2026 INSC 265

SLP (Crl.) No. 10478/2023 Page 1 of 16

REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO. 1470 OF 2026

(Arising out of SLP Criminal No. 10478 of 2023)

V. GANESAN …APPELLANT

VERSUS

STATE REP BY THE SUB INSPECTOR

OF POLICE & ANR. …RESPONDENT (S)

J U D G M E N T

MANOJ MISRA, J.

1. Leave granted.

2. This appeal impugns the judgment and order of

the High Court at Madras

1 dated 06.04.2023 in Crl.

O.P. No. 847 of 2021 and Crl. M.P. No. 518 of 2021,

whereby the prayer of the appellant to quash final

report and consequential proceedings in C.C. No.

3569 of 2020 on the file of the Metropolitan

1

The High Court

SLP (Crl.) No. 10478/2023 Page 2 of 16

Magistrate (CCB and CBCID, Metro Cases), Egmore ,

Chennai-600008, under Section 406 and 420 of the

Indian Penal Code, 1860

2, was partly allowed to the

extent of indictment under Section 406 IPC; however,

the prayer to quash indictment under Section 420

IPC was declined.

3. In brief, the prosecution case, as could be evinced

from the final report (i.e., police report) submitted

under Section 173 of the Code of Criminal Procedure,

1973

3, is that the accused (the appellant herein) was

producing a ‘movie’. In the course of its production,

he ran short of funds. He, therefore, requested the

de-facto complainant (i.e., the second-respondent

herein) to lend him money on assurance that it would

be returned by a share in profits to the extent of

30%. Later, further money was lent on promise of an

additional 17% share in profits. Ultimately, two post-

dated cheques of Rs.24 lacs each were issued by the

2

IPC

3

CrPC

SLP (Crl.) No. 10478/2023 Page 3 of 16

accused to the de facto complainant towards return

of the principal amount which returned unpaid for

insufficient funds in the account. Based on above, it

was alleged that the accused ha d cheated the

complainant and had also committed offence of

criminal breach of trust.

4. Aggrieved by the police report and the

consequential proceedings, the appellant invoked the

jurisdiction of the High Court under Section 482 of

CrPC, inter alia, to quash the report and the

consequential proceedings on the ground that a pure

civil cause of action was given colour of a criminal

offence.

5. By the impugned order, the High Court quashed

the indictment of an offence punishable under

Section 406 IPC but declined to quash the

proceedings qua the offence of cheating punishable

under Section 420 IPC.

SLP (Crl.) No. 10478/2023 Page 4 of 16

6. We have heard the learned counsel for the parties.

7. On behalf of the appellant it is submitted that

admittedly the second-respondent had invested

money in a movie project on expectation of good

returns. There is no dispute that the movie project

was completed. However, it could not generate

profits. In such circumstances, the appellant could

not fulfil its commitment of providing good returns on

the investment. Therefore, there was no dishonest

intention and the dispute between the parties is

purely civil in nature. Hence, institution and

continuation of criminal proceedings is nothing but

abuse of the process of Law.

8. Per contra, on behalf of the respondent(s) it is

submitted that dishonest intention of the appellant

was there from the very beginning which is evident

from the fact that the two cheques got dishonoured

for want of funds. Besides, on appellant’s false

SLP (Crl.) No. 10478/2023 Page 5 of 16

assurance of profits, money was lent. In these

circumstances, offence of cheating is made out.

9. We have accorded due consideration to the rival

submissions and have perused the record.

10. The police report indicted the appellant for

offences of criminal breach of trust and cheating

punishable under Section s 406 and 420 IPC

respectively. The High Court came to the conclusion,

and rightly so, that no offence punishable under

Section 406 of IPC is made out as there was no

entrustment. Regarding the offence of cheating, the

High Court concluded that prima facie it is made out.

The reasoning of the High Court in support of its

conclusions can be found in paragraph 6 of its

judgment, which is extracted below:

“This Court on perusal of the impugned final

report finds that the offence under Section 406

IPC is not made out. There is no entrustment

made to the petitioner, in order to attract the

offence of criminal breach of trust. However, this

Court finds that there was an Agreement

between the petitioner and the de -facto

complainant on 30.12.2013. The Agreement

SLP (Crl.) No. 10478/2023 Page 6 of 16

shows that the petitioner promised 30% interest

on the initial invested amount on Rs.

19,60,000/-. Thereafter, the de -facto

complainant paid Rs. 27,00,000/ - on

03.04.2014; and the petitioner had promised

47% profit on the invested amount. The

petitioner had not made any payment to the de-

facto complainant/second -respondent as

promised. While so, the de -facto

complainant/second-respondent objected to the

petitioner releasing the movie. The petitioner had

given one more undertaking letter, wherein, he

had promised to pay the principal sum in two

instalments, profit on a subsequent date; and

that if the project did not yield any profit, he

would pay an interest on the said sum of Rs.

48,00,000/-. All the above facts, disclose that at

every stage, the representation has been made to

the de-facto complainant to induce him to part

with money. The allegations prima facie disclose

the offence under Section 420 IPC. In the facts of

the instant case, the question whether it was

only a breach of promise or cheating has to be

adjudicated only during trial. Therefore, this

Court is not inclined to quash the impugned

final report in so far as the offence under Section

420 IPC. Hence, the impugned final report is

quashed only in respect of offence under Section

406 IPC. However, the learned Metropolitan

Magistrate may try the case on the basis of

evidence adduced before him without being

influenced by any of the observations made in

this order. The learned Metropolitan Magistrate

(CCB and CBCID, Metro Cases), Egmore,

Chennai – 600 008 may conduct the trial as

expeditiously as possible

4

”.

11. The above extract makes it clear that the High Court

was of the view that as the money was advanced on a

promise of good returns and, subsequently, an

4

Extracted from typed copy of the judgment placed on record. May contain typographical mistakes.

SLP (Crl.) No. 10478/2023 Page 7 of 16

undertaking was also given to return the principal

amount if the project did not yield any profit, it could be

taken that the complainant parted with his money on

the inducement of the appellant and therefore, prima

facie, an offence punishable under Section 420 IPC is

made out.

12. In Iridium India Telecom Ltd. v. Motorola Inc.

5,

this Court laid down the ingredients of an offence of

cheating as defined in Section 415

6 of IPC. It was

observed that Section 415 of IPC has two parts. The

first part makes it necessary that the deception by the

accused of the person deceived, must be fraudulent or

dishonest. Such deception must induce the person to

either: (a) deliver property to any person; or (b) consent

that any person shall retain any property. The second

part also requires that the accused must by deception

5

(2011) 1 SCC 74, paragraph 68

6

Section 415. Cheating. -- Whoever, by deceiving any person, fraudulently or dishonestly induces the

person so deceived to deliver any property to any person, or to consent that any person shall retain any

property, or intentionally induces the person so deceived to do or omit to do anything which he would

not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage

or harm to that person in body, mind, reputation or property, is said to ‘cheat’.

Explanation. --- A dishonest concealment of facts is a deception within the meaning of this section.

SLP (Crl.) No. 10478/2023 Page 8 of 16

intentionally induce the person deceived either to do or

omit to do anything which he would not do or omit, if

he was not so deceived. Besides, such act or omission

must cause or must be likely to cause damage or harm

to that person in body, mind, reputation or property.

Thus, deception is a necessary ingredient for the

offence of cheating under both parts of this section.

Besides, the complainant must allege/ prove that the

inducement had been caused by the deception

exercised by the accused. In other words, such

deception must produce the inducement to part with or

deliver property, which the complainant would not have

parted with or delivered, but for the inducement

resulting from such deception. The explanation to the

section clarifies that non-disclosure of relevant

information would also be treated as a

misrepresentation of facts leading to deception.

13. In order to constitute an offence of cheating the

intention to deceive should be in existence when the

SLP (Crl.) No. 10478/2023 Page 9 of 16

inducement was made. It is necessary to show that a

person had fraudulent or dishonest intention at the

time of making the promise. Mere failure to keep the

promise subsequently cannot be the sole basis to

presume that dishonest intention existed from the very

beginning.

14. In Vesa Holdings Private Limited and Another

v. State of Kerala and others

7, this court held that

every breach of contract would not give rise to an

offence of cheating. Only in those cases breach of

contract would amount to cheating where there was

any deception played at the very inception. If the

intention to cheat has developed later, the same cannot

amount to cheating. In other words, for the purpose of

constituting an offence of cheating, the complaint is

required to show that the accused had fraudulent or

dishonest intention at the time of making promise or

representation. Even in a case where allegations are

7

(2015) 8 SCC 293, paragraph 12

SLP (Crl.) No. 10478/2023 Page 10 of 16

made about failure on part of the accused to keep his

promise, in absence of a dishonest intention at the time

of making the initial promise, no offence under Section

420 of IPC is made out.

15. Whether non-fulfilment of promise/ commitment

by the accused is a reflection of his or her dishonest

intention at the time of making the promise is ordinarily

a matter of trial. However, in our view, where the

transaction between the parties is such that fulfilment

of the promise is not entirely in the control of the

promisor, or there is an inherent risk in fulfilment of

the promise, the High Court may, in exercise of its

inherent powers under the Code, or under Article 226 of

the Constitution, as the case may be, upon

consideration of the attending circumstances, take a

decision whether the dishonest intention existed or not

at the time of making the promise. And, if it comes to

the conclusion that the alleged conduct of the parties

does not reflect a dishonest intention of the accused

SLP (Crl.) No. 10478/2023 Page 11 of 16

from the very beginning, it may quash the criminal

complaint/ proceedings and relegate the aggrieved

party to civil remedies.

16. In the present case, what the High Court

overlooked is that money was advanced for movie

making and initially the agreement was to share the

profits. Importantly, when the first tranche of money

was transferred by the de-facto complainant to the

accused, the alleged promise was a share in profits.

Second tranche of money was transferred when the

project could not be completed for want of funds. It

also appears from paragraph 2 of the impugned order

that before the movie could be released , de facto

complainant took objection to its release. However,

when the appellant gave two post-dated cheques, the

movie could be released.

17. The aforesaid facts would indicate that the initial

payment of money by the de-facto complainant to the

appellant was for a movie project on promise of a share

SLP (Crl.) No. 10478/2023 Page 12 of 16

in profits. Additional money was paid later for its

completion under a promise of an enhanced share in

the profits. Thereafter, post-dated cheques were issued

to return the principal amount because of an objection

taken by the de facto complainant to the release of the

movie. Since there is no denial about the completion of

the movie and its ultimate release, what is clear is that

the promise to make a movie was not false. Therefore, it

cannot be said the appellant made a false promise that

he would make a movie with the aid of funds received

by him. Insofar as promise qua sharing of profits is

concerned, there are no allegations that the movie

earned profits. Therefore, from the allegations made in

the complaint it cannot be said that there was any

dishonest intention of the appellant in making the

promise which remained unfulfilled. In our view, the

High Court overlooked that movie making is a high risk

business. No one can be sure whether a movie would

earn profits or would be a flop. If one agrees to share

profits in lieu of his investment in a movie, he takes the

SLP (Crl.) No. 10478/2023 Page 13 of 16

risk of a possible zero return. Thus, the nature of

transaction between the parties was a crucial factor in

determining whether the investor party should be

allowed to bring in a criminal action or pursue civil

remedies. Unfortunately, the High Court overlooked

this vital aspect.

18. Insofar as dishonour of those two cheques are

concerned, it is clear that those were post-dated

cheques issued not as an inducement to obtain delivery

of money from the de facto complainant but to

discharge an existing obligation at a future date. Thus,

in essence, those cheques were not by way inducement

to lend money or invest money in the proposed movie.

Therefore, dishonour of those cheques, though may give

right to initiate proceeding under Section 138 of the

Negotiable Instruments Act, 1881, would not ipso facto

amount to an offence of cheating, inasmuch as for an

offence of cheating dishonest intention must exist from

the very beginning. Ordinarily, post-dated cheques are

SLP (Crl.) No. 10478/2023 Page 14 of 16

issued either by way of security to discharge an existing

or future liability or to discharge the liability at some

point of time in future. It is quite possible that at the

time of issuance of a post-dated cheque, the drawer

may have reason to believe that he would have

sufficient balance in his account by the date of the

cheque. Therefore, in our view, dishonour of a post-

dated cheque by itself is not sufficient to presume

existence of a dishonest intention on part of its drawer.

19. In the instant case, there is nothing to indicate

that the appellant had a dishonest intention from the

very beginning. Had it been a case where the appellant

had not made the movie despite borrowing funds to

make one, an inference about existence of a dishonest

intention was permissible. However, here there is no

allegation that movie was not made. Rather , it was

made and released. The prosecution case itself is to the

effect that further advance was taken to complete and

release the movie. However, when complainant took

SLP (Crl.) No. 10478/2023 Page 15 of 16

objection to its release, the appellant issued post-dated

cheques to repay the principal amount. Thus, those

cheques were to discharge an existing liability and not

by way of an inducement to take more money.

20. Assuming that by issuance of those cheques, the

de facto complainant was led to vacate his objection to

movie’s release, even then an offence of cheating would

not be made out for two reasons. First, those cheques

were post-dated therefore, did not carry a

representation of sufficient funds in the bank account

at the time of its issuance. Second, initial agreement, as

per the allegations, was to share profit on release of the

movie. Thus, in absence of allegations that movie made

profits, in our view, the complaint and the supporting

materials failed to indicate that the appellant harboured

a dishonest intention from inception. In conclusion, the

allegations only disclosed a civil cause of action and the

High Court fell in error in not quashing the criminal

proceedings.

SLP (Crl.) No. 10478/2023 Page 16 of 16

21. For the foregoing reasons, the appeal is allowed.

The impugned judgment and order of the High Court is

set aside to the extent it declined quashing of the

proceedings under Section 420 IPC. The impugned

criminal proceedings under Section 420 IPC are also

quashed. Pending applications if any stands disposed

of.

….…………. ......................................J.

(PAMIDIGHANTAM SRI NARASIMHA )

…………… ......................................J.

(MANOJ MISRA)

New Delhi;

March 19, 2026