Bombay High Court
Sunil Jain vs Senior Police Inspector And Anr on 8 August, 2025
Author: Milind N. Jadhav
Bench: Milind N. Jadhav
2025:BHC-AS:34081
ABA.2682.22 & 2751.22.doc
Ajay
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
ANTICIPATORY BAIL APPLICATION NO. 2682 OF 2022
Sunil Jain .. Applicant
Versus
Senior Police Inspector and Anr. .. Respondents
WITH
ANTICIPATORY BAIL APPLICATION NO. 2751 OF 2022
Jairaj Vinod Bafna .. Applicant
Versus
The State Of Maharashtra .. Respondent
....................
Mr. Sanjog Parab, Senior Advocate i/b Mr. Mohan Rao a/w Ms.
Sulbha Rane, Ms. Sakshi Baadkar, Mr. Sangram Parab, Mr. Pranjal
Pandey, Advocates for Applicant in Anticipatory Bail Application
No.2682 of 2022.
Mr. Niranjan Mundargi a/w. Ms. Keral Mehta, Mr. Rajiv Hingu &
Mr. Deepraj Shetye, Advocates i/b L. H. Hingu & Co. for Applicant
in Anticipatory Bail Application No.2751 of 2022.
Mr. Karansingh Rajput a/w. Mr. Ibrahim Shaikh and Mr. Dhananjay
Kadam, Advocates i/by Mr. Mayur Sanap for Respondent No.3 in
Anticipatory Bail Application No.2682 of 2022 and Respondent
No.2 in Anticipatory Bail Application No.2751 of 2022.
Ms. Sangita E. Phad, APP for Respondent - State.
PSI - Palve, Vile Parle Police Station present.
...................
CORAM : MILIND N. JADHAV, J.
DATE : AUGUST 08, 2025
P. C.:
1. Heard Mr. Parab, learned Senior Advocate for Applicant in Anticipatory Bail Application No.2682 of 2022; Mr. Mundargi, learned Advocate for Applicant in Anticipatory Bail Application No.2751 of 1 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc 2022; Mr. Rajput, learned Advocate for Respondent No.3 in Anticipatory Bail Application No.2682 of 2022 and Respondent No.2 in Anticipatory Bail Application No.2751 of 2022 and Ms. Phad, learned APP for Respondent - State.
2. This is a group of two Anticipatory Bail Applications. These Applications for anticipatory bail are filed under Section 438 of the Code of Criminal Procedure, 1973 (for short, "Cr.P.C."). Applicants are apprehending arrest in F.I.R. No.859 of 2022 registered with Vile Parle Police Station for the offences punishable under Sections 409, 411, 413, 420, 465, 467, 468, 479, 120-B read with Section 34 of the Indian Penal Code, 1860 (for short "IPC") and Sections 66(d) and 66(e) of the Information Technology Act, 2000 (for short "IT Act") by First Informant - Complainant - Manish Indukumar Shah against two Accused persons namely Sunil Jain and Jairaj Bafna. Both Anticipatory Bail Applications are disposed of by this common order.
3. Briefly stated, facts germane to the present Applications are as follows:-
3.1. Artha Vriddhi Securities Ltd. (for short 'AVSL') was incorporated in the year 2005 by one Mr. Dhirendra Shukla and his family under the name 'Transparent Shares and Securities'. However in the year 2013 the name was changed to 'Artha Vriddhi Securities Limited'. The Company is a Registered Share Broker.
2 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc 3.2. First Informant - Anurag Dhirendra Shukla was appointed as Director in March, 2021, prior to him, his father Dhirendra Shukla served as the Director since the inception. 3.3. On 25.06.2013, Applicant No.1 - Sunil Jain (Accused No.1) was appointed as the Director of AVSL. Trading accounts of clients including Blue Sea International and Manish Shah were managed by AVSL for the purpose of trading shares. 3.4. It is alleged that since the year 2015, present Applicants, in connivance with each other, engaged in illegal acts of circular trading and embezzlement thereby misappropriating funds from AVSL and its clients.
3.5. In October 2021, clients - Blue Sea International and Manish Shah raised complaints before the Grievance Redressal Committee (for short 'GRC') of NSE qua the irregularities in their trading accounts. On 10.11.2021 and 11.11.2021, the GRC passed orders directing AVSL to pay compensation of Rs.1,54,24,446/- and Rs.60,38,280/- respectively. On 11.11.2021, intimation for Arbitration proceedings was sent by AVSL against the GRC orders. 3.6. On 18.02.2022, an order was passed by the Member and Core Settlement Guarantee Fund Committee (MCSGFC) of NSE wherein, Anurag Shukla represented AVSL qua the complaints against 3 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc AVSL. He submitted that there was no misutilization of clients' funds and it is further recorded that the two complaints were settled by AVSL and wanted to withdraw from Arbitration. 3.7. In the interregnum, in October - November 2021, Mr. Sunil Giri - Director of Blue Sea International filed a complaint against four accused persons i.e. Anurag Shukla, Dhirendra Shukla, Jairaj Bafna and Sunil Jain. On 21.07.2022, (first) FIR No.755 of 2022 was registered.
3.8. On 08.08.2022, co-accused No.2 - Jairaj Bafna was granted Anticipatory Bail. On 24.07.2022, other Directors alongwith First Informant - Anurag Shukla were arrested. By order dated 18.08.2022, the learned Sessions Court granted bail to all other Directors including First Informant - Anurag Shukla. 3.9. On 29.08.2022, First Informant - Anurag Shukla obtained permission from the Magistrate under Section 156(3) of Cr.P.C. and pursuant thereto on 11.09.2022, the present (second) FIR No.850 of 2022 was registered against six accused persons i.e. other Directors, employees and investors of AVSL.
3.10. Thereafter, on 13.09.2022 (third) FIR No.859 of 2022 was filed by First Informant - Complainant - Manish Indukumar Shah who 4 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc is an Investor in AVSL against two accused persons viz namely Sunil Jain and Jairaj Bafna.
3.11. It is prosecution case that, in September 2019, First Informant got acquainted with one Nilesh More - Relationship Manager who introduced him to Accused Nos.1 and 2 who asked him to invest in AVSL. First Informant opened a Share Trading Account and amounts were transferred by First Informant from time to time in AVSL account for the purpose of trading. First Informant invested a total amount of Rs.1,55,00,000/- from 30.09.2019 to 18.05.2021.
However it is alleged that both Accused persons made unauthorized transactions in contravention of SEBI Rules and Regulations, sold his shares to gain profit without his knowledge or consent and gave incorrect information about the said transactions by sending incorrect emails and caused loss to him. Hence the present FIR No.859 of 2022. 3.12. It is alleged that Applicant - Sunil Jain (Accused No.1) Head of Sales at AVSL was the mastermind of the offence. It is alleged that internal email exchanges with co-accused clearly reflected that offence was committed on his instructions. He is alleged to have committed the offense with the assistance of Applicant - Accused No.2. It is alleged that both accused persons in collusion executed multiple trade transactions without consent of First Informant and caused wrongful losses to him. It is alleged that Accused Nos.1 and 2 5 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc transferred profit amounts into the accounts of other Investors namely Ritesh Jain and Urvi Milan Shah. It is alleged that both accused persons sent multiple emails consisting false and fabricated details of trades and stock holding report to First Informant. Being the custodian of AVSL's shares and properties, Accused No.1 with the aid of Accused No.2 have allegedly committed criminal breach of trust by misappropriating client's funds and shares.
4. Anticipatory Bail Application No.2682 of 2022:
(i) Mr. Parab, learned Senior Advocate appearing for Applicant - Accused No.1 would submit that Applicant has been falsely implicated and made a scapegoat in the present FIR, selectively states names of Accused Nos.1 and 2 despite the fact that funds were transferred to AVSL's corporate accounts and not to the personal accounts of the accused. He would submit that Accused No.1 was solely heading the sales team and had no role in finance or banking operations. He would submit that day-to-day affairs of AVSL including financial decisions were handled by Dhirendra Shukla and his family members who were authorised signatories. He would submit that First Informant had earlier filed a complaint before the NSE, GRC only against AVSL and not against Applicant for 6 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc alleged unauthorised trading. He would submit that FIR is belated and appears to be a counterblast to the arbitration notice issued by AVSL. He would submit that GRC, by its order dated 28.10.2021 in its findings recorded that First Informant failed to substantiate his claims and that his own negligence contributed to the alleged loss.
(ii) He would submit that allegation of misappropriation of funds through other investors' accounts is baseless as those investors had been independently trading through their own accounts even prior to First Informant. He would submit that Applicant has not been issued any notice or faced action from NSE, BSE, or SEBI till date and all transactions were routed through recognised exchanges with due credit to clients' accounts and no illegality is attributed to Applicant. He would submit that there is no financial trail linking Applicant to any alleged offence. He would submit that three FIRs on the same cause of action have led to parallel investigations in FIR No.755 of 2022, investigation is completed and relevant documents and bank statements have been provided. He would submit that custodial interrogation is not necessary 7 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc and the Anticipatory Bail Application deserves to be allowed.
(iii) In support of his submissions, Mr. Parab, learned Senior Advocate appearing for Applicant - Accused No.1 has referred to and relied upon the decision of this Court in the case of Prashant Vasant Chavan Vs. The State of Maharashtra. 1
5. Anticipatory Bail Application No. 2751 of 2022:
(i) Mr. Mundargi, learned Advocate appearing for Applicant -
Accused No.2 would submit that Applicant - Accused No.2 is falsely implicated. He would submit that Applicant worked as Business Consultant on retainer-ship basis with AVSL. He would submit that Applicant was not an employee of AVSL and not involved in its day-to-day affairs. He would submit that his role was limited to providing customer relationship coordination and operational support. He would submit that the Trading/Demat account of Blue Sea International was opened by Relationship Managers Mr. Nilesh More and Mr. Umesh Malaye after due verification. He would submit that group chat records show Sunil Giri confirming receipt 1 Criminal Anticipatory Bail Application No.31 of 2025, decided on 08.01.2025.
8 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc of account opening forms on 02.11.2019 thereby refuting the allegation of his forged signatures. He would submit that transactions were carried out in the said account with regular confirmations sent by NSE to Sunil Giri.
(ii) He would submit that the allegation regarding his sister being a beneficiary is baseless as she was a client of AVSL, she traded in minimal amounts and also incurred losses. He would submit that the assurance to repay losses was made by Accused No.1 and not this Applicant. He would submit that Applicant has been granted anticipatory bail in FIR No.755 of 2022 which incidentally arises from the same cause of action. He would submit that no money trail has been discovered linking Applicant to the alleged offense of embezzlement.
(iii) In support of his submissions, Mr. Mundargi has referred to and relied upon the decision of the Supreme Court in the case of Musheer Alam Vs. State of Uttar Pradesh and Another2. Hence, he would submit that custodial interrogation is not necessary and the Anticipatory Bail Application of the Applicant deserves to be allowed. 2 2025 SCC OnLine SC 116.
9 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc
6. PER CONTRA, Ms. Phad, learned APP for Respondent - State has vehemently opposed both the Applications. She would submit that both Applicants are actively involved in the commission of offences which involved unauthorised trading, misappropriation of funds and fabrication of documents. She would submit that Accused No.1 though designated as Head of Sales is the masterminded as on his instructions and in collusion with Accused No.2 - Jairaj Bafna, despite claiming to be a mere consultant actively coordinated trading activity and communicated with clients and misled them by sending false and fabricated stock trading report. She would submit that the claim of Applicant that the funds were routed through AVSL's official accounts does not absolve Applicants of their individual roles in the illegal scheme. She would submit that serious allegations of wrongful gains transferred to related parties including co-accused's relatives, require custodial interrogation to unearth the financial trail and digital evidence. Hence, she would submit that considering the nature and seriousness of the offence, quantum of loss involved and for thorough investigation she would urge the Court to reject the Applications 6.1. In support of her submissions, Ms. Phad learned APP for Respondent - State has referred to and relied upon the decision of the 10 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc Supreme Court in the case of Satender Kumar Antil Vs. Central Bureau of Investigation and Anr. 3.
7. Mr. Rajput, learned Advocate appearing for Respondent No.3 in Anticipatory Bail Application No.2682 of 2022 and Respondent No.2 in Anticipatory Bail Application No.2751 of 2022. would adopt the submissions made by Ms. Phad. He would submit that the present case involves a systematic and premeditated financial fraud committed by Accused No.1 wherein investors were lured into opening Demat accounts with promise of consent-based trading. He would submit that Accused No.1 forged documents, manipulated trades without consent, and issued over 300 fake emails misrepresenting shareholding positions.
7.1. He would submit that role of Accused No.1 has been independently corroborated by orders of statutory bodies such as the GRC of NSE and the MCSGFC's order dated 26.11.2024 appended at page No.62 of the compilation which record serious violations including misuse of client funds, non-maintenance of ledgers, running a guaranteed returns scheme, circular trading and uploading fake contact details on the exchange.
7.2. He would submit that Accused No.1 diverted investor funds for personal use and acquisition of immovable properties which 3 AIR Online 2021 SC 1017.
11 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc is evident from detailed bank statements on record appended at page Nos.24 to 84 of compilation, which demonstrate substantial money transfers from investor accounts to those of family members and entities such as Zeus Shelters showing clear financial gain from the fraudulent trades.
7.3. He would submit that fraudulent scheme was carried out in collusion with close associates of Accused No.1. He would submit that data analysis conducted by the NSE revealed 831 pairs of trades between related clients, including other investors like Ritesh Jain and Amit Lalwani who shared personal ties and residential proximity with Accused No.1. This establishes the deliberate and repetitive nature of the fraud.
7.4. He would submit that accused persons are habitual offenders. He would submit that apart from the present FIR, there are two more FIRs pending against them for similar offences. He would submit that there are a total of 22 complaints been lodged against them on the NSE portal pointing out a widespread and recurring pattern of market abuse and public deception. 7.5. He would submit that there is clear evidence of suppression and tampering by both the accused persons. He would submit that audio recordings and whatsApp chats show Accused No.1 12 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc admitting his guilt and making false assurances to repay investors. He would submit that internal emails obtained from the Grant Thornton Report reveal instructions like "stop sending SMS," exposing their intention to conceal actual trades and mislead investors. 7.6. He would submit that the fraudulent conduct goes far beyond a civil dispute or isolated grievance. It is a serious economic offence that erodes investors' confidence and disturbs the capital market thereby impacting broader economic stability and public interest.
7.7. He would submit that Accused No.1 have made misleading representations to the Court. He would submit that Accused No.1 in his Anticipatory Bail Application No.2682 of 2022 claimed to be a 0.1% shareholder Director drawing a salary of 25 lakhs, however his bank accounts reflect multi-crore transactions involving closely linked parties, thereby undermining the claims of his non-involvement and minimal role.
7.8. He would submit that even other Directors of AVSL have initiated criminal proceedings against Accused Nos.1 and 2 by filing a separate FIR. He would submit that their legal notice states the defrauded amount over Rs.9.35 crores thereby confirming internal acknowledgment of the fraud.
13 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc 7.9. He would submit that the findings of the NSE, GRC which upheld the investor complaints totalling of Rs.2.17 crores attained finality as the accused withdrew their challenge to the said orders. He would submit that AVSL's decision to forego arbitration further confirms their liability and the validity of the claims. 7.10. He would submit that the inspection report relied upon by the NSE clearly demonstrates that AVSL misused clients' funds to the tune of Rs.1.49 crores as of 17.12.2021 by diverting credit balance clients' monies to cover the settlement obligations of debit balance clients or for its own internal purposes, in violation of principle 1 of Enhanced Supervision of Stockbrokers.
7.11. He would submit that such misuse of client funds reflects a systemic and deliberate breach of regulatory obligations, pointing towards willful diversion and misappropriation which squarely falls within the ambit of Section 409 IPC. He would submit that quantum involved is not nominal but substantial and the same reflects a pattern of dishonest conduct.
7.12. He would further draw my attention to the Exchange's findings regarding the artificial inflation of net worth. He would submit that despite filing certificates reflecting net worth in excess of Rs.1 crore, AVSL failed to deduct non-allowable assets such as 14 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc doubtful debts and advances which resulted in the actual net worth standing at a negative Rs.1.67 crores and Rs.1.48 crores for the period of March 2021 to September 2021. He would submit that this concealment establishes suppression of material facts and misrepresentation of finances thereby indicative of dishonest intent. 7.13. He would submit that NSE also found that AVSL failed to maintain any evidence of client instructions or orders in all 8 instances of 3 clients selected for sample scrutiny. He would submit that absence of basic client-authorisation records reveals a complete breakdown of compliance and accountability mechanisms thereby reinforcing the allegations of unauthorised trades which further substantiate that trades were executed without consent.
7.14. He would therefore submit that these statutory and regulatory violations recorded by the NSE after due process are admissible and relevant material that go to the root of the matter. He would submit that Applicants cannot wash their hands off such misconduct while having played key roles in sales and client relations. 7.15. He would submit that in the light of the above facts, custodial interrogation of Accused No.1 is essential in the present case. Hence he would urge the Court to dismiss the Anticipatory Bail Application filed by Applicant - Accused No.1.
15 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc 7.16. In support of his submissions, Mr. Rajput has referred to and relied upon the following decisions of the Supreme Court and various High Courts:-
(i) Laxman Irappa Hatti and Anr. Vs. State of Maharashtra4;
(ii) Chirag M. Pathak and Ors. Vs. Dollyben Kantilal Patel and Ors.5;
(iii) Ashok Kumar Vs. State of Union Territory Chandigarh6;
(iv) Pratibha Manchanda and Anr. Vs. State of Haryana and Anr.7;
(v) Sushila Aggarwal and Ors. Vs. State (NCT of Delhi) and Anr.8;
(vi) T.T. Antony Vs. State of Kerala and Ors.9;
(vii) Anju Chaudhary Vs. State of Uttar Pradesh and Anr.10;
(viii)Virupakshappa Gouda and Anr. Vs. State of Karnataka and Anr.11;
(ix) Bharat Chaudhary and Anr. Vs. State of Bihar and Anr.12;
(x) Krishna Lal Chawla and Ors. Vs. State of Uttar Pradesh and Anr.13;
(xi) Shri Gurbaksh Singh Sibbia and Ors. Vs. State of Punjab14; 4
Cri. Appln. No.2816 of 2004 Decided on 15.07.2004. 5 (2018) 1 SCC 330 6 2024 SCC OnLine SC 274 7 Cri. Appeal No.1793 of 2023 - Decided on 07.07.2023. 8 (2020) 5 SCC 1 9 (2001) 6 SCC 181 10 (2013) 6 SCC 384 11 (2017) 5 SCC 406 12 (2003) 8 SCC 77 13 (2021) 5 SCC 435 14 (1980) 2 SCC 565 16 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc
(xii) Ravindra Saxena Vs. State of Rajasthan15;
(xiii) Sumitha Pradeep Vs. Arun Kumar C.K. and Anr.16.
8. I have heard learned Advocates appearing of the parties and learned APP for the State and with their able assistance perused the record of the case.
9. On perusal of the material placed on record, it is evident that both Applicants - Accused persons were admittedly not authorised signatories or fund handlers of AVSL. Accused No.1 headed the sales division and Accused No.2 functioned in a limited marketing consultancy capacity. Hence there is nothing to indicate that First - Informant entrusted funds to Accused Nos.1 and 2 in their personal capacity or that they had dominion or control over such funds. The funds in question were deposited in the official account of AVSL, a SEBI registered intermediary and there is no material to demonstrate that any such funds were misappropriated or received by Accused persons individually. Therefore the offence under Section 409 IPC therefore prima facie cannot be made out against the Applicants.
10. With regard to cheating under Section 420 of IPC, there is no material to suggest that there was fraudulent or dishonest inducement at the inception of client-broker relationship. The 15 (2010) 1 SCC 684 16 (2022) 17 SCC 391 17 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc onboarding and KYC procedures were duly followed and First - Informant had availed services of AVSL in a formal capacity. Even if trades were carried out in excess of limits or without authority it cannot be said that the initial transaction was vitiated by deception. Subsequent mishandling or over-trading, if any, would at best give rise to civil or regulatory consequences and not a criminal prosecution under Section 420 of IPC, Hence in absence of material showing inducement with intent to deceive at the stage of inception dilutes the prosecution case.
11. With respect to the allegations under Sections 467, 468 and 471 of IPC, the investigation has not discovered any forged or fabricated document allegedly created or used by either of the Accused Nos.1 and 2. It is seen that the allegations of falsified reports and manipulated holdings remain broad and unspecific as no document has been shown to bear the authorship or electronic trail linking it directly to the Applicants - Accused. In absence of such prima facie material the applicability of the offences relating to forgery remains doubtful. It is seen that the investigation is documentary in nature and no recovery or custodial interrogation has been shown to be necessary.
12. It is further relevant to note that Applicants are first-time offenders with no prior criminal antecedents. The investigation has 18 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc continued over a considerable period, charge-sheet has been filed and material documents are already in custody of the Investigating Officer. Hence, no recovery as such is pending at the instance of Applicants.
13. While relying on the decision of the Supreme Court in the case of Ramesh Kumar Vs. State (NCT of Delhi) 17 considering Bail Applications, the said Court held that criminal proceedings are not for realisation of disputed dues and thus a criminal Court exercising jurisdiction to grant bail / anticipatory bail is not expected to act as a recovery agent to realise the dues of the First - Informant, and that too, without any trial (emphasis supplied). Supreme Court has however held that in exceptional cases where allegation of misappropriation of public money by Accused is levelled, it would be open to the concerned Court to consider whether in the larger public interest the money which is misappropriated be allowed to be deposited before application for Anticipatory Bail or Bail is taken up for consideration.
14. It is trite law that offence of cheating and criminal breach of trust cannot co-exist simultaneously. In this context reference is made to a decision of the Supreme Court in the case of Delhi Race Club (1940) Ltd. and Ors. Vs. State of Uttar Pradesh and Anr. 18 wherein in paragraph Nos.24 to 30 the Court has laid down the 17 (2023) 7 Supreme Court Cases 461.
18Criminal Appeal No. 3114 of 2024 decided on 23.08.2024 19 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc distinction between offence of cheating and criminal breach of trust. Paragraph Nos. 24 to 30 read thus:-
"DIFFERENCE BETWEEN CRIMINAL BREACH OF TRUST AND CHEATING
24. This Court in its decision in S.W. Palanitkar & Ors. v. State of Bihar & Anr. reported in (2002) 1 SCC 241 expounded the difference in the ingredients required for constituting an of offence of criminal breach of trust (Section 406 IPC) viz-a-viz the offence of cheating (Section 420). The relevant observations read as under: -
"9. The ingredients in order to constitute a criminal breach of trust are: (i) entrusting a person with property or with any dominion over property,(ii) that person entrusted (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any legal contract made, touching the discharge of such trust.
10. The ingredients of an offence of cheating are: (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases covered by
(ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property."
25. What can be discerned from the above is that the offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients. In order to constitute a criminal breach of trust (Section 406 IPC): -
1) There must be entrustment with person for property or dominion over the property, and
2) The person entrusted: -
a) dishonestly misappropriated or converted property to his own use, or
b) dishonestly used or disposed of the property or willfully suffers any other person so to do in violation of:
i. any direction of law prescribing the method in which the trust is discharged; or 20 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc ii. legal contract touching the discharge of trust (see:
S.W.P. Palanitkar (supra).
Similarly, in respect of an offence under Section 420 IPC, the essential ingredients are: -
1) deception of any person, either by making a false or misleading representation or by other action or by omission;
2) fraudulently or dishonestly inducing any person to deliver any property, or
3) the consent that any persons shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit (see: Harmanpreet Singh Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009) Cr.L.J. 3462 (SC))
26. Further, in both the aforesaid sections, mens rea i.e. intention to defraud or the dishonest intention must be present, and in the case of cheating it must be there from the very beginning or inception.
27. In our view, the plain reading of the complaint fails to spell out any of the aforesaid ingredients noted above. We may only say, with a view to clear a serious misconception of law in the mind of the police as well as the courts below, that if it is a case of the complainant that offence of criminal breach of trust as defined under Section 405 of IPC, punishable under Section 406 of 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 and explained in Section 415 of the IPC, punishable under Section 420 of the IPC.
28. Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well. It has been held in Hari Prasad Chamaria v. Bishun Kumar Surekha & Ors., reported in (1973) 2 SCC 823 as under:
"4. We have heard Mr. Maheshwari on behalf of the appellant and are of the opinion that no case has been made out against the respondents under Section 420 Penal Code, 1860. For the purpose of the present appeal, we would assume that the various allegations of fact which have been made in the complaint by the appellant are correct. Even after making that allowance, we find that the complaint does not disclose the commission of any offence on the part of the respondents under Section 420 Penal Code, 1860. There is nothing in the complaint to show that the respondents had dishonest or fraudulent intention at the time the appellant parted with Rs. 35.000/- There is also nothing to indicate that the respondents induced the 21 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc appellant to pay them Rs. 35,000/- by deceiving him. It is further not the case of the appellant that a representation was made, the respondents knew the same to be false. The fact that the respondents subsequently did not abide by their commitment that they would show the appellant to be the proprietor of Drang Transport Corporation and would also render accounts to him in the month of December might create civil liability on the respondents for the offence of cheating."
29. To put it in other words, the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case.
30. The distinction between mere breach of contract and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, it is this intention, which is the gist of the offence. Whereas, for the criminal breach of trust, the property must have been entrusted to the accused or he must have dominion over it. The property in respect of which the offence of breach of trust has been committed must be either the property of some person other than the accused or the beneficial interest in or ownership' of it must be of some other person. The accused must hold that property on trust of such other person. Although the offence, i.e. the offence of breach of trust and cheating involve dishonest intention, yet they are mutually exclusive and different in basic concept. There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a 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 misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously.
22 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc
15. The Supreme Court, while dealing with offence, involving conspiracy to commit economic offences of huge magnitude, in the case of Y.S. Jagan Mohan Reddy Vs. C.B.I. 19 laid down following parameters:-
" i) economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. The economic offence having deep rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as grave offences affecting the economy of the country as a whole and thereby posing serious threat to the financial health of the country, and
ii) while granting bail, the court has to keep in mind the nature of accusations, the nature of evidence in support thereof, the severity of the punishment which conviction will entail, the character of the accused, circumstances which are peculiar to the accused, reasonable possibility of securing the presence of the accused at the trial, reasonable apprehension of the witnesses being tampered with, the larger interest of the public/State and other similar considerations."
16. Attention is drawn to the decision of the Supreme Court in the case of Sanjay Chandra Vs. Central Bureau of Investigation 20 wherein the Court has held that in economic offences while considering an application for bail, the nature of charge may be relevant but at the same the punishment to which the party may be liable, if convicted is also a significant aspect and therefore both, the seriousness of the charge and the severity of the punishment should be taken into consideration for arriving at decision of grant of bail. It further observed that deprivation of liberty must be considered a 19 (2013) 7 SCC 439 20 (2012) 1 SCC 40 23 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc punishment unless it is absolutely necessary in the interest of justice and that object of bail is merely to secure appearance of accused at the trial.
17. Next, in the context of the present case the decision of the Supreme Court in the case of P. Chidambaram Vs. Directorate of Enforcement 21 is also relevant. The Supreme Court observed that economic offences would fall under the category of 'grave offences' and in such circumstances while considering application for bail, the Court will have to deal with the same being sensitive to the nature of allegations made against the accused, however the term of sentence that is prescribed for the offence which is in addition to the triple test or the tripod test that would be normally applied. In that regard the Supreme Court has further held that even if the allegation is one of grave economic offence, it is not a rule that bail should be denied in every case and ultimately the consideration will have to be on case-to- case basis on the facts involved therein and securing the presence of the accused to stand trial.
18. In the present case, it is seen that the First - Informant did not institute any civil suit for recovery of his money allegedly misappropriated by Applicants. Considering the facts in the present case and having regard to the nature of dispute between the parties 21 (2020) 13 SCC 791 24 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc herein which is predominantly civil in nature, process of criminal law cannot be pressed into service for settling a civil dispute in this fashion.
19. In the light of the above prima facie observations and findings, this Court is of the opinion that custodial interrogation of Applicants is neither warranted nor necessary in the facts of the present case. Prima facie the dispute between parties is of a civil nature coupled with absence of essential ingredients of the alleged Sections. Hence, I am of the opinion that the liberty of Applicants be protected. Investigation is completed and all disclosures have been made. In view of the above and looking at the nature of the issue involved in the present case, apprehension of First - Informant and prosecution can be well addressed by this Court by laying down appropriate conditions. In my opinion custodial investigation of Applicants is not required. Appropriate conditions shall be imposed on Applicants regarding participation in investigation, disclosure and to ensure that there is no impediment caused to First - Informant in the interregnum until the completion of trial.
20. In view of the above, both Anticipatory Bail Applications are allowed, subject to the following terms and conditions:-
25 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc
(i) In the event of arrest, both Applicants be enlarged on bail on executing P.R. Bond in the sum of Rs.50,000/- each with one or two sureties in the like amount;
(ii) Applicants shall report to the Investigating Officer at the concerned Police Station as and when called for by the Investigating Officer for investigation;
(iii) Applicants shall disclose and produce before the Investigating Officer all such relevant material with respect to documents which are finding place in the Complaint by First - Informant as also appended to Application as called for by the Investigating Officer;
(iv) Investigating Officer shall allow First - Informant to
participate in the investigation and seek
information from First - Informant with respect to any impediment that may be caused due to actions of Applicants;
(v) Both Applicants shall furnish detailed particulars of their current residential and office address and mobile number to the Investigating Officer within 26 of 27 ::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 ::: ABA.2682.22 & 2751.22.doc one week from today as also any change in the same in future;
(vi) Both Applicants shall deposit their passports with the Trial Court within one week of this order;
(vii) Applicants shall not misuse their liberty in any manner or influence the informant, witnesses or any person concerned with the case and they shall not tamper with the evidence or create any impediment or trouble in respect of investigation;
(viii) It is directed that Applicants shall extend complete cooperation in the investigation of the instant case and shall attend the Trial Court unless exempted on all dates of hearing;
(ix) Any infraction of the above conditions shall entail revocation of this order.
21. All contentions of the parties are left open to be adjudicated at the time of trial. The observations made herein are only for the purpose of adjudication of the present Anticipatory Bail Applications and shall not influence the trial in any manner.
22. Anticipatory Bail Application Nos.2682 of 2022 and 2751 of 2022 stand allowed and disposed in the above terms.
Ajay [ MILIND N. JADHAV, J. ]
27 of 27
::: Uploaded on - 08/08/2025 ::: Downloaded on - 09/08/2025 00:14:00 :::