- 1 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF JULY, 2025 BEFORE THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR CRIMINAL PETITION NO.2674 OF 2025 BETWEEN: GAGAN V. S/O. VENUGOPAL, AGED ABOUT 27 YEARS, NO.36, 2ND CROSS, NEAR ANNAPURNESHWARI TEMPLE, ANJANAPURA, BENGALURU – 560 062. …PETITIONER (BY SRI. P.N. RAJESWARA, ADVOCATE) AND: 1. THE STATE BY INSPECTOR OF POLICE, COTTONPET POLICE STATION, BENGALURU, REPRESENTED BY STATE PUBLIC PROSECUTOR. HIGH COURT OF KARNATAKA BENGALURU – 560 001. 2. NANGIREDDY SHIVAPRASAD, S/O. KRISHNAMURTHY NANGIREDDY, AGED ABOUT 55 YEARS, R/AT NO.416, 1ST FLOOR, TATANAGAR, BENGALURU CITY - 560 092. …RESPONDENTS (BY SRI. B.N. JAGADEESHA, ADDL. SPP FOR R1; SRI. SUYOG HERELE, ADVOCATE FOR R2) Digitally signed by CHANDANA B M Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 THIS CRL.P. IS FILED U/S 482 OF CR.PC (FILED U/S 528 BNSS) PRAYING TO QUASH THE FIR DATED 11.01.2024 IN CR.NO.10/2024 AND COMPLAINT DATED 11.01.2024 REGISTERED WITH THE RESPONDENT COTTONPET POLICE STATION AGAINST THE PETITIONER HEREIN FOR THE OFFENCE P/U/S 506, 34, 406, 420 OF IPC AT ANNEXURES – A AND B PENDING BEFORE THE HON’BLE 4TH A.C.M.M., BENGALURU. THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, petitioner seeks the following reliefs: “(i) Quash the FIR dated 11.01.2024 in Crime No.10/2024 and Complaint dated 11.01.2024 registered with the respondent Cottonpet Police Station against the petitioner herein for the offences punishable under Sections 506, 34, 406 and 420 IPC pending before the Hon’ble 4th Additional Chief Metropolitan Magistrate, Bengaluru, at Annexures – A and B; (ii) Quash the entire proceedings in Crime No.10/2024 pending before the Hon’ble 4th Additional Chief Metropolitan Magistrate, Bengaluru against the petitioner herein; (iii) Pass other order/s as this Hon’ble Court deems fit in the interest of justice.” 2. Heard learned counsel for the petitioner and learned Addl. SPP for respondent No.1 and learned counsel for respondent No.2 and perused the material on record. - 3 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 3. A perusal of the material on record will indicate that the 2nd respondent – de-facto complainant filed the impugned complaint dated 11.01.2024 against petitioner – accused No.5 and six other persons viz., accused Nos.1 to 4 and accused Nos.6 and 7 which was registered as an FIR in Crime No.10/2024 for alleged offences punishable under Sections 506, 34, 406 and 420 IPC, aggrieved by which the petitioner is before this Court by way of the present petition. 4. In addition to reiterating the various contentions urged in the memorandum of petition and referring to the material on record, learned counsel for the petitioner submits there are absolutely no allegations made against the petitioner – accused No.5 except referring to his name at paragraph 2 and 21 of the impugned complaint which do not disclose either involvement, role or commission of the alleged offences by the petitioner and as such, the impugned proceedings qua the petitioner deserve to be quashed. 5. Per contra, learned Addl. SPP for respondent No.1 and learned counsel for respondent No.2 submits that there is no merit in the petition and that the same is liable to be dismissed. 6. Before adverting to the rival contentions it would be necessary to extract the relevant portion of the impugned complaint as under: - 4 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 “2) xxxxxxxxxxx Upon receiving the payment of the aforesaid amount Mr. Ashok and Mr. Raghu arranged a meeting in Super Talkies, Cottonpet to discuss the foreign loan to start my export business. During the meeting, Mr. Shivakumar along with one Mr. Gagan (one of the heirs of Super Talkies) assured me that he would help me to obtain loan through his connections in Singapore. xxxxxxxxxxx 21) When Mr. Rajagopal Thilak and I approached Mr.Shivakumar to repay my money, he threatened me that he’s the right hand of a Minister. If I were to take any legal action or register a police complaint against him, the minister would take care of me so that I will never see the light of the day.” 7. A perusal of the entire complaint will indicate that except merely stating that during an alleged meeting between the 2nd respondent – complainant with accused No.1 – Shivakumar, the petitioner – accused No.5 (Gagan) is alleged to have assured the 2nd respondent that he would help him to obtain loan through his connections in Singapore; except the said statement, there are absolutely no other allegations or references to the petitioner – accused No.5, which would even remotely indicate the commission, role or involvement of the petitioner in the alleged offences and in the absence of the impugned complaint and FIR making out or disclosing the commission of a cognizable offence by the petitioner – accused No.5, I am of the view that the impugned proceedings for the alleged offences punishable under Sections 506, 406 and 420 IPC qua the petitioner - 5 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 deserve to be quashed, especially when respondent No.2 – complainant seeks to give a criminal colour / flavour / texture to an essentially, predominantly and overwhelmingly civil claim against the petitioner by way of the impugned complaint and FIR which is impermissible in law. 8. In the case of Delhi Race Club (1940) Ltd., and others Vs. State of Uttar Pradesh and another – 2024 SCC Online SC 2248, the Apex Court held as under: “Difference between criminal breach of trust and cheating 35. This Court in its decision in S.W. Palanitkar v. State of Bihar [S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241 : 2002 SCC (Cri) 129] expounded the difference in the ingredients required for constituting of an offence of criminal breach of trust (Section 406 IPC) vis-à-vis the offence of cheating (Section 420). The relevant observations read as under : (SCC p. 246, paras 9-10) “9. The ingredients in order to constitute a criminal breach of trust are : (i) entrusting a person with property or with any dominion over property; (ii) that person entrusted : (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any legal contract made, touching the discharge of such trust. 10. The ingredients of an offence of cheating are : (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases - 6 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 covered by (ii)(b), the act of omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property.” 36. What can be discerned from the above is that the offences of criminal breach of trust (Section 406 IPC) and cheating (Section 420 IPC) have specific ingredients: In order to constitute a criminal breach of trust (Section 406 IPC) (1) There must be entrustment with person for property or dominion over the property, and (2) The person entrusted: (a) Dishonestly misappropriated or converted property to his own use, or (b) Dishonestly used or disposed of the property or wilfully suffers any other person so to do in violation of: (i) Any direction of law prescribing the method in which the trust is discharged; or (ii) Legal contract touching the discharge of trust (see : S.W. Palanitkar [S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241 : 2002 SCC (Cri) 129] ). Similarly, in respect of an offence under Section 420IPC, the essential ingredients are: (1) Deception of any person, either by making a false or misleading representation or by other action or by omission; (2) Fraudulently or dishonestly inducing any person to deliver any property, or (3) The consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit (see : Harmanpreet Singh Ahluwalia v. State of Punjab [Harmanpreet Singh - 7 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009) 3 SCC (Cri) 620] ). 37. Further, in both the aforesaid sections, mens rea i.e. intention to defraud or the dishonest intention must be present, and in the case of cheating it must be there from the very beginning or inception. 38. In our view, the plain reading of the complaint fails to spell out any of the aforesaid ingredients noted above. We may only say, with a view to clear a serious misconception of law in the mind of the police as well as the courts below, that if it is a case of the complainant that offence of criminal breach of trust as defined under Section 405IPC, punishable under Section 406IPC, is committed by the accused, then in the same breath it cannot be said that the accused has also committed the offence of cheating as defined and explained in Section 415IPC, punishable under Section 420IPC. 39. 39. Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well. It has been held in Hari Prasad Chamaria v. Bishun Kumar Surekha [Hari Prasad Chamaria v. Bishun Kumar Surekha, (1973) 2 SCC 823 : 1973 SCC (Cri) 1082] as under : (SCC p. 824, para 4) “4. We have heard Mr Maheshwari on behalf of the appellant and are of the opinion that no case has been made out against the respondents under Section 420 of the Penal Code, 1860. For the purpose of the present appeal, we would assume that the various allegations of fact which have been made in the complaint by the appellant are correct. Even after making that allowance, we find that the complaint does not disclose the commission of any offence on the part of the respondents - 8 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 under Section 420 of the Penal Code, 1860. There is nothing in the complaint to show that the respondent had dishonest or fraudulent intention at the time the appellant parted with Rs 35,000. There is also nothing to indicate that the respondents induced the appellant to pay them Rs 35,000 by deceiving him. It is further not the case of the appellant that a representation was made by the respondents to him at or before the time he paid the money to them and that at the time the representation was made, the respondents knew the same to be false. The fact that the respondents subsequently did not abide by their commitment that they would show the appellant to be the proprietor of Drang Transport Corporation and would also render accounts to him in the month of December might create civil liability for them, but this fact would not be sufficient to fasten criminal liability on the respondents for the offence of cheating.” 40. To put it in other words, the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case. 41. The distinction between mere breach of contract and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, it is this intention, which is the gist of the offence. - 9 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 42. Whereas, for the criminal breach of trust, the property must have been entrusted to the accused or he must have dominion over it. The property in respect of which the offence of breach of trust has been committed must be either the property of some person other than the accused or the beneficial interest in or ownership of it must be of some other person. The accused must hold that property on trust of such other person. Although the offence i.e. the offence of breach of trust and cheating involve dishonest intention, yet they are mutually exclusive and different in basic concept. 43. There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e. since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, 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 any property. In such a situation, both the offences cannot co-exist simultaneously. 44. At the most, the Court of the Additional Chief Judicial Magistrate could have issued process for the offence punishable under Section 420IPC i.e. cheating but in any circumstances no case of criminal breach of trust is made out. The reason being that indisputably there is no entrustment of any property in the case at hand. It is not even the case of the complainant that any property was lawfully entrusted to the appellants and that the same has been dishonestly misappropriated. The case of the complainant is plain and simple. He says that the price of the goods sold by him has not been paid. Once there is a sale, Section 406IPC goes out of picture. According to the complainant, the invoices raised - 10 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 by him were not cleared. No case worth the name of cheating is also made out. 45. Even if the Magistrate would have issued process for the offence punishable under Section 420IPC i.e. cheating, the same would have been liable to be quashed and set aside, as none of the ingredients to constitute the offence of cheating are disclosed from the materials on record. 46. It has been held in State of Gujarat v. Jaswantlal Nathalal [State of Gujarat v. Jaswantlal Nathalal, 1967 SCC OnLine SC 58 : AIR 1968 SC 700 : (1968) 2 SCR 408] : (SCC OnLine SC para 8) “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 Raghavji Patel v. State of Maharashtra [Velji Raghavji Patel v. State of Maharashtra, 1964 SCC OnLine SC 185 : AIR 1965 SC 1433 : (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 [Jaswantrai Manilal Akhaney v. State of Bombay, 1956 SCC OnLine SC 46 : AIR 1956 SC 575 : 1956 SCR 483] . 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 to an “entrustment”.” 47. Similarly, in CBI v. Duncans Agro Industries Ltd. [CBI v. Duncans Agro Industries Ltd., (1996) 5 SCC 591 : 1996 SCC (Cri) 1045] this Court held that the expression “entrusted with property” used in Section 405IPC connotes that the property in respect of which criminal breach of trust - 11 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 can be committed must necessarily be the property of some person other than the accused or that the beneficial interest in or ownership thereof must be in the other person and the offender must hold such property in trust for such other person or for his benefit. The relevant observations read as under : (SCC pp. 607-608, para 27) “27. In the instant case, a serious dispute has been raised by the learned counsel appearing for the respective parties as to whether on the face of the allegations, an offence of criminal breach of trust is constituted or not. In our view, the expression “entrusted with property” or “with any dominion over property” has been used in a wide sense in Section 405IPC. Such expression includes all cases in which goods are entrusted, that is, voluntarily handed over for a specific purpose and dishonestly disposed of in violation of law or in violation of contract. The expression “entrusted” appearing in Section 405IPC is not necessarily a term of law. It has wide and different implications in different contexts. It is, however, necessary that the ownership or beneficial interest in the ownership of the property entrusted in respect of which offence 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. The expression “trust” in Section 405IPC is a comprehensive expression and has been used to denote various kinds of relationships like the relationship of trustee and beneficiary, bailor and bailee, master and servant, pledger and pledgee. When some goods are hypothecated by a person to another person, the ownership of the goods still remains with the person who has hypothecated such goods. The property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or the beneficial interest in or ownership of it must be in the other person and the offender must hold such property in trust for such other person or for his benefit. In a case of pledge, the pledged article belongs to some other person but the same is kept in trust by the pledgee.” (emphasis supplied) 48. The aforesaid exposition of law makes it clear that there should be some entrustment of property to the accused wherein the ownership is not transferred to the accused. In - 12 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 case of sale of movable property, although the payment may be deferred yet the property in the goods passes on delivery as per Sections 20 and 24, respectively, of the Sale of Goods Act, 1930. “20. Specific goods in a deliverable state.—Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made and it is immaterial whether the time of payment of the price or the time of delivery of goods, or both, is postponed. *** 24. Goods sent on approval or “on sale or return”.— When goods are delivered to the buyer on approval or “on sale or return” or other similar terms, the property therein passes to the buyer— (a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.” 49. From the aforesaid, there is no manner of any doubt whatsoever that in case of sale of goods, the property passes to the purchaser from the seller when the goods are delivered. Once the property in the goods passes to the purchaser, it cannot be said that the purchaser was entrusted with the property of the seller. Without entrustment of property, there cannot be any criminal breach of trust. Thus, prosecution of cases on charge of criminal breach of trust, for failure to pay the consideration amount in case of sale of goods is flawed to - 13 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 the core. There can be civil remedy for the non-payment of the consideration amount, but no criminal case will be maintainable for it. [See : Lalit Chaturvedi v. State of U.P. [Lalit Chaturvedi v. State of U.P., (2024) 12 SCC 483 : 2024 SCC OnLine SC 171] and Mideast Integrated Steels Ltd. v. State of Jharkhand [Mideast Integrated Steels Ltd. v. State of Jharkhand, 2023 SCC OnLine Jhar 301] .] 50. The case at hand falls in Category 1 as laid in Nagawwa [Nagawwa v. Veeranna Shivalingappa Konjalgi, (1976) 3 SCC 736 : 1976 SCC (Cri) 507] referred to in para 17 of this judgment. 51. If it is the case of the complainant that a particular amount is due and payable to him then he should have filed a civil suit for recovery of the amount against the appellants herein. But he could not have gone to the Court of the Additional Chief Judicial Magistrate by filing a complaint of cheating and criminal breach of trust. It appears that till this date, the complainant has not filed any civil suit for recovery of the amount which according to him is due and payable to him by the appellants. He seems to have prima facie lost the period of limitation for filing such a civil suit. 52. In such circumstances referred to above, the continuation of the criminal proceeding would be nothing but abuse of the process of law. Final conclusion 53. Before we close this matter, we would like to say something as regards the casual approach of the courts below in cases like the one at hand. The Indian Penal Code (IPC) was the official Criminal Code in the Republic of India inherited from British India after Independence. IPC came into force in the sub-continent during the British rule in 1862. IPC - 14 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 remained in force for almost a period of 162 years until it was repealed and replaced by the Bharatiya Nyaya Sanhita (“BNS”) in December 2023 which came into effect on 1-7- 2024. It is indeed very sad to note that even after these many years, the courts have not been able to understand the fine distinction between criminal breach of trust and cheating. 54. When dealing with a private complaint, the law enjoins upon the Magistrate a duty to meticulously examine the contents of the complaint so as to determine whether the offence of cheating or criminal breach of trust as the case may be is made out from the averments made in the complaint. The Magistrate must carefully apply its mind to ascertain whether the allegations, as stated, genuinely constitute these specific offences. In contrast, when a case arises from an FIR, this responsibility is of the police — to thoroughly ascertain whether the allegations levelled by the informant indeed fall under the category of cheating or criminal breach of trust. Unfortunately, it has become a common practice for the police officers to routinely and mechanically proceed to register an FIR for both the offences i.e. criminal breach of trust and cheating on a mere allegation of some dishonesty or fraud, without any proper application of mind. 55. It is high time that the police officers across the country are imparted proper training in law so as to understand the fine distinction between the offence of cheating vis-à-vis criminal breach of trust. Both offences are independent and distinct. The two offences cannot coexist simultaneously in the same set of facts. They are antithetical to each other. The two provisions of IPC (now BNS, 2023) are not twins that they cannot survive without each other. 56. In view of the aforesaid, the appeal succeeds and is hereby allowed. - 15 - HC-KAR NC: 2025:KHC:23970 CRL.P No. 2674 of 2025 57. The impugned order [Delhi Race Club (1940) Ltd. v. State of U.P., 2024 SCC OnLine All 4393] passed by the High Court is set aside so also the order passed by the Additional Chief Judicial Magistrate, Khurja, Bulandshahar taking cognizance upon the complaint.” 9. In view of the aforesaid facts and circumstances and the principles enunciated by the Apex Court in Delhi Race Club’s case supra, I am of the view that continuation of the impugned proceedings qua the petitioner – accused No.5 would amount to abuse of process of law warranting interference by this Court in the present petition. 10. In the result, I pass the following: ORDER i. The petition is hereby allowed. ii. The impugned proceedings pursuant to the impugned FIR in Crime No.10/2024 qua the petitioner – accused No.5 are hereby quashed. iii. It is, however, made clear that the present order is restricted only to petitioner – accused No.5 and will not be applicable to the remaining accused persons. Sd/- (S.R.KRISHNA KUMAR) JUDGE HNM / SV List No.: 5 Sl No.: 8 CT: BHK