Kiran Raj

The Supreme Court Division Bench of Justice B.V. Nagarathna and Justice R. Mahadevan quashed criminal proceedings against an appellant accused under Sections 406, 420, and 120B of the Indian Penal Code, setting aside a Jharkhand High Court order. The Court clarified that the offences of cheating and criminal breach of trust are antithetical and cannot be sustained simultaneously on the same allegations—cheating requires dishonest intent at inception, while breach of trust presumes lawful entrustment later misappropriated. Finding no evidence of fraudulent intention and terming the complaint belated and mala fide, the Bench held the prosecution unsustainable and allowed the appeal.

The dispute originated when the appellant, owner of a property and power of attorney holder for an adjacent property, entered into an agreement for sale with the complainant on 16 February 2013. The total sale consideration was fixed at Rs.43,00,000/-, and an advance payment of Rs.20,00,000/- was made on the date of the agreement.

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After nearly eight years, on 29 January 2021, the complainant lodged Complaint Case No.619 of 2021 alleging that the appellant had failed to transfer the property or return the advance amount. This complaint led to FIR No.18 of 2021 dated 8 February 2021 registered at Hindpiri Police Station, Ranchi. The offences alleged included Sections 406 (criminal breach of trust), 420 (cheating), and 120B (criminal conspiracy) IPC.

The complainant asserted that in January 2013, one Atik Alam had introduced him to the appellant who assured that the property titles were in order. It was also represented that the appellant, holding power of attorney from six other individuals, was authorised to sell the adjacent plot. On this basis, the complainant agreed to purchase both properties. However, the appellant did not convey title to the complainant nor refund the advance paid.

Apprehending arrest, the appellant sought anticipatory bail through Petition No.681 of 2021 before the Judicial Commissioner, Ranchi. The matter was referred to mediation, where both parties agreed that the appellant would repay Rs.24,00,000/- in five instalments as full and final settlement. Anticipatory bail was granted on 23 December 2021, subject to compliance with payment conditions.

The appellant deposited Rs.5,00,000/- as the first instalment on 19 January 2022. However, failure to adhere to further instalment deadlines led to cancellation of anticipatory bail on 15 June 2022, upon the complainant’s application.

The appellant challenged this cancellation before the High Court of Jharkhand through Criminal Miscellaneous Petition No.2384 of 2022, also seeking quashing of the FIR and complaint. On 19 January 2023, the High Court partly allowed the petition, declining to quash proceedings but granting liberty to file a fresh anticipatory bail application. Aggrieved, the appellant approached the Supreme Court.

The Supreme Court examined the FIR, complaint, and statutory provisions, particularly Sections 406 and 420 IPC. It recorded that in Inder Mohan Goswami v. State of Uttaranchal (2007) 12 SCC 1, the Court had observed: “To hold a person guilty of cheating it is necessary to show that he had a fraudulent or dishonest intention at the time of making the promise. From his mere failure to subsequently keep a promise, one cannot presume that he all along had a culpable intention to break the promise from the beginning.”

The Bench noted that the allegations did not satisfy the basic ingredients of cheating under Section 420 IPC. It stated: “We fail to understand as to how the allegations against the appellant herein could be brought within the scope and ambit of the aforesaid section.” The Court further recorded: “Mere allegations by the complainant/respondent No.2 that the appellant failed to execute the agreement for sale and failed to refund the money paid by the complainant/respondent No.2 does not satisfy the test of dishonest inducement.”

Regarding Section 406 IPC, the Court observed: “Every act of breach of trust may not result in a penal offence unless there is evidence of a manipulating act of fraudulent misappropriation of property entrusted to him.” It stated that the complainant had failed to establish entrustment of property or its dishonest misappropriation by the appellant.

The Court also referred to Delhi Race Club (1940) Limited v. State of Uttar Pradesh (2024) 10 SCC 690, recording that cheating and criminal breach of trust are distinct offences that cannot co-exist simultaneously. It observed: “The said offences cannot co-exist simultaneously in the same set of facts as they are antithetical to each other.”

On the issue of delay, the Court observed: “The complaint was filed after a delay of nearly eight years… this fact further raises a suspicion about the bona fides of the complainant/respondent No.2.” It also noted the availability of civil remedies for breach of contractual rights.

The Bench further cited State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, referring to categories where inherent jurisdiction under Section 482 CrPC may be exercised, including cases where allegations do not disclose commission of an offence, are inherently improbable, or are manifestly attended with mala fide intent. It held that sub-paragraphs 1, 3, 5, and 7 of paragraph 102 applied to the present case.

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Finally, reliance was placed on Vishal Noble Singh v. State of Uttar Pradesh, 2024 SCC OnLine SC 1680, where the Court observed: “In recent years the machinery of criminal justice is being misused by certain persons for their vested interests and for achieving their oblique motives and agenda.” The Bench noted that continuation of proceedings in this matter would amount to harassment.

The Supreme Court held: “In the aforementioned circumstances, the impugned order of the High Court is set aside and consequently, the Complaint Case No.619/2021 and FIR No.18 of 2021 dated 08.02.2021 lodged with Police Station Hindpiri and all consequent proceedings initiated pursuant thereto stand quashed.”

Advocates Representing the Parties

For Petitioner(s): Ms. Srija Choudhury, AOR

For Respondent(s): Mr. Rajiv Shankar Dvivedi, Adv. Ms. Madhusmita Bora, AOR Mr. Pawan Kishore Singh, Adv.

Case Title: Arshad Neyaz Khan v. State of Jharkhand & Another
Neutral Citation: 2025 INSC 1151
Case Number: Criminal Appeal No. of 2025 (arising out of SLP (Crl) No.3606 of 2024)
Bench: Justice B.V. Nagarathna and Justice R. MahadevanA