Can a deal that falls through turn a company’s CEO into a cheat? Not on that ground alone, the Supreme Court has said while quashing the Cheating Case Against Tea Company CEO Indroneel Goho, because a later failure to perform a contract does not by itself show the dishonest intent needed for cheating.
New Delhi: A complaint under Sections 417 and 420 of the Indian Penal Code cannot rest on a collapsed deal alone, the Supreme Court has held, quashing the case against the Chief Executive Officer of Darjeeling Organic Tea Estates Private Limited over the failed purchase of the Jamguri Tea Estate in Assam. The Rs 40 lakh paid under the deal went into the company’s account, the Court noted, and the dispute was civil and contractual in nature [Indroneel Goho v. Razouvonuo Thong and Another].
Justice Vikram Nath and Justice Sandeep Mehta allowed the appeal on September 29, 2026. Their order set aside a May 13, 2025 judgment of the Gauhati High Court (Kohima Bench), which had refused to quash the case.
Intent at the start, not failure at the end
On the line between breach of contract and cheating, the bench called the law well settled and leaned on its 2026 ruling in G. Saminathan v. State:
“For an offence under Sections 417 and 420 of IPC, the fraudulent or dishonest intention must exist at the inception of the transaction and must have induced the complainant to part with property. A subsequent failure to perform a contractual obligation cannot, by itself, give rise to an inference of such intention.”
The MoU was a bargain between two businesses, the Court observed, and the money went straight into the company’s account. In its words: “There is no allegation that the appellant received or appropriated any part thereof for his personal benefit.” Whether the termination was valid and whether the complainant could claim a refund were questions with civil consequences, and they could not become criminal merely because the relationship broke down.
The arbitration clause was not the real question
The Court agreed with the High Court that an arbitration clause does not bar criminal proceedings. That, it said, was beside the point:
“The Court must first determine whether the allegations disclose the essential ingredients of the criminal offence alleged. In the present case, the material does not disclose sufficient factual foundation to infer that the appellant, at the inception of the transaction, acted with the dishonest intention necessary to constitute cheating.”
How the deal and the complaint unfolded
The appellant, Indroneel Goho, was the CEO of Darjeeling Organic Tea Estates Private Limited and was authorised to act for it. Razouvonuo Thong, proprietor of C.R. Traders, negotiated with the company over the Jamguri Tea Estate at Golaghat, Assam. Ahead of the agreement, on May 31, 2021, she wrote to UCO Bank about the estate and its mortgage with the bank.
The company and C.R. Traders executed a Memorandum of Understanding on June 1, 2021, with Goho signing as the company’s authorised signatory. On June 7, 2021, the complainant paid Rs 40 lakh into the company’s bank account, in two transfers of Rs 39,95,000 and Rs 5,000. Disputes over performance followed, and the MoU was terminated on the ground that the complainant had not met her obligations.
On August 17, 2022, she filed a criminal complaint before the Judicial Magistrate First Class, Dimapur. It alleged that Goho induced her to part with the money by representing that the estate belonged to his company, when it was owned by Bhumya Tea Company Private Limited and was the subject of proceedings involving UCO Bank. The Magistrate issued summons on September 21, 2022 in C.R. Case No. 17 of 2022. The High Court then dismissed Goho’s petition under Section 482 CrPC, holding that a prima facie case was made out and that the arbitration clause in the MoU was no ground to quash.
What the Court ordered
Letting the case continue would give a predominantly contractual dispute the colour of a criminal prosecution and amount to an abuse of the process of law, the Court held. It set aside the High Court’s judgment and quashed C.R. Case No. 17 of 2022 insofar as Goho is concerned, while clarifying that the complainant remains free to pursue any remedy available in law for her civil or contractual claims.
What the ruling means for sour commercial deals
Courts apply this test daily when business deals go wrong: cheating needs deception at the start of the transaction that induces the other side to part with property. A broken promise or a contested termination, without more, is for a civil court or an arbitrator rather than a criminal court.
Two practical points also come out sharper. Where payment goes to a company and the officer who signed is not shown to have taken any of it, personal criminal liability needs a firmer basis. And although an arbitration clause does not by itself shut out criminal law, a court hearing a quashing plea must still ask whether the ingredients of the offence are made out, and can use its power under Section 482 CrPC (now Section 528 BNSS) when they are not.
Case Title: Indroneel Goho v. Razouvonuo Thong and Another [Criminal Appeal arising out of SLP (Crl.) No. 10621 of 2025; 2026 INSC 1115]
Bench: Justice Vikram Nath and Justice Sandeep Mehta, Supreme Court of India
Date of Order: September 29, 2026
Appearances: Senior Advocate Sudip Sanyal with AOR Arun K. Sinha for the appellant; Advocate Harpreet Singh, AOR Praveen Kumar Jha and AOR K. Enatoli Sema for the respondents