Failure to fulfil commercial payment obligations does not constitute cheating unless there is evidence of an initial intent to deceive.

ORDER

Dated this the 18^th day of June, 2025 Petitioner is the 1^st accused in Crime No.1126 of

2022 registered at the Kannur Town Police Station for the offence punishable under Section 420 read with 34 of the Indian Penal Code , now pending as C.C.No.142 of 2023 on the files of the Judicial First Class Magistrate Court-I, Kannur.

2. The crime was registered on the basis of a complaint filed by the 3rd respondent. The allegations in the complaint are to the following effect;

The complainant is the director of an enterprise named Malabar Agri Expo and Delta Trading Middle East EZE, which is engaged in the business of exporting coconuts. Pursuant to an agreement arrived at between the complainant's enterprise and the petitioner, coconuts were exported based on the orders placed by the accused from 2018 onward. Although the payments for the initial consignments were made promptly, the accused defaulted payments from May, 2019 onwards. Even then, the complainant kept on sending the consignments on the understanding that the payments, along with the outstanding amounts, will be made without delay. Later, when the accused stopped replying to the correspondence sent by the complainant and even refused to pick-up his calls, it became evident that the accused had no intention to pay. The subsequent conduct of the accused also revealed that they had the intention to cheat from the very inception.

3. Based on the complaint, the Police conducted investigation and filed a report stating that the dispute involved is of civil nature. Thereupon, the 3^rd respondent filed a protest complaint and cognizance for the offence under Section 420 read with 34 of the IPC is taken by the jurisdictional court. Hence, this Criminal Miscellaneous Case.

4. Learned Counsel for the petitioner contended that, even if the allegations are accepted in their entirety, only a dispute of civil nature is made out. According to the Counsel, the attempt of the 3^rd respondent is to clothe such dispute as a criminal offence, so as to bring pressure upon the accused. It is contended that, dispute with respect to commercial transactions cannot result in criminal prosecution for the offence under Section 420 . In support of the contention, the following decisions are pressed into service.Hasanul Banna v. State of Kerala [2024 KHC Online 1480],Sachin Garg v. State of U.P. [2024 KHC 6046],Radheyshyam and Others v. State of Rajasthan and Another [2024 SCC Online SC 2311],M/s. Indian Oil Corporation v. M/s. NEPC India Ltd. and Others [ 2006 KHC 1202 ] and Binod Kumar and Others v. State of Bihar and Another [ 2014 KHC 4700 ].

5. Learned Counsel for the 3^rd respondent submitted that her client was lured into sending consignments of coconuts to the accused by making some payments initially. Only when the arrears mounted to more than Rs.1 Crore and the accused refused to pay, it became evident that they had the intention to cheat all along. It is contended that inasmuch as the allegations make out the offence under Section 420 , this Court will not be justified in quashing the proceedings by invoking the power under Section 482 of Cr.P.C.

6. A close scrutiny of the complaint reveals that the petitioner had paid the amounts for the consignments sent between January, 2018 and May, 2019. Even if the petitioner defaulted the payments for the subsequent consignments, that will not attract the offence under Section 420 , since the earlier payments indicate that there was no intention to cheat from the inception. It is settled law that the failure of one party to abide by the terms of the agreement with respect to a commercial transaction cannot result in prosecution for the offence of cheating, in the absence of intention to cheat from the very beginni