Civil property and accounting disputes cannot sustain cheating or criminal breach of trust prosecutions.

The de facto complainant, Rajesh Prasad, and his mother initially occupied Flat No. 104 at Regent Sagar, Kolkata, as tenants/licensees. In 2008, as the complainant was unable to obtain institutional finance, the petitioners—his niece and nephew-in-law—agreed to obtain a housing loan in their names, with the flat registered in the name of Petitioner No. 2. The complainant agreed to bear the registration expenses and repay the EMIs, which he allegedly did for approximately ten years.

In 2019, the flat was sold with the consent of the parties for INR 38,00,000. The purchaser paid INR 6,44,408 directly to ICICI Bank towards the outstanding loan, while the balance sale consideration of INR 31,05,591.92 was paid through a demand draft in favour of Petitioner No. 2.

The petitioners subsequently transferred INR 15,00,000 to the complainant and his family members through NEFT but retained approximately INR 14,77,592, citing outstanding building-repair charges, electricity dues, and liabilities claimed by the flat owners’ association.

The complainant approached the Magistrate under Section 156(3) of the Code of Criminal Procedure, 1973, resulting in registration of Baguiati Police Station Case No. 75 of 2020 under Sections 420, 406 and 34 of the Indian Penal Code, 1860. After investigation, the police submitted Charge Sheet No. 281 of 2020 dated 10 July 2020.

The petitioners invoked Section 482 Cr.P.C. seeking quashing of the charge sheet and consequential proceedings.

Whether the materials collected during investigation prima facie disclosed the essential ingredients of cheating under Sections 415/420 IPC and criminal breach of trust under Sections 405/406 IPC, read with Section 34 IPC?

Whether the dispute was fundamentally civil, familial and monetary in nature, such that continuation of the criminal proceedings would amount to an abuse of the process of court warranting exercise of jurisdiction under Section 482 Cr.P.C.?

The Court applied Sections 415 and 420 IPC, holding that cheating requires dishonest or fraudulent intention at the inception of the transaction; a subsequent failure to perform an arrangement or a mere breach of promise does not, by itself, constitute cheating, as explained in Hriday Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168.

Sections 405 and 406 IPC require entrustment or dominion over property followed by dishonest misappropriation, conversion, use or disposal in violation of law or contract.

Section 482 Cr.P.C. empowers the High Court to prevent abuse of process and secure the ends of justice.

Relying on State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, the Court held that proceedings instituted with an ulterior motive or to achieve a collateral civil objective may be quashed.

It further relied on G. Sagar Suri v. State of U.P., (2000) 2 SCC 636, and V.Y. Jose v. State of Gujarat, (2009) 3 SCC 78, for the principle that essentially civil or contractual disputes should not be given a criminal colour to exert coercive pressure.

The Court also referred to Delhi Race Club Ltd. v. State of Uttar Pradesh, (2024) 10 SCC 690, and Harish Bagla v. State of West Bengal, CRR 2577 of 2018, concerning the mechanical invocation of cheating and criminal breach of trust in civil disputes.

The Court found no prima facie dishonest intention at the inception of the 2008 arrangement. The petitioners had facilitated the housing loan because the complainant was financially ineligible to obtain one, and the property was thereafter occupied by him while he paid the EMIs.

The subsequent remittance of INR 15,00,000 through banking channels was considered inconsistent with an allegation that the petitioners had possessed a dishonest design from the outset.

The Court also held that the dispute did not disclose criminal breach of trust because the retained amount arose from a dispute over adjustment of society dues, repair charges and electricity liabilities, rather than dishonest misappropriation of specifically entrusted property.

The remaining controversy concerned the accounting and settlement of sale proceeds in a family property transaction, which was civil in character and could not be converted into a criminal prosecution merely to facilitate monetary recovery.

The criminal revision was accordingly allowed, Charge Sheet No. 281 of 2020 arising from Baguiati Police Station Case No. 75 of 2020, together with all consequential proceedings before the Chief Judicial Magistrate, Barasat, was quashed, and CRAN 4 of 2025 was disposed of.

No order was made as to costs.