Facts
The respondent was offered a three-year distributorship of ‘Saraswati’ camphor by Oriental Aromatics Ltd. He paid Rs.73 lakh as advance, against which goods worth Rs.31,49,167 were supplied. After a dispute regarding pricing, supplies were stopped and the respondent alleged that Rs.41,50,833 remained unpaid. He lodged an FIR alleging offences under S.318(4) BNS, S.316(2) BNS and S.3(5) BNS. The High Court declined to quash the FIR.
Issues Framed
(i) “Whether the allegations made in the first information report, taken at their face value when accepted in their entirety, disclose the commission of the offences alleged.”
(ii) “Whether a civil/commercial dispute between the parties has been sought to be given a criminal overtone, if yes, the consequence thereof.”
Court’s Reasoning
(a) Cheating — S.318(4) BNS. The Court reiterated that dishonest intention at the inception is the gist of cheating. Mere breach of contract does not constitute cheating unless fraudulent or dishonest intention existed when the transaction began. — Para 9, relying on Delhi Race Club (1940) Ltd. v. State of U.P.
The FIR contained no factual allegation showing that the distributorship was offered without an intention to perform, that the appellants knew they could not supply the goods, or that any representation was false when made. The expressions “cheated” and “I got deceived” were merely conclusions unsupported by foundational facts. — Paras 13–15.
(b) Contractual termination. The termination of the distributorship did not establish deception. Where a contractual power is exercised, even if wrongfully, the remedy ordinarily lies in damages. Criminal liability would require an allegation that the termination resulted from a fraudulent design existing from the outset. — Para 16.
(c) Criminal breach of trust — S.316(2) BNS. Criminal breach of trust requires entrustment. Money paid to a supplier as consideration or advance for goods becomes the supplier's money; non-delivery may constitute breach of contract but does not, without entrustment, constitute breach of trust. No allegation stated that the money or goods were entrusted to the appellants to be held or applied for a specified purpose. — Paras 18–19.
(d) Abuse of criminal process. Cheating and criminal breach of trust were alleged on the same indivisible facts, although their essential ingredients are distinct. Applying State of Haryana v. Bhajan Lal, the Court held that where allegations, even if accepted entirely, do not prima facie constitute an offence, the High Court may quash the proceedings under Art.226 Const. of India and S.482 CrPC. — Paras 11–12, 20–23.
Held
Both appeals were allowed. The High Court judgment was set aside and the FIR registered under Ss.316(2), 318(4) and 3(5) BNS and all consequential proceedings were quashed. The Court clarified that the respondent remained free to pursue any civil, arbitral or other lawful remedy. — Paras 24–25.
Ratio
“To convert that into the offence of cheating, the information would have to allege facts showing that the termination was the culmination of a design formed at the outset.” — Para 16.
Relevant Para
16. The termination of the distributorship carries the matter no further. It is enough to say that the exercise of a power under the contractual terms is not, by itself, an act of deception. Where a contracting party brings the contract to an end in the manner the contract permits, the remedy of the other party, if the termination is wrongful, is to claim damages. To convert that into the offence of cheating, the information would have to allege facts showing that the termination was the culmination of a design formed at the outset. It alleges no such thing, and in the absence of such an allegation the information furnishes no foundation for action under the BNS.
Case Details
Citation: 2026 INSC 846
Decided on: 12 August 2026
Case Title: Parag Kishore Satoskar and Others v. State of Jharkhand and Another
Court: Supreme Court of India
Bench: Sanjay Karol J.; Augustine George Masih J.