Liability for commercial defaults requires dishonest intention; cheating and breach of trust proceedings quashed where only civil dispute exists.

Criminal proceedings under sections concerning cheating and criminal breach of trust were quashed where the complaint disclosed a commercial dispute without allegations of dishonest or fraudulent intention at the inception of transactions; the court applied the principle that criminal liability for cheating requires proof of dishonest intention or fraudulent inducement when representations were made, and mere failure to fulfil contractual obligations yields civil remedies. Applying these principles to the admitted facts, the essential prima facie ingredients of the offences were not made out and the proceedings against the petitioner were set aside.

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Issues: Whether the criminal proceedings under Sections 406 and 420 of the Indian Penal Code, 1860 arising from commercial transactions should be quashed under Section 482 of the Code of Criminal Procedure, 1973 on the ground that the complaint discloses only civil disputes and lacks the essential ingredients of cheating or criminal breach of trust.

Analysis: The complaint and material on record show long-standing commercial dealings with payments made from time to time and no allegation of dishonest or fraudulent intention at the inception of the transactions. The factual matrix indicates a dispute over alleged outstanding dues arising from business transactions, which at best gives rise to civil remedies. Authorities establish that criminal liability for cheating requires proof of dishonest intention or fraudulent inducement at the time of making the representation and that mere failure to fulfil contractual obligations does not constitute cheating or criminal breach of trust. Applying these principles to the admitted facts and the complaint, the essential prima facie ingredients of offences under Sections 406 and 420 of the Indian Penal Code, 1860 are not made out.

Conclusion: The proceedings under Sections 406 and 420 of the Indian Penal Code, 1860 are quashed insofar as the petitioner is concerned; the order passed against the petitioner is set aside. The revisional petition under Section 482 of the Code of Criminal Procedure, 1973 is allowed in favour of the petitioner.

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