Delhi High Court Rejects Cheating Case Over ₹5.15 Lakh Machine Payment; Holds Later Payment Dispute Cannot Establish Dishonest Intention at Transaction’s Inception
Delhi High Court Refuses Summons in Hydraulic Machine Payment Dispute; Holds Subsequent Denial of ₹5.15 Lakh Adjustment Cannot Retrospectively Constitute Cheating
Facts
The petitioner, Raj Kumar Sharma, proprietor of M/s Imperial Shovel Works, filed a petition under Section 482 CrPC challenging orders of the Metropolitan Magistrate and Additional Sessions Judge which had declined to summon the respondents for alleged offences under Sections 420, 120B and 34 IPC.
The dispute arose from the petitioner’s purchase of a hydraulic machine from Om Prakash Singh and Rishal Singh, partners of M/s Parrytech Hydraulics. The transaction was entered into on 5 December 2010 for ₹16,80,000.
An advance of ₹5,15,000 was to be paid through a cheque drawn on the account of the petitioner’s wife. According to the petitioner, Respondent Nos. 1 and 2 specifically asked him to leave the payee’s name blank because the payment was to be made to a third person connected with their business dealings.
The cheque dated 8 December 2010 was subsequently credited to the account of Respondent No. 3, Neetu Gupta. When questioned, Respondent Nos. 1 and 2 allegedly explained that she had business dealings with them and the amount had been routed to her on their account.
The hydraulic machine was subsequently delivered to the petitioner. The dispute arose when Respondent Nos. 1 and 2 allegedly refused to treat the ₹5.15 lakh as part of the sale consideration and demanded further payment. The petitioner treated this subsequent denial as cheating.
The petitioner approached the police and thereafter filed a private complaint with an application under Section 156(3) CrPC. The Section 156(3) application was dismissed, but he was permitted to lead pre-summoning evidence. He examined himself, his wife, a former employee and a Citibank manager who produced the relevant banking records.
The Magistrate ultimately dismissed the complaint and declined to issue process. The Sessions Court dismissed the petitioner’s revision. He therefore approached the High Court under Section 482 CrPC.
Issues
The principal issues were:
- Whether the petitioner’s complaint and pre-summoning evidence disclosed sufficient grounds to summon the respondents for cheating under Section 420 IPC.
- Whether the respondents possessed fraudulent or dishonest intention at the inception of the hydraulic machine transaction.
- Whether the subsequent refusal to adjust ₹5.15 lakh towards the machine’s consideration could retrospectively convert the transaction into criminal cheating.
- Whether transfer of the ₹5.15 lakh cheque to Respondent No. 3 established deception when the petitioner himself claimed that he was originally told the cheque would be routed to a third party.
- Whether delivery of the hydraulic machine was relevant in determining the respondents’ original intention.
- Whether sufficient material existed to establish criminal conspiracy under Section 120B IPC or common intention under Section 34 IPC.
- Whether the High Court could use Section 482 CrPC to undertake another round of factual or revisional scrutiny after the Magistrate’s order had already been examined by the Sessions Court.
Petitioner’s Arguments
The petitioner argued that the Magistrate had failed to properly consider the evidence of CW-1 to CW-4.
According to him, the oral evidence coupled with the banking records established that the ₹5.15 lakh cheque had been handed over to Respondent Nos. 1 and 2 at their request and was thereafter credited to Respondent No. 3. Their subsequent refusal to adjust that amount towards the purchase price, he argued, prima facie disclosed cheating and dishonest inducement.
He also alleged non-application of mind by the Magistrate, pointing out that the certified copy and digitally signed version of the Magistrate’s order allegedly contained materially different reasoning.
One version referred to non-examination of an independent witness or valuer regarding the hydraulic machine, even though the complaint did not concern defects in the machine. Another version referred to proceedings under Section 138 of the Negotiable Instruments Act which, according to the petitioner, had never been instituted.
The petitioner contended that the Sessions Court wrongly characterised the dispute as merely monetary without determining whether the pre-summoning material satisfied the threshold under Section 204 CrPC for issuance of process.
Respondent’s Arguments
Respondent Nos. 1 and 2 argued that the controversy was essentially a civil and monetary dispute and did not disclose any criminal offence.
They relied upon the Action Taken Report considered by the Magistrate, contending that it disclosed a different version regarding the payment to Respondent No. 3 and that the petitioner’s evidence did not displace the findings recorded during that inquiry.
The respondents also argued that the petitioner had not produced complete documentary material concerning the payments allegedly made towards the machine.
According to them, the dispute was fundamentally about the balance sale consideration, and a disagreement over amounts payable under a commercial transaction could not automatically be converted into criminal prosecution for cheating.
Analysis of the Law
Section 482 Cannot Become a Second Revision
The High Court first addressed the procedural posture.
The Magistrate’s refusal to issue process had already been subjected to revisional scrutiny by the Additional Sessions Judge. The Court held that Section 482 CrPC cannot ordinarily be invoked merely to obtain another round of revisional appreciation of the same material.
Thus, inherent jurisdiction could not be used to circumvent the statutory restriction against a second revision under Section 397(3) CrPC.
Threshold for Issuance of Process
The Court explained that at the pre-summoning stage the Magistrate does not determine whether the accused will ultimately be convicted.
The inquiry is whether there are sufficient grounds for proceeding.
At the same time, summoning an accused is a serious judicial act and cannot follow mechanically merely because a complaint has been filed and witnesses have been examined. The Magistrate must determine whether the complaint and supporting evidence actually disclose the essential ingredients of the alleged offence.
Cheating Requires Dishonest Intention at Inception
The decisive legal principle concerned Section 420 IPC.
For cheating, there must be deception and fraudulent or dishonest inducement, and crucially the dishonest intention must exist from the very beginning of the transaction.
A later breach of promise, contractual disagreement or refusal to honour an obligation does not retrospectively establish that the accused possessed dishonest intention when the transaction began.
Precedent Analysis
Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh, 2024 INSC 626
This was the principal authority governing both issuance of process and the ingredients of cheating.
The Supreme Court held that although conviction need not be established at the summoning stage, the Magistrate must determine whether sufficient grounds exist for proceeding. Where the essential ingredients of the alleged offence are absent, the complaint should be dismissed.
On Section 420 IPC, the Supreme Court reiterated that mere breach of contract cannot constitute cheating unless fraudulent or dishonest intention existed from the beginning of the transaction.
V. Ganesan v. State, 2026 INSC 265
The High Court relied upon this recent Supreme Court decision for the proposition that the intention to deceive must exist when the inducement is made.
A subsequent failure to fulfil a promise does not by itself justify an inference that the accused was dishonest from the outset. The underlying transaction and subsequent performance are relevant circumstances when examining original intention.
Manohar Singh v. Pradeep Mehta, 2024:DHC:157
This Delhi High Court decision concerned a similar attempt to challenge dismissal of a private complaint under Section 482 after an unsuccessful revision.
The Court reiterated that the statutory prohibition against a second revision under Section 397(3) CrPC cannot be circumvented simply by invoking Section 482.
Rajan Kumar Manchanda v. State of Karnataka, 1990 Supp SCC 132
This Supreme Court authority was referred to in Manohar Singh for the same principle: inherent jurisdiction cannot ordinarily be used as a device to obtain a second revision where the statute prohibits one.
Court’s Reasoning
The Court found that the petitioner’s own case undermined the allegation of deception concerning the ₹5.15 lakh cheque.
According to the petitioner himself, Respondent Nos. 1 and 2 had expressly told him before the cheque was handed over that the payee’s name should remain blank because the amount would be paid to a third person in connection with their business dealings.
The cheque was thereafter deposited into the account of Respondent No. 3.
Thus, the manner in which the cheque was actually credited was consistent with the representation allegedly made when the cheque was obtained.
The alleged wrongdoing occurred later, when Respondent Nos. 1 and 2 allegedly refused to adjust the ₹5.15 lakh towards the sale consideration and demanded additional payment.
But that subsequent conduct did not establish that their earlier representation was false when made or that they possessed a preconceived dishonest intention.
The fact that the hydraulic machine was actually delivered was another relevant circumstance. While delivery did not automatically rule out criminality, it supported the conclusion that the principal commercial transaction had actually been performed and weakened the allegation that the sellers entered the transaction intending to cheat from its inception.
The pre-summoning evidence established that ₹5.15 lakh moved from the account of the petitioner’s wife to Respondent No. 3. But it did not establish dishonest intention when the cheque was obtained.
The Court therefore held that the subsequent disagreement regarding whether the ₹5.15 lakh should be adjusted towards the sale consideration was capable of constituting a monetary or contractual dispute, but it could not retrospectively supply the mens rea required for Section 420 IPC.
The alleged discrepancies between the two versions of the Magistrate’s order did not change the outcome. Even disregarding the irrelevant observations concerning a valuer and alleged Section 138 NI Act proceedings, the complaint itself still failed to disclose dishonest intention at inception.
Finally, the Court found no independent material establishing an agreement among the respondents to cheat the petitioner. Consequently, the allegation under Section 120B IPC also failed, while Section 34 IPC could not independently sustain issuance of process in the absence of a prima facie substantive criminal offence.
Conclusion
The Delhi High Court dismissed the petition and refused to interfere with the concurrent orders of the Magistrate and Additional Sessions Judge declining to summon the respondents.
The Court held that:
- transfer of ₹5.15 lakh to Respondent No. 3 was consistent with what the petitioner himself claimed he had been told when the cheque was handed over;
- the hydraulic machine was actually delivered;
- the evidence established movement of money but not fraudulent intention at the inception of the transaction;
- the subsequent refusal to adjust ₹5.15 lakh could constitute a monetary dispute but could not retrospectively transform the transaction into cheating;
- no prima facie criminal conspiracy was established; and
- Section 482 CrPC could not be used simply to secure another revisional re-appreciation of the same evidence.
The Court nevertheless declined to endorse the Sessions Court’s observations describing the litigation as “frivolous” or stating that the petitioner had wasted judicial time, holding those observations unnecessary.
The petition and pending applications were accordingly dismissed/disposed of, with the Court clarifying that its observations would not affect the parties’ civil rights or claims.
Case Details
Case: Raj Kumar Sharma v. Om Prakash Singh & Ors.
Court: High Court of Delhi at New Delhi
Case Number: CRL.M.C. 130/2023; CNR No. DLHC010003032023
Judge: Hon’ble Ms. Justice Madhu Jain
Date: 24 August 2026
Result: Petition Dismissed; orders declining issuance of process for Sections 420, 120B and 34 IPC upheld; parties’ civil rights and claims left unaffected
