- 1 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF FEBRUARY, 2026 BEFORE THE HON'BLE MRS. JUSTICE M G UMA CRIMINAL PETITION NO. 12390 OF 2022 BETWEEN: 1. SMT. DEVANSHI GUPTA W/O VIKRAM SINGH AGED ABOUT 35 YEARS OCC: DIRECTOR AUROUS PETRO PRIVATE LIMITED R/O. PLOT NO.8, JAIPUR MAIZE PRODUCT COMPANY, LAXMAN SINGH BLOCK NEAR TRITON MALL, JHOTWARA ROAD DISTRICT JAIPUR-302012. 2. MANOJ KUMAR PAREEK S/O MANGI LAL PAREEK AGED ABOUT 53 YEARS OCC: DIRECTOR AUROUS PETRO PRIVATE LIMITED R/O NO.125, 126 RANA PRATAP NAGAR NEAR BRIJ BAL MANDIR SCHOOL JHOTWARA ROAD DISTRICT JAIPUR-302012. 3. VIKRAM SINGH S/O YOGENDRA SINGH AGED ABOUT 33 YEARS OCC: BUSINESS R/O PLOT NO.8, JAIPUR MAIZE PRODUCT COMPANY, LAXMAN SINGH BLOCK NEAR TRITON MALL JHOTWARA ROAD DISTRICT JAIPUR-302012. Digitally signed by PRASHANTH N V Location: High Court of Karnataka - 2 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 …PETITIONERS (BY SRI. HARSH SHARMA, ADVOCATE FOR SRI. ABHILASH R., ADVOCATE) AND: 1. THE STATE OF KARNATAKA THROUGH THE P.S.I., JAYA NAGAR SUB-DIVISION POLICE STATION JAYA NAGAR, BANGALORE CITY. 2. GURUPRAKASH VERMA S/O SHRI GOPAL RAJU AGED ABOUT 34 YEARS OCC: BUSINESS R/O NO.13/2, 11TH A MAIN 36TH A CROSS, 4TH T BLOCK JAYANAGAR, BANGALORE-560041. …RESPONDENTS (BY SRI. K.N. PHANINDRA, SENIOR ADVOCATE FOR SRI. CHINMAY J. MIRJI, ADVOCATE FOR R-2; SMT. SOWMYA R., HCGP FOR R1) THIS CRL.P IS FILED U/S 482 CR.PC PRAYING TO ALLOW THIS PETITION, AND TO QUASH THE FIR IN CRIME NO.326/2022 OF THE JAYANAGAR SUB-DIVISION POLICE STATION, JAYANAGAR, BENGALURU CITY AGAINST THE PETITIONERS / ACCUSED NO.1 TO 3 FOR THE ALLEGED OFFENCES PUNISHABLE UNDER SECTIONS 34, 406, 420 OF IPC. THIS PETITION, COMING ON FOR ADMISSION, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MRS. JUSTICE M G UMA - 3 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 ORAL ORDER The petitioners being accused Nos.1 to 3 in Crime No.326/2022 of Jayanagar Sub-Division Police Station registered for the offences punishable under Sections 406, 420 and read with Section 34 of Indian Penal Code (for short 'IPC') are seeking to quash the criminal proceedings initiated against them. 2. Heard Sri. Harsh Sharma, learned counsel for Sri.Abhilash. R, learned counsel for the petitioners and Sri.K.N.Phanindra, learned Senior counsel for Sri. Chinmya. J Miriji, learned counsel for respondent No.2 and Smt. Soumya R, learned HCGP for respondent No.1. Perused the materials on record. 3. Respondent No.2 filed the first information with Jayanagar Police Station against accused Nos.1 to 4 alleging commission of the offences as stated above. It is alleged that respondent No.2 entered into an agreement with accused No.4 - a Company represented by accused Nos.1 to 3 as directors, for supply of coke and petroleum products. Respondent No.2 paid an advance amount of Rs.4.02 crores and the accused - 4 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 agreed to supply the goods as per the terms of the agreement. But the accused failed to supply the products as agreed nor they have returned the advance amount paid and thereby, committed cheating and criminal breach of trust. On the basis of this complaint, the First Information Report came to be registered. The petitioners being accused Nos.1 to 3 are before this Court seeking to quash the criminal proceeding initiated against them. 4. Learned counsel for the petitioners submits that, admittedly, there is a written agreement between the parties and as per the terms of agreement advance amount of Rs.4.02 crores was paid. The accused have supplied worth goods Rs.1.98 crores. However, an amount of Rs.1.2 crores is still due to be refunded to the complainant. But in the mean time, the complaint came to be filed, Sections 406 and 420 of I.P.C are not at all attracted to the facts of the case. 5. Per contra, learned Senior advocate for respondent No.2 and learned HCGP for respondent No.1 opposing the petition submitted that, it is a clear case of criminal breach of trust which attracts Sections 406 and 420 of I.P.C. Even - 5 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 according to the petitioners they have not returned the sum of Rs.1.30 crores nor they have supplied the goods and thereby, they have miss-appropriated the huge sums of money. 6. Learned Senior advocate for respondent No.2 placed reliance on the decision of the Hon'ble Apex Court in Indian Oil Corporation V.s Nepc India Ltd and Others1, in support to his contention and prayed for dismissal of the petition. 7. In view of the rival contentions urged by learned counsel for both the parties, the point that would arise for my consideration is: "Whether the petitioners have made out any grounds to allow the petition and to quash the criminal proceedings initiated against them?" My answer to the above point is in the 'Affirmative' for the following: REASONS 8. The facts of the case are not in dispute, there was an agreement dated 13.12.2021 entered into between 1 (2006) 6 SCC 736 - 6 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 respondent No.2 and the accused for supply of 1,000/- metric tons of Bitumen VG. It is stated that goods worth Rs.1.98 crores was supplied in terms of the contract, but the remaining supply was not done. Admittedly, the petitioners have not supplied all the goods as undertaken nor they have returned the balance advance amount received by them. Now the question arises as to whether Sections 406 and 420 of I.P.C are applicable. 9. The copy of the agreement entered into between the parties is produced before the Court. As per the terms of the agreement, there are clauses regarding liquidated damages / price reduction for delay in delivery which reads as under: "Liquidated Damages/Price Reduction for delay in delivery. In the event supplier fails to deliver the Equipment/ Materials within the contracted delivery date in accordance with the delivery schedule, the price payable in accordance with the P.O will be reduced at the rate of 1% (once percent) of the total value of P.O per week up to a maximum of 10% (ten percent) of the total value of P.O. If the supplier fails to supply the finished goods no later than 60 days from the deliver schedule, zetwerk shall be entitled to cancel the PO and in the event of such cancellation the supplier shall be liable to pay (a) liquidated damages of 10% of the PO; (b) differential cost incurred in procuring product from third parties; (c) advances with interest, if any." - 7 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 10. Therefore, the parties have taken care of a situation where there is breach of contract by either parties. 11. On facts of the case it is clear that, it is only a simple breach of contract committed by the petitioners by not supplying the goods as undertaken. Sufficient precautions are taken while entering into contract to face such default on the part of the accused. 12. In Indian Oil Corporation (supra) the Hon'ble Apex Court very specifically held that in a given case the facts may lead to purely a civil wrong or purely a criminal offence or a civil wrong and also a criminal offence. The Hon'ble Apex Court also held that the test is whether the allegations in the complaint disclose the criminal offences or not. In the said case there was allegation that the accused have unauthorizedly removed the engines and certain other parts and there by committed the criminal offences. Therefore, the Hon'ble Apex Court held that, it amounts to both civil wrong as well as criminal offence. 13. In the present case, except stating that, after entering into agreement and receiving the advance amount the - 8 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 accused have failed to supply the goods as agreed and they have also failed to refund the advance amount. It amounts to purely a civil wrong and no criminality will attract to it, since the parties are governed by the terms of contract. In this regard I may referr to the decision of the Hon'ble Apex Court in Delhi Race Club (1940) Limited and Others V.s State of Uttar Pradesh and Another2 where the Hon'ble Apex Court has referred to its earlier decision in S.W Palanitkar V.s State of Bihar3 and exhaustively explained as to what constitute a criminal breach of trust. The Hon'ble Apex Court in paragraph Nos.35, 36 and 37 has held as under: "35. This Court in its decision in S.W. Palanitkar v. State of Bihar (2002) 1 SCC 241 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 2 (2024) 10 SCC 690 3 (2002) 1 SCC 241 - 9 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 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 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 v. State of Bihar, (2002) 1 SCC 241] ). Similarly, in respect of an offence under Section 420IPC, the essential ingredients are: - 10 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 (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, (2009) 7 SCC 712 ). 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." 14. Thus the position of law is made very will clear. If the same principles are applied to the facts of the case, I am of the opinion that the dispute between the parties are purely of civil nature. Neither Section 406 nor 420 of I.C.P could be invoked, as there is no allegation of commission of a criminal offences. Mere breach of contract will not lead to commission of criminal offence to invoke the penal provisions. The ingredients of either cheating or criminal breach of trust are not made out even remotely. Under such circumstances, I am of the opinion that the criminal proceedings initiated against the petitioners is in abuse of process law. Hence, the criminal proceedings initiated against the petitioners are liable to be quashed. - 11 - HC-KAR NC: 2026:KHC:6411 CRL.P No. 12390 of 2022 Accordingly, I answer the above point in the 'Affirmative' and proceed to pass the following: ORDER i) The petition is allowed. ii) The criminal proceedings initiated against the petitioner - accused Nos.1 to 3 in Crime No.326/2022 of Jayanagar Sub-Division Police Station registered for the offences punishable under Sections 406, 420 and read with Section 34 of Indian Penal Code, is hereby quashed. Sd/- (M G UMA) JUDGE PNV List No.: 2 Sl No.: 16