RIKHAB BIRANI & ANR. versus STATE OF UTTAR PRADESH & ANR. (16/04/2025) — Supreme Court headnote

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Summary

The Supreme Court quashed an FIR, chargesheet and summoning order under Sections 420, 406, 354, 504 and 506 IPC arising from a failed oral agreement to sell a godown, holding that a breach of contract is not cheating unless dishonest intention existed when the agreement was made, that the chargesheet merely reproduced the FIR without the particulars required by Section 173(2) CrPC, and that cognizance was taken despite two earlier orders finding the dispute civil. Costs of Rs 50,000 were imposed on the State of Uttar Pradesh for repeatedly turning civil wrongs into criminal prosecutions.

Issues

Whether the allegations arising from the failed oral agreement to sell and the non-refund of part consideration disclose the offences of cheating, criminal breach of trust, criminal intimidation and the offences under Sections 354 and 504 IPC, or only a civil dispute.
Whether a chargesheet that merely reproduces the FIR without stating the material and evidence collected during investigation satisfies Section 173(2) CrPC and can support cognizance and summoning.
Whether the Magistrate could take cognizance and summon the accused on the chargesheet when the complainant's earlier application under Section 156(3) CrPC and private complaint on the same allegations had been dismissed as civil in nature.
Whether costs should be imposed on the State for the repeated registration of FIRs and filing of chargesheets in civil disputes despite the Court's earlier judgments.

Provisions considered

Sections 415 and 420, Indian Penal Code, 1860Cheating requires deception and fraudulent or dishonest inducement causing delivery of property or damage; the dishonest intention must exist at the very inception of the contract. Failure to keep a promise or to pay money is a breach of contract and does not make out the offence; here no such intention at the time of the oral agreement was shown. (¶¶ 15, 16, 18, 21, 24)
Sections 405 and 406, Indian Penal Code, 1860Criminal breach of trust requires entrustment of property, the person handing it over remaining its owner, and a fiduciary relationship; a normal transaction of sale or payment of consideration is not entrustment. Cheating and criminal breach of trust are antithetical and cannot coexist on the same facts. (¶¶ 17, 21, 24)
Sections 503 and 506, Indian Penal Code, 1860Criminal intimidation requires a threat of injury to person, reputation or property made with intent to cause alarm or to compel an act or omission; mere words without such intent are insufficient and the intent must be shown by material on record. No such material existed. (¶¶ 21, 24)
Sections 354 and 504, Indian Penal Code, 1860Also invoked in the FIR; the chargesheet stated no material or evidence establishing their ingredients, which were held not made out. (¶¶ 9, 24)
Section 173(2), Code of Criminal Procedure, 1973The police report must set out with sufficient particularity the contravention alleged and refer to the material and evidence sufficient to take cognizance and for trial; it is complete when the case is not exclusively dependent on further evidence. The present chargesheet merely reproduced the FIR and was bereft of the required particulars. (¶¶ 23, 24)
Sections 190 and 204, Code of Criminal Procedure, 1973Cognizance means judicially taking notice of an offence on the complaint or police report after evaluating whether there is sufficient ground for proceeding; under Section 204 the Magistrate, though not required to record reasons, must form an opinion that there is sufficient ground, may consider prima facie improbabilities, and must not issue summons lightly or as a matter of course. (¶¶ 20, 23)
Section 156(3), Code of Criminal Procedure, 1973The complainant's application for registration of an FIR under this provision had been dismissed by a reasoned order of the Metropolitan Magistrate dated 26.04.2022 holding the matter civil; the FIR was nonetheless later registered directly at the police station. (¶¶ 7, 9, 12)
Section 202, Code of Criminal Procedure, 1973On the complainant's second complaint the Magistrate called for a report from the Station House Officer under this provision and, after receiving it, dismissed the complaint as civil in nature. (¶ 8)
Section 482, Code of Criminal Procedure, 1973The High Court had dismissed the appellants' petition under this provision on the footing that only a prima facie case was to be seen; the Court reiterated (following V.Y. Jose) that where the complaint lacks the ingredients of the offence the High Court should not hesitate to exercise its inherent power so that a person is not harassed by years of litigation. (¶¶ 13, 16, 25)
Sections 211 to 213 and 218, Code of Criminal Procedure, 1973Referred to as the provisions governing the framing and contents of a charge, which together with Sections 190 and 204 are connected to the contents of the chargesheet under Section 173(2). (¶ 23)

Held

A civil wrong in the form of a breach of contract, non-payment of money or violation of contractual terms is distinct from the offences under Sections 420 and 406 IPC, whose ingredients require mens rea at the time the contract is entered into. Following Lalit Chaturvedi, Mohammed Ibrahim, V.Y. Jose and Sarabjit Kaur, a breach of contract gives rise to prosecution for cheating only if fraudulent or dishonest intention is shown at the beginning of the transaction; a mere allegation of failure to keep a promise is not enough. (¶¶ 15, 16, 18)
Criminal breach of trust and cheating are antithetical in nature and cannot coexist; police officers and courts must carefully apply their minds to whether the allegations genuinely constitute the specific offence alleged. (¶ 17)
Courts must exercise great caution in issuing process in matters essentially civil in nature; the notion that civil remedies are too slow to protect creditors must be rejected, as criminal procedure cannot be used to apply pressure. Vexatious complaints camouflaging civil claims must be dismissed at the threshold; a summoning order has grave consequences, requires conscious application of mind and adequate material supporting the essential ingredients, and must not be passed as a matter of course. (¶¶ 19, 20)
Applying Sharif Ahmed: Section 406 requires entrustment and a fiduciary relationship, which a normal sale or exchange of money does not create; the offence of cheating requires dishonest inducement existing when the agreement was entered into; criminal intimidation requires a threat uttered with intent to cause alarm, which must be established by evidence. Courts must check attempts to make out a criminal case on vague and ex facie false assertions. (¶¶ 21, 22)
A chargesheet under Section 173(2) CrPC must be complete, referring to material and evidence sufficient for cognizance and trial and showing with sufficient particularity the contravention alleged; supplementary chargesheets under Section 173(8) are to add to a complete chargesheet, not to make up for a deficient one. The Magistrate taking cognizance under Section 190 and issuing process under Section 204 must evaluate whether there is sufficient ground for proceeding and may seek better particulars, order further investigation or record statements under Section 202. (¶ 23)
The chargesheet in this case was bereft of the particulars mandated by Section 173(2); it merely reproduced the FIR (payments made, the godown standing in the name of the appellant's deceased son, and a request for refund) without stating the material and evidence collected during investigation. The ingredients of Sections 420, 406, 354, 504 and 506 IPC were not made out, and the FIR and resultant proceedings including the chargesheet were quashed, without any observation on the civil rights of the complainant. (¶¶ 24, 25, 26)
Because, despite repeated judgments, the Court is flooded with cases from Uttar Pradesh in which civil wrongs are made the subject of chargesheets, costs of Rs 50,000 were imposed on the State, payable within six weeks, with liberty to recover the amount from the responsible officers after internal enquiry; the Registry was directed to send the order to the Chief Secretary. Costs were not imposed on the complainant as she may have acted on wrong legal advice. (¶¶ 27, 28, 29)

Result

Appeal allowed; the Allahabad High Court's order dated 09.05.2024 set aside; FIR No. 78/2023 and all resultant proceedings, including the chargesheet and the summoning order dated 17.01.2024, quashed; costs of Rs 50,000 imposed on the State of Uttar Pradesh, payable within six weeks of receipt of the order; pending applications disposed of.