Supreme Court – Daily Orders
M/S. Shikhar Chemicals vs The State Of Uttar Pradesh on 4 August, 2025
IN THE SUPREME COURT OF INDIA
EXTRAORDINARY APPELLATE JURISDICTION
PETITION FOR SPECIAL LEAVE TO APPEAL (CRL.) NO.11445 OF 2025
M/S. SHIKHAR CHEMICALS PETITIONER(S)
VERSUS
THE STATE OF UTTAR PRADESH & ANR. RESPONDENT(S)
ORDER
1. This petition arises from the order passed by the High Court
of Judicature at Allahabad (Coram of Prashant Kumar, J.) in
Criminal Miscellaneous Application No. 2507/2024 dated 05.05.2025
by which the application filed by the petitioner herein seeking
quashing of the proceedings of Complaint Case no. 113283 of 2023
pending in the Court of Additional Chief Judicial Magistrate-I,
Kanpur Nagar came to be rejected.
2. With all due deference and humility at our command, we are
constrained to observe that the impugned order is one of the worst
and most erroneous orders that we have come across in our
respective tenures as judges of this Court.
Signature Not Verified
Digitally signed by
CHANDRESH
Date: 2025.08.05
13:23:18 IST
Reason: 1
3. The judge concerned has not only cut a sorry figure for
himself but has made a mockery of justice. We are at our wits’ end”
to understand what is wrong with the Indian Judiciary at the level
of High Court. At times we are left wondering whether such orders
are passed on some extraneous considerations or it is sheer
ignorance of law. Whatever it be, passing of such absurd and
erroneous orders is something unpardonable.
4. It all started with a private complaint lodged by the
respondent no.2 herein in the Court of Additional Chief Judicial
Magistrate-I, Kanpur Nagar, which came to be registered as
Complaint Case No. 113283 of 2023. The complaint reads thus:
“1. That the complainant is engaged in the wholesale
and retail business of yarn (thread) used in fabric
manufacturing, through his firm M/s Lalita Textile
Concern. The respondent, through her firm M/s Shikhar
Chemicals, is involved in the business of manufacturing
and selling cloth made from yarn supplied by the
complainant.
2. That since both parties are in the same trade, they
have had business relations for the past 4–5 years. In
this regard, the complainant, through his firm,
supplied goods (yarn) to the respondent’s firm worth a
total of Rs.52,34,385/- (Fifty-two lakhs thirty-four
thousand three hundred eighty-five only) between April
2019 and July 2019, against various attached tax
invoices. Out of this, the respondent paid
Rs.47,75,000/- (Forty-seven lakhs seventy-five thousand2
only) through RTGS transfers. (Statement of account
showing received and outstanding amounts is attached.)
A balance of Rs.4,59,385/- (Four lakhs fifty-nine
thousand three hundred eighty-five only) has remained
unpaid since August 2019. As per Yarn Committee and
market regulations, interest at the rate of 8% is
payable on the outstanding amount if not cleared within
15 days. Till the date of filing this application, an
additional amount of Rs.7,23,711/- has become due as
interest, which is also recoverable from the
respondent.
3. That the complainant attempted to contact the
respondent several times via phone for the outstanding
payment, but the respondent failed to make any payment.
The complainant submitted a complaint to the concerned
Deputy Commissioner of the GST Zone/Range/Sector. The
GST department issued notices seeking explanation from
the respondent, but she failed to respond or provide
any clarification. Subsequently, another legal notice
was issued under Section DRC-501A of GST Act, but the
respondent again did not respond. The department,
through proper legal process, imposed a penalty on the
respondent for fraudulently availing tax benefits. The
action was taken under Section 73(9) of the Act on
19/04/2023, as per information received by the
complainant under RTI (copy enclosed).
4. That the complainant, through his advocate, sent a
legal notice to the respondent, which was returned
undelivered from all addresses (Factory/Home/Office)
with the remark that the premises were locked. All
notices were sent to addresses registered with the GST
department. These events made the complainant
reasonably believe that the respondent has absconded
after fraudulently obtaining goods and financial
benefits. (Returned notices with postal documents are
enclosed.)
5. That the complainant again sent a legal notice
through his advocate to all GST-registered addresses of
the respondent (Factory/Home/Office) for recovery of
dues and to initiate criminal proceedings for the
fraud. The notice sent to 127/536 W-2, Damodar Nagar
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was returned with the remark “no one found,” and the
notice sent to E-52, Site No. 1, Industrial Area,
DahiChowki, Unnao was returned with the remark “refused
to accept.” (Copy of postal refusal is enclosed.)
6. That the complainant submitted written complaints to
the Station Officer, P.S. Badshahi Naka, and the Police
Commissioner, requesting registration of FIR against
the respondent under applicable sections for fraud,
cheating, and criminal conspiracy. However, no FIR was
registered. (Copies of the complaint applications are
enclosed.)
7. That the GST department has already found the
respondent guilty under Section 73(9) of the GST Act
and penalized her accordingly. Hence, there is no
further doubt about the criminal conduct of the
respondent, as established by facts and evidence
mentioned herein. Therefore, it is just and proper that
this Hon’ble Court may take cognizance of the matter,
summon the accused, and punish her as per law.”
(Emphasis supplied)
5. The statement of the complainant recorded by the Magistrate
upon verification reads thus:
1. That I am the proprietor and authorized signatory
of the complainant firm mentioned in the complaint and
have full knowledge of the facts stated in this
affidavit.
2. That I, through my firm M/s Lalita Textile Concern,
am engaged in the wholesale and retail trade of yarn
(used in the textile industry). The opposite party,
through their firm M/s Shikhar Chemicals, carries on
the business of manufacturing and selling fabric using
the yarn supplied by my firm.
3. That since both our businesses are interrelated, I
have been engaged in business transactions with the
opposite party for the past 4–5 years. Between April4
2019 and July 2019, yarn worth Rs.52,34,385/- (Rupees
Fifty-Two Lakhs Thirty-Four Thousand Three Hundred
Eighty-Five only) was supplied to the opposite party
on order, through multiple Tax Invoices. Against this
supply, the opposite party made a total payment of
Rs.47,75,000/- (Rupees Forty-Seven Lakhs Seventy-Five
Thousand only) via RTGS. A balance of Rs.4,59,385/-
(Rupees Four Lakhs Fifty-Nine Thousand Three Hundred
Eighty-Five only) has remained unpaid since August
2019.As per the Yarn Committee and market regulations,
if payment is not made within 15 days, 8% interest
becomes applicable on the outstanding amount.
Accordingly, as of the date of filing this
complaint/petition, the total outstanding amount
including interest stands at Rs.7,23,711/-, which is
yet to be received by me from the opposite party.
4. That I made several attempts to contact the
opposite party telephonically for payment, but no
amount was paid. A formal complaint was made to the
Deputy Commissioner of the concerned GST
Zone/Range/Sector. The GST department issued notices
to the opposite party seeking clarification. However,
no response or clarification was provided by them. The
department again issued a notice under GST Section
501A for legal action, which was also ignored.
Subsequently, the department penalized the opposite
party for dishonestly and fraudulently availing tax
benefits from my business. Based on my RTI
application, the GST Department, in its reply dated
12.06.2023, confirmed that action was taken against
the opposite party under Section 73(9) of the GST Act
on 19.04.2023. (Copy enclosed).
5. That I also served a legal notice to the opposite
party through my advocate, but all notices sent to the
factory/home/office addresses were returned with
remarks such as “Premises Locked.” These notices were
sent to addresses registered with the GST Department.
After this entire process, I firmly believe that the
opposite party has intentionally defrauded me by
dishonestly benefiting from the business and has now
absconded. (All claim notices along with postal
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tracking documents are annexed.)
6. That again, through my advocate, I sent recovery
notices and legal notices for initiating criminal
action for fraud and cheating. These were sent to both
GST- registered addresses of the opposite party
(factory/home/office). The notice sent to home/office
at 127/536 W-2 Damodar Nagar was returned with the
remark “No one found,” and the factory notice at E-52,
Site No. 1, Industrial Area, DahiChowki, Unnao was
returned with the remark “Refused to accept.”
(Returned envelopes with refusal remarks are
enclosed.)
7. That I submitted written complaints to the SHO,
Badshahi Naka Police Station, and the Commissioner of
Police requesting registration of FIR under relevant
sections for fraud, cheating, and criminal conspiracy
against the opposite party, but no FIR was registered.
(Copies of complaints enclosed.)
(Emphasis supplied)
6. Thus, the Magistrate thought fit to take cognizance upon the
complaint but at the same time postponed the issue of process, as
he thought fit to initiate magisterial inquiry under Section 202 of
the Criminal Procedure Code, 1973 (for short “the Cr.PC.”). At the
end of the magisterial inquiry, the court concerned thought fit to
issue process only for the offence punishable under Section 406 of
the IPC i.e. criminal breach of trust.
7. We may reproduce some part of the order passed by the
Magistrate while issuing process:-
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“Upon perusal of the file, it is evident that
both the complainant and the accused are
businesspersons. As per the complainant’s
statement, goods worth Rs.52,34,385/- were
supplied to the accused between April and July
2019, of which Rs.47,75,000/- was paid, and
Rs.4,59,385/- remained unpaid since August 2019.
According to market regulations of the Yarn
Committee, if payment is not made within 15 days,
8% interest is applicable on the outstanding
amount, which totals Rs.7,23,711/-, and remains
unpaid. The complainant, in his statement under
Section 200 Cr.P.C., also stated that
Rs.7,23,711/- is still due from the accused. The
witnesses under Section 202 Cr.P.C. corroborated
the same. The complainant has submitted relevant
invoices, bank statements, etc., in support. From
the statements under Sections 200 and 202
Cr.P.C., a prima facie case under Section 406 IPC
appears to be made out against Mrs. Kumkum
Pandey, Proprietor of M/s Shikhar Chemicals.
Hence, this case is fit for cognizance and
summoning.
Order:
The accused, Mrs. Kumkum Pandey, Proprietor of
M/s Shikhar Chemicals, is summoned for trial
under Section 406 IPC. The complainant is
directed to pursue the case within a week. Let
the accused appear in court on 15.12.2023.
(Emphasis supplied)
8. The aforesaid Order passed by the Magistrate came to be
challenged before the High Court under Section 482 of the Cr.PC.
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9. The High Court rejected the application.
10. In such circumstances, the petitioner is here before this
Court with the present petition.
11. The case of the respondent no.2 as a complainant, is plain and
simple. He claims to be an unpaid seller. According to him, he
delivered goods in the form of thread to the petitioner herein
worth Rs.52,34,385/- out of which an amount of Rs.47,75,000/- came
to be paid to the complainant by the petitioner herein, however,
the balance amount has not been paid, till this date.
12. It is for the recovery of the balance amount that he thought
fit to file a criminal complaint and institute criminal
proceedings. It appears that the complainant in the first instance
tried to lodge a FIR but the police declined to register the FIR
saying that it was purely a civil dispute.
13. The Magistrate unfortunately remained unmindful of the fact
that even as per the complainant’s own say the case is one of sale
of goods and recovery of some balance amount.
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14. It was expected of the Additional CJM to know that in a case
of sale transaction where is the question of any entrustment of
goods so as to bring the case within the ambit of criminal breach
of trust punishable under Section 406 of the IPC. This position of
law came to be explained by this Court almost six decades back in
the landmark decision titled “State of Gujarat vs. Jaswantlal
Nathalal” reported in 1968 (2) SCR 408, wherein this Court stated
that a mere transaction of sale cannot amount to an entrustment.
We quote the relevant observations made by this Court as under:-
“8. The term “entrusted” found in Section 405 IPC
governs not only the words “with the property”
immediately following it but also the words “or
with any dominion over the property” occurring
thereafter — see Velji Raghvaji Patel v. State of
Maharashtra [(1965) 2 SCR 429] . Before there can
be any entrustment there must be a trust meaning
thereby an obligation annexed to the ownership of
property and a confidence reposed in and accepted
by the owner or declared and accepted by him for
the benefit of another or of another and the
owner. But that does not mean that such an
entrustment need conform to all the technicalities
of the law of trust — see Jaswantrai Manilal
Akhaney v. State of Bombay [[1956] SCR 483, 498-
500] . The expression “entrustment” 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.
Further the person handing over the property must
have confidence in the person taking the property
so as to create a fiduciary relationship between
them. A mere transaction of sale cannot amount to9
an entrustment. It is true that the Government had
sold the cement in question to BSS solely for the
purpose of being used in connection with the
construction work referred to earlier. But that
circumstance does not make the transaction in
question anything other than a sale. After
delivery of the cement, the Government had neither
any right nor dominion over it. If the purchaser
or his representative had failed to comply with
the requirements of any law relating to cement
control, he should have been prosecuted for the
same. But we are unable to hold that there was any
breach of trust.
9. A case somewhat similar to the one before us
came up for consideration before a Division Bench
of the Calcutta High Court in Satyendra Nath
Mukherji v. Emperor [ILR [1947] 1 Cal 97] . These
are the facts of that case. One Satya Sunder Mitra
was a contractor. He was granted a permit by the
Executive Engineer, A.R.P. (Shelters),
construction division, to purchase seven tons of
cement from Balmer Lawrie and Company. The permit
was granted on the condition that the cement was
to be used in the work connected with the
construction of shelters, which work he had
contracted to do for the Executive Engineer. The
finding in the case was that with the help of an
employee of Mitra and Chaudhuri who were banians
of Balmer Lawrie and Company, six tons of cement
were diverted and disposed of for another purpose.
The trial court convicted Satya Sunder Mitra under
Section 406 IPC and another for abetting the
offence committed by Satya Sunder Mitra. The High
Court allowed their appeal, holding that there was
no entrustment of the cement in question within
the meaning of the term as used in Section 405 of
Indian Penal Code. In the course of the judgment
it was observed:
“The permit was granted in accordance with the
system of control established under the Defence of
India Rules, under which an order has been issued
by the Government of India preventing selling10
agents such as Balmer Lawrie and Company from
delivering any cement except under instructions
from the Government or from the Cement Adviser.
The transaction, so far as the contractor is
concerned, was one of purchase and the property in
the cement clearly passed to him. No doubt he
could not have obtained the permit through the
Executive Engineer if it had not been intended
that the cement should be used for the purpose
directed by the Engineer, but, in our opinion, in
no sense can it be said that there was any
entrustment either of the property or of any
dominion over the property.”
We are of the opinion that the legal position is
as explained in that decision.
10. The decision of the Kings Bench Division in
King v. Grubb [[1915] 2 KB 683] relied on by Mr
Dhebar learned counsel for the appellant does not
bear on the question under consideration. Therein,
the factum of entrustment was not in dispute. The
only question of law that arose for decision in
that case was whether when a property is entrusted
to a company, and the person directing and
controlling the company, by whose instructions the
property had passed into the possession of the
company, had converted the same fraudulently, that
person can be said to have committed an offence
under Section 1 of the Larceny Act, 1901. The
court answered that question in the affirmative.
11. ln view of our conclusion that the prosecution
has failed to prove the entrustment pleaded, it is
unnecessary to consider whether on the material on
record it can be concluded that the respondent had
misappropriated 40 bags of cement referred to
earlier.”(Emphasis supplied)
15. We are not taken by surprise with the Magistrate exhibiting
11
complete ignorance of law as regards the position of law, as to
what constitutes cheating punishable under Section 420 of the IPC
and criminal breach of trust punishable under Section 406 of the
IPC. However, we expected at least the High Court to understand the
fine distinction between the two offences and the necessary
ingredients to constitute the offence of cheating and criminal
breach of trust.
16. This very Bench in a very recent pronouncement in the case of
“Delhi Race Club (1940) Ltd. and Others v. State of U.P. and
Another”, reported in (2024) 10 SCC 690 has exhaustively explained
what constitutes criminal breach of trust. However, it appears that
the judgment was not looked into so as to understand what
constitutes criminal breach of trust punishable under Section 406
of the IPC.
17. The most disturbing part of this matter is the manner in which
the High Court dealt with the quashing application filed by the
petitioner-herein and the observations made in para 12 of its
impugned order.
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18. We quote the paragraph 12 as under:-
“12. O.P. no.2 appears to be a very small
business firm and for him, the aforesaid amount
along with interest is a huge amount. In case,
subject to filing civil suit, O.P. no.2 will not
be in position to pursue the civil litigation. In
case, O.P. no.2 files a civil suit firstly, it
will take years for it to see any ray of hope and
secondly, he will have to put more money to
pursue the litigation. To be more precise it
would seem like good money chasing bad money. If
this Court allows the matter to be referred to
civil court on account of civil dispute between
the parties, it would amount to travesty of
justice and O.P. no.2 would suffer irreparable
loss and he might even not be in a position to
emerge from the financial constraints to pursue
the matter.”
(Emphasis supplied)
19. The Judge has gone to the extent of saying that asking the
complainant to pursue civil remedy for the purpose of recovery of
the balance amount will be very unreasonable as civil suit may take
a long time before it is decided and, therefore, the complainant
should be permitted to institute criminal proceedings for the
purpose of recovery of the balance amount.
20. Is it the understanding of the High Court that ultimately if
the accused is convicted, the trial court would award him the
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balance amount? The observations recorded in para 12 are shocking.
It is an extremely sad day for one and all to read the observations
contained in para 12 of the impugned order. It was expected of the
High Court to know the well-settled position of law that in cases
of civil dispute a complainant cannot be permitted to resort to
criminal proceedings as the same would amount to abuse of process
of law. It was expected of the High Court to understand the nature
of the allegations levelled in the complaint. In substance the High
Court has said in so many words that the criminal proceedings
instituted by the complainant in a case of pure civil dispute is
justified because it may take considerable time for the complainant
to recover the balance amount by preferring a civil suit.
21. In such circumstances referred to above we are left with no
other option but to set aside the order of the High Court even
without issuing notice to the respondents.
22. In the result, we partly allow this petition and set aside the
impugned order passed by the High Court. We remand the matter to
the High Court for fresh consideration of the Criminal
Miscellaneous Application No.2507 of 2024. The quashing petition
14
shall be reheard on its own merits keeping in mind the dictum laid
in the two decisions of this Court referred to above.
23. We request the Hon’ble the Chief Justice of the High Court of
Allahabad to assign this matter to any other Judge of the High
Court as he may deem fit.
24. The Chief Justice of High Court shall immediately withdraw the
present criminal determination from the concerned Judge.
25. The Chief Justice shall make the concerned judge sit in a
Division Bench with a seasoned senior judge of the High Court.
26. We further direct that the concerned judge shall not be
assigned any criminal determination, till he demits office. If at
all at some point of time, he is to be made to sit as a single
judge, he shall not be assigned any criminal determination.
27. We have been constrained to issue directions as contained in
Paras 22, 23, 24, 25 and 26 respectively, referred to above,
keeping in mind that the impugned order is not the only erroneous
order of the concerned Judge that we have looked into for the first
time. Many such erroneous orders have been looked into by us over a
period of time.
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28. Registry to forward one copy of this order to Hon’ble the
Chief Justice of Allahabad High Court at the earliest.
29. Pending application(s), if any, stands disposed of.
…………………………………………….J.
[J.B. PARDIWALA]
…………………………………………….J.
[R. MAHADEVAN]
New Delhi;
04th August, 2025.
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ITEM NO.57 COURT NO.8 SECTION II
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition for Special Leave to Appeal (Crl.) No.11445/2025
[Arising out of impugned final judgment and order dated 05-05-2025
in A482 No. 2507/2024 passed by the High Court of Judicature at
Allahabad]
M/S. SHIKHAR CHEMICALS Petitioner(s)
VERSUS
THE STATE OF UTTAR PRADESH & ANR. Respondent(s)
IA No. 183167/2025 – EXEMPTION FROM FILING O.T.
Date : 04-08-2025 This matter was called on for hearing today.
CORAM :
HON’BLE MR. JUSTICE J.B. PARDIWALA
HON’BLE MR. JUSTICE R. MAHADEVANFor Petitioner(s) :
Mr. Surjadipta Seth, Adv.
Mr. Arindam Ghosh, AOR
For Respondent(s) :
UPON hearing the counsel the Court made the following
O R D E R
1. The Special Leave Petition is partly allowed in terms of the
signed order.
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2. The relevant part of the signed order is as under:-
“…We request the Hon’ble the Chief Justice of the
High Court of Allahabad to assign this matter to any
other Judge of the High Court as he may deem fit.
24. The Chief Justice of High Court shall
immediately withdraw the present criminal
determination from the concerned Judge.
25. The Chief Justice shall make the concerned judge
sit in a Division Bench with a seasoned senior judge
of the High Court.
26. We further direct that the concerned judge shall
not be assigned any criminal determination, till he
demits office. If at all at some point of time, he is
to be made to sit as a single judge, he shall not be
assigned any criminal determination.
27. We have been constrained to issue directions as
contained in Paras 22, 23, 24, 25 and 26
respectively, referred to above, keeping in mind that
the impugned order is not the only erroneous order of
the concerned Judge that we have looked into for the
first time. Many such erroneous orders have been
looked into by us over a period of time.
28. Registry to forward one copy of this order to
Hon’ble the Chief Justice of Allahabad High Court at18
the earliest.”
3. Pending application(s), if any, stands disposed of.
(CHANDRESH) (POOJA SHARMA)
ASST.REG-CUM-P.S. COURT MASTER (NSH)
(Signed order is placed on the file)
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