Commercial Contractual Disputes and Failure to Pay Dues Cannot Prima Facie Be Termed Cheating or Criminal Breach of Trust

The accused-applicant, Mukesh Jalan, Director of Sadguru Engineers & Allied Services Pvt. Ltd., was the main contractor for a 4-lane highway project.

The Informant alleged that despite supplying construction materials for eight months, the applicant failed to clear dues amounting to ₹4.36 Crores, despite having received ₹7 Crores from NHIDCL.

It was further alleged that the applicant misappropriated funds and criminally intimidated the Informant when payment was demanded.

The applicant was arrested on 30.12.2025 and held in custody for over 52 days.

The applicant contended the dispute was purely commercial/contractual in nature and arose from complications with a sub-contractor, Shiva Harlalka.

1. Whether the allegations of non-payment of dues in a commercial contract constitute the non-bailable offences of criminal breach of trust and cheating under the BNS, 2023.

2. Whether the accused-applicant is entitled to bail considering the nature of the dispute and the progress of the investigation.

The Court applied Section 483 of the BNSS, 2023 regarding bail.

It relied on Sections 316(5) (Criminal Breach of Trust), 318(4) (Cheating), and 351(3) (Criminal Intimidation) of the BNS, 2023.

The Court followed the precedent in *Jay Shri v. State of Rajasthan* (2024), which held that a mere breach of contract does not constitute cheating unless fraudulent intention existed at the inception of the transaction.

It further cited *Satish Chandra Ratanlal Shah v. State of Gujarat* (2019), establishing that the inability to pay dues does not give rise to criminal prosecution without proof of mens rea.

The Court observed that the dispute was primarily of a civil/commercial nature involving the execution of a highway project that was 94% complete.

It noted that the applicant had admitted to the dues in correspondence and meetings, which contradicted the presence of a "fraudulent inducement" or "dishonest intention" at the inception of the contract.

The Court found that a mere failure to discharge contractual obligations or a breach of promise does not ipso facto constitute criminal breach of trust under Section 316 BNS without evidence of entrustment in the "true sense".

Furthermore, the Court highlighted the "lethargic investigation," noting that while the applicant was in judicial custody for 52 days, the Investigating Agency failed to interrogate him or record the statements of most complainants.

The Court granted bail to Mukesh Jalan subject to a bond of ₹2,00,000/- with two sureties.

Conditions imposed included cooperation with the investigation, providing contact and identification details, and a prohibition against tampering with evidence or threatening witnesses.