Gujarat HC Quashes FIR Against Cloth Trader’s Introducer, Says Alleged ₹1.42-Crore Nonpayment Dispute Is Civil

The complainant, a grey-cloth trader, alleged that between 10 July 2023 and 16 January 2024 he supplied goods worth ₹1,42,67,882 through three firms to accused No. 1, who did not pay the outstanding amount.

The petitioner was alleged to have introduced the complainant to accused No. 1; the petitioner argued that no further specific role was attributed to him.

He also submitted that accused No. 1 had issued cheques for the dues, which were dishonoured, and that the complainant had filed proceedings under the Negotiable Instruments Act.

The complainant’s FIR at Kamrej Police Station, Surat, invoked IPC Sections 409, 420, 504, 506(2) and 120(B). The petitioner sought quashing of the FIR and consequential proceedings qua him

Section 409 IPC requires entrustment of property or dominion over it, followed by dishonest misappropriation or use in violation of law or contract; Section 420 IPC requires deception and dishonest or fraudulent inducement, with dishonest intention present from the inception of the transaction.

Relying on Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, 2024 INSC 626, and the authorities discussed there, the Court noted that a sale of goods ordinarily transfers ownership to the buyer, so non-payment of the price does not, without entrustment, constitute criminal breach of trust; nor does a subsequent breach of contract alone establish cheating.

Under State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, proceedings may be quashed where the FIR allegations, even accepted in their entirety, do not prima facie constitute an offence.

The Court read the FIR as alleging that, on the petitioner’s say, the complainant supplied grey cloth to accused No. 1, who failed to pay. It found no allegation that the petitioner was entrusted with the goods or had dominion over them, or that the goods were dishonestly misappropriated; the transaction was treated as a sale, not an entrustment.

The FIR also did not disclose that the petitioner deceived the complainant or had dishonest intent at the transaction’s inception. The Court therefore characterised the grievance as recovery of an unpaid commercial debt and found that the allegations did not make out the relevant criminal offences, bringing the case within the Bhajan Lal quashing principles.

Rule was made absolute; direct service was permitted.