Karnataka High Court
Mr. Syed Sameer Ahmed vs State By on 4 March, 2026
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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NC: 2026:KHC:13190
CRL.P No. 6658 of 2023
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 4TH DAY OF MARCH, 2026
BEFORE
THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 6658 OF 2023 (482(Cr.PC) /
528(BNSS)-)
BETWEEN:
1. MR. SYED SAMEER AHMED
S/O SYED ISMAIL,
AGED ABOUT 46 YEARS,
R/AT FLAT NO.1, 1ST FLOOR,
R MAIN, AVENUE ROAD,
NANDI DURGA ROAD,
BANGALORE-560 046.
...PETITIONER
Digitally (BY SRI. KIRAN S. JAVALI, SENIOR COUNSEL FOR
signed by
SANJEEVINI J
KARISHETTY SRI. MOHAMED ZULFIKHAR AHAMED, ADVOCATE)
Location: High
Court of
Karnataka
AND:
1. STATE BY KAMAKSHIPALYA PS
REP SPP HIGH COURT OF KARNATAKA,
BANGALORE-01
2. MR. H. POORNACHANDRA
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NC: 2026:KHC:13190
CRL.P No. 6658 of 2023
HC-KAR
S/O CHANDRASHEKAR KEDILAYA,
AGED ABOUT 51 YEARS,
HAVING OFFICE AT PRISTAN
ENGINEERING CORPORATION P
IILLAPPA INDUSTRIAL AREA,
SUNKADAKATTE,
BANGALORE-560 091.
...RESPONDENTS
(BY SRI. B.N. JAGADEESHA, ADDL. SPP FOR R1
SRI. AKASH B. SHETTY, ADVOCATE FOR R2)
THIS CRL.P IS FILED U/S.482 OF THE CR.P.C PRAYING
TO QUASH THE CHARGE SHEET IN C.C.NO.6043/2023
CONNECTED WITH CR.NO.208/2022 REGISTERED BY THE 1ST
RESPONDENT POLICE FOR THE OFFENCE P/U/S.406 AND 420
R/W 34 OF IPC WHICH IS PENDING BEFORE IV A.C.M.M.,
BENGALURU VIDE ANNEXURE-A AND B
RESPECTIVELY.I.A.NO.1/2022 FOR STAY. I.A.NO.1/2022 FILED
BY THE ADVOCATE FOR THE PETITIONER PLEASED TO STAY
FURTHER PROCEEDINGS IN C.C.NO.6043/2023 REGISTERED
BY 1ST RESPONDENT POLICE (KAMAKSHIPALYA P.S.), FOR THE
OFFENCE P/U/S.406 AND 420 R/W 34 OF IPC WHICH IS
PENDING BEFORE IV A.C.M.M., BENGALURU VIDE ANNEXURE-A
AND B RESPECTIVELY.
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NC: 2026:KHC:13190
CRL.P No. 6658 of 2023
HC-KAR
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA
ORAL ORDER
The petitioner is before this Court calling in question the proceedings in C.C.No.6043/2023 registered for offences punishable under Sections 406, 420 read with Section 34 of the Indian Penal Code, 1860 ('the IPC' for short).
2. Heard Sri. Kiran S. Javali, learned Senior counsel along with Sri. Mohamed Zulfikhar Ahamed, learned counsel appearing for the petitioner; Sri. B.N. Jagadeesha, learned Additional Special Public Prosecutor appearing for respondent No.1/State and Sri. Akash B. Shetty, learned counsel appearing for the complainant/respondent No.2.
3. The facts adumbrated are as follows:
Respondent No.2 is the complainant. The petitioner is accused No.1. Petitioner is said to be a partner in one M/s. Provenio Capital Advisors, a company registered under the Companies Act. The said company is said to have arranged a -4- NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR conference, wherein it did project that it would get loans against Foreign Direct Investments (FDI) with lesser rate of interest. One such person, who attended the said conference was the complainant. The complainant was made known that if he would part with the processing fee of Rs.38,00,000/-, he would get Rs.25/-crores with lesser amount of interest. This triggered the complainant to enter into a transaction with the petitioner and transferred the amount of Rs.38,00,000/- to the coffers of the petitioner. The complainant waited for about a year or so, but did not get back his amount, communicated to the petitioners, the petitioners tacitly admitted that if 90 days time is granted, they would get the loan or return the money, a processing fee that was taken by the complainant.
4. Two years thereafter again the complainant did wait, no money came, except the processing fee that had gone to the account of the petitioner. Therefore, approaches the jurisdictional Police to register the crime. The registration of the crime in crime No.208/2022 for the offences punishable under Sections 406 and 420 read with 34 of the IPC led the jurisdictional Police to conduct investigation into the matter.
-5-NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR The conduct of investigation leads to filing of the final report i.e., the charge sheet in C.C.No.6043/2023, again for the aforesaid offences of Sections 406 and 420 of the IPC read with Section 34 of the IPC. It is the filing of the charge sheet that has driven the petitioner to this Court in the subject petition.
5. Sri. Kiran S. Javali, learned Senior counsel appearing for the petitioner would project that the offence under Sections 406 and 420 of the IPC together could not have been initially laid nor later in the charge sheet also laid, as there is no substance or ingredients of Section 406 of the IPC is concerned. He would submit that insofar as the offence under Section 420 of the IPC is concerned, it was an agreement between the parties, a matter that is purely civil in nature and therefore, this Court must not permit further trial qua both Sections 406 and 420 of the IPC. He would further project that the transaction was with the company. The company is not made a party in these proceedings, while the proceedings under Section 138 of the Negotiable Instruments Act, 1881, the very complainant has made the company a party. Therefore, -6- NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR the aforesaid would become fatal to the continuance of the trial. He would seek quashment of the same.
6. Contrariwise, Sri. Akash B. Shetty, learned counsel appearing for the complainant would vehemently refute the submission in contending that the company is actually a shell company. The offices of these petitioners changed from time to time. The petitioners lured the complainant to part with Rs.38,00,000/- as the processing fee for a loan that he was promised to get Rs.25/-crores on lesser rate of interest.
Rs.25/-crores amount never saw the light of the day, except the transfer of Rs.38,00,000/- to the coffers of the petitioner.
The learned counsel submits that it clearly makes out an offence of both Sections 406 and 420 of the IPC. The company was alleged, the jurisdictional Police failed to make the company a party. Therefore, on the said score, the proceedings cannot be annulled as the petitioner, who is the victim of Rs.38,00,000/- transfer should not be left high and dry. He would seek dismissal of the petition.
7. The learned Additional Special Public Prosecutor would submit that the company can be drawn as an accused at -7- NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR a later point in time even by an application under Section 319 of the Cr.P.C. Therefore, would submit that it is a matter of trial for the petitioners to come out clean.
8. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the available material on record.
9. The afore-narrated facts, dates and link in the chain of events are all a matter of record. The petitioner is the partner in the aforesaid company. This is a matter of record.
The petitioner and along with others organised a seminar. The seminar was to attract persons, who would be interested in securing a loan on Foreign Direct Investments. The loan would be on greatly reduced rate of interest for which the petitioners would take processing fee. Likewise, the complainant, who participated in the said seminar generates interest in getting a loan, which was for lesser rate of interest, therefore transacts with the petitioners. The transaction is transfer of a processing fee of Rs.38,00,000/-. This is the only amount that is transacted in the entire episode of this transaction. The complainant does not get Rs.25/-crores that was promised in -8- NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR exchange of the money of Rs.38,00,000/- as processing fee.
Waits for more than a year and communicates that be refunded the amount of Rs.38,00,000/- or the loan be secured. The reply comes from the petitioners, one of the partners. The reply reads as follows:
"Greetings from Provenio!! we are dismayed to inform you that further to our detailed discussions with our Investors, as well as their recent communication, the Bank Negara Malaysia (Central Bank of Malaysia) has put their requested Investment/ Loan/ FDI files approval on hold due to some internal policy decisions affected by the recent change in the Government.
We do understand that you have been patiently waiting for these finds for many months now. We sincerely thank you for your cooperation and understanding in this matter, as the delay was primarily due to circumstances beyond our and our Investors' control namely Covid related Lockdowns, the resulting Economic Slowdown, and the new Government policies.
As you are aware, we have always supported you as well as all our clients in the best possible manner, and devoted our time and efforts to materialize these Investments/ Loans/ FDI in your favoar.
We wish to inform you that we are keen to put a meaningful end to this waiting period and therefore initiating appropriate action in a manner that we resolve the current situation, without prolonging the Investment expected dates any further.
We wish to close this loop within 90 days from today, as in due course we are hopeful of securing the required approvals then the Loan/FDI/ Investment Amount will be transferred to you, else we will request our Investors to return the Processing Fee sent by us. We will then issue -9- NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR a responding Cheque to you returning the Processing Fee received by us.
However, we have already initiated conversations with other Investors in our Network in different Countries to arrange for adequate Interim Funds which will offer some operational relief to you and our other Clients for the Medium-term. Be rest assured of our sincerest efforts in resolving this mater for our valued Clients to the best of our capabilities.
Any inconvenience caused to you is deeply regretted.
Thanks & regards,"
The reply is that they would close the loop within 90 days from the date of the said reply by either refunding the amount of Rs.38,00,000/- that was taken as processing fee or get the loan cleared. Nothing happened for two more years. Therefore, the petitioner proceeds to the jurisdictional Police to register a complaint. The complaint so registered reads as follows:
"gÀªÀjUÉ ೕ ಇ ೆಕ ಾ ಾ ಾಳ ೕ ಾ ೆ, ೆಂಗಳ ರು £ÀUÀgÀ ರವ ಂದ, ೆ . ಪ"ಣ$ಚಂದ& ೆ'(ಾಯ * ಚಂದ&+ೇಖ ೆ'(ಾಯ 51 ವಷ$ .&ಸ , ಇಂ01ಯ ಂ2 ಾ ೕ3ೇಷ .ಳ4ಪ5 ೈ7ಾ ಾ ಪ&8ೇಶ, ಸುಂಕದಕ:
ೆಂಗಳ ರು. 91 ;.ನಂ. 9341228868
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR ಾನ 3ೆ, =ಷಯ:- >ೈಯ? ಸ@ೕ ಅಹಮD?, ಮ1ೕE ಆನಂದ ಮತುH ಅ(ಾIವJ'Kೕ ಎಂ ಾಲಬ: ರವರುಗಳ =ರುದO ದೂರು.
----****----
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR ಸದ ಕಂಪ1ಯವರು ನಮ7ೆ >ಾಲವನು` ಾlU ೊಡಲು &>ೆUಂ2 .ೕt ಎಂದು ಹಣವನು` ಹಆಕುವಂVೆ bxUದುK ಅವರು bxUದಂVೆ 'Yಾಂಕ.13.01.2020 ರ I QೕಲRಂಡ ¨ÁåAQ£À SÁvÉUÉ 6,48,000/ (fJ¸ïn ¸ÉÃjzÀAvÉ 1,08,000 ªÀÄvÀÄÛ nrJ¸ï 60,000 *f ªÉÆvÀÛ 7,08,400/ *f ನಂಬ 004 'Yಾಂಕ.10.01.2020) ಹಣವನು` ವ7ಾ$ವ ೆ ಾlರುVೆH. 'Yಾಂಕ 29.04.2020 ರ I Qಂಬ rsನ ಾ{ ಹಣ 1800/ರೂ. ಗಳನು` &ೕ=1dೕ ಾI.ಟf ಆaೈಜ $ ೆh]ೇi @_ೆj ಕಂಪ1AiÀÄ CPËAmï £ÀA§gï 256000800005, ಇಂjUಂ? ಾ ಂw 7ೆ ವ7ಾ$ವ ೆ ಾlರುVೆH. 'Yಾಂಕ.12.01.2021 ರ I QೕಲRಂಡ ಾ ಂ{ನ SÁvÉUÉ 8,84,000/ (fJ¸ïn ¸ÉÃjzÀAvÉ 1,44,000 ªÀÄvÀÄÛ nrJ¸ï 60,000 *f ªÉÆvÀÛ 9.44.000/ *f ನಂಬ 0029 'Yಾಂಕ 06.02.2021) ºÀtªÀ£ÀÄß ªÀUÁðªÀuÉ ªÀiÁrgÀÄvÉÛ ಮVೆH 'YಾAಕ.29.04.2021 ರ I QೕಲRಂಡ ಾ ಂ{ನ |ಾVೆ7ೆ 9.90.000/- (0ಎ :
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>ೇ ದಂVೆ 36,000 ಮತುH :lಎ 20,000. *f ;ತH 2.36.000 *f ನಂಬ 011 'Yಾಂಕ.13.09.2021) ಹಣವನು` ವ7ಾ$ವ ೆ ಾlರುVೆH. ಒಟು &ೕ=1dೕ ಾ .ಟf ಅaೈಜ $ ೆh]ೇi @_ೆj ಕಂಪ1ಯ ಇಂಡUಂj ಾ ಂw ಎಂ.0 ರ>ೆHಯ ಾ&ಂ 7ೆ ನಮD ಕಂಪ1}ಂದ ಒಟು 27.40.300/ರೂ ಗಳನು` ವ7ಾ$ವ ೆ ಾlರುVೆHೕ]ೆ.
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR Qೕf ಮೂಲಕ ಮನ=ಯನು` ಾlದುK ಸದ ಮನ=7ೆ ಅವರು YಾವJ cಾವJ8ೇ ಸುಳX4 ಭರವ>ೆಗಳನು` 1ೕlರುವJ'ಲI. ೇ ಾದ3ೆ ನಮD =ರುದO ೕ ಾ ೆಯ I ಅಥ]ಾ Yಾ cಾಲಯದ I 8ಾ]ೆಯನು` ಹೂಡಬಹು8ೆಂದು ]ಾಪಸು ಇ-Qೕf ಮೂಲಕ ಉತHರವನು` 1ೕlರುVಾH3ೆ.
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ನಮD ಕಂಪ17ೆ >ಾಲ ೊlಸುVೆHೕ]ೆಂದು ನಮ7ೆ ನಂ*U >ಾಲ ಮಂಜೂರು ಾlಸಲು &>ೆUಂ2 ‡ೕt ಎಂದು ನ@Dಂದ 27,40,300/ರೂ ಗಳX ಮತುH :lಎ 2,30,000/ರೂ. ಗಳನು` ಾಗೂ ಇತ3ೆ ]ೆಚˆಗಳX >ೇ ದಂVೆ ಒಟು ರೂ 38,54,160/- ಗಳನು` ಪaೆದು ನಂತರ ಉ8ೆKೕಶಪ"ವ$ಕ]ಾZ ನಮD ಕಂಪ17ೆ ;ೕಸ ಾl ನಂ* ೆ 8ೊ&ೕಹ ಎಸZರುವ &ೕ=1dೕ ಾ .ಟf ಅaೈಜ $ ೆh]ೇi @_ೆj ಕಂಪ1ಯ ಾಲು8ಾ3ಾದ >ೈಯ? ಸ@ೕ ಅಹಮD?, ಮ1ೕk k ಆನಂzï ಮತುH ಅ(ಾIವJ'Kೕ ಎಂ ಾಲಬ: ರವರುಗಳ =ರುದO ಾನೂನು- ೕb ಕ&ಮ ೈ7ೊಳ4 ೇ ೆಂದು ಮನ= ಾl ೊಳX4VೆHೕYೆ."
Complaint becomes a crime in crime No.208/2022 for the aforesaid offences. The Police conduct investigation and the investigation leads to filing of the final report. The final report is
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR a charge sheet, the summary of the charge sheet as obtaining in column No.7 reads as follows:
"ಈ 8ೋŠಾ3ೋಪ ಾ ಪ: ಯ >ಾ -1 ಮತುH >ಾ{-2 ರವರು ಾ ಾ ಾಳ ಾ ಾ ಸರಹ'Kನ ಸುಂಕದಕಟ ೊಯ ಳ ನಗರ .ಳ4ಪ5 ಇಂಡU‹ಯf ಏ cಾ ಸgÉé ನಂಬ 02 ರ I .&>ೊ ೕ ಇಂ01ಯ ಂ2 ಾŠೋ$3ೇಷ ಕಂಪ1ಯನು` ನaೆU ೊಂlದುK ತಮD ಕಂಪ1ಯನು` =ಸH ಸುವ ಸಲು]ಾZ >ಾಲವನು` ಪaೆಯಲು ಪ&ಯb`ಸುbHದುK &ೕ=1dೕ ಾ .ಟf ಅಡqಜ $ ೆh. ಕಂಪ1ಯ ಾಲಂ ನಂಬ 04 ರ I ನಮೂ'Uರುವ ಎ-2 ಆ3ೋ.ಯು ಕlQ ಬlm ದರದ I >ಾಲ ೊlಸುವJ8ಾZ 2019 Yೇ >ಾ ನ I |ಾUಯ ಭವನದ I >ೆ@Yಾ ನು` ಾlದುK >ಾ -1 ಮತುH >ಾ -2 ರವರು •ಾZcಾZರುVಾH3ೆ. ಈ >ೆ@Yಾ ನ I2 Yೇ ಆ3ೋ.ಯು 1ೕlದ ಆ+ಾqಸYೆಯಂVೆ >ಾ -1 ಮತುH >ಾ -2 ರವರು ಆ3ೋ.ಗಳ ಕಂಪ1dಂ'7ೆ Qಂಬ Žs ಾl ೊಂlದುK ಆ3ೋ.ಗಳX bxUದಂVೆ ಹಂತ ಹಂತ]ಾZ ಒಟು 27,40,300 ರೂಗಳನು` ಆ3ೋ.ಗಳ, ಕಂಪ1ಯ |ಾVೆ7ೆ ವ7ಾ$ವ ೆ ಾlರುVಾH3ೆ. ಇ8ಾದ ನಂತರ ಆ3ೋ.ಗಳX 1ೕlದ ಆ+ಾqಸYೆಯಂVೆ cಾವJ8ೇ >ಾಲವನು` ಮಂಜೂರು ಾlU ೊಡ8ೆ ಇದK ಂದ >ಾ -1 ಮತುH >ಾ -2 ರವರು ಹಲವJ ಾ ಈQೕf ಮೂಲಕ ಮನ= ಾl ೊಂಡರು ಸಹ >ಾಲ ಮಂಜೂರು ಾlU ೊಡುVೆHೕYೆಂದು ಪaೆದು ೊಂlದK ಹಣವನು` ]ಾಪ ೊಡ8ೇ ನಂ* ೆ 8ೊ&ೕಹ ]ೆUZ ;ೕಸ ಾlರುVಾH3ೆ.
ಆದK ಂದ ಆ3ೊ.ಗಳ =ರುದO QೕಲRಂಡ ಕಲಂ ಅ ವಯ 8ೋŠಾ3ೋಪ ಾ ಪ: ."
The offences alleged in the case at hand is the one punishable under Sections 406 and 420 of the IPC. For an offence to become punishable under Section 406 of the IPC, the ingredients are found in Section 405 of the IPC. Section 405 of the IPC would get attracted when there is entrustment of a
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR property to the hands of the accused by the victim and that entrustment is misappropriated with dishonest intention.
10. The transaction in the case at hand is with regard to processing fee of Rs.38,00,000/- against a loan that was promised to be given at Rs.25/-crores. Therefore, there is no entrustment of a property, as such that could become the ingredient of Section 405 of the IPC, for it to become an offence under Section 406 of the IPC. Therefore, the offence under Section 406 of the IPC apart from the fact that it could not be laid in an amalgam with Section 420 of the IPC, as held by the Apex Court in the case of DELHI RACE CLUB (1940) LTD. Vs. STATE OF UTTAR PRADESH, reported in 2024 SCC OnLine SC 2248, the offence is loosely laid against the petitioner. Therefore, the said offence of Section 406 of the IPC stands obliterated.
11. The Apex Court in the case of DELHI RACE CLUB (1940) (supra), has held as follows:
".... .... ....
Difference between criminal breach of trust and cheating
35. This Court in its decision in S.W. Palanitkar v. State of Bihar [S.W. Palanitkar v. State
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR of Bihar, (2002) 1 SCC 241 : 2002 SCC (Cri) 129] expounded the difference in the ingredients required for constituting of an offence of criminal breach of trust (Section 406 IPC) vis-à-vis the offence of cheating (Section 420). The relevant observations read as under : (SCC p. 246, paras 9-
10) "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."
36. 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
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR (2) The person entrusted:
(a) Dishonestly misappropriated or converted property to his own use, or
(b) Dishonestly used or disposed of the property or wilfully 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
(ii) Legal contract touching the discharge of trust (see : S.W. Palanitkar [S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241 :
2002 SCC (Cri) 129] ).
Similarly, in respect of an offence under Section 420IPC, 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 person 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 [Harmanpreet Singh Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009) 3 SCC (Cri) 620] ).
37. 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.
38. 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
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR 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 405IPC, punishable under Section 406IPC, 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 415IPC, punishable under Section 420IPC.
39. 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 [Hari Prasad Chamaria v. Bishun Kumar Surekha, (1973) 2 SCC 823 :
1973 SCC (Cri) 1082] as under : (SCC p. 824, para 4) "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 of the 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 of the Penal Code, 1860. There is nothing in the complaint to show that the respondent 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 appellant to pay them Rs 35,000 by deceiving him. It is further not the case of the appellant that a representation was made by the respondents to him at or before the time he paid the money to them and that at the time the 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
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR create civil liability for them, but this fact would not be sufficient to fasten criminal liability on the respondents for the offence of cheating."
40. 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.
41. 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.
42. 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.
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR
43. 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.
.... .... ....
49. From the aforesaid, there is no manner of any doubt whatsoever that in case of sale of goods, the property passes to the purchaser from the seller when the goods are delivered. Once the property in the goods passes to the purchaser, it cannot be said that the purchaser was entrusted with the property of the seller. Without entrustment of property, there cannot be any criminal breach of trust. Thus, prosecution of cases on charge of criminal breach of trust, for failure to pay the consideration amount in case of sale of goods is flawed to the core. There can be civil remedy for the non-payment of the consideration amount, but no criminal case will be maintainable for it. [See : Lalit Chaturvedi v. State of U.P. [Lalit Chaturvedi v. State of U.P., (2024) 12 SCC 483 : 2024 SCC OnLine SC 171] and Mideast Integrated Steels Ltd. v. State of Jharkhand [Mideast Integrated Steels Ltd. v. State of Jharkhand, 2023 SCC OnLine Jhar 301] .]
50. The case at hand falls in Category 1 as laid in Nagawwa [Nagawwa v. Veeranna Shivalingappa Konjalgi, (1976) 3 SCC 736 : 1976 SCC (Cri) 507] referred to in para 17 of this judgment.
51. If it is the case of the complainant that a particular amount is due and payable to him then he should have filed a civil suit for recovery of the amount against the appellants herein. But he could not have gone to the Court of the Additional Chief
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR Judicial Magistrate by filing a complaint of cheating and criminal breach of trust. It appears that till this date, the complainant has not filed any civil suit for recovery of the amount which according to him is due and payable to him by the appellants. He seems to have prima facie lost the period of limitation for filing such a civil suit.
52. In such circumstances referred to above, the continuation of the criminal proceeding would be nothing but abuse of the process of law."
(Emphasis supplied)
12. What remains is the offence under Section 420 of the IPC. The offence under Section 420 of the IPC has its ingredients in Section 415 of the IPC.
13. Section 415 of the IPC reads as follows:
"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". "
Section 415 of the IPC punishes the accused, who lures the complainant into a transaction with a dishonest intention from the inception. The dishonest intention from the inception is found in the very transaction between the parties as
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR Rs.38,00,000/- is taken as processing fee to secure a loan of Rs.25/-crores. The loan never saw the light of the day of Rs.38,00,000/- is with the petitioners, as processing fee.
Therefore, arranging a seminar, luring persons for the purpose of getting a loan on the Foreign Direct Investments with lesser rate of interest and no loan being later granted the persons, who parted with processing fee would undoubtedly become the ingredient of Section 415 of the IPC, for it to become an offence under Section 420 of the IPC. In that light, the petitioners must come out clean in a full blown trial insofar as the offence under Section 420 of the IPC is concerned.
14. The submission of the learned Senior counsel that the company has not made a party, therefore the proceedings should be annulled is noted only to be rejected. The company can at a later point in time, if needed be drawn into the web of proceedings by an application under Section 319 of the Cr.P.C., which permits adding of an accused during trial. The liberty is always available to the prosecution or the complainant to file the application under Section 319 of the Cr.P.C. However, the
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NC: 2026:KHC:13190 CRL.P No. 6658 of 2023 HC-KAR offence under Section 406 of the IPC cannot be met in the case at hand. It would stand obliterated.
15. For the aforesaid reasons, the following:
ORDER
(i) The criminal petition is allowed-in-
part.
(ii) The offence punishable under Section 406 of the IPC stands quashed.
(iii) The offence punishable under Section 420 of the IPC stands sustained.
(iv) It is made clear that this Court has not
pronounced upon its finding on any
other offence alleged against the
petitioners and the crime or the filing of the charge sheet in the case at hand.
Sd/-
(M.NAGAPRASANNA) JUDGE JY List No.: 2 Sl No.: 18