Offences under Sections 406 and 420 IPC are mutually exclusive; cheating requires dishonest intention from inception, while criminal breach of trust involves lawful entrustment. Mere civil breach of contract does not constitute these offences.

Headnote:(A) Criminal Procedure Code, 1973 - Section 482 - Indian Penal Code, 1860 - Sections 406 and 420 - Quashing of criminal proceedings - Distinction between criminal breach of trust and cheating - Offences under Sections 406 and 420 IPC cannot co-exist - Criminal intention must exist at inception for cheating - Mere breach of contract does not give rise to criminal prosecution unless fraudulent or dishonest intention shown from beginning - Civil dispute given criminal colour - Proceedings quashed.

(B) The court elaborated on the ingredients of Sections 406 and 420 IPC, emphasizing that for cheating, dishonest intention must be present from the very beginning, while for criminal breach of trust, lawful entrustment followed by dishonest misappropriation is key. Both offences are mutually exclusive. (Para 8, relying on Delhi Race Club 1940 Ltd. vs. State of Uttar Pradesh, (2024) 10 SCC 690)

Facts of the case:
The respondent pledged gold jewels and silver articles with the petitioners, who were licensed pawn brokers, for a loan of Rs.1,14,700/-. The respondent paid interest only until July 2019 and thereafter defaulted. After sending notices to the respondent's mobile number, the petitioners sold the pledged items in auction. The respondent filed a criminal complaint for offences under Sections 406 and 420 IPC, which was taken cognizance by the Trial Court. The petitioners sought quashing under Section 482 CrPC.

Findings of Court:
The court found no allegation that the petitioners induced the respondent to pledge the jewels or had an intention to cheat from inception. The petitioners acted within their business after giving due notice. The dispute is purely civil in nature, and the Magistrate erred in taking cognizance. The proceedings constitute an abuse of process of law.

Issues: Whether the ingredients of offences under Sections 406 and 420 IPC are made out against the petitioners? Whether the criminal proceedings can be quashed as a civil dispute given a criminal colour?

Ratio Decidendi: For an offence of cheating under Section 420 IPC, fraudulent or dishonest intention must be present at the time of inducement i.e., from the inception. Criminal breach of trust under Section 406 IPC requires entrustment and dishonest misappropriation. Both cannot co-exist. In this case, there was no initial deception; the respondent voluntarily pledged jewels and received the loan. The subsequent sale after notice does not establish criminal intent. The matter is a civil breach of contract.

Result: Criminal Original Petition allowed. Proceedings in C.C.No.779 of 2023 pending before the Trial Court quashed. Connected miscellaneous petitions closed.

ORDER

This Criminal Original Petition has been filed seeking to quash the proceedings in C.C.No.779 of 2023 pending on the file of the XVIII Metropolitan Magistrate Court, Saidapet, Chennai (for brevity “the Trial Court”).

2. The case of the respondent/complainant is as follows:

i) The complainant pledged his gold jewels weighing 66 gms., fixed with diamond and ruby stones and silver pooja items weighing 2 kgs. and 602 gms., worth Rs.6,00,000/-. On 14.09.2016, 16.11.2016, 16.04.2017 and 20.04.2017 respectively, he pledged them for a value of Rs.1,14,700/- with the 1^st accused /pawn broker and the 2^nd and 3^rd accused are the persons doing the business along with the 1^st accused.

ii) The gold jewels as well as silver pooja items were prestigious and sentimental ornaments of his family and due to his financial emergency to pay fees for his children, he pledged the same. The complainant, who knew the 3^rd accused, asked him to help in pledging the said jewels to any pawn broker known to him. The 3^rd accused informed him that he along with the 1^st and 2^nd accused are carrying on the said business and he himself will advance the loan on the pledged items. Hence, the complainant pledged his gold jewels and silver articles with the petitioners/accused 1 to 3.

iii) The complainant paid monthly interest till 20.07.2019 at the demand of the 2^nd and 3^rd accused. During the year 2019, the complainant approached the accused 1 to 3 to redeem his jewels and silver articles after arranging funds to pay the dues i.e., balance principal amount as well as interest, if any. The accused 1 to 3, citing one reason or other, evaded returning the jewels. The complainant repeatedly demanded for redemption of his jewels and silver articles and informed the accused 1 to 3 that if they fail to return the jewels and silver articles, he will be forced to take legal action. Thereafter, the 2^nd and 3^rd accused informed him that they have sold the golds jewels and silver articles.

iv) When the complainant questioned as to how they can sell the same, the accused informed him that they will somehow try to return the same. The complainant visited the shop of the accused a number of occasions, but all his attempts to redeem the jewels went in vain.

v) Hence, the complainant lodged a complaint before the Inspector of Police, Crime, E3 Teynampet Police Station and the police issued CSR No.183/2020 on 14.06.2020, but no action was taken. Hence, he gave a complaint to the Deputy Commissioner of Police, T.Nagar on 03.08.2020, where he was advised to file a criminal private complaint.

vi) Therefore, a complaint was sent to the Commissioner of Police on 12.10.2020 and the same was received on 13.10.2020, but no action was taken. Subsequently, a complaint was given before the Court and the Court, under Section 156(3) Cr.P.C. in Crl.M.P.No.4860 of 2020, directed the Inspector of Police (Crime), E3 Teynampet Police Station, to register an FIR and file a final report. Even then, no action was taken by the police.

vii) The accused 1 to 3 had indulged in cheating by not returning the items entrusted to them and have committed the offences under sections 406 and 420 IPC. Hence, the complainant filed the complaint against the petitioners for the offences under Sections 406 and 420 IPC which was taken cognizance by the Trial Court in C.C. No.779 of 2023.

3. Mr.A.Kripakaran, learned counsel for the petitioners would submit that the petitioners are licensed pawn brokers in L.No.56/F3/2015-16 and they have been running the business according to the statutory conditions imposed by the authorities; the respondent voluntarily pledged the jewels and paid interest only on two occasions and thereafter, did not pay neither the principal nor the interest component; therefore, the petitioners, in due course of their business, sent intimation to him to his registered mobile number 88388 22719; even thereafter, the complainant neither paid interest nor the principal; while so, on 31.10.2018, the complaina

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2025 Supreme(Online)(Mad) 10490

IN THE HIGH COURT OF JUDICATURE AT MADRASHonourable Mr Justice A.D.JAGADISH CHANDIRAP.SUSHILA KANWAR – AppellantVersusK.DEVENDRAN – Respondent

Offences under Sections 406 and 420 IPC are mutually exclusive; cheating requires dishonest intention from inception, while criminal breach of trust involves lawful entrustment. Mere civil breach of contract does not constitute these offences.

IN THE HIGH COURT OF JUDICATURE AT MADRAS
Honourable Mr Justice A.D.JAGADISH CHANDIRA
P.SUSHILA KANWAR – Appellant
Versus
K.DEVENDRAN – Respondent