Unauthorized use of securities can support criminal breach of trust, but cheating needs clear false inducement allegations.

Unauthorized sale of shares from the complainant's demat and trading accounts, coupled with alleged appropriation of the account balance, was sufficient at the cognizance stage to disclose a prima facie case of criminal breach of trust and conspiracy under Sections 406 and 120-B IPC; the later retransfer of shares did not negate the alleged wrongful act. The complaint, however, did not plead any false representation or inducement by the applicants, so the ingredients of cheating under Section 420 IPC were not made out on the face of the complaint. Proceedings were therefore sustained only for the remaining offences, and the cheating allegation was set aside.

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Issues: (i) Whether the complaint disclosed a prima facie case of criminal breach of trust and conspiracy against the applicants; (ii) Whether the complaint disclosed the offence of cheating against the applicants.

Issue (i): Whether the complaint disclosed a prima facie case of criminal breach of trust and conspiracy against the applicants.

Analysis: The complaint alleged that the applicants, through their office and employee, had access to the complainant's demat and trading accounts, sold shares without authority, and appropriated the balance standing in the account. The subsequent retransfer of shares did not erase the alleged wrongful act alleged to have been committed at the time of unauthorized sale and use of the complainant's securities and funds. At the stage of taking cognizance, the defence version could not be assessed as conclusive.

Conclusion: A prima facie case under Section 406 read with Section 120-B of the Indian Penal Code, 1860 was made out against the applicants.

Issue (ii): Whether the complaint disclosed the offence of cheating against the applicants.

Analysis: The complaint did not contain an allegation that the applicants made any false representation to induce the complainant to deposit money or otherwise enter into the transaction. In the absence of such averments, the ingredients of cheating were not satisfied on the face of the complaint.

Conclusion: No prima facie offence under Section 420 of the Indian Penal Code, 1860 was made out against the applicants.

Final Conclusion: The proceedings were sustained only for the remaining offences, while the finding relating to cheating was set aside and the petitions succeeded to that extent.

Ratio Decidendi: Unauthorized sale or misuse of securities and funds from a complainant's account may disclose criminal breach of trust at the cognizance stage, but cheating requires an allegation of false inducement or misrepresentation.

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