The Calcutta High Court has quashed a criminal case of cheating, criminal breach of trust and criminal intimidation against a factory owner, holding that the dispute arose out of a failed commercial lease and was purely civil in nature. Justice Uday Kumar found that the FIR was a retaliatory counter-blast lodged after the landlord started cheque bounce proceedings under Section 138 of the Negotiable Instruments Act.
Background
Vishal Agarwal owns a factory shed of about 16,000 square feet at Mouza Jala-Dhulagori, Sankrail, Howrah. Vivek Agarwal, acting with Brij Lal Bansal for a proposed company, Bansal Poly Plast Pvt. Ltd., approached him to take the shed on lease for a plastic granules plant. A Leave and License Agreement was executed on December 11, 2018, for 12 months from January 1, 2019.
Vivek Agarwal paid a security deposit of ₹19,25,760 by cheque and handed over an electricity security cheque of ₹25 lakh. After the required electrical load was revised from 250 KVA to 200 KVA, he paid ₹20 lakh, on the understanding that the ₹25 lakh cheque would be returned.
The deal fell apart. On February 11, 2019, Vivek Agarwal sent a legal notice demanding a refund of ₹39,25,760. On March 14, 2019, the landlord presented the ₹25 lakh cheque, which was dishonoured due to stop-payment instructions, and filed a Section 138 complaint on April 18, 2019. On April 25, 2019, Vivek Agarwal lodged an FIR at Golabari Police Station under Sections 420, 406 and 506 IPC. A charge-sheet followed in May 2021. He also filed a money suit for recovery before the civil court at Howrah.
Arguments
Advocate Rachit Lakhmani, appearing for the petitioner along with Advocate Anurag Sardar, argued that the tenant had accepted the premises on an “as is where is basis” under Clause 11 of the agreement, and agreed under Clause 12 to bear the cost of any civil work. He submitted that the FIR was a counter-blast to the cheque bounce case, and that Sections 406 and 420 IPC were mutually destructive. He also pointed out that the charge-sheet itself recorded that the dispute arose out of a tenancy-related civil matter.
Advocate Satadru Lahiri, appearing for the complainant along with Advocate Swati Chowdhury, and Advocate Pawan Kumar Gupta, appearing for the State along with Advocate Shreyash Kr. Singh, opposed the plea. They argued that the landlord had falsely represented that the shed had a ready 250 KVA connection, exhaust chimneys and industrial flooring. They contended that the case raised disputed questions of fact, which cannot be examined in a mini-trial under Section 482 CrPC.
Court’s Findings
The Court noted that the complainant’s own legal notice recorded that the premises were selected and inspected when the agreement was executed. It held that the dispute was about the breach and fallout of a commercial tenancy contract, and observed that “civil liability cannot be converted into criminal prosecution simply because a commercial bargain has soured or a subsequent contractual breach has occurred.”
On the penal provisions, the Court held that security deposits and part-payments in a commercial lease “do not constitute entrustment in a fiduciary or criminal capacity”. Relying on Lalit Chaturvedi and Delhi Race Club, it held that Sections 406 and 420 IPC cannot be applied together to the same transaction.
On the timeline, Justice Kumar observed that “the sudden transformation of a civil commercial grievance into a penal prosecution right after the initiation of Section 138 proceedings speaks volumes regarding the true intent behind the FIR”. Relying on Sunil Kumar, D.P. Gulati and Mahmood Ali, the Court said that “Permitting such a proceeding to continue would subvert the criminal justice system into a tool for coercion and pressure.”
The Court accepted that the rival claims about the shed’s condition and the flooring work would ordinarily need a trial. However, given the civil character of the dispute, the legally unsustainable charges and the counter-blast nature of the FIR, it held that continuing the case would be an abuse of the process of law.
Outcome
The High Court allowed the revision and quashed the entire proceedings in G.R. Case No. 2138 of 2019 before the Chief Judicial Magistrate, Howrah, including Charge Sheet No. 149 of 2021. It clarified that its observations will not affect the pending money suit or the Section 138 case. No costs were imposed.
Case Title: Vishal Agarwal v. State of West Bengal & Anr.
Case No.: CRR 4089 of 2022
Bench: Justice Uday Kumar
Date: 12.10.2026
