Non-payment of salary or settlement dues constitutes a civil dispute and does not amount to cheating or criminal breach of trust.

The petitioners, high-ranking HR officials of Amalgam Steel Private Limited, sought to quash a criminal proceeding arising from a complaint by a former General Manager.

The complainant alleged that following his voluntary resignation, the company paid him Rs. 14,37,204/- towards full and final settlement but withheld a balance of Rs. 2,50,220/-.

A Magistrate took cognizance and issued summons under Sections 406, 417, and 34 of the Indian Penal Code (IPC).

The petitioners contended that the dispute was purely civil and that non-payment of dues does not constitute a criminal offense.

1. Whether the non-payment of the balance amount of a full and final settlement constitutes the offense of Criminal Breach of Trust under Section 406 of the IPC.

2. Whether the allegations make out a case of cheating under Section 417 of the IPC in the absence of evidence of fraudulent intent at the inception of the transaction.

The Court primarily applied Section 406 (Punishment for criminal breach of trust) and Section 417 (Punishment for cheating) of the IPC.

Regarding Section 406, it relied on Ram Narain Popli v. CBI, establishing that "entrustment" and "dishonest misappropriation" are essential ingredients.

For Section 417, the Court applied the principle from Uma Shankar Gopalika v. State of Bihar, which mandates that for an offense of cheating, deception must be played at the very inception of the transaction; a subsequent breach of contract does not suffice.

It further noted the coordinate bench ruling in V.K. Mittal v. State of Jharkhand, holding that non-payment of salary alone does not amount to cheating or criminal breach of trust.

Regarding Section 406, the Court found no evidence of "entrustment" of property by the complainant to the petitioners, nor any dishonest misappropriation, as the dispute concerned unpaid corporate dues.

Regarding Section 417, the Court noted the absence of any allegation that the petitioners intended to deceive the complainant at the time he joined or worked for the company.

The Court reasoned that the dispute was a "purely civil dispute" to which a "cloak of criminal case" had been given.

Since the essential ingredients of the alleged offenses were missing even if the facts were taken at face value, the Court determined that continuing the proceedings would constitute an abuse of the process of law.

The Court allowed the petition and quashed the entire criminal proceeding, including the cognizance order dated 16.08.2024 passed by the JMFC, Jamshedpur, in Complaint Case no. 379 of 2024.