A failure to repay a loan or a breach of contract does not constitute criminal cheating or breach of trust unless there was a dishonest intention or fraudulent inducement present at the very beginning of the transaction.

JUDGMENT :

Heard the parties.

2. This Criminal Miscellaneous Petition has been filed invoking the jurisdiction of this Court under Section 482 of the Code of Criminal Procedure, 1973 with the prayer to quash the entire criminal proceeding against the petitioner in connection with Sukhdeo Nagar (Pandra O.P.) P.S. Case No.355 of 2019 registered for the offences punishable under Sections 406 and 420 of the Indian Penal Code.

3. The allegation against the petitioner is that the petitioner in several installments took a friendly loan of Rs.13,00,000/- from the informant and the petitioner issued three cheques of Rs.1,00,000/- each and the wife of the petitioner issued one cheque of Rs.10,00,000/- as security against the loan taken but the petitioner did not pay the loan taken by him and the informant upon presenting the cheques issued by the petitioner and his wife for payment, all the cheques were dishonoured because of insufficiency of funds in the account.

4. Learned counsel for the petitioner relies upon the judgment of this Court passed in the case of Vikash Kumar @ Bikash Kumar Vs. The State of Jharkhand & Anr. reported in 2023:JHHC:27680 and submits that in that case, this Court has relied upon the judgment passed by the Hon’ble Supreme Court in the case of Satish Chandra Ratanlal Shah Vs. State of Gujarat & Anr. reported in (2019) 9 SCC 148, paragraph Nos.11 to 13 of which read as under:

“11. Having observed the background principles applicable herein, we need to consider the individual charges against the appellant. Turning to Section 405 read with Section 406 IPC, we observe that the dispute arises out of a loan transaction between the parties. It falls from the record that Respondent 2 knew the appellant and the attendant circumstances before lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount, Respondent 2 had instituted a summary civil suit which is still pending adjudication. The law clearly recognises a difference between simple payment/investment of money and entrustment of money or property. A mere breach of a promise, agreement or contract does not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405 IPC without there being a clear case of entrustment.

12. In this context, we may note that there is nothing either in the complaint or in any material before us, pointing to the fact that any property was entrusted to the appellant at all which he dishonestly converted for his own use so as to satisfy the ingredients of Section 405 punishable under Section 406 IPC. Hence the learned Magistrate committed a serious error in issuing process against the appellant for the said offence. Unfortunately, the High Court also failed to correct this manifest error.

13. Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 : 2000 SCC (Cri) 786] .) In the case beforeus, admittedly the appellant was trapped in economic crisis and therefore, he had approached Respondent 2 to ameliorate the situation of crisis. Further, in order to recover the aforesa