2026 Supreme(All) 515

HIGH COURT OF JUDICATURE AT ALLAHABAD
CHANDRA DHARI SINGH, DEVENDRA SINGH-I, JJ.
 
Arjunpreet Singh Sahni – Petitioner
Versus
State of U.P. and others – Respondents
Criminal MISC. Writ Petition No. 23655 of 2025 Connected with Criminal MISC. Writ Petition No. 23649 of 2025 Connected with Criminal MISC. Writ Petition No. 25666 of 2025
Decided On : 26-05-2026
 

A criminal proceeding for cheating or breach of trust cannot be maintained for purely contractual or commercial disputes unless the prosecution establishes the existence of fraudulent or dishonest intent at the inception of the transaction, rather than a subsequent failure to fulfill contractual terms.

Headnote:(A) Criminal Procedure - Quashing of First Information Report - Indian Penal Code, 1860 - Sections 406, 420, 467, 468, 469, 471 and 120-B - Essential ingredients of offences of cheating and criminal breach of trust must be present - Mere breach of contract or failure to fulfill commercial expectations does not constitute criminal offence - Fraudulent or dishonest intention must exist at the inception of the transaction - Criminal law cannot be used as a tool to exert pressure in civil or commercial disputes. (Paras 62, 77, 78, 81)

(B) Civil Disputes - Conversion into criminal proceedings - Inappropriate to allow civil or commercial disputes to be cloaked with criminality to bypass civil remedies - Courts must guard against such tendencies even where arbitration clauses exist, provided the allegations do not disclose independent criminality. (Paras 73, 75, 96, 98)

Facts of the case:
The petitioners challenged the registration of a criminal case regarding a commercial real estate project involving allegations of cheating, forgery, and criminal breach of trust. The dispute concerned allotment of commercial units, non-payment of assured returns, and non-execution of documentation. The petitioners argued that the controversy arose from complex commercial arrangements, management changes, and contractual obligations, and that the allegations were purely civil in nature, being initiated as a pressure tactic. The respondents contended that the deliberate fabrication of documents and the inducing of money constituted serious cognizable offences.

Findings of Court:
The court observed that the dispute was rooted in shifting corporate management and complex contractual arrangements over several years. No clear material indicated a fraudulent or dishonest intention at the inception of the transactions. Furthermore, remedies were available under the applicable regulatory framework for real estate sectors. The court held that forcing criminal proceedings for essentially civil and regulatory disputes constituted an abuse of process.

Issues: Whether the allegations in the FIR, taken at face value, disclose the essential ingredients of cheating, forgery, and criminal breach of trust; and whether the criminal proceedings were an abuse of process to settle a civil dispute.

Ratio Decidendi: The court affirmed that criminal liability requires specific intent at the inception of a transaction, which was absent here as the parties had engaged in long-standing contractual dealings and had access to established regulatory forums for dispute resolution. Consequently, given the civil nature of the underlying claims, the continuation of criminal proceedings was unsustainable.

Result: Petitions allowed; impugned FIRs and consequential proceedings quashed.