Advance consideration under a sale agreement is not entrustment; contractual breach alone does not constitute cheating.

The petitioners invoked Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, seeking quashing of Complaint Case No. 1786 of 2023 and the summoning order dated 18 January 2024, whereby the Judicial Magistrate, Koderma found a prima facie case under Sections 323, 341, 420 and 406 of the Indian Penal Code.

The complainant alleged that the petitioners agreed to sell land to him for ₹6,30,000 per kattha, received advance payments aggregating to ₹28,00,000 under agreements dated 22 September 2021 and 8 November 2021, and thereafter avoided execution of the sale deed.

He further alleged that he incurred expenses towards settlement of disputes and construction of a boundary wall, which was subsequently demolished by unidentified persons.

The complainant also alleged that the petitioners, accompanied by several persons, visited his house on 27 September 2023 and abused him.

The petitioners contended that the dispute was essentially civil in nature and that the allegations, even if accepted in their entirety, did not constitute the alleged offences.

1. Whether the allegations disclosed the ingredients of voluntarily causing hurt under Section 323 IPC or wrongful restraint under Section 341 IPC?

2. Whether the petitioners’ failure to execute the sale deed after receiving advance consideration constituted cheating under Section 420 IPC, in the absence of an allegation of dishonest intention or deception at the inception of the transaction?

3. Whether the advance amount paid under the agreements for sale constituted “entrustment” and its retention constituted criminal breach of trust under Section 406 IPC?

4. Whether continuation of the criminal proceedings amounted to an abuse of the process of law warranting exercise of the High Court’s inherent jurisdiction under Section 528 BNSS?

The Court applied Sections 323, 341, 406 and 420 of the Indian Penal Code and Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023.

Section 323 requires voluntary causing of bodily pain, disease or infirmity with the requisite intention or knowledge.

Section 341 requires voluntary obstruction preventing a person from proceeding in a direction in which that person has a right to proceed.

For cheating under Section 420 IPC, relying on Uma Shankar Gopalika v. State of Bihar, (2005) 10 SCC 336, and Dalip Kaur v. Jagnar Singh, (2009) 14 SCC 696, the Court held that dishonest deception or intention to cheat must exist at the inception; a subsequent breach of contract does not, by itself, constitute cheating.

For criminal breach of trust under Section 406 IPC, relying on State of Punjab v. Pritam Chand, (2009) 16 SCC 769, Binod Kumar v. State of Bihar, (2014) 10 SCC 663, and Ram Narayan Popli v. CBI, (2003) 3 SCC 641, the Court held that there must be entrustment of property followed by dishonest misappropriation, conversion or use in violation of law or contract.

Relying particularly on Radheyshyam v. State of Rajasthan, 2024 SCC OnLine SC 2311, the Court held that advance consideration paid under an agreement for sale is not “entrusted” property, and refusal to register the sale does not amount to criminal breach of trust.

The Court found no allegation that the petitioners caused bodily pain, disease or infirmity to the complainant, and therefore Section 323 IPC was not attracted.

Similarly, the complaint contained no allegation that the petitioners obstructed the complainant or prevented him from proceeding in any particular direction, excluding the ingredients of Section 341 IPC.

Although the complainant alleged receipt of advance money and subsequent failure to execute the sale deed, there was no specific allegation that the petitioners had a dishonest intention or had practised deception when the transaction was entered into.

The allegations therefore indicated, at most, a contractual dispute or subsequent breach, not cheating under Section 420 IPC.

The advance payments were made as part consideration under agreements for sale and were not entrusted to the petitioners in the legal sense required for Section 406 IPC.

Consequently, the essential element of entrustment, as well as dishonest misappropriation of entrusted property, was absent.

Since none of the charged offences was made out even if the complaint allegations were accepted in their entirety, continuation of the prosecution would amount to an abuse of the process of law.

It accordingly exercised its jurisdiction under Section 528 BNSS and quashed the entire criminal prosecution in Complaint Case No. 1786 of 2023, including the order dated 18 January 2024 summoning the petitioners.

The criminal miscellaneous petition was allowed, and the pending interlocutory application was disposed of as infructuous.