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Gujarat High Court
Sidharth Harshadbhai Padaliya vs State Of Gujarat on 29 April, 2026
NEUTRAL CITATION
R/CR.MA/4324/2025 ORDER DATED: 29/04/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 4324 of 2025
With
CRIMINAL MISC.APPLICATION (FOR STAY) NO. 1 of 2025
In
R/CRIMINAL MISC.APPLICATION NO. 4324 of 2025
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SIDHARTH HARSHADBHAI PADALIYA
Versus
STATE OF GUJARAT
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Appearance:
MR. YASHDHAR Y. SUDRA(14610) for the Applicant(s) No. 1
MR ADITYA JADEJA, APP for the Respondent(s) No. 1
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CORAM:HONOURABLE MS. JUSTICE S.V. PINTO
Date : 29/04/2026
ORAL ORDER
1. Rule returnable forthwith. Learned APP waives
service of notice of rule for the respondent-State. Though
served, none appears for respondent no.2.
2. Considering the facts and circumstances of the case
and with consent of learned advocate for the respective parties
and the fact that FIR is quashed qua main accused No.1 to 7 by
the Coordinate Bench of this Court vide order dated 02.09.2024
passed in Criminal Misc. Application No. 22009 of 2021, the
present matter is taken up for final disposal forthwith.
3. By way of this application under Section 482 of the
Code of Criminal Procedure, 1973 (hereinafter referred to as
"Cr.P.C."), the applicant has prayed to quash and set aside the
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complaint being FIR C.R. No. 11202009201601 of 2020 with
City 'B' Division Police Station, Jamnagar for the offences
punishable under Sections 406 & 420 of IPC as well as Sections
13, 16, 17, 19, 23(1) (b), (c),(e) & (f) of The Securities Contract
(Regulation) Act, 1956 and all the consequential proceedings
arising therefrom.
4. The facts of the case are that on 22.10.2020,
respondent No.2, PSI, based on information received by a
police officer while patrolling an area in Jamnagar City along
with other police officers, raided the shop of accused No.3. The
accused persons were trading in securities without a license or
permission and without entering into a contract with SEBI, in
violation of the provisions of the Act. It is further alleged that
during the raid, the police found accused Nos.1 to 3 at the scene
of the offense, along with documents and other materials such as
a computer, register, etc., as stated in the FIR. It is also alleged
that during the raid, the police discovered certain computer
printouts containing codenames of accused Nos.7 to 11, which
led to the filing of the present impugned complaint.
5. Learned advocate for the applicant submits that the
applicant has nothing to do with the offence and he is falsely
implicated in it. Upon submission of charge sheet, the Ld.
Magistrate committed the case to the Sessions Court, Jamnagar
since the offences punishable under the provisions of the Act
are triable by the Sessions Court. Pursuant thereto, Sessions
Case No.113/2021 came to be registered and the same is
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pending at the stage of framing of charge in the Court of Ld. 3 rd
Additional District Judge, Jamnagar.
5.1 It is submitted that there is a specific bar contained in
Section 26 of the Act, and the Court could not have taken
cognizance based on a police report in view of this bar. In the
present case, in the absence of a complaint in writing filed
before the appropriate court, the lower court took cognizance of
the alleged offenses based on a police report, which is clearly in
contravention of the provisions of Section 26. Therefore, the
entire proceedings are illegal and liable to be quashed. It is
further submitted that the allegations leveled against the
present applicant are far from the truth and do not constitute
criminal breach of trust. In light of Section 26 of the Act, the
lower court ought not to have taken cognizance of the offenses
based on a police report. Therefore, the application may be
allowed.
5.2. Learned advocate further submits that the impugned
qua the main accused nos. 1 to 7 has been quashed by the
Coordinate Bench of this Court (Coram : Hon'ble Mr. Justice
Hasmukh D. Suthar, J.) passed in Criminal Misc. Application No.
22009 of 2021 dated 02.09.2026. Therefore, the present
application may be allowed.
6. Learned APP Mr. Aditya Jadeja has strongly opposed
the present application and submits that the accused nos. 1 to 7
were engaging in trading in securities without a license or
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permission and without entering into a contract with SEBI, in
violation of the provisions of the Act. During the raid, the police
found accused persons at the scene of the offense, along with
documents and other materials such as a computer, register,
etc., as stated in the FIR. During the raid, the police discovered
certain computer printouts containing codenames. However, the
present applicant is not named in the FIR but his name came in
light through the mobile phone of the original accused no.3. He
therefore, requested to dismiss the present application.
7. Having heard learned advocates on both the sides
and considering the fact, it appears from the complainant that
on 22.10.2020, respondent No.2, PSI, based on information
received by a police officer while patrolling an area in Jamnagar
City along with other police officers, raided the shop of accused
No.3. The accused persons were trading in securities without a
license or permission and without entering into a contract with
SEBI, in violation of the provisions of the Act. It is further alleged
that during the raid, the police found accused Nos.1 to 3 at the
scene of the offense, along with documents and other materials
such as a computer, register, etc., as stated in the FIR. It is also
alleged that during the raid, the police discovered certain
computer printouts containing codenames of accused Nos.7 to
11, which led to the filing of the present impugned complaint.
8. In view of the above, there is no direct evidence or
material to suggest that there was any entrustment of property.
The allegations in the complaint accuse the applicant of
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engaging in fraud and misconduct, but nowhere is it alleged that
he pocketed money by causing a loss to anyone or obtaining
wrongful gain. Even if this fact is accepted, it constitutes merely
a breach of the Securities Contract (Regulation) Act, which has
been wrongly characterized as criminal breach of trust.
Criminal breach of trust, as defined in Section 405 of the IPC, is
as follows:
"Whoever, being entrusted with property, or having dominion
over property, dishonestly misappropriates or converts that
property to their own use, 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 they have made
concerning the discharge of such trust, or willfully allows any
other person to do so, commits 'criminal breach of trust."
9. In view of the above, it is clear that the applicant has
neither caused any financial loss to anyone nor obtained any
wrongful gain. The investigating agency has also failed to
produce any concrete documents showing financial loss to
anyone in support of his argument. Even when asked on what
grounds the criminal breach of trust is alleged to have been
committed by the applicant, the respondent remained silent.
Merely based on the complaint, a case under the provisions of
criminal breach of trust was registered, but the investigating
agency has not produced any evidence to support this assertion.
Therefore, this does not constitute criminal breach of trust, and
Section 406 of the IPC is not applicable.
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10. Regarding the provisions under the Securities
Contract (Regulation) Act, upon considering Section 26 of the
Act, it is clear that the lower court ought not to have taken
cognizance of the offenses based on a police report.
10.1 Section 26 of the Securities Contract (Regulation) Act
as under:
(1) No court shall take cognizance of any offense
punishable under this Act, or any rules, regulations, or
bye-laws made thereunder, except on a complaint
made by the Central Government, the State
Government, the Securities and Exchange Board of
India, a recognized stock exchange, or any other
authorized person.
(2) No court inferior to that of a Court of Session shall try
any offense punishable under this Act.
11. In view of the above, a plain reading of Section 26 of
the Act suggests that no court can take cognizance of any
offense punishable under the Act except on a complaint made
by the Central Government, the State Government, the
Securities and Exchange Board of India, a recognized stock
exchange, or any authorized person. Therefore, no case is made
out under the provisions of the Securities Contract (Regulation)
Act.
12. So far as offence under Section 420 of the IPC is
concerned, it is appropriate to refer to the decision of the
Hon'ble Apex Court in the case of Rekha Jain vs. The State of
Karnataka & Anr. reported in 2022 LiveLaw (SC) 468, wherein
the Hon'ble Supreme Court held that, to make out a case against
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a person for the offence under Section 420 of IPC, there must be
a dishonest inducement to deceive a person to deliver any
property to any other person. Further, in the case of Sarabjit
Kaur vs. State of Punjab & Anr. reported in (2023)5 SCC 360
has held in paragraph No.13 as follows:
"13. 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. From the facts available on record, it is
evident that the respondent No.2 had improved his
case ever since the first complaint was filed in which
there were no allegations against the appellant rather it
was only against the property dealers which was in
subsequent complaints that the name of the appellant
was mentioned. On the first complaint, the only request
was for return of the amount paid by the respondent
No.2. When the offence was made out on the basis of
the first complaint, the second complaint was filed with
improved version making allegations against the
appellant as well which was not there in the earlier
complaint. The entire idea seems to be to convert a
civil dispute into criminal and put pressure on the
appellant for return of the amount allegedly paid. The
criminal Courts are not meant to be used for settling
scores or pressurise parties to settle civil disputes.
Wherever ingredients of criminal offences are made
out, criminal courts have to take cognizance. The
complaint in question on the basis of which F.I.R. was
registered was filed nearly three years after the last
date fixed for registration of the sale deed. Allowing
the proceedings to continue would be an abuse of
process of the Court."
13. In the case of State of Haryana v. Bhajan Lal,
reported in 1992 Supp (1) SCC 335, the Apex Court has set out
the categories of cases in which the inherent power under
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Section 482 CrPC can be exercised and held in para 102 as
under:
"102. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and
of the principles of law enunciated by this Court in a
series of decisions relating to the exercise of the
extraordinary power under Art. 226 or the inherent
powers under Section 482 of the Code which we have
extracted and reproduced above, we give the
following categories of cases by way of illustration
wherein such power could be exercised either to
prevent abuse of the process of any court or otherwise
to secure the ends of justice, though it may not be
possible to lay down any precise, clearly defined and
sufficiently channelised and inflexible guidelines or
rigid formulae and to give an exhaustive list of myriad
kinds of cases wherein such power should be
exercised :
(1) Where the allegations made in the first
information report or the complaint, even if they
are taken at their face value and accepted in
their entirety do not prima facie constitute any
offence or make out a case against the accused.
(2) Where the allegations in the first information
report and other materials, if any,
accompanying the FIR do not disclose a
cognizable offence, justifying an investigation
by police officers under Section 156(1) of the
Code except under an order of a Magistrate
within the purview of Section 155(2) of the
Code.
(3) Where the uncontroverted allegations made in
the FIR or complaint and the evidence collected
in support of the same do not disclose the
commission of any offence and make out a case
against the accused.
(4) Where, the allegations in the FIR do not
constitute a cognizable offence but constitute
only a noncognizable offence, no investigation
is permitted by a police officer without an order
of a Magistrate as contemplated under sec.
155(2) of the Code.
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(5) Where the allegations made in the FIR or
complaint are so absurd and inherently
improbable on the basis of which no prudent
person can ever reach a just conclusion that
there is sufficient ground for proceeding against
the accused.
(6) Where there is an express legal bar engrafted
in any of the provisions of the Code or the
concerned Act (under which a criminal
proceeding is instituted) to the institution and
continuance of the proceedings and/or where
there is a specific provision in the Code or the
concerned Act, providing efficacious redress
for the grievance of the aggrieved party.
(7) Where a criminal proceeding is manifestly
attended with mala fide and/or where the
proceeding is maliciously instituted with an
ulterior motive for wreaking vengeance on the
accused and with a view to spite him due to
private and personal grudge."
14. In the result, the application is allowed. The
impugned complaint being C.R. No. 11202009201601 of 2020
with City 'B' Division Police Station, Jamnagar as well as all
consequential proceedings initiated in pursuance thereof are
hereby quashed and set aside qua the applicant herein. Rule is
made absolute. Direct service is permitted.
15. Connected application/s, if any, stand/s disposed of.
(S. V. PINTO,J)
F.S. KAZI
