The Supreme Court quashed criminal proceedings under Sections 406 and 420 IPC, holding that mere breach of contract does not constitute a criminal offence absent proof of dishonest intent at the inception. The allegations disclosed only a civil dispute, and continuing criminal prosecution amounted to an abuse of the process of the court.
Facts Of The Case:
The appellant, Arshad Neyaz Khan, entered into an agreement to sell his property to the complainant, Md. Mustafa, in February 2013 for a consideration of Rs. 43,00,000, out of which an advance of Rs. 20,00,000 was paid. Nearly eight years later, in January 2021, the complainant filed a criminal complaint alleging that the appellant had failed to either transfer the property or refund the advance amount, accusing him of cheating, criminal breach of trust, and criminal conspiracy under Sections 420, 406, and 120B of the IPC. The parties subsequently reached a mediation settlement where the appellant agreed to repay Rs. 24,00,000 in instalments. However, after the appellant’s anticipatory bail was granted and later cancelled for non-compliance with the repayment condition, he approached the High Court under Section 482 CrPC seeking to quash the FIR and proceedings. The High Court refused to quash the case but granted him liberty to file a fresh bail application. The appellant then appealed to the Supreme Court, contending that the allegations, even if accepted as true, disclosed only a civil breach of contract and not any criminal offence.
Procedural History:
The procedural history of the case commenced with the filing of a criminal complaint by the respondent-complainant in January 2021, which led to the registration of an FIR. The appellant, apprehending arrest, secured an anticipatory bail order from the Court of the Judicial Commissioner, Ranchi, in December 2021. This bail was subsequently cancelled in June 2022 due to the appellant’s failure to comply with the financial conditions of the settlement. Aggrieved by this cancellation and the ongoing proceedings, the appellant invoked the inherent jurisdiction of the Jharkhand High Court under Section 482 of the CrPC, seeking to quash the FIR and all subsequent orders. However, the High Court, vide its order dated January 19, 2023, dismissed the quashing petition but granted liberty to file a fresh application for anticipatory bail. This refusal to quash the proceedings prompted the appellant to file the present appeal before the Supreme Court, challenging the High Court’s order.
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Court Observation:
The Supreme Court observed that the allegations in the FIR and complaint, even taken at face value, failed to make out the essential ingredients of the offences under Sections 406 or 420 of the IPC. The Court emphasized that for cheating, a dishonest intention must exist at the very inception of the transaction, which was absent here, as the failure to fulfill a contractual obligation alone does not constitute a criminal offence. Similarly, for criminal breach of trust, there was no evidence of entrustment or subsequent dishonest misappropriation of property. The Court noted the significant delay of nearly eight years in lodging the complaint, which further undermined the prosecution’s case. It ruled that the criminal proceedings were a misuse of the judicial process to settle a purely civil dispute and, applying the principles from State of Haryana v. Bhajan Lal, quashed the FIR and all consequent proceedings to prevent an abuse of the process of the court.
Final Decision & Judgement:
The Supreme Court allowed the appeal and set aside the impugned order of the High Court. Consequently, the Complaint Case No. 619 of 2021, the FIR No. 18 of 2021 registered at Police Station Hindpiri, and all proceedings initiated pursuant thereto were quashed. The Court held that continuing the criminal prosecution against the appellant would be an abuse of the process of the court as the allegations, even if accepted in their entirety, did not disclose a prima facie case for any criminal offence and revealed only a civil dispute.
Case Details:
Case Title: Arshad Neyaz Khan versus State of Jharkhand & Another Citation: 2025 INSC 1151 Criminal Appeal No.: (Arising out of Special Leave Petition (Criminal) No. 3606 of 2024) Date of Judgement: September 24, 2025 Judges/Justice Name: Justice B.V. Nagarathna and Justice R. Mahadevan
Download The Judgement Here