Madhya Pradesh High Court Quashes FIR Against Traders; Says Probe Driven By Farmers’ Distress, Not Proof Of Fraud In Crop Transactions
Sanchayita Lahkar
The High Court of Madhya Pradesh at Indore, Single Bench of Justice Sanjeev S Kalgaonkar quashed an FIR against two traders accused of cheating farmers over crop purchases made on credit. The Court found that the dispute stemmed from commercial transactions and lacked evidence of fraudulent intent at the outset. It noted that the investigating agency appeared influenced by the farmers’ distress and the magnitude of unpaid dues rather than establishing the essential ingredients of the alleged offences. Holding that the matter was civil in nature, the Court ruled that no prima facie case of cheating, criminal breach of trust, or forgery was made out and therefore annulled the FIR and all related proceedings.
The case originated from a complaint lodged by a group of farmers at Police Station Khilchipur, District Rajgarh, alleging that two traders had cheated them in crop transactions. The complaint stated that the traders had been purchasing crops such as wheat, soybean, mustard, lentil, and corn on credit since 2023. Initially, payments were made promptly, but during the later period from October 2023 to February 2024, the traders failed to pay for further consignments and went absconding. Acting on these allegations, the police registered an FIR for offences under Sections 420 and 406 of the Indian Penal Code, later adding Sections 409, 467, 468, and 471 after seizing handwritten purchase slips and recording farmers’ statements.
The petitioners sought to quash the FIR under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, contending that the case was civil in nature, arising from commercial dealings rather than any criminal act. They argued that non-payment for goods did not constitute cheating or breach of trust unless dishonest intention existed from the outset. Reliance was placed on judicial precedents to support that breach of contract or delay in payment cannot by itself attract criminal liability.
The State and the complainant opposed the petition, asserting that the traders had deceived 161 farmers and forged purchase receipts involving an amount exceeding two crore rupees. They maintained that the evidence, including seized documents and witness statements, established a prima facie case for offences of cheating, criminal breach of trust, and forgery under the relevant provisions of the Indian Penal Code.
The Court noted that “The section 420 IPC deals with the cheating by dishonestly inducing delivery of property. The petitioners' failure to pay the outstanding money towards purchase of crops has led to charges of cheating. Mere nonperformance of the contract or inaction or deferment in payment in compliance with the promise may provide cause of action for specific performance of the contract or recovery of money but dishonest intention to cheat or fraudulent intention to misappropriate from inception cannot be inferred from these actions in case of continuing transaction. Mere nonpayment or underpayment of the price of the goods by itself does not amount to commission of an offence of cheating or criminal breach of trust.” (Vir Prakash Sharma; Ashok Kumar Jain v. State of Gujarat, 2025 SCC OnLine SC 998 relied).
Referring to International Advanced Research Centre for Powder Metallurgy & New Materials v. Nimra Cerglass Technics (P) Ltd., the Court recorded: “The essential ingredients to attract Section 420 IPC are : (i) cheating; (ii) dishonest inducement to deliver property…; and (iii) mens rea of the accused at the time of making the inducement…. it is further necessary to prove that the representation was false to the knowledge of the accused and was made in order to deceive the complainant.” It further quoted: “The distinction between mere breach of contract and the cheating would depend upon the intention of the accused at the time of alleged inducement.… A mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating.”
Citing Hridaya Ranjan Prasad Verma v. State of Bihar, the Court stated: “Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction… To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise.”
Quoting Radheyshyam v. State of Rajasthan, the Court recorded: “From the bare perusal of the FIR, it is evident that there was no act of cheating… It is a civil dispute and gives rise to the complainant’s right to resort to the remedies provided under civil law by filing a suit for specific performance.” Regarding Section 406 IPC, it noted the ingredients and observed: “The amount paid towards consideration cannot be said to have been entrusted… Since there was no entrustment of property, the offence of… criminal breach of trust cannot be said to be made out.”
On the forgery counts, relying on Mohd. Ibrahim v. State of Bihar and Mir Nagvi Askari v. CBI, the Court observed: “The condition precedent for an offence under Sections 467 and 471 is forgery… When a document is executed by a person claiming a property which is not his, he is not claiming that he is someone else nor is he claiming that he is authorised by someone else…. If what is executed is not a false document, there is no forgery.” It applied this to purchase receipts, noting: “even if it be assumed to have been made dishonestly or fraudulently, [they] had not been made with the intention of causing it to be believed that they were made by or under the authority of someone else.”
Summarising the transactional context, the Court stated: “both the parties consensually agreed for the sale and purchase of crops on credit…. The subsequent failure… to pay… cannot lead to inference that they had fraudulent or dishonest intention at the beginning of the transaction.”
“Consequently, this petition u/S 528 of the BNSS, 2023 is allowed.” The Court directed: “The impugned FIR registered at Crime No. 151 of 2024 dated 09/05/2024 at P.S. Khilchipur, Distt. Rajgarh for offence punishable under Sections 420 and 406 (subsequently added Sections 409, 467, 468 and 471) of the IPC, with all subsequent proceedings, is quashed.” The Court concluded: “The Petitioners stands discharged.” It further recorded: “CC as per rules.”
Advocates Representing the Parties
For the Petitioners: Shri Zenith Chhablani – Advocate.
For the Respondents: Shri Apoorv Joshi – Government Advocate for the State.
Case Title: Raju and Others v. The State of Madhya Pradesh and Others.
Neutral Citation: 2025: MPHC-IND:30844.
Case Number: MISC. CRIMINAL CASE No. 49157 of 2024.
Bench: Justice Sanjeev S Kalgaonkar.
