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Supreme Court of India
Ashok Kumar Jain vs The State Of Gujarat on 1 May, 2025
Author: Pankaj Mithal
Bench: Pankaj Mithal
NON-REPORTABLE
2025 INSC 614 IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NO. OF 2025
(@ S.L.P.(Criminal) No. 1850 OF 2022)
ASHOK KUMAR JAIN
… APPELLANT(S)
VERSUS
THE STATE OF GUJARAT
AND ANOTHER
… RESPONDENT(S)
JUDGMENT
S.V.N. BHATTI, J.
1. Leave granted.
2. The appellant filed R/Criminal Misc. Application No. 11506 of 2017
before the High Court of Gujarat at Ahmedabad under section 482 of The
Code of Criminal Procedure (“the Code”) for quashing the FIR bearing C.R. No.
I- 06 of 2017 registered with Salabatpura, Police Station, Surat for the alleged
offences punishable under sections 406 and 420 of the Indian Penal Code
(“IPC”). The said Criminal Misc. Application was dismissed (“Impugned
Order”) by the High Court resulting in the filing of the Criminal Appeal.
3. The second respondent claims that he is running a business at Surat
Textile market under the name and style of “Ansh Prints”. The nature of the
business activity of the second respondent is to subject the Grey cloths
purchased from weavers and process them for “Dyeing prints” and “Bal
Signature Not Verified
Digitally signed by
geeta ahuja
Date: 2025.05.01
prints”. As a further process, the printed sarees are sent for cutting and saree
17:24:16 IST
Reason:
work. The second respondent sells the finished printed and work saree
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products. The appellant is the director of a company registered in Sri Lankaand is doing business under the name and style of “Maayu Import and Export
Ltd,” having its registered office at 103, 3rd Cross Street, Colombo-11, Sri
Lanka. The places of business activity of the appellant and the respondent are
noted to appreciate the subtle intricacy involved in the matter. In March 2012,
the appellant and the second respondent came into contact with each other
and commenced the business of exporting sarees sold by the second
respondent. The export of sarees sold by the second respondent and
purchased by the appellant has been facilitated through M/s. Oswal
Overseas, inasmuch as the goods could be exported through an entity with
an export-import license from the Government of India. The above narrative
is not disputed by the parties and is stated to appreciate the setting in which
an FIR has been lodged by the second respondent against the appellant.
Shorn of too many details, it is noted that on 03.01.2017, the second
respondent filed an FIR under sections 406 and 420 of the IPC before the
Salabatpura Police Station, Surat. The FIR is registered as I-06 of 2017. The
alleged offence is stated to have occurred between 16.10.2013 and
05.04.2014. The accusations in the FIR refer to the initiative of the appellant
and the second respondent to establish a business relationship between
them. The FIR presents a detailed narrative on the beginning of a transaction
between the second respondent and the appellant. The accusations have been
noted with sufficient details in the judgment impugned in the appeal. Hence,
the contents of the FIR are stated in brief:
3.1 The second respondent from 2012 to 2014 was running his business at
Surat Textile market, parking project shop number 133, in the name of Ansh
Prints. The business is to process the grey clothes from weavers, and after the
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process of Dyeing, printing, and Bal print, the goods are sent for work, andafter cutting the saree and packing, the same is sold to the parties directly or
through a broker.
3.2 In March 2012, the appellant had come to the shop of the respondent
no. 2, told him that he was having his office at Maayu Import & Export Pvt.
Ltd., Maayu Impex No.103, Third Cross Street, Colombo 11, Sri Lanka and
was interested in doing business with the respondent no. 2. Since the sold
goods were to be sent out of India and the respondent no. 2 did not possess
an import-export licence, the appellant had asked him to send the goods
through Vikrambhai Mahendrabhai Barmecha (“Vikrambhai”), owner of M/s.
Oswal Overseas, at Raghunandan Textile Market. It was agreed that the
payment would be made via a cheque within 60 to 90 days.
3.3 From 16.10.2013 to 05.03.2014, the second respondent, vide different
bills, had sent reniyal sarees, work sarees and cotton work quality goods of
75,515 metres and 44,753 pieces, along with saree packing material bags,
handwork beads and stone goods of a total worth of Rs. 39,18,108/- to the
appellant through M/s. Oswal Overseas. The above-mentioned Vikrambhai of
M/s. Oswal Overseas used to stamp and sign the invoice bill of the second
respondent and share the container bill and the customs clearance bill for
sending goods to Sri Lanka.
3.4 The Packing List No. AP- 1 to 98 goods were sent through M/s. Oswal
Overseas to the appellant in Sri Lanka. However, the other packing list No.
AP- 99 to 103 worth Rs. 4,46,764/- for some reason could not be sent by
Vikrambhai to the appellant in Sri Lanka. Vikrambhai paid the money for the
said goods to the second respondent. Hence, the total goods worth
Rs. 34,71,344/- were exported through M/s. Oswal Overseas to the accused.
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3.5 Until March 2014, the second respondent had sent the goods to the
appellant, but despite repeated demand, no payment was made.
Consequently, the second respondent had himself gone to Sri Lanka to the
appellant, and the appellant had assured him of payment regarding the same.
After the second respondent returned to Surat, the appellant stopped
receiving his calls in March 2016. Hence, the FIR was registered.
4. The appellant filed R/Criminal Misc. Application No. 11506 of 2017
under section 482 of the Code for quashing the subject FIR. The foremost
grounds, from the nature of the relationship between the appellant and the
respondent for invoking the jurisdiction of the High Court under section 482
of the Code are summarised as thus:
a. The FIR refers to the date of business transactions between 16.10.2013
and 05.04.2014.
b. On 03.01.2017, the FIR was filed and registered under sections 406 and
420 of the IPC.
c. The export of goods from the second respondent to the appellant, on
the very showing of the second respondent, is through M/s. Oswal
Overseas. The second respondent sold or supplied goods to M/s Oswal
Overseas, and the said exporter has exported the goods to the appellant.
d. The claim of the second respondent is based on the unpaid sale
consideration of goods sold. There is no privity of contract or a shred of
document establishing a tri-partite arrangement between the second
respondent/seller on one hand and M/s. Oswal Overseas/exporter and
the appellant/the importer, on the other hand.
e. None of the ingredients of sections 406 and 420 are attracted from the
accusations in the FIR, and on the mere statement of the second
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respondent, the transaction does not turn out to be an offence under
IPC.
5. The High Court, through the impugned order, dismissed R/Criminal
Misc. Application No. 11506 of 2017. The gist of the consideration of the High
Court is that the appellant misrepresented to the respondent no. 2 and
convinced the latter to do business with the appellant through the exporter.
The High Court, after relying upon judicial pronouncements defining essential
ingredients of criminal breach of trust and cheating, observed that the
distinction between mere breach of contract and offence of cheating has to be
kept in mind. It emphasised that the same would depend upon the intention
of the accused at the time of the alleged inducement, and mere breach of
contract cannot give rise to criminal prosecution for cheating unless a
fraudulent or dishonest intention is shown at the inception of the transaction.
The High Court considered the details provided by the respondent no. 2,
showing how the appellant misrepresented and induced the second
respondent to deliver the goods. On the basis of documents of supply of goods
placed on record and affidavit filed by the respondent no. 2 stating that others
were also cheated by the appellant, the High Court found that the offences as
mentioned in the FIR were substantiated and refused to exercise the powers
under section 482 of the Code to quash the FIR.
6. Mr. P.S. Patwalia, learned Senior Counsel appearing for the appellant,
argues that the accusations in the FIR do not make out an offence of criminal
breach of trust or cheating. The FIR refers to the total outstanding from the
export made through M/s. Oswal Overseas as Rs. 39,18,108/- and the
consignment worth Rs. 4,46,764/- could not be exported to the appellant.
M/s. Oswal Overseas, through one Vikrambhai, paid the said amount to the
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second respondent, thus reducing the unpaid sale consideration of exports
made to the appellant to Rs. 34,71,344/-. Either for un-exported or exported
goods, the liability towards the unpaid sale price is with M/s. Oswal Overseas.
As per the transfer documents, the unpaid sale price can be recovered only
by M/s. Oswal Overseas and the second respondent by treating the director
of M/s. Oswal Overseas, as a witness, cannot convert a pure and simple
dispute on unpaid sale price by the appellant into criminal prosecution under
sections 406 and 420 of the IPC. The appellant prays for quashment of the
FIR not by looking at any extraneous documents but by accepting the
accusation in the FIR.
7. Mr. Mohit D. Ram, learned Counsel, appearing for the second
respondent, contends that business transactions have happened, and sarees
have been exported through M/s. Oswal Overseas on the negotiations held
between the appellant and the second respondent. M/s. Oswal Overseas is a
mere facilitator. The goods sold have finally benefited the appellant. The non-
payment of the full sale price amounts to criminal Breach of trust and
cheating. The investigation into the allegations of the FIR would disclose
whether the case warrants filing a chargesheet or closure report. At this stage,
invoking the power of section 482 of the Code by the appellant is illegal. He
invites our attention to a status report filed by the first respondent, to the
evidence gathered so far and argues that the complicity of the appellant to
convince the second respondent to do business through M/s. Oswal Overseas
can be investigated. The High Court, according to him, has rightly dismissed
the prayer.
8. We have heard the learned Counsel and perused the record. The
appellant prays for quashment of FIR, and we are conscious of the exercise of
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jurisdiction in interdicting an FIR and the legal position is fairly well
established by a catena of decisions, and we refer to the following three
decisions:
8.1 State of Odisha v. Pratima Mohanty1
As per the settled proposition of law, while examining an
FIR/complaint, quashing of which is sought, the court cannot embark upon
any enquiry as to the reliability or genuineness of allegations made in the
FIR/complaint. Quashing a complaint/FIR should be an exception rather
than any ordinary rule. Normally, the criminal proceedings should not be
quashed in exercise of powers under section 482 of the Code when, after a
thorough investigation, the charge-sheet has been filed. At the stage of
discharge and/or considering the application under section 482 of the Code,
the courts are not required to go into the merits of the allegations and/or
evidence in detail as if conducting a mini-trial. As held by this Court, the
powers under this section are very wide, but the conferment of wide power
requires the court to be more cautious. It casts an onerous and more diligent
duty on the Court.
8.2 Kaptan Singh v. State of Uttar Pradesh2
The inherent jurisdiction under section 482 of the Code, though wide,
is to be exercised sparingly, carefully and with caution, only when such
exercise is justified by tests specifically laid down in the section itself. Further,
the appreciation of evidence is not permissible at this stage.
8.3 Pratibha v. Rameshwari Devi3
1 (2022) 16 SCC 703.
2 (2021) 9 SCC 35.
3 (2007) 12 SCC 369.
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It is not open to the High Court to rely on the report of the investigating
agency, nor can it direct the report to be submitted before it as the law is very
clear that the report of the investigating agency may be accepted by the
Magistrate, or the Magistrate may reject the same on consideration of the
material on record. Such being the position, the report of the investigating
agency cannot be relied on by the High Court while exercising powers under
section 482 of the Code.
9. The FIR has been registered under sections 406 and 420 of the IPC. The
scope and expanse of these sections is better appreciated in the company of
sections 405 and 415 of the IPC. This court in the case of Radheyshyam v.
State of Rajasthan4, culled out the following ingredients to constitute the
criminal breach of trust:
“11. For an offence punishable under Section 406, IPC, the
following ingredients must exist:
i. The accused was entrusted with property, or entrusted
with dominion over property;
ii. The accused had dishonestly misappropriated or
converted to their own use that property, or dishonestly
used or disposed of that property or wilfully suffer any other
person to do so; and
iii. Such misappropriation, conversion, use or disposal
should be in violation of any direction of law prescribing the
mode in which such trust is to be discharged, or of any legal
contract.”9.1 This court, while discussing the expression “entrustment” in Rashmi
Kumar v. Mahesh Kumar Bhada5, observed that it carries with it the
implication that the person handing over any property or on whose behalf that
property is handed over to another, continues to be its owner. Entrustment is
not necessarily a term of law. It may have different implications in different
4 2024 SCC OnLine SC 2311.
5 (1997) 2 SCC 397.
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contexts. In its most general significance, all its imports is handing over the
possession for some purpose which may not imply the conferment of any
proprietary right therein. The ownership or beneficial interest in the property
in respect of which criminal breach of trust is alleged to have been committed,
must be in some person other than the accused and the latter must hold it
on account of some person or in some way for his benefit.
9.2 Further, in Hridaya Ranjan Prasad Verma v. State of Bihar6, this
court observed as follows:
“15. In determining the question it has to be kept in mind
that the distinction between mere breach of contract and the
offence of cheating is a fine one. It depends upon the
intention of the accused at the time of inducement which
may be judged by his subsequent conduct but for this
subsequent conduct is not the sole test. 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, that is the time when the
offence is said to have been committed. Therefore it is the
intention which is the gist of the offence. 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. From his mere failure to keep up promise
subsequently such a culpable intention right at the
beginning, that is, when he made the promise cannot be
presumed.”
(Emphasis supplied)9.3 The ingredients to constitute an offence under sections 415 read with
420 of IPC have been considered and laid down by this court in Prof. R.K.
Vijayasarathy and Anr v. Sudha Seetharam and Anr7, as under:
“16. The ingredients to constitute an offence of cheating are
as follows:
16.1. There should be fraudulent or dishonest inducement
of a person by deceiving him:
16.1.1. The person so induced should be intentionally
induced to deliver any property to any person or to consent
that any person shall retain any property, or6 (2000) 4 SCC 168.
7 (2019) 16 SCC 739.
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16.1.2. The person so induced should be intentionally
induced to do or to omit to do anything which he would not
do or omit if he were not so deceived; and
16.2. In cases covered by 16.1.2. above, the act or omission
should be one which caused or is likely to cause damage or
harm to the person induced in body, mind, reputation or
property.
17. A fraudulent or dishonest inducement is an essential
ingredient of the offence. A person who dishonestly induces
another person to deliver any property is liable for the
offence of cheating.
18. xxx xxx xxx
19. The ingredients to constitute an offence under Section
420 are as follows:
19.1 A person must commit the offence of cheating under
Section 415; and
19.2 The person cheated must be dishonestly induced to:
(a) deliver property to any person; or
(b) make, alter or destroy valuable security or anything
signed or sealed and capable of being converted into
valuable security.”
(Emphasis supplied)9.4 Put succinctly, to constitute an offence under sections 415 and 420 of
the IPC, the above ingredients are present in the FIR .
10. This court in AM Mohan v. State Represented by SHO & Another8,
has observed as follows:
“13. It could be thus seen for attracting the provision of
Section 420 of IPC, the FIR/complaint must show that the
ingredients of Section 415 of IPC are made out and the
person cheated must have been dishonestly induced to
deliver the property to any person; or to make, alter or
destroy valuable security or anything signed or sealed and
capable of being converted into valuable security. In other
words, for attracting the provisions of Section 420 of IPC, it
must be shown that the FIR/complaint discloses:
(i) the deception of any person;
(ii) fraudulently or dishonestly inducing that person to
deliver any property to any person; and
(iii) dishonest intention of the accused at the time of
making the inducement.”
(Emphasis supplied)8 2024 INSC 233.
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11. As stated in the FIR:
(i) In March 2012, the appellant had directly contacted the respondent no.
2, gave him his visiting card, and saw the samples of the work being
done by the latter;
(ii) Further, the appellant also enquired from respondent no. 2 from whom
he was purchasing the goods of sarees. After 2-3 days, he came to the
office of the appellant and demanded other samples;
(iii) Appellant had asked respondent no. 2 to prepare goods and informed
that he would make the payments in 60 to 90 days; and
(iv) Appellant had assured and given trust for making timely payments,
stating that he has his own house in Chennai and had good contacts
with political persons.
12. From the above, respondent no. 2 has not availed the services of M/s.
Oswal Overseas as a transport carrier. It is unclear whether the invoice has
been raised in the name of the appellant or the exporter. The “bill of lading”
would have disclosed the transfer of title in goods in favour of the appellant.
On the contrary, the FIR is filed showing that the appellant, as accused, had
an intention to cheat and commit breach of trust. The documents belie the
allegations in the FIR. Looking at the controversy from any perspective, a mere
civil dispute has been given the colour of an offence of cheating and criminal
breach of trust. We have perused the FIR and are convinced that the
inducement is an explanation to contradict the documents through which
exports have been completed. In the circumstances of this case, by referring
to inducement, the continuation of investigation/prosecution into the offence
of cheating and breach of trust would amount to an abuse of the process of
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law. Further, what begs the question is whether such non-payment of the sale
price can be an offence of criminal breach of trust and cheating at the hands
of the second respondent. The answer is clearly no.
13. As per the FIR, the goods were to be exported out of India. The
respondent no. 2, since did not possess an import/export license, the
appellant had asked respondent no. 2 to export the goods through M/s. Oswal
Overseas. Accordingly, from 16.10.2013 to 05.03.2014, respondent no. 2 has
in all exported sarees worth Rs. 34,71,344/- through Vikrambhai, owner of
M/s. Oswal Overseas to the appellant.
14. By keeping in perspective the ratio in the judgments referred supra and
also the well-established position of law under section 482 of the Code, we
will examine the crux of the complaint. The respondent no. 2 complains that
the appellant, after appropriating the goods exported, has not paid the sale
price of Rs. 34,71,344/-. M/s. Oswal Overseas is the exporter, and the
primary liability for the goods entrusted lies with the appellant. The
respondent no. 2 has treated the Director/Partner of M/s. Oswal Overseas as
a witness to bring home the accusation of breach of trust and cheating. We
do not want to hold a mini trial and observe whether such an effort, either in
the course of the investigation by the police or finally in the prosecution, will
bring home the aforesaid charges. In the documents filed as Annexure P2,
which is a true copy of the invoices and the payment receipt made by the
appellant, the appellant is shown as the consignee and M/s. Oswal Overseas
is the exporter. Annexure P2 is as follows:
“69. Beneficiary Customer Name and Address
/912020045714085
M/s Oswal Overseas
2014-2017 Raghunandan Textile
Market Ring Ring Road Surat12
India 395002.
71A: Details of Charges
SHA”
15. Therefore, the entrustment was made to M/s. Oswal Overseas by
respondent no. 2 and not to the appellant.
16. The sale price was agreed to be debited to the account of M/s. Oswal
Overseas accepted the same as part payment against the subject export of
goods from the appellant. It might be true that the appellant is yet to discharge
the sale price of the subject export. The respondent no. 2, by referring to an
oral arrangement of inducement, tries to plead a case contrary to the
documents through which the final “entrustment” of the exported goods
happened in Sri Lanka.
17. For the above reasons, and particularly appreciating Annexures-P1 to
P3, we are of the view that the continuation of the FIR against the appellant
is an abuse of the process of law, and at best, the non-payment of the sale
price could be a civil dispute between the appellant and M/s. Oswal Overseas.
The appeal is accordingly allowed, the impugned order is set aside and FIR
No. I-06 of 2017 is quashed.
……….…………………J
[PANKAJ MITHAL]
..…………………………J
[S.V.N. BHATTI]
New Delhi;
May 1, 2025.
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