Business disputes arising from long-term commercial transactions lack requisite dishonest intent for prosecution under Sections 406 and 420 IPC.

The petitioner, a Consignment and Forwarding Agent (CNF) for Dalmia Cement, sought the quashing of an order of cognizance dated 11.11.2022.

The complainant (Opposite Party No. 2), a cement dealer for ten years, alleged that the petitioner generated false bills amounting to a loss of approximately Rs. 20,00,000/- and coerced him into signing "no dues" documents.

The complainant argued that while payments were made directly to the company, the CNF manipulated the link site to generate fake bills.

Conversely, the petitioner maintained that the dispute was a commercial matter arising from business transactions.

Whether the allegations in the complaint constitute criminal offences under Sections 406 and 420 of the Indian Penal Code or represent a purely civil/commercial dispute

Whether the prosecution can continue in the absence of evidence showing dishonest intention at the inception of the transaction

Sections 406 (Punishment for criminal breach of trust) and 420 (Cheating and dishonestly inducing delivery of property) of the Indian Penal Code.

The core legal principle applied is that for an offence of cheating or criminal breach of trust to be made out in a contractual context, there must be material to suggest a dishonest intention at the very beginning of the transaction; a mere breach of contract or a commercial dispute does not attract criminal liability.

The court observed that the relationship between the parties was based on a long-standing business arrangement spanning ten years.

Upon perusal of the FIR, the court determined that the matter was "out and out [a] business transaction".

The court reasoned that there was no allegation or evidentiary material to suggest that the petitioner possessed a dishonest intention at the commencement of the dealings.

Furthermore, the court found that the dispute essentially related to the business transactions between the dealer (complainant) and the cement company, rather than the petitioner personally, who acted merely as the CNF.

The High Court allowed the petition and quashed the order of cognizance dated 11.11.2022 passed by the learned Judicial Magistrate, 1st Class, Katihar in Complaint Case No. 591 of 2022 insofar as it related to the petitioner.