SOURAV AGARWAL AND ANR vs THE STATE OF WEST BENGAL AND ANR

IN THE HIGH COURT AT CALCUTTA
CRIMINAL REVISIONAL JURISDICTION
APPELLATE SIDE

PRESENT:
THE HON’BLE JUSTICE UDAY KUMAR

CRR 2281 OF 2023
WITH
CRAN 8 OF 2026

SOURAV AGARWAL & ANR.
-VS-
STATE OF WEST BENGAL AND ANR.

For the Petitioners : Mr. Koushik Banerjee
Ms. Rashmita Sen

For the Opposite Party No.2 : Mr. Swapan Kr. Mallick
Mr. Amitabha Karmakar
Mr. Arup Bhowmick

Reserved on : 07.10.2026
Pronounced on : 15.10.2026

UDAY KUMAR, J.: –
1. The present revisional application under Section 482 of the Code of
Criminal Procedure, 1973 ( Cr.P.C. ) has been preferred by the petitioners
who are Directors of M/s. Frontline Corporation Ltd. seeking quashing
of the criminal proceedings in Complaint Case No. CR-585 of 2021
under Sections 406 and 420 of the Indian Penal Code, 1860 ( IPC ),
including the order of Cognizance and issuance of process against them
being Order No. 01 dated December 22, 2021, presently pending before

2
CRR 2281 OF 2023

nd
the 2 Court of the learned Additional Chief Judicial Magistrate,
Haldia, Purba Medinipur.
2. The foundational facts necessary for the disposal of the instant
revisional application, as revealed from the record, trace back to the
year 2019 when M/s. Frontline Corporation Ltd. (a corporate entity
having its head office at 5, Stephen House, B.B.D. Bagh, Kolkata)
floated a commercial tender for establishing a petrol pump project on
National Highway 41 at Dighasipur, Talpukur, Haldia. Opposite Party
No. 2, operating as the sole proprietor of S.B. Construction, participated
in the tender and was awarded the civil job-work contract. The scope of
the agreement was essentially a service or labour contract based on
negotiated rate quotations submitted by Opposite Party No. 2 on April
18, 2019, April 19, 2019, and September 16, 2019, for executing civil
works covering an S.R. oil pump, pump-bed, boundary wall, storage
tank, culvert, and access roads, while the supply of construction
materials remained the exclusive responsibility of the company.
3. In the course of executing the contract, Opposite Party No. 2 raised
periodic bills and received progressive payments from the petitioners’
company from time to time. Following the damage caused to the
boundary wall of the said petrol pump project by Cyclone Amphan,
repair works were executed and separately paid for by the company.
However, upon completion of the main pump-bed works, a commercial
dispute arose between the parties regarding billing deductions and rate
adjustments. To resolve the issue, mutual negotiations were held at the
company's project office and subsequently at Bhabanipur Police Station

3
CRR 2281 OF 2023

on July 29, 2021, culminating in an agreed settled sum of ₹ 7,87,000/-
to be paid to the Opposite Party No. 2 toward the pump-bed bills. In
terms of this settlement, M/s. Frontline Corporation Ltd. disbursed the
entire abovementioned settled amount in three instalments between the
months of July and September 2021, which Opposite Party No. 2
accepted without protest.

4. Nearly three months after receiving the final instalment under the said
negotiated settlement, Opposite Party No. 2 raised a fresh claim
asserting an unpaid balance of ₹ 39,30,525/- across eight other bills.
When the company officials refused to clear the additional claim on
December 10, 2021, on the ground that all accounts stood fully settled
in view of their negotiated settlement dated July 29, 2021 and
nd
subsequent payments, Opposite Party No. 2 approached the 2 Court
of the learned Additional Chief Judicial Magistrate at Haldia, Purba
Medinipur, on December 22, 2021, by filing a private written complaint
under Section 200 Cr.P.C. against four individuals, including the
present petitioners; alleging commission of offences punishable under
Sections 384, 406, and 420 IPC. Significantly, the contracting corporate
entity of the petitioners, M/s. Frontline Corporation Ltd., was not
arrayed as an accused in the complaint.
5. By the impugned Order No. 01 dated December 22, 2021, the learned
ACJM took cognizance of the alleged offences on a pre-typed cyclostyled
order sheet by filling in blanks mechanically, examined the complainant
on Solemn Affirmation under Section 200 Cr.P.C., and issued
Summons under Section 204 Cr.P.C. against all accused persons for

4
CRR 2281 OF 2023

offences under Sections 406 and 420 IPC. Crucial to note, the learned
Magistrate issued process against the present petitioners directly on the
very first day, immediately after filing of the complaint, without
postponing process or conducting a mandatory inquiry or police
investigation under Section 202(1) Cr.P.C., despite the petitioners
permanently residing at Regent Park, Tollygunge, Kolkata situated
strictly beyond the territorial jurisdiction of the ACJM Court, Haldia.

6. Aggrieved by the initiation and continuation of the criminal
proceedings, the petitioners preferred the present revisional application
before this Court, seeking quashing of Complaint Case No. CR-585 of
2021 and setting aside of the summoning order dated December 22,
2021, primarily on the grounds that the dispute is purely civil in
nature, that charges under Sections 406 and 420 IPC are legally
untenable and mutually exclusive on the same set of facts, that the
learned ACJM, Haldia completely bypassed the mandatory inquiry
required under Section 202(1) Cr.P.C., and that in the absence of
arraignment of the corporate entity, the directors cannot be held
vicariously liable.

7. On the basis of the rival pleadings and submissions advanced across
the Bar, the following core questions arise for determination in this
revisional application:
Firstly, Whether the mere non-payment, part-payment, or
disputed deduction of contractual bills raised for civil works
executed under a commercial agreement—where substantial
payments were periodically made and accepted—can make a

5
CRR 2281 OF 2023

party criminally liable for the offence of Cheating punishable
under Section 420 of the Indian Penal Code, 1860, in the
absence of initial fraudulent or dishonest representation at the
very inception of the transaction?
Secondly, Whether, an unpaid contractual price or service bill
for civil labour rendered constitutes "property entrusted" so as
to attract the offence of Criminal Breach of Trust punishable
under Section 406 of the Indian Penal Code, 1860, and whether
charges under Sections 406 and 420 IPC can legally co-exist on
the identical set of commercial facts?
Thirdly, Whether the requirement of holding a prior inquiry or
directing an investigation under the mandatory proviso
appended to Section 202(1) of the Code of Criminal Procedure,
1973 prior to issuing process under Section 204 Cr.P.C. against
an accused residing outside the local territorial jurisdiction of
the Magistrate, is an essential jurisdictional pre-condition, and
whether the presence of local co-accused inside the jurisdiction
waives this statutory protection available to non-resident
accused?
Fourthly, Whether the availability of an alternative statutory
remedy to seek discharge before the Trial Court bars the High
Court from exercising its inherent powers under Section 482
Cr.P.C. to quash a criminal proceeding that fails to disclose any
penal offence at the threshold and falls within the parameters

6
CRR 2281 OF 2023

laid down in State of Haryana & Ors. v. Bhajan Lal & Ors., [1992
Supp (1) 335] ?
8. In analysing the first question for determination, the fundamental
distinction between a mere breach of contract and the criminal offence
of cheating under Section 415 IPC (punishable under Section 420 IPC)
must be kept in mind. The statutory definition of 'cheating' under
Section 415 IPC mandates three essential ingredients:
(i) deception of any person;
(ii) fraudulently or dishonestly inducing that person to deliver
any property or to do or omit to do anything; and
(iii) such act or omission causing or being likely to cause
damage or harm to that person. To bring a case within the
four corners of Section 420 IPC, it is a sine qua non that
the fraudulent or dishonest intention must exist at the
very inception of the transaction.
9. A mere failure to keep a promise at a subsequent stage, or a failure to
pay a disputed contractual balance after partial performance and
substantial payments, does not retroactively convert a civil breach of
contract into the criminal offence of cheating. This principle is
encapsulated in Illustration (g) to Section 415 IPC itself, which clearly
establishes that where a party enters into a contract with an initial
intention to perform, but subsequently breaks the contract, he is
liable only to a civil action for breach of contract and not be roped into
the criminal charge of ‘cheating’.

7
CRR 2281 OF 2023

10. This settled position of law has been consistently affirmed by the
Hon'ble Supreme Court, in Binod Kumar and Ors. v. State of Bihar and
Anr. [(2014) 10 SCC 663] , the Apex Court held that non-payment or
withholding of charges/fees arising out of a work contract or
commercial transaction does not attract criminal liability, and that
converting a civil dispute for recovery of contractual dues into a
criminal prosecution is an abuse of the process of Court, liable to
quashing. Similarly, in VESA Holdings Private Ltd. & Anr. v. State of
Kerala & Ors., [(2015) 8 SCC 293] and Vir Prakash Sharma v. Anil Kumar
Agarwal and Anr. , [(2007) 7 SCC 373] , it was held that every breach of
contract does not amount to cheating unless dishonest intention is
shown at the very beginning of the transaction. Most recently, in
Manish v. State of Maharashtra and Anr., [2025 SCC OnLine SC 707] ,
the Hon’ble Supreme Court reiterated that where work was continued,
bills were raised, and periodic payments were honoured by the
employer, the element of dishonest inducement at inception stands
completely dislodged, leaving no room for a charge under Section 420
IPC.

11. Learned Counsel appearing for Opposite Party No. 2 placed reliance
upon the decision in Ravindra Kumar Madhanlal Goenka & Anr. v.
Rugmini Ram Raghav Spinners (P) Ltd. , [(2009) 11 SCC 529] to contend
that quashing should be refused as eight construction bills remain
unpaid. However, this Court finds that Ravindra Kumar Madhanlal
Goenka (supra) is clearly distinguishable on factual scores. In Goenka ,
the complainant mill had paid money in advance to a cotton

8
CRR 2281 OF 2023

commission agent who retained the money without supplying 100 bales
of cotton, a classic scenario where initial entrustment and parting of
money took place on a false promise. Here in the present case, by stark
contrast, Opposite Party No. 2 parted with no property or advance
money on inducement; he merely provided civil construction labour
under a civil works contract, received periodic payments throughout the
contract, negotiated the final accounts, and accepted substantial
payments under a settlement. The admitted course of continuous
commercial dealing; quotations, execution, periodic billing, periodic
payments, negotiated adjustments, and near-complete disbursement,
directly disproves any allegation of deception or dishonest intention at
the inception of the transaction to attract the offence of cheating
punishable under Section 420 IPC. Therefore, the First Question is
answered in the negative, in favour of the petitioners.
12. Turning to the second question for determination, it is necessary to
scrutinize the statutory definition of "Criminal Breach of Trust" under
Section 405 IPC (punishable under Section 406 IPC). Section 405 IPC
mandates two indispensable statutory ingredients:

(i) entrustment of property, or dominion over property, to the
accused; and
(ii) dishonest misappropriation, conversion, or disposal of that
property in violation of any direction of law or legal contract.
13. "Entrustment" is a substantive ingredient, not a mere technicality. A
customer or employer who owes an unpaid balance or disputed bill to a
service provider/contractor has not been "entrusted" with any property

9
CRR 2281 OF 2023

belonging to that contractor. An unpaid contract price or a disputed
debt represents a civil liability; it is not "property entrusted" in a
fiduciary capacity, nor does it fall within the ambit of moveable property
misappropriated by a debtor.
14. Furthermore, the legal concepts underlying "Cheating" (Section 415 IPC)
and "Criminal Breach of Trust" (Section 405 IPC) are conceptually
distinct and mutually exclusive, as such cannot be applied to identical
facts simultaneously. In an offence of Cheating punishable under
Section 420 IPC, the victim is dishonestly induced to part with property
from the very inception as a result of deception whereas, in Criminal
Breach of Trust under Section 406 IPC, the victim lawfully entrusts the
property to the accused at the inception, and the dishonest intention or
misappropriation develops subsequently. Therefore, both offences
cannot dwell together on the self-same set of un-differentiated factual
allegations of non-payment.
15. This legal principle has been firmly settled by the Hon'ble Supreme
Court. In Delhi Race Club (1940) Limited and Ors. v. State of Uttar
Pradesh and Anr. [(2024) 10 SCC 690] , the Apex Court explicitly held
that although both offences involve dishonest intention, cheating and
criminal breach of trust are mutually exclusive and different in basic
concept. The Hon’ble Supreme Court emphasized that where a
complaint invokes both Sections 406 and 420 IPC on identical,
omnibus allegations of non-payment of contractual dues without
alleging specific initial inducement for Section 420 IPC or explicit
entrustment for Section 406 IPC, the complaint fails to establish either

10
CRR 2281 OF 2023

offence. The same view has been taken by this Hon’ble Court in Dreamz
Collections and Ors. v. State of West Bengal and Anr. , [2022 SCC OnLine
Cal 1321] and Ranjan Sachdeva v. State of West Bengal and Anr., [2022
SCC OnLine Cal 1830] .
16. Learned Counsel for Opposite Party No. 2 placed reliance on Mushtaq
Ahmad v. Mohd. Habibur Rehman Faizi & Ors., [ (1996) 7 SCC 440] to
contend that both sections can be invoked when funds are withheld.
However, Mushtaq Ahmad (supra) is also clearly distinguishable on
factual scores, wherein, a school’s management had specifically drawn
identified Government funds allocated towards the complainant
teacher's salary and allowances, and thereafter misappropriated those
specific identified public funds, a classic case of entrustment and
conversion of government funds held in trust. Here in the present case,
by contrast, there was no identified property or funds handed over in
trust by Opposite Party No. 2 to the petitioners; it is a simple claim for
an unpaid contractual balance for labour rendered. Consequently,
taking the complainant’s case at its highest, the fundamental element
of "entrustment" is conspicuously absent, rendering charge under
Section 406 IPC wholly inapplicable. Therefore, Question No. II is
answered in the negative, in favour of the petitioners.
17. Adverting to the third Question for determination, on the face of the
cause title of the complaint as well as the revisional application,
Petitioners Sourav Agarwal and Narayan Agarwal (Accused Nos. 1 and
2) permanently reside at Tollygunge, Kolkata situated indisputably

11
CRR 2281 OF 2023

outside the local territorial jurisdiction of the learned Additional Chief
Judicial Magistrate at Haldia, Purba Medinipur.
18. A perusal of the impugned Order No. 01 dated December 22, 2021,
reveals that on the very day the private complaint was filed by the
Opposite Party No. 2 under Section 200 Cr.P.C., the learned ACJM
examined complainant Sk. Sirajul Islam on Solemn Affirmation ( S.A. )
and, without anything more, took cognizance and issued
process/summons under Section 204 Cr.P.C. against all four accused
persons, including the present non-resident petitioners, without
postponing process to conduct an inquiry or direct an investigation
under Section 202(1) Cr.P.C.
19. The legal necessity of this procedural filter stems directly from
Parliament's amendment to Section 202(1) Cr.P.C. by Act 25 of 2005.
The deliberate inclusion of the word "shall" in Section 202(1) Cr.P.C.
( "shall, in a case where the accused is residing at a place beyond the
area in which he exercises his jurisdiction, postpone the issue of
process..." ) makes it abundantly clear that holding an inquiry or
directing an investigation prior to summoning an out-station accused is
not discretionary, rather it is a mandatory statutory duty. Parliament
incorporated this mandatory safeguard specifically to prevent
unscrupulous litigants from filing false, frivolous, or vexatious
complaints in far-off jurisdictions to harass innocent residents of
distant places. This statutory mandate has been consistently
interpreted and reaffirmed by the Hon'ble Supreme Court in National
Bank of Oman v. Barakara Abdul Aziz and Anr., [(2013) 2 SCC 488] and

12
CRR 2281 OF 2023

Vijay Dhanuka and Ors. v. Najima Mamtaj and Ors. [(2014) 14 SCC 638] ,
as well as by this Court in Abhishek Kapoor v. Kabir Suman ( CRR 4680
of 2022, decided on September 16, 2026 ) and a co-ordinate Bench of
this Court in Greaves Cotton Limited & Ors. v. State of West Bengal &
Anr. , [2023 SCC OnLine Cal 454] .
20. The submission advanced on behalf of Opposite Party No. 2 that the
presence of local co-accused (Managers and Representatives) within the
jurisdiction of the learned ACJM Court, Haldia waived the requirement
of an inquiry under Section 202(1) Cr.P.C. is fundamentally
misconceived notion, thus legally untenable. The statutory safeguard
under Section 202(1) Cr.P.C. is accused-specific. The statute turns on
where "the accused" against whom process is to issue resides.
Parliament gave this statutory protection to every non-resident
individual accused to protect them from arbitrary summoning. The
mere presence of local co-accused of a complaint within the jurisdiction
of the summoning Court cannot extinguish, dilute, or waive the
personal statutory right and protection granted by Parliament to an
out-station co-accused. Furthermore, taking cognizance on a pre-typed
cyclostyled order sheet by filling in blanks violates Rule 183 of the
Calcutta High Court Criminal (Subordinate Courts) Rules, 1985 and
demonstrates non-application of judicial mind, as settled by a Co-
ordinate Bench of this Court in Chandi Charan Garani & Ors. v. State of
West Bengal, [2021 SCC OnLine Cal 3788] . Therefore, the third Question
is answered in the affirmative, in favour of the petitioners.

13
CRR 2281 OF 2023

21. Proceeding to the fourth question for determination, learned Counsel
appearing for Opposite Party No. 2 placed heavy reliance on the
decision of the Hon’ble Supreme Court in State of Orissa v. Debendra
Nath Padhi, [(2005) 1 SCC 568] to contend that the petitioners ought to
be relegated to the Trial Court to seek discharge at the appropriate
stage. This Court finds itself unable to accept the aforesaid submission.
The argument confuses the limitation on the Trial Court's power at the
stage of framing charges under Sections 227/239/245 Cr.P.C. with the
wide, plenary, and inherent jurisdiction vested in the High Court under
Section 482 Cr.P.C.
22. The legal proposition that the availability of a remedy by way of
discharge before the Magistrate does not operate as an absolute bar or
embargo on the exercise of inherent powers under Section 482 Cr.P.C.
is no longer res integra . In Pepsi Foods Ltd. and Anr. v. Special Judicial
Magistrate and Ors., [(1998) 5 SCC 749] , the Hon'ble Supreme Court
specifically held that summoning an accused in a criminal case is a
serious matter and that the availability of an alternative remedy of
discharge does not preclude an aggrieved party from approaching the
High Court under Section 482 Cr.P.C. to prevent abuse of process. This
principle was recently reaffirmed in Delhi Race Club (1940) Ltd. (supra) ,
where the Apex Court held that an accused need not undergo the rigor,
harassment, and ordeal of a criminal trial when the complaint, taken at
face value, fails to prima facie make out any penal offence.
23. In Debendra Nath Padhi (supra) , the Hon’ble Supreme Court explicitly
recognized in paragraph 29 of the report, that the High Court under

14
CRR 2281 OF 2023

Section 482 Cr.P.C. possesses wide powers to consider unimpeachable
documents of sterling quality to prevent abuse of process of the Court.
Here, the petitioners rely not on defence documents, but on the
complainant’s own written complaint, initial deposition under Section
200 Cr.P.C., and settlement receipts. Where a criminal proceeding is
manifestly attended with mala fide or where the allegations do not
disclose any cognizable offence, forcing the accused to face trial merely
because a discharge application could be filed at a later stage would
amount to a complete failure of justice. The case falls squarely within
categories (1), (3), and (7) of the principles laid down in Bhajan Lal
(supra) . Therefore, the fourth Question is answered in the negative, in
favour of the petitioners.
24. In addition, it is an admitted fact on record that the underlying civil
work contract was executed with M/s. Frontline Corporation Ltd. (a
juristic person). Under Indian criminal jurisprudence, vicarious liability
cannot be imported into IPC offences to prosecute company Directors
without arraying the corporate entity itself as a principal accused and
without establishing specific individual active roles with criminal intent,
as settled by the Hon’ble Supreme Court in S.K. Alagh v. State of U.P. &
Ors., [(2008) 5 SCC 662] and in Sharad Kumar Sanghi v. Sangita Rane,
[(2015) 12 SCC 781] . The non-arraignment of M/s. Frontline
Corporation Ltd. renders the prosecution against petitioners as its
directors legally unsustainable on this ground as well.
25. In the facts and circumstances of the present case, allowing the
criminal law machinery to be weaponized as a coercive tool to enforce

15
CRR 2281 OF 2023

recovery of disputed contractual dues after a settled commercial
transaction constitutes a blatant abuse of the process of Court.
26. Accordingly, the revisional application being C.R.R. No. 2281 of 2023 is
allowed.
27. The proceedings in Complaint Case No. CR-585 of 2021 under Sections
406 and 420 of the Indian Penal Code, 1860, including Order No. 01
dated December 22, 2021, taking cognizance and issuing process,
nd
presently pending before the 2 Court of the learned Additional Chief
Judicial Magistrate, Haldia, Purba Medinipur, are hereby quashed, in
respect of the Petitioners Sourav Agarwal and Narayan Agarwal.
28. Pending Connected application(s), if any, are also disposed of
accordingly.
29. Interim orders, if any, stand vacated.
30. There shall be no order as to costs.
31. Let a copy of this judgment along with the Trial Court Records (T.C.R.)
be transmitted to the learned Trial Court forthwith for necessary
information and compliance.
32. Case diary, be returned to the Learned Counsel for the State.

33. Urgent photostat certified copy of this judgment, if applied for, be
supplied to the parties upon compliance with all requisite formalities.

(Uday Kumar, J.)