Case Number: Criminal Appeal No.5000 Of 2025 (Arising Out Of Special Leave Petition (Crl.) No.4939 Of 2018)
Case Name: Inder Chand Bagri V. Jagadish Prasad Bagri
Court: Supreme Court Of India
Date: Monday, the Twenty-Fourth of November, Two-Thousand Twenty-Five
Quorum: Justice B.V. Nagarathna, Justice R. Mahadevan
Facts
The facts states that the appellant- accused along with four other individuals namely Bhagwandas Bagri, Ramkishan Bagri, Shyamsundar Bagri and Jagdish Prasad Bagri resolved to constitute a partnership firm vide partnership deed dated 01.10.1976 in the name and style of ‘INDRACHAND BAGRI AND BROTHERS’. The partnership involved construction of warehouses on land owned exclusively by the appellant, Inder Chand Bagri which was leased to the Food Corporation of India (FCI). In 1981, all partners executed a supplementary agreement stating that after the expiry of the FCI lease in 1993, the land along with the constructed godowns would revert to the appellant.
The partnership was formally dissolved through a dissolution deed under which all assets and liabilities were transferred to the appellant converting the firm into his sole proprietorship. In 2011, the sold the disputed land and godowns to his nephew for 94.60 lakhs.
Aggrieved by the sale, the complainant-respondent filed multiple civil proceeding challenging the sale deed and claiming partnership rights. He also filed a criminal complaint in 2013, alleging offences under 406, 420, and 120B of the IPC. Cognizance was taken in 2014. The High Court quashed proceedings against the appellant. The appellant challenged this refusal before the Supreme Court.
Issues
- Whether the allegations in the complaints disclose the basic ingredients required to constitute offences under Section 406 and 420 of IPC.
- Whether the partnership property was ever “entrusted” to the appellant in the manner that could give rise to the criminal breach of trust.
- Whether dishonest or fraudulent intention existed at the inception of the partnership enabling prosecution under section, 420.
- Whether continuation of criminal proceedings amounts to abuse of process when civil remedies were already being pursued concerning the same dispute.
Legal Provisions
- Indian Penal Code, 1960: Section 405,406, 420, 415, now in BNS (316, 316(2), 318)
- Code of Criminal Procedure, 1973: Section 468, 473, 482 now in BNSS (514, 515, 528)
Arguments:
Appellant: The appellant argued that the criminal complaint was nothing but a disgusted attempt to convert a civil dispute into a criminal case. He submitted that the complaint filed 16 years after the alleged cause of action without any condonation of delay rendering it, time barred under Section 468 of CrPC. It was further contended that the complainant deliberately suppressed the 1981 supplementary agreement and the 1997 dissolution deed both which clearly reflected that the disputed land always remained the absolute property of the appellant and was agreed to revert to him after the FCI lease expired.
He also argued that cheating under section 420 requires proof of dishonest intention at the inception of the partnership which was completely absent. He further, contended that the complainant was already pursuing a civil suit challenging the sale deed and the criminal process was maliciously invoked to exert pressure.
Respondent: The complainant-respondent argued that once the appellant brought his land into the partnership it became partnership property and was therefore “entrusted” to the firm he alleged that selling the property unilaterally constituted criminal breach of trust. He further submitted that suppression of profits and alleged misappropriation of partnership, assests were sufficient to continue criminal proceedings. He further argued that civil and criminal remedies can proceed simultaneously and that the existence of the civil dispute does not bar criminal prosecution.
Analysis:
The Court examined the allegations in light of the statutory ingredients of Sections 406, 420 of IPC. It held that for an offence under Sec 420, fraudulent or dishonest intention must exist at the inception of the transaction. The complaint contain no averment indicating that at the time of entering into the partnership in 1976, the appellant had any preconceived fraudulent intention to deceive the complainant near subsequent sale of property especially when supported by contractual documents cannot constitute cheating.
Regarding Section 406, the court held that criminal breach of trust required clear proof of entrustment and dishonest misappropriation the supplementary agreement of 1981, showed that all the partners including the complainant explicitly agreed that the property would revert to the appellant upon termination of the FCI lease. The dissolution deed further clarified that all assets and liabilities were transferred to the appellant, therefore the complainant could not allege entrustment and misappropriation after voluntarily agreeing to reversion.
The Court as well noted that the incapability of simultaneously alleging cheating and criminal breach of trust referring to Delhi Race Club (1940) Limited vs. State of Uttar Pradesh, (2024) 10 SCC 690, which held that the two offences are mutually exclusive additionally since civil remedies were already being pursued in relation to the same sale deed criminal prosecution amounted to harassment the Court applied that the principles laid down in State of Haryana vs. Bhajan Lal, 1992 Suppl (1) SCC 335 (“Bhajan Lal”), particularly states that the proceedings constitutes an abuse of process.
Judgement
The Supreme Court held that the complaint did not disclose any prima facie ingredients of the offences under section, 406 or 420 of IPC. It observed that the allegations were inherently, improbable and motivated and continuation of proceedings would cause under harassment. The Court, therefore set aside the Gauhati High Court order and quashed the criminal complaint along with all consequential proceedings. The Court reiterated that the criminal law cannot be used as a tool for personal vendetta or to pressure the parties in civil disputes and that mala fide criminal prosecution must be curbed at the threshold.
Conclusion
The judgement strengthens the judicial principle that the criminal law should not be invoked for settling civil or contractual disputes especially where documents clearly establishes the parties intentions and rights by quashing the proceedings. The Supreme Court reaffirmed that the allegations of cheating or breach of trust must strictly satisfy statutory ingredients and cannot be sustained merely because a civil dispute has arisen between partners. The ruling underscores the Court’s vigilance against misuse of criminal process and reinforces the Bhajan Lal, framework that protects the individual from malicious prosecution were no criminal offence is disclosed.
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WRITTEN BY- SOUMITA CHAKRABORTY
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