BNSS Section 528 Quashing Reaffirmed: Mere Credit Default in Agri-Produce Sales Is Not Cheating or Criminal Breach of Trust; Purchase Slips Are Not “False Documents” Absent Impersonation or Alteration

Introduction

In Raju and Others v. The State of Madhya Pradesh and Others (Neutral Citation: 2025:MPHC-IND:30844), the Madhya Pradesh High Court (Indore Bench), per Justice Sanjeev S. Kalgaonkar, quashed an FIR and all consequential proceedings against purchasers of agricultural produce accused of cheating, criminal breach of trust, and forgery. The petition, filed under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), challenged Crime No. 151/2024 registered at P.S. Khilchipur, District Rajgarh, invoking Sections 420, 406, later 409, 467, 468, and 471 of the IPC.

The prosecution alleged that Raju Soni and Ravi Soni purchased crops (wheat, soyabean, mustard, lentil, corn) from local farmers, often on credit, initially paying timely to build trust, but subsequently defaulted between October 2023 and February 2024, allegedly forging purchase slips and defrauding 161 farmers of approximately Rs. 2.32 crores before absconding.

The petitioners contended that the dispute arises from commercial transactions with continuing dealings and payments; that mere non-payment does not satisfy the ingredients of cheating or criminal breach of trust; and that purchase slips do not amount to “false documents” constituting forgery. The State argued that the magnitude of default and allegations of forged purchase slips attracted graver offences including Sections 409 and 468 IPC.

The central issues before the Court were:

Whether allegations of credit default in continuing sale–purchase transactions disclose the offence of cheating under Section 420 IPC;
Whether there was “entrustment” to attract criminal breach of trust under Section 406 IPC (and by extension, Section 409 IPC);
Whether handwritten purchase receipts could amount to “false documents” and thereby constitute forgery under Sections 467, 468, 471 IPC;
Whether the High Court should exercise inherent powers under Section 528 BNSS to quash the FIR to prevent abuse of process.

Summary of the Judgment

The High Court allowed the petition and quashed the FIR (Crime No. 151/2024) and all subsequent proceedings, holding that:

Mere non-payment/underpayment in a continuing commercial transaction does not, by itself, establish the mens rea necessary for the offence of cheating (Section 420 IPC). The intention to deceive must exist at the inception of the transaction; subsequent default is insufficient.
No offence under Section 406 IPC (criminal breach of trust) is made out since there was no “entrustment” of property; payments were consideration under a contract rather than property held in trust.
Handwritten purchase receipts, even if made dishonestly, are not “false documents” within the meaning of Section 464 IPC in the absence of impersonation, unauthorized execution on behalf of another, material alteration, or deception triggering the statutory categories. Consequently, offences under Sections 467/468/471 IPC are not attracted.
The investigative agency appeared swayed by the magnitude of alleged default and the plight of farmers, but criminal law requires the presence of essential statutory ingredients. Cloaking a civil dispute for recovery/specific performance as a criminal case is impermissible.
Inherent jurisdiction under Section 528 BNSS (functionally analogous to former Section 482 CrPC) must be exercised to prevent abuse of process and to secure the ends of justice.

Analysis

Precedents Cited and Their Influence

Vir Prakash Sharma v. Anil Kumar Agarwal, (2007) 7 SCC 373: The Court relied on the settled principle that mere failure to honour a promise or to pay the price in a commercial arrangement does not, without more, constitute cheating. This underpinned the Court’s conclusion that non-payment in continuing transactions cannot, by itself, supply the initial dishonest intention required by Section 420 IPC.
Ashok Kumar Jain v. State of Gujarat, 2025 SCC OnLine SC 998: Cited for the proposition that criminal proceedings cannot be used to convert civil/commercial breaches into penal wrongs without specific allegations establishing the necessary mens rea at inception.
International Advanced Research Centre for Powder Metallurgy & New Materials v. Nimra Cerglass Technics (P) Ltd., (2016) 1 SCC 348: The Supreme Court’s detailed distillation of the ingredients of Section 420 IPC—cheating, dishonest inducement, and mens rea at the time of inducement—was central. The High Court directly applied this framework, emphasizing that subsequent failure to keep a promise does not retroactively prove initial deceit.
S.W. Palanitkar v. State of Bihar, (2002) 1 SCC 241, and Rashmi Jain v. State of U.P., (2014) 13 SCC 553: Both affirm the necessity of fraudulent or dishonest intention at the very inception of the transaction to sustain a charge of cheating. The High Court quoted and followed this line of authority.
Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168: A seminal exposition distinguishing civil breach from the criminal offence of cheating. The Court invoked the “fine” but critical distinction: intention at the time of inducement is the gist of the offence; subsequent conduct may be relevant but not determinative.
Radheyshyam v. State of Rajasthan, 2024 SCC OnLine SC 2311: Reiterated that defaults in obligations under consensual commercial agreements (there, refusal to register a sale despite part payment) do not amount to cheating and that criminal breach of trust requires “entrustment,” which is absent in ordinary sale transactions. The High Court applied this to the farmers’ part-payments and credit arrangements, treating them as contractual consideration, not entrusted property.
Mohd. Ibrahim v. State of Bihar, (2009) 8 SCC 751: Defined “false document” under Section 464 IPC and clarified that executing a document as oneself (even if one falsely claims title) is not “false,” unless there is impersonation, lack of authority, material alteration, or deception rendering the document another’s act. The High Court used this to hold that the purchase receipts, on their face, did not meet the statutory threshold for forgery.
Mir Nagvi Askari v. CBI, (2009) 15 SCC 643, and Sheila Sebastian v. R. Jawaharaj, (2018) 7 SCC 581: Both reinforce the narrow confines of “making a false document” and aligned with the Court’s rejection of Sections 467/468/471 IPC on the facts.
Two High Court orders cited by petitioners—MCRC No. 35544 of 2019, Sushree Shehal and Others v. State of Madhya Pradesh and Others (order dated 16.05.2025) and MCRC No. 19202 of 2024, Gauri Rahul Takalkar and Others v. Rahul Dilip Takalkar (order dated 05.05.2025)—illustrate the High Court’s broader approach to quashing criminal proceedings where allegations disclose predominantly civil disputes. They support the trajectory of reasoning even though the Supreme Court authorities were decisive.

Legal Reasoning

The Court’s analysis proceeds in three substantive blocks—cheating (Section 420 IPC), criminal breach of trust (Section 406 IPC), and forgery (Sections 467/468/471 IPC)—and a procedural block on the exercise of inherent powers under Section 528 BNSS.

Cheating (Section 420 IPC): The judgment stresses that the sine qua non is mens rea at inception—fraudulent or dishonest intention at the time of inducement. The record indicated a continuing series of transactions in which petitioners initially paid dues, thereby building trust, and later defaulted. That commercial history undermines any inference that deceit existed from the outset. Mere non-payment, deferment, or failure to honour a promise—even if morally or commercially egregious—does not, by itself, prove the initial dishonest intention required by Section 420 IPC.
Criminal Breach of Trust (Section 406 IPC): The statutory hinge is “entrustment” of property or dominion over it. Payments made as price or consideration under a sale contract do not transform the buyer into a trustee. Absent entrustment and a specific legal duty attaching to the property, allegations of misappropriation do not arise. The Supreme Court’s Radheyshyam decision furnished a close comparator: part-payments under an agreement to sell are not entrustment, and refusal to complete the sale is not misappropriation of entrusted property.
Forgery and “False Document” (Sections 467/468/471 IPC read with Section 464 IPC): The High Court applied Mohd. Ibrahim and Mir Nagvi Askari to the handwritten purchase slips. To constitute a “false document,” the maker must (a) execute it by impersonating someone else or asserting unauthorized authority of another, (b) alter a document materially without authority, or (c) procure execution by someone lacking capacity/awareness due to deception. Purchase slips written by the accused themselves, not purporting to emanate from someone else and without allegation of alteration or such deception, do not fall into any of these statutory categories. Consequently, the foundation for Sections 467 (forgery of valuable security), 468 (forgery for purpose of cheating), and 471 (using as genuine a forged document) collapses.
On Section 409 IPC: While the State asserted Section 409 (criminal breach of trust by public servant, banker, etc.), the facts disclosed neither the special fiduciary capacity required nor entrustment; the logic defeating Section 406 applies a fortiori to Section 409. The Court’s blanket quash reflects this doctrinal incompatibility.
Inherent Power under Section 528 BNSS (Quashing): The Court invoked its inherent jurisdiction to prevent abuse of process and secure the ends of justice—continuity in principle with the former Section 482 CrPC. Even at the investigation stage, where the FIR and materials do not disclose the essential ingredients of the offences alleged, the High Court can and should intervene. The Court expressly noted that the investigative addition of serious sections appeared driven by the magnitude of the alleged default and the plight of farmers, which cannot substitute for statutory elements of offences.

Impact and Significance

De-criminalization of Commercial Defaults: The decision fortifies the jurisprudential boundary between civil breach and criminality in the context of credit-based agricultural commodity sales—a frequent practice in rural markets. It signals that criminal law cannot be a debt recovery mechanism in the absence of specific ingredients, especially mens rea at the inception or entrustment.
Guardrails for Police and Complainants: Investigating agencies are cautioned against “section-shopping” (e.g., mechanically adding Sections 467/468/471/409 IPC) unless facts satisfy the precise statutory tests of “false document,” “entrustment,” or specialized capacity. This promotes disciplined investigations and reduces misuse of the criminal process to exert pressure in civil disputes.
BNSS Section 528 Continuity: The ruling reaffirms that the High Court’s inherent powers under the BNSS mirror the pre-existing framework under the CrPC for quashing proceedings that do not disclose an offence. This offers doctrinal stability during the Code transition period and provides a reference point for future quashing petitions under BNSS.
Commodity and Agri-Trade Ecosystem: For traders and farmers, the judgment clarifies the legal risk profile: defaults are largely civil unless accompanied by deceptive initiation, impersonation, falsification of documents, or specific fiduciary arrangements. Farmers retain robust civil remedies (recovery suits, summary procedures, attachment of assets) even as criminalisation is constrained to genuinely fraudulent conduct.
Documentary Practices: The Court’s treatment of purchase slips underscores that mere issuance of receipts acknowledging transactions is not forgery. However, where slips falsely purport to be issued by another entity, bear forged signatures, or are materially altered, forgery charges would be viable. This nuanced guidance will inform how parties generate and scrutinize transaction records (including prospective application to electronic records, which are also covered under Section 464).

Complex Concepts Simplified

Cheating (Section 420 IPC): To prove cheating, the prosecution must show that the accused had a dishonest intention at the time he induced the victim to part with property or money. Later failure to pay or perform the contract, by itself, does not prove that initial intention was fraudulent.
Criminal Breach of Trust (Section 406 IPC): This requires “entrustment” of property—i.e., the accused holds property on behalf of someone else and then dishonestly misappropriates it. Money paid as price under a sale is not “entrusted” property; it is consideration that changes hands under a contract.
False Document and Forgery (Sections 464, 463, 467/468/471 IPC): A document is “false” if it is made by impersonating another or without authority in another’s name, altered materially without authority, or obtained by deceiving a person who cannot understand it. If none of these apply, the document is not “false,” and hence there is no forgery.
Inherent Powers to Quash (Section 528 BNSS): The High Court can step in to quash an FIR/proceeding where allegations, taken at face value, do not disclose any offence, or where continuing the process would abuse the court’s process or defeat justice. This is a safety valve against criminal law being used for collateral purposes (e.g., coercive debt recovery).
Mens Rea at Inception: “Mens rea” means guilty mind. For cheating, the dishonest intention must exist at the moment the promise or representation is made; it cannot be presumed solely from later default or breach.

Key Takeaways

Mere non-payment in a continuing commercial relationship—without specific allegations showing dishonest intention at inception—does not constitute cheating under Section 420 IPC.
Payments made as contractual consideration are not “entrusted” property; Section 406 IPC does not apply absent entrustment and breach of a legal duty touching that trust.
Purchase receipts authored by the accused themselves are not “false documents” unless they involve impersonation, lack of authority, material alteration, or deception as defined in Section 464 IPC; hence, Sections 467/468/471 IPC cannot be sustained on such facts.
The magnitude of default and the plight of victims, while compelling, cannot replace the statutory ingredients of offences.
High Courts retain robust inherent powers under Section 528 BNSS to prevent misuse of the criminal process and to protect the boundary between civil disputes and genuine penal wrongdoing.

Conclusion

Raju v. State of Madhya Pradesh is a careful reaffirmation of first principles: criminal liability for cheating hinges on demonstrable dishonest intention at inception; criminal breach of trust requires entrustment; and forgery turns on the making of a “false document” within the statutory taxonomy. The Court’s application of settled Supreme Court jurisprudence to a familiar rural-commercial setting—credit-based agri-produce sales—sends a clear message that the criminal process cannot be invoked merely because a large sum is outstanding or because one party is vulnerable. Instead, the prosecution must plead and establish the specific ingredients of the offences alleged.

By invoking Section 528 BNSS to quash the FIR and related proceedings, the High Court buttresses the continuity of quashing standards in the BNSS era and provides concrete guidance for investigators, traders, and farmers alike. The ruling preserves the integrity of criminal law while directing aggrieved parties toward appropriate civil remedies—thereby striking the right balance between deterrence of fraud and the de-criminalization of ordinary commercial defaults.

Case Metadata

Case: Raju and Others v. The State of Madhya Pradesh and Others
Neutral Citation: 2025:MPHC-IND:30844
Court/Bench: High Court of Madhya Pradesh, Indore Bench; Justice Sanjeev S. Kalgaonkar
Date: 27 October 2025
Provision Invoked for Quashing: Section 528, BNSS 2023
Offences Alleged in FIR: Sections 420, 406 (subsequently 409, 467, 468, 471) IPC
Disposition: FIR and all subsequent proceedings quashed; petitioners discharged