1. Cheque dishonour — Complaint under Sections 406, 420, and 114 IPC — Quashing of proceedings sought. (Para 1 , 2 )
Back
Next 
2025 Supreme(Online)(Kar) 25678
KARNATAKA HIGH COURT
Hemant Chandangoudar, J
SRI.DHRUVA TALWALKAR – Appellant
Versus
M/S. SWASTIK WIRE INDUSTRIES – Respondent
CRL.P 101737 / 2018
Advocates:
For the Appellants/Petitioners:
For the Respondents: Shivraj S. Balloli, G.I. Gachchinamath
For the Appellants/Petitioners:
For the Respondents: Shivraj S. Balloli, G.I. Gachchinamath
To establish offences under Sections 406 and 420 of the IPC, the fraudulent intention must be present from the inception of the transaction. Mere dishonor of a cheque for a debt does not constitute cheating if no initial intent to defraud is proven.
Headnote:(A) Indian Penal Code, 1860 - Sections 406, 420 and 114 - Code of Criminal Procedure, 1973 - Section 482 - Negotiable Instruments Act, 1881 - Section 138 - Quashing of criminal proceedings - Dishonor of cheque - To attract the ingredients of Sections 406 and 420 of the IPC, the complainant must prima facie establish that the accused intended to cheat or defraud the complainant right from the inception - It must be shown that the alleged act of cheating resulted in wrongful loss to the complainant and corresponding wrongful gain to the accused - In the absence of these elements, criminal proceedings are not permissible in law (Paras 7 and 8).
(B) Maintenance of Parallel Proceedings - While proceedings under the NI Act require a formal complaint, proceedings under the IPC do not - Despite overlap in facts, the ingredients of the offences are different; therefore, parallel proceedings under the IPC and Section 138 of the NI Act are maintainable (Para 6).
Facts of the case:
A manufacturer of copper wires and strips filed a private complaint alleging that customers who maintained a running account issued a cheque to partially discharge an outstanding debt. The cheque was subsequently dishonored with the endorsement "Refer to Drawer". The complainant alleged that the petitioners had assured the cheque would be honored, thus committing criminal breach of trust and cheating. The petitioners sought to quash the proceedings, arguing that there was no intention to deceive at the inception of the transaction.
Findings of Court:
There is no allegation that the petitioners induced the complainant to supply goods with an intention to cheat. The admission that a running account was maintained and partial payments were made towards the purchase of goods demonstrates that the issuance of a cheque that was later dishonored does not satisfy the essential elements to constitute offences under Sections 406 and 420 of the IPC (Paras 8 and 10).
Issues: Whether the dishonor of a cheque issued towards a debt in a running account satisfies the essential ingredients of cheating and criminal breach of trust under the IPC, and whether parallel proceedings under the IPC and the NI Act are maintainable.
Ratio Decidendi: To sustain a charge of cheating or criminal breach of trust, the fraudulent intention must exist at the inception of the transaction. Mere dishonor of a cheque issued for a legally recoverable debt does not constitute an offence under Sections 406 and 420 of the IPC if there is no evidence of an initial intent to defraud. While parallel proceedings under the IPC and the NI Act are legally maintainable, the continuation of criminal proceedings in the absence of the essential ingredients of the IPC offences amounts to an abuse of the process of law.
Result: Petition allowed. The impugned proceedings in CC No.5106/2016 are hereby quashed.
Legal Category Hierarchy
- crime and sentencing
- practice and procedure
Table of Contents
2. Petitioners argued absence of initial intent to deceive; complainant argued parallel proceedings under IPC and NI Act are maintainable. (Para 3 , 4 )
3. Parallel proceedings under IPC and NI Act are maintainable per Sangeetaben; however, no initial intent to deceive, so IPC offences not made out. (Para 6 , 7 , 8 )
4. To attract Sections 406 and 420 IPC, complainant must prima facie establish accused intended to cheat from inception, causing wrongful loss and gain. (Para 7 )
5. Petition allowed; impugned proceedings quashed as continuation would abuse process of law. (Para 10 )
6. Are parallel proceedings under Section 138 of the NI Act and Sections 406 and 420 of the IPC maintainable?
Yes, the ingredients of the offences are different, so parallel proceedings are maintainable even though facts may overlap. (Para 6 )
7. What is required to establish an offence under Sections 406 and 420 of the IPC regarding a cheque dishonour?
The complainant must prima facie show that the accused intended to cheat or defraud from the outset, resulting in wrongful loss to complainant and gain to accused. (Para 7 )
8. Does the issuance of a cheque towards an existing debt, without more, satisfy the ingredients of cheating under Section 420 IPC?
No, without an allegation of initial intent to deceive, the issuance of a cheque towards an existing debt does not satisfy the ingredients of Section 420 IPC. (Para 8 )
Digitally signed by
RAKESHAPPAKERI
Location: KARNATAKA
Date: 2025.01.08 17:46:31 +0530
THIS CRIMINAL PETITION IS FILED US 482 OF CR.P.C. SEEKING TO QUASH THE ENTIRE PROCEEDINGS IN CC NO.5106/2016 ARISING OUT OF POR NO.273/2016 ON THE FILE OF THE JMFC-I COURT, HUBBALLI FOR THE COMMISSION OF THE ALLEGED OFFENCES PUNISHABLE US 406, 420 AND 114 OF THE IPC, 1860 IN SO FAR AS THE SAME RELATES TO PETITIONERS/ACCUSED NO.2 AND 3 ARE CONCERNED.
THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: THE HON'BLE MR. JUSTICE HEMANT CHANDANGoudar
ORAL ORDER
1. The petitioners challenge the cognizance taken by the learned Magistrate for the offences punishable under Sections 406, 420, and 114 of the Indian Penal Code (IPC).
2. The respondent filed a private complaint under Section 200 of the Code of Criminal Procedure, 1973 (Cr.P.C.), alleging that he is a manufacturer of copper wires and strips, and the petitioners, who are regular customers, used to purchase these items on credit and maintained a running account. In order to partially discharge the outstanding balance due to the complainant, accused No.2 issued a cheque dated 16.02.2016 for ₹41,97,857/- in favor of the complainant to clear a legally recoverable debt. It was alleged that the accused persons assured the complainant that they had sufficient funds in their account and that the cheque would not be dishonored. Relying on their assurance, the complainant presented the cheque for realization; however, it was dishonored with the endorsement "Refer to Drawer," thereby committing the alleged offences.
3. Learned counsel for the petitioners argued that there are no allegations in the complaint to substantiate that the petitioners induced the complainant to supply copper wires and strips with an intention to deceive at the inception. Therefore, the essential ingredients to constitute offences under Sections 406 and 420 of IPC are conspicuously absent. In the absence of such essential elements, the cognizance taken by the learned Magistrate lacks substance. In support of his contentions, he relied on the following decisions:
i) Vijay Kumar Ghai & Others vs. The State of West Bengal & Others
ii) A.M. Mohan vs. The State
iii) Umar Farooq vs. State of Karnataka
4. In response, learned counsel for the complainant argued that the petitioners issued a cheque towards a legally recoverable debt, assuring that it would be honored. However, contrary to their assurance, the cheque was dishonored due to insufficient funds. He contended that the petitioners committed criminal breach of trust and cheating. He further submitted that parallel proceedings under IPC and Section 138 of the Negotiable Instruments Act, 1881 (NI Act), are maintainable. In support of his arguments, he relied on the following decisions:
i) Sangeetaben Mahendrabhai Patel vs. State of Gujarat & Another
ii) Rashmi Tandon & Another vs. The State of Karnataka & Another
iii) Prakash vs. Vijaykumar & Another
5. The arguments of the learned counsel for both parties have been duly considered.
6. The Apex Court in Sangeetaben's case held that while proceedings under the NI Act require a formal complaint to be filed, proceedings under the IPC do not require such a condition. There may be some overlap in facts, but the ingredients of the offences are different. Therefore, the contention of the complainant that parallel proceedings under IPC and Section 138 of the NI Act are maintainable is accepted.
7. In Vijay Kumar Ghai's case, the Apex Court ruled that to attract the ingredients of Sections 406 and 420 of IPC, the complainant must prima facie establish that the accused intended to cheat or defraud the complainant right from the inception. Furthermore, it must be shown that the alleged act of cheating resulted in wrongful loss to the complainant and corresponding wrongful gain to the accused. In the absence of these elements, proceedings are not permissible in law.
8. In the instant case, there is no al
