MR ALKESH VINOD SHAH vs STATE OF KARNATAKA

1
Reserved on : 29.07.2026
Pronounced on : 16.10.2026

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

TH
DATED THIS THE 16 DAY OF OCTOBER, 2026

BEFORE

THE HON'BLE MR. JUSTICE M. NAGAPRASANNA

CRIMINAL PETITION No.8419 OF 2025
R
C/W
CRIMINAL PETITION No.4215 OF 2021

IN CRIMINAL PETITION No.8419 OF 2025

BETWEEN:

1 . MR.ALKESH VINOD SHAH
AGED ABOUT 41 YEARS
S/O MR. VINOD KANJI SHAH,
RESIDING AT 'KALPAVRUKSH HOMES'
ST ST
NO.5, 1 FLOOR, 1 MAIN
UPPER PIPE LINE ROAD,
KUMARA PARK WEST,
BENGALURU – 560 020.

ALSO AT:
RESIDING AT 'KALPAVRUKSH HOMES'
ST
NO.51, 1 FLOOR
CHAKRAVARTHY IYENGAR EXTENSION
SHESHADRIPURAM
BENGALURU – 560 020.













Digitally
signed by
CHETAN B C
Location:
High Court
of Karnataka

2
2 . VINOD KANJI SHAH
AGED ABOUT 68 YEARS
S/O LATE MR. KANJI DEVSHI SHAH
RESIDING AT NO.7
KUNAL UPPER PIPELINE ROAD
KUMARAPARK WEST
BENGALURU – 560 020.

3 . M/S VKS INCENSE
PRIVATE LIMITED,
(NOW KNOWN AS
SHALIMAR INCENSE PRIVATE LIMITED)
HAVING REGISTERED OFFICE AT
SHALIMAR HOUSE NO.32 AND 33,
RD
3 CROSS, SRIRAMPURAM,
BENGALURU – 560 021.

REPRESENTED BY ITS
MANAGING DIRECTOR
MR. ALKESH VINOD SHAH
... PETITIONERS

(BY SRI ASHWIN PRABHU K., ADVOCATE FOR P-1 AND 3;
SRI ANGAD KAMATH, ADVOCATE A/W
SRI BALA NIKIT, ADVOCATE FOR P-2)

AND:

1 . STATE OF KARNATAKA
SRIRAMPURA POLICE STATION
REPRESENTED BY
THE SPP,
HIGH COURT OF KARNATAKA,
BENGLAURU – 560 001.

2 . NITIN KANJI SHAH
S/O LATE KANJI DEVSHI SHAH
AGED ABOUT 58 YEARS

3
RESIDING AT NO.70
ST
KUNAL, 1 FLOOR
UPPER PIPELINE ROAD
KUMARA PARK WEST
BENGALURU – 560 020.
... RESPONDENTS

(BY SMT.WAHEEDA M.M., HCGP FOR R-1;
SRI MAHESH S., ADVOCATE FOR R-2 )

THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C.,/READ WITH SECTION 528 OF BNSS PRAYING TO
1.QUASH THE FIR BEARING NO.50/2021 REGISTERED AGAINST
ST
THE PETITIONERS BY THE 1 RESPONDENT IN SRIRAMAPURA
POLICE STATION , III ADDL. CHIEF METROPOLITAN MAGISTRATE
AND IPC UNDER SECTION 120(B), 403, 406, 420, 468, 471, 417,
470, 469, 423, 379, 380, 415; 2. SET ASIDE THE ORDER DATED
27.12.2023 IN PCR 6431/2021, PASSED BY THE LD.III A.C.M.M
ST
REJECTING THE B REPORT FILED BY THE 1 RESPONDENT POLICE;
3.QUASH ALL PROCEEDINGS IN PCR NO.6431/2021 PENDING
BEFORE THE LD.III A.C.M.M.

IN CRIMINAL PETITION No.4215 OF 2021
BETWEEN:

SANDEEP HARAKCHAND SHAH
S/O HARAKCHAND SHAH,
AGED ABOUT 50 YEARS,
RESIDING AT FLAT NO.1101,
TH
11 FLOOR, EMERALD TOWER,
PARK WEST APARTMENT,
1/1 BINNYPET ROAD,
BINNYPET,
BENGALURU – 560 023.
... PETITIONER
(BY SRI ANGAD KAMATH, ADVOCATE FOR

4
SRI BALA NIKIT AND
SRI ASHWIN PRABHU K., ADVOCATES)

AND:

1 . STATE BY
SRIRAMPURA POLICE STATION,
TH
NO.47, 9 MAIN ROAD,
DAYANANDA NAGAR,
SRIRAMPURA,
BENGALURU – 560 021.

2 . NITIN KANJI SHAH
S/O LATE KANJI DEVSHI SHAH,
AGED ABOUT 54 YEARS,
RESIDING AT NO.07, KUNAL,
ST
1 FLOOR,
UPPER PIPELINE ROAD,
KUMARA PARK WEST,
BENGALURU – 560 020.
... RESPONDENTS
(BY SMT.WAHEEDA M.M., HCGP FOR R-1;
SRI MAHESH S., ADVOCATE FOR R-2)

THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO I. QUASH THE ORDER DATED 19.04.2021 IN
CR.NO.7522/2021 PASSED BY THE IV ADDL.C.M.M., AND THE
REGISTRATION OF THE FIR NO.50/2021 REGISTERED AGAINST
ST
THE PETITIONER BY THE 1 RESPONDENT AND ALL THE
SUBSEQUENT PROCEEDING EMANATING THEREFROM; II. QUASH
ND
THE COMPLAINT FILED BY THE 2 RESPONDENT IN
CR.NO.7522/2021 PENDING BEFORE THE IV ADDL.C.M.M.,
BENGALURU AGAINST THE PETITIONER AND ALL THE SUBSEQUENT
PROCEEDINGS EMANATING THEREFROM.

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THESE CRIMINAL PETITIONS HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 29.07.2026, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-

CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA

CAV ORDER


Criminal Petition No.4215 of 2021 is preferred by accused
No.4 in Crime No.50 of 2021 renumbered as Crime No. 7522 of
2021 and the companion petition Criminal Petition No.8419 of 2025
is preferred by accused Nos.1, 2 and 3 in Crime No.50 of 2021
arising from PCR No.6431 of 2021. The complainant in both these
cases is common and the transactions between the two, that have
raised these crimes are also common. Therefore, the two are taken
up together and considered by this common order.


2. Heard in both the cases, Sri Angad Kamath , learned
counsel appearing for the petitioners; Smt Waheeda M.M , learned
High Court Government Pleader appearing for respondent No.1 and
Sri Mahesh S , learned counsel appearing for respondent No.2.

3. Facts, in brief, germane are as follows:-

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Criminal Petition No.4215 of 2021:

nd
3.1. The petitioner/accused No.4 and the 2 respondent/
complainant are in the business of supply of raw materials,
including raw sticks for preparation of incense sticks and agarbattis
through the proprietorship concern of the petitioner ‘Sandeep
Agarbatti Co’. The petitioner has been supplying raw materials to
'Shalimar Agarbatti Co.', a registered partnership firm for two
decades. The said firm has three partners, one Nitin Kanji Shah,
Vinod Kanji Shah and Alkesh Vinod Shah. The complainant is the
brother of Vinod Kanji Shah and uncle of Alkesh Vinod Shah. The
petitioner is the son of Vinod Kanji Shah’s sister. Therefore, the
complainant and the petitioner are members of the same family.

3.2. In 2017, the complainant owing to some disputes
between the partners of the firm was expelled from the firm.
Subsequently in early 2018 Vinod Kanji Shah and Alkesh Vinod
Shah approached the petitioner informing him that they were
incorporating a new Company and offered the petitioner some
shares. The petitioner being related to one of the persons in the
family of the complainant decided to purchase 100 shares out of

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10,000 shares in the new incorporated company called ‘VKS
Incense Private Limited’. After its incorporation, the said Company
enters into a Business Transfer Agreement with the firm of the
petitioner i.e., Shalimar Agarbatti Company. The firm then gets
embroiled in legal tussle on account of several crimes registered by
the family of the complainant. The complainant is expelled from the
firm. After his expulsion, certain disputes which had to be resolved
are being resolved by an Arbitrator appointed at the hands of this
Court in C.M.P.No.246 of 2017. Upon settlement of claims being
filed by the complainant, the petitioner and another filed their
statement of objections and counter claims informing the Arbitral
Tribunal and the complainant regarding execution of a Business
Transfer Agreement, at the instance of the complainant himself.
Since the firm was not made a party in the arbitration proceedings
initially, the complainant impleaded the firm by naming the
petitioner as the Director of the firm. Be that as it may, the
arbitration proceedings are even as on date continuing before the
Arbitrator.

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3.3. During the subsistence of the said arbitration, a private
complaint comes to be registered invoking Section 200 of the
Cr.P.C., in P.C.R.No.6431 of 2021, in which the learned Magistrate
refers the matter for investigation. The matter then becomes a
crime in Crime No.50 of 2021 for it having been registered on
23-04-2021. On 11-06-2021 the subject petition is preferred and a
coordinate Bench of this Court which grants an interim order of stay
on 29-06-2021 by a detailed order. The said interim order is
subsisting even today.

Criminal Petition No.8419 of 2025:


3.4. The subject petition is preferred by accused 1, 2 and 3
in the very same crime in Crime No.50 of 2021. The facts in the
subject petition commence from the date on which the aforesaid
interim order is granted at the hands of this Court. After the grant
of the interim order in Criminal Petition No.4215 of 2021, a ‘B’
report is filed by the Police on 25-09-2021. The complainant then
prefers a protest petition on 14-11-2022. All this while the
petitioners and the complainant were fighting their battle in
arbitration proceedings. The ‘B’ report so filed by the Police comes

9
to be rejected by the concerned Court. By then, several crimes had
been registered against each other. On 26-03-2025 joint affidavit is
filed by the parties by mutual consent seeking quashment of 6
crimes in several writ petitions. But, the learned Magistrate had by
then rejected ‘B’ report and took cognizance of the offence in terms
of his order dated 27-12-2023. It is this order that is called in
question in the subject petition by the other accused who were not
petitioners in the companion petition, in whose favour an interim
order is operating. Therefore, the two petitions arise at different
circumstances over a solitary crime in Crime No.50 of 2021.

4. The learned counsel Sri Angad Kamath, appearing for
the petitioners in both these cases would vehemently contend that
the petitioners and the respondent/complainant either through their
firm or individually are before the Arbitrator on day today
proceedings. Even on the date on which the matter was being
heard, the arbitration proceedings were on. Though 6 crimes were
registered against each other and have all stood closed by filing
joint affidavits, now the complainant wanting to pursue this matter,
notwithstanding the fact that the entire issue is completely arising

10
out of civil transaction or financial transaction between the parties.
The learned counsel for the petitioners submits that the subject
proceedings must not be permitted to be continued even. He would
contend that the concerned Court ought not to have rejected the ‘B’
report and taken cognizance of the offence in the teeth of
subsistence of the interim order.

nd
5. The learned counsel appearing for the 2 respondent/
complainant would vehemently refute the submissions in
contending that it is settled principle of law that a civil case and a
criminal case can go hand in hand. It is not that merely because
civil proceedings have been instituted the criminal proceedings
must be terminated. He would submit that this Court had granted
interim order of stay in the earlier petition which did not stop the
concerned Court in accepting or rejecting the ‘B’ report since Police
had filed the ‘B’ report. He would further contend that after
rejection of the ‘B’ report, by a separate order cognizance is taken
which is challenged by the petitioner. Therefore, Criminal Petition
No.4215 of 2021 at least must be dismissed as nothing survives in
the said petition. He would submit that the crime must be

11
permitted to be taken to its logical conclusion by the concerned
Court and the petitioners having liberty to knock the doors of the
appropriate fora in the event of need, this Court must not exercise
jurisdiction under Section 482 of the Cr.P.C.

6. The afore-narrated facts are a matter of record. The
genesis of the problem is a Business Transfer Agreement that is
entered into between the protagonists of the crime on 24-01-2018.
Then dispute arose between the two. An Arbitrator is appointed in
C.M.P. No.246 of 2017 at the hands of this Court. The claimant is
the complainant. The claim before the Arbitrator is as follows:

“WHEREFORE the Claimant prays that this Hon'ble Tribunal be
pleased to pass the following award:

a) Dissolving the Firm Shalimar Agarbatti Company as per
dissolution Notice dated.28/7/2017 under Document.
No.51 issued by the Claimant in terms of Clause 2 of the
Partnership Deed dated 1/1/2016 or in the alternative
dissolve the Firm by an order of this Hon'ble Tribunal;

b) Appointing a Receiver in order to take over the business,
affairs and assets of the Firm i.e. Shalimar Agarbatti
Company for its proper management including taking of
its accounts:

c) Directing the Respondents to pay an amount of Rs.
14,77,72,328 towards his share in the Firm;

12
d) Directing the Respondents to handover 50% of the
"Landed Properties of the Firm Shalimar Agarbatti Co in
favour of the Claimant;

e) Directing the Respondents to pay amount of Rs.
86,84,03,065/- towards the Goodwill of the Firm;

f) Directing the Respondents to pay an amount of Rs.
2,17,78,000/- (Rupees Two Crore Seventeen Lakhs
Seventy Eight Thousand Only) to the Claimant towards
the 15% share for the period of 7 years;

g) Directing the Respondents to pay 50% share in the profits
for the financial year 2017-2018 to the Claimant;

h) Directing the Respondents to return 15% of the share in
the Firm to the Claimant;

st
i) Declaring that the 1 Respondent is not a partner of the
nd
Firm and the 2 Respondent and the Claimant are the
only partners of the Firm having 50% of the share in the
same;

j) Restraining the Respondents or their agents or anyone
acting on their behalf from dealing with the assets of the
Firm in any manner whatsoever either in the course of
business or otherwise;

k) Restraining the Respondents or their agents or anyone
acting on their behalf from carrying on any business in
the name of the Firm i.e. Shalimar Agarbatti Company
holding themselves as partners of the Firm or in any
manner whatsoever with anyone whomsoever and
including the banking transactions;

l) Restraining the Respondents or their agents or anyone
acting on their behalf from preventing the rights of the
Plaintiff from entering into the premises of the Firm and
discharging his duties as a partner of the Firm and also
not to do any such acts which prevents the Claimant to
continue and function as a partner in the Firm viz.,
Shalimar Agarbatti Company in any manner whatsoever
till the completion of the winding up proceedings;

13

m) Directing the respondents not to carry on any transaction
pertaining to the firm without the permission and consent
of the claimant and further to do so only with the joint
signature of the claimant in all the business and banking
transactions till the appointment of the Receiver:

n) Grant permanent injunction against the defendants not to
alienate any of the properties or assets of Firm in any
third parties favour in whatsoever nature:

o) To render and submit the daily accounts of the Firm
before this Hon'ble Tribunal;

p) Declare the Business Transfer Agreement dated 24-1-
2018 produced at Document No. 57 by the Respondents
as illegal, nor binding either on the firm or the Claimant;

q) Declare that the (1) Sale Deed dated 5-3-2018 registered
in the office of the Sub-Registrar, Rajajinagar, Bangalore,
vide Doc. No. RJN-1-04874/2017-18, Volume No. I,
Stored in CD No. RJND310, (2) sale deed dated 5-3-2018
registered in the office of the Sub-Registrar, Rajajinagar,
Bangalore, vide Doc. No. RJN-1-04873/2017-18, Volume
No. I. Stored in CD No. RJND310, (3) sale deed dated
5-3-2018 registered in the office of the Sub-Registrar,
Rajajinagar, Bangalore, vide Doc. No. RJN-1-04878/2017-
18, Volume No. I, Stored in CD No. RJND310 and (4) sale
deed dated 5-3-2018 registered in the office of the Sub-
Registrar, Rajajinagar, Bangalore, vide Doc. No. RJN-1-
04876/2017-18, Volume No. I, Stored in CD No. RJND310
execute by Shalimvar Agarbatti Co in favour of Ms.V.K.S.
Incense Pvt Ltd are null and void and not binding on the
claimant;

r) Declare that all the business, goodwill, properties both
moveable and immovable, all other assets of the Firm
which was standing as on 31-3-2017 continues to be that
of the Firm and the claimant has 50% share in the same:

s) Restrain M/s.V.K.S. Incense Pvt Ltd. its Directors, agents,
or anyone attached to it or acting under it from alienating
all such moveable, immovable properties, assets,

14
business that it has acquired from the Firm Shalimar
Agarbatti Co in whatsoever manner in favor of any third
parties in whatsoever manner;

t) Pass such other further orders/directions as may be
deemed fit in the interest of justice and equity.

SCHEDULE

SHALIMAR AGARBATHI CO ., "Shalimar House" P.B. No 2114,
rd
32 & 33, 3 Cross, Srirampuram, Bengaluru – 560 021.”


One of the prayers is to declare the Business Transfer Agreement
as not binding on the firm. The said matter is still being arbitrated
before the sole Arbitrator – a retired Judge of this Court, Justice
Keshavanarayana. In the teeth of the subsistence of arbitration
nd
proceedings, a private complaint comes to be registered by the 2
respondent/complainant invoking Section 200 of the Cr.P.C. In a
lengthy complaint, the gist of the allegation is as follows:
“…. …. ….
6) I humbly submit that as demonstrated above, I reasonably
infer that right from the inception, that the Accused had
conspired with each other and hatched a plan to cheat me in
order to knock of the business, properties and finances of the
firm. With a view to do so, by their words and promises, the
Accused No. 1 and 2 had induced me to part with his 15% of
the shares promising that they would return it to me. Further
they have also promised to pay 15% of the proportionate
profits. However, after the said period, when I requested
them to return my shares and also to make payment of
profit of Rs. 2.17 crores, they have unleashed serious illegal
acts and also denied to return 15% and the said amounts,

15
thus cheating me. Further after the I initiated the legal
st nd th
proceedings, the 1 and 2 and Accused conspiring with 4
th th
and 5 accused, have illegally formed the 4 accused on
23-1-2018 and on the very next date i.e. on 24-1-2018, they
have created a fraudulent Business Transfer Agreement and
are claiming that they have transferred the entire business of
th
the firm to the 4 accused. In this regard, as stated above, it
st nd
is the 1 and 2 accused representing the firm, have sold to
th rd
themselves representing the 4 accused. As stated, in the 3
st nd
accused company, 1 and 2 accused almost holds the
st nd
entire shares. Apart from the same 1 and 2 accused have
rd
sold the immovable properties of the firm in favour of the 3
th
accused who are nothing but themselves. Even the 4 and
th
5 accused were aware of my rights and the firm and were
also aware that the properties of the firm cannot be sold to
anyone without my consent or permission. However, when
the entire worth of the firm was Rs.235 crores they have
stated that they have sold it to Rs. 35 crores. Apart from the
st nd
same, the 1 and 2 accused have claimed that the firm was
suffering losses when they have utilised the said amount for
themselves. Furthermore as demonstrated above, they have
purchased luxury cars for their usage from and out of the
monies of the firm which belongs to me also and are using
the Firm's funds for their purposes and luxaries. Apart from
st nd
the above, as proved, 1 and 2 accused have withdrawn
crores of rupees from the firm illegally. As stated above,
when the dispute is pending with regard to the firm and its
properties, the right title and interest and ownership of the
complainant over the properties and assessts of the firm
continues and without my consent the same cannot be
moved in any manner whatsoever and such movement
without my prior consent amounts to theft. I had implicit
st nd
faith in the 1 and 2 accused that during the pendency of
the litigation till its finality, the accused who have entire
dominion and control over the business of the firm would act
legally, however illegally they have committed the above
said crime to make unlawful gains for themselves while
causing wrongful loss to the complainant. In order to achieve
their objective, they have also committed several other
criminal act, which is pending consideration before the
Hon'ble Courts. Hence the above acts of the Accused No. 1
and 2 including that of other accused, attracts the provisions
of conspiracy, criminal breach of trust, cheating, causing

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mischief, creation of fraudulent documents and using it as
genuine, among other offences which attracts the provisions
of Sec. 403, 406, 415, 420, 468, 471, 417, 120B of IPC
among other penal offences for which the accused have to be
tried.

7) I state that despite of the commission of the above offences
by the Accused which are cognizable, the jurisdictional police
have not registered the Fir and investigating the same.

8) I am filing this affidavit in compliance with the directions of
the Hon'ble Supreme Court of India in the case of in the case
of Priyanka Srivatsa & Anr V/s State of U.P reported in 2015
Cri L. J 2396

I pray that his Hon'ble Court be pleased to accept the
complaint and initiate necessary criminal proceedings against
the accused in the interest of justice.

I swear that this is my name and signature and the contents
of this affidavit are true and correct to the best of my
knowledge, information and belief.”


The matter is referred for investigation by the learned Magistrate
which then becomes a crime in Crime No.50 of 2021 for the
offences punishable under Sections 120B, 403, 406, 417, 420, 468
and 471 of the IPC. The crime was registered on 23-04-2021.
Criminal Petition No.4215 of 2021 is preferred on 11-06-2021. The
coordinate Bench by a detailed order, after hearing the parties,
grants an interim order on 29-06-2021. The interim order reads as
follows:

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“ Heard the learned senior counsel for the petitioner,
learned HCGP for the first respondent and learned counsel for
the second respondent-complainant.

Learned senior counsel appearing for the petitioner
submits that the complainant is none other than the partner of
the partnership firm known as Shalimar Agarbatti Company of
which accused nos.1 & 2 were also the partners. There was
some dispute between the partners of the said firm which has
resulted in the complainant dissolving the firm and thereafter
initiating proceedings under the arbitration and conciliation Act
claiming his right in the assets of the partnership firm. He
submits that the arbitration proceedings has been initiated in
the year 2017 and the said proceedings is at an advanced stage.
He submits that to wreck vengeance the complainant has now
filed a private complaint alleging that his partners who are
accused Nos.1 & 2 have transferred entire assets of partnership
firm to the newly constituted company known as VKS Incense
Private Limited and the allegations against the petitioner is that
he being 1% share holder of the company has conspired with
accused Nos.1 & 2 and has illegally transferred all the assets to
deprive him of his rightful share. The complainant has rightful
share in partnership assets. He submits that only with an
intention to coerce the person named in the complaint, the
present private complaint is filed and even if the allegation in
the complaint is prima facie taken to be true, no case can be
made out against the petitioner who is the only 1% share holder
in the company for the offences alleged against him.

Per contra, learned counsel appearing for respondent
No.2–complainant submits that the petitioner is a close relative
of the accused Nos.1 & 2 and he had all the knowledge about
the transactions of the partnership firm. He submits that the
petitioner had played pivotal role in constituting the company
and transferring the assets of the partnership firm to the
company and he being the 1% share holder is a beneficiary of
the assets of the company. Therefore, he is required to be tried
for the offences alleged. He submits that there are prima facie
materials in the complaint that would attract alleged offences
even against the petitioner and therefore, prays to dismiss the
petition.

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The dispute between the accused Nos.1 & 2 and the
complainant prima facie appears to be with regard to the assets
of the partnership firm and arbitration proceedings initiated by
the second respondent-complainant is already pending
consideration before the learned Arbitrator who has been
appointed by this Court. Even in respect to for the allegations in
the complaint with regard to the transfer of the assets of the
partnership firm clandestinely to the newly constituted company
of the accused Nos.1 & 2, on the face of it no case for the
alleged offences can be made out against the petitioner who is
only 1% person share holder in the company.

Matter needs consideration. Therefore, there shall be an
interim order as prayed for insofar as the petitioner is concerned
till the next date of hearing.

List this matter on 09.08.2021.

The interim order granted herein shall not come in way of
the investigation officer continuing the investigation insofar as
the other accused persons are concerned.”

The interim order was restricted only to the petitioner and against
others the investigation was permitted to be continued. The
continuation of investigation led the Police to file a ‘B’ report against
others and not the petitioner. The concerned Court then rejects ‘B’
report by the following order:
“ORDER ON ‘B’ REPORT
The complainant has filed this private complaint against
accused persons for the alleged commission of offences
punishable under Sections 379, 380, 403, 406, 415, 420, 423,
469, 470, 471, 120B of IPC. This court referred the matter for
investigation to the Srirampura PS for investigation under
Section 156(3) of CrPC. The IO registered the FIR in Cr.No.50
of 2021 investigated the matter and submitted ‘B’ report.

19

2. In the B report IO submitted that the case is in civil
nature hence offences not attracted. On perusal of the B report,
wherein he clearly disclosed that the accused are the partners
and directors of the Shalimar Agarbathi Company and father of
the complainant was one of the partner. The accused have
removed the father of complainant from the partnership but
whether amount of investment returned or not is not disclosed.
As per the allegation the accused misappropriated the
investment of complainant’s father. When he asked the amount
he threatened the complainant. In this regard admittedly there
are some criminal cases have been pending before different
Courts. But the IO not disclosed any document subject matter in
civil nature. Only on the basis of transaction is concerned he
came to the conclusion that matter is civil in nature. Therefore,
it is necessary to give an opportunity to the complainant to
prove his case. Hence, I proceed to pass the following:

ORDER

‘B’ report filed by the IO is hereby rejected.

The complainant is permitted to prove his case of
examining himself and other witnesses.

For sworn statement.

Call on 09-02-2024.”

By a separate order, the concerned Court takes cognizance of the
offence. The rejection of the ‘B’ report and taking of cognizance of
the offence happens on 27.12.2023. But, the companion petition is
preferred on 16-06-2025. The reason is interregnum proceedings
pending between the parties.

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7. There were about 6 crimes pending in (i) FIR No.162 of
2017 dated 25-07-2017 filed by Mr. Nitin Kanji Shah; (ii) FIR
No.165 of 2017 dated 26-07-2017 filed by Mr. Nitin Kanji Shah; (iii)
FIR No.166 of 2017 dated 26-07-2017 filed by Mr. Vinod Kanji
Shah; (iv) FIR No.172 of 2017 dated 29-07-2017 filed by Mrs.
Digna Alkesh; (v) FIR No.181 of 2017 dated 11-08-2017 filed by
Mr. Nitin Kanji Shah; and (vi) FIR No.182 of 2017 dated
11-08-2017 filed by Mr. Alkesh Vinod Shah. All these crimes come
to be closed by entering into settlements between each other, all on
the score that the matter was pending adjudication before the
Arbitrator. This crime No.50 of 2021 is sought to be continued by
the complainant despite the aforesaid facts.

8. The fulcrum of the crime is a dispute arising out
Business Transfer Agreement. The claim before the Arbitrator is
that the Business Transfer Agreement is not binding upon the
complainant and several other monetary reliefs are sought before
the Arbitrator. In the same breath the complainant registers the
crime invoking offences under Sections 420 and 468 of the IPC viz.,
cheating and forgery. In the considered view of this Court and in

21
the teeth of aforesaid fact of several crimes pending between the
parties, if further proceedings are permitted to continue under the
umbrella of criminal law, it would become an abuse of the process
of law. It is no doubt true that in a given circumstance an incident
may give rise to a civil wrong as well as criminal law. This is not
one such case. This is a case where criminal law is being set into
motion on a business arising out of Business Transfer Agreement
and monetary claims, all of which are pending before the Arbitrator
not today, but for the last 8 years.

9. Jurisprudence is replete with the judgments of the Apex
Court on the issue, as to whether criminal proceedings must be
permitted to be continued before the concerned Court,
notwithstanding the fact that the issue is completely civil which is
dressed with a colour of crime.

9.1. The Apex Court in the case of ANUKUL SINGH v.
1
STATE OF UTTAR PRADESH , has held as follows:
“…. …. ….
11.5. Thus, the cumulative principles that emerge
are: while the jurisdiction under Section 482 Cr.P.C. is

1
2025 SCC OnLine SC 2060

22
extraordinary and must be exercised sparingly, it is the
duty of the High Court to intervene where continuation of
criminal proceedings would amount to an abuse of
process of law, or where the dispute is purely of a civil
nature and criminal colour has been artificially given to it.
Conversely, where disputed questions of fact arise requiring
adjudication, the matter must ordinarily proceed to trial.

12. The specific case of the appellant is that his father
purchased land comprised in Khasra Nos. 18, 19, 20, 21 and 22
situated at Village Sherpur Mafi, District Moradabad, from one
Akil Hussain. This land was used for the purposes of Qurbani.
According to the appellant, in order to usurp the said property,
the Shaher Imam of Bilari, in collusion with the district
administration and under pressure exerted upon the local police,
ensured that a series of false criminal cases were foisted against
him. As many as eight FIRs were lodged against the
appellant, including the present one, all of which, in
substance, arise out of a civil dispute relating to
ownership and possession of the property. Initiation of
the present criminal proceedings, therefore, amounts to a
clear abuse of the process of law, squarely falling within
the illustrative categories delineated in Bhajan Lal ,
particularly where the dispute is manifestly civil in nature
and the prosecution is maliciously instituted with an
ulterior motive.

13. The record reveals that within a short span, as many
as eight FIRs were registered against the appellant. The
gravamen of the allegations in the present FIR is that
Respondent No. 2/complainant approached the appellant for a
loan of Rs. 2,00,000/-, but was allegedly advanced only Rs.
1,40,000/-. It is further alleged that, in connection with the said
transaction, an agreement to sell dated 09.11.1998 was
executed in respect of a plot owned by the complainant, and
that the appellant procured three cheques from Respondent No.
2, which, upon presentation, were dishonoured for insufficiency
of funds . Even if accepted in entirety, these allegations
disclose, at best, a civil dispute and do not prima
facie constitute the essential ingredients of the criminal
offences alleged.

23
14. It is significant to note that prior to registration of the
present FIR, the appellant had already initiated proceedings
against Respondent No. 2, namely a complaint under Section
138 of the N.I. Act (Complaint No. 2402840/2005) before the
N.I. Court, Moradabad, as well as FIR No. 120/2002, in which,
the complainant himself was arrested. The present FIR was
lodged nearly three months after the filing of the Section 138
complaint and seven months after FIR No. 120/2002. The plea
that the FIR is a retaliatory counterblast to the proceedings
legitimately initiated by the appellant, therefore, carries
substantial weight.

15. The mala fide nature of the complaint is further
fortified by the fact that, by judgment dated 15.01.2025, the
trial Court convicted Respondent No. 2 under Section 138 of the
N.I. Act, sentencing him to one month's imprisonment and
imposing a fine of Rs. 90,000/-. This conviction lends strong
support to the appellant's case that the initiation of the present
FIR was a retaliatory measure, maliciously instituted with an
ulterior motive to neutralise the lawful action taken by him.

16. Despite this background, the police proceeded to file
a charge sheet dated 16.04.2003 against the appellant for
offences under sections 420, 467, and 468 IPC. Even if the
allegations are assumed to be true, they unmistakably
arise out of a commercial/contractual transaction
relating to loan and repayment, which has been given a
criminal colour. The case thus falls squarely within
categories (1) and (7) of Bhajan Lal , namely, where the
allegations do not disclose the commission of an offence,
and where the proceedings are maliciously instituted
with an ulterior motive. Continuation of such prosecution
would amount to an abuse of process of law and
consequently, warrant quashing under
Section 482 Cr.P.C.

17. This Court has, in a long line of decisions,
deprecated the tendency to convert civil disputes into
criminal proceedings. In Indian Oil Corporation v. NEPC
India Ltd. , it was held that criminal law cannot be used as
a tool to settle scores in commercial or contractual
matters, and that such misuse amounts to abuse of

24
process. The following paragraphs from the decision are
apposite:

“9. The principles, relevant to our purpose are:

(i) A complaint can be quashed
where the allegations made in the
complaint, even if they are taken at their
face value and accepted in their entirety, do
not prima facie constitute any offence or
make out the case alleged against the
accused. For this purpose, the complaint has
to be examined as a whole, but without
examining the merits of the allegations.
Neither a detailed inquiry nor a meticulous
analysis of the material nor an assessment
of the reliability or genuineness of the
allegations in the complaint, is warranted
while examining prayer for quashing of a
complaint.

(ii) A complaint may also be
quashed where it is a clear abuse of the
process of the court, as when the criminal
proceeding is found to have been initiated
with malafides/malice for wreaking
vengeance or to cause harm, or where the
allegations are absurd and inherently
improbable .

(iii) The power to quash shall not,
however, be used to stifle or scuttle a legitimate
prosecution. The power should be used sparingly
and with abundant caution.

(iv) The complaint is not required to
verbatim reproduce the legal ingredients of the
offence alleged. If the necessary factual
foundation is laid in the complaint, merely on the
ground that a few ingredients have not been
stated in detail, the proceedings should not be
quashed. Quashing of the complaint is
warranted only where the complaint is so
bereft of even the basic facts which are
absolutely necessary for making out the
offence.

25
(v) A given set of facts may make out:
(a) purely a civil wrong; or (b) purely a criminal
offence; or (c) a civil wrong as also a criminal
offence. A commercial transaction or a
contractual dispute, apart from furnishing a
cause of action for seeking remedy in civil
law, may also involve a criminal offence. As
the nature and scope of a civil proceedings
are different from a criminal proceeding, the
mere fact that the complaint relates to a
commercial transaction or breach of
contract, for which a civil remedy is
available or has been availed, is not by itself
a ground to quash the criminal proceedings.
The test is whether the allegations in the
complaint disclose a criminal offence or not.

10. While on this issue, it is necessary to
take notice of a growing tendency in business
circles to convert purely civil disputes into criminal
cases. This is obviously on account of a prevalent
impression that civil law remedies are time
consuming and do not adequately protect the
interests of lenders/creditors. Such a tendency is
seen in several family disputes also, leading to
irretrievable break down of marriages/families.
There is also an impression that if a person could
somehow be entangled in a criminal prosecution,
there is a likelihood of imminent settlement. Any
effort to settle civil disputes and claims, which do
not involve any criminal offence, by applying
pressure though criminal prosecution should be
deprecated and discouraged .”

18. Similarly, in Inder Mohan Goswami v. State of
Uttaranchal , it was emphasized that criminal prosecution
must not be permitted as an instrument of harassment or
private vendetta. In Ganga Dhar Kalita v. State of Assam ,
this Court again reiterated that criminal complaints in
respect of property disputes of civil nature, filed solely to
harass the accused or to exert pressure in civil litigation,
constitute an abuse of process.

19. Most recently, in Shailesh Kumar Singh @
Shailesh R. Singh v. State of Uttar Pradesh , this Court
disapproved the practice of using criminal proceedings as

26
a substitute for civil remedies, observing that money
recovery cannot be enforced through criminal
prosecution where the dispute is essentially civil. The
Court cautioned High Courts not to direct settlements in such
matters but to apply the settled principles in Bhajan Lal . The
following paragraphs are relevant in this context:

“9. What we have been able to understand is that
there is an oral agreement between the parties. The
Respondent No. 4 might have parted with some money
in accordance with the oral agreement and it may be
that the appellant - herein owes a particular amount to
be paid to the Respondent No. 4. However, the question
is whether prima facie any offence of cheating could be
said to have been committed by the appellant.

10. How many times the High Courts are to
be reminded that to constitute an offence of
cheating, there has to be something more than
prima facie on record to indicate that the intention
of the accused was to cheat the complainant right
from the inception. The plain reading of the FIR does
not disclose any element of criminality.

11. The entire case is squarely covered by a
recent pronouncement of this Court in the case of “Delhi
Race Club (1940) Limited v. State of Uttar
Pradesh”, (2024) 10 SCC 690. In the said decision, the
entire law as to what constitutes cheating and criminal
breach of trust respectively has been exhaustively
explained. It appears that this very decision was relied
upon by the learned counsel appearing for the petitioner
before the High Court. However, instead of looking into
the matter on its own merits, the High Court thought fit
to direct the petitioner to go for mediation and that too
by making payment of Rs. 25,00,000/- to the
th
4 respondent as a condition precedent. We fail to
understand why the High Court should undertake such
exercise. The High Court may either allow the petition
saying that no offence is disclosed or may reject the
petition saying that no case for quashing is made out.
Why should the High Court make an attempt to help the
complainant to recover the amount due and payable by
the accused. It is for the Civil Court or Commercial Court
as the case may be to look into in a suit that may be
filed for recovery of money or in any other proceedings,

27
be it under the Arbitration Act, 1996 or under the
provisions of the IB Code, 2016.

12. Why the High Court was not able to
understand that the entire dispute between the parties
is of a civil nature.

13. We also enquired with the learned counsel
appearing for the Respondent No. 4 whether his client
has filed any civil suit or has initiated any other
proceedings for recovery of the money. It appears that
no civil suit has been filed for recovery of money till this
date. Money cannot be recovered, more particularly, in a
civil dispute between the parties by filing a First
Information Report and seeking the help of the Police.
This amounts to abuse of the process of law.

14. We could have said many things but we
refrain from observing anything further. If the
Respondent No. 4 has to recover a particular amount, he
may file a civil suit or seek any other appropriate
remedy available to him in law. He cannot be permitted
to take recourse of criminal proceedings.

15. We are quite disturbed by the manner in
which the High Court has passed the impugned order.
The High Court first directed the appellant to pay Rs.
25,00,000/- to the Respondent No. 4 and thereafter
directed him to appear before the Mediation and
Conciliation Centre for the purpose of settlement. That's
not what is expected of a High Court to do in a Writ
Petition filed under Article 226 of the Constitution or a
miscellaneous application filed under Section 482 of
the Criminal Procedure Code, 1973 for quashing of FIR
or any other criminal proceedings. What is expected of
the High Court is to look into the averments and the
allegations levelled in the FIR along with the other
material on record, if any. The High Court seems to have
forgotten the well-settled principles as enunciated in the
decision of this Court in the “State of Haryana v. Bhajan
Lal”, 1992 Supp (1) SCC 335”

20. Applying the above principles to the facts of the
present case, it is manifest that the dispute - concerning
repayment of loan money and the alleged coercion in
execution of documents - is purely civil in character. The

28
essential ingredients of cheating or forgery are not prima
facie made out. The institution of multiple FIRs in quick
succession, particularly after the appellant had already initiated
lawful proceedings, reinforces the inference of mala fides.

21. The High Court, in refusing to quash the
proceedings, misdirected itself in law by failing to apply
the ratio laid down in Bhajan Lal , and the subsequent
authorities referred to above, which uniformly hold that
the machinery of criminal law cannot be permitted to be
misused for settling civil disputes or to wreak vengeance.

22. Accordingly, the impugned judgment dated
22.10.2019 of the High Court is set aside. FIR No. 47 of 2003
dated 05.02.2003 and the consequential charge sheet dated
16.04.2003, pending before the trial Court, are hereby quashed.
This judgment, however, shall not preclude the parties from
pursuing civil remedies as may be available to them in
accordance with law.”

9.2. The Apex Court in the case of INDER CHAND BAGRI
2

v. JAGADISH PRASAD BAGRI , has held as follows:
“…. …. ….
24. The complainant/respondent No. 1 has an
alternative remedy of filing a civil suit to set aside the
sale deed dated 20.06.2011 and claim damages for the
alleged violation of his contractual rights which he is
already pursuing vide Title Suit No. 160 of 2012 against
the appellant-accused which is currently pending
adjudication and hence the route through criminal
proceedings, when no ingredient of offence is made out,
cannot be permitted. Criminal law ought not to become a
platform for initiation of vindictive proceedings to settle
personal scores and vendettas. The appellant-accused
therefore, in our view, could not be attributed any mens
rea and therefore, the allegations levelled by the

2
2025 SCC OnLine SC 2529

29
prosecution against the appellant-accused are
unsustainable.

25. Furthermore, in Inder Mohan Goswami , it was
held by this Court that the Court must ensure that
criminal prosecution is not used as an instrument of
harassment or for seeking private vendetta or with an
ulterior motive to pressurise the accused. It was further
held by this Court that it is neither possible nor desirable
to lay down an inflexible rule that would govern the
exercise of inherent jurisdiction. In view of the above and
for the reasons stated above, we are of the firm opinion
that to continue the criminal proceedings against the
appellant-accused herein would cause undue harassment
to him because as observed hereinabove, no prima
facie case for the offence under Sections 406 or 420 of
the IPC is made out.

26. In this regard, it would be apposite to rely on the
judgment in the case of State of Haryana v. Bhajan Lal , 1992
Supp (1) SCC 335 : 1992 SCC (Cri) 426 (“Bhajan Lal”) with
particular reference to paragraph 102 therein, where this Court
observed:

“102. In the backdrop of the interpretation of the
various relevant provisions of the Code under Chapter
XIV and of the principles of law enunciated by this Court
in a series of decisions relating to the exercise of the
extraordinary power Under Article 226 or the inherent
powers Under Section 482 of the Code which we have
extracted and reproduced above, we have given the
following categories of cases by way of illustration
wherein such power could be exercised either to prevent
abuse of the process of any court or otherwise to secure
the ends of justice, though it may not be possible to lay
down any precise, clearly defined and sufficiently
channelised and inflexible guidelines or rigid formulae
and to give an exhaustive list of myriad kinds of cases
wherein such power should be exercised.

(1) Where the allegations made in the first
information report or the complaint, even if they
are taken at their face value and accepted in their
entirety do not prima facie constitute any offence
or make out a case against the accused.

30

(2) Where the allegations in the first information
report and other materials, if any, accompanying the FIR
do not disclose a cognizable offence, justifying an
investigation by police officers Under Section 156(1) of
the Code except under an order of a Magistrate within
the purview of Section 155(2) of the Code.

(3) Where the uncontroverted allegations
made in the FIR or complaint and the evidence
collected in support of the same do not disclose
the commission of any offence and make out a
case against the accused.

(4) Where, the allegations in the FIR do not
constitute a cognizable offence but constitute only a
non-cognizable offence, no investigation is permitted by
a police officer without an order of a Magistrate as
contemplated Under Section 155(2) of the Code.

(5) Where the allegations made in the FIR
or complaint are so absurd and inherently
improbable on the basis of which no prudent
person can ever reach a just conclusion that there
is sufficient ground for proceeding against the
Accused.

(6) Where there is an express legal bar engrafted
in any of the provisions of the Code or the concerned Act
(under which a criminal proceeding is instituted) to the
institution and continuance of the proceedings and/or
where there is a specific provision in the Code or the
concerned Act, providing efficacious redress for the
grievance of the aggrieved party.

(7) Where a criminal proceeding is manifestly
attended with mala fide and/or where the proceeding is
maliciously instituted with an ulterior motive for
wreaking vengeance on the Accused and with a view to
spite him due to private and personal grudge.”

27. On a careful consideration of the aforementioned
judicial dicta, we find that none of the offences alleged against
the appellant-accused herein is made out. In fact, we find that
the allegations of criminal intent and other allegations against
the appellant-accused herein have been made with a mala-

31
fide intent and therefore, the judgment of this Court in the case
of Bhajan Lal extracted above, squarely applies to the facts of
these cases. It is neither expedient nor in the interest of justice
to permit the present prosecution to continue.

28. At this juncture, we find it apposite to mention
the observations of this Court in Vishal Noble
Singh v. State of Uttar Pradesh , (2024) 14 SCC
112 wherein it was observed that in recent years the
machinery of criminal justice is being misused by certain
persons for their vested interests and for achieving their
oblique motives and agenda. Courts have therefore to be
vigilant against such tendencies and ensure that acts of
omission and commission having an adverse impact on
the fabric of our society must be nipped in the bud. We
say so for the reason that while the
complainant/respondent No. 1 has made grave
allegations against the appellant herein, he has failed to
justify the same before this Court. Such actions would
create significant divisions and distrust among people,
while also placing an unnecessary strain on the judicial
system, particularly criminal courts. ”

9.3. The Apex Court in the case of VANDANA JAIN v.
3
STATE OF UTTAR PRADESH , has held as follows:
“…. …. ….
25. Insofar as the allegation regarding non-
fulfillment of contractual obligations is concerned,
recourse to appropriate civil remedy was required.
Moreover, this is not a case where something emerged
quickly after the agreement to indicate that dishonest
intention existed from the beginning. The JVA is dated
th
16 August 2010 whereas the FIR was lodged in 2021. If
there was something stark about the dishonest intention
on part of one of the parties to the agreement, it would
have been reported promptly and not after 10 years. This

3
2026 SCC OnLine SC 309

32
clearly indicates that the dispute between the parties was
purely of a civil nature.

26. No offence of cheating is made out because, as
discussed above, there is no false representation in the JVA. As
far as the allegation of false representation about the title is
concerned, there is nothing to indicate that what the appellants
had stated in the JVA was false. Further, there is no allegation
that history of title of the property/land narrated in the JVA
contains any false statement. Moreover, the JVA nowhere states
that there is no litigation or dispute pending, rather it speaks of
indemnifying the complainant party in case of any loss on
account of any dispute. The statement in the JVA that there was
no restraint order of any court or Government department in
respect of dealing with the land is not alleged or shown to be
false or incorrect.

27. As far as non-fulfillment of contractual
obligations are concerned, recourse can be had to civil
remedies. On facts, recourse to criminal proceedings, in
our view, is nothing but abuse of the process of
law/court. More so, when there is nothing to show that
the accused had harbored a dishonest intention from
inception.

28. There is no criminal breach of trust because the
security amount was not refundable, rather it was
adjustable against the share of the first party derived
from sale proceeds. Thus, in the event of breach of any of
the conditions of the agreement, the appropriate course
was to take recourse to civil remedies.

29. For the foregoing reasons, we are of the
considered view that dispute between the parties is
essentially of a civil nature arising from the JVA. Further,
a complete reading of the FIR along with admitted
documents, does not disclose commission of offence of
either cheating or criminal breach of trust much less
creation or using of a false document.”

33
4
9.4. The Apex Court in the case of V. GANESAN v. STATE ,
has held as follows:
“…. …. ….
12. In Iridium India Telecom Ltd. v. Motorola Inc. , this
Court laid down the ingredients of an offence of cheating as
defined in Section 415 of IPC. It was observed that Section 415
of IPC has two parts. The first part makes it necessary that the
deception by the accused of the person deceived, must be
fraudulent or dishonest. Such deception must induce the person
to either: (a) deliver property to any person; or (b) consent that
any person shall retain any property. The second part also
requires that the accused must by deception intentionally induce
the person deceived either to do or omit to do anything which
he would not do or omit, if he was not so deceived. Besides,
such act or omission must cause or must be likely to cause
damage or harm to that person in body, mind, reputation or
property. Thus, deception is a necessary ingredient for the
offence of cheating under both parts of this section.
Besides, the complainant must allege/prove that the
inducement had been caused by the deception exercised
by the accused. In other words, such deception must
produce the inducement to part with or deliver property,
which the complainant would not have parted with or
delivered, but for the inducement resulting from such
deception. The explanation to the section clarifies that
non-disclosure of relevant information would also be
treated as a misrepresentation of facts leading to
deception.

13. In order to constitute an offence of cheating the
intention to deceive should be in existence when the
inducement was made. It is necessary to show that a
person had fraudulent or dishonest intention at the time
of making the promise. Mere failure to keep the promise
subsequently cannot be the sole basis to presume that
dishonest intention existed from the very beginning.


4
2026 SCC OnLine SC 444

34
14. In Vesa Holdings Private Limited v. State of
Kerala , this court held that every breach of contract
would not give rise to an offence of cheating. Only in
those cases breach of contract would amount to cheating
where there was any deception played at the very
inception. If the intention to cheat has developed later,
the same cannot amount to cheating. In other words, for
the purpose of constituting an offence of cheating, the
complaint is required to show that the accused had
fraudulent or dishonest intention at the time of making
promise or representation. Even in a case where
allegations are made about failure on part of the accused
to keep his promise, in absence of a dishonest intention
at the time of making the initial promise, no offence
under Section 420 of IPC is made out.

15. Whether non-fulfilment of promise/commitment by
the accused is a reflection of his or her dishonest intention at
the time of making the promise is ordinarily a matter of trial.
However, in our view, where the transaction between the
parties is such that fulfilment of the promise is not
entirely in the control of the promisor, or there is an
inherent risk in fulfilment of the promise, the High Court
may, in exercise of its inherent powers under the Code, or
under Article 226 of the Constitution, as the case may be,
upon consideration of the attending circumstances, take
a decision whether the dishonest intention existed or not
at the time of making the promise. And, if it comes to the
conclusion that the alleged conduct of the parties does
not reflect a dishonest intention of the accused from the
very beginning, it may quash the criminal
complaint/proceedings and relegate the aggrieved party
to civil remedies.

16. In the present case, what the High Court overlooked
is that money was advanced for movie making and initially the
agreement was to share the profits. Importantly, when the
first tranche of money was transferred by the de-facto
complainant to the accused, the alleged promise was a
share in profits. Second tranche of money was
transferred when the project could not be completed for
want of funds. It also appears from paragraph 2 of the
impugned order that before the movie could be released,

35
de facto complainant took objection to its release.
However, when the appellant gave two post-dated
cheques, the movie could be released.

17. The aforesaid facts would indicate that the initial
payment of money by the de-facto complainant to the appellant
was for a movie project on promise of a share in profits.
Additional money was paid later for its completion under a
promise of an enhanced share in the profits. Thereafter, post-
dated cheques were issued to return the principal amount
because of an objection taken by the de facto complainant to
the release of the movie. Since there is no denial about the
completion of the movie and its ultimate release, what is clear is
that the promise to make a movie was not false. Therefore, it
cannot be said the appellant made a false promise that he would
make a movie with the aid of funds received by him. Insofar as
promise qua sharing of profits is concerned, there are no
allegations that the movie earned profits. Therefore, from the
allegations made in the complaint it cannot be said that there
was any dishonest intention of the appellant in making the
promise which remained unfulfilled. In our view, the High Court
overlooked that movie making is a high risk business. No one
can be sure whether a movie would earn profits or would be a
flop. If one agrees to share profits in lieu of his investment in a
movie, he takes the risk of a possible zero return. Thus, the
nature of transaction between the parties was a crucial
factor in determining whether the investor party should
be allowed to bring in a criminal action or pursue civil
remedies. Unfortunately, the High Court overlooked this vital
aspect.

18. Insofar as dishonour of those two cheques are
concerned, it is clear that those were post-dated cheques issued
not as an inducement to obtain delivery of money from the de
facto complainant but to discharge an existing obligation at a
future date. Thus, in essence, those cheques were not by way
inducement to lend money or invest money in the proposed
movie. Therefore, dishonour of those cheques, though may give
right to initiate proceeding under Section 138 of the Negotiable
Instruments Act, 1881, would not ipso facto amount to an
offence of cheating, inasmuch as for an offence of cheating
dishonest intention must exist from the very beginning.
Ordinarily, post-dated cheques are issued either by way of

36
security to discharge an existing or future liability or to
discharge the liability at some point of time in future. It is quite
possible that at the time of issuance of a post-dated cheque, the
drawer may have reason to believe that he would have sufficient
balance in his account by the date of the cheque. Therefore, in
our view, dishonour of a post-dated cheque by itself is not
sufficient to presume existence of a dishonest intention on part
of its drawer.

19. In the instant case, there is nothing to indicate
that the appellant had a dishonest intention from the very
beginning. Had it been a case where the appellant had
not made the movie despite borrowing funds to make
one, an inference about existence of a dishonest intention
was permissible. However, here there is no allegation
that movie was not made. Rather, it was made and
released. The prosecution case itself is to the effect that
further advance was taken to complete and release the
movie. However, when complainant took objection to its
release, the appellant issued post-dated cheques to repay
the principal amount. Thus, those cheques were to
discharge an existing liability and not by way of an
inducement to take more money.

20. Assuming that by issuance of those cheques, the de
facto complainant was led to vacate his objection to movie’s
release, even then an offence of cheating would not be made
out for two reasons. First, those cheques were post-dated
therefore, did not carry a representation of sufficient funds in
the bank account at the time of its issuance. Second, initial
agreement, as per the allegations, was to share profit on release
of the movie. Thus, in absence of allegations that movie made
profits, in our view, the complaint and the supporting materials
failed to indicate that the appellant harboured a dishonest
intention from inception. In conclusion, the allegations only
disclosed a civil cause of action and the High Court fell in
error in not quashing the criminal proceedings.”

37
9.5. The Apex Court in the case of G. SAMINATHAN v.
5
STATE , has held as follows:
“…. …. ….
7.1. Section 406 of IPC, as extracted above,
prescribes punishment for criminal breach of trust, which
may extend to three years imprisonment or with fine or
with both, when the ingredients of Section 405 of IPC are
satisfied. Thus, for Section 406 of IPC to get attracted,
there must be a criminal breach of trust in terms of
Section 405 of IPC. The essential ingredients for invoking
Section 405 of IPC are as follows:

(a) the accused was entrusted with property, or
entrusted with dominion over property;

(b) the accused had dishonestly misappropriated
or converted to their own use that property,
or dishonestly used or disposed of that
property or wilfully suffer any other person to
do so; and

(c) such misappropriation, conversion, use or
disposal should be in violation of any
direction of law prescribing the mode in which
such trust is to be discharged, or of any legal
contract which the person has made, touching
the discharge of such trust.

In other words, for the invocation of the offence of
criminal breach of trust, it is expedient that the use or
disposal of the property is made by a person entrusted
with or who has dominion over the property.
Furthermore, such an act must not only be done
dishonestly but also in violation of any direction of law or
any contract, express or implied, relating to carrying out
the trust.


5
2026 SCC OnLine SC 1460

38
7.2. For the invocation of Section 420 of IPC, which
provides for cheating and dishonestly inducing the
delivery of property, the ingredients of Section 415 of IPC
have to be established. To constitute the offence under
Section 415 of IPC, it is essential that, by way of certain
acts, a fraudulent or dishonest inducement is made and
the person so deceived was made to deliver any property
on account of such inducement. The said provision lays
down two separate classes of acts which the person
deceived may be induced to do, as follows:

i) In the first class of acts he may be induced
fraudulently or dishonestly to deliver the
property to any person or consent that any
person shall retain any property.

ii) The second class of acts set forth in the
Section is the intentional inducement of doing
or omitting to do anything which the person
deceived would not do or omit to do if he
were not so deceived.

7.3. While explaining the contours of the said
provision, this Court in Deepak Gaba v. State of U.P. ,
(2023) 3 SCC 423 : (2023) 1 SCC (Cri) 714 observed that
the sine qua non of Section 415 of IPC is “fraudulence”,
“dishonesty”, or “intentional inducement” and that the
absence of the said elements would debase the offence of
cheating.

8. Now coming to the facts of the present case, the
complainant has alleged that the accused continued to retain
the refundable security deposit even after the planning
permission was rejected by the development authority and the
project had failed. It was also alleged that, in furtherance of the
dishonest intention and despite being bound by the Joint
Development Agreement, the accused sold off the disputed
property to a third party while not even a single rupee of the
refundable security deposit was returned. Thus, the accused
committed the offence of criminal breach of trust as defined
under Section 405 of IPC. As discussed above, to constitute the
offence under Section 405 of IPC, it must be proved that the
accused was entrusted with the property and the property so

39
entrusted was misappropriated, converted or disposed of by the
accused with a dishonest intention and in contravention of any
law or legal contract prescribing the mode in which such trust
was to be discharged. In the present case, mere payment of a
refundable security deposit by the complainant to the accused
cannot be treated as entrustment of property inasmuch as the
same was paid as a consideration in lieu of the execution of GPA
in favour of the complainant. Even otherwise the FIR as well as
the chargesheet in question are silent on the method and mode
in which the appellants-accused misappropriated, converted, or
disposed of the so-called entrusted property in the form of
refundable security deposit for their own use to the
disadvantage of the complainant in contravention of the Joint
Development Agreement. Furthermore, a perusal of the legal
notice dated 09.01.2018 issued by the accused reveals that the
complainant was called upon to return the original title deeds
pertaining to the disputed property and to receive the
refundable security deposit lying with the accused. In view of
the aforesaid circumstances, we are prima facie of the view that
the allegation of dishonest intention on the part of the accused
to retain the refundable security deposit and cause wrongful loss
to the complainant is untenable. Therefore, a mere bald and
omnibus allegation against the accused with regard to their
dishonest intention to misappropriate the refundable security
deposit, uncorroborated with any cogent material, cannot by
itself sustain the charge under Section 405 of IPC against them.

8.1. In this regard, we find it apposite to refer to this
Court's decision in Binod Kumar v. State of Bihar , (2014) 10
SCC 663 : (2015) 1 SCC (Cri) 203 wherein it considered a
criminal complaint arising out of retention of bill amount in the
course of a commercial transaction and found that the essential
ingredients of criminal breach of trust or dishonest intention of
inducement, which formed the foundation of the complaint
missing. The relevant portion of the judgment reads as follows:

“18. In the present case, looking at the
allegations in the complaint on the face of it, we find
that no allegations are made attracting the ingredients
of Section 405 IPC. Likewise, there are no allegations as
to cheating or the dishonest intention of the appellants
in retaining the money in order to have wrongful gain to
themselves or causing wrongful loss to the complainant.

40
Excepting the bald allegations that the appellants did not
make payment to the second respondent and that the
appellants utilised the amounts either by themselves or
for some other work, there is no iota of allegation as to
the dishonest intention in misappropriating the property.
To make out a case of criminal breach of trust, it is not
sufficient to show that money has been retained by the
appellants. It must also be shown that the appellants
dishonestly disposed of the same in some way or
dishonestly retained the same. The mere fact that the
appellants did not pay the money to the complainant
does not amount to criminal breach of trust.”

(underlining by us)

8.2. On a prima facie view of the allegations
contained in the FIR and the chargesheet, it appears that
the complainant has attempted to hold the accused
persons criminally liable for breach of a contract. This
court in Hridaya Ranjan Prasad Verma v. State of Bihar ,
(2000) 4 SCC 168 : 2000 SCC (Cri) 786, held that a mere
breach of contract cannot give rise to criminal
prosecution unless a fraudulent and dishonest intention
of the accused is proved from the very inception of the
transaction. The relevant portion of the judgment reads as
follows:

“15. In determining the question it has to be kept
in mind that the distinction between mere breach of
contract and the offence of cheating is a fine one. It
depends upon the intention of the accused at the time of
inducement which may be judged by his subsequent
conduct but for this subsequent conduct is not the sole
test. Mere breach of contract cannot give rise to
criminal prosecution for cheating unless
fraudulent or dishonest intention is shown right at
the beginning of the transaction, that is the time
when the offence is said to have been committed.
Therefore it is the intention which is the gist of the
offence. To hold a person guilty of cheating it is
necessary to show that he had fraudulent or
dishonest intention at the time of making the
promise. From his mere failure to keep up promise
subsequently such a culpable intention right at the
beginning, that is, when he made the promise
cannot be presumed. ”

41
8.3. The aforesaid dictum was reiterated by this Court in
the case of Dalip Kaur v. Jagnar Singh , (2009) 14 SCC 696 :
(2010) 2 SCC (Cri) 223, wherein it was held as under:

“10. The High Court, therefore, should have
posed a question as to whether any act of inducement
on the part of the appellant has been raised by the
second respondent and whether the appellant had an
intention to cheat him from the very inception. If the
dispute between the parties was essentially a civil
dispute resulting from a breach of contract on the
part of the appellants by non-refunding the
amount of advance the same would not constitute
an offence of cheating. Similar is the legal position in
respect of an offence of criminal breach of trust having
regard to its definition contained in Section 405 of the
Penal Code.”
(underlining by us)

8.4. It is trite law that for establishing the offence of
cheating, the complainant was required to show that the
accused had a fraudulent or dishonest intention at the time of
making a promise or representation of not fulfilling the joint
development agreement. Such a culpable intention right at the
beginning when the promise was made cannot be presumed but
has to be made out with cogent facts. In the present case, the
accused and the complainant entered into an unregistered Joint
Development Agreement on 23.05.2012 with the objective of
carrying out construction, development and promotion of the
disputed property into residential flats. For the said purpose, the
accused executed a GPA bearing Document No. 711 of 2012 in
favour of the complainant, and on the same day, the
complainant, by way of two cheques, paid a refundable security
deposit to the accused in terms of the development agreement.
Thus, it cannot be said that the accused at the time of entering
into the agreement had a fraudulent and dishonest intention to
induce the complainant to part with the refundable security
deposit inasmuch as both parties, pursuant to the execution of
the development agreement, acted with the intention of
performing their respective contractual obligations. It is only
when the planning permission application sought by the
complainant came to be rejected that the project was stalled.
The complainant has alleged that the accused had knowledge
that the disputed property was part of an unapproved layout,

42
yet they suppressed the said fact from the complainant at the
time of entering into the Joint Development Agreement. It is
trite that before entering into a venture, the developer ought to
conduct a comprehensive due diligence of the land sought to be
developed. In the present case, the complainant failed to carry
out a comprehensive due diligence before entering into the joint
development agreement with the accused. In the aforesaid
circumstances, any subsequent defects or legal flaws with
respect to the disputed property could not have been used by
the complainant as a means to criminally prosecute the
accused-owners.

8.5. We therefore find force in the argument
advanced by the learned counsel for the accused that the
inability of the complainant to obtain planning permission
from the development authority cannot give rise to
criminal prosecution against the accused inasmuch as
their obligation was limited to furnishing the required
documents for the complainant to apply before the
Development Authority. Furthermore, viewed in the
backdrop of the totality of the circumstances, the mere
allegation that the disputed property was subsequently
sold to a third party, by itself, does not prima facie
disclose the commission of the offence of cheating. We
are therefore of the prima facie view that the allegations
against the accused in the FIR as well as the chargesheet
do not satisfy the ingredients for constituting the offence
of cheating as defined under Section 415 of IPC.

…. …. ….

8.8. This Court, in the case of Delhi Race Club , while
explaining the difference between the offences of criminal
breach of trust and cheating, observed that to constitute the
offence of cheating, it has to be sufficiently proved that the
offender fraudulently or dishonestly induced a person by
deceiving him to deliver any property and that the said
dishonest intention was from the very inception of the
transaction. Whereas, in the case of criminal breach of trust,
what is to be proved is the act of dishonest misappropriation of
the property which the offender was legally entrusted with, but
illegally misappropriated or converted it to his own use against
the terms of the contract. Thus, in view of the aforesaid

43
fundamental distinction between the offences of criminal breach
of trust and cheating, this Court in the abovementioned case
observed that both the offences cannot co-exist simultaneously.
On a careful perusal of both the provisions as well as the
aforesaid dictum of this Court, we find that with regard to the
same property and on the same set of facts, the offences of
criminal breach of trust and cheating cannot be sustained as
against the accused. We say so because, on one hand, the
prosecution alleges that the refundable security deposit was
lawfully entrusted to the accused by the complainant, which the
accused continued to retain even after the project had failed and
after the disputed property was sold by them to a third party.
On the other hand, it is also alleged that the accused cheated
the complainant by inducing him to part with Rs. 3,00,00,000/-
(Rupees three crore) as refundable security based on a false
representation that the disputed property was free from all
encumbrances. In other words, the allegation by the prosecution
is that the accused was entrusted with the refundable security
deposit, which he later on dishonestly misappropriated and the
allegation that the accused, with a dishonest intention, induced
the complainant to part with the refundable security deposit
based on a false representation, are not tenable on the same
substratum of facts. If there was a lawful entrustment of Rs.
3,00,00,000/- (Rupees three crore) to the accused under the
Joint Development Agreement, it cannot be a case of cheating
and if so, the non-return of the amount by the accused as the
plan sanction was not granted is not a case of criminal breach of
trust. The dispute between the parties is essentially civil
in nature. The subsequent sale of the subject property by
the accused to a third party may give rise to a cause of
action on the civil side to the complainant but not a case
of cheating or criminal breach of trust as the said act of
sale per se is not a criminal act.

8.9. Thus, on perusal of the material on record as
well as from the aforesaid discussion, we hold that
continuation of criminal proceedings instituted against
the accused by the complainant would be nothing but a
sheer abuse of the process of law inasmuch as on a
consideration of the allegations, none of the offences
invoked in the FIR as well as the chargesheet appear to
be made out against the accused.

44
8.10. This Court in Indian Oil Corporation v. NEPC
India Ltd. , (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188,
while taking judicial notice of the surge of civil disputes
being given a criminal flavour, observed as follows:

“13. While on this issue, it is necessary to
take notice of a growing tendency in business
circles to convert purely civil disputes into criminal
cases. This is obviously on account of a prevalent
impression that civil law remedies are time
consuming and do not adequately protect the
interests of lenders/creditors. Such a tendency is
seen in several family disputes also, leading to
irretrievable breakdown of marriages/families.
There is also an impression that if a person could
somehow be entangled in a criminal prosecution,
there is a likelihood of imminent settlement. Any
effort to settle civil disputes and claims, which do
not involve any criminal offence, by applying
pressure through criminal prosecution should be
deprecated and discouraged . In G. Sagar Suri v.
State of U.P. [(2000) 2 SCC 636 : 2000 SCC (Cri)
513 : (2000) 100 COMP CAS 613] this Court
observed: (SCC p. 643, para 8)

“It is to be seen if a matter, which
is essentially of a civil nature, has been
given a cloak of criminal offence. Criminal
proceedings are not a short cut of other
remedies available in law. Before issuing
process a criminal court has to exercise a
great deal of caution. For the accused it is
a serious matter. This Court has laid
certain principles on the basis of which
the High Court is to exercise its
jurisdiction under Section 482 of the
Code. Jurisdiction under this section has
to be exercised to prevent abuse of the
process of any court or otherwise to
secure the ends of justice.”

14. While no one with a legitimate cause or
grievance should be prevented from seeking
remedies available in criminal law, a complainant
who initiates or persists with a prosecution, being
fully aware that the criminal proceedings are
unwarranted and his remedy lies only in civil law,
should himself be made accountable, at the end of

45
such misconceived criminal proceedings, in
accordance with law. One positive step that can be
taken by the courts, to curb unnecessary prosecutions
and harassment of innocent parties, is to exercise their
power under Section 250 CrPC more frequently, where
they discern malice or frivolousness or ulterior motives
on the part of the complainant. Be that as it may.”

9. We have given our careful consideration to the
submissions advanced by the learned counsel for the respective
parties as well as the material placed on record and analysed
the same. In our view, the complainant in the present case
has sought to give a criminal colour to a purely civil
dispute. We must also hasten to add that the accused, in
terms of the joint development agreement, has already
invoked the arbitration clause, and an arbitral award
dated 12.04.2023 has already been passed by the learned
arbitrator determining the liabilities of both parties in
terms of their contractual obligations. Moreover, the said
award has been challenged under Section 34 of the
Arbitration Act by the complainant. Thus, while the
parties in the present case are also pursuing their civil
remedies, we find that it will be in complete disregard of
the criminal justice system to permit the continuation of
criminal prosecution against the accused herein for the
offences under Section 406 and 420 of IPC . This aspect of
the matter has not been noticed by the High Court.

9.1. At this juncture, we find it expedient to refer to the
judgment in the case State of Haryana v. Bhajan Lal , 1992 Supp
(1) SCC 335 : 1992 SCC (Cri) 426, (“ Bhajan Lal ”) wherein this
Court enumerated the categories of cases warranting the
exercise of extraordinary judicial powers under Article 226 of
the Constitution of India or the inherent powers under Section
482 of CrPC by the courts either to prevent the abuse of the
process of law or otherwise to secure the ends of justice. The
relevant para 102 of the said judgment reads as follows:

“102. In the backdrop of the interpretation of the
various relevant provisions of the Code under Chapter
XIV and of the principles of law enunciated by this Court
in a series of decisions relating to the exercise of the
extraordinary power under Article 226 or the inherent
powers under Section 482 of the Code which we have

46
extracted and reproduced above, we have given the
following categories of cases by way of illustration
wherein such power could be exercised either to prevent
abuse of the process of any court or otherwise to secure
the ends of justice, though it may not be possible to lay
down any precise, clearly defined and sufficiently
channelised and inflexible guidelines or rigid formulae
and to give an exhaustive list of myriad kinds of cases
wherein such power should be exercised.

(1) Where the allegations made in the first
information report or the complaint, even
if they are taken at their face value and
accepted in their entirety do not prima
facie constitute any offence or make out a
case against the accused.

(2) Where the allegations in the first
information report and other materials, if
any, accompanying the FIR do not
disclose a cognizable offence, justifying an
investigation by police officers under
Section 156(1) of the Code except under
an order of a Magistrate within the
purview of Section 155(2) of the Code.

(3) Where the uncontroverted allegations
made in the FIR or complaint and the
evidence collected in support of the same
do not disclose the commission of any
offence and make out a case against the
accused.

(4) Where, the allegations in the FIR do not
constitute a cognizable offence but
constitute only a non-cognizable offence,
no investigation is permitted by a police
officer without an order of a Magistrate as
contemplated under Section 155(2) of the
Code.

(5) Where the allegations made in the FIR or
complaint are so absurd and inherently
improbable on the basis of which no
prudent person can ever reach a just
conclusion that there is sufficient ground
for proceeding against the accused.

47

(6) Where there is an express legal bar
engrafted in any of the provisions of the
Code or the concerned Act (under which a
criminal proceeding is instituted) to the
institution and continuance of the
proceedings and/or where there is a
specific provision in the Code or the
concerned Act, providing efficacious
redress for the grievance of the aggrieved
party.

(7) Where a criminal proceeding is manifestly
attended with mala fide and/or where the
proceeding is maliciously instituted with
an ulterior motive for wreaking vengeance
on the accused and with a view to spite
him due to private and personal grudge.”

9.2. We find that the categories (1), (3), (5) and
(7) enlisted in Bhajan Lal are squarely applicable to the
facts of the present case, making it a fit case for quashing
of the criminal proceedings pending against the accused.
Therefore, the High Court, by way of the impugned
judgment and final order dated 28.03.2025, erred in
dismissing the quashing petition filed by the accused. The
High Court overlooked the fact that the allegations in the
FIR and the chargesheet did not prima facie make out the
offences under Section 406 and 420 of IPC. In fact, the
allegations on the face of it point to a purely civil dispute
between the parties .”

(Emphasis supplied at each instance)
If the facts obtaining in the case at hand are considered on the
bedrock of the principles laid down by the Apex Court in afore-
quoted cases, what would unmistakably emerge is, obliteration of
the subject proceedings to save it becoming an abuse of the
process of law and result in miscarriage of justice.

48

10. For the aforesaid reasons, the following:

O R D E R

(i) Criminal Petitions are allowed.
(ii) Order dated 19-04-2021 passed by the IV Additional
Chief Metropolitan Magistrate, Bengaluru in Crime 50 of
2021 renumbered as Crime No.7522 of 2021 stands
quashed. Consequential registration of FIR No.50 of
2021 also stands quashed.

(iii) Order dated 27-12-2023 and the proceedings pending
in PCR No.6431 of 2021 before the IV Additional Chief
Metropolitan Magistrate, Bengaluru stands quashed.

Pending applications, if any, also stand disposed.




Sd/-
(M.NAGAPRASANNA)
JUDGE

BKP
CT:MJ