Commercial nonpayment is not cheating or breach of trust absent dishonest intent at inception.

Two FIRs were registered at Mansa Police Station in April 2018 under Sections 406, 420 and 114 IPC.

They arose from maize supplied on credit to Anil Limited: one complainant alleged outstanding dues of ₹1,33,83,350 and the other ₹30,78,437.

The complainants alleged that company representatives asked them not to present post-dated cheques, which later expired after their dates were altered without validation.

The FIRs named the applicants as participants in a conspiracy to obtain goods dishonestly.

The applicants sought quashing under Section 482 CrPC, contending that the dispute was commercial, the FIRs attributed no specific acts to them, and the alleged offences were not made out.

The complainants opposed, relying on the alleged fraudulent scheme and other proceedings involving the applicants.

The High Court heard the connected applications together.

1. Whether the FIRs disclosed the essential ingredients of criminal breach of trust under Section 406 IPC or cheating under Section 420 IPC, including the relevance of the asserted mutual exclusivity of those offences.

2. Whether the applicants’ alleged antecedent proceedings and “habitual offender” status could defeat their applications to quash these FIRs.

3. Whether the FIRs disclosed criminal conduct or instead sought to use criminal proceedings to recover a commercial debt.

Section 482 CrPC empowers the High Court to quash proceedings to prevent abuse of process and secure the ends of justice.

Under Sections 406 and 420 IPC, criminal breach of trust requires entrustment and subsequent dishonest misappropriation, while cheating requires dishonest or fraudulent intention at the time of inducement; a sale of goods ordinarily transfers ownership and creates a debtor–creditor relationship, not an entrustment (Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, (2024) 10 SCC 690).

A later failure to perform a promise, without dishonest intention at inception, does not by itself constitute cheating (Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168).

The existence of a civil remedy does not automatically bar criminal proceedings, but criminal process should not be used to exert pressure for recovery of a civil debt (Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736).

Under State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, quashing may be justified, among other circumstances, where allegations do not disclose an offence, are inherently improbable, or proceedings are manifestly mala fide.

The Court also relied on Section 54 of the Indian Evidence Act, 1872, observing that bad character is generally irrelevant in criminal proceedings.

The Court treated the transactions as ordinary sales of maize against invoices.

Because the goods were sold rather than entrusted, it held that the allegations did not support Section 406 IPC.

It also found that the FIRs described an established business relationship and non-payment of invoices, but did not disclose dishonest intention at the inception of the transactions sufficient to make out cheating.

The alleged requests to defer presentation of cheques were viewed as consistent with commercial financial distress, not by themselves proof of an original fraudulent design; moreover, the FIRs did not attribute specific acts of inducement to the applicants, and the IPC imposes no general vicarious liability on directors for these offences.

The Court held that other pending cases and allegations of bad character could not substitute for proof of the elements of the offences in these particular FIRs.

Applying Bhajan Lal, it concluded that the proceedings, insofar as they concerned the applicants, lacked a sufficient criminal foundation and risked using criminal process to recover corporate dues.

It quashed FIR C.R. I-54 of 2018 and FIR C.R. I-57 of 2018, together with consequential proceedings, including any charge-sheet or process, qua the present applicants.

Rule was made absolute accordingly.