Karnataka High Court
Sri C Subba Reddy vs State Of Karnataka on 13 January, 2026
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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NC: 2026:KHC:1926
CRL.P No. 10480 of 2023
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 13TH DAY OF JANUARY, 2026
BEFORE
THE HON'BLE MR. JUSTICE M.NAGAPRASANNA
CRIMINAL PETITION NO. 10480 OF 2023
BETWEEN:
1. SRI. C. SUBBA REDDY
S/O LATE C. DHARMA REDDY
AGED ABOUT 83 YEARS
R/AT NO. 604, 4TH CROSS,
2ND BLOCK, KALYANNAGAR,
BANGALORE - 560 043.
2. SMT. SUMANA P
D/O C. SUBBA REDDY
Digitally AGED 54 YEARS,
signed by
NAGAVENI RESIDING AT NO. 604, 4TH CROSS,
Location:
HIGH COURT 2ND BLOCK, KALYANNAGAR,
OF
KARNATAKA BENGALURU - 560 043.
...PETITIONERS
(BY SRI. SANDESH J. CHOUTA, SR. COUNSEL FOR
SRI. K.B.K. SWAMY, ADVOCATE)
AND:
1. STATE OF KARNATAKA
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NC: 2026:KHC:1926
CRL.P No. 10480 of 2023
HC-KAR
BY BANASWADI POLICE STATION
BANGALORE
REPRESENTED BY STATE PUBLIC PROSECUTOR
AND ANOTHER, HIGH COURT OF KARNATAKA,
BENGALURU - 560 001.
2. SRI. A.K. ABDULLA,
S/O KUNHAMMU,
AGED 58 YEARS,
RESIDING AT FIRDOUS HOUSE,
CHINGAPURAM,
MOODADI, KOZHIKODE,
KERALA - 673 529.
...RESPONDENTS
(BY SRI. VINAY MAHADEVAIAH, HCGP FOR R1;
SRI. VENKATESH PRASAD R, ADVOCATE FOR R2)
THIS CRL.P IS FILED U/S.482 OF CR.PC PRAYING TO SET
ASIDE THE ORDER OF ISSUANCE OF PROCESS DATED
04.03.2021 PASSED IN CR.NO.89/2021 NOW PENDING IN
C.C.NO.7414/2023 AND QUASH THE FURTHER PROCEEDINGS
BEFORE THE VI ADDL.C.M.M., BENGALURU FOR THE OFFENCE
P/U/S 406, 420, 120B, 506,504 OF IPC.
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NC: 2026:KHC:1926
CRL.P No. 10480 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 petitioners, two in number, stand at the doors of this Court in the subject petition, calling in question proceedings in CC.No.7414/2023 registered for offences punishable under Section 406, 420, 120B, 504 and 506 of the Indian Penal Code, 1860 ('the IPC' for short).
2. Heard Sri. Sandesh J. Chouta, learned Senior counsel for Sri. K.B.K. Swamy, learned counsel appearing for the petitioners; Sri. Vinay Mahadevaiah, learned High Court Government Pleader appearing for respondent No.1 and Sri. Venkatesh Prasad R., learned counsel appearing for respondent No.2.
3. Facts adumbrated are as follows:
The entire issue springs from an agreement of sale entered into between the petitioners and the complainant. The agreement of sale takes place on 16.02.2019. The date on -4- NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR which the sale deed was to be executed was also indicated.
There were two conditions in the agreement of sale, one that the tenants should be evicted and the other that the loan on the property has to be cleared. Both of which are said to have not taken place. This leads the petitioners to cause a legal notice upon the complainant seeking termination of the agreement. The termination of the agreement ought to have resulted in getting the agreement executed by way of a suit for specific performance. What the complainant would do instead is seek to register a complaint before the jurisdictional Police for the afore-quoted offences, which becomes a crime in Crime No.89/2021. The Police conduct investigation and file a charge sheet in CC.No.7414/2023. The day prior to the filing of the charge sheet, the complainant rushes to the Civil Court and registers a suit for specific performance. The said suit for specific performance is pending adjudication before the concerned Court. The petitioners are before this Court calling in question the proceedings in CC.No.7414/2023 on the score that a matter which is purely civil in nature arising out of an agreement is sought to be given a colour of crime.-5-
NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR
4. Sri. Sandesh J. Chouta, learned Senior counsel appearing for the petitioners, taking this Court through the charge sheet material, would seek to contend that the suit instituted against the petitioners seeking specific performance also seeks refund of the entire money that has been transacted between the parties. He would submit that it is by now a well settled principal of law that criminal law cannot be set into motion for the purpose of recovery of money. He would further submit that cognizance could not have been taken by the concerned Court for both the offences punishable under Sections 406 and 420 of the IPC since the two offences cannot go hand in hand. He would seek to place reliance upon certain judgments of the Apex Court, which would bear consideration and during the course of the order qua their relevance.
5. The learned counsel appearing for respondent No.2/complainant submits that the money has been transacted six years ago. He is now left with no money as his hard earned money is transacted with the petitioners. Therefore, the complainant has set the criminal law into motion for an immediate relief. The learned counsel submits that the suit is -6- NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR instituted on 06.01.2023, prior to filing of the charge sheet, and would further submit that the case clearly attracts the offences punishable under Sections 406 and 420 of the IPC.
Since the charge sheet is filed, it is for the petitioners to come out clean is the submission of the learned counsel appearing for respondent No.2/complainant.
6. Learned High Court Government Pleader would toe the lines of the learned counsel representing respondent No.2 in contending that the petitioner should come out clean in a full blown trial.
7. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the available material on record.
8. The afore-narrated facts linked in the chain of events are all a matter of record. They would require a skeletal reiteration. Both the parties enter into an agreement of sale on 16.02.2019. Time is said to be the essence of the agreement.
The agreement also had two conditions, of eviction of the tenant and the clearance of the loan of the Bank, that appears -7- NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR to have gone wrong. The transaction thus flounders. On floundering of the transaction between the two, the complainant initially sets the criminal law into motion by filing a complaint before the jurisdictional Police. The complaint reads as follows:
"From Mr. Shri. Abdulla. A. K Son of Kunhammu, Aged about 58 years, Residing at: Firdous House, Chingapuram, Moodadi, Kozhikode, Kerala-673 529.
Now camping Bangalore To Station House Officer, Banasawadi Police Station, Bangalore City.
Sir, Subject: Complaint against Mr. C. Subba Reddy and his daughter Mrs. P. Sumanafor cheating, criminal conspiracy, threatening to my life and limband breach of trust.
With respect to the above mentioned subject, I wish to bring to your kind notice the following few lines:
1. 1, Shri. Abdulla. K, the abovenamed, in the year 2019, a broker had introduced me to Mr. C. Subba Reddy and his daughter Mrs P Sumana, both residing at 604, 4th Cross, 2nd Block, Kalyan Nagar, Bangalore - 560
043. Mr. C. Subba Reddy and his daughter P. Sumana allegedly claimed that they are the absolute owner of the immoveable building property bearing Site No. 220, with -8- NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR PID No. 10M-220 situated at 1ª Block, HRBR Layout (Kalyanagar) Bangalore 560 043, and consists of ground plus four floors building in all measuring about 7000 square feet with amenities and rights appurtenances, which has been occupied by the tenants of the aforementioned persons. The aforementioned persons were in need of funds for their respective legal necessities and induced me to invest in the aforementioned property and had accordingly offered to sell the aforementioned property for a valuable consideration of Rs. 7,40,00,000/- (Seven Crore Forty Lakhs Only). The Aforementioned persons had promised and undertaken to vacate the tenants within three months' time limit and deliver the vacant possession of the aforementioned property at the time of execution of Conveyance Deed in my favour, trusting them I had agreed and accordingly the Agreement of Sale is made and executed on 16/12/2019 between myself and the Aforementioned persons and I have made the advance sale consideration of Rs. 55,00,000/-(Fifty Five Lakhs Only) by way Cheque bearing No. 011022 and Rs.
60,00,000/- (Rupees Sixty Lakhs only) by way cheque bearing No. 011024 both the cheques were drawn on Axis Bank Ltd, Koyilandi Branch, Kerala favouring of Mr. C. Subba Reddy and also Rs. 5,00,000/-(Rupees Five Lakhs Only) was given by cash to him on the date of execution of the Agreement of Sale, which the said Mr. C. Subba Reddy acknowledges the receipt of the same.
2. Further I enquired with the status of the tenants in the aforementioned property, with the aforementioned persons and when they were vacating, that time the said Subba Reddy and Mrs. P. Sumana demanded for more money to vacate the tenants in the aforementioned property. Accordingly, on 31/05/2019, on demand by them I have further advanced Rs. 1,35,00,000/-(Rupees One Crore Thirty Five Lakhs only) and again on demand by the Aforementioned persons, I have paid Rs. 10,00,000/- (Rupees Ten Lakhs only), on 25/06/2019. Further I have also paid Rs. 1,00,00,000/- (One Crore Only) on 11/07/2019. I have also paid on demand Rs. 17,00,000/-(Rupees Sixteen Lakhs Only) on 07/08/2019 by cheque and on the same day I have advanced Rs. 49,00,000/- (Rupees Forty Nine Lakhs only) by way of cash and transferred Rs. 34,00,000/- (Rupees Thirty -9- NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR Four Lakhs) by RTGS, in total I have advanced Rs. 4,65,00,000/- (Rupees Four Crore Sixty Five Lakhs Only) has been advanced to the aforementioned persons and the aforementioned persons acknowledges and are in receipt of the same.
3. Later I continuously requesting to Mr. C. Subba Reddy and Mrs. P. Sumana, to execute the absolute Sale Deed in my favourby collecting the remaining amount and also about the status of the vacating the tenants in the aforementioned property, but the aforementioned persons have been evading me, by giving one on the other reason. In the month of October-2020, I visited their residence in order discuss with them and for inviting them to come forward for completion of the registration of the absolute Sale Deed, but Mr. C. Subba Reddy and Mrs. P. Sumana sought time for the execution and registration of the absolute sale deed, as one of the Tenant in the aforementioned property had filed a Suit against the Aforementioned persons in the City Civil Court, Bangalore and accordingly sought time to sort out the issues. Believing their words, I had again granted further time. Now again I tried contacting the Aforementioned persons in the third week of January to come forward to execute the Sale Deed in my favour after sorting out the issue with the tenants, but for the reasons best known to the aforementioned persons, are deceitfully are avoiding me and from known sources it is ascertained that the Aforementioned persons has issues with their tenants and also financial disputes with them. Both the aforementioned persons have criminally conspired to deceive me, my hard-earned money. Since the aforementioned persons failed to adhere to their words, I have requested the aforementioned persons to either execute absolute the Sale Deed in my favour or to repay the advance amount, paid as aforementioned along with interest @36%, as the aforementioned persons had diverted the money advanced by me to money lending business and are charging exorbitant interest and other penal charges to the money borrowers. But the aforementioned persons, having misappropriated the funds paid as advance, by diverting the same to third persons for lending loans at exorbitant rates of interests, the aforementioned persons have enriched themselves with my money, illegally. The
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR aforementioned persons criminally conspired with each other, thereby abetting to deceive me of my hard earned money have hatched a scheme of lending hand loans at exorbitant rates of interest and are dishonestly avoiding me and have either executed the registered Sale Deed or have returned my hard earned money paid as advance in lieu of the Agreement of Sale dated 16/02/2019 above all the aforementioned persons are abusing me in filthy language and threat to kill me and my family, for demanding for repayment of my money.
4. Mr. C. Subba Reddy and Mrs. P. Sumana have received the sum of Rs. 4,65,00,000/- (Rupees Four Crore Forty Five Lakhs Only) in lieu of Sale Agreement dated 16/12/2019, with a sole intention of cheating later they have breached the contract by violating the terms and conditions of the Agreement of Sale and they are also threatening me to kill me and my family. The aforementioned persons have knowing fully aware of the issues they had with the Tenants, have received huge amounts from me, have abetted and Criminally conspired together with each other, with an ulterior motive of cheating me. At the inception itself the aforementioned persons had dishonestly conspired to deceive me by enriching themselves. I am enclosing here with the copy of the Agreement of Sale dated 16/12/2019, for the kind perusal of the authority.
Hence, I request your good offices to take early action as per law, in the matter as against the aforementioned persons for Abetment, cheating with the dishonest intention and for criminal conspiracy, threatening and mis-appropriation of funds, breach of trust and protect us from the high handedness of the aforementioned persons."
(Emphasis added) The complainant narrates that Rs.4,65,00,000/- was taken by the petitioners in lieu of the sale agreement dated 16.12.2019, and they have violated the terms and conditions of
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR the agreement of sale and further adds to it that they have threatened the complainant that they would be killed if the amount would be asked for, yet again.
9. The police investigate into the crime and file a charge sheet. The summary of the charge sheet as obtaining in column No.17 reads as follows:
"F zÉÆà ಾ ೋಪ ಾ ಪ ಯ ಎ-1, ಎ-2 ಆ ೋ ಗಳ ತಮ ೆ ೇ ರುವ ೆಂಗಳ ರು ನಗರ, ಾಣಸ ಾ! "#ೕ$ %ಾ ಾ ಸರಹ'( ೆ ¸ÉÃjgÀĪÀ PÀ¯ÁåtUÀgÀ, ºÉZï.Dgï.©.Dgï ¯ÉÃOmï, 1£Éà ¨ÁèPï, ¸ÉÊmï £ÀA.10M-220, PID No. 10M- 220 7000 ¸ÉÌ÷éÃgï *ೕ+ ,-.ೕಣ/ದ 1ೆಲಮಹ! ಮತು. 4 ಮಹ!ಯುಳ, ಕಟ ಡವನು6 7,40,00:000/- ರೂ 7ಾ ಾಟ 7ಾಡುವ89ಾ: ಾ;-1 ರವ ೆ ನಂ<-ರು=ಾ. ೆ, ಾ;-1 ರವರು ಎ-1, ಎ-2 ಇವರುಗಳ 7ಾತನು6 ನಂ< ಎ-2 ರವರ ?ೈ ೆ '1ಾಂಕ: 05/01/2019 ರಂದು ಮುಂಗಡ ಾ: 5,00,000/- ರೂ ನಗದು ಹಣವನು6 Aೕ! ಹಣವನು6 -Bೕಕ -ದ ಬ ೆD ಸEಯನು6 ಪFೆದು?ೊಂ!ರು=ಾ. ೆ. ನಂತರ ಾ;-1 ರವರು '1ಾಂಕ : 18/02/2019 ರಂದು ಒಟು 1,15,00,000/- ರೂ ಅನು6 ಎ-1 ರವರ ಬಂಧJ ಾKಂL Mಾ=ೆ ಸಂMೆK. 50180027048351 ೆ ವಗ/ವ ೆ 7ಾ!ರು=ಾ. ೆ. ಅ9ೇ ಪN?ಾರ '1ಾಂಕ:16/02/2019 ರಂದು ಎ-1 ಮತು. ಎ-2 ಇವರುಗಳ ಾ;-1 ರವ ೆ ೇO ೇOಆ:NPಂ+ ಅನು6 7ಾ!?ೊ ರು=ಾ. ೆ, ನಂತರ '1ಾಂಕ : 31/05/2019 ರಂದು ಾ;-1 ರವರು 1,35,00,000/- ರೂ ನಗದು ಹಣವನು6 ಮತು. '1ಾಂಕ : 25/06/2019 ರಂದು ಒಟು 10,00,000/- ರೂ ನಗದು ಹಣವನು6 ಎ-1, ಎ-2 ರವರುಗQ ೆ Aೕ!ರು=ಾ. ೆ, ನಂತರ '1ಾಂಕ:11/07/2019 ರಂದು ಾ;-1 ರವರು 1,00,00,000/- ರೂ ನಗದು ಹಣವನು6 ಮತು. '1ಾಂಕ: 07/08/2019 ರಂದು 16,00,000/- ಲR ರೂ ಮತು.. 1,00,000/- ರೂ ೆ SೆL ಅನು6 ಏ-1 ರವ ೆ Aೕ!ರು=ಾ. ೆ. Uಾಗೂ ಅ9ೇ 'ನ 49,00,000/- ರೂ ನಗದು ವಣವನು6 ಎ-1 ರವ ೆ Aೕ!ರು=ಾ. ೆ. '1ಾಂಕ:06/08/2019 ರಂದು 34,00,000/- ರೂ ಹಣವನು6 ಾ;-1 ರವರ
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR ಸಂಬಂVWಾದ ಾ;-6 ರವರು ಎ-1 ರವರ ಬಂಧJ ಾKಂL Mಾ=ೆ ಸಂMೆK. 50180027048351 ೆ ವ ಾ/ವ ೆ 7ಾ!ರು=ಾ. ೆ.
PೕಲXಂಡಂ=ೆ ಎ-1, ಎ-2 ರವರುಗQ ೆ ಾ;-1
ಾ; ರವರು ಹಂತ-ಹಂತ
ಹಂತ ಹಂತ ಾ:
ಒಟು .4,65,00,000/- ರೂಗಳನು6 Aೕ!ರು=ಾ. ೆ,ೆ ಇ9ಾದ ನಂತರದ°è ನಂತರದ ಾ;-1 ಾ;
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ಕ]ಾKಣಗರ ೆಂಗಳ ರು ನಗರದ 1ೆಲ ಮಹ!ಯ ಆ*$ ರೂಂ ೆ Uೋ: ಎ-1, ಎ-2 ರವರುಗQ ೆ =ಾನು Aೕ!ರುವ ಹಣವನು6 ಬ!^ ಸPೕತ ಾ_ಾ$ Aೕಡುವಂ=ೆ ?ೇQ9ಾಗ ಎ -1, ಎ-2 ಆ ೋ ಗಳ ಾ;-1 ಾ; ರವ ೆ ಸೂZೆ ಮಗ1ೆ ಮ=ೊ.P` ಹಣವನು6 ಾ_ಾ$ Aೕಡುವಂ=ೆ ?ೇQದ ೆ Aನ6ನು6 ಮತು. Aನ6 ಕುಟುಂಬದವರನು6 aೕವಂತ ಾ: ಉQಸುವ8'ಲc ೆಂದು ೆದ ?ೆ UಾYರುವ8ದು ತAMೆdಂದ ದೃಢಪ ರುತ.9ೆ.ೆ PೕಲXಂಡಂ=ೆ ಎ-1, ಎ-2 ಇವರುಗಳ ಕಟ ಡವನು6 7ಾ ಾಟ 7ಾಡುವ89ಾ: ಒಟು 4,65,00,000/- ರೂ.
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(Emphasis added) If the complaint and the summary of the charge sheet are read in tandem, what would unmistakably emerge is that the criminal law is set into motion for the purpose of recovery of
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR money. Quite so, as the complainant himself submits that it was six years and the amount of Rs.4,65,000,00/- was stuck with the petitioners and therefore, left with no choice, the respondent No.2/complainant had to set the criminal law into motion.
10. The said submission is noted only to be rejected, whereas, it is now by well a settled principle of law that criminal law cannot be set into motion for the purpose of recovery of money. For the purpose of recovery of money, the complainant institutes a suit for specific performance in OS.No.217/2023. The prayer sought in the suit is as follows:
"WHEREFORE the Plaintiff humbly prays for a Judgment and Decree against the Defendants:
a) For specific performance of the Agreement of Sale/Agreement dated 16/02/2019, the Defendants to execute and registrar the Sale Deed/Deed of Conveyance with respect to the Suit Schedule Property in favour of the Plaintiff. (OR)
b) In alternative, Plaintiff seek for the relief of refund of earnest money, advanced to the Defendants in the event of Decree for Specific Performance cannot be granted for any reason.
c) The Plaintiff prays for compensation by way of damages for the breach committed by the Defendants.
d) Award cost of this suit, and grant such further relief as this Hon'ble Court may deem fit in the circumstances of the case."
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR The complainant seeks refund of the entire earnest money advanced to the defendants therein, who are the present petitioners, in the event a decree of specific performance cannot be granted by any reason. Therefore, two reliefs are sought, one for specific performance and the other for refund of the amount. The present criminal proceedings also lie on the same set of facts.
11. It is no longer res integra that criminal proceedings cannot be instituted for the purpose of recovery of money.
11.1. The Apex Court, in the case of LALIT CHATURVEDI v. STATE OF UTTAR PRADESH reported in 2024 SCC OnLine SC 171, has held as follows:
".... .... ....
5. This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, non- payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406IPC. Repeated judgments of this Court, however, are somehow overlooked, and are not being applied and enforced. We will be referring to these judgments. The impugned judgment [Lalit Chaturvedi v. State of U.P., 2023 SCC OnLine All 2945] dismisses the application filed by the appellants under Section 482CrPC on the ground of delay/laches and also the factum that the charge-sheet had been filed on 12- 12-2019. This ground and reason is also not valid.
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR
6. In Mohd. Ibrahim v. State of Bihar [Mohd. Ibrahim v. State of Bihar, (2009) 8 SCC 751 :
(2009) 3 SCC (Cri) 929] , this Court had referred to Section 420IPC, to observe that in order to constitute an offence under the said section, the following ingredients are to be satisfied: (SCC pp.
757-58, paras 18-19) "18. Let us now examine whether the ingredients of an offence of cheating are made out. The essential ingredients of the offence of "cheating" are as follows:
(i) deception of a person either by making a false or misleading representation or by dishonest concealment or by any other act or omission;
(ii) fraudulent or dishonest inducement of that person to either deliver any property or to consent to the retention thereof by any person or to intentionally induce that person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived; and
(iii) such act or omission causing or is likely to cause damage or harm to that person in body, mind, reputation or property.
19. To constitute an offence under Section 420, there should not only be cheating, but as a consequence of such cheating, the accused should have dishonestly induced the person deceived:
(i) to deliver any property to any person, or
(ii) to make, alter or destroy wholly or in part a valuable security (or anything signed or sealed and which is capable of being converted into a valuable security)."
7. Similar elucidation by this Court in V.Y. Jose v. State of Gujarat [V.Y. Jose v. State of Gujarat, (2009) 3 SCC 78 : (2009) 1 SCC (Cri) 996] , explicitly states that a contractual dispute or breach of contract per se should not lead to initiation of a criminal proceeding. The ingredient of "cheating", as defined under Section 415IPC, is existence of a
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR fraudulent or dishonest intention of making initial promise or representation thereof, from the very beginning of the formation of contract. Further, in the absence of the averments made in the complaint petition wherefrom the ingredients of the offence can be found out, the High Court should not hesitate to exercise its jurisdiction under Section 482CrPC. Section 482CrPC saves the inherent power of the High Court, as it serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years, when no criminal offence is made out. It is one thing to say that a case has been made out for trial and criminal proceedings should not be quashed, but another thing to say that a person must undergo a criminal trial despite the fact that no offence has been made out in the complaint. This Court in V.Y. Jose [V.Y. Jose v. State of Gujarat, (2009) 3 SCC 78 : (2009) 1 SCC (Cri) 996] placed reliance on several earlier decisions in Hira Lal Hari Lal Bhagwati v. CBI [Hira Lal Hari Lal Bhagwati v. CBI, (2003) 5 SCC 257 : 2003 SCC (Cri) 1121 : (2003) 262 ITR 466] , Indian Oil Corpn. v. NEPC India Ltd. [Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188] , Vir Prakash Sharma v. Anil Kumar Agarwal [Vir Prakash Sharma v. Anil Kumar Agarwal, (2007) 7 SCC 373 :
(2007) 3 SCC (Cri) 370] and All Cargo Movers (India) (P) Ltd. v. Dhanesh Badarmal Jain [All Cargo Movers (India) (P) Ltd. v. Dhanesh Badarmal Jain, (2007) 14 SCC 776 :
(2009) 1 SCC (Cri) 947] .
8. Having gone through the complaint, which was registered as an FIR and the assertions made therein, it is quite clear that Respondent 2 complainant Sanjay Garg's grievance is regarding failure of the appellants to pay the outstanding amount, in spite of Respondent 2 complainant Sanjay Garg's repeated demands. Respondent 2 complainant Sanjay Garg states that the supplies were made between the period 1-12-2015 and 6-8-2017. The appellants had made the payments from time to time of Rs 3,76,40,553 leaving a balance of Rs 1,92,91,358.
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9. We will assume that the assertions made in the complaint are correct, but even then, a criminal offence under Section 420 read with Section 415IPC is not established in the absence of deception by making false and misleading representation, dishonest concealment or any other act or omission, or inducement of the complainant to deliver any property at the time of the contract(s) being entered. The ingredients to allege the offence are neither stated nor can be inferred from the averments. A prayer is made to the police for recovery of money from the appellants. The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money.
10. The charge-sheet also refers to Section 406IPC, but without pointing out how the ingredients of the said section are satisfied. No details and particulars are mentioned. There are decisions which hold that the same act or transaction cannot result in an offence of cheating and criminal breach of trust simultaneously. [Wolfgang Reim v. State, (2012) 173 Comp Cas 86 : 2012 SCC OnLine Del 3341; Mahindra and Mahindra Financial Services Ltd. v. Delta Classic (P) Ltd., (2009) 151 Comp Cas 661 : 2009 SCC OnLine Gau 105 : (2011) 6 Gau LR 604; Mukesh Sharma v. State of H.P., 2024 SCC OnLine HP 426] For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later.
11. In this case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods. The charge-sheet does refer to Section 506IPC relying upon the averments in the complaint. However, no details and particulars are given, when and on which date and place the threats were given. Without the said details and particulars, it is apparent to us, that these allegations of threats,
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR etc. have been made only with an intent to activate police machinery for recovery of money.
12. It is for Respondent 2 complainant Sanjay Garg to file a civil suit. Initiation of the criminal process for oblique purposes, is bad in law and amounts to abuse of process of law."
(Emphasis supplied) 11.2. The Apex Court, in its recent judgment rendered in the case of INDER CHAND BAGRI v. JAGADISH PRASAD BAGRI, reported in 2025 SCC OnLine SC 2529, reiterates that criminal proceedings cannot be instituted for the recovery of money or to settle civil scores, as the case may be, and holds as follows:
".... .... ....
24. The complainant/respondent No. 1 has an alternative remedy of filing a civil suit to set aside the sale deed dated 20.06.2011 and claim damages for the alleged violation of his contractual rights which he is already pursuing vide Title Suit No. 160 of 2012 against the appellant-accused which is currently pending adjudication and hence the route through criminal proceedings, when no ingredient of offence is made out, cannot be permitted. Criminal law ought not to become a platform for initiation of vindictive proceedings to settle personal scores and vendettas. The appellant-accused therefore, in our view, could not be attributed any mens rea and therefore, the allegations levelled by the prosecution against the appellant-accused are unsustainable.
25. Furthermore, in Inder Mohan Goswami, it was held by this Court that the Court must ensure that criminal prosecution is not used as an
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR instrument of harassment or for seeking private vendetta or with an ulterior motive to pressurise the accused. It was further held by this Court that it is neither possible nor desirable to lay down an inflexible rule that would govern the exercise of inherent jurisdiction. In view of the above and for the reasons stated above, we are of the firm opinion that to continue the criminal proceedings against the appellant-accused herein would cause undue harassment to him because as observed hereinabove, no prima facie case for the offence under Sections 406 or 420 of the IPC is made out.
26. In this regard, it would be apposite to rely on the judgment in the case of State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335 : 1992 SCC (Cri) 426 ("Bhajan Lal") with particular reference to paragraph 102 therein, where this Court observed:
"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 have given 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.
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR (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 non-cognizable 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."
27. On a careful consideration of the aforementioned judicial dicta, we find that none of the offences alleged against the appellant-accused herein is made out. In fact, we find that the allegations of criminal intent and other allegations against the appellant-accused herein have been made with a mala-fide intent and therefore, the judgment of this Court in the case of Bhajan Lal extracted above, squarely applies to the facts of these cases. It is neither expedient nor in the interest of justice to permit the present prosecution to continue.
28. At this juncture, we find it apposite to mention the observations of this Court in Vishal Noble Singh v. State of Uttar Pradesh, (2024) 14 SCC 112 wherein it was observed that in recent years the
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR machinery of criminal justice is being misused by certain persons for their vested interests and for achieving their oblique motives and agenda. Courts have therefore to be vigilant against such tendencies and ensure that acts of omission and commission having an adverse impact on the fabric of our society must be nipped in the bud. We say so for the reason that while the complainant/respondent No. 1 has made grave allegations against the appellant herein, he has failed to justify the same before this Court. Such actions would create significant divisions and distrust among people, while also placing an unnecessary strain on the judicial system, particularly criminal courts."
(Emphasis supplied) Therefore, it is now a settled principle of law that the criminal proceedings cannot be instituted for the purpose of recovery of money.
12. The other submission of the learned Senior counsel qua the cognizance taken by the concerned Court, both for offences under Sections 406 and 420 of the IPC also is unsustainable for the reason of the interpretation by the Apex Court in the case of DELHI RACE CLUB (1940) LTD. v.
STATE OF UTTAR PRADESH, reported in 2024 SCC OnLine SC 2248, has held as follows:
".... .... ....
Difference between criminal breach of trust and cheating
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35. This Court in its decision in S.W. Palanitkar v. State of Bihar [S.W. Palanitkar v. State 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)
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR (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 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.
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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 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
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR 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 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
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR 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.
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.
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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 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) The Apex Court distinguishes between the offences of criminal breach of trust and cheating and holds that both these cannot be the offences that can go hand in hand. The cognizance taken thus would falter in the teeth of the elucidation of law by the Apex Court.
13. Permitting further proceedings to continue against these petitioners in the present criminal case would amount to permitting continuance of the criminal case for the purpose of recovery of money and would fall foul of the judgments rendered by the Apex Court on the issue, apart from it
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NC: 2026:KHC:1926 CRL.P No. 10480 of 2023 HC-KAR becoming an abuse of the process of the law and resulting in miscarriage of justice.
14. For the aforesaid reasons, the following:
ORDER
(i) The criminal petition is allowed.
(ii) The proceedings in CC.No.7414/2023 pending on the file of VI Additional CMM Court at Bangalore stands quashed.
(iii) It is made clear that the observations made in the course of the order was only for the purpose of consideration of the case of these petitioners under 482 of the Cr.P.C. He would not bind or influence any further proceedings pending before any other fora.
Sd/-
(M.NAGAPRASANNA) JUDGE JY List No.: 1 Sl No.: 23