Manish vs. The State Of Maharashtra

2025 INSC 430
Non-Reportable

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION



CRIMINAL APPEAL NO. OF 2025
(Arising out of SLP (Criminal) No. 10931 OF 2022)



Manish .…Appellant(s)

Versus


State of Maharashtra and Anr. …. Respondent(s)




J U D G M E N T






Joymalya Bagchi, J.


1. Leave granted.
th
2. The appeal is directed against judgment and order dated 27
September, 2022, passed by the High Court of Judicature at
Bombay at Nagpur in Criminal Application (APL) No. 506 of
2022, whereby the appellant’s prayer for quashing of FIR No.
th
80/2022, dated 11 February, 2022, registered under Section
Signature Not Verified
420 of the Indian Penal Code, 1860, (for short the ‘IPC’) at
Digitally signed by
KAPIL TANDON
Date: 2025.04.02
18:00:27 IST
Reason:
Police Station Lakadganj, Nagpur, was refused.
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Genesis of the case:
nd
3. The 2 non-applicant (respondent no.2 herein) – Nitin, S/o
Murlidhar Agrawal, took out an application under Section
156(3) of the Code of Criminal Procedure, 1973, before the
Judicial Magistrate First Class (Nagpur) alleging as follows:-
nd
a) The appellant/accused approached the 2 non-applicant
and represented himself as a ‘reputed, trustworthy and
creditworthy’ businessman. On such representation,
th nd nd
between 20 November, 2015 and 02 June, 2017, the 2
non-applicant sold coal to the appellant and raised invoices,
which carried a credit period of 15 days. In respect of the
few initial invoices, the appellant made payments.
Subsequently, he failed to make payments and a large

amount became due.
th nd
b) On 06 March, 2019, the 2 non-applicant issued notice
to the appellant claiming a sum of Rs.76,82,883/- along
with interest payable within 15 days of notice. Appellant
rd
failed to pay and pursuant to negotiations, on 23 July,
2020, a notarized agreement was executed, by and between
2

st
the parties, wherein it was agreed between 01 August,
st
2020 and 31 January, 2021, the appellant would repay the
nd
sum of Rs.80,00,000/- in five installments to the 2 non-
applicant, failing which the latter would be at liberty to
initiate civil and criminal proceedings.
c) The appellant paid Rs.5,00,000/- as per the agreement, but
failed to pay the remaining sum.
nd
d) Under such circumstances, the 2 non-applicant
th
approached Lakadganj Police Station on 28 June, 2021 for
registration of a criminal case. Police did not take action,
nd
which constrained the 2 non-applicant to approach the
Magistrate concerned for direction to register FIR.
4. After considering the averments in the application and report
from the Police Station, the Magistrate directed registration of
FIR.
5. In course of investigation, police recorded further statement of
nd
the 2 non-applicant. Other witnesses were also examined.
Notarized agreement, invoices and bank statements were
nd
seized. In his further statement, the 2 non-applicant
reiterated the allegations. He further disclosed he had lodged
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a prior complaint at Lakadganj Police Station and the Crime
Branch had started investigation thereon. At that stage, the
appellant had met him in his office and the notarized
agreement came to be signed, which has not been honoured by
the appellant.
6. In conclusion of investigation, a charge-sheet came to be filed
against the appellant alleging commission of offence
punishable under Section 420 IPC.
Proceeding before the High Court:
7. The appellant assailed the charge-sheet before the High Court
in Criminal Application (APL) No. 506 of 2022. The High Court
refused to quash the proceeding inter alia holding the
allegations prima facie divulging ingredients of offence under
Section 415 IPC.
8. The High Court held the case did not divulge a purely
nd
commercial dispute and the 2 non-applicant had not given
the dispute a cloak of criminality. What primarily persuaded
the High Court to come to such conclusion are the averments
in the notarized agreement, wherein the appellant admitted
nd
that he had induced the 2 non-applicant to sell coal by
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projecting himself as a reputed, trustworthy and creditworthy
party. It is trite, the High Court would sparingly exercise its
inherent powers to interdict a criminal proceeding.
Relevant Law:
9. The principles circumscribing the power of the High Court to
quash a criminal proceeding are succinctly laid down in State
1
of Haryana vs. Bhajan Lal :-
“(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 ac-
cused.

(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 Sec-
tion 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 of-
fence, 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

1
1992 Supp (1) SCC 335.

5

10. The trajectory of events narrated earlier would reveal a
continuing business transaction between 2015 and 2017
nd
between parties. During this period, the 2 non-applicant
supplied coal in tranches under various invoices with a credit
limit of 15 days. Though the appellant had breached the credit
nd
limit and failed to pay the 2 non-applicant, the latter
continued to supply coal irrespective of such breach. A sum of
Rs.76,82,883/- became due and payable.
rd
11. On 23 July, 2020, a notarized agreement was executed
st
wherein the appellant agreed to liquidate the dues between 1
st
August, 2020 and 31 January, 2021 in five installments. The
schedule was not adhered to. The High Court referring to the
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recitals in the subsequent agreement held the appellant had
nd
acknowledged that he had induced the 2 non-applicant to
supply coal on the false representation and thereby had
cheated the latter.
12. It is strenuously argued at the inception of the transaction the
appellant had dishonestly portrayed himself as a ‘reputed,
trustworthy and creditworthy’ businessman and thereby
nd
induced the 2 non-applicant to supply coal which the
appellant had no intention to pay.
13. In support of his argument, Mr. Subramoniam refers to
illustration (f) of Section 415 of IPC which reads as follows:
“(f) A Intentionally deceives Z into a belief that A means
to repay any money that Z may lend to him and thereby
dishonestly induces Z to lend him money, A not intend-
ing to repay it. A cheats.”
14. There is no cavil that in some cases a commercial dispute may
give rise to a criminal offence in addition to a civil cause of
action. The test to determine whether a case would attract

penal consequences is as follows:-
“Did the offending party make dishonest representation
at the inception of the transaction and induce the other
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party to part with property, or act in a manner which but
2
for such representation, the latter would not have done .”


15. This fine distinction is brought out in illustration (g) of Section

415 of IPC which reads as follows:-
“(g) A intentionally deceives Z into a belief that A means
to deliver to Z a certain quantity of indigo plant which he
does not intend to deliver, and thereby dishonestly in-
duces Z to advance money upon the faith of such delivery.
A cheats; but if A, at the time of obtaining the money, in-
tends to deliver the indigo plant, and afterwards breaks
his contract and does not deliver it, he does not cheat, but
is liable only to a civil action for breach of contract.”
16. Materials collected during investigation do not show the
present case falls in the category of commercial disputes which
would attract penal consequences. Investigating officer had
recorded statements of two bankers and a builder. The bankers
disclosed the appellant and his relations had substantial
landed properties which had been mortgaged to them in 2014.
The appellant had repaid the loan regularly till 2016 thereafter
defaulted. Notwithstanding default, in 2018 an additional loan
was also sanctioned to him.
17. These materials support the appellant’s representation that
he was a businessman of substance and as late as on 2018,

2
Hridaya Ranjan Prasad Verma and Ors vs State of Bihar and Anr, (2000) 4 SCC 168 (Para 13-15)
;
Satishchandra Ratanlal Shah vs State of Gujarat and Anr., (2019) 9 SCC 148 (Para 13); Delhi Race
Club (1940) Ltd and Ors vs State of Uttar Pradesh and Anr, (2024) 10 SCC 690 (Para 41).

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his bankers reposed confidence in his financial liquidity to
extend additional loans. Nothing is placed on record to disclose
utter insolvency or bankruptcy of the appellant, which he had
nd
knowingly suppressed and persuaded the 2 non-applicant to
enter into the commercial arrangement. The High Court erred
in not taking into consideration these relevant aspects, which
shows the representation of the appellant that he was a
creditworthy businessman cannot be labelled as ‘deception’
merely on the ground that the appellant had failed to honour
the terms of the subsequent agreement. The High Court came
to the conclusion that the appellant had intention to deceive
from the inception of the transaction. This reasoning is wholly
fallacious. Mere breach of promise to repay per se does not
3
infer dishonest intention .
18. In order to attract the penal provision, the uncontroverted
allegations including material collected during investigation
must disclose that pursuant to the assurance in the
nd
subsequent agreement, the 2 non applicant had parted with
property, that is to say made further supplies and suffered

3
Hari Prasad Chamaria vs Bishun Kumar Surekha and others, (1973) 2 SCC 823 (Para 4).
9

wrongful loss. It is nobody’s case after the subsequent
nd
agreement further supplies had been made or the 2 non-
applicant had been subjected to wrongful loss.
19. On the contrary, appellant had clarified he had suffered
continuous business setbacks. Due to losses, he was unable
nd
to pay the 2 non-applicant. He had sold the coal to a brick
manufacturer and suffered losses thereto. Vicissitudes in the
commercial market are well known. Failure to pay due to
unfortunate business losses cannot be clothed with culpability
and the process of criminal law utilized to recover outstanding
4
dues .
20. The proposition of law declared in Mohsinbhai Fateali vs
5 nd
Emperor does not help the 2 non applicant. In the said case,
the Bench held merely because the accused had subsequently
filed for insolvency, it cannot be held that he had no reasonable
expectation to pay for the goods on the date of contract.


4
Sarabjit Kaur vs State of Punjab & Anr., (2023) 5 SCC 360 (Para 13).
5
1931 SCC OnLine Bom 55.
10

21. Beaumont J. opined to prove the offence of cheating, the
prosecution must establish:-

Nothing has been placed on record to demonstrate the
nd
appellant was in dire financial straits at the time when the 2
non-applicant had supplied coal.
6
22. In Khoda Bakhsh vs Bakeya Mundari , the accused had
deceived the complainant to part with money on the assurance
to liquidate a mortgage debt and utilized the money to repay
another debt which he had suppressed. No such divergence of
funds/ goods is made out in the factual matrix to show
‘deception’ by the appellant.
23. For the aforesaid reasons, the impugned order is set aside and
th
the proceeding arising out of FIR No. 80/2022, dated 11
February, 2022, registered under Section 420 IPC, at the Police

Station Lakadganj, Nagpur is hereby quashed.

6
1905 SCC OnLine Cal 170.
11

24. The appeal is allowed. Pending applications, if any, shall
stand disposed of.


….……..…..……...……………………….J.
(PAMIDIGHANTAM SRI NARASIMHA)




….……..…..……...……………………….J.
(JOYMALYA BAGCHI)
New Delhi,
April 02, 2025.

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