Gujarat High Court
Viral Mukund Shah vs State Of Gujarat on 8 July, 2026
NEUTRAL CITATION
R/CR.MA/4536/2014 JUDGMENT DATED: 08/07/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 4536 of 2014
With
CRIMINAL MISC.APPLICATION (DIRECTION) NO. 1 of 2026
In R/CRIMINAL MISC.APPLICATION NO. 4536 of 2014
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE P. M. RAVAL
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Approved for Reporting Yes No
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VIRAL MUKUND SHAH
Versus
STATE OF GUJARAT & ANR.
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Appearance:
MR TEJAS BAROT, SR ADVOCATE with APURVA R KAPADIA(5012)
for the Applicant(s) No. 1
MR ROHAN SHAH, APP for the Applicant(s) No. 1
MR SUNIL S JOSHI(2925) for the Respondent(s) No. 2
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CORAM:HONOURABLE MR.JUSTICE P. M. RAVAL
Date : 08/07/2026
JUDGMENT
1. The Hon’ble Supreme Court vide order dated 13.01.2026
passed in Criminal Appeal No. 293 of 2026 (@ SLP (Crl.) No.
2125/2024) set aside the judgment and order dated 15.09.2023
passed by the Coordinate bench of this Court, and remanded the
matter back for fresh consideration after duly hearing the parties
(more particularly the informant) of the FIR being I-C.R. No.17 of
2014 dated 14.03.2014, lodged before the Vasai Police Station,
Mehsana for the offences punishable under Sections 406, 420 &
114 of the Indian Penal Code, 1860. Accordingly, the matter is
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heard afresh.
2. The present application has been filed by the applicant –
original accused under Section 482 of the Code of Criminal
Procedure, 1973 (CrPC) seeking quashing and setting aside the
above-stated FIR.
3. The facts and circumstances giving rise to the filing of the
present application are such that on 14.11.2005, a tripartite
Agreement was entered between M/s. Gyscoal Alloys Limited,
M/s. MSTC Limited, Calcutta and M/s. Transafe Services
Limited, whereby M/s. Gyscoal Alloys Limited had shown the
willingness to procure the material being H.S.S. and Stainless
Steel from Kandla and Mundra Port from the respondent No. 2
-Company. As per the tripartite Agreement, the material sold by
the respondent No. 2 – Company to the Company of the present
applicant was required to be stored at a specified place to be
provided by third party to the agreement viz. M/s. Transafe
Services Limited. Pursuant to the said agreement, on
17.07.2010, a material of 477.610 Metric Tons worth
Rs.9,57,00,000/- was sold by the respondent No. 2 – Company
to the Company of the present applicant. Out of which, sum of
Rs.1,87,00,000/- was paid by the Company of the present
applicant and sum Rs.7,70,00,000/- was outstanding.
3.1 On 27.07.2012, the officers of the respondent No. 2 –
Company visited the Company of the present applicant at
Village: Ubkhal, Tal: Vijapur and found that the goods sold by
the respondent No. 2 – Company to the Company of the present
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applicant were not present and no proper information as regard
the goods was received by them. On 27.07.2012 itself one Mr.
Suryakant, Branch Manager, Vadodara intimated to the officer
in-charge Vasai Police Station with regards to illegal
removal/appropriation of pledged materials by M/s. Gyscoal
Alloys Pvt. Ltd and M/s. Transafe Services Ltd from the
stockyard situated at Ubhkal, Kukurwada, Taluka Vijapur,
District Mehsana with an intention to cheat M/s. MSTC Limited.
3.2 The present FIR came to be lodged with the aforesaid facts
by respondent No. 2 herein before the Vasai Police Station, Dist:
Mehsana and on the basis of the same, an offence punishable
under Sections 406, 420 and 114 of the IPC came to be
registered against the present applicant on 14.03.2014. Hence,
the present application.
4. Learned Senior Counsel for the applicant has submitted
that tripartite Agreement was entered into between the parties,
as mentioned herein above and on the basis of the said tripartite
Agreement; the said goods were procured by the Company of the
present applicant from the respondent No. 2. In the FIR itself, it
has been stated on the basis of the said tripartite Agreement, the
Company of the present applicant regularly used to procure the
material from the respondent No. 2 and the Company of the
present applicant used to make payment for the goods procured
from the respondent No. 2 within due course of time.
5. Learned Senior Counsel for the applicant has submitted
that the tripartite Agreement in question contained an arbitration
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clause and on the basis of the same, the respondent No. 2
-Company has already invoked the proceedings under the
Arbitration and Conciliation Act, 1996 against the Company of
the present applicant for resolving the dispute in question.
6. Learned Senior Counsel for the applicant has submitted
that the respondent No. 2 – Company had also deposited the
cheques issued by the Company of the present applicant towards
security for recovering the amount involved in the present
transaction and since the said cheques got dishonored, the
respondent No. 2 – Company has also lodged a complaint against
the Company of the present applicant under the provisions of
Section 138 of the Negotiable Instruments Act. Thus, the first
informant has already taken recourse to the other remedies
available to it for recovery of the amount in question and since
respondent No. 2 could not yield the desired result in the
aforesaid proceedings, the present FIR has been lodged with an
ulterior motive to pressurize the present applicant.
7. Learned Senior Counsel for the applicant has submitted
that the tripartite Agreement on the basis of which the Company
of the present applicant had procured goods from respondent
No. 2, was entered into in the Year 2006, the goods were
procured by the Company of the present applicant in the
Year-2010 and the present FIR has been lodged in the
Year-2014. Thus, the FIR in question has been lodged by the
present applicant after considerably long time. The delay caused
in lodging the FIR has not been explained satisfactorily by the
first informant, and therefore, the said delay would vitiate the
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entire proceedings.
7.1 Learned Senior Counsel for the applicant has submitted
that considering the fact that the FIR has been lodged after the
period of more than 4 years, would indicate that the same has
been lodged as an afterthought and with an ulterior motive.
7.2 Learned Senior Counsel for the applicant has submitted
that the Company of the present applicant was never entrusted
with any property nor was there any intention on the part of the
Company of the present applicant to cheat the first informant
from the very inception and therefore, the ingredients for the
offence under Sections 406 and 420 of the IPC are not made out.
Therefore, he submitted to allow the present application and
quash and set aside the impugned FIR.
8. Learned Senior Counsel for the applicant has relied upon
the following judgments in support of his submissions:-
i) Kishan Singh (Dead) Through LRS. Vs. Gurpal
Singh & Ors. Reported in (2010) 8 SCC 775.
ii) Manoj Kumar Sharma & Ors. Vs. State of
Chhattisgarh & Anr. Reported in (2016) 9 SCC 1.
iii) Vinod Natesan Vs. State of Kerala reported in
2019(2) SCC 401.
iv) R.K. Vijayasarathy Vs. Sudha Seetharam
reported in 2019 (16) SCC 739.
v) Deepak Gaba & Ors. Vs. State of Uttar Pradesh
reported in 2023 (2) SCC 423.
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vi) Bhikhubhai Govindbhai Patel and Anr. Vs. State
of Gujarat 2026 SCC OnLine SC 915.
vii) Delhi Race Club (1940) Limited and Others Vs.
State of Uttar Pradesh and Another (2024) 10 SCC
690.
9. Learned Senior Counsel Mr.Tejas Barot, assisted by Mr.
Aditya Pandya, submitted that a plain reading of the complaint
dated 27.07.2012 lodged before the Officer-in-Charge, Vasai
Police Station, reveals allegations of dishonest misappropriation
of the pledged goods belonging to the informant , MSTC Limited,
by the applicant in connivance with GAL Transafe, with an
intention to defraud the informant of its legitimate goods and
money. It was submitted that the dishonest intention of the
applicant is evident from the complaint itself. Merely because the
Investigating Officer did not act upon the complaint dated
27.07.2012 and the FIR came to be registered subsequently on
14.03.2014, it cannot be said that there was any delay on the
part of the informant in setting the criminal law into motion.
Immediately upon discovering, during the inspection of the
stockyard at Ubhkal, Kukarwada, Taluka Vijapur, District
Mehsana that the pledged goods were missing from the
applicant’s custody the informant had informed the concerned
police station by a written complaint/communication dated
27.07.2012.
10. Learned Senior Counsel further submitted that under the
tripartite Agreement, both Transafe and GAL were custodians of
the pledged goods on behalf of the informant . Upon noticing
that the pledged goods were missing during the inspection on
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27.07.2012, the matter was immediately reported to the police. It
was, therefore, contended that the informant had acted promptly
and cannot be accused of inaction.
11. Inviting the attention of the Court to Clauses 1(a) and 15.8
of the tripartite Agreement and Clauses 5.2 and 9 of the
Memorandum of Agreement between MSTC and GAL, learned
Senior Counsel submitted that the goods remained under the
joint custody of Transafe and the applicant and could not have
been removed from the stockyard without prior authorization
from MSTC and receipt of the requisite payment. Neither GAL
nor Transafe was authorized to take delivery or remove the
pledged goods without MSTC’s prior approval. The unauthorized
removal of the goods, therefore, constituted a clear breach of the
contractual arrangements. It was further submitted that the
dishonour of the cheques issued by the applicant clearly
indicates that, from the very inception, the applicant had no
intention to honour its obligations and had entered into the
transaction with the sole intention of cheating and defrauding
the informant. Transafe, according to the learned Senior
Counsel, actively participated in the transaction and was a party
to the criminal conspiracy.
12. Learned Senior Counsel further submitted that merely
because the informant had initiated proceedings under Section
138 of the Negotiable Instruments Act, arbitration proceedings,
and winding-up proceedings, it cannot be contended that
criminal proceedings are not maintainable. It was submitted that
the informant had merely availed of all remedies available in law,
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including the criminal remedy. The intention to initiate criminal
action is evident from the written intimation dated 27.07.2012
and is reflected in the impugned FIR registered on 14.03.2014.
13. Learned Senior Counsel further relied upon the order dated
07.05.2025 passed by the Hon’ble Supreme Court in SLP (Crl.)
Nos. 9574-9575 of 2019, MSTC Ltd. v. Bipin Kumar Vohra
& Ors., whereby the judgment dated 12.07.2019 quashing the
FIR lodged by MSTC Ltd. against the private respondents was set
aside. It was submitted that the Hon’ble Supreme Court held
that the High Court had virtually conducted a mini trial while
exercising its jurisdiction to quash the proceedings, despite the
investigation prima facie disclosing the commission of cognizable
offences. The Hon’ble Supreme Court further observed that the
High Court had erroneously relied upon an arbitral award
founded on a compromise and, upon examining the material on
record, concluded that the allegations warranted a thorough
investigation. It is argued that in the present case also the
applicant has parted with pledged goods and therefore, petition
be rejected.
14. Learned Additional Public Prosecutor Mr. Rohan Shah
contended that a bare reading of the FIR clearly indicates that
the applicant had, from the very inception, a dishonest intention
to cheat the informant. It was submitted that, in furtherance of
such intention, the applicant Company procured the goods from
respondent No. 2, dishonestly misappropriated the same, and
failed to make payment therefor.
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14.1 Learned APP further submitted that the cheque issued by
the applicant Company towards discharge of its liability was
dishonoured, which further strengthens the prosecution case
and prima facie demonstrates the dishonest intention of the
applicant from the inception of the transaction. It was, therefore,
contended that the essential ingredients of the offences
punishable under Sections 406 and 420 of the IPC are prima
facie made out against the Directors of GAL, and accordingly, the
present petition deserves to be rejected.
15. Heard the learned advocates for the respective parties and
perused the FIR as well as the material available on record.
16. Following undisputed facts emerge from the record:
(a) The Applicant Company, respondent No. 2 – informant,
and M/s. Transafe Services Ltd. entered into a tripartite
Agreement.
(b) Pursuant to the said tripartite Agreement, the applicant
Company procured goods from the informant, and the
pledged goods were kept in the custody of the applicant
Company in terms of the agreement.
(c) In all, 477.610 metric tonnes of goods were procured by
MSTC Ltd. at a total value of Rs.9.57 crore. Out of the said
amount, the applicant Company paid Rs.1.87 crore, leaving
an outstanding balance of Rs.7.70 crore payable by GAL.
(d) Cheques aggregating to Rs.12,04,90,351/- issued by
the applicant Company towards discharge of its liability
were dishonoured, pursuant to which the informant
instituted proceedings under Section 138 of the Negotiable
Instruments Act, being Criminal Case No. 13 of 2010, before
the Chief Judicial Magistrate, Alipore, Kolkata. The fact thatPage 9 of 28
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arbitration proceedings as well as winding-up proceedings
were also initiated between the parties is not in dispute.
17. It is the case of the informant that the applicant has
committed offences punishable under Sections 406 and 420 read
with Section 114 of the Indian Penal Code, 1860.
18. For ready reference, Sections 405, 406, 415 and 420 of the
Indian Penal Code, 1860 are extracted hereunder:
Section 405 – Criminal breach of trust:
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’.
Section 406 – Punishment for criminal breach of trust:
Whoever commits criminal breach of trust shall be
punished with imprisonment of either description for a term
which may extend to three years, or with fine, or with both.
Section 415 – Cheating:
Whoever, by deceiving any person, fraudulently or
dishonestly induces the person so deceived to deliver any
property to any person, or to consent that any person shallPage 10 of 28
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retain any property, or intentionally induces the person so
deceived to do or omit to do anything which he would not do
or omit if he were not so deceived, and which act or omission
causes or is likely to cause damage or harm to that person
in body, mind, reputation or property, is said to ‘cheat’.
Section 420 – Cheating and dishonestly inducing
delivery of property:
Whoever cheats and thereby dishonestly induces the
person deceived to deliver any property to any person, or to
make, alter or destroy the whole or any part of a valuable
security, or anything which is signed or sealed and which is
capable of being converted into a valuable security, shall be
punished with imprisonment of either description for a term
which may extend to seven years, and shall also be liable to
fine.
19. In order to constitute the offence of Criminal Breach of
Trust, the following ingredients are required to be established:
(i) entrusting a person with property or with any
dominion over property:
(ii) that person entrusted:
(a) dishonestly misappropriating or converting that
property to his own use; or
(b) dishonestly using or disposing of that property or
wilfully suffering any other person so to do in violation;
(b-i) of any direction of law prescribing the mode in
which such trust is to be discharged;
(b-ii) of any legal contract made, touching the
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discharge of such trust.
20. The ingredients of an offence of Cheating are:
(i) there should be fraudulent or dishonest inducement of
a person by deceiving him,
(ii) (a) the person so deceived should be induced to
delivery any property to any person, or to consent that any
person shall retain any property; or
(b) the person so deceived should be intentionally
induced to do or omit to do anything which he would
not do or omit if he were not so deceived; and
(iii) in cases covered by (ii)(b), the act of omission should
be one which causes or is likely to cause damage or harm to
the person induced in body, mind, reputation or property.
21. Thus, to constitute the offence of criminal breach of trust
under Section 405 or the offence of cheating under Section 415
of the IPC, the essential ingredients of the respective offences
must be satisfied. As held by the Hon’ble Supreme Court in
Delhi Race Club (1940) Limited (Supra), the existence of a
dishonest or fraudulent intention is the sine qua non for both
offences. In the case of cheating, such dishonest intention must
exist from the very inception of the transaction. In paragraphs
40 to 43 of the said decision, the Hon’ble Supreme Court has
observed as under:
“40. To put it in other words, the case of cheating and
dishonest intention starts with the very inception of the
transaction. But in the case of criminal breach of trust, a
person who comes into possession of the movable property
and receives it legally, but illegally retains it or converts it toPage 12 of 28
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his own use against the terms of the contract, then the
question is, in a case like this, whether the retention is with
dishonest intention or not, whether the retention involves
criminal breach of trust or only a civil liability would depend
upon the facts of each case.
41. The distinction between mere breach of contract and
the offence of criminal breach of trust and cheating is a fine
one. In case of cheating, the intention of the accused at the
time of inducement should be looked into which may be
judged by a subsequent conduct, but for this, the
subsequent conduct is not the sole test. Mere breach of
contract cannot give rise to a criminal prosecution for
cheating unless fraudulent or dishonest intention is shown
right from the beginning of the transaction i.e. the time when
the offence is said to have been committed. Therefore, it is
this intention, which is the gist of the offence.
42. Whereas, for the criminal breach of trust, the property
must have been entrusted to the accused or he must have
dominion over it. The property in respect of which the offence
of breach of trust has been committed must be either the
property of some person other than the accused or the
beneficial interest in or ownership of it must be of some other
person. The accused must hold that property on trust of such
other person. Although the offence i.e. the offence of breach
of trust and cheating involve dishonest intention, yet they
are mutually exclusive and different in basic concept.
43. There is a distinction between criminal breach of trust
and cheating. For cheating, criminal intention is necessary
at the time of making a false or misleading representation
i.e. since inception. In criminal breach of trust, mere proof of
entrustment is sufficient. Thus, in case of criminal breach of
trust, the offender is lawfully entrusted with the property,
and he dishonestly misappropriated the same. Whereas, in
case of cheating, the offender fraudulently or dishonestlyPage 13 of 28
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induces a person by deceiving him to deliver any property.
In such a situation, both the offences cannot co-exist
simultaneously.”
22. It is alleged that the goods pledged in favour of the
respondent No. 2 – informant Company were found missing from
the stockyard situated at Ubhkal, Kukarwada, Taluka Vijapur,
District Mehsana. However, it is an admitted position that
although the informant addressed a written communication/
complaint dated 27.07.2012 to the Officer-in-Charge, Vasai
Police Station, no investigation was undertaken at that point of
time.
23. Even if the said communication/complaint is read
conjointly with the impugned FIR dated 14.03.2014, both
documents merely state that, during the inspection carried out
on 27.07.2012 by the representative of MSTC Ltd., Vadodara,
the pledged goods were found missing. Significantly, neither the
communication/complaint nor the FIR specifies the exact
quantity of goods allegedly found missing or dishonestly
misappropriated by the applicant. The FIR records that goods
worth Rs.9.57 crore were supplied, out of which Rs.1.87 crore
had admittedly been paid by the applicant, leaving an
outstanding amount of Rs.7.70 crore. It further records that
cheques aggregating to Rs.12,04,90,351/- issued by the
applicant were dishonoured, pursuant to which proceedings
under Section 138 of the Negotiable Instruments Act were
initiated.
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24. The payment of Rs.1.87 crore is not disputed by the
informant. However, there is no material to indicate the quantity
of goods corresponding to the said payment and the balance of
goods found missing. Equally, neither the FIR nor the earlier
intimation discloses the quantity of goods allegedly found short.
It is also not the informant’s case that the entire stock of pledged
goods had disappeared. The absence of these foundational
particulars assumes significance while considering the
allegations of criminal breach of trust and cheating.
25. It also emerges from the undisputed material that, under
the tripartite Agreement, the goods were kept in the custody of
M/s. Transafe Services Ltd. at the godown provided by the
applicant. Mere allegations that goods were found missing, in the
absence of particulars regarding the quantity allegedly
misappropriated, would not by themselves constitute the
offences of cheating or criminal breach of trust. The dispute
essentially relates to the outstanding amount payable under the
commercial transaction, for recovery of which the informant has
already invoked proceedings under Section 138 of the Negotiable
Instruments Act.
26. In the absence of any material demonstrating that the
applicant had a dishonest intention from the very inception of
the transaction, the essential ingredient of the offence of
cheating is not prima facie established. Likewise, even assuming
entrustment of the pledged goods, the allegations of criminal
breach of trust remain unsupported by any specific assertion as
to the quantity of goods allegedly misappropriated by the
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applicant. The FIR is also silent on the aspect of fraudulent
intention for cheating right from the beginning of the entering in
to transaction. Both the communication/complaint dated
27.07.2012 and the impugned FIR dated 14.03.2014 are
conspicuously silent on this vital aspect.
27. It is further the case of the applicant that, upon receipt of
the informant’s application dated 27.07.2012, a reply was
submitted to the Officer-in-Charge, Vasai Police Station. It is an
admitted position that no further action was taken by the police
pursuant to the said communication/complaint.
28. It is also required to be noted that respondent No. 2 –
Company had already initiated arbitration proceedings,
proceedings under Section 138 of the Negotiable Instruments
Act, Arbitration proceedings and winding-up proceedings way
back in year 2010. Despite having addressed a complaint dated
27.07.2012, the respondent remained silent till 14.03.2014,
when the impugned FIR came to be lodged on the basis of the
allegations contained in the earlier complaint.
29. Even assuming that the FIR is not vitiated on the ground of
delay, a plain reading of the complaint dated 27.07.2012 and the
impugned FIR dated 14.03.2014 does not disclose the essential
ingredients of the offences punishable under Sections 406 or 420
of the IPC. It is not in dispute that the goods were stored in the
applicant’s stockyard. However, the FIR clearly alleges goods
being missing. The allegations remain vague and bereft of the
necessary particulars to constitute the alleged offences.
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30. The material on record further indicates that the FIR
appears to have been lodged primarily because the cheque
issued by the applicant was dishonoured and certain
outstanding amounts were allegedly recoverable by the
informant. This Court is conscious of the fact that the initiation
of arbitration proceedings, proceedings under Section 138 of the
Negotiable Instruments Act, or winding-up proceedings does not,
by itself, bar the lodging of an FIR. However, the allegations
contained in the complaint dated 27.07.2012 and the FIR dated
14.03.2014 falls short of the necessary ingredients of criminal
breach of trust or cheating.
31. On the contrary, the minutes of the proceedings dated
09.03.2013 submitted by the Court Commissioner appointed by
the learned Arbitrator reveal that goods were found lying outside
the applicant’s stockyard. The Commissioner, however,
expressed his inability to weigh or take physical possession of
the goods in view of the practical difficulties relating to weighing,
transportation, and safe custody of the goods. Therefore, the said
report does not support the allegation that the entire stock of
pledged goods was missing. Rather, it demonstrates that
disputes existed regarding the quantity, identification, and
physical possession of the goods.
32. Such disputed questions of fact require adjudication on the
basis of evidence and cannot be resolved through a criminal
investigation. Even if the investigation is permitted to proceed,
the investigating agency would not be in a position to determine
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these contractual disputes. Thus, having regard to the facts of
the present case, the dispute essentially arises out of the alleged
non-fulfillment of obligations under the tripartite Agreement and
the Memorandum of Agreement executed between MSTC and
GAL Ltd., and is predominantly civil in nature.
33. Learned Senior Counsel for the informant has relied upon
Clause 5.2 of the Memorandum of Agreement to contend that
GAL was required to keep the material purchased on a high-
seas-sale basis or as a facilitator under pledge with MSTC until
lifting of the goods. However, a plain reading of Clause 9 of the
Memorandum of Agreement makes it clear that GAL was obliged
to make payment and take delivery of the entire material from
the stockyard under the control of MSTC, its agent, or nominee,
in accordance with the agreed schedule. Thus, the obligations of
the parties arise out of the contractual terms, and the alleged
breach thereof, by itself, does not give rise to the offences alleged
in the impugned FIR.
33.1 GAL shall make payment and take delivery of the entire
purchased material on their account from stockyard under
control of MSTC/its agent/nominee as per the following schedule
By 30 days from BL/RR/LR date 50% of the Material
By 90 days from BL/RR/LR date Balance Quantity
33.2 Even as per the Memorandum of Agreement, GAL was
required to lift 50% of the material within 30 days from the date
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of the BL/RR/LR and the remaining quantity within 90 days
therefrom. However, the core issue pertains to the goods
allegedly pledged with the informant and stated to be missing.
Significantly, while the complaint dated 27.07.2012 alleges that
the pledged goods were missing, no such specific averment finds
place in the impugned FIR dated 14.03.2014. This material
omission assumes significance while examining whether the
allegations disclose the commission of the offences alleged.
34. Learned Senior Counsel for the applicant has also invited
the attention of this Court to Annexure-A2, a letter dated
05.09.2008 addressed to the Chairman of MSTC Limited,
wherein the applicant complained of short supply and inferior
quality of material procured by MSTC on its behalf. The letter
further records that payments aggregating to approximately
Rs.3.25 crore had been made during July and August, 2008,
whereas material worth only about Rs.2.25 crore, measuring
approximately 10,000 metric tonnes, was supplied under three
delivery orders. Details of the excess payment were also enclosed
with the said communication. The said document prima facie
indicates that disputes regarding the quantity and quality of the
goods had existed between the parties since 2008, which
ultimately culminated in the complaint dated 27.07.2012 and
the impugned FIR dated 14.03.2014.
35. The Apex Court in the case of Vinod Natesan (supra) has
observed as under:
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“The dispute between the parties at the most can be said to
be the civil dispute and it is tried to be converted into the
criminal dispute. Therefore, we are also of the opinion that
continuing the criminal proceedings against the accused will
be an abuse of process of law and, therefore, the High Court
has rightly quashed the criminal proceedings. Merely
because the original accused might not have paid the
amount due and payable under the agreement or might not
have paid the amount in lieu of one month Notice before
terminating the agreement by itself cannot be said to be a
cheating and/or having committed offence under Sections
406 and 420 of the IPC as alleged.”
36. The Apex Court, in its recent judgment in case of Sarabjit
Kaur Vs. State of Punjab reported in 2023 (5) SCC 360, in
Paragraph No.13 has observed that 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.
37. Learned Senior Counsel for the applicant has relied on the
case of Kishan Singh (Dead) Through LRS. (supra) to butters
the argument that lodging delayed FIR without any plausible
explanation if fatal. In the cited case Hon’ble Supreme Court
held as follows:
“In cases where there is a delay in lodging a FIR, the Court
has to look for a plausible explanation for such delay. In
absence of such an explanation, the delay may be fatal. The
reason for quashing such proceedings may not be merely
that the allegations were an afterthought or had given aPage 20 of 28
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coloured version of events. In such cases the court should
carefully examine the facts before it for the reason that a
frustrated litigant who failed to succeed before the Civil
Court may initiate criminal proceedings just to harass the
other side with mala fide intentions or the ulterior motive of
wreaking vengeance on the other party. Chagrined and
frustrated litigants should not be permitted to give vent to
their frustrations by cheaply invoking the jurisdiction of the
criminal court. The court proceedings ought not to be
permitted to degenerate into a weapon of harassment and
persecution. In such a case, where an FIR is lodged clearly
with a view to spite the other party because of a private and
personal grudge and to enmesh the other party in long and
arduous criminal proceedings, the court may take a view
that it amounts to an abuse of the process of law in the facts
and circumstances of the case.”
38. Thus, in the case on hand as such it cannot be said that
there is delay since the information was given on 12.07.2012 the
day itself when the Manager visited the stockyard that he found
goods missing however, in the facts of the case more particularly
when dispute regarding quantity and quality has been raised
right from the year 2008 and for the reasons stated herein above
present FIR is quashed based on the facts of the case.
39. The next case relied by learned Senior Counsel for the
applicant is Manoj Kumar Sharma & Ors. (supra) wherein it is
held that delay in lodging the FIR often results in embellishment,
which is a creature of an afterthought. On account of delay, the
FIR not only gets bereft of the advantage of spontaneity, danger
also creeps in of the introduction of a coloured version or
exaggerated story. Though the ratio of the case is binding
however, the facts in the cited case are totally different and the
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FIR in the cited case came to be lodged after 5 (five) years of the
closing of the case under Section 174 of the Code, a fresh FIR
being No. 194 of 2005 was registered on the basis of anonymous
letters received by Respondent No. 2 therein. Hence, cited case is
of no help to the applicant as the facts on hand are totally
different.
40. Learned Senior Counsel for the applicant has further relied
upon the judgment in the case of R.K. Vijayasarathy (supra) to
contend that after filing civil proceedings of Arbitration, winding
up and also lodging complaint under section 138 of Negotiable
Instrument Act, way back in the year 2010 the informant has
lodged the present FIR which is not tenable. In the cited case
Supreme Court held that the son of the appellants therein had
instituted a civil suit for the recovery of money against the first
respondent. The suit was pending. The first respondent had filed
the complaint against the appellants six years after the date of
the alleged transaction and nearly three years from the filing of
the suit. The averments in the complaint, read on its face, did
not disclose the ingredients necessary to constitute offences
under the Penal Code and thus held that an attempt was made
by the first respondent to cloak a civil dispute with a criminal
nature despite the absence of the ingredients necessary to
constitute a criminal offence and thus constitutes an abuse of
process of court and quashed the FIR.
40.1 In the case on hand the complaint was lodged in year 2012
while the informant found goods pledged were missing and FIR
is lodged in 2014 however, after initiating proceedings under the
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Arbitration, Companies Act for liquidation and availing 138
compliant in the year 2010 has lodged complaint in year 2012
and FIR in year 2014. Thus, there is delay in lodging complaint
as well as FIR and even the compliant and FIR prima face do not
disclose the correct facts which are not controverted by the
informant more particularly existence of shortage of goods as
well as with regards the quality of goods.
40.2 Learned Senior Counsel for the applicant has further relied
upon the judgment in the case of Deepak Gaba & Ors. (supra)
to contend that even at the stage of issuance of a process in a
private complaint the Court has to come to a prima facie conclu-
sion that ingredients of invoking relevant provisions of IPC are
made out. In the present case Criminal breach of trust is alleged
which would, inter alia, mean using or disposing of the property
by a person who is entrusted with or otherwise has dominion.
Such an act must not only be done dishonestly, but also in viola-
tion of any direction of law or any contract express or implied re-
lating to carrying out the trust. Hence, even if respondent no. 2 –
informant is of the opinion that the monetary demand or claim
is still payable, given the failure to prove the requirements
of Section 405 of the IPC, an offence under the same section is
not constituted. In the absence of factual allegations which sat-
isfy the ingredients of the offence under Section 405 of the IPC, a
mere dispute on monetary demand does not attract criminal
prosecution under Section 406 of the IPC. In the present case as
noted above though the applicant was under obligation by a tri-
partite Agreement and Memorandum of Agreement and was
holding goods under trust, the factum of non-mentioning of
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amount and quantity of goods missing and by cleverly drafting
complaint (Since FIR is completely missing the ingredients to at-
tract any provisions of IPC) without disclosing such material fact
is nothing but abuse of process of law.
40.3 Lastly, the learned Senior Counsel for the applicant has
relied on the judgment in the case of Bhikhubhai Govindbhai
Patel (supra) to contend that where delay is coupled with
circumstances creating serious doubt about the genuineness of
the prosecution, the proceedings may warrant quashing. In the
present case even if the compliant as well as FIR is read as it is
the ingredients of the offence of cheating punishable
under Section 420 of the IPC are also absent i.e. to constitute
the offence of cheating, there must exist deception, fraudulent
inducement and consequential delivery of property coupled with
dishonest intention at the inception of the transaction. There is
no allegation in the complaint as well as FIR that respondent No.
2 delivered any property, money or valuable security to the
applicant herein pursuant to deception or inducement and
importantly, the material on record does not disclose dishonest
intention at inception.
41. The learned advocate for the informant has relied on the
order dated 07.05.2025 passed by the Hon’ble Supreme Court
in SLP (Crl.) Nos. 9574-9575 of 2019, MSTC Ltd. v. Bipin
Kumar Vohra & Ors., wherein, by judgment dated 12.07.2019
quashing the FIR lodged by MSTC Ltd. against the private
respondents was set aside. It was submitted that the Hon’ble
Supreme Court held that the High Court had virtually conducted
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a mini trial while exercising its jurisdiction to quash the
proceedings, despite the investigation prima facie disclosing the
commission of cognizable offences. The Hon’ble Supreme Court
further observed that the High Court had erroneously relied
upon an arbitral award founded on a compromise and, upon
examining the material on record, concluded that the allegations
warranted a thorough investigation.
41.1 In the said case, despite the subsistence of the pledge
agreement, SPS Steel Rolling Mills Ltd. had allegedly illegally
removed and consumed 19,360.42 MT of pig iron valued at more
than Rs.65 crore, which had been pledged in favour of MSTC
Ltd., as reflected in the communication dated 27.11.2017. It was
also alleged that SPS Steel Rolling Mills Ltd. falsely attributed
the shortage of the pledged goods to wastage and inadvertent
consumption. However, the facts of the present case are different
inasmuch as though the applicant had pledged the goods the
factum of quantity and/or amount of missing goods is
conspicuously silent in the complaint as well as the FIR. There
are no allegation to counter the shortage of goods as well as with
regards to quality of goods raised by the applicant way back in
year 2008. Thus, the cited case is of no help to the informant.
42. The Hon’ble Supreme Court in the case of Mahmood Ali v.
State of U.P. reported in (2023) 15 SCC 488 : 2023 SCC On-
Line SC 950 at page 498 thus observed:
“12. We say so because once the complainant decides to
proceed against the accused with an ulterior motive forPage 25 of 28
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wreaking personal vengeance etc. then he would ensure
that the FIR/complaint is very well drafted with all the nec-
essary pleadings. The complainant would ensure that the
averments made in the FIR/complaint are such that they
disclose the necessary ingredients to constitute the alleged
offence. Therefore, it will not be just enough for the Court to
look into the averments made in the FIR/complaint alone for
the purpose of ascertaining whether the necessary ingredi-
ents to constitute the alleged offence are disclosed or not.
13. In frivolous or vexatious proceedings, the Court owes a
duty to look into many other attending circumstances emerg-
ing from the record of the case over and above the aver-
ments and, if need be, with due care and circumspection try
to read in between the lines. The Court while exercising its
jurisdiction under Section 482CrPC or Article 226 of the Con-
stitution need not restrict itself only to the stage of a case
but is empowered to take into account the overall circum-
stances leading to the initiation/registration of the case as
well as the materials collected in the course of investigation.
Take for instance the case on hand. Multiple FIRs have been
registered over a period of time. It is in the background of
such circumstances the registration of multiple FIRs as-
sumes importance, thereby attracting the issue of wreaking
vengeance out of private or personal grudge as alleged.”
43. It emerges from the record that since the Company of the
present applicant did not pay the amount due to the respondent
No. 2, it had deposited the cheques issued by the Company of
the present applicant in favour of the respondent No. 2 in its
bank account for clearance and the said cheques were
dishonored and respondent No. 2 herein has already lodged a
complaint in that regard for the offence punishable under
Section 138 of the Negotiable Instruments Act before the
competent Court at Calcutta (Kolkata). Thus, the proceedings of
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criminal nature are already pending, which are arising out of the
very same transaction. The record also indicates that the present
applicant has approached the High Court at Calcutta for
quashing of the proceedings arising out of the said complaint
and an interim-relief is operating in favour of the present
applicant in the said proceedings. Arbitration proceedings as
well as winding up proceedings are also initiated in the year
2010 and the informant has lodged compliant by cleverly
drafting complaint dated 12.07.2012 and FIR dated 14.03.2014,
the payment of Rs.1.87 crore and dispute of over payment in
year 2008 along with dispute of quantity and quality in 2008 is
also neither denied nor dislodged by the informant. More
particularly, the facts as narrated in complaint dated 12.07.2012
are conspicuously missing from FIR dated 14.03.2014. The facts
narrated in compliant dated 12.07.2021 and FIR dated
14.03.2014 suppresses number of facts to give pure civil dispute
a criminal colour.
44. For the forgoing discussion and observations, this
application succeeds and is, accordingly allowed. The impugned
FIR being I-C.R. No. 17 of 2014, registered with Vasai Police
Station, District: Mehsana, for the offences punishable under
Sections 406, 420 and 114 of the Indian Penal Code, 1860, and
all consequential proceedings arising therefrom, are hereby
quashed and set aside qua the present applicant only. Rule is
made absolute, accordingly.
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CRIMINAL MISC. APPLICATION (DIRECTION) NO. 1 of 2026
45. In view of the disposal of the main matter, Criminal Misc.
Application No. 1 of 2026 does not survive and is accordingly
disposed of.
(P. M. RAVAL, J)
MOHD SAIF ULLAH
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