Failure to pay balance sum in commercial transaction is a civil dispute not attracting criminal liability.

The OP alleged that in March 2015, they supplied plywood worth ₹12,89,968 to the petitioner.

The petitioner paid ₹7,89,968 but failed to clear a balance of ₹5,00,000.

After a delay of five years, the OP issued a demand notice in February 2020 and filed a criminal complaint under Sections 420/406 IPC in July 2020.

The Metropolitan Magistrate, 16th Court, Calcutta, issued process against the petitioner after conducting an inquiry under Section 202 Cr.P.C.

The petitioner moved the High Court for quashing, arguing the dispute was purely civil, barred by jurisdiction, and filed with inordinate delay.

1. Whether the allegations in the complaint, involving a commercial transaction and part-payment, constitute the criminal offences of cheating (Section 420 IPC) and criminal breach of trust (Section 406 IPC).

2. Whether the Magistrate properly exercised jurisdiction under Section 202 Cr.P.C. considering the petitioner resided outside the court's territorial limits and the significant delay in filing.

Section 420 IPC (Cheating) and Section 406 IPC (Criminal Breach of Trust).

"Dishonest intention at the inception" is a sine qua non for cheating as established in V.Y. Jose v. State of Gujarat.

Sections 406 and 420 are "antithetical" and cannot generally co-exist on the same facts as stated in Arshad Neyaz Khan v. State of Jharkhand.

Procedure under Section 202 Cr.P.C. mandates a meaningful (not formal) inquiry for accused persons residing outside the court's jurisdiction (Abhijit Pawar v. Hemant Madhukar Nimbalkar and Vijay Dhanuka).

Section 482 Cr.P.C. provides inherent powers to the High Court to prevent the abuse of the process of law in civil disputes dressed as criminal cases.

The Court observed that the transaction was a commercial one where the petitioner had actually paid over ₹7 Lakhs, which negated the "fraudulent intent from the inception" required for Section 420.

The court noted that a mere breach of contract or failure to pay a balance sum does not automatically attract criminal liability.

It found the concurrent allegation of Sections 406 and 420 legally flawed as one requires a lawful entrustment while the other requires a dishonest inducement.

The Court highlighted the unexplained five-year delay between the invoice (2015) and the legal notice (2020), suggesting the criminal machinery was used as a shortcut for civil recovery.

The Court found that the Magistrate failed to apply his mind to the territorial jurisdiction and the absence of criminal ingredients during the Section 202 inquiry, rendering the issuance of process an "erroneous observation" and an abuse of process.

The Court allowed the Revisional Application and quashed the entire proceeding (Complaint Case No. 14738/2020) pending before the Metropolitan Magistrate, 16th Court, Calcutta.