THE JHARKHAND STORY NETWORK
Ranchi, June 4: The Jharkhand High Court has quashed criminal proceedings against two Jamshedpur businessmen in a ₹1.91 crore investment dispute, holding that the matter was essentially civil in nature and did not constitute offences of cheating or criminal breach of trust. The court, in a recent order, observed that a business or loan-related dispute cannot be converted into a criminal case in the absence of evidence showing fraudulent intent from the very inception of the transaction.
Justice Anil Kumar Choudhary, while allowing a criminal miscellaneous petition, set aside the entire proceedings in Sonari P.S. Case No. 45 of 2025, including the cognisance order passed by a Judicial Magistrate, First Class, Jamshedpur.
Dispute Stemmed from Railway Tender Business Investment
The case was lodged on allegations that Bimal Kumar Agarwal and his son Pratik Agarwal had received ₹1.91 crore from the informant for investment in their railway tender business with a promise of attractive returns, but later failed to repay the amount.
Following an investigation, police submitted a charge sheet, and the trial court took cognisance under Sections 406, 420 and 34 of the Indian Penal Code (IPC).
No Evidence of Cheating at the Inception: Court
The High Court observed that for an offence of cheating under Section 420 IPC to be made out, there must be evidence of dishonest intention or deception from the very beginning of the transaction.
The court found that the complaint contained no allegation suggesting that the accused had intended to cheat the informant at the inception of the investment arrangement.
Referring to Supreme Court precedents, the court reiterated that every breach of contract does not amount to cheating and that a subsequent failure to fulfil a promise cannot automatically attract criminal liability.
Loan Transaction Does Not Amount to Criminal Breach of Trust
The court also held that the ingredients of criminal breach of trust under Section 406 IPC were absent.
It observed that money advanced as a loan or investment does not constitute “entrusted property” under Section 405 IPC because ownership of the money passes to the borrower, creating a debtor-creditor relationship rather than a fiduciary one.
The judgment noted that while the borrower remains legally liable to repay the money, such transactions do not amount to entrustment unless specific circumstances establish a trust relationship.
‘Purely a Civil Dispute’
The High Court concluded that the allegations, even if accepted in their entirety, failed to disclose offences under Sections 406 or 420 IPC.
The court observed that the dispute was essentially civil in nature and that criminal proceedings appeared to have been initiated to exert pressure on the accused.
Accordingly, the entire criminal proceeding and the cognisance order were quashed, and the petition was allowed.