Safiya Malik

The Kerala High Court Single Bench of Justice G Girish has dismissed a plea seeking to quash criminal proceedings initiated against two individuals accused of breaching a business agreement. The petitioners contended that the allegations against them were civil in nature and did not constitute criminal offenses.

The dispute arose from a complaint filed by a company engaged in the manufacture and marketing of ice creams and frozen foods. The complainant alleged that the accused, who were distributors of the company’s products, had violated an agreement governing the use of certain equipment provided by the company. Under the terms of the agreement, the complainant entrusted the accused with specialized refrigeration units, including deep freezers, at a subsidized cost. These units were to be used solely for storing and selling the complainant’s products.

The complainant alleged that the accused misused the entrusted property by using the equipment to store and distribute rival products, thereby breaching the agreement. Furthermore, it was asserted that some of the deep freezers were defaced and resold without the complainant’s authorization. The complainant also claimed that the accused had divulged confidential business information to competitors, thereby causing financial and reputational harm to the company.

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Following the complaint, criminal proceedings were initiated against the accused under Sections 405, 406, 420, and 120B of the Indian Penal Code (IPC), read with Section 34 IPC. The case was admitted, and the Magistrate issued summons to the accused after an initial inquiry.

The petitioners argued that the allegations against them did not constitute criminal offenses but rather pertained to contractual disputes that should be addressed through civil litigation. They contended that they had purchased the deep freezers with their own funds and that the complainant had no claim over the property. Additionally, they submitted that the allegations regarding unauthorized sales and the disclosure of confidential business information were unsubstantiated and based on conjecture.

The petitioners further asserted that, at best, the complainant’s allegations amounted to a breach of contract, which does not attract criminal liability. They sought the quashing of the proceedings on the ground that the criminal justice system should not be used to settle commercial disputes.

The court examined the materials on record, including the complaint, supporting documents, and sworn statements from the complainant’s representatives. It noted that the complainant had provided the equipment to the accused at a subsidized cost and that there was a clear understanding that the equipment was to be used solely for the complainant’s business purposes.

The court stated: “The averments in the complaint would disclose that there was entrustment of deep freezers and other machineries on a subsidized rate with the petitioners/accused by the second respondent on the basis of their assurance that the said property would be utilized in the manner as agreed.”

The court further recorded that the accused had allegedly diverted the entrusted equipment for their personal gain. It stated: “The sworn statements given before the learned Magistrate by the Manager of the complainant and another witness would further reveal the above entrustment of property with the petitioners/accused.”

Regarding the allegations of conspiracy, the court observed that there was material indicating collusion between the accused and other parties to misuse the equipment in violation of the agreement. It recorded: “The sworn statements given by the Manager of the complainant establishment and another witness would also disclose the aforesaid objectionable acts on the part of the accused.”

The court also addressed the question of whether the facts supported the charge of cheating under Section 420 IPC. It noted: “It is doubtful whether the facts disclosed in the aforesaid enquiry would bring home the offense of cheating as envisaged under Section 420 IPC. However, it is a matter to be decided by the learned Magistrate at the stage of framing charges.”

The court observed that while some aspects of the dispute may have civil implications, the allegations also involved elements of criminal wrongdoing, particularly concerning breach of trust and conspiracy.

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Dismissing the petition to quash the proceedings, the court stated that the presence of a contractual arrangement does not necessarily preclude the initiation of criminal action. It stated: “The mere fact that the dispute has got a colour of breach of obligation of civil nature is not a reason to stifle a criminal prosecution initiated by the aggrieved party, when the ingredients of the offense of criminal breach of trust and criminal conspiracy are brought out.”

The court found that the complaint contained sufficient allegations to warrant further proceedings. It held that the trial court was the appropriate forum for determining whether the accused were guilty of the offenses alleged.

Accordingly, the court dismissed the petition, allowing the criminal case to proceed.

Advocates Representing the Parties

For the Petitioners: Biju Abraham, Advocate.

For the Respondents: Prasun S., Advocate; N.A. Retheesh, Advocate; Sangeetharaj N.R., Public Prosecutor.

Case Title: Jeevan Sebastian & Anr v. State of Kerala & Anr
Neutral Citation: 2025:KER:18730
Case Number: Crl.M.C.No.9018/2019
Bench: Justice G. Girish

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