Gujarat High Court
Krishnakumar Guruvachan vs State Of Gujarat on 24 July, 2025
NEUTRAL CITATION
R/SCR.A/1742/2017 ORDER DATED: 24/07/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CRIMINAL APPLICATION (QUASHING) NO. 1742 of 2017
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KRISHNAKUMAR GURUVACHAN & ANR.
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR.D K.PUJ(3836) for the Applicant(s) No. 1,2
MR. MN MARFATIA(6930) for the Respondent(s) No. 2
MR. CHINTAN DAVE, PUBLIC PROSECUTOR for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 24/07/2025
ORAL ORDER
1. By way of this petition, filed under Section 482 of the
Criminal Procedure Code, 1973, (for short “Cr.P.C.”), the
petitioners prayed for following reliefs.
“24(a). To call for the records and proceedings
concerning FIR No.I/131/16 of Salabatpura Police Station,
Surat and after examining the legality, validity and
propriety of the same being in vogue, may be pleased to
quash and set aside the same.
24(b). To direct the respondent No.1 to hold a
departmental inquiry as against the erring police
personnel of Salabatpura Police Station, Surat,
responsible for colluding and conniving with the
respondent No.2 in getting FIR No.131/16 registered
against the petitioners with Salabatpura Police Station,
Surat and thereupon causing harassment of the
petitioners under the garb of conducting investigation.”
2. The brief facts of the case are as under.
2.1. The petitioners are husband and wife, respectively and
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both of them had opened demat accounts with Rangta Rising
Stock Private Limited (for short “Rungta” on or about
24.09.2015, being demat account Nos. K146 and D135,
respectively.
2.2. As per the statement of accounts made available by
Rungta while there is a debit of Rs.46,07,118.81 in the account
of the 2nd petitioner, there is a credit of Rs.35,694.75 in the
account of the 1st petitioner. The petitioners transacted in the
shares of JRI Industries and Infrastructure Limited. From time
to time, while the 1st petitioner remitted a sum of
Rs.84,15,000/- to Rungta and the 2 nd petitioner remitted a sum
of Rs.30,00,000/- to Runta. The petitioners through Rungta had
purchased/sold from time to time scrip of JRI Industries and
Infrastructure Limited and when the price of the scrip had
reached to Rs.44.50 in the month of 17.11.2015, 1 st petitioner
informed Rungta to dispose of the entire stock of 1,05,000
shares of JRI Industries and Infrastructure Limited and 1,29,980
shares of JRI Industries and Infrastructure Limited instantly and
by which a sum of Rs.1,04,56,610/- were due and payable by
Rungta to the petitioners. However, Rungta on behalf of the
petitioners and without their expressed and/or implied
knowledge of instructions wanted to manipulate the price of
the scrip by disposing of those scrips which Rungta expected
to go still high, however, in the meantime the price of the scrip
of JRI Industries and Infrastructure Limited crashed and today
the price of the said scrip is hovering around Rs.2.10.
2.3. Rungta, instead of making payment of Rs.1,04,56,610/- +
payment of Rs.35.694.75 which is still shown in the credit of
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the 1st petitioner, is falsely claiming Rs.46,07,118.81 from the
2nd petitioner, without disclosing in the FIR that the shares of
JRI Industries and Infrastructure Limited to the extent of
1,05,000 and 1,29,980 are still lying in the credit of the demat
accounts of the petitioners and which shares were deliberately
and with ulterior motive were not disposed of by Rungta when
the price of the scrip had reached Rs.44.50 and in respect
whereof specific instructions to dispose of were given by the 1 st
petitioner on 17.11.2015.
2.4. Rungta and 1st petitioner have been trying to negotiate
and reach to a conclusion in which Rungta promised and
assured the 1st petitioner that they would settle the claim of
the petitioners and they the petitioners may not precipitate the
matter any further from their end by initiating any legal action
against them and acceding to their request, the petitioners did
not pursue the matter any further. However, to the utter shock
and surprise of the petitioners, they received a summons from
Salabatpura Police Station, Surat inter alia calling upon them to
visit the police station for the purpose of investigation and
accordingly the 1st petitioner visited Salabatpura police station
and informed the police of the aforesaid facts. The police
although promised and assured the 1 st petitioner that they
would themselves ensure that the claim of the petitioners as
against Rungta is amicably settled with their intervention and
the 1st petitioner was further informed by Salabatpura Police
Station officials not to precipitate the matter any further and
that is the reason why the petitioners did not pursue the
matter as against Runga. After about an year of the visit of the
1st petitioner to the police station, petitioner came to know that
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an FIR has been registered with Salabatpura Police Station and
the police personnel even visited the residence of the
petitioners on 28.12.2016 in the absence of petitioners.
2.5. FIR contains aforesaid facts, sought to be quashed by
way present petition.
3. Heard, learned advocate Mr. D. K. Puj appearing for the
petitioners, learned advocate Mr. M. N. Marfatia appearing for
the respondent No.2 and learned Addl. Public Prosecutor Mr.
Chintan Dave appearing for the State.
4. Some and substance of the arguments of learned
advocate Mr. D. K. Puj for the petitioners is that plain reading
of the FIR demonstrates that FIR is filed to recover the
outstanding amount of Rs.36,29,420/-. He would further submit
that the petitioners are maintaining demat accounts with
complainant for the purpose of selling and purchasing shares
in stock market. He would further submit that according to the
FIR, the petitioners have purchased several shares of JRI
Industries and Infrastructure Limited and did not pay amount
of purchase of the shares. Learned advocate Mr. D. K. Puj in
this regard would further submit that when the price of share
of JRI Industries and Infrastructure Limited reached to
Rs.44.50/- per share, the petitioners have telephonically
instructed the complainant to sell the shares, however, the
complainant expected to go price of share still high, and
therefore, the complainant, who has been given instruction but
did not sell the shares of JRI Industries and Infrastructure
Limited on same price subsequently, the price of share is
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reduced to Rs.2.10. Learned advocate would further submit
that instruction to sell the share of JRI Industries and
Infrastructure Limited is telephonically recorded. He would
further submit that complainant did not follow the instruction
of petitioners, the profit of Rs.1,04,56,610/- would not gain by
the petitioners due to fault of the complainant.
4.1. Learned advocate Mr. D. K. Puj would further submit that
FIR is filed to convert the civil dispute into the criminal
proceedings. The FIR, therefore, is abuse of process of law. He
would further submit that essential ingredients of Sections 406
and 420 of IPC is upon such submission are missing.
4.2. Learned advocate Mr. D. K. Puj would submit to allow the
petition and quash the FIR.
5. On the other hand, learned advocate Mr. M. N. Marfatia
appearing for the respondent No.2 would submit that
investigation is completed in the matter and chargesheet is
filed against the petitioners, which indicates the cognizable
offence against the petitioners. He would further submit that
the cognizable offence under Section 406 and 420 of the IPC is
disputable, the contention raised by the petitioners can count
the most be a good defence and can be tested in trial.
Therefore, the contention cannot be accepted at this juncture
by taking by holding mini trial. Learned advocate Mr. M. N.
Marfatia referred to the judgment delivered by Hon’ble
Supreme Court in case of Kaptan Singh Vs. State of Uttar
Pradesh, (2021) 9 SCC 35; State of Karnataka Vs. M.
Devendrappa and Ors. MANU/SC/0027/2002; Sau. Kamal
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Shivaji Pokarnekar Vs. the State of Maharashtra & Ors.
Passed in Criminal Appeal No.255 of 2019.
5.1. By making aforesaid submission, learned advocate Mr. M.
N. Marfatia would submit to reject the petition.
6. Learned Addl. Public Prosecutor Mr. Chintan Dave
appearing for the State by presenting report to the record filed
by the Police Sub Inspector, Salabatpura Police Station, would
submit that chargesheet is filed. He would also submit that
contention raised by learned advocate for the petitioners that
civil dispute has been given colour of criminality can be tested
during trial.
6.1. Upon such submission, learned Addl. Public Prosecutor
submitted to dismiss the petition.
7. I have heard the learned advocates of both sides.
Considered rival submissions of learned advocates for both
side. At the outset, let refer the center part of the, FIR which
has taken up dispute between the parties.
“I am working in “Rungta Rising Stock Pvt. Ltd.” on the
post of Risk Management and our Company is dealing in
purchase and sale of shares. Our company has its other
Branches at Culcuta, Poona, Ahmedabad, Delhi and
Rajkot and here is our “Head Office” All the deal of
purchase & sale / sell are going on through this head
office, and financial transactions are also run through
“Insind Bank” in said bldg and prior to at about three
months a staff member Shri. Amitbhai Gupta who was
working in our Delhi Branch, he informed by phone that
the party dealing in share market in the name of RevenPage 6 of 16
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Investment i.e. Krushna Kumar Guruvachan
Brahamhabhatt R/o. ‘B’ Wing No.2 Divy Smit Housing
Society, Opp. Gaurav Garden, Kandivali (W), Mumbai-
400067. Said party is good. And said Mr. Amit Gupta also
recommended us to open the account of Krushanakumar
Guruvachan Brahamhabhatt. So in our K.Y.C. Department
on dated 24.09.2015 we filled the form in the name of
Krushnakumar Guruvachan Brahamhabhatt and his wife
Deepikaben’s Pan Car, Passport Xerox copy and sent
K.Y.C. form by courier and in this way and on this base
Krushnakumar Guruvachan Brahamhabhatt’s A/c. No.K-
146 and his wife’s A/c. Deepikaben Krushnakumar
Brahamhabhatt’s A/c. No.’D’ 135 were opened in our
“Rungta Rising Stock Pvt. Ltd. Shop No.411-412, Empire
State Bldg. 4th Floor, Near Udhana Darvaja, Surat and in
our said company their share dealing remained continued
upto two months only and during said two months upto
two months only and during said two months they dealt
in a good way in money transactions but thereafter on
16.11.2015 the said party i.e. Krushnakumar Guruvachan
Brahamhabhatt informed us by phone that he desires to
purchase 11,300 shares of JRI Industries & Infrastructure
Company. So you please grant them credit and I will sent
the payment to your company in evening by R.T.G.S. and
as per this instruction we gave them credit limit of
Rs.5,00,000/- in their account No.K-46 and by said credit
facility in the name of our company they purchased
11,300 shares of JRI Industries and Infrastructure and its
money value is worked out Rs.5,01,170/- and thereafter
we reminded Krushnakumar for payment on tomorrow so
we trusted in him we put faith in him and again when on
date 17.11.2015 we made a call for the recovery of
payment at that time he hold us that he was wishing to
purchase 80,000 shares of JRI Industries and
Infrastructure in the name of his wife Deepikaben
Krushnakumar Brahamhabhatt in A/c. No.D-135 and also
assured us that we would make both the payment at
once only. So we gave credit limit in wife’s A/c. No.D-135
for Rs.35,10,650 and due to our said credit limit
Krushnakumar Brahamhabhatt Guruvachan purchased
80,000 shares of JRI Industries and Infrastructure Co. and
its total worth is Rs.35,10,650/- and we reminded for the
recovery of payment to him frequently but by showingPage 7 of 16
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various excuses and he didn’t make payment but on date
10.12.2015 he deposited 40,000 shares in our account.
However, from both of them still we have to recover total
amount of Rs.36,29,420/- and for said amount they didn’t
make any payment till today.”
8. In case of Ashok Kumar Jain Vs. the State of Gujarat
and another, 2025 INSC 614, FIR registered with the same
Salabatpura Police Station, for commercial transaction
between the party for the offence under Sections 406 and 420
of IPC, the Supreme Court in para 9, 9.1, 9.2, 9.3, 9.4, 10, 11
and 12 held as under.
9. The FIR has been registered under sections 406 and
420 of the IPC. The 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 Rajasthan, culled out the
following ingredients to constitute the Criminal breach of
trust:
“11. For an offense 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
willfully suffered 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
Bhada, 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
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law. It may have different implications in different
contexts. In its most general significance, all its imports
are handed over 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 Bihar, 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 offense 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 offense is said to have been
committed. Therefore it is the intention which is the
gist of the offense. 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
cannot be presumed.”
(Emphasis supplied)
9.3. The ingredients to constitute an offense under
sections 415 read with 420 of IPC have been considered
and laid down by this court in Prof. RK Vijayasarathy
and Anr v. Sudha Seetharam and Anr, as under:
“16. The ingredients to constitute an offense 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 bePage 9 of 16
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intentionally induced to deliver any property to any
person or to consent that any person shall retain
any property, or
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 offense. A person who
dishonestly induces another person to deliver any
property is liable for the offense of cheating.
18. xxx xxx xxx
19. The ingredients to constitute an offense under
Section 420 are as follows:
19.1 A person must commit the offense 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 offense 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 & Another, 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 orPage 10 of 16
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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)
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 done by the latter;
(ii) Further, the appellant also inquired 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 favor 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 color of an offense of cheating and
criminal breach of trust. We have perused the FIR and are
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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 offense of cheating and breach of
trust would amount to an abuse of the process of law.
Further, what begs the question is whether such non-
payment of the sale price can be an offense of criminal
breach of trust and cheating at the hands of the second
respondent. The answer is clearly no.
9. Recently, in case of Shailesh Kumar Singh Alias
Shailesh R. Singh Vs. State of Uttar Pradesh & Ors.,
Criminal Appeal No.2963 of 2025, 2025 INSC 869, the
Supreme Court in para No.9, 11, 13, 14 and 15 held as under.
9. What we have been able to understand is that there
is an oral agreement between the parties. The
Respondent No.4 might have parted with some money in
accordance with the oral agreement and it may be that
the appellant – herein owes a particular amount to be
paid to the Respondent No.4. However, the question is
whether prima facie any offence of cheating could be said
to have been committed by the appellant.
11. The entire case is squarely covered by a recent
pronouncement of this Court in the case of “Delhi Race
Club (1940) Limited vs. State of Uttar Pradesh” reported
in (2024) 10 SCC 690. In the said decision, the entire law
as to what constitutes cheating and criminal breach of
trust respectively has been exhaustively explained. It
appears that this very decision was relied upon by the
learned counsel appearing for the petitioner before the
High Court. However, instead of looking into the matter
on its own merits, the High Court thought fit to direct the
petitioner to go for mediation and that too by making
payment of Rs. 25,00,000/- to the 4 th respondent as a
condition precedent. We fail to understand, why the High
Court should undertake such exercise. The High Court
may either allow the petition saying that no offence is
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disclosed or may reject the petition saying that no case
for quashing is made out. Why should the High Court
make an attempt to help the complainant to recover the
amount due and payable by the accused. It is for the Civil
Court or Commercial Court as the case may be to look
into in a suit that may be filed for recovery of money or in
any other proceedings, be it under the Arbitration Act,
1996 or under the provisions of the IB Code, 2016.
13. We also enquired with the learned counsel
appearing for the Respondent No.4 whether his client has
filed any civil suit or has initiated any other proceedings
for recovery of the money. It appears that no civil suit
has been filed for recovery of money till this date. Money
cannot be recovered, more particularly, in a civil dispute
between the parties by filing a First Information Report
and seeking the help of the Police. This amounts to abuse
of process of law.
14. We could have said many things but we refrain from
observing anything further. If the Respondent No.4 has to
recover a particular amount, he may file a civil suit or
seek any other appropriate remedy available to him in
law. He cannot be permitted to take recourse of criminal
proceedings.
15. We are quite disturbed by the manner in which the
High Court has passed the impugned order. The High
Court first directed the appellant to pay Rs.25,00,000/- to
the Respondent No.4 and thereafter directed him to
appear before the Mediation and Conciliation Centre for
the purpose of settlement. That’s not what is expected of
a High Court to do in a Writ Petition filed under Article
226 of the Constitution or a miscellaneous application
filed under Section 482 of the Code of Criminal
Procedure, 1973 for quashing of FIR or any other criminal
proceedings. What is expected of the High Court is to
look into the averments and the allegations levelled in
the FIR along with the other material on record, if any.
The High Court seems to have forgotten the well-settled
principles as enunciated in the decision of this Court in
the “State of Haryana & Others vs. Bhajan Lal & Others“
Reported in 1992 Supp.(1) SCC 335.
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10. As stated in FIR, complainant “Rungta Rising Stock Pvt.
Ltd.” is stock broker having office at Surat. Petitioners have
opened demat accounts with the complainant in the year
2015. The accounts were opened after completing K.Y.C. Then
on 16.11.2015, the petitioner No.1 informed that he wants to
purchase 11,300 shares of JRI Industries and Infrastructure and
requested to grant them credit in his account. The total
purchase value of such share comes to Rs.5,01,170/-. The
transaction between the complainant and petitioners
continued thereafter. The petitioner No.1 again informed that
he wants to purchase further 80,000 shares of JRI Industries
and Infrastructure in name of his wife i.e. petitioner No.2, and
also asked for credit. According to the complainant, the
petitioners paid consideration of purchase of share i.e.
Rs.35,10,650/- and on frequent reminding of recovery of
payment by the complainant, petitioners deposited 40,000
shares in their account on 10.12.2015. However, from
petitioners, complainant has to recover total amount of
Rs.36,29,420/-. Therefore, incident is reported to the police on
16.11.2015, which is culminating into FIR under sections 406,
420 and 414 of the IPC.
11. Learned advocate Mr.D. K. Puj for the petitioners referring
to Annexure – B submitted that FIR is missing essential
elements regarding the payment made by the petitioners. He
would further submit that one petitioner’s account with the
complainant is having credit of Rs.35,694.75, and also shows
multiple transactions subsequent to the alleged incident. He
would also submit that petitioners even telephonically
instructed the complainant to sell shares at the price of 44.50,Page 14 of 16
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however Rungta has kept shares in their accounts with
speculation of rise in stock price, but later it fell to ground and
as such huge loss occurred. He would further submit that
instruction to sell entire pack of shares was given
telephonically. As per rule, all such instruction recorded.
Complainant suppressing all this aspects has filed malicious
complaint. He would further submit that averments made in
this regards are not controverted by the respondent by filing
reply. He would also submit that invoice which is charged by
the complainant contains arbitrary clause, but the
complainant, without referring the dispute to the arbitration,
filed criminal complaint and used the criminal complaint as a
mode of recovery.
12. In Annexure D invoice generated by the complainant, the
particular clause read as under:-
“Transactions mentioned in this contract note cum bill
shall be governed and subject to the Rules, Bye-laws and
Regulations and Circulars of the respective Exchanges on
which trades have been executed and Securities and
Exchange Board of India from time to time. The
Exchanges provide Complaint Resolution, Arbitration and
Appellate arbitration facilities at the Regional Arbitration
Centres (RAC). The client may approach its nearest
centre, details of which are available on respective
Exchange’s website. Please visit www.bseindia.com for
BSE, www.mcx-sx.com for MCX-SX, www.nseindia.com for
NSE and www.useindia.com for USE.”
13. In all, it would be noticed from the aforesaid submission
that it is yet another FIR filed at Salabatpura Police Station for
commercial transaction under Sections 406 and 420 of IPC.
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NEUTRAL CITATION
R/SCR.A/1742/2017 ORDER DATED: 24/07/2025
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The complainant remained unsuccessful to recover
outstanding amount from the petitioners, filed present FIR.
Quary was raised that whether civil suit or arbitration
proceedings are initiated to recover outstanding amount, it is
replied “No”. Thus, FIR is found abuse of process, it lacks the
intention to cause criminal breach of trust or cheating from
inception. Hence, in absence of essential ingredients of
sections 406 and 420 of IPC, the offence cannot be made out
against petitioners.
14. As far as judgment upon which the learned advocate
appearing for the respondent relied upon mainly states that
the Court could not hold mini trial while exercising jurisdiction
under section 482 of the Cr.P.C. No different ratio is reasoning
out of the judgment. However, the FIR indicates that criminal
complaint is initiated to recover amount through police
authority, as such, since it is abuse of process of law, it cannot
survive.
15. For the foregoing reasons, the petition stands allowed.
The impugned FIR No.I/131/16 registered with Salabatpura
Police Station for the offence punishable under Sections 406,
420 and 414 of the IPC and subsequent proceedings arising out
of the said FIR are hereby quashed. Rule is made absolute.
Direct service permitted.
(J. C. DOSHI,J)
NITIN MAKWANA
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