Gujarat HC Quashes Cheating, Breach-of-Trust Case Against Former Director Over ₹1.33-Crore Maize Debt, Citing No Specific Role

The complainant, proprietor of Jayprabhu Trading Company, alleged that he supplied maize to Anil Limited and that an outstanding sum of ₹1,33,93,560 remained unpaid.

He alleged that 30 post-dated cheques were issued for the amount, but the accused induced him not to present them and later altered their dates without validating the alterations.

The FIR, registered at Mansa Police Station on 12 April 2018, named the applicant and others for alleged offences under Sections 406, 420 and 114 of the IPC.

The applicant sought quashing under Section 482 CrPC, contending that the FIR disclosed no specific role on his part and that the dispute was commercial. He also relied on company records concerning his appointment and resignation as a director.

The complainant opposed the application, disputing the resignation and relying, among other things, on other proceedings involving the applicant.

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

Under Sections 406 and 420 IPC, criminal breach of trust requires entrustment and subsequent dishonest misappropriation, while cheating requires dishonest or fraudulent intention at the time of inducement; a commercial sale ordinarily transfers ownership of the goods and does not, without more, constitute entrustment.

The Court relied on Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, (2024) 10 SCC 690, concerning the distinction between a sale and entrustment, and Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168, on the requirement of dishonest intention at the inception of the transaction.

It applied the quashing categories in State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, and noted the principle in Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736, against using criminal proceedings as a means of debt recovery.

The Court also stated that the IPC does not impose vicarious criminal liability on a director merely by virtue of office, absent specific allegations of personal involvement.

The Court treated the alleged supply of maize as a sale of goods, not an entrustment, and therefore found the essential basis for Section 406 IPC absent.

It considered the FIR’s account of an initially established business relationship and subsequent non-payment insufficient, without allegations showing dishonest intention at the outset, to make out cheating under Section 420 IPC.

The alleged requests to delay depositing cheques were viewed as consistent with commercial cash-flow difficulties and did not, by themselves, establish an original fraudulent design.

The Court further found no specific overt act or individualised allegation linking the applicant to the alleged offence; his position as a director or employee could not alone establish IPC liability.

It held that other pending proceedings and alleged antecedents could not substitute for proof of the elements of this particular FIR.

In the Court’s view, the FIR therefore fell within the Bhajan Lal categories warranting quashing.

It allowed the application under Section 482 CrPC and quashed FIR I-54 of 2018, together with consequential proceedings, qua the applicant.