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SUPREME COURT OF INDIA
B.V. Nagarathna, R. Mahadevan, JJ.
Arshad Neyaz Khan – Appellant
Versus
State of Jharkhand & Another – Respondents
Criminal Appeal No. 4281 of 2025 (Arising out of Special Leave Petition (Criminal) No.3606 of 2024
Decided On : 24-09-2025
(A) Indian Penal Code, 1860 – Sections 406, 420 and 120B – Criminal Procedure Code, 1973 – Section 482 – Criminal breach of trust, cheating and conspiracy – Refusal by High Court to quash criminal proceeding – In FIR as well as complaint, there is no cheating and dishonest inducement to deliver any property or a valuable security – For establishing offence of cheating, complainant/respondent was required to show that appellant had fraudulent or dishonest intention at the time of making promise or representation of not fulfilling agreement for sale of property – Such a culpable intention right at the beginning when promise was made cannot be presumed but has to be made out with cogent facts – In facts of present case, there is clear absence of dishonest and fraudulent intention on part of appellant during agreement for sale – There is no allegation in FIR or complaint indicating either expressly or impliedly any intentional deception or fraudulent/dishonest intention on part of appellant right from the time of making promise or misrepresentation – Mere allegations by complainant that appellant failed to execute agreement for sale and failed to refund money paid by complainant/respondent does not satisfy test of dishonest inducement to deliver property or part with a valuable security as enshrined under Section 420 IPC. (Paras 18 and 19)
(B) Indian Penal Code, 1860 – Sections 406, 420 and 120B – Criminal Procedure Code, 1973 – Section 482 – Criminal breach of trust, cheating and conspiracy – Refusal by High Court to quash criminal proceeding – Every act of breach of trust may not result in a penal offence unless there is evidence of manipulating act of fraudulent misappropriation of property – Complainant/respondent has failed to place any material on record to show as to how he had entrusted property to appellant – Complaint also omits to aver as to how property, so entrusted to appellant, was dishonestly misappropriated or converted for his own use, thereby committing breach of trust – Offences of criminal breach of trust and cheating cannot co-exist simultaneously in same set of facts as they are antithetical to each other – Complaint was filed after delay of nearly eight years – Complainant had alternative remedy of filing civil suit claiming damages for alleged violation of his contractual rights which has not been availed – Appellant could not be attributed any mens rea – Allegations levelled by prosecution against appellant are unsustainable – To continue criminal proceedings against appellant would cause undue harassment to him – Criminal proceedings quashed. (Paras 20, 21, 22, 23, 25 and 27)
Facts of the case:
Present appeal arises out of order dated 19.01.2023 passed by High Court of Jharkhand at Ranchi in Cr.M.P. No.2384 of 2022 dismissing application filed under Section 482 of Code of Criminal Procedure preferred by accused-appellant and thereby refusing to quash proceedings arising out of Complaint Case under Sections 406, 420, and 120B of Indian Penal Code, 1860.
Findings of Court:
Impugned order of the High Court is set aside and consequently, Complaint Case and FIR lodged with all consequent proceedings initiated pursuant thereto stand quashed.
Result : Appeal allowed.
Certainly. Based on the provided legal document, the key legal principles and conclusions are as follows:
Offense of Breach of Trust: Not every act of breach of trust constitutes a criminal offense unless there is clear evidence of fraudulent misappropriation of property. Mere failure to perform contractual obligations, such as not transferring property or refunding money, without evidence of dishonest intent, does not amount to criminal breach of trust (!) (!) .
Offense of Cheating: To establish cheating under the law, it must be shown that the accused had a fraudulent or dishonest intention at the time of making a promise or representation. A failure to fulfill a promise alone, without evidence of such intent from the outset, does not constitute cheating. The absence of allegations indicating deliberate deception or dishonesty at the time of agreement is crucial (!) (!) .
Legal Presumption and Burden of Proof: The prosecution must prove the accused's dishonest or fraudulent intent at the time of the alleged act. Presuming such intent solely based on subsequent failure to perform is not permissible. The facts must support the inference of culpable mental state from the outset (!) (!) .
Delay and Alternative Remedies: A significant delay in filing the complaint (nearly eight years) raises questions about the bona fide nature of the allegations. Additionally, the complainant had an alternative civil remedy to seek damages, which was not pursued, indicating that criminal proceedings may be misused or are unwarranted (!) .
Mala Fide and Vexatious Proceedings: If the allegations are made with mala fide intent, or the proceedings are initiated with ulterior motives such as harassment or vendetta, the criminal case can be quashed. The court must ensure that criminal prosecution is not used as an instrument of harassment or for personal vendettas (!) (!) .
Principle of Inherent Jurisdiction: The court has the power to quash criminal proceedings if they are found to be based on frivolous or mala fide allegations, or if they do not prima facie constitute an offense. This exercise of jurisdiction is essential to prevent abuse of process and to uphold justice (!) (!) .
Outcome: In this case, the court found no prima facie evidence of dishonest intention or fraudulent conduct at the time of the agreement. The allegations were deemed to be made with mala fide intent, and continuing criminal proceedings would cause undue harassment. Therefore, the criminal proceedings, including the FIR and complaint, were quashed (!) .
These principles emphasize that criminal proceedings require clear and cogent evidence of fraudulent intent from the outset and that courts must be vigilant against misuse of criminal law for personal or vindictive reasons.
JUDGMENT :
NAGARATHNA, J.
Leave granted.
2. This appeal arises out of the order dated 19.01.2023 passed by the High Court of Jharkhand at Ranchi in Cr.M.P. No.2384 of 2022 dismissing the application filed under Section 482 of the Code of Criminal Procedure (hereinafter ‘CrPC’ for short) preferred by the accused-appellant and thereby refusing to quash the proceedings arising out of the Complaint Case No.619 of 2021 and FIR No.18 of 2021 dated 08.02.2021 registered at PS Hindpiri that was filed by Md. Mustafa, the complainant/respondent No.2.
3. Briefly stated, the facts of the case are that the appellant is the owner of the property situated at Khata No.186, MS Plot No.1322, Sub Plot No.1322/38-A and that he is also the power of attorney holder for the property adjacent to the above-mentioned plot situated at Sub-Plot No.1322/39-A-1.
4. On 16.02.2013, the appellant entered into an agreement for sale of the aforesaid properties with the complainant/respondent No.2 for a total consideration of Rs.43,00,000/-. Out of the said consideration, the petitioner received an advance payment of Rs.20,00,000/- on the date of agreement for sale.
5. Thereafter, on 29.01.2021, after nearly eight years from the date of the agreement for sale, aggrieved by the non-transfer of the said properties, a complaint was filed being Complaint Case No.619 of 2021 by the complainant/respondent No.2 against the appellant alleging offences under Sections 406, 420, and 120B of the Indian Penal Code, 1860 (hereinafter, “IPC” for short.). The said complaint culminated into registration of the FIR No.18 of 2021 dated 08.02.2021 at Police Station Hindpiri against the appellant. The allegations contained in the said complaint and F.I.R. can be crystallized as hereunder:
ii. The complainant/respondent No.2 was also informed that the land adjacent to the property owned by the appellant, situated at M.S. Plot No.1322, Sub Plot No.1322/39-A-1, was owned by six different individuals, all of whom had created a power of attorney in favour of the appellant and therefore authorized him to sell the said adjacent land as well.
iii. Pursuant to the said representations, the complainant/ respondent No.2 agreed to buy the said properties for a consideration of Rs.43,00,000/- vide agreement for sale dated 16.02.2013. In furtherance to the said agreement, a total sum of Rs.20,00,000/- was given to the appellant and it was agreed between the parties that the balance amount shall be paid by the complainant/respondent No.2 to the appellant at the time of the registration of the said document.
iv. After the execution of the said agreement for sale, the appellant failed to convey title of the said lands to the complainant/ respondent No.2 nor did he return the money deposited with him by the complainant/respondent No.2.
6. Apprehending arrest on the aforesaid complaint and F.I.R., the appellant herein preferred Anticipatory Bail Petition No.681 of 2021 before the Judicial Commissioner, Ranchi, Jharkhand on 22.03.2021.
7. Meanwhile, the parties were referred to the Mediation Centre, Ranchi wherein they arrived at a mutually satisfactory disposition according to which the appellant agreed to return a sum of Rs.24,00,000/- to the complainant/respondent No.2 in five instalments as a full and final settlement of all the claims between the parties.
8. The Court of Judicial Commissioner, Ranchi, vide order dated 23.12.2021, allowed the Anticipatory Bail Application No.681 of 2021.
9. In pursuance to the aforesaid order of the Judicial Commissioner, Ranchi, the appellant appeared before the said Court on 19.01.2022 to surrender and sought per
(1) Every act of breach of trust may not result in a penal offence unless there is evidence of manipulating act of fraudulent misappropriation of property.(2) Offences of criminal breach of trust and....
The court held that mere breach of contract does not constitute a criminal offence of cheating or criminal breach of trust, emphasizing the necessity of fraudulent intent from inception.
Sections 406 and 420 of the IPC cannot co-exist in the same transaction; criminal breach of trust and cheating are distinct offences requiring different elements of fraud.
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