Rs 1.42 crore of grey cloth supplied on credit, with the complainant saying it was never paid for: the Gujarat High Court quashes cheating FIR registered over it, holding that a money dispute was given a criminal colour, and recording its displeasure that police keep registering such FIRs despite a DGP circular against it.
Ahmedabad: What the complainant brought as a criminal case was really a claim for money that belonged in a civil court, the Gujarat High Court has held while quashing an FIR registered at Kamrej Police Station in Surat under Sections 409, 420, 504, 506(2) and 120B of the Indian Penal Code against a man accused of helping a buyer avoid paying for grey cloth supplied on credit [Pratik Gulshanbhai Allawadi v. State of Gujarat & Anr.].
Justice J.C. Doshi allowed the petition, filed under Articles 226 and 227 of the Constitution, in a judgment dated November 2, 2026, and called the FIR a “complete misuse of power”. The Court also recorded its displeasure that police continue to register such FIRs even though the State’s Director General of Police has issued a circular telling officers not to do so.
The Court’s reading of the FIR
Justice Doshi set out the text of Sections 409 and 420 and then turned to the FIR, finding it “amply clear” that the complainant had filed an FIR instead of a money recovery suit.
“Thus, FIR is filed giving color of criminality. It is significant to note that first informant feels duped, he could have filed civil suit for recovery of outstanding amount.”
On the police, the Court was critical of the use of serious penal provisions to help recover a commercial debt.
“What could be noticed that police authorities have misused powers and added section 409 and 420 of IPC for the purpose of recovery of outstanding amount which alleged to have been due in commercial transaction. This Court has time and again deprecated approach of police authorities for filing such kind of FIR whereby civil dispute has been converted into criminal proceedings. Even highest police officer of State in the rank of DGP has issued circular to police personnel for not registering FIR where civil dispute are given color of criminal proceedings. But for the reason best known to the police officers concerned without following those circulars, FIR of such kind are registered.”
How the dispute arose
The complainant manufactures and trades in grey cloth. According to the FIR, he came in contact with the petitioner through the first accused about three years ago and began supplying grey cloth to the first accused, who initially paid on time.
The complainant alleged that between July 10, 2023 and January 16, 2024, his three firms supplied goods worth Rs 1,42,67,882 to the first accused, and that the amount was never paid. On that basis, an FIR was registered against the petitioner and others for criminal breach of trust, cheating, intentional insult, criminal intimidation and criminal conspiracy.
What each side argued
Counsel for the petitioner argued that the FIR, read as it stood, did not disclose the essential ingredients of criminal breach of trust or cheating. Apart from introducing the first accused to the complainant, no specific role was attributed to the petitioner. He pointed out that before the FIR was lodged, the first accused had issued cheques for the outstanding dues, which bounced, and the complainant had already filed a complaint under the Negotiable Instruments Act. He relied on the Supreme Court’s ruling in Delhi Race Club (1940) Ltd. v. State of Uttar Pradesh [2024 INSC 626].
When the matter was called out, no one appeared for the complainant. The Additional Public Prosecutor, Manan Mehta, argued that the petitioner had cheated the complainant and that offences under Sections 409 and 420 were made out.
Relying on Delhi Race Club
At length, the High Court extracted the Supreme Court’s reasoning in Delhi Race Club, which explains that criminal breach of trust and cheating are mutually exclusive. Cheating requires a dishonest intention from the very start of the transaction, while criminal breach of trust requires that property was entrusted to the accused. In a sale of goods, ownership passes to the buyer on delivery, so a failure to pay the price cannot amount to criminal breach of trust. The remedy for non-payment is civil.
Applying that ratio, Justice Doshi held that the FIR “appears to be complete misuse of power”. The Court also referred to the categories laid down in State of Haryana v. Bhajan Lal, where the High Court may step in to prevent abuse of the process of law, including where the allegations, taken at face value, do not make out any offence.
The outcome
The petition was allowed. The FIR registered as C.R. No. I-11214020241297 of 2024 at Kamrej Police Station, Surat, and all proceedings arising from it were quashed and set aside qua the petitioner. Rule was made absolute. The judgment deals only with the petitioner, and the Court expressed no view on the dues claimed by the complainant, which remain open to civil remedies and the pending cheque-dishonour complaint.
Why the judgment matters
A commercial dispute over unpaid money does not become a crime simply because the creditor feels let down, a principle the Supreme Court has repeated many times. Sections 409 and 420 of the IPC cannot be invoked unless the complaint shows entrustment of property and dishonest misappropriation, or deception with a dishonest intention from the outset. A sale on credit, where the buyer later fails to pay, meets neither test.
The judgment is also a pointed reminder to the Gujarat Police. The High Court noted that its own repeated warnings and a circular from the State’s top police officer have not stopped officers from registering such FIRs. Using criminal law as a recovery tool burdens courts, harasses people who may at most face civil liability, and diverts police time from genuine crime. By calling the FIR a “complete misuse of power”, the Court has signalled that it expects the DGP’s circular to be followed at police station level.
Case Title: Pratik Gulshanbhai Allawadi v. State of Gujarat & Anr.
Case No.: R/Special Criminal Application (Quashing) No. 14190 of 2025
Bench: Justice J.C. Doshi, Gujarat High Court
Date of Judgment: November 2, 2026
Appearances: Herschelle K. Raval and Suraj A. Shukla for the petitioner; Manan Mehta, APP, for the State; none for the complainant
