Cognizance remains valid where partnership profit diversion suggests criminal misappropriation notwithstanding civil remedies.

The petitioner (Keshab Gogoi) and Respondent No. 2 (Nitul Medhi) entered into a partnership agreement on September 15, 2019, for contractual work.

Respondent No. 2 allegedly invested over ₹1.03 crore into the firm.

While the first bill payment was deposited into a joint account and shared, the petitioner allegedly diverted the second and third bill payments (totaling approximately ₹42.7 lakhs) into his personal bank account at Canara Bank, Beltola, in violation of the partnership deed.

Following a complaint by Respondent No. 2, a charge sheet was filed, and the Trial Court took cognizance of the offenses under Sections 406 (Criminal Breach of Trust) and 420 (Cheating) of the IPC on August 19, 2024.

The petitioner moved the High Court under Section 528 of the BNSS (corresponding to Section 482 CrPC) to quash the proceedings, arguing the dispute was purely civil and lacked initial fraudulent intent.

1. Whether the criminal proceedings in PRC No. 293/2024 should be quashed on the ground that the dispute is essentially civil in nature and the ingredients of Sections 406/420 IPC are not met.

2. Whether the lack of "initial intention to cheat" at the time of agreement is sufficient to quash proceedings at the stage of cognizance.

The court applied Section 528 of the BNSS regarding the inherent powers of the High Court to prevent abuse of process.

Supreme Court’s "four-step test" for quashing from Pradeep Kumar Kesarwani v. State of U.P. and Rajiv Thapar v. Madan Lal Kapoor, emphasizing that material relied upon for quashing must be of "sterling quality".

Vesa Holdings P. Ltd. v. State of Kerala, which distinguishes between a mere breach of contract and the offense of cheating.

Anil Todi v. State of Assam, which establishes that taking cognizance does not automatically dictate the final charges to be framed.

The court reasoned that at the stage of taking cognizance, it is premature to conduct a "roving enquiry" into the petitioner's specific intent.

While the petitioner argued that a breach of partnership terms is a civil wrong, the court found that the allegations—specifically the diversion of partnership profits into a personal account contrary to the express terms of the deed—prima facie disclosed a criminal texture involving misappropriation.

The court noted that a single set of facts can constitute both a civil wrong and a criminal offense.

Since the stage of framing charges had not yet been reached, the Trial Court remained the appropriate forum to evaluate whether the evidence supports the specific charges under Sections 406 or 420 IPC.

The court found that the materials presented by the petitioner did not meet the "sterling quality" threshold required to terminate the trial at the threshold.

It held that the petitioner may raise all contentions regarding the lack of criminal ingredients during the stage of framing of charges before the Trial Court; the Trial Court was directed to consider any prayer for discharge in accordance with law; the petition was disposed of, and the Trial Court Record was ordered to be returned.