Devendra Gupta vs The State Of Madhya Pradesh on 19 February, 2026

Author: Milind Ramesh Phadke

Bench: Milind Ramesh Phadke

NEUTRAL CITATION NO. 2026:MPHC-GWL:6154




                                             1                            MCRC-1198-2020
             IN     THE      HIGH COURT OF MADHYA PRADESH
                                   AT GWALIOR
                                       BEFORE
                     HON'BLE SHRI JUSTICE MILIND RAMESH PHADKE
                           MISC. CRIMINAL CASE No. 1198 of 2020
                           DEVENDRA GUPTA AND OTHERS
                                      Versus
                     THE STATE OF MADHYA PRADESH AND OTHERS
         Appearance:
                  Shri Rakesh Kumar Dubey - Advocate for the petitioners.
                  Ms. Kalpana Parmar - Public Prosecutor for the State.

         RESERVED ON              :-   11/02/2026
         DELIVERED ON             :-   19/02/2026
                                                 ORDER

This petition, under Section 528 of BNSS (482 of CrPC) has been filed by the petitioner seeking following reliefs:

"अतः िनवेदन है क यािचकाकतागण क तुत यािचका को वीकार करते हुये यािचकाकतागण को अपराध कमांक 358/2018 अंतगत धारा 420, 406 भा०द० व० पुिलस थाना कोतवाली ल कर, जला वािलयर क थम सूचना रपोट एवं यायालयीन कायवाह को अपा त कये जाने का आदे श पा रत करने क कृ पा कर।"

As per prosecution story, the complainant, Vinayak Gupta, son of Shri Daulataram Gupta, resident of Nayi Sadak, Lashkar, Gwalior, submitted a written complaint at Police Station Kotwali, alleging that the petitioners had committed criminal breach of trust and cheating, as they were engaged in the NEUTRAL CITATION NO. 2026:MPHC-GWL:6154

2 MCRC-1198-2020

business of running a hotel and liquor trade and their hotel, namely, Bhagwati Lodge, had been lying in a dilapidated condition for a considerable period, the petitioners represented to the complainant that the hotel would be restarted and renovated, and they assured him that he would be made a partner in the said business. Relying upon their assurances, on 03.08.2018, the complainant paid a sum of Rs.5,00,000/- through Cheque No.191276. On the same day, he further transferred Rs.10,00,000/- to the account of Devendra Gupta (petitioner No.2) through RTGS from Axis Bank. Thus, a total sum of Rs. 15,00,000/- was paid by the complainant in good faith and in trust. It was alleged that from the very inception, the intention of the petitioners was dishonest and fraudulent. After the hotel commenced

operations, when the complainant requested that the partnership arrangement be reduced into writing, the petitioners initially avoided the matter on one pretext or another. Subsequently, they outrightly refused to execute any partnership deed or acknowledge his share. On the basis of the said written complaint, alleged FIR bearing Crime No.358 of 2018 was registered against the petitioners at Police Station Kotwali, Lashkar, under Sections 420 and 406 of the Indian Penal Code. Aggrived by the aforesaid registration of FIR, the present petition has been filed.

Learned counsel for the petitioners submitted that the present FIR bearing Crime No. 358/2018 registered at Police Station Kotwali, Lashkar, District Gwalior under Sections 420 and 406 of the Indian Penal Code is wholly misconceived, malicious and amounts to gross abuse of the process of law, as the allegations contained in the complaint, even if taken at their NEUTRAL CITATION NO. 2026:MPHC-GWL:6154

3 MCRC-1198-2020 face value and accepted in their entirety, do not satisfy the essential ingredients of the offences alleged against the petitioners.

It was further submitted that the dispute between the parties was purely civil in nature arising out of a business transaction and the complainant had voluntarily entered into a commercial understanding with the petitioners for renovation and operation of Bhagwati Lodge. The amount of Rs.15,00,000/- was advanced in furtherance of a proposed business arrangement and not by way of entrustment as contemplated under Section 406 IPC. There was no written agreement creating fiduciary obligation, dominion over property, or any specific entrustment so as to constitute criminal breach of trust.

It was further submitted that one of the essential ingredients of the offence under Section 420 IPC is dishonest or fraudulent intention at the very inception of the transaction and the complaint was completely silent on any material suggesting that at the time of receiving the amount, the petitioners had a pre-existing intention to deceive the complainant. Mere non-execution of a partnership deed or subsequent business disagreement cannot retrospectively convert a civil dispute into a criminal prosecution. In the absence of mens rea at the inception, the offence of cheating is not made out.

It was further submitted that during the course of investigation, the police authorities conducted inquiry into the allegations and did not find any concrete or cogent evidence substantiating the commission of offences under Sections 420 and 406 IPC. Consequently, on 17.07.2019, a Final Report was submitted before the learned Magistrate seeking closure of the case on the

ground that no offence was made out against the petitioners. NEUTRAL CITATION NO. 2026:MPHC-GWL:6154

4 MCRC-1198-2020 It was further submitted that the complainant himself, in Complaint Case No. 2087/2018, specifically admitted in paragraph 2 of his sworn affidavit that out of the total amount allegedly advanced, a sum of Rs.10,00,000/- was repaid to him through RTGS. This admission demolished the very foundation of the allegation of dishonest intention. With regard to the remaining amount of Rs.5,00,000/-, the complainant has already instituted proceedings under Section 138 of the Negotiable Instruments Act, which are presently pending before the Court of the learned JMFC, Gwalior.

It was further submitted that once the complainant had invoked the statutory remedy under Section 138 of the Negotiable Instruments Act in respect of the alleged outstanding amount of Rs.5,00,000/-, and the matter is sub-judice before a competent court, continuation of criminal proceedings under Sections 420 and 406 IPC on the same set of facts amounts to multiplicity of proceedings and harassment. The law is well settled that criminal proceedings cannot be permitted to be used as a tool for recovery of money or for exerting pressure in a purely contractual dispute.

It was also submitted that the learned Magistrate, while rejecting the Final Report and directing further investigation, did not properly appreciate that the entire case rests solely upon the interested testimony of the complainant and no independent witnesses or corroborative evidence were available. The order directing further investigation has been passed mechanically without examining whether the basic ingredients of the alleged offences are prima facie established.

It was further submitted that the petitioners are respectable NEUTRAL CITATION NO. 2026:MPHC-GWL:6154

5 MCRC-1198-2020 businessmen and have been falsely implicated due to monetary disputes arising from a business understanding. The continuation of criminal proceedings in such circumstances would cause undue harassment and irreparable prejudice to the petitioners and would amount to misuse of the criminal justice machinery.

In view of the aforesaid submissions, it was prayed that the present petition be allowed and FIR No. 358/2018 registered at Police Station Kotwali, Lashkar, District Gwalior under Sections 420 and 406 of the Indian Penal Code be quashed.

Per contra, learned Public Prosecutor for the State opposed the petition and prayed for its rejection submitting that the FIR bearing Crime No. 358/2018 registered at Police Station Kotwali, Lashkar, District Gwalior under Sections 420 and 406 of the Indian Penal Code discloses a prima facie commission of cognizable offences and the allegations in the complaint clearly stated that the accused persons induced the complainant to part with a substantial amount of Rs.15,00,000/- on the pretext of granting partnership in the hotel business and thereafter failed to honour their commitment. Whether there was dishonest intention at the inception of the transaction is a matter of evidence, which cannot be conclusively determined at the stage of quashment. The settled position of law is that where the allegations disclose the ingredients of an offence, the criminal proceedings ought not to be scuttled at the threshold.

It was further submitted that the learned Magistrate, upon perusal of the case diary and the material placed on record, found that the investigation NEUTRAL CITATION NO. 2026:MPHC-GWL:6154

6 MCRC-1198-2020 was not conducted in a proper and comprehensive manner and therefore rightly rejected the closure report and directed further investigation. The complainant had specifically alleged collusion and incomplete investigation, and the matter requires thorough probe to ascertain the true facts.

Heard counsel for the parties and perused the record. It is evident from the material placed on record that the dispute between the parties arises out of a monetary transaction pertaining to a proposed business arrangement in respect of renovation and operation of a hotel and the complainant admittedly advanced a total sum of Rs.15,00,000/- to the petitioners. It is further borne out from the record, including the affidavit filed by the complainant in Complaint Case No. 2087/2018, that a sum of Rs.10,00,000/- was subsequently repaid to him through RTGS. With regard to the remaining amount of Rs.5,00,000/-, proceedings under Section 138 of the Negotiable Instruments Act have already been instituted and are pending before the competent court. These admitted facts clearly demonstrated that the dispute is predominantly of a civil and contractual nature.

For an offence under Section 420 IPC, dishonest intention at the inception of the transaction is a sine qua non . The complaint and the material collected during investigation do not disclose any specific allegation or prima facie evidence to establish that the petitioners had a fraudulent or dishonest intention at the very inception when the amount was received. Similarly, the essential ingredients of Section 406 IPC, namely, entrustment and subsequent dishonest misappropriation, are not made out from the facts NEUTRAL CITATION NO. 2026:MPHC-GWL:6154

7 MCRC-1198-2020 of the case. The transaction appears to be a business understanding which subsequently failed, giving rise to civil consequences.

It is also noteworthy that after conducting investigation, the police submitted a Final Report on the ground that no offence was made out against the petitioners and the learned Magistrate rejected the closure report and directed further investigation; however, even upon consideration of the entire material, this Court finds that continuation of the criminal proceedings would amount to permitting the criminal process to be used as a tool for recovery of money and for settling a business dispute.

The inherent powers of this Court under Section 528 of BNSS (482 CrPC) are to be exercised to prevent abuse of the process of court and to secure the ends of justice. In the facts and circumstances of the present case, allowing the criminal prosecution to continue would result in unnecessary harassment of the petitioners and would amount to misuse of the criminal justice system.

Accordingly, the present petition is allowed. FIR bearing Crime No. 358/2018 registered at Police Station Kotwali, Lashkar, District Gwalior under Sections 420 and 406 of the Indian Penal Code, along with all consequential proceedings arising therefrom, stands quashed.

The quashment of the FIR under Sections 420 and 406 IPC has no automatic bearing on the proceedings under Section 138 of the Negotiable Instruments Act.

Proceedings under Section 138 of the Negotiable Instruments Act are distinct and independent in nature. They arise out of dishonour of cheque for NEUTRAL CITATION NO. 2026:MPHC-GWL:6154

8 MCRC-1198-2020 discharge of legally enforceable debt or liability and are governed by a special statutory mechanism. The ingredients of the offence under Section 138 are materially different from those under Sections 420 and 406 IPC. Therefore, even if the criminal case alleging cheating and criminal breach of trust has been quashed, the complaint under Section 138 can validly continue, provided its statutory requirements are satisfied.

In the present case, since the alleged remaining amount of Rs.5,00,000/- forms the subject matter of the Section 138 complaint, the learned trial court shall proceed with the said complaint independently and decide the same on its own merits, in accordance with law, uninfluenced by the quashment of the FIR under the IPC. The quashing order would not preclude the complainant from prosecuting his remedy under the Negotiable Instruments Act, nor would it prejudice the defence of the accused in those proceedings.

Accordingly, while the proceedings arising out of Crime No. 358/2018 stand quashed, the complaint under Section 138 of the Negotiable Instruments Act shall continue in accordance with law.

(MILIND RAMESH PHADKE) JUDGE

pwn* DN: c=IN, o=HIGH COURT OF MADHYA PRADESH BENCH AT GWALIOR, 2.5.4.20=b864d1ab4ace2215bfcf3ab301c34d631287f1b1cdd90b4a49f265 f02d9d593f, ou=HIGH COURT OF MADHYA PRADESH BENCH AT GWALIOR,CID - 7064434, postalCode=474001, st=Madhya Pradesh, serialNumber=61b9d129971d2ea4fd4455ed49ea436ea65e26164beeed89 153191c56e98ce21, cn=PAWAN KUMAR Date: 2026.02.19 18:22:14 +05'30'