Supreme Court Quashes Criminal Proceedings Over Alleged Misappropriation of Partnership Property

A bench of Justices B.V. Nagarathna and R. Mahadevan heard an appeal by Inder Chand Bagri challenging the Gauhati High Court’s refusal to quash criminal proceedings instituted under Sections 406, 420 and 120B IPC arising from a 2013 complaint alleging conversion and cheating in relation to a disputed partnership property.

The Court allowed the appeal, set aside the High Court’s order insofar as it refused quashing against the appellant, and quashed Complaint Case No.3230c of 2013 and all consequent proceedings. The Court held that the complaint did not disclose prima facie offences under Sections 420 or 406 IPC and that continuation of prosecution would amount to harassment. The Court relied on settled principles that cheating requires dishonest intention at the time of representation and that criminal prosecution must not be used as a vehicle for private vendetta. The Court, in its reasoning, observed: “In the present case, the complainant/respondent No.1 has failed to establish ingredients essential to constitute an offence under Section 406 of the IPC. The complainant/respondent No.1 has failed to place any material on record to show us as to how he had entrusted the subject property to the appellant-accused. Furthermore, the complaint/respondent No.1 also omits to aver as to how the property, so entrusted to the appellant-accused, was dishonestly misappropriated or converted for his own use, thereby committing a breach of trust. On the contrary, the bare perusal of the partnership deed dated 01.10.1976 shows that the disputed property was solely owned and enjoyed by the appellant-accused wherein as per Clause 4 of the said agreement he agreed to bring into the partnership the said disputed property. We must hasten to mention herein that upon reading of the supplementary agreement dated 03.04.1981, it becomes amply clear that all the partners including the complainant/respondent No.1 had agreed that upon expiry of the lease period of 15 years with the Food Corporation of India i.e. 01.06.1993, the said land would revert back to the appellant-accused along with all the constructions erected upon it. In the facts of the present case, the complainant/respondent No.1 cannot be allowed to blow hot and cold at the same time wherein on one hand, through the supplementary deed, he has agreed upon the reversion of the said disputed property back to the original owner i.e. appellant-accused and yet on the other hand has proceeded to file a complaint alleging cheating and misappropriation of said disputed property against appellant-accused.” The Court further noted that “criminal prosecution is not used as an instrument of harassment or for seeking private vendetta.”

Background The dispute arose from a 1976 partnership deed for a firm carrying on construction and letting of godowns, in which the appellant agreed to bring his land at Maidamgaon, Beltola (Kamrup) into the partnership. Godowns on the land were leased to the Food Corporation of India until 1993. A supplementary agreement in 1981 recorded that, on expiry of the lease, the land and constructions would revert to the appellant. The partnership purportedly dissolved by a deed in 1997 and an ex parte decree in Title Suit No.144 of 1998 later declared dissolution.

In June 2011 the appellant executed a sale deed transferring the disputed property to his nephew. The complainant (one of the original partners) filed Title Suit No.160 of 2012 seeking to set aside the sale deed, and subsequently lodged a criminal complaint in September 2013 alleging criminal breach of trust, cheating and conspiracy. The Magistrate took cognizance in February 2014. The Gauhati High Court, while quashing proceedings against accused No.2, declined to quash the charges against the appellant and directed trial to proceed, finding a prima facie case.

The appellant contested that the complaint was time-barred, that material documents (the supplementary and dissolution deeds) had been suppressed by the complainant, and that the dispute was essentially civil. The complainant maintained that the appellant had been entrusted with firm property and had dishonestly misappropriated it. The Supreme Court examined the ingredients of Sections 405, 406 and 420 IPC and authorities including Inder Mohan Goswami and Bhajan Lal. It held that the complaint did not establish requisite dishonest intention for cheating nor did it show entrustment and dishonest conversion necessary for criminal breach of trust; the supplementary agreement corroborated reversionary rights in favour of the appellant. The Court observed that where no ingredient of the offence was made out, “the route through criminal proceedings, when no ingredient of offence is made out, cannot be permitted.” Consequently the appeal succeeded and the criminal complaint and all consequent proceedings were quashed.

Case Details: Case No.: 2025 INSC 1350 (Criminal Appeal No.5000 of 2025 arising out of SLP (Crl.) No.4939 of 2018) Case Title: Inder Chand Bagri v. Jagadish Prasad Bagri & Another Appearances: For the Petitioner(s): Not indicated in judgment For the Respondent(s): Not indicated in judgment