Contractual disputes over profit-sharing and consultancy fees lack criminal intent and constitute purely civil matters.

The petitioner, owner of M/s Recon, entered into a partnership with the informant (Rakesh Kumar) via a deed dated 24.08.2010 for constructing a commercial building in Patna

A subsequent "Deed of Investment" was notarized on 04.07.2014

The informant alleged the petitioner refused to pay a 7.5% profit share and consultancy fees totaling ₹50,62,500/-, leading to an FIR under Sections 406, 420, and 506 of the IPC

The petitioner contended the dispute was purely civil, involving an unregistered deed, varied terms, and a specific arbitration clause

1. Whether the allegations in the FIR constitute the criminal offences of Cheating (Sec. 420) and Criminal Breach of Trust (Sec. 406), or represent a purely civil/commercial dispute

2. Whether the existence of an arbitration clause and the absence of dishonest intention at the inception of the contract warrant the quashing of criminal proceedings

The court applied Section 405 (Criminal Breach of Trust) and Section 415 (Cheating) of the IPC, noting that Section 420 requires mens rea (dishonest intent) at the time of the initial inducement

It relied on Dalip Kaur Ors. v. Jagnar Singh and Alpic Finance Ltd. v. P. Sadasivan, which establish that a breach of contract does not constitute cheating unless fraudulent intent existed at the start

The court also referenced Mamatha Duggal v. State of Karnataka regarding cases where arbitration clauses signify the civil nature of a dispute

The court observed that the dispute was essentially monetary, arising from a partnership and investment deed where both parties claimed financial defaults by the other

It reasoned that for Sections 406 and 420 IPC to apply, there must be evidence of a "dishonest intention at the inception," which was absent here as the parties had successfully engaged in business and leasing for years before the dispute arose

The court noted that while an arbitration clause does not strictly bar criminal action, its presence—combined with a dispute over profit calculations and consultancy fees—strongly indicates a civil character

Furthermore, the allegation under Section 506 (Criminal Intimidation) was found to be a "bald" addition to a money dispute without specific factual support

The Patna High Court allowed the petition and quashed FIR No. 318 of 2023 (Patliputra P.S.) against the petitioner, clarifying that the parties remain free to resolve their grievances through a money suit or arbitration