SH JOHN LIVINGSTION GONUGUNTLA AND 4 OTHERSversusState of UP AND ANOTHER

          HIGH COURT OF JUDICATURE AT ALLAHABAD

                 APPLICATION U/S 482 No. - 4445 of 2024

Sh John Livingstion Gonuguntla And 4 Others
                                                                 .....Applicant(s)
                                     Versus
State of U.P. and Another
                                                                    .....Opposite
                                                                          Party(s)

Counsel for Applicant(s)                      :   Satish Kumar Tyagi
Counsel for Opposite Party(s)                 :   G.A., Sohan Lal Yadav

Court No. - 81
                     HON'BLE ACHAL SACHDEV, J.

1. Heard learned counsel for the applicants, learned A.G.A. for the State and
Shri Sohan Lal Yadav, learned counsel for the opposite party no.2.

2. From perusal of the order-sheets, it is reflected that time and again,
sufficient time was granted to the learned counsel for the opposite party no.2
to file counter affidavit but till date no counter affidavit has been filed on his
behalf, therefore, opportunity to file counter affidavit is hereby closed.

3. The present application u/s 482 Cr.P.C. has been preferred by the
applicants with a prayer to quash the summoning order dated 24.04.2023
passed by Civil Judge (Sr. Div.)/Additional Chief Judicial Magistrate,
Gautambuddh Nagar in Complaint Case No.1083 of 2022 (Shri Sarjeet
Kumar Vs. M/s. Johnette Technologies Pvt. Ltd. & Ors.) u/s 406 I.P.C.,
Police Station- Phase-3, Noida, District- Gautambuddh Nagar.

4. The contention of the learned counsel for the applicants is that the
complaint lodged by the opposite party no.2 against the applicants as well as
the summoning order dated 24.04.2023 summoning the applicants under
Section 406 of the IPC is nothing but the grossest misuse of the process of
law, particularly, in view of the fact that the allegation so leveled by the
opposite party no.2 is regarding withholding of earned wage and earned
leave.

5. Learned counsel for the applicants submits that the said dispute is a
dispute under Industrial Disputes Act and further the opposite party no.2
herein has preferred an application before the Controlling Authority for
payment of gratuity, thus the matter is civil dispute.

6. Learned counsel for the applicants submits that the applicants have been
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wrongly roped in, in the criminal case just to harass them.

7. Learned counsel for the opposite party no.2 submits that the opposite
party no.2/complainant in his complaint has stated that he has sent his
resignation letter through E-mail to the said company on 07.05.2021 and the
same was accepted on 11.01.2021 but relieving letter was issued to him on
31.05.2021 and he has claimed earned wage of Rs.2,54,936/- from
01.07.2019 to 30.11.2020 and earned leave of Rs.25,200/- from 01.05.2018
to 31.05.2021 and he time and again visited the office for the said demand
but the company dilly dallying to pay the same.

8. In the context of Section 406 I.P.C., proceedings may be quashed if the
complaint or F.I.R., even if taken at face value, does not disclose the
essential ingredients of the offence. A clear absence of allegations regarding
entrustment or dishonest misappropriation can be a ground for quashing. The
Supreme Court in Anand Kumar Mohatta (S) v. State (Govt. Of NCT Of
Delhi), emphasized the need to ascertain if the facts make out an offence
under Section 406 I.P.C.

9. Section 406 of the Indian Penal Code, 1860 (I.P.C.) prescribes the
punishment for the offence of criminal breach of trust. This provision plays a
crucial role in upholding fiduciary relationships and ensuring accountability
for the misappropriation of property entrusted to another. Criminal breach of
trust, as defined in Section 405 of the I.P.C., is a nuanced offence, requiring
a careful examination of the elements of entrustment, dishonest
misappropriation, and the violation of legal or contractual duties. Section
406 I.P.C. is intrinsically linked to Section 405 I.P.C., as the former provides
punishment for the offence defined by the latter.

10. For the sake of convenience, Section 405 I.P.C. is being reproduced
hereinbelow :

       405. Criminal breach of trust - Whoever, being in any manner
       entrusted with property, or with any dominion over property,
       dishonestly misappropriates or converts to his own use that
       property, or dishonestly uses or disposes of that property in
       violation of any direction of law prescribing the mode in
       which such trust is to be discharged, or of any legal contract,
       express or implied, which he has made touching the discharge
       of such trust, or wilfully suffers any other person so to do,
       commits criminal breach of trust.

This definition is further elucidated by two explanations, which create
deeming fictions in specific employer-employee contexts.

Explanation 1 pertains to deductions made by an employer from an
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employee's wages for contribution to a Provident Fund or Family Pension
Fund. If the employer defaults in remitting such contributions, they are
deemed to have been entrusted with the amount and to have dishonestly used
it.

Similarly, Explanation 2 addresses deductions for the Employees' State
Insurance Fund, with a similar deeming provision for default in payment.

11. For a conviction under Section 406 I.P.C., the prosecution must prove
the commission of criminal breach of trust as defined in Section 405 I.P.C.
In Binod Kumar and Others v. State Of Bihar and Another, (2014) 10
SCC 663, the Supreme Court reiterated that the prosecution must prove:

(i) entrustment with property or dominion over it ; and

(ii) dishonest misappropriation, conversion, use, or disposal of that property
in violation of law or legal contract.

12. The cornerstone of criminal breach of trust is 'entrustment'. The
expression "entrusted" as used in Section 405 I.P.C. is not a term of art with
a narrow technical meaning. Entrustment implies that the accused had
voluntarily handed over property for a specific purpose, creating a
relationship of trust and confidence.

13. At this stage, it is crucial to distinguish entrustment from other
transactions. For instance, a mere transaction of sale does not amount to
entrustment. Similarly, the Supreme Court in Indian Oil Corporation Vs.
Nepc India Ltd. And Others, 2006 (6) SCC 736, held that hypothecation
of goods as security for a debt does not constitute "entrustment" as required
under Section 405 I.P.C., because ownership and possession (subject to the
hypothecatee's rights) remain with the debtor. The absence of a clear
allegation or proof of entrustment is fatal to a prosecution under Section 406
I.P.C., as highlighted in cases like Pradeep Kumar Alias Pradeep Kumar
Verma Vs. State Of Bihar and Another, 2007 (7) SCC 413 and Arti And
3 Others Vs. State of U.P. and Another, Neutral Citation No. -
2024:AHC:152597.

14. The second critical element is the "dishonest misappropriation or
conversion" of the entrusted property. "Dishonestly" is defined in Section 24
I.P.C. as doing anything with the intention of causing wrongful gain to one
person or wrongful loss to another. This implies a deliberate act of using the
property for a purpose other than that for which it was entrusted, or
converting it to the accused's own use.
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15. The Apex Court in Anand Kumar Mohatta (supra) has held that the
dishonest misappropriation or use must be "in violation of any direction of
law prescribing the mode in which such trust is to be discharged, or of any
legal contract, express or implied, which he has made touching the discharge
of such trust."

16. This means the accused's actions must contravene either a statutory duty
or a contractual term (whether express or implied) governing how the
entrusted property was to be handled. This element underscores the fiduciary
nature of the relationship and the breach of the specific terms of that trust.

17. Mens rea, specifically a "dishonest intention," is the lynchpin of the
offence of criminal breach of trust. A mere failure to return property or a
simple breach of contract does not automatically translate into a criminal
breach of trust. The prosecution must establish that the accused acted with a
dishonest mind. The Supreme Court in Indian Oil Corporation (supra)
emphasized the distinction between a civil wrong (breach of contract) and a
criminal offence, noting that criminal liability arises when elements like
fraudulent or dishonest intention are present. The lack of dishonest intention
can lead to the quashing of proceedings under Section 406 I.P.C. Dishonest
intention is the sine qua non of the offence of criminal breach of trust. Mere
failure to account for money does not constitute criminal breach of trust. The
prosecution must establish that the accused dishonestly misappropriated or
converted the property. A mere civil liability to pay does not attract Section
406 I.P.C. as held by the Apex Court in Velji Raghavji Mehta Vs. State of
Maharashtra, (AIR 1965 SC 1433).

18. The Delhi Race Club case [Delhi Race Club (1940) Ltd. Vs. State of
U.P. and Anr., (2024) 10 SCC 690], is a recent Supreme Court precedent
emphasizing that commercial disputes should not be criminalized unless
clear evidence of dishonest intention exists. It is now a strong authority for
quashing criminal complaints in business debt recovery matters.

19. In the present complaint, it appears that the complainant concealed the
material fact about filing of the case before the Controlling Authority under
the payment of Gratuity Act, 1972/DLC/ALC Noida, G.B. Nagar, G-25A,
Sector-3, Noida, G.B. Nagar on 04.04.2022 and the trial court while taking
cognizance on the said complaint has failed to consider this fact and passed
the summoning order dated 24.04.2023. Claims for arrears of salary and
earned leave encashment is purely a civil/contractual dispute between the
shareholders and only where the case comes under the provisions of
explanation to Section 406 I.P.C. that an offence under Section 406 I.P.C.
can be considered.
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                                    20. The fatal difficulty with salary and earned leave claim in question of
                                    entrustment as every payment of money by one person to another does not
                                    qualify the term entrustment. When an employee render service and
                                    employer owes to salary to him in return, the employer has in no manner
                                    been entrusted with any property belonging to the employee and the
                                    obligation to pay salary arises from a contract of employment but not from
                                    any form of entrustment. The element of fiduciary relationship is absent. The
                                    appropriate forum for resolving the dispute may be Labour Court/Industrial
                                    Tribunal under Industrial Disputes Act and the proceedings under the
                                    Payment of Wages Act, 1936 may be initiated against the erring employer
                                    and civil suit may also lie for recovery of dues.

                                    21. In view of the above, it reflects that trial court has clearly ignored this
                                    aspect of law and the summoning order dated 24.04.2023 passed by Civil
                                    Judge (Sr. Div.)/Additional Chief Judicial Magistrate, Gautambuddh Nagar
                                    in Complaint Case No.1083 of 2022 (Shri Sarjeet Kumar Vs. M/s. Johnette
                                    Technologies Pvt. Ltd. & Ors.) u/s 406 I.P.C., Police Station- Phase-3,
                                    Noida, District- Gautambuddh Nagar suffers from non-application of
                                    judicial mind and is unsustainable and is hereby quashed.

                                    22. The present application u/s 482 Cr.P.C. is, accordingly, allowed.

                                    April 30, 2026
                                    Zafar
                                                                                              (Achal Sachdev,J.)




Digitally signed by :-
MOHAMMAD ZAFAR ANSARI
High Court of Judicature at Allahabad