Criminal Prosecution for Cheating Unattainable in Commercial Disputes Arising from Purely Civil Contractual Breaches

Petitioner No. 1 (Vice Chairman) and Petitioner No. 2 (Director) of "SKH Sheet Metal Components Pvt. Ltd." were charged in a chargesheet for alleged offenses under the Bharatiya Nyaya Sanhita (BNS) following a commercial dispute with Respondent No. 2 (S.M. Enterprises).

Respondent No. 2 had previously invoked the MSMED Act, 2006, seeking ₹80,24,206/- for supplied components.

The MSEF Council awarded only ₹40,56,273/- plus interest, explicitly rejecting claims for "unbilled amounts" and "running stock".

Respondent No. 2 accepted this award but later issued a legal notice for the rejected amount (₹47,59,470/-).

Upon non-payment, Respondent No. 2 filed FIR No. 0272/2025 alleging cheating and breach of trust.

1. Whether a purely commercial dispute regarding contractual non-payment, which has already been adjudicated by a statutory civil forum, can be maintainable as a criminal prosecution for cheating.

2. Whether the FIR and chargesheet disclose the essential ingredients of Sections 316(2) and 318(2) of the Bharatiya Nyaya Sanhita (BNS).

Section 528 of the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023, which corresponds to the inherent powers of the High Court to quash proceedings to prevent abuse of process.

Definition of "Cheating" under Section 318 of the BNS (formerly Section 415/420 IPC), emphasizing that fraudulent or dishonest inducement is an essential ingredient.

State of Haryana v. Bhajan Lal, establishing parameters for quashing FIRs.

A. M. Mohan v. State, which deprecated the tendency of converting civil disputes into criminal cases to exert pressure for settlement.

The Court observed that the dispute was indubitably civil and commercial, arising from a sale-purchase agreement.

It noted that Respondent No. 2 had already exhausted civil remedies under the MSMED Act and was now attempting to recover "rejected claims" through criminal law.

The Court found that the legal notice and FIR lacked any allegations of "deception" or "dishonest intention" existing at the inception of the contract.

It reasoned that a mere breach of contract does not constitute cheating unless a fraudulent intent is shown from the outset. Consequently, the Court determined that the criminal machinery was being used as a "pressure tactic" for a matter already finalized by a civil award.

The Court quashed FIR No. 0272/2025 and the resulting chargesheet in R.C.C. No. 1263 of 2026 pending before the 5th JMFC, Pune, effectively exonerating the Petitioners.