Shifting Defense From 'No Transaction' To 'Transaction Not Proved' Prima Facie Shows Dishonest Intent Since Inception: Calcutta High Court

"The subsequent conduct of changing stand from 'never had any transaction' to 'transaction pertains to present dispute' shows prima facie dishonest intention on the part of the petitioners." The Calcutta High Court, in a significant ruling, held that an accused party’s shifting stance—initially denying any business relationship and subsequently merely disputing the authenticity of bills—serves as prima facie evidence of dishonest intention from the inception of the contract.

A bench of Dr. Justice Ajoy Kumar Mukherjee observed that while commercial disputes often carry civil remedies, such a "commercial origin" does not preclude criminal prosecution under the IPC if the ingredients of cheating and criminal breach of trust are established. The Court emphasized that such conduct manifests an attempt to deceive the complainant and obstruct the administration of justice.

The petitioners, M/S. Sarada Jute Mills Pvt. Ltd. and its directors, sought the quashing of a criminal complaint filed by M/S. P.G. Electricals involving alleged offences under Sections 406, 420, and 120B of the IPC. The complainant alleged that the petitioners induced the supply of electrical goods worth Rs. 11,15,297 through false representations of financial goodwill, only to later deny the transactions and refuse payment. The petitioners had initially obtained an interim stay from the High Court by claiming they never had any business dealings with the opposite party.

The primary question before the court was whether the criminal proceedings should be quashed under Section 482 CrPC on the ground that the dispute was purely civil and lacked criminal intent. The court was also called upon to determine if the contradictory stands taken by the accused regarding the existence of business transactions were sufficient to infer mens rea.

Scope Of Section 482 CrPC and Prohibition of Mini-Trials

The Court began by reiterating the established limits of its inherent powers under Section 482 of the CrPC, noting that at the stage of quashing, a High Court must not conduct a "mini-trial" or weigh the reliability of evidence. Justice Mukherjee observed that the High Court is not supposed to decide whether documents submitted in support of the delivery of goods are genuine or false, as that remains the exclusive function of the trial court.

"At this stage High Court is not supposed to embark upon an enquiry whether the evidence in question is reliable or not or whether on a reasonable appreciation of it, accusation would not be sustained."

Shifting Stands Of Accused Disclose Dishonest Intent

The Court took a stern view of the petitioners' evolving defense. While the petitioners initially argued in their revisional application that they "never had any business dealings" with the complainant, they later shifted their stand after the complainant produced invoices, delivery challans, and bank statements. In their subsequent replies, the petitioners modified their claim to state that the specific "supply in question" was not authenticated or that the bills were concocted.

"The petitioners shifted their stand from 'there was never any business between the parties' to there being no business in connection with the 'supply in question'. It also appears that their such stand... can hardly be said to be a mistake."

Inferring Mens Rea From Subsequent Conduct

Justice Mukherjee noted that while proving dishonest intention through direct evidence is difficult, it can be inferred from the conduct of the accused and surrounding circumstances. The Court held that the act of receiving goods and thereafter repudiating the entire transaction constitutes strong prima facie evidence of a dishonest intention existing since the inception of the deal.

"The subsequent conduct of the petitioners prima facie shows that they had no intention of making the full payment, thus the inducement is apparent, right from the inception of the business relationship."

> "Merely because a civil claim is maintainable does not mean that the criminal complaint cannot be maintained."

Commercial Nature Of Dispute No Bar To Prosecution

The bench dismissed the petitioners' argument that the matter was purely civil. Relying on the Supreme Court’s rulings in Lal Moni Devi v. State of Bihar and Rajest Bajaj v. State of NCT Delhi, the Court held that facts may give rise to both a civil claim and a criminal offence. The Court remarked that many "cheatings" are committed during commercial or money transactions, and the presence of a commercial contract does not grant immunity from penal provisions.

"Just because the allegation involved the factum of recovery of money, it cannot be concluded that the complaint is purely civil in nature, when other serious allegations prima facie attract the penal provisions."

Triability of Co-existing Charges under Sections 406 and 420 IPC

Addressing the legal argument that charges under Section 406 (Criminal Breach of Trust) and Section 420 (Cheating) cannot coexist, the Court noted that this is a triable issue. Citing Ravindra Kumar Madanlal Goenka v. Rugmini Ram Raghav Spinners Pvt. Ltd., the bench held that the defense case should be considered at the trial stage and not during quashing proceedings unless the evidence is "unimpeachable."

"The petitioners would have ample opportunity to raise all the issues urged in this Application at an appropriate later stage, where such pleas would be and could be properly analysed and scrutinised."

Direction on Application for False Statement on Oath

Regarding the complainant’s application under Section 340 CrPC (Section 379 BNSS) seeking prosecution of the petitioners for making false statements on oath, the Court deemed it premature. However, the bench kept the issue open for future consideration, stating that the allegation of suppressing material facts to procure a stay could be reopened if the situation demands after the substantive adjudication of the case.

The High Court dismissed the revisional application and vacated all interim orders, directing the criminal proceeding before the Judicial Magistrate, 8th Court, Calcutta, to continue. The Court concluded that the material on record prima facie established the ingredients of cheating and conspiracy, and any interference at this stage would amount to an abuse of the judicial process.

Date of Decision: 20 April 2026