“No Allegation of Deception from the Very Inception”: Calcutta High Court Quashes Cheating Charge, Says Breach of Contract Cannot Attract Section 420 IPC
Sanchayita Lahkar
The High Court of Calcutta Single Bench of Justice Chaitali Chatterjee Das quashed the criminal proceeding initiated under Section 420 of the Indian Penal Code in connection with G.R. Case No. 35 of 2012, arising out of Hare Street Police Station Case No. 6 dated January 2, 2012. The Court allowed the revisional application filed under Section 482 of the Code of Criminal Procedure and directed that the pending criminal proceeding before the Chief Metropolitan Magistrate at Calcutta be terminated. It was further ordered that the case diary, if any, be returned to the Advocate for the State and that a copy of the judgment be forwarded to the trial court for necessary action.
The petitioner, Managing Director of Calcutta Chroma Type Private Limited, filed an application seeking quashing of the criminal proceedings initiated on the basis of a complaint made by KCT Trading Private Limited. The petitioner submitted that Calcutta Chroma Type Private Limited, engaged in printing, had entered into a business arrangement with the complainant company for the supply of paper of specific size and weight, which was not readily available in the market.
The petitioner contended that the complainant was informed at the outset that regularity in supply was crucial due to the competitive nature of the printing industry. According to the petitioner, the complainant agreed to these terms and commenced supply from October 2010. However, there was an alleged shortfall in delivery of 1006 reams of paper between September 2010 and April 2011, resulting in substantial financial losses for the petitioner's company.
It was further submitted that repeated requests for rectification and issuance of credit notes were made via phone and email, but the complainant failed to respond. Consequently, the petitioner discontinued business dealings with the complainant in April 2011. In 2013, the petitioner became aware of a criminal case registered against him under Section 420 IPC following an order dated December 12, 2011, issued by the Chief Metropolitan Magistrate at Calcutta under Section 156(3) CrPC.
Challenging the criminal proceeding, the petitioner argued that the complaint failed to disclose any criminal offence and amounted merely to a contractual dispute. It was contended that no ingredients under Section 420 IPC were satisfied and that the case lacked any indication of dishonest intention at the inception of the transaction. The petitioner also submitted that the complainant did not name the company as an accused despite it being the contracting party and instead proceeded solely against the Managing Director, which was improper.
Citing multiple precedents, including Lalit Chaturvedi v. State of Uttar Pradesh, the petitioner distinguished between breach of contract and criminal offences, contending that dishonest intention must exist from the outset to constitute cheating. It was also submitted that the learned Magistrate failed to apply judicial mind before forwarding the complaint for investigation.
In response, the State and the complainant submitted that the petitioner had received materials worth ₹7,19,634 between November 2010 and March 2011 without raising any objections at the time of delivery. It was alleged that the petitioner later defaulted on payment and began avoiding communication, indicating fraudulent intention.
The complainant stated that repeated attempts were made to contact the petitioner, but the office was found locked and calls went unanswered. The complaint was filed only after the police advised the complainant to obtain directions from the Magistrate for investigation. It was alleged that the non-payment and the petitioner's conduct constituted cheating, warranting a criminal trial.
Justice Chaitali Chatterjee Das examined the submissions and relevant materials on record and stated that, “pursuant to an agreement between the petitioner and Opposite Party No.2, a business transaction started between them and accordingly some materials were supplied but payment was not made despite repeated demand and the supplied materials also never returned, which certainly amounts to breach of contract.”
The Court analysed the distinction between breach of contract and the offence of cheating and referred to decisions including Delhi Race Club (1940) Ltd. v. State of U.P., Harmanpreet Singh Ahluwalia v. State of Punjab, and Mohammed Ibrahim v. State of Bihar. Citing Supreme Court observations, the Court stated that, “in the absence of deception by making false and misleading representation, dishonest concealment, or any other factor, omission, or inducement of the complainant to deliver any property at the time of the contracts being entered, the ingredients to allege the offence are neither stated nor can be inferred from the averment.”
The Court further recorded that, “it is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases, breach of contract would amount to cheating where there was any deception played at the very inception.”
Regarding the company not being arrayed as an accused, the Court noted that, “when appellant 1 is the Company and it is alleged that the company has committed the offence then there is no question of attributing vicarious liability to the office-bearers of the Company so far as the offence of cheating or criminal breach of trust is concerned.”
The Court additionally noted that the materials supplied were not returned, but the complaint did not allege that any false representation was made at the inception of the contract. Rather, the dispute arose post-delivery, indicating a commercial disagreement, not a criminal act. It was observed, “the present petition the petitioner has made out his own case about non-fulfilment of the agreed quality and standard of the material by the opposite party, No.2, which resulted in huge losses to the company as they had to purchase the materials from the local market at the much higher rate.”
Upon considering the complaint, the submissions, and the precedents cited, the Court held that no offence under Section 420 IPC was made out against the petitioner. It was recorded that, “the Opposite Party number two could have filed the appropriate proceeding before the civil court for recovery of money against the company of the petitioner.” The Court concluded that the complaint lacked any allegation indicating fraudulent or dishonest intention from the inception.
Accordingly, the Court stated, “in the light of above discussions no such ingredients can be found from the four corner of the petition of complaint to attract either Section 420 IPC against the petitioner and furthermore the company has not been arrayed as an accused despite putting allegations against the company and hence the criminal proceeding is liable to be quashed.”
It was ordered that the revisional application be allowed and that all connected applications, if any, be disposed of. The Court directed, “The entire proceeding being G.R. Case No. 35 of 2012 arising out of Hare Street P.S. Case No. 6 dated January 2, 2012 under section 420 IPC is hereby quashed.”
The judgment further directed that the case diary, if any, be returned to the Advocate for the State and that a copy of the judgment be sent to the Chief Metropolitan Magistrate at Calcutta for necessary compliance.
Advocates Representing the Parties
For the Petitioners: Ayan Bhattacharjee, Senior Advocate; Arpit Choudhury, Advocate; Anil Choudhury, Advocate
For the Respondents: Imran Ali, Advocate; Debjani Sahu, Advocate
Case Title: Sekhar Sharma v. State of West Bengal and Anr.
Case Number: CRR 818 of 2015
Bench: Justice Chaitali Chatterjee Das
[Read/Download order]
