Non-payment in a commercial transaction : Offences of cheating or criminal breach of trust cannot be presumed

Madhya Pradesh High Court Quashes FIR in Commercial Dispute. Court Prevents Misuse of Criminal Prosecution in Civil Transaction

In a significant judgment, the Madhya Pradesh High Court at Indore, presided over by Justice Sanjeev S Kalgaonkar, has quashed an FIR registered against Raju Soni and Ravi Soni concerning allegations of cheating, criminal breach of trust, and forgery. The FIR was filed at Police Station Khilchipur, District Rajgarh, for offenses under Sections 420, 406, 409, 467, 468, and 471 of the Indian Penal Code (IPC).

The case stemmed from a complaint by farmers who accused the petitioners of purchasing crops on credit and failing to make the promised payments. The farmers alleged that Raju and Ravi Soni absconded without settling dues amounting to Rs. 2,32,10,000. The petitioners contended that the dispute was civil, arising from a commercial transaction, and was wrongfully given a criminal hue to exert pressure.

The High Court's judgment emphasized the distinction between civil and criminal liability, asserting that mere non-payment or underpayment does not constitute cheating or criminal breach of trust unless fraudulent intent is evident from the transaction's inception. The court referred to several Supreme Court precedents, including Vir Prakash Sharma v. Anil Kumar Agarwal, and Ashok Kumar Jain v. State of Gujarat, underscoring that criminal liability requires proof of dishonest inducement at the transaction's outset.

Justice Kalgaonkar, in his order, noted that the FIR appeared to cloak a civil dispute with criminal charges, which is an abuse of the court's process. The court found no prima facie evidence of forgery or making false documents concerning the purchase slips. Consequently, the FIR and subsequent proceedings were quashed, preventing misuse of criminal prosecution in what was essentially a civil dispute.

This judgment highlights the judiciary's role in discerning the nature of disputes, ensuring that criminal law is not misapplied to civil matters. It serves as a reminder of the importance of proving fraudulent intent at the outset in cases of alleged cheating and criminal breach of trust.

Bottom Line:

Offences of cheating, criminal breach of trust, and forgery cannot be presumed merely based on non-payment or underpayment in a commercial transaction unless fraudulent or dishonest intention is shown at the inception of the transaction.

Statutory provision(s): Indian Penal Code, Sections 420, 406, 409, 467, 468, 471; Bharatiya Nagarik Suraksha Sanhita, 2023 Section 528

Raju v. State of Madhya Pradesh, (Madhya Pradesh)(Indore) : Law Finder Doc Id # 2803458