Contractual non-performance without entrustment or dishonest misappropriation is not criminal breach of trust.

The complainant instituted Complaint Case No. 3681 of 2015 alleging offences under Sections 406 and 120(B) IPC in connection with an agreement dated 17 February 2015 concerning the sale of land at Khushkibagh, Purnea.

He alleged that the petitioners received advance payments but failed to complete the transaction.

After an enquiry, the Magistrate found a prima facie case and summoned the petitioners by order dated 30 May 2016.

The petitioners sought quashing under Section 482 CrPC, contending that the dispute was contractual and that the complaint disclosed neither entrustment nor dishonest misappropriation.

The High Court’s account of the agreement stated that the complainant was to pay the balance consideration, failed to do so, and was sent a notice requiring performance.

Section 405 IPC requires entrustment of property or dominion over it, followed by dishonest misappropriation, conversion, use or disposal in breach of law or contract; Section 406 prescribes punishment for that offence.

Mere retention or non-payment of money does not, without dishonest misappropriation, establish criminal breach of trust (Binod Kumar v. State of Bihar).

A breach of contract does not constitute cheating absent dishonest or fraudulent intention at the inception of the transaction (Hridaya Ranjan Prasad Verma v. State of Bihar).

The Court also relied on Rashmi Kumar v. Mahesh Kumar Bhada for the meaning of entrustment.

The Court also relied on State of Haryana v. Bhajan Lal for quashing proceedings where, among other circumstances, the allegations do not disclose an offence or the proceeding is manifestly mala fide.

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

The Court treated the dispute as arising from an agreement for sale and found that the complaint concerned non-performance of the contract and the handling of advance consideration.

It concluded that the allegations did not establish entrustment of property to the petitioners followed by dishonest misappropriation or conversion, as required by Sections 405 and 406 IPC.

Applying the distinction between contractual breach and criminal conduct, the Court held that the complainant’s remedy lay in civil proceedings and that the complaint did not disclose the alleged criminal offence.

It considered the case to fall within categories (1), (3), (5) and (7) of Bhajan Lal.

The judgment did not separately analyse the ingredients of the Section 120(B) allegation.

It quashed the Magistrate’s order dated 30 May 2016 and all criminal proceedings arising from Complaint Case No. 3681 of 2015 against the petitioners; the application was allowed.