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2026 DIGILAW 12 (TS)

Venkata Krishna Rao Mannam v. State of Telangana

2026-01-05

N.TUKARAMJI

body2026
ORDER : 1. This Writ Petition is filed with the following relief: “…to issue a Writ of Certiorari or other appropriate order or direction in the nature of a Writ declaring the Crime No. 686/2015 of P.S. Medchal, Cyberabad , Rangareddy District as arbitrary, discriminatory, without any basis not attracting the offence for which it was registered malafide and violative of Articles 14 and 21 of the Constitution of India and consequently set aside the same in the interest of justice and pass.......” 2. Heard Mr.B.Nalin Kumar, learned senior counsel for the petitioner, Mr.D.Pradeep, learned Assistant Government Pleader for Home appearing for respondent Nos.1 and 2 and Mr.Badra Nanavath, learned counsel representing Mr.Sanjeev Kumar, learned Senior Counsel appearing for respondent No.3. 3.1. Learned counsel for the petitioner contends that the grievance of the de facto complainant is that the petitioner failed to make payment to the farmers who had supplied paddy seeds to the petitioner’s company, M/s. Manisha Agri Bio-Tech Private Limited, Kandlakoya. It is alleged in the complaint that the cheques issued by the petitioner’s company towards payment of the amount due were dishonoured by the banker with the endorsement “payment stopped”. 3.2. Learned counsel for the petitioner submits that the transaction between the petitioner’s company and the de facto complainant is purely contractual in nature, governed by a written agreement concerning the supply of paddy seeds and the corresponding payment terms. The de facto complainant had, in fact, instituted a civil suit in O.S. No. 1238 of 2015 before the II Additional District Judge, Mahabubnagar, seeking recovery of the said amount, which is presently pending trial. 3.3. It is therefore contended that, in view of the existence of a civil remedy, initiation of criminal proceedings on the same cause of action is unsustainable. Learned counsel submits that it is a settled position of law that a breach of contract or failure to perform an agreement does not, by itself, constitute a criminal offence unless fraudulent or dishonest intention exists from the inception of the transaction. 3.4. He relies upon the judgment of the Hon’ble Supreme Court in Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr. (2024) 10 SCC 690 , wherein it has been held that the offences of “cheating” and “criminal breach of trust” are mutually exclusive and cannot coexist for prosecution in respect of the same transaction. 3.5. He relies upon the judgment of the Hon’ble Supreme Court in Delhi Race Club (1940) Ltd. & Ors. v. State of Uttar Pradesh & Anr. (2024) 10 SCC 690 , wherein it has been held that the offences of “cheating” and “criminal breach of trust” are mutually exclusive and cannot coexist for prosecution in respect of the same transaction. 3.5. Furthermore, it is submitted that this Court had earlier granted interim stay of investigation, which itself reflects that the petitioner has made out a prima facie case for interference. The petitioner, who was the Managing Director of the company at the relevant time, resigned from the said post on 12.10.2014, and his resignation was duly recorded by the Registrar of Companies on 02.12.2015. Hence, any action taken during his tenure was on behalf of the company in his official capacity, and therefore, no vicarious criminal liability can be fastened upon him. Reliance is placed on the decision of the Hon’ble Supreme Court in S.K. Alagh v. State of Uttar Pradesh & Ors., (2008) 5 SCC 662 , wherein it was held that criminal liability cannot be extended to the Managing Director or officers of a company in the absence of specific statutory provision creating such vicarious liability. Accordingly, it is prayed that the proceedings in the present crime be quashed. 4.1. Learned Assistant Government Pleader for Home, appearing for the respondents, submits that the de facto complainant lodged a report alleging that, on the assurance of the petitioner, about 75 farmers had supplied paddy seeds to the petitioner’s company. The de facto complainant acted as a mediator in facilitating the said transaction. It is alleged that, after the delivery of the seeds, an amount of Rs.38,41,000/- was paid out of the total consideration of Rs.64,19,070/-. As per the agreement, the entire payment was to be made within 30 days of delivery. The company issued five post-dated cheques towards the balance amount, which were dishonoured with the endorsement “payment stopped”. It is therefore contended that the petitioner, with dishonest intention, induced the farmers to part with their goods, thereby committing offences of cheating, criminal breach of trust, and criminal conspiracy. 4.2. The learned Assistant Government Pleader further submits that, since an interim stay was granted by this Court, the investigation could not proceed. It is therefore contended that the petitioner, with dishonest intention, induced the farmers to part with their goods, thereby committing offences of cheating, criminal breach of trust, and criminal conspiracy. 4.2. The learned Assistant Government Pleader further submits that, since an interim stay was granted by this Court, the investigation could not proceed. Hence, it is prayed that the police authorities be permitted to continue investigation to ascertain the factual position and to determine whether prosecution is warranted. Accordingly, dismissal of the petition is sought. 5. Learned counsel appearing for the de facto complainant (respondent No.3) submits that the petitioner and his company, with dishonest intention, failed to make payment of the agreed consideration and thereby cheated innocent farmers. He further submits that the civil suit filed earlier for recovery of the amount was dismissed for default and that no civil proceedings are presently pending. It is contended that there exists a clear prima facie case of cheating and breach of trust, warranting continuation of the criminal investigation. 6. I have perused the material available on record. 7. A perusal of the police report dated 21.11.2015 submitted by the de facto complainant indicates that the petitioner, as Managing Director of M/s. Manisha Agri Bio-Tech Private Limited, entered into an agreement with respondent No.3 for the supply of paddy seeds, with an understanding that payment would be made within thirty days. The de facto complainant procured paddy seeds from farmers valued at Rs.64,19,070/-. The petitioner issued five cheques; four for Rs.5,00,000/- each and one for Rs.5,78,000/-, all post-dated. Upon presentation, the cheques were dishonoured with the endorsement “payment stopped”. It is alleged that the petitioner, with dishonest intention, directed his banker to stop payment, thereby cheating the farmers. 8. The complaint, therefore, discloses the existence of a contractual arrangement between the petitioner’s company and respondent No.3 for the supply of paddy seeds, partial payment made, and dishonour of cheques issued for the balance amount. The essence of the grievance is that the petitioner, with mala fide intention, instructed the banker to stop payment, thereby causing wrongful loss to the de facto complainant and the farmers. 9. The essence of the grievance is that the petitioner, with mala fide intention, instructed the banker to stop payment, thereby causing wrongful loss to the de facto complainant and the farmers. 9. It is well settled that, to constitute the offence of cheating under Section 415 of the Indian Penal Code, it must be established that there was fraudulent or dishonest intention from the inception of the transaction, which induced the complainant to deliver property or act to his detriment. Similarly, to constitute criminal breach of trust under Section 405 IPC, there must be an element of entrustment of property and a subsequent dishonest misappropriation or conversion thereof. Further, to establish criminal conspiracy under Section 120-B IPC, there must exist an agreement between two or more persons to commit an illegal act or a legal act by illegal means. 10. When these ingredients are examined in the context of the present case, it becomes evident that the entire dispute arises out of a commercial transaction founded upon a contractual agreement between the parties. Certain payments were admittedly made, and cheques were issued towards the balance consideration. The subsequent dishonour of the cheques with the endorsement “payment stopped” may give rise to civil consequences and, at most, attract proceedings under the law governing dishonour of cheques. However, in the absence of material to indicate a dishonest or fraudulent intention at the inception of the transaction, the allegations do not constitute the offences of cheating or criminal breach of trust. The mere pendency or dismissal of a civil suit for recovery of money does not, by itself, transform a civil dispute into a criminal offence. 11. It is a well-settled principle of law that mere breach or non- performance of a contractual obligation does not ipso facto constitute a criminal offence, unless it is demonstrated that the accused had a fraudulent or dishonest intention at the very inception of the transaction. The distinction between a mere breach of contract and the commission of a criminal offence such as cheating or criminal breach of trust lies primarily in the mens rea accompanying the act. 12. In State of Haryana v. Bhajan Lal, AIR 1992 SC 604 , the Hon’ble Supreme Court laid down the classic guidelines governing the exercise of inherent powers under Section 482 of the Code of Criminal Procedure to prevent abuse of the process of law. 12. In State of Haryana v. Bhajan Lal, AIR 1992 SC 604 , the Hon’ble Supreme Court laid down the classic guidelines governing the exercise of inherent powers under Section 482 of the Code of Criminal Procedure to prevent abuse of the process of law. The Court observed that where the allegations made in the complaint, even if taken at their face value, disclose only a civil dispute or a matter arising out of a commercial or contractual transaction, criminal proceedings are liable to be quashed. The Court emphasized that the machinery of criminal law cannot be invoked to settle civil scores or to exert undue pressure for enforcement of contractual terms, unless it is shown that the accused acted with dishonest intention at the inception of the transaction. 13. Similarly, in Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra , AIR 2021 SC 1918 , the Supreme Court reaffirmed that the criminal process should not be used as a weapon to harass parties in matters which are purely civil in nature. The Court cautioned that before allowing criminal law to take its course, the courts must ensure that the allegations prima facie disclose the essential ingredients of the alleged offence and that the proceedings are not merely a device to coerce payment or performance of a civil obligation. 14. Thus, to attract criminal liability under provisions such as Sections 415 and 420 IPC (cheating) or Section 406 IPC (criminal breach of trust), it must be shown that the accused possessed a dishonest or fraudulent intention at the inception of the transaction, that is, at the time the promise or representation was made. Subsequent failure to perform the contract, even if it results in financial loss to the other party, cannot by itself give rise to criminal prosecution, as such failure may amount only to a civil wrong, remediable through a suit for recovery of money or damages. 15. Applying the above principles to the facts of the present case, it is clear that the allegations in the complaint primarily disclose a civil dispute arising from contractual obligations and monetary claims. In the absence of any prima facie material establishing dishonest intention on the part of the petitioner from the inception, continuation of the criminal proceedings would amount to an abuse of process of law. 16. Accordingly, the writ petition is allowed. In the absence of any prima facie material establishing dishonest intention on the part of the petitioner from the inception, continuation of the criminal proceedings would amount to an abuse of process of law. 16. Accordingly, the writ petition is allowed. The proceedings in Crime No. 686 of 2015 of Police Station Medchal, Cyberabad, Ranga Reddy District, against the petitioner are hereby quashed. There shall be no order as to costs. Miscellaneous Petitions, pending if any, shall stand closed.