CHINTAN JITENDRA ACHARYA vs STATE OF GUJARAT

R/CR.MA/8637/2018 JUDGMENT DATED: 02/11/2026
(GJHC240275712018)
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 8637 of 2018

FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE M. R. MENGDEY

================================================================
Approved for Reporting Yes No
==========================================================
CHINTAN JITENDRA ACHARYA
Versus
STATE OF GUJARAT & ANR.
================================================================
Appearance:
NANAVATI ASSOCIATES(1375) for the Applicant(s) No. 1
MR SATYAM Y CHHAYA(3242) for the Respondent(s) No. 2
MR. TRUPESH KATHIRIYA, APP for the Respondent(s) No. 1
===============================================================
CORAM: HONOURABLE MR. JUSTICE M. R. MENGDEY

Date : 02/11/2026

JUDGMENT
PART I: INTRODUCTION:
1. The present application has been preferred under the in-
herent powers of this Court enshrined under Section 482 of
the Code of Criminal Procedure, 1973 (hereinafter referred to
as "the Code" or "Cr.P.C."). The applicant herein seek the in-
vocation of this Court's inherent jurisdiction to quash and set
aside First Information Report (FIR) and all consequential, in-
cidental, and subsequent criminal proceedings arising there-
from.
2. The impugned FIR being I-57 of 2018, intrinsically inter-
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woven in the commercial origin by the complainant, filed be-
fore the Mansa Police Station, Gandhinagar on 16.4.2018, en-
compassing alleged offences committed during the period of
6.07.2016 to 7.08.2016 , for offences punishable under Sec-
tions 406, 420, and 114 of the Indian Penal Code, 1860.
3. Rule. Mr. Trupesh Kathiriya, learned Additional Public
Prosecutor, waives service of notice of Rule on behalf of the
Respondent No.1 – State of Gujarat. Mr. Satyam Chhaya,
learned advocate, waives service of notice of Rule on behalf of
the original complainant.
PART II: THE FACTUAL MATRIX OF THE IMPUGNED
FIR:
4. To appreciate the controversy and the subsequent legal
analysis, it is imperative to dissect the allegations levied in the
First Information Report. The gravamen of the charges funda-
mentally revolves around a buyer-seller relationship that pur-
portedly degenerated into a systemic default.
A. Facts of FIR:
6. The complainant herein, Tanusukhbhai Lekhrajbhai Ma-
heshwari (brother of Rajeshbhai), runs 'Ganesh Trading' in the
same market yard. He was inducted into a business relation-
ship with the accused companies by Amolbhai Sheth and
Harsh Zaveri for the supply of maize.
7. It is alleged that approximately three years prior to the
lodging of the FIR, the complainant was introduced to one of
the co-applicant i.e. Mr. Amolbhai Shripalbhai Sheth, Man-
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aging Director of 'Anil Limited' and 'Anil Mines and Minerals
Ltd.', alongside the present Applicant. The business model of
the accused companies involved procuring maize in bulk for
the manufacturing of starch. The FIR narrates that business
relations were forged on the anvil of trust, leading the com-
plainant to open a ledger account for Anil Limited. Regular
bulk orders were placed through brokers (Mahalakshmi Can-
vas and Jalaram Canvas).
8. Between 06.07.2016 and 07.08.2016, Ganesh Trading al-
legedly supplied maize worth Rs. 30,78,437/-. Against these
supplies (documented via bills nos. 914, 915, 116, 917, 932,
942, and 834), 7 cheques drawn on Punjab National Bank
were issued. Parallel to the events in the first FIR, the com-
plainant was instructed by the Managing Director not to
present the cheques. The cheques ultimately expired, were
altered without validating signatures, and were rendered use-
less.
9. Consequently, FIR No. I - 57 of 2018 was registered, im-
plicating 12 individuals, including the present applicant based
on the general assertion of their capacity as a director / em-
ployee involved in the overarching conspiracy to misappropri-
ate goods and funds.
10. The core of the alleged deception is that the complain-
ant was consistently instructed by the accused individuals not
to deposit these cheques in the bank due to purported tempor-
ary financial restructuring. Trusting these representations,
the complainant withheld presentation. Once the validity
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period (three months) expired, the complainant sought re-val-
idation of the instruments. The dates were allegedly altered
by the accused, but no validating countersignatures were af-
fixed, rendering the cheques legally sterile.
11. Following adverse media reports in the 'Sandesh' daily
regarding widespread corporate defaults by Anil Limited, the
complainant realized he had been duped. The FIR was thus
filed against 12 individuals, arraying the present applicant,
designating as a "Chief Financial Officer" who, in criminal
conspiracy with the others, procured goods on credit with a
pre-meditated intention to cheat.
PART III: SUBMISSIONS ON BEHALF OF THE APPLIC-
ANT:
12. Ms. Vishwa M. Shah, learned advocate for Nanavati Asso-
ciates appearing for the applicant, has launched a multi-
pronged assault on the sustainability of the FIR. The submis-
sions can be broadly categorized as follows:
13. Severance of Corporate Ties (The Chronological
Impossibility):
13.1 It is submitted, backed by incontrovertible statutory re-
cords, that the applicant formally tendered his resignation to
the Board of Directors in August 2016. Despite the fact even if
the averments in the FIR is taken on the face of it do not dis-
close the particular role attributed to the applicant which may
connect the applicant with commission of offence and, there-
fore, resignation before or after filing of the FIR would render
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said FIR as an abuse of process of law and, therefore, would
argue that the FIR is required to be quashed and set aside.
14. Absence of Specific Overt Act: It was further heavily
canvassed that the FIR, even if read akin to a gospel truth, do
not attribute a single, isolated, or specific overt act to the
present applicant.
15. Unexplained Delay and Civil Cloak: Learned advocate
for the applicant drew the Court's attention to the glaring and
unexplained delay in lodging the FIR. The transactions failed
in late 2016, yet the FIR was lodged in April 2018—an after-
thought spanning nearly a year and a half. This delay, he ar-
gues, was utilized to weaponize the criminal justice system to
bypass standard civil recovery mechanisms. The dispute is es-
sentially one of outstanding commercial balance (Rs.30.78
Lakhs).
16. Legal Submissions on IPC Provisions: Relying on a
catena of judgments, including this Court’s decision in Mehul
Chinubhai Choksi vs. State of Gujarat (Special Criminal Ap-
plication No.1072 of 2018), it was argued that Sections 406
and 420 IPC are fundamentally mutually exclusive in standard
single-stage commercial transactions. Furthermore, invoking
the landmark guidelines in State of Haryana v. Bhajan Lal
[1992 Supp (1) SCC 335] , it was pressed that the FIR is mani-
festly attended with mala fides and fall squarely under cat-
egories 1, 3, and 7 of the said judgment, warranting immedi-
ate quashing.
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16.1 It is argued that not even a prima facie case has been
made out in the impugned FIR to arraign the applicant as an
accused. Even if all the allegations set out in the impugned
FIR is taken to be true and correct, no offense whatsoever can
be made out against the applicant as alleged or otherwise at
all.
16.2 It is further argued that entire transaction/dispute
is purely civil in nature. There is no element of criminality in-
volved whatsoever and adequate remedy is available in law
for the Respondent No.2 to recover the money from the Com-
panies by whom such outstanding amounts are payable, if any.
It is submitted that the Respondent No.2 is attempting to
cloak, what can at best be civil dispute by filing the impugned
FIR against the Petitioner. The impugned FIR is motivated
and mala fide and that there is no criminality involved, the Re-
spondent No.2, if at all, can easily get appropriate and ad-
equate reliefs, if any, from initiating appropriate civil proceed-
ings. The impugned FIR is liable to be quashed on this ground
alone.
16.3 Learned advocate for the applicant would further
argued that impugned FIR has been filed with mala fide inten-
tion to harass the applicant and to cause tremendous hard-
ship. The impugned FIR filed is mala fide, baseless and there
is nothing on record to substantiate the illegal and wrongful
claims of the Informant/Respondent No.2. The entire conduct
of the Respondent No.2 reeks of malafides and is a clear ab-
use of due process of law. Even assuming that there is any dis-
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pute, it would be entirely a civil dispute, which is being given
the colour of a criminal dispute only with an attempt to mis-
utilise the police machinery for personal gains. Hence, the im-
pugned FIR deserves to be quashed and set aside.
16.4 Learned advocate for the applicant would submit
that there are no allegations with regard to involvement the
applicant and in any case, the allegations made in the im-
pugned FIR do not even disclose the commission of any of-
fence by the applicant and do not make out any case against
the applicant.
PART IV: SUBMISSIONS ON BEHALF OF THE RE-
SPONDENT-COMPLAINANT:
17. Per contra , Mr.Satyam Chhaya, learned advocate for the
original complainant, vehemently resisted the application,
urging this Court to decline the exercise of its inherent juris-
diction, submitting that the matter require deep investigation
and a full-fledged trial.
18. Dispute Regarding the Resignation Date: The
primary factual rebuttal offered by the respondent was a dir-
ect challenge to the resignation date. Mr. Chhaya submitted,
with considerable emphasis, that the applicant continued to
act as a Chief Financial Officer till 31.08.2016. He argued that
the purported resignation is a smokescreen, an internal ma-
nipulation by the corporate machinery designed to insulate its
directors from the massive, pre-planned default that was to
follow. Since the complainant asserts the applicant was Chief
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Financial Officer till August 2016 (covering the 2016 transac-
tions), it creates a disputed question of fact which cannot be
adjudicated in a Section 482 petition.
19. The "Habitual Offender" Argument: Mr.Chhaya ex-
tensively argued that the applicant is not an innocent
bystander but a habitual offender entangled in a web of cor-
porate fraud. To substantiate this, he pointed to various paral-
lel proceedings. It was submitted that a similar application for
quashing (Criminal Misc. Application No. 1646 of 2017) pre-
ferred by co-accused persons before the Bombay High Court
(Aurangabad Bench) was summarily rejected, citing the wide-
spread nature of the fraud.
20. Crucially, he highlighted that multiple complaints under
Section 138 read with Section 141 of the Negotiable Instru-
ments Act, 1881, is pending against the applicant across vari-
ous jurisdictions (Addl. Chief Metropolitan Magistrate,
Ahmedabad; Mirzapur Court; and courts in Rajasthan and
Mumbai). Bailable warrants and proclamations under Section
87 of the Cr.P.C. (dated 31.03.2016) have allegedly been is-
sued against the applicant due to continuous evasion of the ju-
dicial process. Anil Limited's subsequent journey into liquida-
tion was cited as the ultimate proof of an overarching, decept-
ive corporate strategy to defraud creditors, in which the ap-
plicant was key architect.
21. Co-existence of Civil and Criminal Remedies: Ad-
dressing the applicant’s argument that the dispute is purely
civil, Mr.Chhaya relied heavily on the Supreme Court's pro-
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nouncements in Rajesh Bajaj v. State of NCT of Delhi [(1993)
3 SCC 259] , Trisuns Chemical Industry v. Rajesh Agarwal
[(1999) 8 SCC 686] , Kamladevi Agarwal v. State of W.B.
[(2002) 1 SCC 555] , and Sangeetaben Mahendrabhai Patel v.
State of Gujarat [(2012) 7 SCC 621] . He argued that a com-
mercial transaction can certainly give a birth to a criminal of-
fence if the intention to deceive is present from the beginning.
Simply because a civil remedy exists does not grant immunity
from criminal prosecution.
PART V: LEGAL ISSUES INVOLVED:
22. Having traversed the extensive pleadings, the FIR, and
the submissions advanced at the bar, this Court finds that the
adjudication of the present necessitates a detailed judicial in-
quiry into the following cardinal issues of law:
I] Whether the foundational ingredients of Criminal
Breach of Trust (Section 406 IPC) and Cheating (Section
420 IPC) are established on a bare perusal of the FIR,
and what is the jurisprudential nuance regarding their
alleged "mutual exclusivity"?
II] Whether the complainant’s heavy reliance on the
applicant’s antecedent history (pending NI Act cases,
warrants, and alleged "habitual offender" status) creates
a legal bar to the quashing of the present, specific FIRs?
III] Whether the impugned proceedings represent a le-
gitimate criminal prosecution or an illegitimate weapon-
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ization of the criminal justice system to coerce the recov-
ery of a purely civil commercial debt?
PART VI: REASONING AND ANALYSIS:
ISSUE I: The Anatomy of Sections 406 and 420 IPC and
the Nuance of Mutual Exclusivity:
23. The applicant urged that Sections 406 and 420 of the
IPC are mutually exclusive. It is paramount that this Court cla-
rifies the exact jurisprudential standing of this argument.
24. It is a broadly accepted principle that a single, indivis-
ible act cannot simultaneously satisfy the ingredients of both
Criminal Breach of Trust and Cheating. Section 406 requires
"entrustment" of property or dominion over property. "En-
trustment" implies that the victim, willingly and without any
deception, handed over property to the accused in a fiduciary
capacity, and the accused subsequently misappropriated it.
Conversely, Section 420 requires deception right from the in-
ception . If a person is deceived into handing over property,
the transfer is vitiated by fraud; hence, it can never constitute
a lawful "entrustment."
25. However, the Supreme Court has nuanced this position.
In complex, multi-stage commercial or corporate dealings, the
two offences are not always mutually exclusive. It is highly
possible that at Stage 1, property is lawfully entrusted (at-
tracting Section 406 if later misappropriated), and at Stage 3,
a fresh, distinct fraudulent inducement is made regarding a
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separate asset (attracting Section 420).
26. But does this nuance apply to the present FIR? The an-
swer is an unequivocal negative. The transactions detailed in
the FIR is straightforward, single-stage commercial sales of
goods (maize) against invoices. This brings us directly to the
recent pronouncement of the Hon'ble Supreme Court in Delhi
Race Club (1940) Limited and others vs. State of Uttar
Pradesh and another [(2024) 10 SCC 690] .
27. In Delhi Race Club (Supra) , the Apex Court exhaustively
analyzed the interface of Sections 406 and 420 in standard
buyer-seller relationships. The Court categorically laid down
that a commercial sale of goods does not constitute "entrust-
ment." In a sale, the property in the goods passes to the
buyer. The relationship formed is that of a debtor and a cred-
itor, not a trustee and a beneficiary. Therefore, the non-pay-
ment of trade invoices or the dishonouring of cheques issued
for such goods does not, by any stretch of legal imagination,
constitute a Criminal Breach of Trust under Section 406 IPC.
Section 406 is thus completely ousted from the present factual
matrix.
28. Regarding Section 420 IPC, the law is equally stringent.
To establish Cheating, the prosecution must demonstrate that
the accused possessed a fraudulent or dishonest intention at
the time of making the promise or representation . Mere fail-
ure to keep a promise at a subsequent stage (e.g., failure to
clear dues due to business losses or liquidation) does not ret-
rospectively constitute cheating. [See: Hridaya Ranjan Prasad
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Verma v. State of Bihar, (2000) 4 SCC 168 ) wherein it is held
as follows: “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 to 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 fraudu-
lent 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 inten-
tion 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 can-
not be presumed.”]
29. In the present case, the FIR indicates that business was
initially conducted smoothly, and trust was built. This itself
negates the theory of "deception at inception." More import-
antly, even if we assume the company intended to cheat in
2016, how can this mens rea be attributed to the present ap-
plicant? There is absolutely no vicarious liability under the
IPC for the offences of Cheating or Breach of Trust (unlike
Section 141 of the NI Act). The applicant did not negotiate the
deal and did not even sign the cheques, and was merely an
employee of the company. The foundational ingredients of
both Section 406 and Section 420 IPC are hopelessly absent
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against the applicant.
ISSUE II: The "Habitual Offender" Paradigm and Ante-
cedent History:
30. Mr.Chhaya, with considerable rhetorical force, urged
this Court to deny relief to the applicant on the ground that he
is a habitual offender. He cited the pendency of numerous
Section 138 NI Act cases, non-bailable warrants, and proclam-
ations under Section 87 of the Cr.P.C. across Mumbai, Ra-
jasthan, and Gujarat.
31. This Court must address this submission to maintain
complete judicial analytical integrity. What is the evidentiary
and legal value of a person's antecedent criminal history when
deciding a quashing petition for a distinct, unconnected FIR?
32. Criminal jurisprudence dictates that a person’s liability
must be established on the specific facts, actus reus (guilty
act), and mens rea (guilty mind) of the particular transaction
under scrutiny. Bad character, a history of defaults, or the
pendency of multiple prosecutions cannot serve as a legal sub-
stitute for the absence of foundational facts in the present
FIR.
33. Section 54 of the Indian Evidence Act, 1872, explicitly
states that in criminal proceedings, the fact that the accused
person has a bad character is irrelevant, unless evidence has
been given that he has a good character. While this Court un-
der Section 482 Cr.P.C. is not strictly conducting a trial, the
underlying equitable principle applies. The pendency of pro-
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ceedings under the Negotiable Instruments Act in other juris-
dictions is a matter for those specific courts to adjudicate
based on whether the applicant was in charge of the company
at the time those specific cheques were issued .
34. In the present case, the prosecution’s case suffers from a
fundamental legal infirmity, inasmuch as, no specific role, act,
omission, has been attributed to the Applicant in the alleged
commission of the offence. The Applicant was merely
employed as Chief Financial Officer with Anil Limited and was
neither a Director nor a person In charge of, or is responsible
for, the conduct of the Company’s business. His name has
been arrayed as an accused without any specific allegation or
material indicating his involvement in the alleged offence.
Mere employment or past association with the Company can-
not by itself be a ground to fasten criminal liability upon him.
The Applicant’s implication solely on account of his former
employment, in the absence of any specific allegation, disclos-
ing his culpability, renders his prosecution, legally unsustain-
able and warrants interference by this court, in exercise of it’s
inherent jurisdiction.
ISSUE IV: Civil Dispute vs. Criminal Prosecution:
35. The final nail in the coffin of the prosecution's case is the
inherently civil flavor of the entire dispute. The complainant’s
grievances stem from unpaid invoices for the supply of agri-
cultural commodities.
36. Mr. Chhaya relied upon cases like Rajesh Bajaj and
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Trisuns Chemical Industry to argue that the existence of a
civil remedy does not preclude criminal prosecution. The pro-
position of law cited by the learned counsel is entirely correct,
but its application to the present facts is fundamentally mis-
placed.
37. In the judgments relied upon by the complainant, the Su-
preme Court allowed simultaneous proceedings because spe-
cific, overt acts of cheating—forged documents, deliberate
misrepresentations at the exact time of signing the contract,
specific inducements—were explicitly pleaded against the spe-
cific accused. The instruction to withhold cheque presentation
or a request for time due to liquidity issues is a classic indica-
tor of a commercial cash-flow crunch or corporate financial
distress. In standard commercial dealings, buyers facing tem-
porary financial constraints frequently request suppliers to
hold off on presenting cheques while they arrange funds.
While this may form the basis of a civil breach of contract or
subsequent legal remedies under the Negotiable Instruments
Act (such as Section 138), it does not automatically translate
into a fraudulent, pre-conceived intention ( mens rea ) to cheat
ab initio under Section 420 of the IPC. Unlike specific statu-
tory enactments (such as Section 141 of the Negotiable In-
struments Act, 1881), there is no concept of vicarious liability
under the Indian Penal Code for offences like cheating or
criminal breach of trust. Even if a Managing Director or cor-
porate representative asks a supplier to hold off on depositing
a cheque during a liquidity crisis, such a commercial commu-
nication cannot rope in Directors or Corporate Representative
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without specific, individualized allegations of active, fraudu-
lent inducement right at the inception of the transaction.
38. The Hon'ble Supreme Court in Indian Oil Corpn. v.
NEPC India Ltd. [(2006) 6 SCC 736] expressed deep con-
cern over the growing tendency in business circles to convert
purely civil disputes into criminal cases. The Court noted that
this is often done to apply pressure on the accused for the re-
covery of money, effectively using the police machinery as a
debt collection agency.
39. When evaluated against the celebrated parameters laid
down in State of Haryana v. Bhajan Lal [(1992) Supp (1)
SCC 335] , the present case squarely attracts parameters (1),
(3), and (7). The uncontroverted allegations against the ap-
plicant do not make out any case. The evidence (RoC records)
renders the allegations absurd and inherently improbable re-
garding the applicant’s involvement. Finally, the proceeding is
manifestly attended with a mala fide intention to strong-arm
an employee into settling the commercial debts of a corporate
entity that has since slipped into liquidation.
PART VII: CONCLUSION:
40. The criminal justice system is a potent instrument; its in-
vocation carries severe consequences for the liberty, reputa-
tion, and life of an individual. It cannot be permitted to be util-
ized as a tool for corporate debt recovery, especially against
individuals whose legal association with the defaulting entity
had extinguished long before the inception of the disputed
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commercial transactions for vague and omnibus allegations
there is no overact attributed to the applicant.
41. Merely labeling a commercial default with the headings
of "cheating" (Section 420 IPC) or "breach of trust" (Section
406 IPC) in an FIR does not automatically attract those penal
sections. Criminal liability depends strictly on whether the
foundational ingredients—such as dishonest inducement ab
initio or specific property entrustment—are legally made out
on the face of the complaint. If the act itself does not consti-
tute a criminal offence under the IPC, then debating whether
a director / employee resigned before or after the police com-
plaint becomes secondary to the primary conclusion that no
criminal case is made out at all. The complainant had ongoing
commercial dealings with the company "since last 3 years as
narrated in the FIR itself". A long-standing, continuous busi-
ness relationship robustly negates the theory of fraudulent in-
tention or deception ab initio, reinforcing that the dispute is
fundamentally a civil or commercial contractual default rather
than a criminal offence.
42. Therefore, this Court finds it not only appropriate but
strictly necessary to exercise its inherent powers under Sec-
tion 482 of the Code of Criminal Procedure to prevent the ab-
use of the process of the Court and to secure the ends of
justice.
43. In the result, the present Criminal Miscellaneous Applic-
ation is hereby allowed. The impugned First Information Re-
port being C.R. No. I-57 of 2018 , registered at Mansa Police
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Station, Gandhinagar on 16.04.2018, along with all con-
sequential, incidental, and subsequent proceedings arising
therefrom, including any charge-sheet or process that may
have been issued, is hereby quashed and set aside qua
present applicant.
44. Rule is made absolute in all the applications in the afore-
said terms. Direct service is permitted.
(M. R. MENGDEY,J)
J.N.W / 56
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