### Breach of Contract Lacks Criminal Intent Required for Cognizance Under Sections 406 and 420 IPC

The Petitioner (a film producer from Madhya Pradesh) and Opposite Party No. 2 (the Complainant) entered into an agreement to co-produce a film titled "ARAAJAK" on a 50-50% investment and profit-sharing basis.

The Complainant alleged he invested ₹31,85,000, but the Petitioner failed to pay his share or return the investment, thereby committed fraud.

Prior to this complaint, the Complainant attempted to lodge an FIR in Jabalpur, M.P., where the police concluded the claim was premature as the film remains unreleased.

Subsequently, the Complainant filed a complaint in Patna, and the Judicial Magistrate took cognizance under Sections 406 and 420 of the IPC on 01.07.2023.

The Petitioner moved the High Court to quash the order, arguing it was a civil breach of contract and lacked territorial jurisdiction in Bihar.

1. Whether the allegations in the complaint constitute criminal offences under Sections 406 and 420 of the IPC or are purely civil in nature regarding a breach of contract.

2. Whether the criminal proceedings amount to an abuse of the process of law given the prior failed attempts to litigate the same facts in another state.

The Court primarily applied Section 406 (criminal breach of trust) and Section 420 (cheating) of the Indian Penal Code.

It relied on the principle that a mere breach of contract does not attract criminal liability unless dishonest intention existed at the inception of the transaction.

The Court specifically cited *Delhi Race Club (1940) Limited and Ors. vs State of Uttar Pradesh and Another* (2024 10 SCC 690), which held that offences under Sections 406 and 420 IPC generally cannot go side by side as they are based on distinct legal premises.

It also considered Section 73 of the Indian Contract Act, 1872 regarding damages for breach of contract.

The Court observed that the legal notice sent by the Complainant explicitly described the dispute as a "breach of contract" and sought damages under the Indian Contract Act.

The court found that the Complainant’s own admissions indicated the dispute arose from the non-performance of contractual terms regarding profit-sharing and investment.

Since the film had not yet been released, the police inquiry in Jabalpur had already deemed the claim premature.

The High Court reasoned that the essential ingredients of cheating (dishonest inducement at the start) and criminal breach of trust were absent; instead, the case represented a civil dispute dressed up as a criminal one.

Furthermore, the court noted that the agreement was executed in Mumbai and the petitioner resided in Jabalpur, raising significant territorial jurisdiction concerns for a case filed in Patna.

The Court held that continuing the criminal proceedings would amount to an abuse of the process of the court.

Consequently, the application was allowed, and the order of cognizance dated 01.07.2023 passed by the Judicial Magistrate 1st Class, Patna, in Complaint Case No. 1965(c) of 2023 was set aside.