Mr. Kumar Srinivasa Penumatessa Varma vs The State Of Telangana
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Telangana High Court

Mr. Kumar Srinivasa Penumatessa Varma vs The State Of Telangana on 16 June, 2025

Author: Juvvadi Sridevi

Bench: Juvvadi Sridevi

THE HONOURABLE SMT JUSTICE JUVVADI SRIDEVI

        CRIMINAL PETITION No.11127 OF 2022

O R D E R:

This Criminal Petition is filed by the petitioner-

accused seeking to quash the proceedings against him in

C.C.No.3114 of 2022 pending on the file of the learned

XVII Additional Chief Metropolitan Magistrate at Nampally,

Hyderabad, registered for the offences under Sections

420, 406 of the Indian Penal Code (for short 'IPC').

02. Heard Sri Duvva Pavan Kumar, learned counsel

for the petitioner-accused and Smt.S.Madhavi, learned

Assistant Public Prosecutor for the State-respondent No.1

as well as Sri Dishit Bhattacharjee, learned counsel for the

unofficial respondent No.2. Perused the record.

03(a). Brief facts of the case are that on 21.02.2022 at

19:00 hours the complainant lodged a complaint alleging

that the petitioner-accused is the Founder of the company

i.e. M/s.Super Surfaces, which deals with the high end

luxury paints. During July, 2019, the friend of the

petitioner-accused by name Mr.Ravi Varma.P, introduced

the complainant to the petitioner-accused, as a contractor

to execute the painting works. After having an oral

agreement regarding works and payments, the

complainant commenced the work. The complainant

executed works in Telangana, Andhra Pradesh and

Chennai. The payments were regular for a period of two

months. Therefore, the said Ravi Varma was exited out of

the company by the petitioner-accused due to some

unknown reasons. After few days of his friend exiting the

company, the complainant started facing problems with

the accused company with regard to payments. The

complainant asked the petitioner-accused for payments

and somehow he used to give the complainant some

reasonless excuses.

03(b). During March 2020, total lockdown was

announced by the Central Government due to Covid-19.

Once the lockdown got relaxed during the month of May

2020, the complainant got a call from the petitioner-

accused asking him to commence the work. The

complainant rejected his offer to resume work as he faced

problems with the petitioner-accused before lockdown

regarding payments and as his pending bills are not

cleared. The petitioner-accused called the complainant to

his office and discussed the matter and the accounts were

settled and the petitioner-accused was found to be due to

the tune of Rs.16,00,000/- and odd. For which, the

complainant asked the petitioner-accused to settle down

his balance amount immediately.

03(c). Again the petitioner-accused stated that the

company was in losses during the financial year 2019-

2020 and promised to pay the amount after completion of

work and requested the complainant to continue the work.

The complainant had agreed for the said request of the

petitioner-accused, on condition i.e. the complainant

should be given a proper work order for each work before

commencement of work and that his previous payments

have to be made after work. For which, the petitioner-

accused agreed and the complainant started executing

the works. Once again, the petitioner-accused committed

default in payments.

03(d). During December, 2020 and January, 2021 the

complainant got exhausted with all his financial resources

and he was not in a position to even pay salaries to his

applicators. After Sankranti festival in January 2021, the

complainant accounted his total pending amount from the

petitioner-accused company which is nearing to Rs.85 to

90 lakhs. The complainant demanded the petitioner-

accused to clear his payment. The petitioner-accused

asked for a GST bill on date. The complainant

immediately registered his GST from his home state

Andhra Pradesh, Palakollu town, as that is the place

where he could get his GST registered immediately, as it

takes 2 to 3 weeks to get GST registered in Hyderabad.

During February, 2021 the complainant submitted the

company all his GST invoices and got acknowledgement

for the same from Mr. Srikanth in the accounts department

for a total sum of Rs.1,05,86,640.28 inclusive GST, out of

which the complainant received an amount of

Rs.16,60,467/- and the balance to be received is

Rs.88,26,173.28/- inclusive GST.

03(e). After submitting his invoices with GST to the

accounts department, the complainant demanded the

petitioner-accused for his payment but the petitioner-

accused started avoiding him, for which, he stopped

execution of works and stated that he would re-commence

the works only if his payment is cleared. At this stage, the

petitioner-accused started threatening the complainant

with dire consequences stating that he will not do the

payment and would file a criminal case against the

complainant. During March, 2021 the petitioner-accused

has uploaded some GST bills to his GST account stating

that they sold some painting material which comes to

around 60 to 70 lakhs. Later, the complainant found out

that the petitioner-accused committing malpractices to

subside the dues or payments to be made. Since March

31st 2022 is Financial Year closing day, the complainant

supposed to at least close his GST by that time. After

accounting his total due from the company with 18% GST

penalties and 24% interest rate for the whole one year for

personal damage occurred to him it came to

Rs.1,12,70,072.27. Hence, the complainant requested for

necessary action against the petitioner-accused.

04. Learned counsel for the petitioner submitted that

the petitioner is nothing to do with the alleged offences.

There is no dishonest intention on the part of the

petitioner-accused. Mere failure to repay the amount

would not amount to criminal offence of cheating. There

is no element of cheating from the beginning of the

transaction. There is no fraudulent intention on the part of

the petitioner-accused to cheat the complainant. The

Police filed the charge sheet without proper investigation

and reproduced the contents of the complaint and FIR in

the charge sheet and there is no incriminating material

collected by the Police by way of investigation. All the

allegations levelled against the petitioner-accused are

purely civil in nature and the respondent No.2-complainant

is trying to convert the civil dispute into a criminal dispute.

The offences under Sections 406 and 420 of IPC are anti-

thetical and cannot co-exist simultaneously.

05. With the above submissions, learned counsel for

the petitioner-accused while praying for the quashment of

criminal proceedings relied upon a decision of the

Honourable Supreme Court of India in Delhi Race Club

(1940) Ltd., v State of UP 1, wherein it was held at

Paragraph No. 43 that:

"43. There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously."

06. Further, he relied upon a decision in Rikhab

Birani and another v State of UP 2 it was held by the

Honourable Supreme Court at Paragraph Nos. 2, 6, 12,

13, 14, 20 that:

"2. The appellants, Rikhab Birani and Sadhna Birani, had entered into an oral agreement to sell Roti Godown No. 28/27, Birhana Road, Kanpur, Uttar Pradesh, to respondent No.2, Shilpi Gupta, for a consideration of ₹1,35,00,000/- (Rupees one crore thirty five lakhs only) in June, 2020.

6. It is the case of the appellants, Rikhab Birani and Sadhna Birani, that they had

(2024) 10 SCC 690

2025 SCC OnLine SC 823

suffered losses of ₹45,00,000/- (Rupees forty five lakhs only) on account of the failure of respondent No. 2, Shilpi Gupta, and her husband, in paying the sale consideration amount and abiding by the oral agreement;

hence, they are not liable to refund or pay any amount to respondent No.2, Shilpi Gupta. It is the accepted position that neither the appellants, Rikhab Birani and Sadhna Birani, nor respondent No. 2, Shilpi Gupta, initiated any civil proceedings. On the other hand, respondent No.2, Shilpi Gupta, approached the Court of the Metropolitan Magistrate, Kanpur Nagar, for registration of a First Information Report1 by taking recourse to the provisions of Section 156(3) of the Code of Criminal Procedure, 1973. However, by the detailed and reasoned order dated 26.04.2022, the Metropolitan Magistrate, Kanpur Nagar, dismissed the application under Section 156(3) of the Cr.P.C. holding that this is a civil matter and no criminal offence is made out.

12. Thereupon, the appellants, Rikhab Birani and Sadhna Birani, preferred a petition under Section 482 of the Cr.P.C. before the High Court, which was dismissed by the High Court, vide the impugned order dated 09.05.2024, notwithstanding the aforesaid facts, stating that at that stage, only a prima facie case was to be seen in the light of the law laid down by this Court.

13. We are constrained to pass this detailed speaking order, as it is noticed that, notwithstanding the law clearly laid down by this Court on the difference between a breach of contract and the criminal offence of cheating, we are continuously flooded with cases where the police register an FIR,

conduct investigation and even file chargesheet(s) in undeserving cases.

14. During the last couple of months, a number of judgments/orders have been pronounced by this Court, especially in cases arising from the State of Uttar Pradesh, deprecating the stance of the police as well as the courts in failing to distinguish between a civil wrong in the form of a breach of contract, non-payment of money or disregard to and violation of contractual terms; and a criminal offence under Sections 420 and 406 of the IPC, the ingredients of which are quite different and requires mens rea at the time when the contract is entered into itself to not abide by the terms thereof.

20. In yet another case, again arising from criminal proceedings initiated in the State of Uttar Pradesh, this Court was constrained to note recurring cases being encountered wherein parties repeatedly attempted to invoke the jurisdiction of criminal courts by filing vexatious complaints, camouflaging allegations that are ex facie outrageous or are pure civil claims. These attempts must not be entertained and should be dismissed at the threshold. Reference was made to a judgment of this Court in Thermax Limited and Others v K.M. Johny and Others, which held that courts should be watchful of the difference between civil and criminal wrongs, though there can be situations where the allegation may constitute both civil and criminal wrongs. Further, there has to be a conscious application of mind on these aspects by the Magistrate, as a summoning order has grave consequences of setting criminal proceedings in motion. Though the Magistrate is not required to record detailed

reasons, there should be adequate evidence on record to set criminal proceedings into motion. The Magistrate should carefully scrutinize the evidence on record and may even put questions to the complainant/investigating officer etc. to elicit answers to find out the truth about the allegations. The summoning order has to be passed when the complaint or chargesheet discloses an offence and when there is material that supports and constitutes essential ingredients of the offence. The summoning order should not be passed lightly or as a matter of course."

07. Further, he relied upon a decision in Sharif

Ahmed v State of UP 3 it was held by the Honourable

Supreme Court at Paragraph No.13 that:

"13. The charge sheet is complete when it refers to material and evidence sufficient to take cognizance and for the trial. The nature and standard of evidence to be elucidated in a charge sheet should prima facie show that an offence is established if the material and evidence is proven."

08. On the other hand, learned Assistant Public

Prosecutor appearing for the State-respondent No.1 as

well as learned counsel for the unofficial respondent No.2

contended that there are triable issues and factual

aspects to be examined by the learned trial Court and it is

2024 SCC OnLine SC 726

not a fit case to quash the proceedings against petitioner

at this juncture and the matter is to be decided after

conducting full-fledged trial by the learned trial Court and

prayed to dismiss this Criminal Petition.

09. Having regard to the submissions made on either

side and on perusal of the material record, it is apparent

that there was an oral agreement between the

complainant and the petitioner-accused with regard to

painting works. Admittedly, the payments were done for a

period of two months. Thereafter, certain amounts were

due from the petitioner-accused to the complainant, for

which, the complainant halted the works. Subsequently,

there were discussions between the complainant and the

petitioner-accused and the work has been resumed by the

complainant. Some part payments were also made by the

petitioner-accused and the same were accepted by the

complainant. It is also apparent on the face of the record

that the petitioner-accused had admittedly promised to

repay the balance amount to the complainant. In so far as

uploading or deletion of GST invoices is concerned, it is

evident from the contents of the complaint itself that the

GST registration was done by the complainant, only after

demand of GST invoices from the petitioner-accused.

Hence, it is for the concerned authorities to take

necessary action, if any, violation was committed by the

complainant.

10. It is settled principle of law that the dishonest or

fraudulent intention on the part of the petitioner-accused,

to cheat the complainant shall be from inception. In the

case on hand, on the demand made by the complainant

for payment of due amount, the petitioner-accused had

paid part of the amount to the complainant and further

undertook to return the remaining amount. Therefore, the

allegation that there is dishonest or fraudulent intention on

the part of the petitioner-accused to cheat the

complainant, right from the beginning of the transaction, is

not sustainable in the eye of law.

11. It is to be noted that admittedly there is no

complaint lodged or reported grievance by the

complainant when initially the petitioner-accused failed to

pay the amounts. It is settled principle of law that mere

inability of the petitioner-accused to pay the amount

cannot give rise to a criminal prosecution for cheating

unless fraudulent or dishonest intention is shown right at

the beginning of the transaction.

12. The offences that are registered against the

petitioner-accused are under Sections 420, 406 of IPC.

Section 406 of IPC Criminal Breach of Trust, deals with

dishonestly misusing property entrusted to someone,

where the person is in a position of trust. It is about

violating a duty or obligation associated with the property.

Section 420 of IPC deals with cheating and focuses on

deceiving someone to induce them to deliver property or

consent to the retention of property, typically involving

fraud or dishonest inducement. It is about making a false

representation or inducing someone to believe in

something false. Cheating requires the element of

deception, while criminal breach of trust requires a trust

relationship and dishonestly using property entrusted.

13. In case of cheating, the intention of the accused

at the time of inducement should be looked into which

may be judged by a subsequent conduct, but for this, the

subsequent conduct is not the sole test. Mere breach of

contract cannot give rise to a criminal prosecution for

cheating unless fraudulent or dishonest intention is shown

right from the beginning of the transaction i.e. the time

when the offence is said to have been committed.

Therefore, it is this intention, which is the gist of the

offence. Whereas, for the criminal breach of trust, the

property must have been entrusted to the accused or he

must have dominion over it. The property in respect of

which the offence of breach of trust has been committed

must be either the property of some person other than the

accused or the beneficial interest in or ownership' of it

must be of some other person. The accused must hold

that property on trust of such other person. Although the

offence, i.e. the offence of breach of trust and cheating

involve dishonest intention, yet they are mutually

exclusive and different in basic concept. In such a

situation, both the offences cannot co-exist

simultaneously, as they are anti-thetical of each other and

cannot dwell together in the same set-of-facts.

14. On a careful scrutiny of charge sheet averments,

it appears that there is reiteration of the contents of the

complaint and FIR. The investigation to be conducted

subsequent to registration of an FIR and prior to filing of a

charge sheet is a crucial step in criminal proceedings.

The contents of the charge sheet must reflect the result of

the said investigation including material evidence

sufficient to prove the alleged offences. But, in the case

on hand, the contents of the complaint and FIR are

reproduced in the charge sheet without any reference to

the investigation done or material evidence collected.

15. To prove the basic allegations against the

petitioner-accused for the alleged offences, there is no

single independent witness examined by the Police. Out

of seven list of witnesses examined, there are three

official witnesses, one de-facto complainant and three

circumstantial witnesses. In order to prove the alleged

oral agreement between the complainant and the

petitioner-accused, no independent witness was

examined. LW5 is shown as Expert witness. It is not

known from the entire record as to what type of

specialized expertise or skill possessed by LW5 and there

is no whisper about his role in the investigation. However,

the entire allegations revolves around the payment of due

amount by the petitioner-accused to the complainant. It

appears that all the allegations levelled against the

petitioner-accused are of purely civil in nature. Therefore,

initiation of criminal proceedings against the petitioner-

accused is not tenable.

16. In view of the aforesaid facts and circumstances

of the case including the settled principle of law laid down

by the Hon'ble Supreme Court of India in the above

decisions, this Court is of the firm opinion that the required

material ingredients for constituting the offences under

Sections 406, 420 of IPC are not made out against the

petitioner-accused. Hence, the continuation of the

criminal proceedings against the petitioner-accused

amounts to abuse of process of law and the same are

liable to be quashed.

17. Accordingly, this Criminal Petition is allowed and

the proceedings against the petitioner-accused in

C.C.No.3114 of 2022 pending on the file of learned XVII

Additional Chief Metropolitan Magistrate at Nampally,

Hyderabad, are hereby quashed.

As a sequel, pending miscellaneous applications,

if any, shall stand closed.

__________________ JUVVADI SRIDEVI, J Dated: 16-JUN-2025 KHRM