Neeraj Pokhariya v. State Of Chhattisgarh Through Sho, Ps. Basantpur, District Rajnandgaon

Hon'ble Shri Ramesh Sinha, Chief Justice Hon'ble Shri Ravindra Kumar Agrawal, Judge Order on Board Per Ramesh Sinha, Chief Justice 23/07/2026

1. Heard Mr. Ashish Gangwani, learned counsel for the petitioners. Also heard Mr. Priyank Rathi, learned Govt. Advocate, for the State/Respondent No.1. None appears for the Respondent No. 2, though served.

2. The petitioners have filed the present petition with the following prayer: "A. That, the Hon'ble court may kindly be pleased to set aside the impugned charge sheet filed by the respondent no. 1 bearing final report no. 194/2023 in FIR no. 31 of 2023 dated 25.01.2023 under Section 420, 34 of IPC (Discharged Vide order dated 13.11.2024 by Learned Special Judge CGPDI Act, Rajnandgaon from Section 6(5) and 10 of the Chhattisgarh Protection of Depositors Interest Act, 2005) along with the order of taking cognizance of Charge sheet dated 07.08.2024 by Learned Special Judge CGPDI Act, Rajnandgaon (Annexure P/1). B. That, the Hon'ble court may kindly be pleased to set aside the consequential proceedings going on in RCC No 9731 of 2024, Judicial Magistrate, Rajnandgaon under section 420, 34 of the IPC before Learned Chief C. Any other relief which this Hon'ble Court deems fit and proper may also kindly be granted to the Petitioner, in the interest of justice. An affidavit in support of is filed herewith."

3. The prosecution case, in brief, is that the petitioners, who were associated with Rise Vision Fashion Company, allegedly induced the complainant and other persons through advertisements and promotional 3 activities to join the company's business model by assuring attractive commissions upon becoming distributors after depositing specified amounts. Pursuant thereto, the complainant and other persons deposited different sums of money, underwent training, and were supplied garments for the purpose of distribution. It is alleged that the garments supplied were of inferior quality and that despite demands, neither the deposited amount nor the expected returns were paid, leading to registration of the impugned FIR. Upon completion of investigation, the respondent police filed a charge-sheet against the petitioners for the offences under Sections 420 and 34 IPC as well as Sections 6(5) and 10 of the Chhattisgarh Protection of Depositors Interest Act, 2005. However, by order dated 13.11.2024, the learned Special Judge discharged the petitioners from the offences under the Chhattisgarh Protection of Depositors Interest Act, 2005, while permitting the prosecution under Sections 420 and 34 IPC to continue before the learned Chief Judicial Magistrate. The petitioners contend that they were merely employees of the company, that the company was engaged only in the manufacture and sale of garments through a distributor network and not in any investment or deposit scheme, and that the complainant entered into a commercial distributor agreement as a customer/distributor. According to the petitioners, the allegations, even if accepted in their entirety, disclose at best a contractual, consumer or civil dispute relating to the quality of goods supplied and refund of the amount paid, without satisfying the essential ingredients of the offence of cheating. It is therefore contended that the continuation of the criminal proceedings amounts to an abuse of the process of law, warranting interference by this Court in exercise of its inherent jurisdiction.

4. Learned counsel for the petitioners submits that the present petition 4 has been filed challenging Final Report No. 194/2023 arising out of FIR No. 31/2023 dated 25.01.2023 registered under Sections 420 and 34 of the IPC, the order dated 07.08.2024 taking cognizance thereof, and the consequential proceedings pending in RCC No. 9731 of 2024 before the learned Chief Judicial Magistrate, Rajnandgaon. It is submitted that the petitioners are merely employees of Rise Vision Fashion Company, which is engaged in the business of manufacturing and marketing readymade garments through a distributor network and not in any investment or deposit scheme. The complainant voluntarily entered into a distributor agreement with the company, and the allegations essentially pertain to the supply of inferior- quality garments and non-refund of the amount paid. It is contended that the dispute is purely commercial in nature arising out of contractual obligations and, at best, gives rise to a civil or consumer dispute. It is further submitted that the petitioners have already been discharged from the offences under Sections 6(5) and 10 of the Chhattisgarh Protection of Depositors Interest Act, 2005, which clearly demonstrates that the company was not engaged in any deposit or investment activity.

5. Learned counsel further submits that the essential ingredients of the offence of cheating are completely absent, as there was no dishonest or fraudulent intention on the part of the petitioners at the inception of the transaction. The petitioners neither induced the complainant in their personal capacity nor derived any personal benefit from the alleged transactions, having acted only in the course of their employment. It is argued that the complainant has an efficacious remedy before the appropriate civil or consumer forum, and the initiation as well as continuation of the criminal proceedings is nothing but an attempt to give a criminal colour to a purely civil 5 dispute. It is, therefore, submitted that the impugned charge-sheet, the order taking cognizance, and the consequential proceedings pending before the trial Court are illegal, constitute an abuse of the process of law, and deserve to be quashed in order to secure the ends of justice.

6. Learned State counsel appearing for respondent No.1 opposes the petition and submits that the impugned charge-sheet has been filed after a fair, proper and thorough investigation conducted on the basis of a written complaint lodged by the complainant. It is submitted that the complaint specifically alleges that the petitioners induced the complainant and several other persons to join the business of Rise Vision Fashion Company by promising attractive commissions upon depositing different amounts as membership fees. Acting upon such representations, the complainant deposited money, underwent training and purchased garments supplied by the company. However, the garments supplied were found to be of inferior quality, the promised commissions were never paid, and the petitioners refused to refund the amount. During investigation, it was further revealed that several other persons had allegedly been induced in a similar manner. On the basis of the statements of witnesses and the documentary material collected during investigation, the investigating agency found sufficient material to establish a prima facie case against the petitioners and accordingly filed the charge-sheet before the competent Court. It is submitted that the order taking cognizance has been passed after due consideration of the material available on record and does not suffer from any legal infirmity.

7. Learned State counsel further submits that the jurisdiction of this Court under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 is extraordinary in nature and is to be exercised sparingly. At the stage of 6 quashing, the Court is only required to examine whether the allegations in the FIR and the material collected during investigation disclose the commission of a cognizable offence, and not to undertake a meticulous appreciation of evidence or adjudicate disputed questions of fact. The defence raised by the petitioners that the dispute is civil in nature, that they were merely employees of the company, or that they lacked dishonest intention are all matters of evidence which can appropriately be examined during trial. The discharge of the petitioners from the offences under the Chhattisgarh Protection of Depositors Interest Act, 2005 does not ipso facto absolve them from their criminal liability under Sections 420 and 34 of the IPC, as the ingredients of the said offences are distinct and the material collected during investigation prima facie discloses their involvement. It is, therefore, submitted that the impugned charge-sheet, the order taking cognizance and the consequential criminal proceedings have been initiated strictly in accordance with law, and as the petitioners have failed to make out any case for interference, the present petition deserves to be dismissed.

8. We have heard learned counsel for the parties and perused the documents appended with this petition.

9. The Supreme Court in the matter of State of Haryana and others v. Bhajan Lal and others, 1992 Supp (1) SCC 335 laid down the principles of law relating to the exercise of extraordinary power under Article 226 of the Constitution of India to quash the first information report and it has been held that such power can be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice.

10. The Hon’ble Supreme Court in the matter of Manoj Kumar Sharma and others v. State of Chhattisgarh and others, (2016) 9 SCC 1 held as under:- 7 “35. While discussing the scope and ambit of Section482 of the Code, a similar view has been taken by a Division Bench of this Court in Rajiv Thapar and others vs. Madan Kal Kapoor (2013) 3 SCC 330 wherein it was held as under:- would have “29. The issue being examined in the instant case is the jurisdiction of the High Court under Section 482 CrPC, if it chooses to quash the initiation of the prosecution against an accused at the stage of issuing process, or at the stage of committal, or even at the stage of framing of charges. These are all stages before the commencement of the actual trial. The same parameters would naturally be available for later stages as well. The power vested in the High Court under Section 482 CrPC, at the stages referred far-reaching to hereinabove, consequences inasmuch as it would negate the prosecution’s/complainant’s case without allowing the prosecution/complainant to lead evidence. Such a determination must always be rendered with caution, care and circumspection. To invoke its inherent jurisdiction under Section 482 CrPC the High Court has to be fully satisfied that the material produced by the accused is such that would lead to the conclusion that his/their defence is based on sound, reasonable, and indubitable facts; the material produced is such as would rule out and displace the assertions contained in the charges levelled against the accused; and the material produced is such as would clearly reject and overrule the veracity of the allegations contained in the accusations levelled by the prosecution/complainant. It should be sufficient to rule out, reject and discard the accusations levelled by the prosecution/complainant, necessity of recording any evidence. For this the material relied upon by the defence should not have been refuted, or alternatively, cannot be justifiably refuted, being material of sterling and impeccable quality. The material relied upon by the accused should be such as would persuade a reasonable person to dismiss and condemn the actual basis of the accusations as false. In such a situation, the judicial conscience of the High Court would persuade it to exercise its power under Section 482 CrPC to without 8 quash such criminal proceedings, for that would prevent abuse of process of the court, and secure the ends of justice.

30. Based on the factors canvassed in the foregoing paragraphs, we would delineate the following steps to determine the veracity of a prayer for quashment raised by an accused by invoking the power vested in the High Court under Section 482 CrPC:

30.1 Step one: whether the material relied upon by the accused is sound, reasonable, and indubitable i.e. the material is of sterling and impeccable quality?

30.2 Step two: whether the material relied upon by the accused would rule out the assertions contained in the charges levelled against the accused i.e. the material is sufficient to reject and overrule the factual assertions contained in the complaint i.e. the material is such as would persuade a reasonable person to dismiss and condemn the factual basis of the accusations as false?

30.3 Step three: whether the material relied upon by the accused has not been refuted by the prosecution/complainant; and/or the material is such that it cannot be justifiably refuted by the prosecution/complainant?

30.4 Step four: whether proceeding with the trial would result in an abuse of process of the court, and would not serve the ends of justice?

30.5 If the answer to all the steps is in the affirmative, the judicial conscience of the High Court should persuade it to quash such criminal proceedings in exercise of power vested in it under Section 482 CrPC. Such exercise of power, besides doing justice to the accused, would save precious court time, which would otherwise be wasted in holding such a trial (as well as proceedings arising therefrom) specially when it is clear that the same would not conclude in the conviction of the accused.”

11. In the matter of Paramjeet Batra v. State of Uttarakhand, (2013) 11 SCC 673, the Supreme Court recognized that although the inherent powers of a High Court under Section 482 of the Code of Criminal Procedure should be exercised sparingly, yet the High Court must not hesitate in quashing such criminal proceedings which are essentially of a civil nature. It was held as 9 under: “12. While exercising its jurisdiction under Section 482 of the Code the High Court has to be cautious. This power is to be used sparingly and only for the purpose of preventing abuse of the process of any court or otherwise to secure ends of justice. Whether a complaint discloses a criminal offence or not depends upon the nature of facts alleged therein. Whether essential ingredients of criminal offence are present or not has to be judged by the High Court. A complaint disclosing civil transactions may also have a criminal texture. But the High Court must see whether a dispute which is essentially of a civil nature is given a cloak of criminal offence. In such a situation, if a civil remedy is available and is, in fact, adopted as has happened in this case, the High Court should not hesitate to quash the criminal proceedings to prevent abuse of process of the court.” (emphasis supplied)

12. Relying upon the decision in Paramjeet Batra (supra), the Supreme Court in Randheer Singh v. State of U.P., (2021) 18 SCC 626, observed that criminal proceedings cannot be taken recourse to as a weapon of harassment. In Usha Chakraborty & Anr. v. State of West Bengal & Anr., 2023 SCC OnLine SC 90, relying upon Paramjeet Batra (supra) it was again held that where a dispute which is essentially of a civil nature, is given a cloak of a criminal offence, then such disputes can be quashed, by exercising the inherent powers under Section 482 of the Code of Criminal Procedure.

13. The allegation against the petitioners is that they, while being associated with Rise Vision Fashion Company, induced the complainant and other persons to become distributors by assuring attractive commissions on deposit of certain amounts. Pursuant thereto, the complainant and other 10 witnesses deposited different amounts, underwent training and purchased garments supplied by the company. The grievance of the complainant is that the garments supplied were of inferior quality and that despite seeking refund, neither the deposited amount nor the expected commission was paid. The investigating agency, after completion of investigation, filed the charge- sheet under Sections 420 and 34 of the IPC and Sections 6(5) and 10 of the Chhattisgarh Protection of Depositors Interest Act, 2005. However, the petitioners have already been discharged from the offences under the Chhattisgarh Protection of Depositors Interest Act, 2005 by the competent Court and the prosecution now survives only in respect of the offences under Sections 420 and 34 IPC.

14. The principal question for consideration is whether the allegations contained in the FIR and the material collected during investigation disclose the essential ingredients of the offence of cheating or whether the dispute is essentially civil and commercial in nature. From a plain reading of the complaint and the charge-sheet, it appears that the complainant voluntarily entered into a distributor arrangement with the company, deposited money for carrying on the business and purchased garments for marketing. The entire grievance revolves around the alleged inferior quality of the garments supplied, non-payment of the promised commission and non-refund of the amount deposited. Such allegations arise out of a commercial transaction between the parties and relate to the alleged breach of contractual obligations under the distributor arrangement.

15. It is well settled that in order to constitute an offence under Section 420 IPC, there must exist dishonest or fraudulent intention at the very inception of the transaction. Mere failure to fulfil a promise or breach of contractual 11 obligations, without anything more, would not attract the offence of cheating. A careful reading of the FIR and the charge-sheet does not disclose any specific material to indicate that the petitioners had dishonest intention at the very inception when the complainant entered into the distributor arrangement. The allegations primarily indicate that after entering into the business arrangement, disputes arose regarding the quality of the garments supplied and the commercial benefits expected by the complainant. Such allegations, even if accepted in their entirety, do not prima facie satisfy the ingredients of the offence punishable under Section 420 IPC.

16. It is also pertinent to note that the petitioners have already been discharged from the offences under Sections 6(5) and 10 of the Chhattisgarh Protection of Depositors Interest Act, 2005. Though such discharge by itself may not automatically absolve the petitioners of their liability under the IPC, it nevertheless indicates that the transaction in question was not found to be an unauthorized deposit or investment scheme. The material available on record further demonstrates that the complainant had entered into the arrangement as a distributor of the company and the dispute essentially pertains to the business arrangement entered into between the parties.

17. The Hon'ble Supreme Court in State of Haryana & Others v. Bhajan Lal & Others, 1992 Supp (1) SCC 335, has held that where the allegations made in the FIR, even if taken at their face value, do not prima facie constitute any offence or where the criminal proceedings are manifestly attended with mala fides or amount to abuse of the process of the Court, the High Court would be justified in exercising its inherent jurisdiction to quash the proceedings. Likewise, in Hridaya Ranjan Prasad Verma & Others v. State of Bihar & Another, (2000) 4 SCC 168, it has been held that the distinction between 12 mere breach of contract and the offence of cheating depends upon the intention of the accused at the inception of the transaction. Similar principles have been reiterated in Mohd. Ibrahim & Others v. State of Bihar & Another, (2009) 8 SCC 751, Indian Oil Corporation v. NEPC India Ltd. & Others, (2006) 6 SCC 736, Joseph Salvaraj A. v. State of Gujarat & Others, (2011) 7 SCC 59, and R. Nagender Yadav v. State of Telangana, (2023) 2 SCC 195, wherein it has consistently been held that a dispute arising purely out of contractual or commercial transactions should not be permitted to be converted into a criminal prosecution in the absence of material demonstrating dishonest intention from the inception.

18. Applying the aforesaid principles to the facts of the present case, this Court is of the considered view that the allegations made in the FIR and the material collected during investigation predominantly disclose a commercial dispute arising out of a distributor agreement and alleged breach of contractual obligations. The essential ingredients constituting the offence of cheating are conspicuously absent. The complainant may have appropriate remedies before the competent civil or consumer forum for redressal of his grievances, but continuation of the criminal proceedings in the facts of the present case would amount to permitting criminal law to be used for enforcing contractual obligations, which is impermissible.

19. In view of the above discussion, this Court is of the considered opinion that the allegations contained in FIR No. 31/2023 dated 25.01.2023, even if taken at their face value, do not disclose the essential ingredients of the offence punishable under Sections 420, 34 of the Indian Penal Code and the dispute between the parties is essentially civil/commercial in nature. Accordingly, Final Report No. 194/2023 arising out of FIR No. 31/2023 dated 13

25.01.2023, the order dated 07.08.2024 taking cognizance thereof passed by the learned Special Judge, Chhattisgarh Protection of Depositors Interest Act, Rajnandgaon, and the consequential criminal proceedings in RCC No. 9731 of 2024 pending before the learned Chief Judicial Magistrate, Rajnandgaon, are liable to be and are hereby quashed qua the present petitioners.

20. The petition is accordingly allowed. No order as to costs. Sd/- Sd/- (Ravindra Kumar Agrawal) (Ramesh Sinha) Judge Chief Justice Alok