Sher Singh Raikwal v. State of Uttarakhand Anr

exchanged, but the dispute escalated, leading Sandeep Sethi to file an FIR on 24.09.2017 against the Applicant and three other landowners for offences under Sections 406, 420, and 506 of the IPC. Post investigation, a charge sheet was submitted only against the Applicant for the offence of criminal breach of trust under Section 406 IPC.

5. Heard learned counsel for the parties and perused the records.

6. Learned Counsel for the Applicant strenuously argued that the gravamen of the dispute falls squarely within the four corners of a detailed written agreement executed between the parties, which unambiguously contains an arbitration clause stipulating that any and all disputes arising thereunder are to be resolved through the process of arbitration.

7. It is submitted that the sum of Rs. 51 lakhs paid by the complainant, Sandeep Sethi, to the Applicant was strictly in the nature of earnest money and advance, as contemplated under the contract, and that the said amount was duly passed on to the landowners, for whom the Applicant was merely acting in a representative capacity. There was, it is urged, no entrustment of property in any fiduciary or trust-based relationship so as to attract the application of Section 406 IPC.

8. It is further submitted that, on a plain reading of the agreement, subsequent payments and relevant conditions were required, which the complainant himself failed to fulfil, particularly about the payment of the Criminal Misc. Application No. 1844 of 2018-----Sher Singh Raikwal vs State of Uttarakhand & Another 2 Ashish Naithani J. balance sale consideration. Learned counsel contended that any alleged breach, whether in obtaining government clearance or other stipulations, would, at best, amount to breach of contract, for which the complaint lies in civil law, offering remedies such as specific performance and, notably, arbitration. These are not matters that warrant criminal sanction, nor do they constitute the essential elements of a criminal breach of trust.

9. Additionally, it is vehemently argued that the order of cognizance by the Magistrate is mechanically passed, utterly lacking in proper judicial application of mind to whether “entrustment” and “dishonest misappropriation”, the sine qua non for prosecution under Section 406, were made out from the materials on record.

10. Learned counsel would highlight that the complainant, having parted not only with Rs.51 lakhs towards earnest money but also having incurred over Rs.52 lakhs in developmental works, advertisements, and related expenses amounting to a total investment exceeding Rs.1 crore finds himself with neither land nor refund, the work having ultimately been brought to a standstill by the authorities. The repeated requests of the complainant to resolve the matter amicably or alternately, to refund the money advanced, fell on deaf ears.

11. It is, therefore, contended that retaining the earnest money in these circumstances, coupled with non-performance and lack of genuine intent to fulfil contractual obligations, amounts to criminal breach of trust and misrepresentation under Section 406 IPC. The mere existence of an arbitration clause, counsel submits, does not preclude criminal prosecution where the ingredients of a cognizable offence are present; criminal and civil remedies can lawfully proceed concurrently. The learned counsel further asserts that the Magistrate’s order taking cognizance is correct and proper and emphasizes that the charge sheet ought to have been filed against all the landowners in addition to the Applicant. Criminal Misc. Application No. 1844 of 2018-----Sher Singh Raikwal vs State of Uttarakhand & Another 3 Ashish Naithani J.

12. The Court has, after a thorough consideration of the case record, arrived at its reasoning in great detail. At the outset, it must be emphasized that the inherent powers of this Court under Section 482 Cr.P.C. are to be exercised sparingly and only in exceptional circumstances where the Court is satisfied that allowing the criminal process to continue would be an abuse of the court’s process or would otherwise result in a miscarriage of justice. The touchstone for exercising such power is whether, if the allegations made in the complaint and supporting materials are taken at face value, a prima facie case for the alleged offence is made out.

13. In the present case, it is apparent from the pleadings and annexed documents that the Applicant, along with other landowners, entered into a series of agreements with the opposite party No. 2, Sandeep Sethi, for the development and sale of land at Natadol, Almora. Substantial sums of money totalling at least Rs. 51 lakhs were paid by the complainant to the Applicant as advance or earnest money, with further investments made towards development and ancillary expenses. The written agreements, meticulously placed on record, provide for the rights and obligations of each party. They include a detailed arbitration clause and provisions for specific performance, which the Applicant relies upon to assert the civil nature of the dispute.

14. However, the Court notes that the gravamen of the allegations levelled by the complainant is not merely that of a contractual breach, but of deliberate conduct suggesting an intention to defraud and misappropriate the funds entrusted for a specific purpose.

15. The complainant's case, supported by contemporaneous receipts, correspondence, and statements, narrates that, despite repeated assurances, the Applicant and the landowners failed to obtain requisite permissions, execute transfer documents or even refund the substantial advances when the project stalled. Criminal Misc. Application No. 1844 of 2018-----Sher Singh Raikwal vs State of Uttarakhand & Another 4 Ashish Naithani J.

16. The allegations further state that the Applicant, instead of fulfilling his obligations or returning the sums by mutual agreement or through arbitration, continued to retain the amount despite non-performance. The complainant, therefore, asserts that the conduct of the Applicant and others constitutes, in effect, criminal breach of trust under Section 406 IPC.

17. The Court is mindful that, at this stage, the facts as stated in the charge sheet and other accompanying materials must be taken as correct, and the existence of any contract, civil claim, or arbitral remedy does not per se nullify criminal liability if the requisite elements of the offence exist in the allegations.

18. It is well settled that for the offence of criminal breach of trust to be made out under Section 406 IPC, two essential elements must be present: first, that property must be entrusted to the accused for a specific purpose; and second, that the accused must have dishonestly misappropriated or converted the property to his own use in violation of such entrustment.

19. The record demonstrates that the complainant entrusted the Applicant with Rs. 51 lakhs, specifically for the purposes of land acquisition and development, with the expectationarising from express promises and contractual obligationsthat such purpose would be fulfilled.

20. The further facts, as alleged, that the money has neither been put to its intended use nor returned despite repeated demands, and that the Applicant has not initiated ancillary legal recourse such as arbitration and specific performance, prima facie suggest dishonest intention and misappropriation.

21. The Court further notes that the complainant has placed on record evidence of subsequent investments and efforts to perform his own obligations. The failure of the Applicant and other landowners to reciprocate with genuine action or a refund, taken cumulatively and viewed through the lens of criminal law, discloses at this stage the Criminal Misc. Application No. 1844 of 2018-----Sher Singh Raikwal vs State of Uttarakhand & Another 5 Ashish Naithani J. necessary ingredients for proceeding against the Applicant under Section 406 of the IPC.

22. The Applicant’s argument that the dispute is purely civil, because of the presence of an arbitration clause or alternative civil remedies, does not hold up to judicial scrutiny on these facts. The law is clear that the mere existence of a civil remedy or contractual relationship does not, by itself, bar the institution of criminal proceedings if the factual matrix reveals that criminality is involved. Both remedies may proceed in parallel until such stage as the criminal court, upon full examination, determines otherwise after trial.

23. Additionally, the Court finds no procedural irregularity in the cognizance taken by the learned Magistrate. The Magistrate considered the police report, statements recorded under Section 161 Cr.P.C., and the documentary evidence before proceeding to summon the Applicant for trial. Whether or not the prosecution ultimately establishes the requisite elements of entrustment and dishonest misappropriation is a matter for evidence and trial, not for summary quashing at this threshold stage. ORDER In view of the above, the Court is satisfied that the allegations, statements, and materials accompanying the charge sheet, when taken at face value, do disclose a prima facie case under Section 406 IPC against the Applicant. The invocation of the criminal process, in the facts and circumstances of the case, cannot be said to be manifestly unjust or an abuse of the process of the Court. The Applicant has not demonstrated any exceptional ground warranting the exercise of this Court’s inherent jurisdiction under Section 482 Cr.P.C. for quashing the proceedings. Criminal Misc. Application No. 1844 of 2018-----Sher Singh Raikwal vs State of Uttarakhand & Another 6 Ashish Naithani J. Accordingly, the application is liable to be dismissed, and all consequential criminal proceedings are permitted to continue in accordance with law. Dated: 24.06.2025 NR/ (Ashish Naithani, J.) Criminal Misc. Application No. 1844 of 2018-----Sher Singh Raikwal vs State of Uttarakhand & Another 7 Ashish Naithani J.