Charitable Trust Collects ₹74.55 Crore During Covid and Diverts Funds to Land Purchase; Delhi High Court Finds No Cheating or Entrustment and Quashes FIR
Can Using Covid Donations for Another Purpose Amount to Criminal Breach of Trust? Delhi High Court Says Donation Transfers Ownership to Donee
Facts
Hemkunt Foundation approached the Delhi High Court under Section 482 CrPC seeking quashing of FIR No. 18/2022 registered by the Special Cell, Delhi under Sections 406, 420 and 120B IPC, together with all consequential proceedings. HEMKUNT
The FIR originated from secret information regarding allegedly suspicious financial activities of the Foundation. During the Covid-19 pandemic, it allegedly collected approximately ₹74.55 crore from the public and corporate entities through appeals for Covid relief. The prosecution alleged that part of the money was placed in fixed deposits and ₹38.31 crore was transferred to M/s Dhruva Healthcare LLP for purchase of land. HEMKUNT
The Foundation maintained that it was a public charitable trust established in 2010 and had undertaken humanitarian operations, including distribution of oxygen cylinders, medical kits, ration and food during the pandemic. HEMKUNT
Issues
The principal questions were:
- Whether donations received for Covid relief constituted “entrustment” capable of attracting criminal breach of trust under Sections 405/406 IPC.
- Whether alleged utilisation of donated funds for purchasing land or creating fixed deposits constituted dishonest misappropriation.
- Whether soliciting donations through emotional Covid-relief appeals established cheating under Section 420 IPC.
- Whether dishonest intention existed at the inception when the donations were solicited.
- Whether prosecution under Sections 406/420 could survive where no donor or alleged victim had complained of being cheated or of entrusting property.
- Whether Section 120B IPC could independently survive when the substantive offences themselves were not disclosed.
Petitioner’s Arguments
The Foundation argued that there was no victim or complainant alleging either cheating or breach of trust. The FIR arose from secret information and a complaint by a police officer who was neither a donor nor an alleged victim. HEMKUNT
Its central argument was that a donation cannot constitute entrustment. Once money is donated, ownership is transferred to the recipient. Therefore, an essential ingredient of Section 406 IPC was absent.
For Section 420 IPC, it argued that there was no allegation or evidence showing deception or fraudulent intention from the inception. Merely making emotional appeals for donations could not establish cheating. HEMKUNT
It further argued that the ₹38.31 crore transferred to Dhruva Healthcare LLP was traceable to identifiable assets and there was no allegation of personal enrichment or siphoning. Similarly, fixed deposits merely retained the funds within the banking system and generated interest. HEMKUNT
State’s Arguments
The State contended that donations had been solicited through social media, crowdfunding and public appeals with specific representations that they would be used for Covid-19 relief, oxygen cylinders, concentrators, medicines and emergency supplies. HEMKUNT
According to the prosecution, these donations constituted property entrusted for a specified charitable purpose. Their subsequent transfer to Dhruva Healthcare LLP and conversion into fixed deposits allegedly amounted to dishonest dealing with entrusted property. HEMKUNT
The State also relied on statements from institutional donors, including Perfetti Van Melle India, Mahindra & Mahindra and HSBC Electronic Data Processing India, which allegedly donated specifically for Covid relief and required utilisation certificates, bills and invoices. HEMKUNT
Analysis of the Law
1. Absence of an Aggrieved Person
The Court considered the absence of an identifiable victim significant.
It held that for the alleged offences under Sections 406 and 420 IPC, an aggrieved person was a prerequisite, whereas nobody had alleged that property was entrusted to the Foundation and dishonestly misappropriated or that he/she had been cheated into delivering money. HEMKUNT
Relying on M/s PPK Newsclick Studio Pvt. Ltd. v. State (NCT of Delhi), the Court noted that an informant who is not the person allegedly cheated cannot substitute for the absence of an aggrieved person in the circumstances considered there. HEMKUNT
The Court consequently observed that the FIR having originated from secret information and the complaint of a police officer who was not a victim “rocks the very foundation of the FIR itself.” HEMKUNT
2. Donation Is Different From Entrustment
This is the judgment’s most significant proposition.
For criminal breach of trust, there must first be entrustment of property or dominion over property, followed by dishonest misappropriation, conversion or disposal contrary to law or contract. HEMKUNT
The Court then examined the legal nature of a donation.
It noted that approximately ₹74.55 crore had admittedly been received as donations. Referring to the concept of a gift under Section 122 of the Transfer of Property Act, the Court reasoned that a donor voluntarily transfers ownership to the donee without consideration. HEMKUNT
Once a donation is completed, the donor ceases to retain ownership or beneficial interest in the donated property. HEMKUNT
Accordingly, the Court held that there was no “entrustment” of the donated funds. Without entrustment, utilisation of those funds for purchasing land from Dhruva Healthcare LLP or creating fixed deposits could not constitute criminal breach of trust under Section 406 IPC. HEMKUNT
3. Different Utilisation of Donation Does Not Automatically Become Cheating
For Section 420 IPC, the Court emphasised that cheating requires fraudulent or dishonest inducement, causing the deceived person to deliver property.
Crucially, the dishonest intention must exist from the commencement of the transaction. A subsequent failure to honour a representation or deviation from the intended use, without fraudulent intention at inception, does not by itself constitute cheating. HEMKUNT
The prosecution alleged that Hemkunt Foundation collected donations by posting emotional photographs and videos concerning Covid relief.
But the Court found no material in the FIR or investigation showing that those appeals were made with dishonest or fraudulent intention from inception. HEMKUNT
Significantly, the prosecution’s own case in the related PMLA proceedings acknowledged that the Foundation had spent approximately ₹5.18 crore on Covid-19 relief activities. HEMKUNT
The Court therefore held that an emotional appeal for donations does not by itself constitute deception. Even assuming that some funds were ultimately utilised inconsistently with the purpose for which donations were solicited, that circumstance alone could not establish cheating without evidence of deception and dishonest intention at inception. HEMKUNT
Precedent Analysis
State of Haryana v. Bhajan Lal
The Court reiterated that Section 482 jurisdiction is exceptional and should be exercised sparingly. However, quashing is permissible where allegations, even if accepted at face value, do not constitute an offence or where the collected material fails to disclose commission of the alleged offence. HEMKUNT HEMKUNT
M/s PPK Newsclick Studio Pvt. Ltd. v. State (NCT of Delhi)
Relied upon for the proposition applied by the Court that offences of cheating and criminal breach of trust require an aggrieved person in the factual context considered, and that an informant cannot substitute for a person allegedly cheated or whose property was entrusted. HEMKUNT
Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh
Relied upon while identifying the essential ingredients of criminal breach of trust—entrustment followed by dishonest misappropriation, conversion, use or disposal contrary to law or contractual obligation. HEMKUNT
Duncans Agro Industries Ltd. v. CBI
The judgment explains that although “entrustment” has a broad meaning, ownership or beneficial interest in the property must remain with somebody other than the accused, with the accused holding the property for that person’s benefit. HEMKUNT
Madhab Bhattacharjee v. State of West Bengal
Relied upon for the nature of a donation: once property is donated, the donor ceases to retain ownership or interest in the donated property. HEMKUNT
Court’s Reasoning
The Court found three fundamental defects in the prosecution.
First, there was no victim or aggrieved donor forming the foundation of the FIR.
Second, the money had been received as donations rather than entrusted property. Since a donation transfers ownership to the donee, the essential ingredient of entrustment under Section 405 IPC was absent.
Third, there was no material showing that Hemkunt Foundation had dishonest or fraudulent intention when it originally solicited the donations. Subsequent utilisation of funds for a different purpose could not retrospectively create fraudulent intention at inception.
Therefore, neither Section 406 nor Section 420 IPC was made out. Once those substantive offences failed, the Court held that Section 120B IPC could not independently survive. HEMKUNT
Conclusion
The Delhi High Court quashed FIR No. 18/2022 dated 22 January 2022 and all consequential proceedings against Hemkunt Foundation. The petition was allowed. HEMKUNT
The judgment’s central proposition is significant: a donation, once voluntarily made and accepted, ordinarily involves transfer of ownership and is conceptually different from “entrustment” required for criminal breach of trust. Further, even an alleged diversion from the stated purpose of fundraising does not by itself establish cheating unless fraudulent or dishonest intention existed when the money was solicited.
Case Details
Case: Hemkunt Foundation Through Its Trustee Smt. Natasha Ahluwalia v. State NCT of Delhi
Court: High Court of Delhi at New Delhi
Case No.: CRL.M.C. 5185/2022 with CRL.M.A. 20708/2022
CNR: DLHC010383112022 HEMKUNT
Judge: Justice Saurabh Banerjee HEMKUNT
Reserved: 15 September 2026
Pronounced: 29 September 2026
Result: Petition allowed; FIR under Sections 406, 420 and 120B IPC and all consequential proceedings quashed.
