Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(SC) 846

SUPREME COURT OF INDIA
B.V. NAGARATHNA, UJJAL BHUYAN, JJ.
G. Saminathan & Another – Appellants
Versus
The State, Represented by the Sub-Inspector of Police & Another – Respondents
Criminal Appeal No. 3565 of 2026 (Arising out of Special Leave Petition (Criminal) No. 10294 of 2025)
Decided On : 31-07-2026

Advocates appeared:
For the Petitioner(s): Mr. Shashwat Singh, AOR Mr. R. Ilam Paridi, Adv. Mr. R. Vishnu Kumar, Adv. Mr. Saurav Beniwal, Adv. Ms. Sejal Nanda, Adv. Mr. Aman Kumar, Adv. Mr. Sidhant Verma, Adv.
For the Respondent(s): Mr. Sabarish Subramanian, AOR Mr. Ankur S. Kulkarni, AOR Mr. M Gireesh Kumar, Adv. Mr. Ankur S. Kulkarni, Adv. Mr. Sanjay Singh, Adv. Ms. Sneha Mathew, Adv.

Mere breach of contract does not constitute criminal breach of trust or cheating unless fraudulent or dishonest intention existed at the inception of the transaction. Criminal jurisdiction cannot be invoked to settle civil disputes or as a pressure tactic.

Headnote:(A) Indian Penal Code, 1860 - Sections 405, 406, 415, 420, 109 and 34 - Criminal Breach of Trust - Cheating - Quashing of criminal proceedings - Agreement for property development - Allegation of civil dispute given criminal colour - Held, mere breach of contract does not constitute offence under Sections 406 or 420 unless fraudulent or dishonest intention existed from the inception of the transaction. (Paras 6.1, 6.2, 8.2, 8.4)

(B) Criminal Procedure - Quashing of proceedings - Inherent powers under Section 482 CrPC - When allegations in complaint do not disclose a cognizable offence or are absurd and inherently improbable, the court must exercise power to prevent abuse of process of law - Criminal law cannot be used as a shortcut for settling civil disputes or for wreaking vengeance. (Paras 8.9, 9.1, 9.2)

(C) Criminal Breach of Trust vs. Cheating - Both offences involve dishonest intention and are mutually exclusive in basic concept - A person cannot be accused of both for the same transaction - Lawful entrustment excludes the possibility of initial cheating, whereas initial deception excludes the element of lawful entrustment. (Paras 8.6, 8.8)

Facts of the case:
An agreement was entered into for the development of property, involving a security deposit and a power of attorney. After the rejection of planning permission, the property owners sold the land to a third party. The developer initiated criminal proceedings alleging cheating and breach of trust. The accused sought to quash these proceedings, asserting the dispute was contractual, already subject to arbitration, and lacked any initial dishonest intention.

Findings of Court:
The Court held that the prosecution failed to prove any fraudulent or dishonest intention at the time of the execution of the agreement. The allegations made were primarily indicative of a civil dispute, and the initiation of criminal proceedings was a misuse of the process of law. The court emphasized that criminal courts should not be used to settle disputes that are essentially civil in nature and, therefore, warranted the quashing of the pending proceedings.

Issues: Whether the alleged breach of contract and retention of security deposit constitute the criminal offences of cheating and criminal breach of trust, and whether the criminal proceedings were an abuse of the court process.

Ratio Decidendi: To establish the offence of cheating, it must be proved that the accused possessed a dishonest or fraudulent intention at the time of making the representation. Furthermore, there is a fundamental distinction between criminal breach of trust, which requires lawful entrustment, and cheating, which requires inducement by deception since inception; therefore, these offences cannot be sustained simultaneously on the same set of facts.

Result: Appeal allowed. Criminal proceedings quashed.

Table of Content
1. factual matrix of the dispute arising from a failed joint development agreement. (Para 1 , 2 , 3)
2. arguments concerning the conversion of civil contractual disputes into criminal litigation. (Para 4 , 5)
3. distinction between civil breach of contract and criminal offences of cheating and breach of trust. (Para 6 , 7 , 8 , 9)
4. application of bhajan lal guidelines to quash firs based on purely civil disputes. (Para 10)

JUDGMENT :

NAGARATHNA, J.

Leave granted.

2. The present criminal appeal arises out of the impugned order dated 28.03.2025, passed by the High Court of Judicature at Madras in Crl. O.P No.15131 of 2023 refusing to quash the proceedings in C.C. No.2776 of 2023 pending on the file of the Metropolitan Magistrate for Special Court CCB, CBCID, Egmore, Chennai (hereinafter referred to as “trial court”) against the appellants herein under Sections 406, 420 read with Sections 109 and 34 of the Indian Penal Code, 1860 (for short “IPC”).

3. Briefly stated, the facts of the case are that respondent No.2 (hereinafter referred to as the “complainant”) is the Joint Managing Director and authorised representative of M/s Barath Building Construction (India) Pvt. Ltd., (hereinafter referred to as the “construction company”), which is involved in the business of property development. Appellant Nos.1 and 2 herein, namely G. Saminathan and his wife S. Radhika Malini (hereinafter referred to as the “accused”) are the owners of vacant land bearing Old Plot No.B-1, New Plot No.30A, admeasuring 0.50 acres and Old Plot No.B-2, New Plot No.31, admeasuring 0.50 acres, totalling 43,560 square feet comprised in Survey No.602/13, situated at Sholinganallur village and Taluk, Kancheepuram District (hereinafter referred to as the “disputed property”). The disputed property formed part of a layout known as Classic Retreat located at 1st Main Road, Sholinganallur, Chennai and was originally purchased by the accused under sale deeds dated 31.05.1996 and 12.08.1996.

3.1 On 23.05.2012, an unregistered Joint Development Agreement was executed between the appellants-accused and the respondent No.2-complainant for the construction, development and promotion of the disputed property into residential flats. On the same date, the accused executed a General Power of Attorney (for short “GPA”) bearing Document No.711 of 2012 in favour of the complainant. Subsequent to the execution of the GPA, the complainant, in terms of Clause 4(b) of the Joint Development Agreement, paid a refundable security to the tune of Rs.3,00,00,000/- (Rupees three crore) to the appellants-accused, through two cheques.

3.2 Thereafter, the construction company submitted a Planning Permission Application to the Member Secretary of the Chennai Metropolitan Development Authority (hereinafter referred to as the “Development Authority”) for the construction of a basement floor, stilt floor and a four-storey residential building on the disputed property. The Member Secretary of the Development Authority, by way of a letter bearing No.B1/13485/2012 dated 26.08.2013, rejected the Permission Application on the ground that the disputed property was part of an unapproved layout. The relevant portion of the said letter is reproduced as follows:

1) The Sale under reference forms part of an unapproved layout made after 31.12.1989. Hence the site under reference is not regularisable.

2) Qualifying public road to a length of 250 meters was not established.

In view of above, your planning permission Application is Prima-facie returned herewith unapproved.”

3.3 Subsequently, the complainant became aware that on 05.01.2018, that the appellants-accused had cancelled the GPA executed in favour of the respondent-complainant vide Document No.116 of 2018 and had, on the very same day, sold the disputed property to one Smt. Banumathi by way of Sale Deed bearing Documen

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2026 Supreme(SC) 846

Mere breach of contract does not constitute criminal breach of trust or cheating unless fraudulent or dishonest intention existed at the inception of the transaction. Criminal jurisdiction cannot be invoked to settle civil disputes or as a pressure tactic.

Cases Referred (8)