Commercial sale transactions lack entrustment for Section 406 IPC but sustain Section 420 charges for fraudulent conduct.

The petitioners (accused) placed purchase orders for 293 metric tonnes of TMT steel bars worth approximately ₹1.19 Crores from the complainant’s company in November 2011

Against this delivery, the petitioners issued ten cheques, all of which were dishonored due to "insufficient balance"

An FIR was subsequently registered under Sections 406, 420, and 114 of the Indian Penal Code (IPC)

The petitioners filed an application for discharge under Section 239 of the CrPC, which was rejected by the learned Additional Chief Judicial Magistrate, Anjar-Kutch, on 08.02.2016

The petitioners challenged this rejection and the subsequent framing of charges (02.03.2023) through the present Revision Application

The petitioners contended that the dispute was purely civil, arising from a long-standing business relationship since 2008, and lacked criminal intent

1. Whether the scope of revisional jurisdiction under Section 397 of the CrPC permits interference with an order rejecting a discharge application

2. Whether the ingredients of Section 406 IPC (Criminal Breach of Trust) are attracted in a commercial transaction of sale and purchase

3. Whether the ingredients of Section 420 IPC (Cheating) are prima facie made out based on the conduct of the accused from the inception of the transaction

The court primarily applied Section 397 of the CrPC regarding revisional jurisdiction, which is limited to correcting patent defects, errors of jurisdiction, or gross perversity [relying on Amit Kapoor v. Ramesh Chander, (2012) 9 SCC 460].

For the substantive offences, the court relied on the distinction between Section 406 (Criminal Breach of Trust) and Section 420 (Cheating) IPC as established in Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, (2024) 10 SCC 690, and S.W. Palanitkar v. State of Bihar

The rule dictates that Section 406 requires "entrustment" of property, whereas Section 420 requires fraudulent or dishonest inducement/intention from the very inception of the transaction

The court observed that in a standard contract for the sale and purchase of property for consideration, there is no "entrustment" for a limited purpose; thus, the property is not held in trust for the complainant

Consequently, the court found that the essential ingredients for Section 406 IPC were missing as the complainant did not retain dominion over the goods once sold

However, regarding Section 420 IPC, the court analyzed the petitioners' conduct: they placed two large orders within 14 days, received goods via ten trucks, sold the goods to third parties, and collected approximately ₹19 lakhs from those purchasers without paying a single penny to the complainant or even the transporter

This conduct, the court reasoned, indicated a specific "plan and design" to cheat from the inception, distinguishing it from a mere civil breach of contract where part-payment or financial crunch might be a defense

The court ordered the discharge of the petitioners from the offence punishable under Section 406 IPC but confirmed the rejection of the discharge application regarding Section 420 read with Section 114 IPC. The trial court was directed to alter the charge and proceed only under Section 420 read with Section 114 IPC