The Supreme Court of India has quashed criminal proceedings instituted against a former partner of a firm, holding that criminal breach of trust and cheating are distinct offences that cannot co-exist simultaneously on the same set of facts. The Court observed that the criminal machinery was being misused to settle a civil dispute regarding partnership assets.
The Division Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan, in the case of Inder Chand Bagri v. Jagadish Prasad Bagri & Another (Criminal Appeal No. 5000 of 2025), set aside the order of the Gauhati High Court which had refused to quash the complaint under Section 482 of the Code of Criminal Procedure (CrPC).
Case Background
The dispute dates back to a partnership deed executed on October 1, 1976, establishing the firm ‘INDRACHAND BAGRI AND BROTHERS’. The appellant, Inder Chand Bagri, brought his land situated at Village Maidamgaon, Beltola, District Kamrup, Assam, into the partnership for constructing godowns to be leased to the Food Corporation of India (FCI).
The partners executed a supplementary agreement on April 3, 1981, agreeing that upon the expiry of the lease with FCI on June 1, 1993, the property would revert to the appellant along with all rights, title, and interest. The firm was subsequently dissolved via a dissolution deed dated April 3, 1997.
In 2011, the appellant sold the property to his nephew. Following this, the complainant, Jagadish Prasad Bagri (Respondent No. 1), filed a Title Suit in 2012 challenging the sale. Subsequently, in 2013—sixteen years after the alleged acts—the respondent filed a criminal complaint alleging offences under Sections 406 (Criminal Breach of Trust), 420 (Cheating), and 120B (Criminal Conspiracy) of the Indian Penal Code (IPC).
The Judicial Magistrate took cognizance of the complaint. The appellant moved the Gauhati High Court to quash the proceedings, but the petition was dismissed on February 13, 2018. The High Court held that a prima facie case was made out and the defense materials required scrutiny at trial.
Arguments of the Parties
The counsel for the appellant argued that the complaint was time-barred and constituted an abuse of the process of law, as a civil suit regarding the same subject matter was already pending. The appellant contended that under the supplementary agreement of 1981 and the dissolution deed of 1997, the property rightly reverted to him. It was submitted that the complainant had suppressed these documents.
Conversely, the complainant argued that the appellant was entrusted with the firm’s property and had dishonestly misappropriated it by selling it to a third party. The respondent contended that the civil nature of the dispute did not bar criminal proceedings if criminal elements were present and questioned the authenticity of the dissolution deeds.
Supreme Court’s Analysis
The Supreme Court examined the ingredients of Sections 406 and 420 of the IPC. Regarding the allegation of cheating, the Bench referred to the judgment in Inder Mohan Goswami v. State of Uttaranchal (2007), noting that to establish cheating, it must be shown that the accused 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 Court noted. The Bench found no material to attribute fraudulent intention to the appellant at the inception of the partnership.
Regarding the allegation of criminal breach of trust, the Court observed that the complainant failed to prove how the property was entrusted to the appellant or dishonestly misappropriated, given the existence of the 1981 supplementary agreement which provided for the reversion of the land to the appellant.
Significantly, the Court addressed the simultaneous invocation of Sections 406 and 420 IPC. Relying on the decision in Delhi Race Club (1940) Limited v. State of Uttar Pradesh (2024), the Bench held:
“In case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver a property. In such a situation, both offences cannot co-exist simultaneously. Consequently, the complaint cannot contain both the offences that are independent and distinct.”
Decision
The Supreme Court concluded that the allegations were made with a mala fide intent and the dispute was essentially civil in nature. The Court cited State of Haryana v. Bhajan Lal (1992), classifying this case as one where the allegations do not disclose the commission of any offence and are maliciously instituted.
The Bench also referred to Vishal Noble Singh v. State of Uttar Pradesh (2024), expressing concern over the misuse of the criminal justice machinery.
“Courts have therefore to be vigilant against such tendencies and ensure that acts of omission and commission having an adverse impact on the fabric of our society must be nipped in the bud,” the Bench remarked.
The appeal was allowed, and the Complaint Case No. 3230c of 2013 pending before the Sub-Divisional Judicial Magistrate (I) Kamrup, Gauhati, along with all consequent proceedings, was quashed.
Case Details:
- Case Title: Inder Chand Bagri v. Jagadish Prasad Bagri & Another
- Case No.: Criminal Appeal No. 5000 of 2025
- Bench: Justice B.V. Nagarathna and Justice R. Mahadevan
- Citation: 2025 INSC 1350
