[Cites 7, Cited by 0]
Bombay High Court
Rajiv Suryakant Mehta vs The State Of Maharashtra And Anr on 16 April, 2026
Author: Amit Borkar
Bench: Amit Borkar
2026:BHC-AS:17758-DB
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Shabnoor
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CRIMINAL APPELLATE JURISDICTION
WRIT PETITION NO.21 OF 2016
Rajiv Suryakant Mehta,
Aged 55 years, Indian Inhabitant,
permanently residing at 6, Gokul
Building, 2nd Floor, 3, Tejpal Road,
Gamdevi, Mumbai 400 007 ... Petitioner
Vs.
SHABNOOR 1. State of Maharashtra,
AYUB
PATHAN (at the instance of L.T. Marg
Digitally signed by
SHABNOOR AYUB
PATHAN Police Station, Mumbai -
Date: 2026.04.16
13:23:00 +0530
C.R. No.231 of 2015)
2. Mithalal Devilal Jain @ Dhakan,
having his office at 1st Floor,
Danabai House, Opp. ICICI Bank,
Zaveri Bazar, Mumbai - 400 002 ... Respondents
Mr. Subhash Jha with Mr. Sumeet Upadhyay i/by Law
Global Advocates for the petitioner.
Mr. Yogesh M. Nakhwa, APP for respondent No.1-State.
Mr. Akash Patil with Mr. Jarin Doshi i/by Malvi
Ranchhoddas & Co., for respondent No.2.
Mr. Kalidas N. Dhaware, PSI (Pairavi), L.T. Marg Police
Station, Mumbai, is present.
CORAM : AMIT BORKAR, J.
RESERVED ON : APRIL 8, 2026.
PRONOUNCED ON : APRIL 16, 2026
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JUDGMENT:
1. The present writ petition arises from Case No. 491/PW/16,
wherein the petitioner has been arraigned as an accused for the
offences punishable under Sections 406 and 420 of the Indian
Penal Code, 1860. By the present petition, the petitioner seeks
quashing of Crime Register No. 231 of 2014 registered with L.T.
Marg Police Station, Mumbai, at the instance of respondent No. 2,
being the original complainant, against the petitioner.
2. The factual background giving rise to the present writ
petition, as set out by the petitioner, deserves to be noted.
Respondent No. 2, namely Mithalal Devilal Jain, in his statement
dated 13 June 2015 recorded before L.T. Marg Police Station,
stated that he has been engaged in the business of manufacturing
and sale of gold and diamond jewellery for the last 20 to 25 years
under the name and style of Aarti Jewellers. He further stated that
he was acquainted with one broker, namely Mehul Ashwanikumar
Mehta, who, apart from acting as a broker, was also working for
the petitioner. According to respondent No. 2, on 29 September
2014, the said broker introduced him to the petitioner. It is
thereafter alleged that during the period from 29 September 2014
to 10 November 2014, though erroneously mentioned as 29
September 2011 in certain records, respondent No. 2, on three
separate occasions, namely 29 September 2014, 18 November
2014, and 19 November 2014, entrusted gold ornaments valued at
Rs. 60,66,606/- to the petitioner, with the understanding that the
same were to be sold by the petitioner and the sale proceeds
thereof were to be duly accounted for and remitted to respondent
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No. 2.
3. It is further alleged that certain cheques issued by the
petitioner towards discharge of the aforesaid liability came to be
dishonoured upon presentation. Though the petitioner is stated to
have thereafter assured respondent No. 2 that payment would be
effected through RTGS transfer, the petitioner allegedly failed and
neglected to remit the outstanding amount of Rs. 60,66,606/- to
respondent No. 2. It is further the case that the business dealings
between the petitioner and respondent No. 2 had commenced even
prior to the aforesaid transactions, and during the period from 10
April 2014 to 7 November 2014, the petitioner had made
payments aggregating to Rs. 59,20,000/- through cheques and
RTGS transfers from his ICICI Bank and Dena Bank accounts.
4. The petitioner contends that, assuming without admitting
that the aforesaid gold ornaments had in fact been entrusted to
him, even then, having regard to the admitted position that
payments aggregating to Rs. 59,20,000/- were made by the
petitioner to respondent No. 2 during the period from 10 April
2014 to 7 November 2014, and even if the entire claim of
respondent No. 2 for Rs. 60,66,606/- is accepted in its entirety, the
balance amount allegedly remaining payable would only be Rs.
1,46,606/-. According to the petitioner, such a transaction, viewed
from any perspective, would at best constitute a monetary dispute
of civil nature and, by no stretch of imagination, can be said to
attract the ingredients of any criminal offence or amount to breach
of any penal statute for the time being in force.
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5. Mr. Jha, learned counsel appearing for the petitioner,
submitted that the supplementary statement of respondent No. 2
dated 14 July 2015 refers to six transactions aggregating to
Rs.59,96,273/-. He submitted that, however, the present First
Information Report has been registered only on the basis of three
invoices dated 29 September 2014, 18 November 2014, and 19
November 2014, which, according to respondent No. 2, pertain to
a total amount of Rs.60,66,606/-. Learned counsel invited
attention to pages 138, 142, and 143 of the writ petition, where
copies of the said invoices have been annexed, and contended that
none of the said invoices bears the signature of the purchaser. It
was, therefore, submitted that the mere unilateral issuance of
invoices by respondent No. 2, in the absence of acknowledgment
or signature by the purchaser, cannot by itself constitute proof of
the alleged transaction. Learned counsel further submitted that the
said invoices record that Value Added Tax (VAT) had been paid by
respondent No. 2; however, to the best of his knowledge, no such
VAT payment has in fact been made by respondent No. 2, despite
the contrary recital in the invoices. He contended that the said
claim appears to be false and dishonest, and that no investigation
whatsoever has been undertaken by the investigating agency in
that regard.
6. Mr. Jha further placed reliance upon the decision of the
Supreme Court in Delhi Race Club (1940) Limited & Ors. v. State
of Uttar Pradesh & Anr., reported in (2024) 10 SCC 690, and
submitted that in a contract for sale of goods, the ownership in the
goods passes from the seller to the purchaser upon delivery
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thereof. It was submitted that once the property in the goods
stands transferred, it cannot thereafter be contended that the
purchaser was entrusted with the property of the seller. According
to learned counsel, in the absence of the essential element of
entrustment, the offence of criminal breach of trust cannot be said
to be made out merely because the purchaser has failed to pay the
sale consideration.
7. In support of the aforesaid submission, learned counsel also
relied upon the judgment of the Supreme Court in Vir Prakash
Sharma v. Anil Kumar Agarwal, reported in (2007) 7 SCC 373,
wherein it has been held that dishonour of cheques issued towards
payment for purchase of goods, or mere non-payment or short
payment of sale consideration, would not ipso facto constitute the
offence of cheating or criminal breach of trust.
8. Learned counsel further submitted that where the
complainant alleges commission of an offence of criminal breach
of trust punishable under Section 406 of the Indian Penal Code, it
would not be legally permissible, on the same factual foundation,
to simultaneously contend that the offence of cheating punishable
under Section 420 of the Indian Penal Code is also made out,
unless the necessary and distinct ingredients of both offences are
independently established. According to him, the present
prosecution has been initiated with an oblique motive and solely
with a view to harass the petitioner. It was, therefore, prayed that
apart from quashing the impugned proceedings, this Court may
also direct the complainant to pay compensatory costs to the
petitioner.
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9. Per contra, Mr. Patil, learned counsel appearing for
respondent No. 2, submitted that in view of the law laid down by
the Supreme Court in Delhi Race Club (1940) Limited & Ors , the
prosecution against the petitioner is maintainable and liable to
proceed, at least insofar as the offence punishable under Section
406 of the Indian Penal Code is concerned. Learned counsel for
respondent No. 2 invited the attention of the Court to the material
collected during investigation and placed on record along with the
charge sheet, and submitted that the same sufficiently discloses
commission of the alleged offences. According to him, the
petitioner had represented to respondent No. 2 that he was in
contact with two diamond merchants who were desirous of
purchasing jewellery belonging to respondent No. 2. Acting upon
such representation, respondent No. 2 is stated to have delivered
jewellery valued at Rs.16,96,870/- to the petitioner under a bill,
upon which the petitioner allegedly mentioned his Permanent
Account Number (PAN) and assured respondent No. 2 that
payment would be made within two days, if not on the following
day itself. It was further submitted that on 19 November 2014, the
petitioner once again obtained jewellery valued at Rs.16,86,467/-
from respondent No. 2 by preparing a bill and assuring payment of
the consideration amount. According to respondent No. 2, during
the period from 29 September 2014 to 19 November 2014, the
petitioner had thus obtained jewellery aggregating to
Rs.60,66,606/- from respondent No. 2, ostensibly for the purpose
of sale.
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10. Learned counsel submitted that despite receipt of the
aforesaid goods, neither was the sale consideration paid by the
petitioner nor were the goods returned to respondent No. 2. In the
aforesaid circumstances, according to respondent No.2, the
conduct of the petitioner clearly attracts the ingredients of the
offence punishable under Section 406 of the Indian Penal Code. It
was, therefore, submitted that the present writ petition is devoid of
merit and deserves to be dismissed.
REASONS AND ANALYSIS:
11. After having heard the learned counsel for both sides and
after going through the record placed before this Court, I am of the
view that the matter is required to be seen on the real nature of
the transaction and not on the mere words used in the complaint.
The whole case of respondent No. 2 is that certain jewellery was
handed over to the petitioner for sale and that the sale proceeds
were to be returned or accounted for. On the other hand, the
petitioner has consistently taken the stand that this was a business
dealing in sale of goods, that substantial amounts were already
paid by cheque and RTGS, and that at the highest there remained
a monetary balance which cannot by itself be stretched into a
criminal offence. When these rival submissions are examined in
the light of the material on record, the question is whether the
basic ingredients of Sections 406 and 420 of the Indian Penal Code
are really made out.
12. For the purpose of adjudicating the issue involved in the
present matter, it becomes necessary to reproduce the definition of
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the offence of criminal breach of trust as contained in Section 405
of the Indian Penal Code, which reads thus:
"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".
Explanation 1.-- A person, being an employer [of an
establishment whether exempted under section 17 of the
Employees' Provident Funds and Miscellaneous Provisions
Act, 1952 (19 of 1952) or not who deducts the employee's
contribution from the wages payable to the employee for
credit to a Provident Fund or Family Pension Fund
established by any law for the time being in force, shall be
deemed to have been entrusted with the amount of the
contribution so deducted by him and if he makes default in
the payment of such contribution to the said Fund in
violation of the said law, shall be deemed to have dishonestly
used the amount of the said contribution in violation of a
direction of law as aforesaid.
Explanation 2.--A person, being an employer, who deducts
the employees' contribution from the wages payable to the
employee for credit to the Employees' State Insurance Fund
held and administered by the Employees' State Insurance
Corporation established under the Employees' State
Insurance Act, 1948 (34 of 1948), shall be deemed to have
been entrusted with the amount of the contribution so
deducted by him and if he makes default in the payment of
such contribution to the said Fund in violation of the said
Act, shall be deemed to have dishonestly used the amount of
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the said contribution in violation of a direction of law as
aforesaid."
13. Section 405 of the Indian Penal Code defines the offence of
criminal breach of trust. A plain reading of the provision would
show that, in order to attract the said offence, the prosecution
must prima facie establish the following essential ingredients:
(i) that the accused was entrusted with property, or was
otherwise vested with dominion over such property;
(ii) that such entrustment was in the nature of confidence
reposed in the accused requiring him to deal with the
property in a particular manner;
(iii) that the accused dishonestly misappropriated or
converted the said property to his own use, or dishonestly
used or disposed of the same;
(iv) that such use, disposal, or conversion was in violation
of any direction of law or in breach of any legal contract,
whether express or implied, governing the discharge of such
entrustment; and
(v) that the dishonest intention accompanying such
misappropriation or conversion existed at the time of the
alleged act complained of.
14. The foundation of the offence under Section 405 is the
element of "entrustment". Unless it is first shown that the property
in question continued to belong to the complainant and had
merely been handed over to the accused in trust or for a specific
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purpose, the question of criminal breach of trust does not arise.
Mere receipt of property in the course of a commercial or
contractual transaction does not by itself amount to entrustment
within the meaning of Section 405. The relationship between the
parties must disclose that the accused held the property on behalf
of another and was under an obligation to deal with it in
accordance with the directions of the person entrusting it.
15. Further even after establishing entrustment it must also be
shown that the accused dishonestly misappropriated the property
or converted the same to his own use. Mere retention of money,
delayed payment, or failure to honour a promise, without more,
would not satisfy the ingredients of Section 405 unless
accompanied by material indicating dishonest misappropriation.
16. The Explanations appended to Section 405 create statutory
deeming fictions in specific situations involving employers
deducting employees' contributions towards Provident Fund and
Employees' State Insurance. In such cases the law deems the
employer to have been entrusted with the deducted amounts and
treats default in remittance as dishonest use in violation of law.
These explanations demonstrate that where the legislature
intended to expand the ordinary meaning of "entrustment," it has
done so expressly by legal fiction.
17. Thus, the settled legal position remains that, for constituting
an offence of criminal breach of trust, mere breach of contract or
non payment of dues is insufficient unless the foundational
requirement of entrustment coupled with dishonest
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misappropriation is made out.
18. The first requirement for criminal breach of trust is
entrustment. Unless the property is shown to have been entrusted
to the accused in such manner that he was under a duty to deal
with it for the benefit of the complainant or in a particular legal
manner, Section 405 cannot be brought in. The law does not
permit every failure in payment or every broken promise in a
commercial transaction to be called criminal breach of trust. The
facts must show that the accused was in a position of trust and
that he dishonestly misappropriated or converted the property.
That element is missing here or at least not shown with such
clarity as would justify criminal prosecution.
19. The statement of respondent No. 2 and his supplementary
statement certainly allege that jewellery was delivered to the
petitioner for sale. But the material placed before the Court shows
that the dealings were in the nature of business transactions
between two traders. The invoices relied upon by the complainant
are said to be unsigned by the purchaser. That circumstance goes
to the proof of the transaction itself. The invoices are also relied
upon with a mention of VAT payment, yet no investigation of any
real VAT payment is shown to have been carried out. When the
foundation documents themselves are not free from doubt, the
Court cannot lightly infer entrustment of property in the criminal
sense. The case may still give rise to a claim for money. It does not
automatically become a case of criminal breach of trust.
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20. The judgment in Delhi Race Club (1940) Limited and others
clearly supports the petitioner on this aspect. The principle is states
that in a sale transaction, once goods are delivered and property
passes, the relationship does not remain one of entrustment unless
some special arrangement is shown. Here, the complainant himself
says that jewellery was handed over for sale. That description does
not prove entrustment in the sense required by Section 405. If the
transaction was one of sale or supply of goods and if the petitioner
had already paid a large part of the amount through bank, then
the dispute more naturally falls within the civil nature. The
criminal law cannot be used to recover what may be payable in
accounts.
21. The reliance placed by the petitioner on Vir Prakash Sharma
is also well-founded. The Supreme Court has made it clear that
dishonour of cheques, non-payment, or short payment of
consideration, without more, does not constitute cheating or
criminal breach of trust. The present case, on the material shown,
appears to stand on that same footing. There are allegations of
unpaid balance. There are allegations of dishonoured cheques.
There are also clear assertions that payments of Rs.59,20,000/-
were already made. Once such payments appear from the record,
the dispute becomes one of accounts. It may be large. But size
alone does not create criminality.
22. The submission of the complainant that jewellery worth
Rs.60,66,606/- was obtained from him and neither price was paid
nor goods were returned cannot be accepted as sufficient by itself
to complete the offence. For criminal breach of trust, it must be
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shown that the petitioner held the property for the complainant
and then dishonestly misused it. There must be some material to
show a clear breach of trust and dishonest conversion. In the
present case, the material only shows that the petitioner was
involved in transactions of jewellery and payments were moving
from time to time. A businessman receiving goods and making part
payments is not a trustee of the goods in criminal law. The
complainant has not shown any material which would take the
case beyond a commercial liability.
23. The offence under Section 420 also does not stand on firmer
ground. For cheating, the dishonest intention must exist at the very
beginning of the transaction. A later failure to pay does not by
itself prove cheating. The present record does not show that the
petitioner induced the complainant from the very start with a
dishonest design. On the contrary the record reflects ongoing
business relations earlier payments and later dispute over
outstanding amounts. If the intention was dishonest from
inception, one would expect stronger material. That material is not
there. Mere breach of promise after a commercial deal is not
enough.
24. I also find substance in the petitioner's submission that a
substantial amount had already been paid between 10 April 2014
and 7 November 2014. This fact takes away force of the allegation
of a dishonest intention. If the petitioner had intended from the
beginning not to pay anything, such part payments would not have
been made in the ordinary course of business. These payments do
not wipe out the entire controversy, but they certainly indicate that
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the matter was moving as a running commercial account. Such a
dispute cannot be allowed to be converted into a criminal
prosecution.
25. The Court must also keep in mind that criminal process is a
serious matter. It cannot be used as a pressure tactic in a business
dispute. If the basic facts themselves show a commercial
transaction, part payments, disputed invoices, and an unresolved
balance, the lawful course is to leave the parties to their civil
remedies. Criminal law should not be permitted to become a
weapon for recovery of money.
26. For these reasons, I find that the essential ingredients of
criminal breach of trust are not made out. Entrustment in the legal
sense is not established. Dishonest misappropriation is also not
shown. The allegations, even if read as they are, disclose at best a
monetary dispute arising out of business dealings. No clear initial
dishonest intention is made out from the record. The continuation
of the criminal case, therefore, would amount to an abuse of the
process of law.
27. Accordingly, the writ petition deserves to succeed. The
impugned FIR and the proceedings arising therefrom are liable to
be quashed, as the matter does not disclose the commission of
offences punishable under Sections 406 and 420 of the Indian
Penal Code on the material placed before this Court.
28. In view of the discussion made hereinabove, the following
order is passed:
(i) The writ petition is allowed;
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(ii) Rule is made absolute in terms of prayer clause (a);
(iii) It is hereby declared that the allegations contained in
the impugned First Information Report, even if taken at their
face value and accepted in entirety, do not disclose the
commission of offences punishable under Sections 406 and
420 of the Indian Penal Code;
(iv) Consequently, Crime Register No.231 of 2014
registered with L.T. Marg Police Station, Mumbai, and Case
No. 491/PW/16 arising therefrom, together with all
consequential proceedings thereto, stand quashed and set
aside;
(v) It is, however, clarified that this order shall not
preclude respondent No. 2 from pursuing such civil remedies
as may be available in law for recovery of the alleged
outstanding amount, if so advised;
(vi) In the facts and circumstances of the case, there shall
be no order as to costs;
(vii) Pending interim applications, if any, shall stand
disposed of accordingly.
29. At this stage, learned Advocate for respondent No.2 seeks
stay of this judgment and order for a period of four weeks from
today. However, for the reasons recorded above, the request for
stay is rejected.
(AMIT BORKAR, J.)
