Legal Review and Analysis of Arshad Neyaz Khan vs State of Jharkhand & Anr 2025 INSC 1151
1. Name of the Judgment
Arshad Neyaz Khan vs. State of Jharkhand & Anr.
Criminal Appeal No. _____ of 2025 (Arising out of SLP (Crl.) No. 3606 of 2024)
Decided on: September 24, 2025
Judges: Justice B.V. Nagarathna and Justice R. Mahadevan
2. Relevant Laws and Sections
Indian Penal Code, 1860 (IPC) – Sections 406, 420, 120B
Code of Criminal Procedure, 1973 (CrPC) – Section 482 (Inherent Powers of the High Court)
Precedents Referenced:
Inder Mohan Goswami vs. State of Uttaranchal (2007) 12 SCC 1
State of Haryana vs. Bhajan Lal, 1992 Supp (1) SCC 335
Delhi Race Club (1940) Limited vs. State of Uttar Pradesh (2024) 10 SCC 690
Vishal Noble Singh vs. State of Uttar Pradesh, 2024 SCC Online SC 1680
3. Basic Details of the Case
Appellant: Arshad Neyaz Khan (Accused)
Respondents: State of Jharkhand and Md. Mustafa (Complainant)
Nature of Dispute: Quashing of FIR and criminal proceedings arising from a failed land sale agreement.
Forum: Appeal against the order of the Jharkhand High Court dated January 19, 2023, which refused to quash the criminal proceedings.
Allegations: Cheating (Section 420 IPC), criminal breach of trust (Section 406 IPC), and criminal conspiracy (Section 120B IPC).
Supreme Court’s Decision: Quashed the FIR and all criminal proceedings against the appellant.
4. Core Principle of the Judgment
Issue Before the Supreme Court
Whether the FIR and criminal proceedings under Sections 406, 420, and 120B IPC should be quashed when the dispute is essentially of a civil nature arising from a breach of contract, and the complaint does not disclose the essential ingredients of the alleged criminal offences.
Background and Contractual Dispute
The appellant entered into a sale agreement dated February 16, 2013, to sell certain properties to the complainant for ₹43,00,000. An advance of ₹20,00,000 was paid. The appellant failed to execute the sale deed after eight years. The complainant filed a criminal complaint in 2021 alleging cheating and criminal breach of trust. The parties also attempted mediation, and the appellant agreed to refund ₹24,00,000 in instalments, but failed to comply fully, leading to cancellation of his anticipatory bail.
Legal Analysis by the Supreme Court
A. Absence of Dishonest Intention for Cheating (Section 420 IPC)
The Court referred to Inder Mohan Goswami and emphasized that for an offence of cheating, there must be a fraudulent or dishonest intention at the time of making the promise. The failure to fulfil a contractual obligation alone does not constitute cheating unless a culpable intention exists from the inception. The Court found no allegation in the FIR indicating that the appellant had a dishonest intention at the time of entering the agreement.
B. No Criminal Breach of Trust (Section 406 IPC)
The Court noted that criminal breach of trust requires entrustment of property and dishonest misappropriation or conversion thereof. The advance payment was made as part of a contractual agreement, not as an entrustment. Mere failure to refund the amount does not amount to criminal breach of trust; it may give rise to civil liability.
C. Offences of Cheating and Criminal Breach of Trust Are Antithetical
Citing Delhi Race Club, the Court observed that the offences under Sections 406 and 420 IPC are distinct and cannot coexist on the same set of facts. Cheating requires deception at the outset, while criminal breach of trust involves lawful entrustment followed by misappropriation.
D. Delay and Malicious Intent
The complaint was filed after a delay of nearly eight years, with no satisfactory explanation. The Court inferred that the criminal proceedings were initiated with a mala fide intent to harass the appellant, especially since the complainant had not availed civil remedies.
E. Abuse of Criminal Process
Relying on Bhajan Lal, the Court held that criminal law should not be used as a tool for private vendetta. The allegations, even if taken at face value, did not disclose a cognizable offence. Continuing the prosecution would amount to an abuse of the process of law.
5. Final Outcome
The Supreme Court allowed the appeal and set aside the impugned order of the High Court. It quashed the following:
FIR No. 18 of 2021 dated February 8, 2021
Complaint Case No. 619 of 2021
All consequent proceedings arising therefrom
6. MCQs Based on the Judgment
Q1. In Arshad Neyaz Khan vs. State of Jharkhand, on what primary ground did the Supreme Court quash the criminal proceedings?
A. The appellant had refunded the entire advance amount
B. The dispute was essentially civil in nature and lacked criminal intent
C. The High Court had already quashed the FIR
D. The complainant withdrew the allegations
Correct Answer: B
Explanation: The Court held that the failure to execute a sale deed did not constitute cheating or criminal breach of trust in the absence of dishonest intention at the time of agreement.
Q2. Which legal principle did the Supreme Court emphasize regarding the offence of cheating under Section 420 IPC?
A. Cheating is established merely by breach of contract
B. Dishonest intention must exist at the time of making the promise
C. Delayed filing of complaint strengthens the case of cheating
D. Cheating and criminal breach of trust always coexist
Correct Answer: B
Explanation: The Court reiterated that to prove cheating, it must be shown that the accused had a fraudulent or dishonest intention at the time of making the representation or promise.