Quashing at the investigation stage depends on prima facie offences; misuse of entrusted blank cheques can support criminal breach of trust.

At the quashing stage, courts may examine allegations and admitted materials to see whether a cognizable offence is prima facie disclosed, but disputed defences are not normally tested. Cheating requires dishonest inducement at the inception of the transaction, and the later dispute over blank cheques did not by itself show fraudulent intent from the beginning. Filling a blank cheque was not treated as forgery on these materials, and conspiracy was not clearly made out. However, entrusted blank signed cheques could support a prima facie case of criminal breach of trust if they were misused for a different purpose, so the investigation was confined to that offence.

---

---

Issues: (i) Whether the First Information Report and criminal proceedings deserved to be quashed under the inherent jurisdiction for alleged abuse of process and absence of prima facie ingredients of cheating, criminal breach of trust, forgery, and conspiracy; (ii) Whether the materials disclosed a prima facie case only for criminal breach of trust in relation to the blank cheques.

Issue (i): Whether the First Information Report and criminal proceedings deserved to be quashed under the inherent jurisdiction for alleged abuse of process and absence of prima facie ingredients of cheating, criminal breach of trust, forgery, and conspiracy.

Analysis: The power to quash is wide but must be exercised with caution. At the stage of quashing, the allegations and admitted materials may be examined to see whether they disclose any cognizable offence, but disputed defences are not ordinarily to be adjudicated. For cheating, the dishonest inducement must exist at the inception of the transaction. On the facts, the blank cheques were said to have been handed over for business purposes during a period when the parties were on good terms, and the later dispute did not establish fraudulent intention from the beginning. The filling up of a blank cheque, by itself, does not amount to forgery, and the materials did not show a clear conspiracy between the respondents and any employee.

Conclusion: The proceedings were not liable to be quashed in full on the ground that no offence was disclosed.

Issue (ii): Whether the materials disclosed a prima facie case only for criminal breach of trust in relation to the blank cheques.

Analysis: A cheque is property for the purpose of entrustment. If blank signed cheques entrusted for a limited purpose were misused or diverted to a different purpose, a prima facie case under criminal breach of trust could arise. The existence of parallel civil or Section 138 proceedings did not by itself bar criminal investigation. The Court therefore confined the permissible investigation to the offence for which entrustment and misuse were sufficiently disclosed.

Conclusion: A prima facie case was made out only under Section 406 of the Indian Penal Code, 1860.

Final Conclusion: The quashing order was set aside to the extent that it terminated the investigation entirely, and the criminal investigation was allowed to proceed only in relation to criminal breach of trust.

Ratio Decidendi: At the stage of quashing, criminal proceedings may continue where the allegations and admitted materials prima facie disclose an offence; for cheating, fraudulent intention must exist at the inception, and misuse of entrusted property may sustain criminal breach of trust even if other alleged offences are not made out.

---