Arun Kumar Bagla Vs SCJ Plastics Ltd (Delhi High Court)
The Delhi High Court examined whether a Managing Director’s assurance of payment given in the ordinary course of commercial dealings can, by itself, justify framing of a cheating charge under Section 420 of the Indian Penal Code. The petition was filed under Article 226 of the Constitution read with Section 482 CrPC seeking quashing of orders by the Metropolitan Magistrate and the Additional Sessions Judge that had framed and upheld charges of cheating against the Managing Director after the complaint against the company was dismissed.
The dispute arose out of commercial transactions between two companies involving supply of master batches on credit between 1999 and 2001. Orders worth ₹26.13 lakh were placed, and while partial payments of ₹2.25 lakh were made, the outstanding dues were not cleared. A civil suit for recovery was filed in 2002 and was eventually decreed. Separately, in 2005, a criminal complaint was lodged alleging that supplies were induced by concealing the fact that the company had already approached the BIFR and was suffering financial losses, amounting to cheating.
The Magistrate dismissed the complaint against the company as it had been struck off by the Registrar of Companies, but proceeded to frame charges against the Managing Director alone. The revisional court upheld this order. The High Court analysed the essential ingredients of cheating under Section 420 IPC, reiterating that dishonest or fraudulent intention must exist at the time the promise or representation is made. Mere failure to honour a promise or subsequent financial incapacity does not constitute cheating.
