Manish Kumar Munda v. State of NCT Delhi & Anr.

5.15 That Section 405 IPC requires dishonest intention (mens rea). Mere retention of money without misappropriation does not constitute criminal breach of trust. Similarly, “misappropriation” requires wrongful use of property to the exclusion of the owner, which is absent in this case.

5.16 That to attract Section 420 IPC, the prosecution must prove cheating coupled with dishonest inducement to deliver property. Breach of contract by itself cannot constitute cheating unless fraudulent intent exists at the inception of the transaction, which is not the case here.

5.17 That the FIR is nothing but an abuse of the legal process, lodged with the intent to harass the petitioner and pressurize him into yielding to the promoter’s unjust demands. It is a retaliatory measure to the petitioner’s complaints, and if allowed to stand, it would cause grave prejudice to the petitioner’s rights and liberty.

6. Opposing the aforesaid, learned counsel for the complainant would submit that the petitioner has cheated the complainant by inducing him to part with a huge amount of Rs.1.[5] Crores without performing the security part of his assurance of his agreement to deliver the goods i.e., alcohol/liquor as agreed vide agreement executed between the petitioner and the respondent No.2 (Annexure P-2).

7. Furthermore, they would point out that the petitioner is also stated to be involved in four more criminal cases, i.e., three FIRs and one criminal complaint under Section 138 of the N.I. Act and thus they would contend in that he does not deserve any indulgence of this Court to exercise discretionary powers under Section 528 of the BNSS.

8. Adverting to the arguments in reverse, i.e., the arguments of the respondents were, i.e. the registration of other FIRs as well as proceedings under Section 138 of the N.I. Act.

9. At the very outset, on a query put to the learned counsel for the petitioner, he would submit that in one of the FIRs, closure report has been filed and the other was also in misuse of the police powers and thus quashed by the High Court of Chhattisgarh, inter alia, holding that it was also an outright civil dispute between the parties.

10. With regard to the third FIR he would state, under instructions of the petitioner, that the same does not pertain to him. As regards the fourth criminal complaint, the same also arose out of certain business transaction and there was no legally enforceable debt to be recovered from the petitioner and in any case, the same is sub judice before the Competent Court and thus has no bearing on the present proceedings.

11. Coming to the present case. There appears to be an outright civil dispute between the complainant and the accused. And yet, impugned FIR has been registered in complete misuse of powers by a pliant, nay, rather compliant police official. Obviously it would help the complainant to recover his money who has lodged an FIR under Sections 406 read with 420 of the IPC. Thus giving the entire case a colour of criminal culpability, where none exists.

12. At the threshold, it may be pertinent to note here that in terms of guidelines laid down by Supreme Court in Arnesh Kumar Singh V. State of Bihar: [2014] 8 SCC 273; a preliminary inquiry had to be carried out before registration of the FIR. The impugned FIR contains a cryptic note that on receipt of the complaint, an enquiry was conducted in the above matter. But nothing more is stated about the proceedings carried out in and the result of the so-called inquiry. It seems that the note about conducting of so-called inquiry was just recorded as a paper formality and complaint received in the police station by the complainant was simply converted into an FIR.

13. Gist of relevant allegations in the FIR, necessary for adjudication of the matter, is that in their business, on behalf of Niloy Syndicate Private Limited Company, the complainant’s company was told that it would get 50 percent profit on investing the amount as a promoter / investor in the State of Jharkhand. In this regard, an agreement was also executed between the complainant company and Niloy Syndicate Private Limited. Thereafter, the complainant company transferred sums of money time to time totaling Rs. 1,50,00,000/- to Niloy Syndicate. In relation to this, Manish Kumar Munda, Director of Niloy Syndicate Private Limited Company, assured that the amount of profit will be given to the complainant company on time and the complainant company believed him. But no profit was paid to the complainant. Instead, Manish Kumar Munda asked the complainant company to invest more money. The complainant started doubting his intentions, tried to find out the reality and came to know that in fact there was no manufacturing unit of Manish Kumar Munda's liquor in the name of Niloy Syndicate Private Limited Company, nor has any brand been registered by him in the State of Maharashtra, nor was any such business being done by them. The complainant also came to know that the bill shown by Manish Kumar Munda, Director of Niloy Syndicate Pvt Ltd Company, for the supply of liquor after taking money from our company, was fake, false and fabricate. In this way Manish Kumar Munda, Director of Niloy Syndicate Pvt Ltd company conspired to misappropriate the complaiant company’s amount of Rs.1,50,00,000/- by obtaining/ forging fake documents.

14. It would be seen that as per complainant’s own allegations in the FIR, an agreement was executed between the complainant and the accused companies, for sharing the latter’s profits, upon complainant’s investing money therein. The complainant’s grievance is that it had invested the amount of Rs. 1.[5] crore in the company of the accused but no share of it’s profit has been given by the accused. There is nothing brought out in the FIR to show that at or before the time of executing of the profit sharing agreement, the intention of the accused was dishonest and/or that they had no intention to share their company’s profit with the complainant.

15. The petitioners’ averments, inter alia, are that as per the business promotion agreement dated 08.10.2021 entered into between the parties, investment of Rs.2,50,000,00/- (Rupees Two Crores Fifty lakhs only) each by the respective parties was conceived. Petitioner has so far received Rs.1,50,000,00/- (Rupees One crore Fifty Lakhs only) from the promoter in different instalments and the petitioner himself has invested approx. Rs. 3,00,000,00/- (Rupees Three Crores only) under the agreement. These factual averments have not been disputed/refuted on behalf of the complainant. It shows that the complainant’s investment of Rupees One crore Fifty Lakhs is only a part of the promised investment of Rs. 2.[5] crore in the business to entitle him to a share of the business profits. Further, it is not shown if at all since the investment of the complainant’s amount in the business of Niloy Syndicate Private Limited Company till the lodging of the FIR, the company had earned any profits. Merely because the complainant has not been paid any amount by way of his share in the profits of the company of the accused, it cannot be readily inferred or presumed firstly that at or before the time of the execution of business promotion agreement dated 08.10.2021 entered into between the parties, or the investment of complainant’s money in their business, the intention of the accused was dishonest and/or they had no intention to share their company’s profit with the complainant.

16. Further, it is not even alleged, let alone shown, that since the investment of the complainant’s amount in the business of Niloy Syndicate Private Limited Company till the lodging of the FIR, the company had actually earned any profits. This being so, it cannot be said that the accused failed to share the business profits with the complainant let alone holding that at or before the time of executing of the profit sharing agreement and the investment of money by the complainant in their business, the intention of the accused was dishonest and/or they had no intention to share the company’s business profit with the complainant. It follows that the allegations in the FIR do not make out an offence under section 420 IPC attributed to the accused.

17. Section 405 defines the offence of criminal breach of trust, punishable under section 406 IPC. It would be seen from their bare reading that the sine qua non for applicability of section 406 IPC, inter alia, is that the beneficial interest in the property in respect of which the offence is alleged to have been committed, continues to vest in the person by whom the entrustment was made i.e. in same person and not the accused.

18. In the instant case, the complainant had invested money in the company of the accused pursuant to an agreement for profit sharing. Upon it’s investment by the complainant, the beneficial interest in that money had passed over to the accused/their company. In other words, it became the money of the accused company. Thereafter, the complainant’s status was only that of a creditor while the accused became his debtor qua the amount invested. It cannot, therefore, be said that the beneficial interest in the money in respect of which the offence is alleged to have been committed, continued to vest in the complainant. Thus, the said essential ingredient for the applicability of section 405/406 IPC is lacking in the FIR. That apart, on the same set of factual allegations, two mutually inconsistent offences - under section 406 IPC for criminal breach of trust and also under section 420 IPC for cheating - have been invoked against the petitioner shows that the complainant is approbating and reprobating in the same breath.

19. The offence of cheating is defined in Section 415 IPC. While Section 405 envisages entrustment of property. Section 415 ibid envisages essential ingredient of inducement, thus entrustment and inducement cannot co-exist at the same time as the ingredients of both the sections are completely antithetical.

20. The very fact that on the same set of factual allegations, two mutually inconsistent offences - under section 406 IPC for criminal breach of trust and also under section 420 IPC for cheating - have been invoked against the petitioner shows that the complainant is approbating and reprobating in the same breath. Be that as it may, in somewhat similar circumstances, while being puisne judge in Rajasthan High Court, I had an occasion to render a judgment titled Rana Ram V. State of Rajasthan & Anr.: SB Criminal Misc.(Pet.) No. 4893/2024 the relevant paragraphs of that judgement are reproduced hereunder:

Section 316(1) in the Bhartiya Nyaya Sanhita, 2023 and reads as under:- ―316. Criminal breach of trust. – (1) Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such trust, or wilfully suffers any other person so to do, commits criminal breach of trust.‖

15. Let us break down the ingredients of the section as below for its better understanding:- (a). Entrustment: The individual must be entrusted with property or some dominion over the property. This entrustment can be explicit (direct) or implied through legal agreement or duties. (b). Dishonest Misappropriation or Use The individual must dishonestly misappropriate, convert, or use the entrusted property for their own benefit. This includes any form of misuse that is contrary to law, the terms of the trust or agreement. (c). Violation of Directions or Contracts: The misuse must be in violation of specific directions of law that outline how the trust is to be executed or contrary to any legal contract—whether express (clearly stated) or implied (understood without direct expression). (d). Wilful Suffering: If the individual knowingly allows another person to misuse the property in violation of the trust, this also constitutes a breach.

15.1. It would be seen that the sine qua non for the applicability of the section, supra, is that the beneficial interest in the property in respect of which the offence is alleged to have been committed, continues to vest in the person by whom the entrustment was made i.e. in same person and not the accused. Examples of Criminal Breach of Trust are: - An employee entrusted with company funds who uses them for personal expenses. - A trustee of a property who sells the property against the terms of the trust. - A warehouse keeper who disposes of goods stored under his care without the owner's permission.

15.2. The prosecution thus must prove the elements of entrustment and dishonest breach of terms of entrustment to secure a conviction. This is essential for discharge of fiduciary responsibilities and ensuring that entrusted property is handled as per law and intended by the terms of the trust or legal agreement.

16. Allegations in the instant FIR show that the complainant had sold goods to Ram Kishore Jhanwar and/or his son Narendra Jhanwar. This is further clear from the complainant’s allegations in the FIR that when he requested payment for the total amount of Rs. 25,54,807/- for both transactions, instead of paying the due amount, the accused blocked (obviously Ram Kishore Jhanwar and/or his son Narendra Jhanwar) his phone number.

16. Allegations in the instant FIR show that the complainant had sold goods to Ram Kishore Jhanwar and/or his son Narendra Jhanwar. This is further clear from the complainant’s allegations in the FIR that when he requested payment for the total amount of Rs. 25,54,807/- for both transactions, instead of paying the due amount, the accused blocked (obviously Ram Kishore Jhanwar and/or his son Narendra Jhanwar) his phone number.

17. These allegations leveled by the complainant himself in the FIR run contrary to and demolish the submission of his learned counsel that the complainant had also sold the said goods to Rana Ram, the petitioner herein. Thus, the petitioner is equally complicit as he is claiming the same without paying the sale proceeds to the original seller i.e. the complainant. It is rather intriguing that a very contradictory stand has been taken by the petitioner in the FIR vis-à-vis submissions made in the Court.

18. Either way, it seems to be a simple commercial transaction of sale of goods by the complainant to Narendra Kumar Jhanwar. At the time of sale itself, the property (ownership) in the sold goods had passed on to the purchaser (Narendra Kumar Jhanwar) and no longer remained with the complainant or in some person other than Narendra Kumar Jhanwar accused.

19. To my mind, the allegations in the FIR herein, taken at their face value, do not disclose the commission of offence of criminal breach of trust defined in section 405 of IPC punishable under section 406 IPC.

20. As found above, it was a simple commercial transaction of salepurchase of goods; at the time of sale itself, the property/beneficial interest in the sold goods had passed on to the purchaser (Narendra Jhanwar) and no longer remained with the complainant or in some person other than the accused. The present petitioner has asserted that he had purchased the goods from said Narendra Jhanwar, had made the full and final payment for the said Guar Gum and, a sale receipt was issued by Narendra Kumar Jhanwar in favor of the petitioner on 14.06.2024 confirming the transaction.

21. Adverting now to section 420 IPC, a sine qua non for attracting criminal liability there under is the element of cheating and, thereby, dishonestly inducing the person deceived to deliver any property to any person. The present case being a simple sale of goods and its delivery by the complainant to Narendra Jhanwar, it cannot be said that the complainant was cheated and thereby dishonestly induced by the accused to deliver the goods to the latter. In my opinion, the allegations in the FIR also do not even disclose the commission of an offence under section 420 IPC.

22. There is yet another aspect of the case. The offences under Section 405 IPC and section 420 IPC are mutually anti-thetical and cannot stand together. In the case of Section 405 IPC, the property is delivered by the owner in trust to the accused and there is no element of dishonesty on the part of the accused at the inception i.e. before or time of entrustment of the property to him, but the element of dishonesty of the accused develops/arises subsequent to the entrustment of the property to him. As against this, for applicability of section 420, it is necessary to show that element of dishonesty of the accused existed prior to and/or at the time of the delivery of the property to him i.e., at the inception itself.

22.1. Both Sections 405 and 420 of the IPC operate in distinctly different domains i.e. entrustment versus inducement. Section 405 deals with entrustment, where the victim places trust in the accused by entrusting property, and any breach of this trust by the accused directly hurts the victim. In contrast, Section 420 pertains to inducement, where the accused actively approaches the victim, often through misrepresentation or deception, leading the victim to mistakenly believe in his honesty and part with their property under false pretenses/inducement. Therefore, entrustment centers on a breach of existing trust, while inducement involves deceit from the outset.

22.2. For ready reference, Section 420 IPC is also reproduced hereinbelow:-

22.3. The provision, ibid, thus envisages that the act of cheating where a person deceives someone ought to be such, whereby the deceived person is induced to: Deliver any property to another person.  Make, alter, or destroy the whole or any part of a valuable  security. Modify or destroy anything signed, sealed, and capable of  being converted into a valuable security. The provision thus highlights the serious consequences of using deceit to manipulate others into parting with property or altering valuable documents.

23. In the aforesaid backdrop, it is obvious that the report lodged with the police does not disclose the commission of the offences either under section 406 or 420 IPC or any other cognizable offence.

24. Moreover, before registering the FIR, the conditions/parameters laid down either in the case of Lalita Kumari (supra) were not complied with. Firstly, the allegations in report lodged with the police, taken at their face value, did not disclose the commission of an offence of criminal breach of trust defined in section 405 of IPC punishable under section 406 IPC and section 420 IPC or any other cognizable offence. Secondly, the alleged offences arose out of purely commercial transactions of sale and purchase of goods. Yet, before registering an FIR, any preliminary inquiry was not at all conducted, to ascertain whether or not a cognizable offence was disclosed. Had the needful been done, obviously the result would have been different.

25. Be that as it may, it is for the complainant to institute appropriate civil proceedings for recovering his claimed money from the debtor and not for the police officials to substitute themselves as his civil recovery agents under the garb of doing the investigation by misusing their khaki uniform.”

21. I hold the same view in the present case as well, as expressed in Rana Ram supra.

22. For reasons stated earlier, I am of the opinion that the dispute inter se the complainant and the accused is purely of a civil nature. It has arisen out of the profit sharing agreement, pursuant to which the complainant had invested money with the accused company. His perceived grievance is over non-payment of share of the claimed profit and the refund of the money paid by him. However, by skilful and astute framing of the complaint, the civil dispute has been given the colour of criminality and the impugned FIR has been registered to armtwist and pressurise the petitioner to recover money and/or settle the civil dispute on complainant’s terms. The registration of the FIR is an utter abuse of the process of law. Continuance of the consequential proceedings would cause unnecessary further hardship, harassment and humiliation to the petitioners.

23. As an upshot, the FIR No. 167/2022 under Sections 406/420 of the IPC registered at Police Station IGI Airport along with all the criminal proceedings which may have arisen therefrom against the petitioners are quashed, with liberty to the complainant to seek remedy in civil law including arbitration, in accordance with law. ARUN MONGA, J AUGUST 8, 2025