Patna HC Quashes ₹4 Lakh Loan Case, Finding Mere Nonpayment And Earlier Complaint Did Not Show Cheating Intent

The complainant alleged that the petitioner borrowed a total of ₹4 lakhs for constructing a house, undertook to repay it within a year, and failed to do so despite a legal notice.

The Magistrate took cognizance under Sections 420 and 406 IPC and issued summons.

The petitioner sought quashing under Section 482 CrPC, contending that the dispute arose from a family dispute and that substantially the same loan allegation had appeared in an earlier complaint, in which cognizance was taken only against the petitioner’s younger brother, the complainant’s son-in-law, under Section 498A IPC and Section 4 of the Dowry Prohibition Act.

The complainant’s statement and the inquiry witnesses’ statements principally described non-repayment of the loan.

Section 420 IPC, read with Section 415 IPC, requires fraudulent or dishonest inducement, or intentional inducement, to deliver property; a promise to repay a loan followed by non-payment does not, without fraudulent or dishonest intention at the inception of the transaction, by itself constitute cheating (*Satish Chandra v. State of Gujarat*, (2019) 9 SCC 148; *Deepak Gaba v. State of U.P.*, (2023) 3 SCC 423).

The Court found no allegation indicating criminal breach of trust under Section 406 IPC in the material before it.

Under Section 482 CrPC, proceedings may be quashed where the allegations, even if accepted in their entirety, do not disclose an offence, or where the prosecution is manifestly mala fide and instituted with an ulterior motive, as set out in categories (1) and (7) of *State of Haryana v. Bhajan Lal*, 1992 Supp (1) SCC 335.

The Court also referred to *Urmila Devi v. Balram*, 2025 SCC OnLine SC 1574, concerning criminal proceedings used as a circuitous means to abuse the process of law.

The complaint, the complainant’s statement on solemn affirmation, and the inquiry witnesses’ statements alleged that the petitioner borrowed money and did not repay it, but did not indicate fraudulent or dishonest intention when the money was advanced or otherwise disclose criminal breach of trust.

The Court therefore treated the allegations as a loan-recovery dispute insufficient to establish the offences charged.

It further noted that the earlier complaint concerned the same loan allegation, that cognizance in that case was taken only against the petitioner’s brother under different provisions, and that the present complaint did not disclose the earlier proceeding. In the Court’s view, these circumstances supported its finding that the prosecution was vexatious and mala fide.

It allowed the application and quashed the Magistrate’s order dated 9 August 2016 taking cognizance in Complaint Case No. 1413 of 2016, together with the entire prosecution against the petitioner.