A movie producer (appellant) borrowed money from a de-facto complainant on the promise of a share in profits — first 30%, then an enhanced 47% — for the production and completion of a Tamil film. When the film failed to generate profits, the appellant issued two post-dated cheques of Rs. 24 lacs each towards return of the principal amount; both were dishonoured for insufficient funds. The complainant lodged a police report alleging cheating (Section 420 IPC) and criminal breach of trust (Section 406 IPC). The Madras High Court, in Crl. O.P. No. 847 of 2021, quashed the Section 406 indictment for want of entrustment but declined to quash the Section 420 proceedings, holding that repeated representations at every stage prima facie disclosed cheating.
The Supreme Court allowed the criminal appeal and quashed the Section 420 proceedings. The Court reasoned that the movie was in fact made and released — the promise to make a film was therefore not false — and there were no allegations that the film earned profits, making it impossible to infer that the promise of profit-sharing was dishonest from inception. Crucially, the post-dated cheques were issued not as an inducement to obtain money but to discharge an existing liability after the complainant objected to the film's release; their dishonour could not, ipso facto, establish a dishonest intention at the time of the original promise. The Court held that movie-making is an inherently high-risk venture and the nature of the transaction was a decisive factor the High Court had overlooked.
The Court applied and elaborated upon Iridium India Telecom Ltd. v. Motorola Inc. [(2011) 1 SCC 74] and Vesa Holdings Private Limited and Another v. State of Kerala and Others [(2015) 8 SCC 293], reiterating that mere failure to keep a promise cannot be the sole basis to presume dishonest intention from the very beginning. It further laid down that where fulfilment of a promise is not entirely within the promisor's control — as in a profit-sharing arrangement in a speculative venture — the High Court may, in exercise of its Section 482 CrPC or Article 226 powers, examine the attending circumstances and quash proceedings if no dishonest intention at inception is disclosed, relegating the parties to civil remedies.