Allahabad High Court
Sh John Livingstion Gonuguntla And 4 ... vs State Of U.P. And Another on 30 April, 2026
HIGH COURT OF JUDICATURE AT ALLAHABAD
Neutral Citation No. - 2026:AHC:98249
HIGH COURT OF JUDICATURE AT ALLAHABAD
APPLICATION U/S 482 No. - 4445 of 2024
Sh John Livingstion Gonuguntla And 4 Others
.....Applicant(s)
Versus
State of U.P. and Another
.....Opposite Party(s)
Counsel for Applicant(s)
:
Satish Kumar Tyagi
Counsel for Opposite Party(s)
:
G.A., Sohan Lal Yadav
Court No. - 81
HON'BLE ACHAL SACHDEV, J.
1. Heard learned counsel for the applicants, learned A.G.A. for the State and Shri Sohan Lal Yadav, learned counsel for the opposite party no.2.
2. From perusal of the order-sheets, it is reflected that time and again, sufficient time was granted to the learned counsel for the opposite party no.2 to file counter affidavit but till date no counter affidavit has been filed on his behalf, therefore, opportunity to file counter affidavit is hereby closed.
3. The present application u/s 482 Cr.P.C. has been preferred by the applicants with a prayer to quash the summoning order dated 24.04.2023 passed by Civil Judge (Sr. Div.)/Additional Chief Judicial Magistrate, Gautambuddh Nagar in Complaint Case No.1083 of 2022 (Shri Sarjeet Kumar Vs. M/s. Johnette Technologies Pvt. Ltd. & Ors.) u/s 406 I.P.C., Police Station- Phase-3, Noida, District- Gautambuddh Nagar.
4. The contention of the learned counsel for the applicants is that the complaint lodged by the opposite party no.2 against the applicants as well as the summoning order dated 24.04.2023 summoning the applicants under Section 406 of the IPC is nothing but the grossest misuse of the process of law, particularly, in view of the fact that the allegation so leveled by the opposite party no.2 is regarding withholding of earned wage and earned leave.
5. Learned counsel for the applicants submits that the said dispute is a dispute under Industrial Disputes Act and further the opposite party no.2 herein has preferred an application before the Controlling Authority for payment of gratuity, thus the matter is civil dispute.
6. Learned counsel for the applicants submits that the applicants have been wrongly roped in, in the criminal case just to harass them.
7. Learned counsel for the opposite party no.2 submits that the opposite party no.2/complainant in his complaint has stated that he has sent his resignation letter through E-mail to the said company on 07.05.2021 and the same was accepted on 11.01.2021 but relieving letter was issued to him on 31.05.2021 and he has claimed earned wage of Rs.2,54,936/- from 01.07.2019 to 30.11.2020 and earned leave of Rs.25,200/- from 01.05.2018 to 31.05.2021 and he time and again visited the office for the said demand but the company dilly dallying to pay the same.
8. In the context of Section 406 I.P.C., proceedings may be quashed if the complaint or F.I.R., even if taken at face value, does not disclose the essential ingredients of the offence. A clear absence of allegations regarding entrustment or dishonest misappropriation can be a ground for quashing. The Supreme Court in Anand Kumar Mohatta (S) v. State (Govt. Of NCT Of Delhi), emphasized the need to ascertain if the facts make out an offence under Section 406 I.P.C.
9. Section 406 of the Indian Penal Code, 1860 (I.P.C.) prescribes the punishment for the offence of criminal breach of trust. This provision plays a crucial role in upholding fiduciary relationships and ensuring accountability for the misappropriation of property entrusted to another. Criminal breach of trust, as defined in Section 405 of the I.P.C., is a nuanced offence, requiring a careful examination of the elements of entrustment, dishonest misappropriation, and the violation of legal or contractual duties. Section 406 I.P.C. is intrinsically linked to Section 405 I.P.C., as the former provides punishment for the offence defined by the latter.
10. For the sake of convenience, Section 405 I.P.C. is being reproduced hereinbelow :
405. Criminal breach of trust - Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits criminal breach of trust.
This definition is further elucidated by two explanations, which create deeming fictions in specific employer-employee contexts.
Explanation 1 pertains to deductions made by an employer from an employee's wages for contribution to a Provident Fund or Family Pension Fund. If the employer defaults in remitting such contributions, they are deemed to have been entrusted with the amount and to have dishonestly used it.
Similarly, Explanation 2 addresses deductions for the Employees' State Insurance Fund, with a similar deeming provision for default in payment.
11. For a conviction under Section 406 I.P.C., the prosecution must prove the commission of criminal breach of trust as defined in Section 405 I.P.C. In Binod Kumar and Others v. State Of Bihar and Another, (2014) 10 SCC 663, the Supreme Court reiterated that the prosecution must prove:
(i) entrustment with property or dominion over it ; and
(ii) dishonest misappropriation, conversion, use, or disposal of that property in violation of law or legal contract.
12. The cornerstone of criminal breach of trust is 'entrustment'. The expression "entrusted" as used in Section 405 I.P.C. is not a term of art with a narrow technical meaning. Entrustment implies that the accused had voluntarily handed over property for a specific purpose, creating a relationship of trust and confidence.
13. At this stage, it is crucial to distinguish entrustment from other transactions. For instance, a mere transaction of sale does not amount to entrustment. Similarly, the Supreme Court in Indian Oil Corporation Vs. Nepc India Ltd. And Others, 2006 (6) SCC 736, held that hypothecation of goods as security for a debt does not constitute "entrustment" as required under Section 405 I.P.C., because ownership and possession (subject to the hypothecatee's rights) remain with the debtor. The absence of a clear allegation or proof of entrustment is fatal to a prosecution under Section 406 I.P.C., as highlighted in cases like Pradeep Kumar Alias Pradeep Kumar Verma Vs. State Of Bihar and Another, 2007 (7) SCC 413 and Arti And 3 Others Vs. State of U.P. and Another, Neutral Citation No. - 2024:AHC:152597.
14. The second critical element is the "dishonest misappropriation or conversion" of the entrusted property. "Dishonestly" is defined in Section 24 I.P.C. as doing anything with the intention of causing wrongful gain to one person or wrongful loss to another. This implies a deliberate act of using the property for a purpose other than that for which it was entrusted, or converting it to the accused's own use.
15. The Apex Court in Anand Kumar Mohatta (supra) has held that the dishonest misappropriation or use must be "in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust."
16. This means the accused's actions must contravene either a statutory duty or a contractual term (whether express or implied) governing how the entrusted property was to be handled. This element underscores the fiduciary nature of the relationship and the breach of the specific terms of that trust.
17. Mens rea, specifically a "dishonest intention," is the lynchpin of the offence of criminal breach of trust. A mere failure to return property or a simple breach of contract does not automatically translate into a criminal breach of trust. The prosecution must establish that the accused acted with a dishonest mind. The Supreme Court in Indian Oil Corporation (supra) emphasized the distinction between a civil wrong (breach of contract) and a criminal offence, noting that criminal liability arises when elements like fraudulent or dishonest intention are present. The lack of dishonest intention can lead to the quashing of proceedings under Section 406 I.P.C. Dishonest intention is the sine qua non of the offence of criminal breach of trust. Mere failure to account for money does not constitute criminal breach of trust. The prosecution must establish that the accused dishonestly misappropriated or converted the property. A mere civil liability to pay does not attract Section 406 I.P.C. as held by the Apex Court in Velji Raghavji Mehta Vs. State of Maharashtra, (AIR 1965 SC 1433).
18. The Delhi Race Club case [Delhi Race Club (1940) Ltd. Vs. State of U.P. and Anr., (2024) 10 SCC 690], is a recent Supreme Court precedent emphasizing that commercial disputes should not be criminalized unless clear evidence of dishonest intention exists. It is now a strong authority for quashing criminal complaints in business debt recovery matters.
19. In the present complaint, it appears that the complainant concealed the material fact about filing of the case before the Controlling Authority under the payment of Gratuity Act, 1972/DLC/ALC Noida, G.B. Nagar, G-25A, Sector-3, Noida, G.B. Nagar on 04.04.2022 and the trial court while taking cognizance on the said complaint has failed to consider this fact and passed the summoning order dated 24.04.2023. Claims for arrears of salary and earned leave encashment is purely a civil/contractual dispute between the shareholders and only where the case comes under the provisions of explanation to Section 406 I.P.C. that an offence under Section 406 I.P.C. can be considered.
20. The fatal difficulty with salary and earned leave claim in question of entrustment as every payment of money by one person to another does not qualify the term entrustment. When an employee render service and employer owes to salary to him in return, the employer has in no manner been entrusted with any property belonging to the employee and the obligation to pay salary arises from a contract of employment but not from any form of entrustment. The element of fiduciary relationship is absent. The appropriate forum for resolving the dispute may be Labour Court/Industrial Tribunal under Industrial Disputes Act and the proceedings under the Payment of Wages Act, 1936 may be initiated against the erring employer and civil suit may also lie for recovery of dues.
21. In view of the above, it reflects that trial court has clearly ignored this aspect of law and the summoning order dated 24.04.2023 passed by Civil Judge (Sr. Div.)/Additional Chief Judicial Magistrate, Gautambuddh Nagar in Complaint Case No.1083 of 2022 (Shri Sarjeet Kumar Vs. M/s. Johnette Technologies Pvt. Ltd. & Ors.) u/s 406 I.P.C., Police Station- Phase-3, Noida, District- Gautambuddh Nagar suffers from non-application of judicial mind and is unsustainable and is hereby quashed.
22. The present application u/s 482 Cr.P.C. is, accordingly, allowed.
(Achal Sachdev,J.) April 30, 2026 Zafar