Gujarat High Court
Thakor Jigarji Ishvarji vs State Of Gujarat on 27 July, 2026
NEUTRAL CITATION
R/CR.MA/1297/2023 JUDGMENT DATED: 27/07/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 1297 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE P. M. RAVAL
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Approved for Reporting Yes No
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THAKOR JIGARJI ISHVARJI & ORS.
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR PRATIK B BAROT(3711) for the Applicant(s) No.
1,10,11,2,3,4,5,6,7,8,9
DS AFF.NOT FILED (N) for the Respondent(s) No. 2
K.M. ANTANI, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MR.JUSTICE P. M. RAVAL
Date : 27/07/2026
JUDGMENT
1. Rule fixed forthwith. Learned APP waives service of rule on
behalf of the respondent – State.
2. The applicants have invoked the inherent jurisdiction of this
Court under Section 482 of the Code of Criminal Procedure,
1973, seeking quashing and setting aside of the impugned FIR
being C.R. No. 11206075220452 of 2022 registered with
Visnagar Town Police Station, District Mehsana, for the offences
punishable under Sections 406, 420, 465, 467, 468, 471, 474,
114 and 120B of the Indian Penal Code, Sections 13, 14, 19 and
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23(1)(b), (c), (d), (e), (f), (g) and (i) of the Securities Contracts
(Regulation) Act, 1956, and Section 66D of the Information
Technology Act, along with all consequential proceedings arising
therefrom.
3. The brief facts as narrated in the FIR are to the effect that:
(3.1) Respondent No.2 – original first informant as in
capacity of Assistant Sub-inspector serving with Visnagar Town
Police Station, upon a secret information received by them that
applicant No.1 – Thakor Jigarji Ishvarji by calling the persons in
the house of her sister, namely, Thakor Komalben Ishvarji, and
by giving them the mobiles as well as dummy sim cards and
keeping a search on the market plus application downloaded in
his mobile, applicant No.1 was giving tips for earning more
money without procuring any valid licence from the Stock
Market, all the applicants are illegally indulged into a “dabba
trading” in such premises as also are maintaining records to
that effect, soon thereafter, after a search warrant was procured,
raid was carried out at the said premises wherein the present
applicants were found and arrested from the scene of offence
with mobile phones, sim cards, account books, which resulted
into lodgment of the impugned FIR as against twelve arrested
accused as along with one Kripalsinh, in nutshell with a case
that with the help of market plus application downloaded, a
financial loss is caused to Government of India and SEBI by
artificially shooting the prizes of shares and thereby deriving
monetary gain out of such illegality.
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4. Learned advocate Mr. Ravi Mandaliya, appearing on behalf
of learned advocate Mr. Pratik B. Barot for the applicants,
submitted that, as per the prosecution case, the applicants are
alleged to have been involved in dubba trading. It is alleged that
the raiding party apprehended the applicants at the house of the
sister of applicant No.1 and recovered certain articles, including
mobile phones, account books and other incriminating material.
However, even if the allegations contained in the FIR are
accepted in their entirety, no offence under Sections 406 and
420 of the Indian Penal Code is made out. It was submitted that
there was neither any entrustment of property nor any dishonest
misappropriation so as to attract the ingredients of Section 405
IPC. Likewise, the essential ingredients of the offence of
cheating, namely dishonest or fraudulent inducement, are
conspicuously absent. Hence, no case is made out against the
applicants under Sections 406 and 420 IPC.
5. Learned advocate further submitted that, in view of Section
26 of the Securities Contracts (Regulation) Act, 1956, no Court
can take cognizance of any offence under the said Act except
upon a complaint made by the competent authority as
contemplated under Section 2(d) of the Code of Criminal
Procedure, 1973. It was contended that the present proceedings
have been initiated on the basis of an FIR lodged by the
investigating agency and not on a complaint by the competent
authority. Therefore, in view of the statutory bar contained in
Section 26 of the Securities Contracts (Regulation) Act, 1956,
the impugned FIR is without jurisdiction and deserves to be
quashed and set aside. It was, accordingly, urged that the FIR
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and all consequential proceedings arising therefrom be quashed
and set aside.
6. Per contra, learned APP submitted that, insofar as the bar
under Section 26 of the Securities Contracts (Regulation) Act,
1956 is concerned, the legal position is well settled. However, he
relied upon the statements of various witnesses, including those
in whose names the dummy SIM cards were procured, to
contend that the ingredients of the offences under the IPC are
still made out. It was, therefore, argued that the proceedings,
insofar as they relate to the offences under the IPC, ought not to
be quashed.
7. Heard learned advocates for the respective parties.
7.1 Section 26 of the Securities Contracts (Regulation) Act,
1956, reads thus:
“26. Cognizance of offences.–
(1) No Court shall take cognizance of any offence
punishable under this Act or any rules, regulations or
bye-laws made thereunder, save on a complaint made
by the Central Government or the State Government or
the Securities and Exchange Board of India or a
recognized Stock Exchange or by any person.
(2) No Court inferior to that of a Court of Session shall
try any offence punishable under this Act.”
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7.2 A plain reading of Section 26 of the Securities
Contracts (Regulation) Act, 1956 would indicate that no Court
can take cognizance of any offence punishable under the said
Act or the rules, regulations or bye-laws framed thereunder,
except upon a complaint made by the Central Government, the
State Government, the Securities and Exchange Board of India,
a recognized Stock Exchange, or any other person authorized
under the provision.
7.3 Even if it is assumed for the moment that the
respondent No. 2 herein would fall within the ambit of ‘any
person’. The issue which falls for consideration of this Court is,
whether the Court before whom the charge-sheet would be filed,
can take cognizance of the offence. The word ‘complaint’
figuring under Section 26 of the Act means, a complaint in
writing before the Court as defined under Section 2(d) of the
Code of Criminal Procedure, 1973. The Court is conscious of
the fact that Section 25 makes the offence under Section 23 of
the Act a cognizable offence. Since Section 23 of the Act is a
cognizable offence, police would definitely have power to
investigate. In the considered opinion of the Court, the Sessions
Court will not be able to take cognizance on the police report in
view of the specific bar contained in Section 26 of the Act. The
same is the position with Section 26 of the Securities and
Exchange Board of India Act, 1992.
7.4 The law in this regard is well settled. Although the
police has power to investigate the offence alleged against the
applicants and if charge-sheet is filed, the Court will not be able
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to take cognizance in view of the specific bar. The investigation
carried out by the police can be used for the purpose of filing a
complaint in writing before the appropriate court. To be precise,
whatever materials have been collected by the Investigating
Officer could be used by the authority for the purpose of filing a
complaint before the competent court.
7.5 Regarding the provisions under the Securities Contract
(Regulation) Act, upon considering Section 26 of the Act, it is
clear that the trial court cannot taken cognizance of the
offenses based on a police report. Section 26 of the Act states:
(1) No court shall take cognizance of any offense punishable
under this Act, or any rules, regulations, or bye-laws made
thereunder, except on a complaint made by the Central
Government, the State Government, the Securities and
Exchange Board of India, a recognized stock exchange, or any
other authorized person. (2) No court inferior to that of a Court
of Session shall try any offense punishable under this Act.
7.6 In view of the above, a plain reading of Section 26 of
the Act suggests that no court can take cognizance of any
offense punishable under the Act except on a complaint made
by the Central Government, the State Government, the
Securities and Exchange Board of India, a recognized stock
exchange, or any authorized person. Therefore, no case is made
out under the provisions of the Securities Contract (Regulation)
Act.
8. Coming to the second contention, the Court is of the view
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that even if the entire case put up by the prosecution is
accepted as true, none of the ingredients to constitute the
offence of criminal breach of trust or cheating are spelt out
inasmuch as there is no direct evidence or material to suggest
that there was any entrustment of property. The allegations in
the complaint is of engaging in fraud and misconduct, but
nowhere is it alleged that present applicants pocketed money by
causing a loss to anyone or obtaining wrongful gain. Even if
this fact is accepted, it constitutes merely a breach of the
Securities Contract (Regulation) Act, which has been wrongly
characterized as criminal breach of trust. Criminal breach of
trust, as defined in Section 405 of the IPC, is as follows:
“Whoever, being entrusted with property, or having
dominion over property, dishonestly misappropriates
or converts that property to their own use, 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 they have made
concerning the discharge of such trust, or willfully
allows any other person to do so, commits ‘criminal
breach of trust.”
8.1 In view of the above, it is clear that the applicants have
neither caused any financial loss to anyone nor obtained any
wrongful gain. The investigating agency has also failed to
produce any concrete documents showing financial loss to
anyone in support of his argument. Even when asked on what
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grounds the criminal breach of trust is alleged to have been
committed by the applicants, the respondent remained silent.
Merely based on the complaint, a case under the provisions of
criminal breach of trust was registered, but the investigating
agency has not produced any evidence to support this
assertion. Therefore, this does not constitute criminal breach of
trust, and Section 406 of the IPC is not applicable.
8.2 Further, it is trite that Sections 406 and 420 of the IPC
cannot be run together. In this regard, the Court deems it
proper to refer to the judgment passed by the Hon’ble Apex
Court in the case of Delhi Race Club (1940) Ltd. vs State of
Uttar Pradesh, passed in Criminal Appeal No. 3114 Of 2024,
wherein the Court observed that criminal breach of trust under
Section 406 of the Indian Penal Code (IPC) and cheating under
Section 420 of the IPC are distinct offenses and cannot co-exist.
The Court also observed that if the complainant had a claim for
a specific amount, they should have filed a civil suit instead of
filing a criminal complaint.
8.3 Moreover, so far as offence under Section 420 of the
IPC is concerned, it is appropriate to refer to the decision of the
Hon’ble Apex Court in the case of Rekha Jain vs. The State
of Karnataka & Anr. reported in 2022 LiveLaw (SC) 468,
wherein the Hon’ble Supreme Court held that, to make out a
case against a person for the offence under Section 420 of IPC,
there must be a dishonest inducement to deceive a person to
deliver any property to any other person. Further, in the case of
Sarabjit Kaur vs. State of Punjab & Anr. reported in
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(2023)5 SCC 360 has held in paragraph No.13 as follows:
“13. A breach of contract does not give rise to criminal
prosecution for cheating unless fraudulent or dishonest
intention is shown right at the beginning of the
transaction. Merely on the allegation of failure to keep
up promise will not be enough to initiate criminal
proceedings. From the facts available on record, it is
evident that the respondent No.2 had improved his
case ever since the first complaint was filed in which
there were no allegations against the appellant rather
it was only against the property dealers which was in
subsequent complaints that the name of the appellant
was mentioned. On the first complaint, the only request
was for return of the amount paid by the respondent
No.2. When the offence was made out on the basis of
the first complaint, the second complaint was filed with
improved version making allegations against the
appellant as well which was not there in the earlier
complaint. The entire idea seems to be to convert a civil
dispute into criminal and put pressure on the appellant
for return of the amount allegedly paid. The criminal
Courts are not meant to be used for settling scores or
pressurize parties to settle civil disputes. Wherever
ingredients of criminal offences are made out, criminal
courts have to take cognizance. The complaint in
question on the basis of which F.I.R. was registered
was filed nearly three years after the last date fixed for
registration of the sale deed. Allowing the proceedingsPage 9 of 12
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to continue would be an abuse of process of the Court.”
9. In the case of State of Haryana v. Bhajan Lal, reported in
1992 Supp (1) SCC 335, the Apex Court has set out the
categories of cases in which the inherent power under Section
482 CrPC can be exercised and held in para 102 as under:
“102. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and of the
principles of law enunciated by this Court in a series of
decisions relating to the exercise of the extraordinary power
under Art. 226 or the inherent powers under Section 482 of
the Code which we have extracted and reproduced above, we
give the following categories of cases by way of illustration
wherein such power could be exercised either to prevent abuse
of the process of any court or otherwise to secure the ends of
justice, though it may not be possible to lay down any precise,
clearly defined and sufficiently channelised and inflexible
guidelines or rigid formulae and to give an exhaustive list of
myriad kinds of cases wherein such power should be
exercised :
(1) Where the allegations made in the first information
report or the complaint, even if they are taken at their
face value and accepted in their entirety do not prima
facie constitute any offence or make out a case against
the accused.
(2) Where the allegations in the first information report
and other materials, if any, accompanying the FIR do
not disclose a cognizable offence, justifying anPage 10 of 12
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investigation by police officers under Section 156(1) of
the Code except under an order of a Magistrate within
the purview of Section 155(2) of the Code.
(3) Where the uncontroverted allegations made in the FIR
or complaint and the evidence collected in support of the
same do not disclose the commission of any offence and
make out a case against the accused.
(4) Where, the allegations in the FIR do not constitute a
cognizable offence but constitute only a noncognizable
offence, no investigation is permitted by a police officer
without an order of a Magistrate as contemplated under
sec. 155(2) of the Code.
(5) Where the allegations made in the FIR or complaint
are so absurd and inherently improbable on the basis of
which no prudent person can ever reach a just
conclusion that there is sufficient ground for proceeding
against the accused.
(6) Where there is an express legal bar engrafted in any
of the provisions of the Code or the concerned Act (under
which a criminal proceeding is instituted) to the
institution and continuance of the proceedings and/or
where there is a specific provision in the Code or the
concerned Act, providing efficacious redress for the
grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly attended
with mala fide and/or where the proceeding is
maliciously instituted with an ulterior motive for
wreaking vengeance on the accused and with a view to
spite him due to private and personal grudge.”
9.1 For the aforesaid discussion, and in view of the settled legal
position, the Court is of the opinion that the case on hand clearly
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falls within some of the parameters laid down in the aforesaid
decision, which would required indulgence of this Court.
10. In the result, the present application succeeds and is
allowed in part. The impugned FIR being C.R. No.
11206075220452 of 2022 registered with Visnagar Town Police
Station, District Mehsana, for the offences punishable under
Sections 406 and 420 of the Indian Penal Code and Sections 13,
14, 19 and 23(1)(b), (c), (d), (e), (f), (g) and (i) of the Securities
Contracts (Regulation) Act, 1956 is only hereby quashed and set
aside qua the present applicants, along with all consequential
proceedings arising therefrom. Rule is made absolute accordingly.
11. It is made clear that, insofar as the remaining offences, the
investigating agency may proceed with the investigation and file
the charge-sheet in accordance with law.
12. It is clarified that it shall be open for the authority concerned
to initiate appropriate proceedings afresh against the writ
applicants herein, in accordance with law.
(P. M. RAVAL, J)
MOHD SAIF ULLAH
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