Absence of entrustment or direct inducement precludes criminal liability for breach of trust and cheating.

The complainant (Respondent No. 2) and Accused No. 1 (Petitioner No. 1) were friends. In 2017, the complainant sought to purchase a house and, through Accused No. 1, met a builder (Piyushbhai Patel).

The complainant handed over 13 signed blank cheques to the builder for the transaction. While 4 cheques were used for the sale deed, 9 remained with the builder.

Later, a dispute arose when the complainant filed a NI Act Section 138 case against Accused No. 1 over a separate loan. Allegedly, Accused No. 1 procured two of the remaining blank cheques from the builder and, in connivance with his wife (Petitioner No. 2), filled in large amounts and deposited them to exert pressure on the complainant.

Consequently, Petitioner No. 2 filed a counter-complaint under Section 138 against the complainant, which was eventually dismissed.

The complainant then lodged the present FIR (No. 11206043210966 of 2021) alleging offences under Sections 406 (Criminal breach of trust), 420 (Cheating), and 114 of the IPC. Petitioner No. 1 died during the proceedings.

1. Whether the ingredients of Section 406 and 420 of the IPC are made out against Petitioner No. 2 when the cheques were never directly entrusted to her by the complainant.

2. Whether the dispute is primarily civil in nature, rendered with a criminal color to settle collateral litigation.

The court primarily applied Section 406 (punishment for criminal breach of trust) and Section 420 (cheating) of the IPC.

The court relied on the precedent S.W. Palanitkar & Ors. v. State of Bihar & Anr. (2002), which mandates that for Section 406, there must be (i) entrustment of property and (ii) dishonest misappropriation.

Regarding Section 420, it relied on Harmanpreet Singh Ahluwalia v. State of Punjab (2009), establishing that cheating requires fraudulent or dishonest inducement at the inception of the transaction.

The court also noted that mens rea (dishonest intention) is a prerequisite for both offences.

The court observed that the cheques were handed over to the builder (Piyushbhai) in 2017, yet the complainant did not seek their return or initiate "stop payment" instructions until 2019, following the counter-litigation.

Crucially, the court found no evidence of "entrustment" as defined under Section 405 IPC between the complainant and Petitioner No. 2; the cheques were allegedly obtained from a third party (the builder).

Since there was no direct contact or inducement by Petitioner No. 2 to make the complainant deliver the property, the essential element of "deception" required for cheating under Section 420 was absent.

The court characterized the overarching dispute—involving professional acquaintance, property possession, and a pending civil suit—as civil in nature.

It concluded that continuing criminal proceedings would be an abuse of process, particularly as Petitioner No. 2 had no direct role in the initial transaction.

Regarding Petitioner No. 2, the court held that no prima facie case for criminal breach of trust or cheating was establishes as the essential ingredients of entrustment and inducement were missing.

The court allowed the petition and quashed FIR No. 11206043210966 of 2021 against Petitioner No. 2.

It clarified that the trial court may proceed with the Section 173(8) application for further investigation against other parties (like the builder) but not against Petitioner No. 2. Rule made absolute.