To constitute the offence of cheating, the accused must possess a dishonest or fraudulent intention at the time of the initial inducement. Mere breach of contract, failure to fulfill a promise, or the dishonour of post-dated cheques issued for existing liabilities does not establish such intention.

MANOJ MISRA, J.

1. Leave granted.

2. This appeal impugns the judgment and order of the High Court at Madras, Digitally signed by dated 06.04.2023 in Crl. O.P. No. 847 of 2021 and Crl. M.P. No. 518 of 2021, whereby the prayer of the appellant to quash final report and consequential proceedings in C.C. No.

Signature Not Verified

3569 of 2020 on the file of the Metropolitan CHETAN ARORA Date: 2026.03.19 Reason:

1 The High Court

Chennai-600008, under Section 406 and 420 of the Indian Penal Code, 1860, Magistrate (CCB and CBCID, Metro Cases), Egmore,, was partly allowed to the extent of indictment under Section 406 IPC; however, the prayer to quash indictment under Section 420 IPC was declined.

3. In brief, the prosecution case, as could be evinced from the final report (i.e., police report) submitted under Section 173 of the Code of Criminal Procedure, 1973, CrPC, is that the accused (the appellant herein) was producing a ‘movie’. In the course of its production, he ran short of funds. He, therefore, requested the de-facto complainant (i.e., the second-respondent herein) to lend him money on assurance that it would be returned by a share in profits to the extent of 30%. Later, further money was lent on promise of an additional 17% share in profits. Ultimately, two post- dated cheques of Rs.24 lacs each were issued by the

2 IPC

accused to the de facto complainant towards return of the principal amount which returned unpaid for insufficient funds in the account. Based on above, it was alleged that the accused had cheated the complainant and had also committed offence of criminal breach of trust.

4. Aggrieved by the police report and the consequential proceedings, the appellant invoked the jurisdiction of the High Court under Section 482 of CrPC, inter alia, to quash the report and the consequential proceedings on the ground that a pure civil cause of action was given colour of a criminal offence.

5. By the impugned order, the High Court quashed the indictment of an offence punishable under Section 406 IPC but declined to quash the proceedings qua the offence of cheating punishable under Section 420 IPC.

6. We have heard the learned counsel for the parties. 7. On behalf of the appellant it is submitted that admittedly the second-respondent had invested money in a movie project on expectation of good returns. There is no dispute that the movie project was completed. However, it could not generate profits. In such circumstances, the appellant could not fulfil its commitment of providing good returns on the investment. Therefore, there was no dishonest intention and the dispute between the parties is purely civil in nature. Hence, institution and continuation of criminal proceedings is nothing but abuse of the process of Law.

8. Per contra, on behalf of the respondent(s) it is submitted that dishonest intention of the appellant was there from the very beginning which is evident from the fact that the two cheques got dishonoured for want of funds. Besides, on appellant’s false assurance of profits, money was lent. In these circumstances, offence of cheating is made out.

9. We have accorded due consideration to the rival submissions and have perused the record.

10. The police report indicted the appellant for offences of criminal breach of trust and cheating punishable under Sections 406 and 420 IPC respectively. The High Court came to the conclusion, and rightly so, that no offence punishable under Section 406 of IPC is made out as there was no entrustment. Regarding the offence of cheating, the High Court concluded that prima facie it is made out. The reasoning of the High Court in support of its conclusions can be found in paragraph 6 of its judgment, which is extracted below:

“This Court on perusal of the impugned final report finds that the offence under Section 406 IPC is not made out. There is no entrustment made to the petitioner, in order to attract th