Unpaid Steel Bills Set Off Against Deposit Are a Civil Dispute, Not Cheating; Criminal Case Quashed: Supreme Court

The appellants, directors of Shivamy Enterprises, bought 293 tonnes of TMT bars worth Rs 1.19 crore from Hans Ispat Ltd. in November 2011; their post-dated cheques were dishonoured and the bills went unpaid (paras 4-5). On the complaint of a Hans Ispat employee, an FIR under Sections 406, 420 and 114 IPC was registered at Anjar, Kutch and a charge-sheet filed (paras 5-7). The magistrate refused discharge on 08.02.2016. On 17.03.2026 the Gujarat High Court discharged them of criminal breach of trust but sustained the charge under Section 420 read with Section 114 IPC (paras 8-11).

Cheating under Section 415 IPC requires fraudulent or dishonest inducement, or intentional inducement; without these the offence is not made out (paras 18, 20-20.1). The complainant's own police statement admitted that the appellants had paid Rs 2 crore to the company in 2006-07, when the Barnala group owned it, but said the old owners, not the new ones, must repay it (para 21). The appellants had adjusted the unpaid bills against that deposit, so the dispute was pre-eminently civil, yet no civil suit had been filed (para 22). Following Delhi Race Club, a person claiming money due should sue for recovery instead of complaining of cheating, and cheating and criminal breach of trust cannot coexist on the same facts (paras 23-23.1). Lalit Chaturvedi holds that without deception or inducement when the contract was made Section 420 is not attracted and the police cannot act as recovery agents (paras 24-24.1); Shailesh Kumar Singh and G. Saminathan are to the same effect (paras 25-26). Continuing the prosecution would abuse the process of the court (paras 27-28).