Allahabad High Court

Laxmi Kant Agarwal And 3 Others vs State Of U.P. And Another on 25 November, 2025





HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 


Neutral Citation No. - 2025:AHC:210724
 
 Reserved on 15.11.2025 Delivered on 25.11.2025 
 
HIGH COURT OF JUDICATURE AT ALLAHABAD 
 
APPLICATION U/S 482 No. - 10686 of 2016   
 
   Laxmi Kant Agarwal And 3 Others    
 
  .....Applicant(s)   
 
 Versus  
 
   State of U.P. and Another    
 
  .....Opposite Party(s)       
 
   
 
  
 
Counsel for Applicant(s)   
 
:   
 
Gyan Prakash Shrivastava, Saroj Kumar Dubey   
 
  
 
Counsel for Opposite Party(s)   
 
:   
 
G.A., Shailesh Kumar Tripathi   
 
     
 
 Court No. - 83
 
   
 
 HON'BLE RAJIV LOCHAN SHUKLA, J.

1. Heard Shri Saroj Kumar Dubey, Learned counsel for the applicants, Shri Shailesh Kumar Tripathi, Learned counsel for the opposite party No.2 and Shri R.K. Srivastava, Learned AGA for the State.

2. Learned counsel for the applicants states that the allegations in the complaint, even if they are accepted on their face value, amount to a business transaction leading to a monetary dispute, for which no offence under Section 406 IPC is made out. He states that as per the assertions made in the complaint Ferric Alum costing Rs.2,73,000/- was purchased by the applicants with the stipulation that the money for the said purchase would be paid within 30 days. If the said payment was not made, there was a stipulation between the parties as per the complaint that a penal interest of 18% would be charged. Learned counsel for the applicants submits that these averments of the complaint, if taken at their face value, would not constitute an offence of criminal breach of trust. Assuming without admitting that there was a liability to pay, Shri Dubey submits that the only remedy for the opposite party No.2 is to institute a suit for recovery of money and no criminal proceedings would lie.

3. Shri Shailesh Tripathi, on the other hand, contends that it is an admission on the part of the applicants that money was due. They have also made part payment of Rs.50,000/- and Rs.2,23000/- alongwith interest is still required to be paid towards the Ferric Alum that was purchased by the applicants.

4. I have heard Learned counsels for the parties and perused the record.

5. Section 406 IPC provides that criminal breach of trust would be occasioned if the conditions mentioned in Section 405 IPC exist. Section 405 of the IPC is reproduced here-in-below-

"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 off 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."

6. From the perusal of Section 405 IPC, it is clearly indicated that the property, which is entrusted belongs to the principal and only is given in trust to the accused, who then dishonestly misappropriates, converts to his own use, uses or disposes off that property in violation of any direction of law or a legal contract express or implied. The averments made in the complaint clearly indicate that there was no stipulation with respect to return of the property. The Ferric Alum was sold and payment for the Ferric Alum sold was deferred to be paid within 30 days, failing which penal interest would be charged.

7. It is not disputed that Rs.50,000/-, as part payment, towards the Ferric Alum has also been made by the applicants to the opposite party No.2. The only grievance that is being raised by means of the complaint is non payment of money due, which does not make out an offence under Section 406 IPC.

8. Shri Dubey relies upon a decision of Hon'ble the Supreme Court in M/s Shikhar Chemicals vs. The State of U.P. and others, Special Leave to Appeal (Crl.) No.11445 of 2025 and contends that criminal proceedings cannot be converted into a means of recovery of money. The criminal complaint can only be proceeded when an offence is made out. He specifically relies upon paragraphs No.11, 12, 13 and 14 of the above-mentioned judgement.

9. For ready reference, the paragraphs No.11, 12, 13 and 14 of the said judgement are produced herein below:-

?11. The case of the respondent no.2 as a complainant, is plain and simple. He claims to be an unpaid seller. According to him, he delivered goods in the form of thread to the petitioner herein worth Rs.52,34,385/- out of which an amount of Rs.47,75,000/- came to be paid to the complainant by the petitioner herein, however, the balance amount has not been paid, till this date.

12. It is for the recovery of the balance amount that he thought fit to file a criminal complaint and institute criminal proceedings. It appears that the complainant in the first instance tried to lodge a FIR but the police declined to register the FIR saying that it was purely a civil dispute.

13. The Magistrate unfortunately remained unmindful of the fact that even as per the complainant?s own say the case is one of sale of goods and recovery of some balance amount."

14. It was expected of the Additional CJM to know that in a case of sale transaction where is the question of any entrustment of goods so as to bring the case within the ambit of criminal breach of trust punishable under Section 406 of the IPC. This position of law came to be explained by this Court almost six decades back in the landmark decision titled ?State of Gujarat vs. Jaswantlal Nathalal? reported in 1968 (2) SCR 408, wherein this Court stated that a mere transaction of sale cannot amount to an entrustment. We quote the relevant observations made by this Court as under:-

?8. The term ?entrusted? found in Section 405 IPC governs not only the words ?with the property? immediately following it but also the words ?or with any dominion over the property? occurring thereafter ? see Velji Raghvaji Patel v. State of Maharashtra [(1965) 2 SCR 429] . Before there can be any entrustment there must be a trust meaning thereby an obligation annexed to the ownership of property and a confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner. But that does not mean that such an entrustment need conform to all the technicalities of the law of trust ? see Jaswantrai Manilal Akhaney v. State of Bombay [[1956] SCR 483, 498-500] . The expression ?entrustment? carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them. A mere transaction of sale cannot amount to an entrustment. It is true that the Government had sold the cement in question to BSS solely for the purpose of being used in connection with the construction work referred to earlier. But that circumstance does not make the transaction in question anything other than a sale. After delivery of the cement, the Government had neither any right nor dominion over it. If the purchaser or his representative had failed to comply with the requirements of any law relating to cement control, he should have been prosecuted for the same. But we are unable to hold that there was any breach of trust.

9. A case somewhat similar to the one before us came up for consideration before a Division Bench of the Calcutta High Court in Satyendra Nath Mukherji v. Emperor [ILR [1947] 1 Cal 97] . These are the facts of that case. One Satya Sunder Mitra was a contractor. He was granted a permit by the Executive Engineer, A.R.P. (Shelters), construction division, to purchase seven tons of cement from Balmer Lawrie and Company. The permit was granted on the condition that the cement was to be used in the work connected with the construction of shelters, which work he had contracted to do for the Executive Engineer. The finding in the case was that with the help of an employee of Mitra and Chaudhuri who were banians of Balmer Lawrie and Company, six tons of cement were diverted and disposed of for another purpose. The trial court convicted Satya Sunder Mitra under Section 406 IPC and another for abetting the offence committed by Satya Sunder Mitra. The High Court allowed their appeal, holding that there was no entrustment of the cement in question within the meaning of the term as used in Section 405 of Indian Penal Code. In the course of the judgment it was observed:

?The permit was granted in accordance with the system of control established under the Defence of India Rules, under which an order has been issued by the Government of India preventing selling agents such as Balmer Lawrie and Company from delivering any cement except under instructions from the Government or from the Cement Adviser. The transaction, so far as the contractor is concerned, was one of purchase and the property in the cement clearly passed to him. No doubt he could not have obtained the permit through the Executive Engineer if it had not been intended that the cement should be used for the purpose directed by the Engineer, but, in our opinion, in no sense can it be said that there was any entrustment either of the property or of any dominion over the property.?

We are of the opinion that the legal position is as explained in that decision.

10. The decision of the Kings Bench Division in King v. Grubb [[1915] 2 KB 683] relied on by Mr Dhebar learned counsel for the appellant does not bear on the question under consideration. Therein, the factum of entrustment was not in dispute. The only question of law that arose for decision in that case was whether when a property is entrusted to a company, and the person directing and controlling the company, by whose instructions the property had passed into the possession of the company, had converted the same fraudulently, that person can be said to have committed an offence under Section 1 of the Larceny Act, 1901. The court answered that question in the affirmative.

11. ln view of our conclusion that the prosecution has failed to prove the entrustment pleaded, it is unnecessary to consider whether on the material on record it can be concluded that the respondent had misappropriated 40 bags of cement referred to earlier.?

(Emphasis supplied)"

10. As held above, the expression ?entrustment? clearly indicates that the ownership of the property remains with the person entrusting the property. The circumstances of the present case clearly indicate that a sale had taken place with deferred payment. If the payment was delayed, then in the contract there was also an option for charging penal interest. In such circumstances, it is clear that there was no entrustment but a sale of property. The sale cannot amount to entrustment. Part payment to the tune of Rs.50,000/- is also admitted by the opposite party No.2, which further cements the transaction being that of sale and not entrustment.

11. In the opinion of the Court, no offence under Section 406 is made out against the applicants. Continuation of these proceedings would tantamount to an abuse of the process of law. Criminal proceedings cannot be converted into an alternative forum for the recovery of money.

12. In these circumstances, the impugned proceedings of Complaint Case No.2224 of 2014 (Sanjai Jhunjhunwala vs. Laxmi Kant Agarwal and others) under Section 406 IPC, including the summoning order dated 28.01.2016 passed by the Additional Chief Judicial Magistrate, 9th Varanasi deserve to be quashed and are hereby quashed.