. This Court in Delhi Race Club (1940) Limited US. State of Uttar Pradesh, (2024) 10 SCC 690 observed that there is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making false or misleading representation i.e. since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriates the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver a property. In such a situation, both offences cannot co-exist simultaneously. Consequently, the complaint cannot contain both the offences that are independent and distinct. The said offences cannot co-exist simultaneously in the same set of facts as they are antithetical to each other. 10. In such a situation, both offences cannot co-exist simultaneously. Consequently, the complaint cannot contain both the offences that are independent and distinct. The said offences cannot co-exist simultaneously in the same set of facts as they are antithetical to each other. 10. This Court may gainfully refer to the following observations of this Court in the case of State of Haryana v. Bhajan Lal [1992 Suppl (1) SCC 335] , and the law laid down therein has been consistently followed. In para 102, the Hon’ble Apex Court held as under :- “102. In the backdrop of the interpretation of the various relevant provisions of the Code under Chapter XIV and of the principles of law enunciated by this Court in a series of decisions relating to the exercise of the extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted and reproduced above, we give the following categories of cases by way of illustration wherein such power could be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice, though it may not be possible to lay down any precise, clearly defined and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of myriad kinds of cases wherein such power should be exercised. (1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused. (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a noncognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code. (4) Where, the allegations in the FIR do not constitute a cognizable offence but constitute only a noncognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code. (5) Where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused. (6) Where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party. (7) Where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge." 11. Applying the ratio decidendi of the aforesaid decision to the factual matrix of the present case, it becomes manifest that the complainant, having suffered defeat in the civil proceedings, has now sought to resurrect the same cause under the garb of criminal prosecution against the petitioner. Such conduct, in the considered opinion of this Court, amounts to a vexatious and mala fide attempt to convert a purely civil dispute into a criminal proceeding by invoking the penal machinery of the State. The approach adopted by the learned Trial Court is wholly unsustainable in law and stands deprecated. The impugned order, therefore, deserves to be quashed and set aside. 12. In view of the foregoing discussion present petition deserves consideration and is accordingly ALLOWED . The Criminal Case No. 139 of 2015 , before the Court of learned Addl. Chief Judicial Magistrate, Bardoli , together with all pre and consequential proceedings arising therefrom, is hereby quashed and set aside. Rule is made absolute. Direct service is permitted.