Sections 420 and 406 IPC cannot be simultaneously invoked for the same transaction.

The petitioner sought quashing of G.R. No. 513 of 2021 arising from Sankrail Police Station Case No. 111 of 2021 dated 25 January 2021, registered under Sections 420, 406 and 120B of the Indian Penal Code, 1860 (“IPC”).

The de facto complainant alleged that, after maintaining an account with the cooperative bank since 2012, his passbook reflected a balance of approximately ₹23,51,811 in 2019, but showed only about ₹4,000 when he sought an update in October 2020. He alleged that the bank authorities failed to explain the discrepancy or respond to his requests.

The petitioner contended that he had ceased to be a director of the cooperative society from 26 September 2016 and therefore could not be responsible for transactions reflected in the complainant’s account in 2019 or thereafter.

The investigating officer had issued notices under Section 41A of the Code of Criminal Procedure, 1973, but the accused allegedly did not cooperate and were reported to be absconding; several documents, including allegedly forged documents, were seized during investigation.

1. Whether the criminal proceeding against the petitioner under Sections 420, 406 and 120B IPC was liable to be quashed at the threshold for want of specific allegations or prima facie material against him.

2. Whether the offences of cheating under Section 420 IPC and criminal breach of trust under Section 406 IPC could be simultaneously invoked on the same facts.

3. Whether the Magistrate had properly applied his mind before issuing process/summons on the basis of the charge-sheet and case diary.

The Court considered Sections 420, 406 and 120B IPC, relating respectively to cheating, criminal breach of trust and criminal conspiracy, and Section 41A CrPC concerning notice of appearance before arrest.

Relying on Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, 2024 INSC 626, the Court noted that cheating requires dishonest or fraudulent intention at the inception of the transaction, whereas criminal breach of trust requires lawful entrustment followed by dishonest misappropriation; the two offences are conceptually distinct and ordinarily cannot coexist simultaneously on the same factual foundation.

Relying on Sunil Bharti Mittal v. CBI, AIR 2015 SC 923, the Court reiterated that vicarious criminal liability cannot automatically be attributed to a director in the absence of a statutory provision or specific allegations showing his individual role.

Under Pepsi Foods Ltd. v. Special Judicial Magistrate, (1998) 5 SCC 749, summoning an accused is a serious matter and the Magistrate must apply judicial mind to the allegations and the supporting material before issuing process.

The Court found that the petitioner’s reliance on the alleged 2017 termination notice could not, at the quashing stage, conclusively establish that he had ceased to be connected with the cooperative society.

Further, the charge-sheet and case diary allegedly contained material connecting the petitioner with the investigation, including the seizure of forged documents and his failure to comply with notices issued under Section 41A CrPC.

These circumstances prevented the Court from holding that continuation of the prosecution would amount to an abuse of process.

However, the Court held that the Magistrate’s order did not demonstrate adequate application of mind in relation to the simultaneous invocation of Sections 420 and 406 IPC.

Since the legal ingredients and foundational concepts of cheating and criminal breach of trust are distinct, the Magistrate was required to reconsider whether both offences could properly proceed on the facts disclosed in the charge-sheet.

However, it set aside the Magistrate’s order for failure to apply the law governing the simultaneous invocation of Sections 420 and 406 IPC.

The matter was remanded to the learned Magistrate to hear and decide afresh, particularly on whether summons could issue under both provisions, preferably within six weeks from communication of the order and without being influenced by the High Court’s observations on the merits.

The criminal revision was accordingly allowed, and connected applications were disposed of.