Supreme Court Quashes Cheating Case Against Ex-Darjeeling Organic Tea Estates CEO Over ₹40 Lakh Deal
The Supreme Court has quashed cheating proceedings against Indroneel Goho, who was serving as Chief Executive Officer of Darjeeling Organic Tea Estates Private Limited at the time of a transaction involving the Jamguri Tea Estate in Assam.
The case arose from a ₹40 lakh agreement concerning the property.
A Bench comprising Justice Vikram Nath and Justice Sandeep Mehta set aside the Gauhati High Court's order refusing to quash the criminal proceedings. The complaint alleged that Goho had falsely represented that the estate belonged to the company. The Court held that mere failure to fulfil contractual obligations does not constitute cheating unless dishonest intention existed at the inception of the transaction.
“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 Court ruled
The dispute arose from negotiations between Darjeeling Organic Tea Estates Private Limited and C.R. Traders, whose proprietor is Thong, over the Jamguri Tea Estate in Golaghat, Assam.
The estate was mortgaged to UCO Bank, and the MoU contemplated clearing the bank's outstanding dues and encumbrances before eventually acquiring the property. Thong contacted the bank regarding the estate and its mortgage on May 31, 2021.
The next day, Darjeeling Organic Tea Estates and C.R. Traders signed a Memorandum of Understanding (MoU), with Goho signing on behalf of the company. Thong transferred ₹40 lakh directly to the company's bank account on June 7, 2021.
The agreement was terminated on July 26, 2021, on the ground that Thong had failed to comply with its terms.
Thong filed a criminal complaint against Goho on August 17, 2022. She alleged that he had induced her to pay ₹40 lakh by falsely representing that the estate belonged to Darjeeling Organic Tea Estates, although it was owned by Bhumya Tea Company Private Limited and was the subject of proceedings involving UCO Bank.
On September 21, 2022, the Judicial Magistrate First Class, Dimapur, issued summons against Goho for alleged cheating under Sections 417 and 420 of the Indian Penal Code, 1860.
Goho approached the Gauhati High Court under Section 482 of the Code of Criminal Procedure, 1973, seeking to quash the proceedings. He argued that the dispute was contractual, that he had signed the MoU only as the company's authorised representative and that the money had gone directly to the company, which had not been made an accused.
On May 13, 2025, the High Court refused to quash the proceedings, finding a prima facie case of cheating. It also held that the arbitration clause in the MoU did not, by itself, prevent criminal prosecution.
Goho then appealed to the Supreme Court.
The Supreme Court found that the complaint did not establish dishonest intention at the inception of the transaction.
The Court noted that Thong knew the estate was mortgaged to UCO Bank before signing the MoU. The agreement itself contemplated clearing the bank's dues and encumbrances before the eventual acquisition of the estate.
The Bench also noted that Darjeeling Organic Tea Estates was in possession of and operating the estate and had substantial claims concerning it. There was no allegation that Goho personally received or appropriated any part of the ₹40 lakh.
“In these circumstances, a bare assertion that the appellant knew the representation to be false does not, without more, establish dishonest intention at the inception of the transaction,” the Court held.
The Bench agreed with the High Court that an arbitration clause does not, by itself, bar criminal proceedings. However, it stressed that the allegations must disclose the essential ingredients of the alleged offence.
“The High Court was correct in observing that the existence of an arbitration clause does not, by itself, bar criminal proceedings. That proposition, however, does not answer the real question. The Court must first determine whether the allegations disclose the essential ingredients of the criminal offence alleged,” it observed.
Finding that the ingredients of cheating were not made out against Goho, the Supreme Court held that continuing the prosecution would give a predominantly contractual dispute the colour of a criminal case. It quashed the proceedings against him while clarifying that Thong could pursue civil or contractual remedies.
For Appellant (Indroneel Goho): Senior Advocate Sudip Sanyal; Advocates Arun K. Sinha, Rakesh Singh and Jayanta Kumar Sanyal.
For Respondents (Razouvonuo Thong & Anr.): Advocates Harpreet Singh, Praveen Kumar Jha, Jitin Singhal, Pravesh Bahuguna, Rudraksh Pandey, K. Enatoli Sema, Amit Kumar Singh, Chubalemla Chang, Prang Newmai and Yanmi Phazang.