'Criminal Law Cannot Be Used To Recover Business Dues': Calcutta High Court Quashes Cheating, Breach Of Trust Case

The Calcutta High Court has reiterated that mere non-payment of business dues or breach of contractual obligations cannot be dressed up as offences of cheating or criminal breach of trust, and that criminal proceedings cannot be used as a pressure tactic for recovery of money. Quashing an FIR against a small poultry feed trader, the Court held that in the absence of dishonest intention at the inception of the transaction, offences under Sections 406 and 420 IPC are not made out.

Justice Ajay Kumar Gupta allowed a petition under Section 482 CrPC and set aside the criminal proceedings pending before the Additional Chief Judicial Magistrate, Arambagh, holding that the dispute between the parties was “purely civil in nature” and continuation of prosecution would amount to abuse of the process of law.

The petitioner, who runs a small poultry feed business under the name “Loknath Feed Centre”, had been purchasing feed on credit from the complainant supplier since 2012. Payments were regularly made through cash, cheque and bank transfers. Records showed that between April 2013 and March 2014 alone, transactions exceeded ₹1 crore, of which over ₹75 lakh had been paid, and the supplier had even granted a rebate on the outstanding amount. Business dealings continued till July 2016.

The dispute arose when the supplier alleged that nearly ₹40 lakh remained unpaid for over a year and lodged a police complaint accusing the petitioner of cheating and criminal breach of trust. Based on the complaint, Arambagh Police registered an FIR under Sections 406 and 420 IPC and filed a charge sheet.

Challenging the proceedings, the petitioner argued that the transactions were purely commercial and any outstanding dues could only be recovered through a civil suit. It was contended that the complaint was a misuse of criminal law to coerce payment and lacked the essential ingredients of cheating or breach of trust.

Agreeing with the petitioner, the Court noted that there was “nowhere stated that at the very inception there was any intention on behalf of the petitioner to cheat,” which is a condition precedent for an offence under Section 420 IPC. The Court observed that the parties had a long-standing business relationship, regular payments were made, and the continuation of dealings belied any allegation of fraudulent or dishonest inducement.

The Bench emphasised that “simply because the amounts have not been paid or are outstanding will not make it a case of wilful or dishonest inducement or deception,” and held that at best the dispute may give rise to civil liability. The complaint, the Court said, failed to disclose the essential ingredients of offences under Sections 406 or 420 IPC.

Relying on Supreme Court precedents including State of Kerala v. A. Pareed Pillai, Haridaya Ranjan Prasad Verma v. State of Bihar, and Hari Prasad Chamaria v. Bishun Kumar Surekha, the Court reiterated that dishonest intention must exist from the very beginning of the transaction. A subsequent failure to pay money or honour commitments cannot retrospectively convert a civil dispute into a criminal offence.

Holding that allowing the prosecution to continue would amount to criminalising a contractual dispute, the Court concluded that the proceedings constituted an abuse of process. Accordingly, it quashed the FIR and the entire criminal case against the petitioner.

The criminal revision was thus allowed, and all connected applications were disposed of.

Case: Pradyut Samanta v. State of West Bengal & Anr.

Case No.: C.R.R. 933 of 2017

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