Criminal Prosecution for Cheating and Breach of Trust Invalid Where Primary Dispute is Predominantly Civil and Commercial.

The Petitioner company, a licensee of "Goodyear" lubricants, entered into a distributorship agreement with Respondent No. 2 (Complainant) in January 2021.

The Complainant alleged that the Petitioner induced him to place orders worth ₹1.75 crores by misrepresenting an association with Goodyear USA and claiming the products met high international quality (API) standards.

It was further alleged that the products were inferior, "dead stock," and that the Petitioner committed criminal intimidation upon termination of the distributorship.

Following investigation, a chargesheet was filed under Sections 420, 406, 120-B, and 34 of the IPC.

The Petitioner sought quashing of the FIR, arguing the dispute was purely commercial and the allegations of fraud were belied by a valid trademark license and lab reports.

1. Whether the filing of a chargesheet during the pendency of a Section 482 petition bars the High Court from quashing the FIR.

2. Whether the allegations and material collected during investigation prima facie disclose the ingredients of cheating (S. 420) and criminal breach of trust (S. 406).

3. Whether the parallel filing of multiple complaints across different jurisdictions constitutes an abuse of the process of law.

Section 482 of the CrPC regarding the inherent powers of the High Court to prevent abuse of process.

The criteria for quashing established in State of Haryana v. Bhajan Lal, emphasizing that proceedings may be quashed if allegations are absurd or attended with mala fides.

Shaileshbhai Ranchhodbhai Patel v. State of Gujarat and Mukesh v. State of Uttar Pradesh, holding that the power to quash remains available even after a chargesheet is filed.

Sections 405/406 (Criminal Breach of Trust) and 415/420 (Cheating) of the IPC, noting that the absence of dishonest intention at the inception of a transaction distinguishes a breach of contract from a criminal offense.

The Court observed that the Petitioner provided an authorization letter and a trademark license agreement dated 09.04.2020, which were verified by the Trademark Registry and Goodyear India, thus negating the allegation of fraudulent misrepresentation regarding the Goodyear brand.

Regarding product quality, Shri Ram Laboratory reports confirmed the lubricants met Indian Standards (IS), were synthetic-based, and had permissible water content, failing to prove the products were "spurious" or "reused".

The Court found that the placement of 40+ purchase orders over 15 months contradicted the plea of deception from the inception.

It reasoned that disputes over credit notes and "dead stock" were matters of account reconciliation/civil recovery.

The Complainant’s act of "forum shopping" by filing identical complaints in Delhi and Haryana—withdrawing the latter only after the Delhi FIR was registered—was deemed a design to harass the Petitioner.

The filing of a chargesheet does not preclude quashing under Section 482 if the ingredients of the offense are absent.

Since no substantive offense under Section 406 or 420 was made out, the charge of criminal conspiracy under Section 120-B could not stand.

The High Court quashed FIR No. 294/2022 and all consequential proceedings to prevent the abuse of the process of law.