In a significant ruling on the misuse of criminal law in business disputes, the Calcutta High Court has quashed a cheating and criminal breach of trust case arising from a failed real estate development deal worth over ₹2 crore.
Delivering judgment on February 13, 2026, Justice Ajay Kumar Gupta held that the dispute was “purely civil in nature” and that criminal proceedings could not be used as a pressure tactic in commercial disagreements.
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The case, Siddharth Sethia & Ors. vs. State of West Bengal & Anr., revolved around an MoU signed in 2014 for joint development of land in New Town, North 24 Parganas.
Background of the Case
The dispute began with a Memorandum of Understanding (MoU) dated April 29, 2014. Under the agreement, landowners led by Siddharth Sethia agreed to develop their land through a company linked to the complainant.
The complainant’s company paid ₹1.01 crore initially and later another ₹1 crore - totaling ₹2.01 crore - as part of a security deposit arrangement. The land was located at Pathuriaghata, New Town, an area under the planning jurisdiction of the West Bengal Housing Infrastructure Development Corporation (HIDCO).
However, the project never took off.
According to the petitioners, the developer failed to perform its obligations under the MoU. Years later, part of the land was exchanged with HIDCO to facilitate development under a revised proposal. The complainant alleged that the land was later sold to a third party without notice and that the ₹2.01 crore was not refunded.
In August 2021, a criminal complaint was filed under Sections 406 (criminal breach of trust), 420 (cheating), 120B (criminal conspiracy), and 34 (common intention) of the Indian Penal Code. The Magistrate took cognizance and issued summons.
The accused then approached the High Court seeking quashing of the proceedings.
Petitioners’ Arguments
Counsel for the petitioners argued that the dispute stemmed entirely from contractual obligations under the MoU.
They submitted that:
- There was no dishonest intention at the time of signing the MoU.
- The amount paid was part of a commercial arrangement.
- A civil suit had already been filed by the complainant for recovery of money.
- Criminal proceedings were initiated only to pressure the landowners into settlement.
The court was also told that the delay of several years in filing the criminal complaint indicated mala fide intent.
Court’s Observations
Justice Gupta examined the MoU and the allegations carefully.
The court framed the central question clearly: Was this a case of cheating and breach of trust, or simply a failed business arrangement?
“The essence of performance has expired long ago. It was not materialised,” the bench noted.
The judge observed that for cheating, dishonest intention must exist at the very beginning of the transaction. Simply failing to fulfill a contract does not amount to a criminal offence.
“To constitute cheating, there must be deception coupled with fraudulent or dishonest inducement at the inception of the transaction,” the court said.
The judgment emphasized that the complaint did not contain specific allegations showing that the accused never intended to honor the agreement from the start.
On criminal breach of trust, the court said entrustment of property is essential. In this case, the money was paid as part of a commercial development agreement - not in a fiduciary or trust-based capacity.
The bench referred to Supreme Court precedents cautioning against converting civil disputes into criminal cases.
“The complaint appears to be an attempt to impart a criminal colour to what is essentially a civil dispute,” Justice Gupta observed.
Parallel Civil Proceedings
Significantly, the complainant had already filed a commercial civil suit seeking recovery of ₹2.01 crore along with interest.
The High Court noted that when a party has already sought civil remedies for recovery of money, it cannot simultaneously use criminal law as a shortcut for settlement.
The judge remarked that the dispute arose from reciprocal obligations under the MoU and did not disclose ingredients of cheating or breach of trust.
The Decision
Allowing the criminal revision petition, the High Court quashed the entire proceeding pending before the Metropolitan Magistrate.
“The proceeding… is a gross abuse of process of law,” the court held.
The criminal case under Sections 406, 420, 120B and 34 IPC was set aside insofar as the petitioners were concerned. The order dated August 24, 2021 taking cognizance was also quashed.
With this, the criminal case stands closed, leaving the parties to pursue their remedies in civil court.
Case Title: Siddharth Sethia & Ors. vs. State of West Bengal & Anr.
Case No.: C.R.R. 3637 of 2022
Decision Date: 13 February 2026
