Mitesh Kumar J Sha vs The State Of Karnataka on 26 October, 2021


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Supreme Court of India

Mitesh Kumar J Sha vs The State Of Karnataka on 26 October, 2021

Author: Krishna Murari

Bench: S. Abdul Nazeer, Krishna Murari

                                                                               REPORTABLE

                                    IN THE SUPREME COURT OF INDIA

                                  CRIMINAL APPELLATE JURISDICTION

                                    CRIMINAL APPEAL NO. 1285 OF 2021
                                  (arising out of S.L.P (Crl.) No. 9871 OF 2019)

          MITESH KUMAR J. SHA                                             …APPELLANT (S)

                                                    VERSUS

          THE STATE OF KARNATAKA & ORS.                                   …RESPONDENT(S)


                                                  JUDGMENT

KRISHNA MURARI, J.

Leave granted.

2. This appeal is directed against the judgment and order dated 13.08.2019

passed by the High Court of Karnataka at Bengaluru in Criminal Petition No.

2691 of 2016, filed by the Appellants under Section 482 of the Code of

Criminal Procedure (hereinafter referred to as ‘CrPC’) challenging the FIR No.

185/2016 dated 29.03.2016 implicating the appellants for offences under

Section 420 read with Section 34 IPC and to quash the proceedings in C.C. No.

20609 of 2017 on the file of VI Additional CMM, Bengaluru, initiated pursuant

to charge sheet dated 29.03.2017 against the appellants for offences punishable
Signature Not Verified

under Sections 406, 419, 420 read with Section 34 of IPC. The High Court vide
Digitally signed by
Neelam Gulati
Date: 2021.10.26
16:11:09 IST
Reason:

order impugned herein dismissed the same.

1

3. Pending instant appeal before this Court, Appellant No. 1 has died and his

name has been deleted vide order dated 29.09.2021. The term ‘Appellants’ used

herein should thus be construed to include only Appellant No. 2.

Facts

4. On 07.08.13 Respondent No. 2 had initially executed a Joint

Development Agreement (JDA) for developing a particular property with the

company of the Appellants (The Appellants being directors in this company),

i.e., Rajarajeshwari Buildcon Private Ltd. (hereinafter referred to as ‘the builder

company’). The property was to be developed either entirely as residential

apartments, or as residential apartments with commercial complex. In

furtherance of the Joint Development Agreement, a General Power of Attorney

(GPA) was also executed on the same date. Respondent No. 2 thereafter also

entered into a Supplementary Agreement with the Appellants specifying their

respective shares in undivided area and super built up area.

5. Further, on 19.02.15 a Memorandum of Understanding (MoU) was

entered into by Respondent No. 2 with the builder company, whereby the

company was authorized to sell 8000 sq. ft out of respondent No.2’s share in the

undivided area and super built up area. The MoU was entered into by

Respondent No. 2 for the purpose of making partial payment of a loan borrowed

2
by him from one Religare Finvest Ltd. Pursuant to the MoU, Appellants had to

obtain NOC for 15 flats by making payment of Rs. 40,00,000/- for each flat.

6. The Appellants herein contend at this juncture, that it was verbally agreed

between the parties, that the company would be entitled to adjust the payments

made to Religare Finvest Ltd., by way of selling additional flats beyond its

share, i.e., an additional 8000 sq.ft of built up area would be allotted to the

company’s share in lieu of the partial payment of loan borrowed by Respondent

No. 2 from Religare Finvest Ltd.

7. Eventually, at the instance of Respondent no. 2, the said developer

company thereby executed sale-deeds for two flats, Flat No. 202 & 203 in

favour of the daughter and son-in-law of Respondent No. 2. The company

further executed a sale deed for another flat bearing No. 301 in favour of one

Smt. Yashoda Sundararajan on 27.08.15.

8. Thereafter, vide an email the company informed Respondent no. 2 to

execute and register the above said flats comprising 6821 sq. ft. (out of the 8000

sq. ft. given to the company as per the MoU dated 19.02.15) in favour of the

relevant purchasers and to further make payments to Religare Finvest Ltd. At

this juncture, Respondent no. 2 issued a letter to the Appellants contending that

3
the company had not adhered to the terms of the JDA, and consequently

revoked the GPA.

9. Aggrieved, the company filed an application for arbitration under section

9 of the Arbitration Act, praying for injunction restraining Respondent No. 2

from alienating or creating third party rights over the property. Respondent No.

2 on the other hand filed a police complaint claiming that the sale of flats was in

excess of the share agreed between the parties. The complaint (Respondent

No.2), inter-alia, had two contentions-

 First, that the GPA was not executed in favour of the company,

therefore, company could not have sold the said apartments.

 Secondly, flats sold by the company belonged to Respondent no. 2’s

share. Flats alleged to have been sold in excess bearing No. 002, 301,

304, 404.

10. Pursuant to this complaint, FIR No. 185/2016 dated 29.03.2016, was

registered against Appellant No. 1 and 2 for offences punishable under section

420 read with 34 of Indian Penal Code. Appellants herein, thereby approached

the High Court of Karnataka seeking quashing of the said FIR invoking Section

482 of CrPC. Further on 29.03.17 charge sheet was filed against the appellants

for offences under sections 406, 419, 420 read with Section 34 of the Indian

Penal Code, which was also sought to be quashed in the said proceedings.
4

11. Meanwhile, in the arbitration proceedings, the arbitrator partly allowed

the claims of the Appellants as well as Respondent No. 2. The arbitrator held

that unilateral revocation of GPA by Respondent no. 2 was illegal and that the

company had the right to effectuate sale agreements/sale deeds in terms of

MoU. Furthermore, regarding the question of sale of four excess flats by the

Appellants, the question was left unanswered in the arbitral award as

Respondent No. 2 had withdrawn his claim prayed for in paras (e), (f) and (g) of

the written submissions in light of pending civil proceedings, with liberty to

pursue the issue in those proceedings. Prayer in para (f) in particular being:-

“directing the Applicant/Developer to evict and remove the

present occupants of Flat No. 002, 301, 304 & 404 and deliver

possession of the said Flats, redoing and refurbishing the

interiors, as if it was a new Flat, with Occupancy Certificate

in respect of the said Flats.”

12. Aggrieved by the award, Respondent no. 2 preferred a challenge to

the said award under section 34 of the Arbitration Act.

13. Eventually, the quashing petition also came up before the High Court,

which was disposed of by observing that dispute regarding alienation of flats by

the Appellants herein has not been answered by the arbitrator and was not a

5
subject matter of the arbitration suit pending between the parties. It was further

observed that since there are allegations against the Appellants for having sold

the flats contrary to the terms of MoU, there were no grounds to interfere with

the matter. The Appellants herein, thereby approached this court by way of the

present Special Leave Petition.

Contentions made on behalf of the Appellant

14. The Appellants herein have contended that the sequence of events in the

instant case do not fulfill the necessary ingredients of an alleged offence,

therefore Respondent No. 2 has been simply trying to impart criminal color to a

civil dispute. It is contended that the issue of alienation of flats had not been

responded to by the arbitrator since Respondent No. 2 had withdrawn his claim

in respect of the said flats from arbitral proceedings with liberty to pursue his

case in pending civil proceedings. Furthermore, since Respondent No. 2 had

decided to pursue his claim by way of a civil suit, therefore criminal complaint

on the same issue should be quashed.

15. It is further submitted that the entire dispute between the parties pertains

to an alleged sale of flats in excess of the share agreed between the parties, and

that the complaint is filed by Respondent No. 2 for settling scores in a dispute

which is entirely of civil nature.

6

16. The Appellants placed reliance on the judgment of this Court in case of

Prof. R. K. Vijayasarathy & Anr. Vs. Sudha Seetharam & Anr. 1, to substantiate

the above stated argument. The relevant paras referred are as hereunder:-

“23. The jurisdiction under Section 482 of the Code of
Criminal Procedure has to be exercised with care. In the
exercise of its jurisdiction, a High Court can examine whether a
matter which is essentially of a civil nature has been given a
cloak of a criminal offence. Where the ingredients required to
constitute a criminal offence are not made out from a bare
reading of the complaint, the continuation of the criminal
proceeding will constitute an abuse of the process of the court.

24. In the present case, the son of the appellants has instituted
a civil suit for the recovery of money against the first
respondent. The suit is pending. The first respondent has filed
the complaint against the appellants six years after the date of
the alleged transaction and nearly three years from the filing of
the suit. The averments in the complaint, read on its face, do
not disclose the ingredients necessary to constitute offences
under the Penal Code. An attempt has been made by the first
respondent to cloak a civil dispute with a criminal nature
despite the absence of the ingredients necessary to constitute a
criminal offence. The complaint filed by the first respondent
against the appellants constitutes an abuse of process of court
and is liable to be quashed.”

17. Learned counsel for the appellant further submits that Respondent No. 2

has neither denied execution of MoU nor grant of marketing rights to the

company of the Appellants. It is further submitted that since variation in

supplementary agreement, allotting an additional area of 8000 sq. ft to the

Petitioner Company in lieu of partial payment made to Religare Finvest Ltd.

1. (2019) SCC Online SC 208
7
was not made in writing, therefore, Respondent No. 2 has made an attempt to

cloak the transactions of the Appellants as a criminal offence. It is also

contended that since the dispute between the parties had any way been

adjudicated by the arbitrator therefore the existing criminal complaint is liable

to be quashed.

Contentions made by Respondent No. 2 appearing in person

18. Respondent No. 2 who appeared in person on the contrary submits that

the developer company of the Appellants being entitled to sell only 9 flats has

executed a sale deed for 13 flats in all. Further the sale of 4 flats (flat nos. 002,

301, 304 & 404) beyond the 9 flats is in excess of the Appellants company’s

share and therefore Respondent No. 2 has been constrained to lodge a complaint

for cheating against the Appellants.

19. Respondent No. 2 in his objection to the contention of the Appellants

that civil dispute is being given a criminal color, relying upon the dictum in

State of Karnataka Vs. M. Devendrappa & Anr.2, submits that reliance must be

placed on whether the complaint spells out the ingredients of a criminal offence

or not, and not on the defenses available to an accused, which if established in

trial may lead to his acquittal.

2. (2002) 3 SCC 89
8

20. It is further submitted that the Appellants after selling a property which

they were unauthorized to sell cannot evade a criminal case merely on the

contention that the person whose property has been sold has filed a civil suit for

recovery of the said property. The Respondent further relies upon the judgment

of this Court in Priti Saraf & Anr. Vs. State of NCT of Delhi & Anr. 3, wherein

it was observed that :-

“32. In the instant case, on a careful reading of the
complaint/FIR/charge-sheet, in our view, it cannot be said that
the complaint does not disclose the commission of an offence.

The ingredients of the offences under Sections
406
and 420 IPC cannot be said to be absent on the basis of
the allegations in the complaint/FIR/charge-sheet. We would
like to add that whether the allegations in the complaint are
otherwise correct or not, has to be decided on the basis of the
evidence to be led during the course of trial. Simply because
there is a remedy provided for breach of contract or arbitral
proceedings initiated at the instance of the appellants, that
does not by itself clothe the court to come to a conclusion that
civil remedy is the only remedy, and the initiation of criminal
proceedings, in any manner, will be an abuse of the process of
the court for exercising inherent powers of the High Court
under Section 482 CrPC for quashing such proceedings.

33. We have perused the pleadings of the parties, the
complaint/FIR/charge-sheet and orders of the Courts below
and have taken into consideration the material on record.
After hearing learned counsel for the parties, we are satisfied
that the issue involved in the matter under consideration is not
a case in which the criminal trial should have been short-
circuited. The High Court was not justified in quashing the
criminal proceedings in exercise of its inherent jurisdiction.
The High Court has primarily adverted on two circumstances,

(i) that it was a case of termination of agreement to sell on
account of an alleged breach of the contract and (ii) the fact
that the arbitral proceedings have been initiated at the

3. 2021 SCC Online SC 206
9
instance of the appellants. Both the alleged circumstances
noticed by the High Court, in our view, are unsustainable in
law. The facts narrated in the present complaint/FIR/charge-
sheet indeed reveal the commercial transaction but that is
hardly a reason for holding that the offence of cheating would
elude from such transaction. In fact, many a times, offence of
cheating is committed in the course of commercial
transactions and the illustrations have been set out under
Sections 415, 418 and 420 IPC. Similar observations have
been made by this Court in Trisuns Chemical Industry Vs.
Rajesh Agarwal and Ors.(supra) :-

9. We are unable to appreciate the reasoning that the provision
incorporated in the agreement for referring the disputes to
arbitration is an effective substitute for a criminal prosecution
when the disputed act is an offence. Arbitration is a remedy for
affording reliefs to the party affected by breach of the
agreement but the arbitrator cannot conduct a trial of any act
which amounted to an offence albeit the same act may be
connected with the discharge of any function under the
agreement. Hence, those are not good reasons for the High
Court to axe down the complaint at the threshold itself. The
investigating agency should have had the freedom to go into
the whole gamut of the allegations and to reach a conclusion
of its own. Pre-emption of such investigation would be justified
only in very extreme cases as indicated in State of Haryana v.
Bhajan Lal
[1992 Supp (1) SCC 335].”

21. It has been further argued that reliance made by the Appellants on

the judgment of this Court in Prof. R K Vijayasarathy & Anr Vs. Sudha

Seetharam & Anr.4 is misplaced, as the said case was decided on

different facts, wherein criminal proceedings were instituted as late as

three years after the institution of civil proceedings, and the necessary

ingredients to constitute an offence were also not made out in the

4. 2019 SCC Online SC 208
10
complaint. On the contrary, in the instant case, relevant ingredients to

constitute an offence under section 405 and 415 have clearly been made

out.

22. Placing reliance upon Sri Krishna Agencies Vs. State of Andhra

Pradesh & Anr.5, it is further contended by Respondent No. 2 that

criminal proceedings cannot be quashed solely because the dispute was

referred to arbitration and that arbitration proceedings had taken place

thereafter. Para 7 of the said judgment has been particularly emphasized

upon by Respondent No. 2, wherein it has been observed as under :-

“On behalf of respondent No. 2, the submissions which had
been urged before the High Court, were reiterated, which,
however, appears to be unacceptable having regard to the
decision cited by Mr. Adhyaru. We are also of the view that
there can be no bar to the simultaneous continuance of a
criminal proceeding and a civil proceeding if the two arise
from separate causes of action. The decision in Trisuns
Chemical Industry’s case (Supra) appears to squarely cover
this case as well.”

23. To simply put, what has been argued on behalf of Respondent No.

2 is that cause of action in civil and criminal proceedings instituted by

Respondent No. 2 are separate and independent of each other, i.e.,

liability for breach of agreement is independent of the liability for

commission of offence under sections 405 and 415 of the Indian Penal

5. (2009) 1 SCC 69
11
Code. Therefore, criminal proceedings so instituted against the Appellants

herein cannot be quashed.

24. It is further contended that sale deed in respect of 8000 sq. ft. area

cannot be executed by the Appellants as Respondent No 2 had not given

GPA to sell the said area. Therefore, the sale made by the Appellants in

excess of their authority is unlawful and is indicative of the criminal

intent of the appellants. Moreover, the said excess four flats sold by the

Appellants, have also been taken out of the arbitral proceedings and

therefore the Appellants herein can place no reliance on the arbitral

proceedings.

Contentions made on behalf of Respondent No. 1-State

25. Counsel appearing for the State of Karnataka i.e. Respondent No. 1

submits that, as far as the argument of the Appellants that Respondent

No. 2 has merely made an attempt to cloak a dispute of civil nature is

concerned, the High Court has held that in the instant circumstances there

being clear allegations that the appellants had executed sale deed of the

said flats without authority, there were no grounds to interfere with the

matter. It is further submitted that in the instant facts clear ingredients of

offences punishable under sections 406, 419 and 420 read with section 34

of Indian Penal Code have been made out.

12

Issues

26. Having perused the relevant facts and contentions made by the

Appellants and Respondents herein in our considered opinion, the

following three key issues require determination in the instant case:

– Whether the necessary ingredients of offences punishable under Sections

406, 419 and 420 are prima facie made out?

– Whether sale of excess flats, even if made, amounts to a mere breach of

contract or constitutes an offence of cheating?

– Whether the dispute is one of entirely civil nature and therefore liable to

be quashed?

Whether the necessary ingredients of offences punishable under Sections
406
, 419 and 420 are prima facie made out?

27. In order to ascertain the veracity of contentions made by the parties

herein, it is imperative to firstly examine whether the relevant ingredients

of offences which the appellants herein had been charged with, are prima

facie made out. The relevant sections read as follows:-

“405. Criminal breach of trust—Whoever, being in any
manner entrusted with property, or with any dominion over
property, dishonestly misappropriates or converts to his own
use that property, or dishonestly uses or disposes of that
13
property in violation of any direction of law prescribing the
mode in which such trust is to be discharged, or of any legal
contract, express or implied, which he has made touching the
discharge of such trust, or wilfully suffers any other person so
to do, commits “criminal breach of trust”.

[Explanation [1].—A person, being an employer [of an
establishment whether exempted under section 17 of the
Employees’ Provident Funds and Miscellaneous Provisions Act,
1952 (19 of 1952), or not] who deducts the employee’s
contribution from the wages payable to the employee for credit
to a Provident Fund or Family Pension Fund established by
any law for the time being in force, shall be deemed to have
been entrusted with the amount of the contribution so deducted
by him and if he makes default in the payment of such
contribution to the said Fund in violation of the said law, shall
be deemed to have dishonestly used the amount of the said
contribution in violation of a direction of law as aforesaid.]
[Explanation 2.—A person, being an employer, who deducts the
employees’ contribution from the wages payable to the
employee for credit to the Employees’ State Insurance Fund
held and administered by the Employees’ State Insurance
Corporation established under the Employees’ State Insurance
Act
, 1948 (34 of 1948), shall be deemed to have been entrusted
with the amount of the contribution so deducted by him and if
he makes default in the payment of such contribution to the said
Fund in violation of the said Act, shall be deemed to have
dishonestly used the amount of the said contribution in
violation of a direction of law as aforesaid.]

406. Punishment for criminal breach of trust—Whoever
commits criminal breach of trust shall be punished with
imprisonment of either description for a term which may extend
to three years, or with fine, or with both.

419. Punishment for cheating by personation—Whoever
cheats by personation shall be punished with imprisonment of
either description for a term which may extend to three years,
or with fine, or with both.

14

420. Cheating and dishonestly inducing delivery of property—
Whoever cheats and thereby dishonestly induces the person
deceived to deliver any property to any person, or to make,
alter or destroy the whole or any part of a valuable security, or
anything which is signed or sealed, and which is capable of
being converted into a valuable security, shall be punished with
imprisonment of either description for a term which may extend
to seven years, and shall also be liable to fine.”

28. In the instant case, the complaint levelled against the Appellants herein is

one which involves commission of offences of criminal breach of trust and

cheating. While a criminal breach of trust as postulated under section 405 of the

Indian Penal Code, entails misappropriation or conversion of another’s property

for one’s own use, with a dishonest intention, cheating too on the other hand as

an offence defined under section 415 of the Indian Penal Code, involves an

ingredient of having a dishonest or fraudulent intention which is aimed at

inducing the other party to deliver any property to a specific person. Both the

sections clearly prescribed ‘dishonest intention’, as a pre-condition for even

prima facie establishing the commission of said offences. Thus, in order to

assess the relevant contentions made by the parties herein, the question whether

actions of the Appellants were committed in furtherance of a dishonest or

fraudulent scheme is one which requires scrutiny.

29. Coming to the facts of the case at hands, the contested contention

between the parties is that the builder company had sold four excess flats

beyond its share, in terms of the JDA and supplementary agreement entered into

15
between the parties. Respondent No. 2 contends that builder company which

was entitled to sell only 9 flats in its favour, has instead executed sale deed for

13 flats in total. Thus, the company simply could not have sold the flats beyond

9 flats for which it was authorized and resultantly cannot evade criminal

liability on a mere premise that a civil dispute is already pending between the

parties.

30. The Appellants on the other hand contend that in terms of a subsequent

MoU dated 19.02.15, it was mutually agreed between the parties, that partial

payment for a loan amount borrowed by Respondent No. 2 from Religare

Finvest Ltd., would be paid out from the sale proceeds of the said development

project undertaken by both the parties. Pursuant to this MoU, the Appellants had

agreed to get an NOC for 15 flats by making payment of Rs. 40,00,000/- for

each flat.

31. The key contention, and also the central point of dispute, made by the

Appellants is that, it was specifically agreed between the parties that the

Appellants would be entitled to sell additional flats beyond their share, as

adjustments for payment made to Religare Finvest Ltd on behalf of Respondent

No. 2. It is further contended that Respondent No. 2 had also agreed to execute

a ratification deed to the JDA and GPA eventually, which would have formally

authorised the Appellants to sell additional apartments.

16

32. Nonetheless, the ratification deed was never made and Respondent No. 2

subsequently even revoked the GPA unilaterally, contending that the terms of

JDA were not followed.

33. It was only after revocation of GPA that the company filed an application

for arbitration seeking interim orders to restrain the Respondent No. 2 from

alienating the disputed property. Simultaneously, while this dispute was pending

adjudication before the arbitrator Respondent No. 2 filed a criminal complaint

against the Appellants.

34. At this juncture, it further becomes pertinent to mention that eventually

though both the parties partly succeeded before the arbitrator, in terms of their

respective claims, the arbitrator observed that GPA indeed could not have been

revoked unilaterally at the instance of Respondent No. 2. Aggrieved,

Respondent No. 2 thereafter even preferred a challenge to the award passed by

the arbitrator. Moreover, pending arbitration proceedings issue regarding selling

of excess flats at the instance of Appellants, was also withdrawn by Respondent

No. 2 seeking liberty to pursue his claim with regard to selling of four excess

flats in pending civil proceedings.

35. Upon a careful assessment of such facts, by no stretch can it be concluded

that the Appellants herein have deceptively or intentionally tried to sell excess

flats if any, as contended by Respondent No. 2. Here, it must also be borne in

mind that subsequent to the revocation of GPA, it was the Appellants herein
17
who had first resorted to arbitration proceedings on 02.03.16 for redressal of

dispute between the parties, to which Respondent No 2 had accordingly filed his

statement of objections dated 09.03.16. It was only on 29.03.16 that Respondent

No. 2 had filed the FIR in question bearing Crime No. 185/2016 against the

Appellants. Moreover, it was Respondent No. 2 who had withdrawn his prayer

with respect to selling of four excess flats by the Appellants, only to pursue the

same in civil proceedings.

36. At this stage, by placing reliance on the judgment of this Court in Priti

Saraf & Anr. Vs. State of NCT of Delhi & Anr. (Supra) and Sri Krishna

Agencies Vs. State of Andhra Pradesh & Anr. (Supra), it has been further

submitted by Respondent No. 2 that Appellants cannot evade a criminal case by

merely contending that the person whose property has been sold has filed a civil

suit for recovery of the property, or that the dispute had been referred to

arbitration.

37. Although, there is perhaps not even an iota of doubt that a singular factual

premise can give rise to a dispute which is both, of a civil as well as criminal

nature, each of which could be pursued regardless of the other. In the instant

case, the actual question which requires consideration is not whether a criminal

case could be pursued in the presence of a civil suit, but whether the relevant

ingredients for a criminal case are even prima facie made out. Relying on the

18
facts as discussed in previous paragraphs, clearly no cogent case regarding a

criminal breach of trust or cheating is made out.

38. The dispute between the parties, could at best be termed as one involving

a mere breach of contract. Now, whether and what, is the difference between a

mere breach of contract and an offence of cheating has been discussed in the

ensuing paragraphs.

Whether sale of excess flats even if made amounts to a mere breach of
contract?

39. This Court in the case of Hridaya Ranjan Prasad Verma & Ors. Vs.

State of Bihar & Anr.6, has observed:-

“15. ….that the distinction between mere breach of contract
and the offence of cheating is a fine one. It depends upon
the intention of the accused at the time to inducement which
may be judged by his subsequent conduct but for this
subsequent conduct is not the sole test. Mere breach of
contract cannot give rise to criminal prosecution for
cheating unless fraudulent or dishonest intention is shown
right at the beginning of the transaction, that is the time
when the offence is said to have been committed. Therefore
it is the intention which is the gist of the offence. To hold a
person guilty of cheating it is necessary to show that he had
fraudulent or dishonest intention at the time of making the
promise…”

6. (2000) 4 SCC 168
19

40. Applying this dictum to the instant factual matrix where the key

ingredient of having a dishonest or fraudulent intent under sections 405, 419

and 420 is not made out, the case at hand, in our considered opinion is a suitable

case necessitating intervention of this Court.

Whether the dispute is one of entirely civil nature and therefore liable to be
quashed?

41. Having considered the relevant arguments of the parties and decisions of

this court we are of the considered view that existence of dishonest or

fraudulent intention has not been made out against the Appellants. Though the

instant dispute certainly involves determination of issues which are of civil

nature, pursuant to which Respondent No. 2 has even instituted multiple civil

suits, one can by no means stretch the dispute to an extent, so as to impart it a

criminal colour. As has been rightly emphasised upon by this court, by way of

an observation rendered in the case of M/s Indian Oil Corporation Vs. M/s.

NEPC India Ltd & Ors.7, as under :-

“14. While no one with a legitimate cause or grievance
should be prevented from seeking remedies available in
criminal law, a complainant who initiates or persists with a
prosecution, being fully aware that the criminal proceedings
are unwarranted and his remedy lies only in civil law,
should himself be made accountable, at the end of such

7. (2006) 6 SCC 736
20
misconceived criminal proceedings, in accordance with
law.”

42. It was also observed:-

“13. While on this issue, it is necessary to take notice of a
growing tendency in business circles to convert purely civil
disputes into criminal cases. This is obviously on account of
a prevalent impression that civil law remedies are time
consuming and do not adequately protect the interests of
lenders/creditors….There is also an impression that if a
person could somehow be entangled in a criminal
prosecution, there is a likelihood of imminent settlement.
Any effort to settle civil disputes and claims, which do not
involve any criminal offence, by applying pressure though
criminal prosecution should be deprecated and
discouraged.”

43. On an earlier occasion, in case of G. Sagar Suri and Anr. Vs. State

of UP and Ors.8, this Court has also observed:-

“8. Jurisdiction under Section 482 of the Code has to be
exercised with a great care. In exercise of its jurisdiction
High Court is not to examine the matter superficially. It is
to be seen if a matter, which is essentially of civil nature,
has been given a cloak of criminal offence. Criminal
proceedings are not a short cut of other remedies available
in law. Before issuing process a criminal court has to
exercise a great deal of caution. For the accused it is a
serious matter. This Court has laid certain principles on the
basis of which High Court is to exercise its jurisdiction
under Section 482 of the Code. Jurisdiction under this
Section has to be exercised to prevent abuse of the process
of any court or otherwise to secure the ends of justice.”

8. (2000) 2 SCC 636
21

44. Furthermore, in the landmark judgment of State of Haryana &

Ors. Vs. Ch. Bhajan Lal and Ors. 9 regarding exercise of inherent

powers under section 482 of CrPC, this Court has laid down following

categories of instances wherein inherent powers of the can be exercised in

order to secure the ends of justice. These are:-

“(1) where the allegations made in the First Information
Report or the complaint, even if they are taken at their face
value and accepted in their entirety do not prima facie
constitute any offence or make out a case against the
accused;

(2) where the allegations in the First Information Report and
other materials, if any, accompanying the F.I.R. do not
disclose a cognizable offence, justifying an investigation by
police officers under Section 156(1) of the Code except under
an order of a Magistrate within the purview of Section 155(2)
of the Code;

(3) where the uncontroverted allegations made in the FIR or
‘complaint and the evidence collected in support of the same
do not disclose the commission of any offence and make out a
case against the accused;

(4) where the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable
offence, no investigation is permitted by a police officer
without an order of a Magistrate as contemplated under
Section 155(2) of the Code;

(5) where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no
prudent person can ever reach a just conclusion that there is
sufficient ground for proceeding against the accused;

9. (1992) SCC (Cri) 426
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(6) where there is an express legal bar engrafted in any of the
provisions of the Code or the concerned Act (under which a
criminal proceeding is instituted) to the institution and
continuance of the proceedings and/or where there is a
specific provision in the Code or the concerned Act, providing
efficacious redress for the grievance of the aggrieved party;
(7) where a criminal proceeding is manifestly attended with
mala fide and/or where the proceeding is maliciously
instituted with an ulterior motive for wreaking vengeance on
the accused and with a view to spite him due to private and
personal grudge.”

45. Applying this dictum to the instant factual matrix, it can be safely

concluded that the present case clearly falls within the ambit of first, third and

fifth category of the seven categories enlisted in the above said judgment. The

case therefore warrants intervention by this Court, and the High Court has erred

in dismissing the petition filed by the Appellants under section 482 CrPC. We

find that there has been attempt to stretch the contours of a civil dispute and

thereby essentially impart a criminal color to it.

46. Recently, this Court in case of Randheer Singh Vs. The State of U.P. &

Ors.10, has again reiterated the long standing principle that criminal proceedings

must not be used as instruments of harassment. The court observed as under:-

“33. ….There can be no doubt that jurisdiction under
Section 482 of the Cr.P.C. should be used sparingly for the
purpose of preventing abuse of the process of any court or
otherwise to secure the ends of justice. Whether a complaint

10. Criminal Appeal No. 932 of 2021 (decided on 02.09.2021)
23
discloses criminal offence or not depends on the nature of
the allegation and whether the essential ingredients of a
criminal offence are present or not has to be judged by the
High Court. There can be no doubt that a complaint
disclosing civil transactions may also have a criminal
texture. The High Court has, however, to see whether the
dispute of a civil nature has been given colour of criminal
offence. In such a situation, the High Court should not
hesitate to quash the criminal proceedings as held by this
Court in Paramjeet Batra (supra) extracted above.”

47. Moreover, this Court has at innumerable instances expressed its

disapproval for imparting criminal color to a civil dispute, made merely to take

advantage of a relatively quick relief granted in a criminal case in contrast to a

civil dispute. Such an exercise is nothing but an abuse of the process of law

which must be discouraged in its entirety.

48. In view of the above facts and discussions, the impugned order dated

13.08.2019 passed by the High Court of Karnataka is set aside. The impugned

F.I.R. No. 185 of 2016 dated 29.03.2016 and proceedings in C.C.No. 20609 of

2017 on the file of VI Additional CMM, Bengaluru, in pursuance of charge

sheet dated 29.03.2017 against the appellants for offences under Sections 406,

419, 420 read with Section 34 IPC stands quashed.

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49. As a result, appeal stands allowed.

….………………………..J.

(S. ABDUL NAZEER)

……………………………..J.

(KRISHNA MURARI)

NEW DELHI;

26th OCTOBER, 2021

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