Section 406 IPC | 'Donation' Does Not Constitute 'Entrustment'; Criminal Prosecution Quashed In Absence Of Aggrieved Victim: Delhi High Court

"Once a donation is voluntarily made by any donor and it is accepted by the donee, the donor ceases to have any ownership or beneficial interest in the property so donated. In the absence of any kind of 'entrustment', there can be no 'criminal breach of trust'." Delhi High Court, in a significant ruling dated September 29, 2026, held that criminal proceedings under Sections 406 and 420 of the IPC cannot be sustained in the absence of a specific aggrieved victim who claims to have been cheated or whose property was misappropriated.

Dealing with a petition to quash an FIR against the Hemkunt Foundation, a bench of Justice Saurabh Banerjee observed that donations, by their very legal nature, involve a complete divestment of ownership, precluding the essential element of 'entrustment' required for the offence of criminal breach of trust.

Absence Of Victim Vitiates The FIR

The court underscored that the power under Section 482 of the CrPC, though to be exercised sparingly, must be invoked where the FIR fails to disclose the basic ingredients of the alleged offences. The bench noted that the present FIR originated from a secret police information rather than a complaint by a donor. Relying on the precedent set in M/s. PPK Newsclick Studio Pvt. Ltd. vs. State, the court held that where no person has come forward to claim that they were cheated or that their property was misappropriated, the very foundation of the criminal prosecution crumbles.

Court Explains The Nature Of 'Donation' In Law

Distinguishing a 'donation' from 'entrustment', the court relied upon Section 122 of the Transfer of Property Act, 1882, and the definition of 'gift' as a voluntary transfer without consideration. The court reasoned that since a donor loses all beneficial interest in the property upon gifting it to a charitable entity, the subsequent utilization of those funds—even if inconsistent with the donor's original expectations—cannot be equated to a criminal breach of trust.

"Essentially, the issue herein is, as to if any prima facie case under Sections 406/420/120B of the IPC is made out against the petitioner on the basis of the contents of the present FIR and/ or the materials collated during investigation thereafter, even if they are taken at their face value and assumed to be true."

No Deception At Inception Under Section 420 IPC

The court further addressed the charge of cheating, noting that for an offence under Section 420 IPC to be established, there must be evidence of fraudulent or dishonest inducement at the very inception of the transaction. The court found that the prosecution failed to demonstrate any such intent. Merely soliciting donations through emotional appeals or failing to provide utilization certificates does not, by itself, satisfy the high threshold of 'cheating' as defined under Section 415 IPC.

Criminalization Of Civil Disputes Is Impermissible

The bench emphasized that the utilization of funds for purposes like fixed deposits or investments does not constitute a criminal act in the absence of evidence showing dishonest conversion. Observing that the petitioner is a charitable trust, the court held that any deviation in the application of funds remains a matter of civil or administrative regulation rather than a crime. Consequently, as the main offences under Sections 406 and 420 failed, the charge of criminal conspiracy under Section 120B IPC also became unsustainable.

Finding that the FIR was an abuse of the process of law and lacked the foundational elements required to substantiate the invoked sections of the IPC, the court allowed the petition. The FIR No. 18/2022 registered at Police Station Special Cell, along with all consequential proceedings, was quashed in its entirety. This judgment serves as a vital precedent for advocates arguing against the over-criminalization of charitable fund-management disputes.

Date of Decision: 29 September 2026