Holding

The Supreme Court held that where the transaction involves inherent commercial risk and there is no evidence of dishonest intention at the inception of the promise, the complaint discloses only a civil cause of action and the criminal proceedings under Section 420 IPC must be quashed.

Summary

The appellant, a movie producer, borrowed money from the complainant on the promise of a share in profits and later issued post‑dated cheques to repay the principal, which later bounced. The complainant filed a criminal complaint for cheating under Section 420 IPC and criminal breach of trust under Section 406 IPC. The High Court quashed the Section 406 charge but declined to quash the Section 420 charge, holding that a prima facie case of cheating existed. On appeal, the Supreme Court examined the ingredients of cheating, emphasizing that dishonest intent must exist at the time of the promise and that the mere failure to fulfil a risky commercial promise does not constitute cheating. It held that the transaction involved inherent risk, the promise to make a movie was not false, and there was no evidence of dishonest intention at inception, rendering the complaint a civil matter. Consequently, the Supreme Court set aside the High Court’s order to the extent it refused to quash the Section 420 proceedings and quashed the criminal complaint.

Issues considered

Whether the High Court was justified in declining to quash criminal proceedings under Section 420 IPC where the alleged conduct reflects a civil cause of action.
Whether the dishonour of post‑dated cheques amounts to an offence of cheating under Section 420 IPC.
Whether dishonest intention must exist at the time of making the promise for an act to constitute cheating.
Whether the inherent risk in a movie‑production investment precludes criminal liability for cheating.

Legislation cited

Code of Criminal Procedure, 1973s. 173, s. 482
Constitution of India
Indian Penal Code, 1860s. 406, s. 415, s. 420
Negotiable Instruments Act, 1881s. 138

Headnote

Issue for Consideration Issue arose whether the High Court was justified in declining to quash proceedings u/s.420 IPC. Headnotes† Penal Code, 1860 – s.420 – Offence of cheating – Appellant- movie producer borrowed money from the complainant on assurance that it would in profits – Appellant issued two post-dated cheques towards return of the principal amount – Cheques dishonoured for insufficient funds in the account – Complaint for the offence of cheating and criminal breach of trust – Petition for quashing of report and

Subjects

CheatingCriminal breach of trustFraudulentDishonest intentionCivil cause of actionQuashing of the criminal proceedingsDishonour of chequeCriminal actionPromise of a share in profitsFalse promiseDishonest intention from inceptionDishonest intention at the time of making the promiseFailure to keep the promise

Judgment

[2026] 4 S.C.R. 239 : 2026 INSC 265

V. Ganesan
v.
State Rep by the Sub Inspector of Police & Anr.
(Criminal Appeal No. 1470 of 2026)
19 March 2026
[Pamidighantam Sri Narasimha and Manoj Misra,* JJ.]

Issue for Consideration
Issue arose whether the High Court was justified in declining to
quash proceedings u/s.420 IPC.

Headnotes†
Penal Code, 1860 – s.420 – Offence of cheating – Appellant-
movie producer borrowed money from the complainant on
assurance that it would be returned by a share in profits –
Appellant issued two post-dated cheques towards return of
the principal amount – Cheques dishonoured for insufficient
funds in the account – Complaint for the offence of cheating
and criminal breach of trust – Petition for quashing of report
and consequential proceedings on the ground that it was a
civil cause of action given a colour of criminal offence – High
Court quashed the indictment of an offence punishable u/s.406
but declined to quash proceedings qua the offence of cheating
punishable u/s.420 – Correctness:
Held: Where the transaction between the parties is such that
fulfilment of the promise is not entirely in the control of the promisor,
or there is an inherent risk in fulfilment of the promise, the High Court
may, in exercise of its inherent powers under the Code, or u/Art.226
of the Constitution, as the case may be, upon consideration of the
attending circumstances, take a decision whether the dishonest
intention existed or not at the time of making the promise – And, if
it comes to the conclusion that the alleged conduct of the parties
does not reflect a dishonest intention of the accused from the very
beginning, it may quash the criminal complaint/proceedings and
relegate the aggrieved party to civil remedies – On facts, the initial
payment of money by the complainant to the appellant was for a

* Author
240 [2026] 4 S.C.R.

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movie project on promise of a share in profits – Additional money
was paid later for its completion under a promise of an enhanced
share in the profits – No denial about the completion of the movie
and its ultimate release, thus, the promise to make a movie not
false, as also no dishonest intention of the appellant in making the
promise which remained unfulfilled – Nature of transaction between
the parties was a crucial factor in determining whether the investor
party should be allowed to bring in a criminal action or pursue civil
remedies – High Court overlooked the same – Post-dated cheques
were not by way inducement to lend money or invest money in
the proposed movie – Dishonour of those cheques, would not
ipso facto amount to an offence of cheating – Thus, dishonour of
a post-dated cheque by itself not sufficient to presume existence
of a dishonest intention on part of its drawer – Thus, in absence
of allegations that movie made profits, the complaint and the
supporting materials failed to indicate that the appellant harboured
a dishonest intention from inception – Allegations only disclosed
a civil cause of action and the High Court erred in not quashing
the criminal proceedings – Impugned judgment and order of the
High Court set aside to the extent it declined quashing of the
proceedings u/s.420 – Impugned criminal proceedings u/s.420
quashed. [Paras 15, 17, 18, 20, 21]

Penal Code, 1860 – s.420 – Cheating – Necessary ingredients
to constitute an offence of cheating:
Held: In order to constitute an offence of cheating the intention to
deceive should be in existence when the inducement was made –
It is necessary to show that a person had fraudulent or dishonest
intention at the time of making the promise – Mere failure to keep
the promise subsequently cannot be the sole basis to presume
that dishonest intention existed from the very beginning. [Para 13]

Case Law Cited
Iridium India Telecom Ltd. v. Motorola Inc. [2010] 14 SCR 591 :
(2011) 1 SCC 74; Vesa Holdings Private Limited and Another v.
State of Kerala and Others [2015] 4 SCR 27 : (2015) 8 SCC
293 – referred to.

List of Acts
Penal Code, 1860; Constitution of India; Code of Criminal
Procedure, 1973; Negotiable Instruments Act, 1881.
[2026] 4 S.C.R. 241

V. Ganesan v. State Rep by the Sub Inspector of Police & Anr.

List of Keywords
Cheating; Criminal breach of trust; Fraudulent; Dishonest intention;
Civil cause of action; Quashing of the criminal proceedings;
Dishonour of cheque; Criminal action; Promise of a share in profits;
False promise; Dishonest intention from inception; Dishonest
intention at the time of making the promise; Failure to keep the
promise.

Case Arising From
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
1470 of 2026
From the Judgment and Order dated 06.04.2023 of the High Court
of Judicature at Madras in CRLOP No. 847 of 2021

Appearances for Parties
Advs. for the Appellant(s):
S. Nagamuthu, Sr. Adv., M.P. Parthiban, Ankur Prakash,
Mrs. Priyanka Singh, Bilal Mansoor, Shreyas Kaushal, S. Geyolin
Selvam, Alagiri K.
Advs. for the Respondent(s):
V. Krishnamurthy, Sr. A.A.G., Sabarish Subramanian, Vishnu
Unnikrishnan, Ms. Azka Sheikh Kalia, Ms. Jahnavi Taneja, Danish
Saifi.

Judgment / Order of the Supreme Court

Judgment

Manoj Misra, J.

1. Leave granted.
2. This appeal impugns the judgment and order of the High Court at
Madras1 dated 06.04.2023 in Crl. O.P. No. 847 of 2021 and Crl.
M.P. No. 518 of 2021, whereby the prayer of the appellant to quash
final report and consequential proceedings in C.C. No. 3569 of 2020
on the file of the Metropolitan Magistrate (CCB and CBCID, Metro

1 The High Court
242 [2026] 4 S.C.R.

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Cases), Egmore, Chennai-600008, under Section 406 and 420 of
the Indian Penal Code, 18602, was partly allowed to the extent of
indictment under Section 406 IPC; however, the prayer to quash
indictment under Section 420 IPC was declined.
3. In brief, the prosecution case, as could be evinced from the final
report (i.e., police report) submitted under Section 173 of the Code of
Criminal Procedure, 19733, is that the accused (the appellant herein)
was producing a ‘movie’. In the course of its production, he ran short
of funds. He, therefore, requested the de-facto complainant (i.e., the
second-respondent herein) to lend him money on assurance that it
would be returned by a share in profits to the extent of 30%. Later,
further money was lent on promise of an additional 17% share in
profits. Ultimately, two post-dated cheques of Rs.24 lacs each were
issued by the accused to the de facto complainant towards return
of the principal amount which returned unpaid for insufficient funds
in the account. Based on above, it was alleged that the accused
had cheated the complainant and had also committed offence of
criminal breach of trust.
4. Aggrieved by the police report and the consequential proceedings,
the appellant invoked the jurisdiction of the High Court under Section
482 of CrPC, inter alia, to quash the report and the consequential
proceedings on the ground that a pure civil cause of action was
given colour of a criminal offence.
5. By the impugned order, the High Court quashed the indictment of an
offence punishable under Section 406 IPC but declined to quash the
proceedings qua the offence of cheating punishable under Section
420 IPC.
6. We have heard the learned counsel for the parties.
7. On behalf of the appellant it is submitted that admittedly the
second-respondent had invested money in a movie project on
expectation of good returns. There is no dispute that the movie
project was completed. However, it could not generate profits. In
such circumstances, the appellant could not fulfil its commitment of
providing good returns on the investment. Therefore, there was no

2 IPC
3 CrPC
[2026] 4 S.C.R. 243

V. Ganesan v. State Rep by the Sub Inspector of Police & Anr.

dishonest intention and the dispute between the parties is purely civil
in nature. Hence, institution and continuation of criminal proceedings
is nothing but abuse of the process of Law.
8. Per contra, on behalf of the respondent(s) it is submitted that dishonest
intention of the appellant was there from the very beginning which is
evident from the fact that the two cheques got dishonoured for want
of funds. Besides, on appellant’s false assurance of profits, money
was lent. In these circumstances, offence of cheating is made out.
9. We have accorded due consideration to the rival submissions and
have perused the record.
10. The police report indicted the appellant for offences of criminal
breach of trust and cheating punishable under Sections 406 and
420 IPC respectively. The High Court came to the conclusion, and
rightly so, that no offence punishable under Section 406 of IPC is
made out as there was no entrustment. Regarding the offence of
cheating, the High Court concluded that prima facie it is made out.
The reasoning of the High Court in support of its conclusions can
be found in paragraph 6 of its judgment, which is extracted below:
“This Court on perusal of the impugned final report finds
that the offence under Section 406 IPC is not made out.
There is no entrustment made to the petitioner, in order
to attract the offence of criminal breach of trust. However,
this Court finds that there was an Agreement between the
petitioner and the de-facto complainant on 30.12.2013.
The Agreement shows that the petitioner promised 30%
interest on the initial invested amount on Rs. 19,60,000/-.
Thereafter, the de-facto complainant paid Rs. 27,00,000/-
on 03.04.2014; and the petitioner had promised 47% profit
on the invested amount. The petitioner had not made any
payment to the de-facto complainant/second-respondent
as promised. While so, the de-facto complainant/second-
respondent objected to the petitioner releasing the movie.
The petitioner had given one more undertaking letter,
wherein, he had promised to pay the principal sum in two
instalments, profit on a subsequent date; and that if the
project did not yield any profit, he would pay an interest
on the said sum of Rs. 48,00,000/-. All the above facts,
disclose that at every stage, the representation has been
244 [2026] 4 S.C.R.

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made to the de-facto complainant to induce him to part with
money. The allegations prima facie disclose the offence
under Section 420 IPC. In the facts of the instant case,
the question whether it was only a breach of promise or
cheating has to be adjudicated only during trial. Therefore,
this Court is not inclined to quash the impugned final report
in so far as the offence under Section 420 IPC. Hence,
the impugned final report is quashed only in respect of
offence under Section 406 IPC. However, the learned
Metropolitan Magistrate may try the case on the basis of
evidence adduced before him without being influenced by
any of the observations made in this order. The learned
Metropolitan Magistrate (CCB and CBCID, Metro Cases),
Egmore, Chennai – 600 008 may conduct the trial as
expeditiously as possible4”.
11. The above extract makes it clear that the High Court was of the view
that as the money was advanced on a promise of good returns and,
subsequently, an undertaking was also given to return the principal
amount if the project did not yield any profit, it could be taken that
the complainant parted with his money on the inducement of the
appellant and therefore, prima facie, an offence punishable under
Section 420 IPC is made out.
12. In Iridium India Telecom Ltd. v. Motorola Inc.5, this Court laid down
the ingredients of an offence of cheating as defined in Section 4156
of IPC. It was observed that Section 415 of IPC has two parts. The
first part makes it necessary that the deception by the accused of the
person deceived, must be fraudulent or dishonest. Such deception
must induce the person to either: (a) deliver property to any person;
or (b) consent that any person shall retain any property. The second
part also requires that the accused must by deception intentionally
induce the person deceived either to do or omit to do anything which

4 Extracted from typed copy of the judgment placed on record. May contain typographical mistakes.
5 (2011) 1 SCC 74, paragraph 68
6 Section 415. Cheating. -- Whoever, by deceiving any person, fraudulently or dishonestly induces the
person so deceived to deliver any property to any person, or to consent that any person shall retain any
property, or intentionally induces the person so deceived to do or omit to do anything which he would not
do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or
harm to that person in body, mind, reputation or property, is said to ‘cheat’.
Explanation. --- A dishonest concealment of facts is a deception within the meaning of this section.
[2026] 4 S.C.R. 245

V. Ganesan v. State Rep by the Sub Inspector of Police & Anr.

he would not do or omit, if he was not so deceived. Besides, such act
or omission must cause or must be likely to cause damage or harm
to that person in body, mind, reputation or property. Thus, deception
is a necessary ingredient for the offence of cheating under both
parts of this section. Besides, the complainant must allege/ prove
that the inducement had been caused by the deception exercised
by the accused. In other words, such deception must produce the
inducement to part with or deliver property, which the complainant
would not have parted with or delivered, but for the inducement
resulting from such deception. The explanation to the section clarifies
that non-disclosure of relevant information would also be treated as
a misrepresentation of facts leading to deception.
13. In order to constitute an offence of cheating the intention to deceive
should be in existence when the inducement was made. It is necessary
to show that a person had fraudulent or dishonest intention at
the time of making the promise. Mere failure to keep the promise
subsequently cannot be the sole basis to presume that dishonest
intention existed from the very beginning.
14. In Vesa Holdings Private Limited and Another v. State of Kerala
and others7, this court held that every breach of contract would not
give rise to an offence of cheating. Only in those cases breach of
contract would amount to cheating where there was any deception
played at the very inception. If the intention to cheat has developed
later, the same cannot amount to cheating. In other words, for
the purpose of constituting an offence of cheating, the complaint
is required to show that the accused had fraudulent or dishonest
intention at the time of making promise or representation. Even
in a case where allegations are made about failure on part of the
accused to keep his promise, in absence of a dishonest intention
at the time of making the initial promise, no offence under Section
420 of IPC is made out.
15. Whether non-fulfilment of promise/ commitment by the accused is
a reflection of his or her dishonest intention at the time of making
the promise is ordinarily a matter of trial. However, in our view,
where the transaction between the parties is such that fulfilment of
the promise is not entirely in the control of the promisor, or there

7 (2015) 8 SCC 293, paragraph 12
246 [2026] 4 S.C.R.

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is an inherent risk in fulfilment of the promise, the High Court may,
in exercise of its inherent powers under the Code, or under Article
226 of the Constitution, as the case may be, upon consideration of
the attending circumstances, take a decision whether the dishonest
intention existed or not at the time of making the promise. And, if
it comes to the conclusion that the alleged conduct of the parties
does not reflect a dishonest intention of the accused from the very
beginning, it may quash the criminal complaint/ proceedings and
relegate the aggrieved party to civil remedies.
16. In the present case, what the High Court overlooked is that money
was advanced for movie making and initially the agreement was
to share the profits. Importantly, when the first tranche of money
was transferred by the de-facto complainant to the accused, the
alleged promise was a share in profits. Second tranche of money
was transferred when the project could not be completed for want
of funds. It also appears from paragraph 2 of the impugned order
that before the movie could be released, de facto complainant took
objection to its release. However, when the appellant gave two post-
dated cheques, the movie could be released.
17. The aforesaid facts would indicate that the initial payment of money
by the de-facto complainant to the appellant was for a movie project
on promise of a share in profits. Additional money was paid later for
its completion under a promise of an enhanced share in the profits.
Thereafter, post-dated cheques were issued to return the principal
amount because of an objection taken by the de facto complainant
to the release of the movie. Since there is no denial about the
completion of the movie and its ultimate release, what is clear is
that the promise to make a movie was not false. Therefore, it cannot
be said the appellant made a false promise that he would make a
movie with the aid of funds received by him. Insofar as promise qua
sharing of profits is concerned, there are no allegations that the
movie earned profits. Therefore, from the allegations made in the
complaint it cannot be said that there was any dishonest intention
of the appellant in making the promise which remained unfulfilled.
In our view, the High Court overlooked that movie making is a high
risk business. No one can be sure whether a movie would earn
profits or would be a flop. If one agrees to share profits in lieu of his
investment in a movie, he takes the risk of a possible zero return.
[2026] 4 S.C.R. 247

V. Ganesan v. State Rep by the Sub Inspector of Police & Anr.

Thus, the nature of transaction between the parties was a crucial
factor in determining whether the investor party should be allowed
to bring in a criminal action or pursue civil remedies. Unfortunately,
the High Court overlooked this vital aspect.
18. Insofar as dishonour of those two cheques are concerned, it is clear
that those were post-dated cheques issued not as an inducement
to obtain delivery of money from the de facto complainant but to
discharge an existing obligation at a future date. Thus, in essence,
those cheques were not by way inducement to lend money or invest
money in the proposed movie. Therefore, dishonour of those cheques,
though may give right to initiate proceeding under Section 138 of
the Negotiable Instruments Act, 1881, would not ipso facto amount
to an offence of cheating, inasmuch as for an offence of cheating
dishonest intention must exist from the very beginning. Ordinarily,
post-dated cheques are issued either by way of security to discharge
an existing or future liability or to discharge the liability at some point
of time in future. It is quite possible that at the time of issuance of
a post-dated cheque, the drawer may have reason to believe that
he would have sufficient balance in his account by the date of the
cheque. Therefore, in our view, dishonour of a post-dated cheque by
itself is not sufficient to presume existence of a dishonest intention
on part of its drawer.
19. In the instant case, there is nothing to indicate that the appellant had
a dishonest intention from the very beginning. Had it been a case
where the appellant had not made the movie despite borrowing funds
to make one, an inference about existence of a dishonest intention
was permissible. However, here there is no allegation that movie
was not made. Rather, it was made and released. The prosecution
case itself is to the effect that further advance was taken to complete
and release the movie. However, when complainant took objection
to its release, the appellant issued post-dated cheques to repay the
principal amount. Thus, those cheques were to discharge an existing
liability and not by way of an inducement to take more money.
20. Assuming that by issuance of those cheques, the de facto complainant
was led to vacate his objection to movie’s release, even then an
offence of cheating would not be made out for two reasons. First, those
cheques were post-dated therefore, did not carry a representation
of sufficient funds in the bank account at the time of its issuance.
248 [2026] 4 S.C.R.

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Second, initial agreement, as per the allegations, was to share profit
on release of the movie. Thus, in absence of allegations that movie
made profits, in our view, the complaint and the supporting materials
failed to indicate that the appellant harboured a dishonest intention
from inception. In conclusion, the allegations only disclosed a civil
cause of action and the High Court fell in error in not quashing the
criminal proceedings.
21. For the foregoing reasons, the appeal is allowed. The impugned
judgment and order of the High Court is set aside to the extent it
declined quashing of the proceedings under Section 420 IPC. The
impugned criminal proceedings under Section 420 IPC are also
quashed. Pending applications if any stands disposed of.

Result of the case: Appeal allowed.

†
Headnotes prepared by: Nidhi Jain