CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 1 of 23

* IN THE HIGH COURT OF DELHI AT NEW DELHI

% Reserved on: 23

rd

September, 2025

Pronounced on: 06

th

January, 2026

+ CRL. M.C. 4979/2017

1. CHINA TRUST COMMERCIAL BANK.

(Now Known as M/S CTBC Bank Co. Ltd.)

Through Sh. Padmanabh Prabhakar

Constituted Attorney

25, Barakhamba Road

New Delhi-110001

2. MRITUNJAY NARAYAN JHA

Sr. Manager, Corporate Banking

China Trust Commercial Bank.

(Now Known as M/S CTBC Bank Co. Ltd.)

25, Barakhamba Road

New Delhi-110001

......Petitioners

Through: Mr. Sanjay Gupta, Mr. Rajnish Gaur,

Mr. Ateev Mathur and Mr. Amol

Sharma, Advocates.

versus

1. STATE, GOVT. OF NOT OF DELHI

Through Chief Secretary

2. ARUN JAIN

Ex. Director

M/S Lilliput Kidswear Ltd.

Office At: D-95, Okhla Industrial Area

Phase 1, New Delhi-110020

also at

ARUN JAIN

Ex. Director

M/S Lilliput Kidswear Ltd.

Villa No. 34, Block Iv, Second Floor,

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 2 of 23

Eros Garden, Charmswood Village

Faridabad - 121009

....Respondents

Through: Mr. Utkarsh, APP for the State. Mr.

Ayush Jindal, Mr. Harsh Vashisht,

Ms. Harshita Bansal, Mr. Pankush

Goyal, Mr. Myank Sharma,

Advocates for R2.

+ CRL. M.C. 559/2018

1. MR. SARVJEET SINGH AHUJA

S/o Shri Gurbax Singh Ahuja

R/o 2157/2, A/2, 2

nd

Floor

Guru Arjan Nagar, Patel Nagar

New Delhi-110008

2. MR. SUBHASIS BANERJEE

S/o Shri Sailendra Nath Banerjee

R/o Villa C 6, Ajmera Infinity,

Neeladri Road,

Electronic City,

Banglore-560100

3. MR. MAYANK GOEL

S/o Shri Sushil Kumar Goel

R/o 10983, East Park Road,

Doriwalan,

New Delhi - 110005

......Petitioners

Through: Mr. Sanjay Gupta, Mr. Rajnish Gaur,

Mr. Ateev Mathur and Mr. Amol

Sharma, Advocates.

versus

1. STATE, GOVT. OF NCT OF DELHI

Through Chief Secretary

2. ARUN JAIN

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 3 of 23

Ex. Director

M/S Lilliput Kidswear Ltd.

Office at: D-95, Okhla Industrial Area

Phase 1, New Delhi-110020

also at

ARUN JAIN

Ex. Director

M/S Lilliput Kidswear Ltd.

Villa No. 34, Block IV, Second Floor,

Eros Garden, Charmswood Village

Faridabad - 121009

.....Respondents

Through: Mr. Utkarsh, APP for the State. Mr.

Ayush Jindal, Mr. Harsh Vashisht,

Ms. Harshita Bansal, Mr. Pankush

Goyal, Mr. Myank Sharma,

Advocates for R2.

CORAM:

HON'BLE MS. JUSTICE NEENA BANSAL KRISHNA

J U D G M E N T

NEENA BANSAL KRISHNA , J.

1. The aforesaid two Petitions have been filed by China Trust

Commercial Bank (hereinafter referred to as “M/s CTBC”) and the

employees of M/s CTBC i.e. Mritunjay Narayan Jha, Sarvjeet Singh Ahuja,

Subhasis Banerjee, Mayank Goel to challenge to challenge the summoning

Order dated 12.07.2017 in the CC No. 621809/2016 under Sections 409,

465, 467, 468, 471, 109, 120-B, and 34 of the Indian Penal Code, 1860

(hereinafter referred to as “IPC”) and the Order dated 01.12.2017

whereby Non-Bailable Warrants (NBWs) were issued against them.

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 4 of 23

2. The Complaint Case under Sections 409, 465, 467, 468, 471, 109,

120-B, and 34 IPC along with an Application under Section 156(3) of the

Code of Criminal Procedure, 1973 (hereinafter referred to as “CrPC”) was

filed by Arun Jain, Ex-Director of M/s Lilliput Kidswear Limited

(hereinafter referred to as “M/s LKL”) (“the Complainant”), against the

Petitioner Company i.e. M/s CTBC (Accused No.1), its senior officials and

Managers/Director of this Bank and other unknown persons who may have

been involved in committing the alleged cognizable offences.

3. It was stated in the Complaint that during March 2011,

representatives of the Accused Bank approached the Company with

proposals for business expansion and offered to provide loan facilities at

concessional rates, emphasizing lucrative benefits if the loan was secured

before the conclusion of that financial year.

4. As per the Loan Arrangement involved the Bank’s requirement for an

“undated” cheque, the undated cheque was issued as a trust security as a

protective measure, against the sanctioned loan amount, with an assurance

that it would not be utilized for any other purpose. It was specifically

mentioned in the loan Sanction Letter that the cheque would be retained

strictly as an undated security instrument.

5. However, during June/July 2012, the Complainant was shocked to

receive summons from Ld. MM, pertaining to a Complaint Case filed under

Section 138 NI Act, from where the Complainant came to know that the

cheque which had been entrusted for security purposes, was presented to the

Banker by the Petitioner Company for encashment, which got dishonoured.

Furthermore, while all other details in the Cheque were typed, the date had

been filled in by hand. The accused persons, acting with malicious intent

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 5 of 23

and in conspiracy with one another, committed criminal breach of trust by

misappropriating the cheque.

6. Furthermore, by filling the date in the cheque before presenting it to

their bankers, without the knowledge, consent, or authorization of the

Petitioner Company, a false document was created, thereby committing the

offence of forgery for the purpose of cheating.

7. The accused persons conspired together to commit the

aforementioned offences and have therefore, committed offences under

Section 120B IPC, and common intention to defame the Complainant and

cause wrongful loss to the company while securing wrongful gain for

themselves, as contemplated under Section 34 IPC. Through their actions

and omissions, they abetted the commission of offences within the meaning

of Section 107 IPC, thereby committing an offence under Section 109 IPC.

8. Thus, the Accused Persons are liable for the commission of the above-

said offences.

9. The Petitioners have given the background leading to the present

Petition that the Respondent No.2/Arun Jain (Complainant) along with

Directors of the Company approached the M/s CTBC seeking credit

facilities. M/s CTBC granted vide Sanction Letter dated 31.03.2011,

Working Capital Demand Loan Facilities amounting to Rs. 15 crores vide

Sanction Letter dated 31.03.2011, under the signatures of Subhasis Banerjee

(Accused No.7) as an authorized officer and CEO of the bank at the time of

the transaction. Several documents were executed by the Company’s

directors which included a Working Capital Demand Loan Agreement dated

06.04.2011 for Rs. 15 crores; Demand Promissory Note dated 06.04.2011

for Rs. 15 crores; a Letter of Continuity dated 06.04.2011, and a Letter of

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 6 of 23

Set-off dated 06.04.2011, and a Cheque No. 026402 for Rs. 15,00,00,000/-

in the name of M/s CTBC, in discharge of its liability toward the finance

facilities.

10. Clause 16 of the Working Capital Demand Loan Agreement

specifically stated that in case of default in repaying the loan amount,

including principal or interest, M/s CTBC would be entitled to enforce

the securities provided by the Company.

11. Vide Letter dated 20.05.2011; the Company undertook to include the

Bank in its multiple banking arrangement with existing bankers. The

Company also committed that if it failed to do so within six months, it

would repay the entire facility. However, the Company failed to induct the

Bank into the multiple banking arrangements.

12. Consequently, the Petitioner No.1, M/s CTBC issued a Legal Notice

dated 20.10.2011, recalling the entire facility and demanded payment of Rs.

15 crores along with future interest at 13.50% per annum from 01.10.2011,

and also the penal interest and other charges until actual payment. As of

17.01.2012, an amount of Rs. 15,15,39,623.81 remained due and

outstanding.

13. Thereafter, Petitioner filed Original Application No. 9/2012 under

Section 19 of the Recovery of Debts due to Banks and Financial Institutions

Act, 1993, on 23.01.2012 before the Debt Recovery Tribunal, Delhi, for

recovery of Rs. 15,15,39,623.81. The matter was reserved for judgment on

08.02.2018.

14. Since the Company failed to repay its debt, the Petitioner Bank also

filed Winding-Up Petition No. 66/2012 under Section 433(e) of the

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 7 of 23

Companies Act 1956 on 07.02.2012, before this Court. An Official

Liquidator was appointed vide Order dated 06.01.2014.

15. Since no payment was forthcoming, M/s CTBC was compelled to

present the Cheque No. 026402 for Rs. 15 crores (dated 18.01.2012) for

encashment toward repayment of the outstanding amount. However, the

Cheque was dishonoured with the reason “ACCOUNT BLOCKED ,” as

per the Bank Returning Memo dated 09.03.2012.

16. Thereafter, petitioner M/s CTBC filed CC No. 2489/2012 under

Section 138 of the Negotiable Instruments Act, 1881 (hereinafter referred

to as “NI Act”) against the Respondent Company and Directors, who

were summoned vide Order dated 22.05.2012, by the Ld. MM.

17. Aggrieved by this summoning Order, the Respondent No.2/Company

along with the Directors, filed Crl. Rev. Pet. No. 55/2013 before the court of

Ld. ASJ, which was dismissed vide Order dated 31.07.2013. The

Respondent Company along with the Respondent No.2, then filed Crl. M.C.

No. 4160/2013 before this Court against Order dated 31.07.2013 and

seeking to set aside the summoning Order 22.05.2012, which was later

withdrawn.

18. M/s CTBC then filed the Complaint under Section 138 NI Act before

Ld. MM, Saket Court. After taking cognizance of the offence, the Court

issued summons against the Company and Respondent No.2 vide Order

dated 12.11.2014.

19. Aggrieved by this summoning Order, Respondent No. 2 along with

director, Mr. Sanjeev Narula filed Crl. Rev. Pet. 95/2015 which was

dismissed by Ld. ASJ on 12.11.2014.

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 8 of 23

20. The Respondent No.2, upon receiving Summons in the Complaint

under Section 138 NI Act, filed an Application under Section 156(3) CrPC

along with a Complaint bearing No. 621809/2016 dated 08.01.2015 under

Section 200 CrPC against the Petitioners, i.e. M/s CTBC and various other

bank officers, alleging offences under Sections 409, 465, 467, 468, 471,

109, 120-B, and 34 IPC before Ld. MM, Saket Court, New Delhi.

21. The Petitioners assert that the Complaint has been filed by the

Respondent No.2 as retaliation and to unnecessarily harass the Petitioners.

Ld. MM dismissed the Respondent No.2’s Application under Section

156(3) vide Order dated 11.02.2015, and directed him to lead evidence.

Aggrieved by Order dated 11.02.2015, the Respondent No.2 Crl Rev. Pet.

No. 180/2015 before Ld. ASJ, Saket Court. Ld. ASJ dismissed the Revision

vide Order dated 26.04.2016 with a cost of Rs. 50,000.

22. Respondent No.2 then led his pre-summoning evidence and examined

two witnesses, namely himself as CW-1 and CW-2 Mr. Sanjeev Narula.

Respondent No.2 had reiterated in his testimony, the allegations made in the

Complaint that M/s LKL was approached by M/s CTBC for sanction of

credit facility amounting to Rs.15 crores. He deposed that the bank officials

and confirmed that the undated cheques will not be banked and that it was

just a formality.

23. Mr. Sanjeev Narula as CW-2 deposed along the same lines as CW-1.

24. Ld. MM on appreciation of the evidence led on behalf of the

Complainant, summoned the Petitioners and other officers, under

Section 409 IPC, vide Order dated 12.07.2017.

25. The Petitioners, M/s CTBC and Mritunjay Narayan Jha in Crl

MC. 4979/2018, have challenged the Complaint filed by the Respondent

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 9 of 23

No.2 as a gross abuse of legal process, filed as direct retaliation against the

Petitioner Bank’s Complaint under Section 138 NI Act for dishonour of

Cheque No. 026402 for Rs. 15 crores. It has not been appreciated that the

impugned Complaint discloses no cause of action, rather presents defences.

26. The Respondent No.2 has filed the present Complaint more than two

years after the Bank sent its Notice under Section 138 NI Act, in regard to

the dishonour of the cheque. There is no explanation for what prevented the

Respondent No.2 from filing it earlier. This clearly demonstrates that the

Complaint was filed merely to avoid legitimate Bank dues and to pressure

and harass the petitioners under the guise of criminal proceedings.

27. The main grounds for Challenging the Summoning Order dated

12.07.2017 is that the Ld. MM are factually incorrect and legally unsound,

warranting it to be set aside.

28. The Complaint fails to disclose that there was any entrustment of any

goods by the Complainant to the Petitioner Bank, much less to the

Petitioners’ officers, who were not even remotely connected with the

transactions, to have committed criminal breach of trust. There are no

specific allegations of any nature against the petitioners in the Complaint.

Only vague and unsubstantiated allegations have been levelled against them,

in the Complaint. The allegations are essentially defences that the

Respondent No.2 may raise in the Complaint under Section 138 filed by

Petitioner No.1. A bare reading of the Complaint reveals that no offence of

any nature was committed by the Petitioners, even if the Complaint’s

contents are accepted at face value. The dispute raised by the Complainant

entails civil consequences, making the criminal Complaint, an abuse of legal

process.

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 10 of 23

29. Ld. MM has not appreciated the contents of the Sanction Letter dated

31.03.2011 and Working Capital Demand Loan Agreement dated

06.04.2011, which specifically mentioned that in case of default in

repayment, the Petitioner Bank would be entitled to enforce securities

provided by the company and its directors, including the Respondent No.2.

30. Moreover, Section 20 NI Act provides that when an incomplete but

signed cheque is handed to the payee or holder in due course, the drawer

prima facie gives authority to fill in particulars such as date and amount and

present it for payment.

31. Ld. MM has failed to appreciate that documents filed by the

Complainant itself shows that credit facilities were enjoyed by the

Respondent No.2. A bare reading of these documents reflects that no

payments were made by the Respondent No.2 until the filing of the Section

138 Complaint.

32. The averments in the impugned Complaint directly contradict the

Respondent’s stand. In Company Petition No. 66/2012, the Respondent

Company had categorically admitted the Petitioner bank's dues. Since it

failed to honour its undertakings given in the Court to repay the Petitioner

bank, the winding up of the Respondent Company was allowed and the

official liquidator was appointed, by this Court in the Company Petition.

Notably, the present Complaint was filed after the winding up Order was

passed against the Respondent, indicating that it is an afterthought.

33. The averments made in the impugned Complaint, is entirely different,

and contradictory to the defence taken in Revision Petitions filed to

challenge the summoning orders in the Section 138 Complaint, wherein the

Respondent No.2 stated that “Account Blocked” is not covered under Section

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 11 of 23

138. However, in the impugned Complaint, he alleges that the Bank

misappropriated the cheque and presented it for encashment without prior

information.

34. The Petitioners, Sarvjeet Singh Ahuja, Subhasis Banerjee,

Mayank Goel in Crl. M.C. 559/2017 who are the Senior

Managers/Officers of the Petitioner Bank have further asserted that

they been implicated solely on account of their official positions in the bank.

Having left the Bank’s employment, they have no direct or indirect role in

the entire transaction, rendering the impugned Order liable to be quashed

regarding the Petitioners.

35. The Petitioners were merely the employees of the Petitioner Bank

performing their duties in the normal course of banking activities. The

Petitioner No.2/Subhasis Banerjee and Petitioner No. 3/Mayank Goel never

dealt with the Company’s Account in their personal capacity, nor did they

carry out any activities constituting an offence under the law. The Petitioner

No.1/M/s CTBC did not ever deal with the Company's Account and was

made a party only because he filed the Section 138 NI Act Complaint, as the

bank’s Authorized Officer.

36. Thus, Petitioners’ submit that they committed no offence and the

Respondent No.2’s Complaint is false, misleading, frivolous, and bogus.

37. The Petitioners, who are Accused Nos. 2, 7 and 8 in Complaint No.

621809/2016 have also challenged the Orders dated 25.10.2017, and

01.12.2017 vide which Bailable Warrants and subsequently NBWs were

issued by the Ld. MM. on the ground that they never received any

summons or warrants from the Ld. MM. Despite reports on the Bailable

Warrants stating that the Petitioners had left the Bank’s employment, Ld.

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 12 of 23

MM proceeded to issue NBWs without valid and proper service of summons

and warrants upon the Petitioners. Even the Order dated 01.12.2017

confirms that the Petitioners had left the Bank’s service, yet the Ld. MM

ignored this fact and issued NBWs.

38. The Petitioners submitted that the Petitioners have never been served

with any summons or warrants by the Court of the Ld. MM. It was only in

December, 2017 that the Bank apprised the Petitioners of the impugned

orders dated 25.10.2017 and 01.12.2017, whereby bailable warrants and

thereafter non-bailable warrants were issued against them by the Ld. MM.

39. The Respondent in his Reply has vehemently opposed the present

Petitions. It is contended that the Petitioners are seeking adjudication of

their defence at the threshold, bypassing the procedure prescribed under the

Code of Criminal Procedure. The pleas urged in the Petition, are matter of

record which need to be tested and proved during the course of trial, to be

faced by them. The plea of taking loan and consequential events, do not

exonerate the Petitioners from their acts done in conflict of law of the land.

The present petition, deserves to be dismissed.

40. Respondent No.2 has submitted that that the allegations of absence of

entrustment and personal non-involvement are contrary to the contents of

the Complaint, which specifically attribute specific roles to the Petitioners.

The Petitioners have contended that they never dealt with the account of the

Company in “Personal Capacity”. However, is an implied admission of

commission of act, but not in personal capacity. Further, leaving the services

of bank after committing complained offences, would not exonerate the

Petitioners from the offences committed by them during their tenure. These

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 13 of 23

aspects are a matter of trial and this ground is unsustainable and is liable to

be rejected.

41. Even otherwise, the plea that the Complaint is a counterblast to

proceedings under Section 138 NI Act, in any event does not constitute a

valid ground for quashing.

42. It is contended that the impugned Summoning Order was passed after

due compliance with Sections 202 and 204 Cr.P.C., and no illegality or

perversity is made out. Section 409 IPC is punishable with a sentence of life

imprisonment, hence there was no bar under law for the Ld. MM to take

cognizance of the said offence, under Section 468 CrPC.

43. The contention regarding misuse of a security cheque and

applicability of Section 20 NI Act, raises issues of fact and contractual

understanding, which can only be adjudicated in trial.

44. Further, it is submitted that the Petitioners have suppressed material

facts, including their knowledge that the Respondent/Company’s Account

had been blocked by the Income Tax Department and that a meeting of

consortium lenders was convened to discuss the said blocking, in which the

Petitioners and other bank representatives participated. Despite being aware

that the Account was inoperative, the cheque was nevertheless presented for

encashment.

45. It is further alleged that the date on the cheque was subsequently filled

in by hand and the cheque was not presented immediately. Thus, these facts

indicate mala fide intent and give rise to issues requiring evidence, which

cannot be adjudicated in proceedings under Section 482 CrPC.

46. Reliance is placed on Krishan Kumar Variar vs. Share Shoppe, (2010)

12 SCC 485 wherein the Apex Court has observed that parties should not

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 14 of 23

rush directly to superior courts for seeking quashing but should approach the

court below to seek their remedy.

47. Hence, the Petitions are liable to be dismissed.

48. Rejoinder and Written Submissions have been filed by the

Petitioners, essentially reiterating the assertions made in the Petition.

Submissions heard and record perused.

49. The present two Petitions essentially arise out of a long-standing

dispute between M/s CTBC and M/s Lilliput Kidswear Ltd., in respect of a

Working Capital demand loan of Rs. 15 crores, sanctioned in March, 2011.

Upon the Company/M/s LKL‟s default in repayment, M/s CTBC initiated

Recovery proceedings before the Debt Recovery Tribunal, Winding-up

proceedings, and also instituted a Complaint under Section 138 NI Act after

the Cheque issued by the Company/M/s LKL towards discharge of its

liability, was dishonoured.

50. During the pendency of the proceedings under Section 138 NI Act,

Respondent No.2/Arun Jain, an ex-director of the Company/M/s LKL,

instituted the present Complaint under Sections 409, 465, 467, 468, 471,

109, 120-B and 34 IPC, alleging that the Cheque in question was an

undated security cheque which had been misappropriated and fraudulently

presented by M/s CTBC and its officials. On the basis of the said Complaint,

the Ld. MM passed the summoning Order dated 12.07.2017 under Section

409 IPC. Thereafter, on the non-appearance of the Petitioners, Bailable

Warrants and Non-Bailable Warrants vide Order dated 01.12.2017.

51. The Petitioners, seek quashing of the Complaint filed by the

Respondent and the Impugned Orders dated 12.07.2017 and 01.12.2017.

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 15 of 23

52. The Respondent No.2 though had filed the Complaint against the

Petitioners under Sections 465/467/468/471 IPC on the allegations that he

had entrusted a cheque of Rs.15 crores, which according to him, has been

misappropriated by the Petitioners by presenting the same for encashment.

The Complainant alleged that this cheque being merely a security cheque,

was never intended to be presented for encashment and consequently, such

act of the Petitioner resulted in an offence under Section 409 IPC.

53. The learned MM vide Order dated 12.07.2017 however, summoned

the Petitioners for the offence punishable under Section 409 IPC.

54. The core question for determination is whether the essential

ingredients of the offence under Section 409 IPC is disclosed in the

Complaint filed by the Respondent and whether the Complaint is liable to be

quashed, to prevent the abuse of the process of Court and secure the interest

of justice.

55. The allegations of the Complainant in regards to offence under

Sections 409 IPC are reproduced as under:

“11. That the accused persons had misappropriated the said

cheque and banked the same with their banker which got

dishonoured. Further a perusal of the complaint filed in

court along with the cheque in issue was also annexed,

clearly reflects that the date is filled in hand, do all other

particulars are tight. It clearly reflects that the date was

interpolated by someone in utter violation of the

representations, terms and trust imposed upon the accused

persons. …

12. That the abovementioned cheque was entrusted to

accused persons with the condition that the same shall be

kept by accused persons as security but shall be returned

back upon repayment of the loan, but the accused persons

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 16 of 23

with malafide intention in conspiracy with each other have

committed criminal breach of trust by misappropriating

the same by banking it with their banker and have

committed criminal breach of trust. The above said accused

persons were holding the cheque in trust for us which was

meant to be returned to us, hence these people have

committed the offence of criminal breach of trust

punishable u/s 409 IPC.”

56. Admittedly, the cheque in question which bears the genuine

signatures of the authorised signatories of the Company, was handed over to

the Petitioner Bank, by the Respondent Company as a security for the Loan

of Rs. 15 crores extended to the Respondent under a Working Capital

Demand Loan Agreement dated 06.04.2011. The relevant Clauses of the

Loan Agreement in regard to Security Cheque is as under:

“The Borrower (Lilliput Kidswear Limited) agrees to

borrow from the Bank and the Bank agrees to lend to the

Borrower Working Capital Demand Loan up to the

maximum extent of Rs. 150,000,000/- (Indian Rupees One

Hundred Fifty Million Only) and in consideration of the

Bank having agreed to grant/granted to the Borrower the

said WCDL, the Borrower irrevocably agrees, undertakes

and confirms to the Bank as follows: …

6. The Borrower hereby specifically agrees, confirms and

undertakes that:

(i) this Agreement shall operate as a continuing security to

the Bank, to be enforceable for me repayment of me

ultimate balance and/or all sums remaining unpaid under

me said WCDL now or hereafter, including all interest to

become payable upon me said WCDL; and also all moneys

lent, advanced, paid or incurred on the said WCDL or

which may in future be advanced or incurred together with

interest, discount, commission and other banking charges

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 17 of 23

and all other costs, charges and expenses which may be or

become payable in connection therewith; …

10. The Borrower will execute necessary Demand

Promissory note and such further documents, forms and

papers as the Bank/its nominees may in its/their discretion

from time to time require.

20. Nothing contained in these presents shall be deemed

to limit or adversely affect the rights and powers of the

Bank under the security documents to be executed

pursuant hereto, or under any letters of guarantee, or

under any law.

21. The Borrower shall not assign or transfer any of its

rights and/or obligations under this Agreement except with

the prior written permission of the Bank. No delay in

exercising or omission to exercise any right, power, or

remedy accruing or available to the Bank upon any

default or otherwise hereunder or under other security

documents or letters of guarantee shall impair or prejudice

any such right, power, or remedy, or be construed as a

waiver thereof or as any acquiescence therein. Any single

or partial exercise of any right, power, or remedy hereunder

shall not preclude the further exercise thereof, and every

right and remedy of the Bank shall continue in full force and

effect until such right power or remedy is specifically

waived by an instrument in writing executed by the Bank.”

57. The Clause 16 of this Loan Agreement specifically provided that the

dues and all the obligations of the borrower (Respondent) shall immediately

become due and payable irrespective of any agreed maturity and the bank

shall be entitled to enforce its security upon the happening of the specified

event (events of default). It is reproduced as under:

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 18 of 23

“16. At the option of the Bank, and without necessity of any

demand upon or notice to the Borrower, all of which are

hereby expressly; waived by the Borrower, and

notwithstanding anything contained herein of in any

security documents executed by / to be executed by the

Borrower in the Bank‟s favour, the said Dues and all of the

obligations of the Borrower to the Bank hereunder, shall

immediately become due and payable irrespective of any

agreed maturity, and the Bank shall be entitled to enforce

its security, upon the happening of any of the following

events (“Events of Default”): …”

58. The Security Cheque simply implies that a cheque is issued as a

guarantee for a future obligation. It is given to ensure performance of a

promise, such as payment or fulfillment of terms under a business or

financial arrangement. The cheque is intended to be used only if the issuer

fails to meet the agreed obligation, thereby serving as a “safeguard” for the

recipient.

59. Therefore, in the Loan Agreement, it was specifically agreed between

the parties that this security cheque given in discharge of contractual

obligation would be encashed as and when liability arises. On the amount

due under the loan agreement becoming payable, in respect of which the

Complaint had defaulted, the cheque was presented for encashment.

60. The Complainant has alleged commission of offences under Sections

409 IPC on the premise that the cheque was entrusted to the Petitioners for a

limited purpose as security and was dishonestly misappropriated and used to

cheat the Company.

61. The question is whether presentation of the Security Cheque for

realization of alleged outstanding amount, would constitute an offence of

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 19 of 23

criminal breach of trust by Agent, which is punishable under Section 409

IPC.

62. To appreciate whether the offence of Section 409 IPC is disclosed, it

would be relevant to reproduce the Sections.

63. Sections 406 reads as under:

“405. Criminal breach of trust:-

Whoever, being in any manner entrusted with property, or

with any dominion over propert y, dishonestly

misappropriates or converts to his own use that property, or

dishonestly uses or disposes off that property in violation of

any direction of law prescribing the mode in which such

trust is to be discharged, or of any legal contract, express or

implied, which he has made touching the discharge of such

trust, or wilfully suffers any other person so to do, commits

“criminal breach of trust”.

409. Criminal breach of trust by public servant, or by

banker, merchant or agent:-

Whoever, being in any manner entrusted with property, or

with any dominion over property in his capacity of a public

servant or in the way of his business as a banker, merchant,

factor, broker, attorney or agent, commits criminal breach

of trust in respect of that property, shall be punished with

imprisonment for life, or with imprisonment of either

description for a term which may extend to ten years, and

shall also be liable to fine.”

64. The offense of criminal breach of trust under Section 406 IPC

requires two foundational elements: first, an “entrustment” of property, and

second, a dishonest misappropriation of that property.

65. The term entrustment has been explained by the Apex Court in State

of Gujarat vs. Jaswantlal Nathalal, (1968) 2 SCR 408, to the following

effect:

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 20 of 23

“The term “entrusted” found in Section 405 IPC governs

not only the words “with the property” immediately

following it but also the words “or with any dominion over

the property” occurring thereafter - see Velji Raghvaji

Patel v. State of Maharashtra [(1965) 2 SCR 429]. Before

there can be any entrustment there must be a trust meaning

thereby an obligation annexed to the ownership of property

and a confidence reposed in and accepted by the owner or

declared and accepted by him for the benefit of another or

of another and the owner. But that does not mean that such

an entrustment need conform to all the technicalities of the

law of trust - see Jaswantrai Manilal Akhaney v. State of

Bombay [1956 SCR 483]. The expression “entrustment”

carries with it the implication that the person handing over

any property or on whose behalf that property is handed

over to another, continues to be its owner. Further the

person handing over the property must have confidence in

the person taking the property so as to create a fiduciary

relationship between them. A mere transaction of sale

cannot amount to an “entrustment”.

66. Similarly, the Apex Court in Central Bureau of Investigation, SPE,

SIU(X), New Delhi vs. Duncans Agro Industries Ltd., Calcutta, (1996) 5

SCC 591 held that the expression “entrusted with property” used in Section

405 of the IPC, connotes that the property in respect of which criminal

breach of trust can be committed, must necessarily be the property of some

person other than the accused or that the beneficial interest in or ownership

thereof must be in the other person and the offender must hold such property

in trust for such other person or for his benefit.

67. As observed in the case of N. Raghavender vs. State of Andhra

Pradesh, CBI, Crl. Appeal No. 5/2010 decided on 13.12.2021, the

entrustment of public property and dishonest misappropriation or use

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 21 of 23

thereof in the manner provided under Section 405 IPC, are a sine qua non

for making an offence punishable under Section 409 IPC.

68. In N. Raghavender, (supra), the requirement of Section 409 was

explained. It was observed:

“44. No sooner are the two fundamental ingredients of

„criminal breach of trust‟ within the meaning of Section 405

IPC proved, and if such criminal breach is caused by a

public servant or a banker, merchant or agent, the said

offence of criminal breach of trust is punishable under

Section 409 IPC, for which it is essential to prove that:

(i) The accused must be a public servant or a banker,

merchant or agent;

(ii) He/She must have been entrusted, in such capacity,

with property; and

(iii) He/She must have committed breach of trust in

respect of such property.

45. Accordingly, unless it is proved that the accused, a

public servant or a banker etc. was „entrusted‟ with the

property which he is duty bound to account for and that

such a person has committed criminal breach of trust,

Section 409 IPC may not be attracted. ...”

69. These principles have been reiterated by the Apex Court in Delhi

Race Club, (supra) and in the recent case of Apex Court in the case of

Paramjeet Singh, (supra).

70. From the facts as narrated and also not disputed, it emerges that there

was no entrustment of property by the Complainant to the Petitioners; rather

the very fact that it was a security cheque under the Loan Agreement, which

was intended to secure any debt and liability which may arise under the

Loan Agreement in future and for the realization of the same, the cheque

would be presented.

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 22 of 23

71. The cheque was voluntarily issued as part of a commercial transaction

and formed an integral component of the contractual security mechanism,

intended to be encashed in case of default of Loan liability. The issuance of

a security cheque pursuant to a commercial loan transaction, does not create

a fiduciary relationship, but merely evidences a contractual arrangement

between creditor and debtor. There is neither any entrustment nor any

misappropriation of the cheques; the presentation of which was strictly in

terms of the Loan Agreement.

72. At best, the grievance raised is that there was no legally enforceable

liability for which the cheque could have been presented. It may be a

defence of the Complainant in the Complaint under Section 138 NI Act filed

by the petitioner, but it does not constitute criminal breach of trust.

73. Even if the Complainant’s allegation that the cheque was issued as a

“security cheque” is accepted at face value, the same does not give rise to

an offence under Section 409 IPC.

74. Crucially, the Complaint is conspicuously silent on any specific

averment demonstrating dishonest intention at the inception of the

transaction. It is well settled that a mere breach of contractual terms, absent

fraudulent or dishonest misappropriation, does not satisfy the mens rea

required under Sections 405 or 409 IPC.

75. Therefore, in the absence of entrustment in its criminal sense,

existence of a fiduciary relationship, and specific allegations of dishonest

misappropriation, the basic requirements for invoking Section 409 IPC are

wholly lacking.

76. As already discussed above, no prima facie offence under Section 409

IPC is made out in the Complaint. Rather it is evident that the present

CRL. M.C. 4979/2024 & CRL. M.C. 559/2018 Page 23 of 23

Complaint had only been filed as a counterblast to the Complaint under

Section 138 NI Act. Also, by way of this Complaint, the Complainant

intended to prove its defences which is required to be done in the Complaint

under Section 138 NI Act. The present Complaint is blatantly an abuse of

the process of law on which ground as well, it is liable to be quashed.

Conclusion:

77. In view of the aforesaid discussion, the impugned Order of the Ld.

MM dated 12.07.2017 summoning the Petitioners under Section 409 IPC,

and the Order dated 01.12.2017 whereby NBWs were issued are hereby, set

aside.

78. The Petition is allowed.

79. The Complaint Case No. 621809/2016 filed by the Respondent No.2

is hereby quashed and the Petitioners are discharged.

80. The Petitions are disposed of accordingly, along with pending

Application(s), if any.

(NEENA BANSAL KRISHNA)

JUDGE

JANUARY 06, 2026

N