Criminal Proceedings Not A Shortcut For Civil Remedies: Punjab And Haryana High Court Quashes FIR In Financial Dispute

Justice N.S. Shekhawat of the Punjab and Haryana High Court allowed a petition to quash FIR No. 03 dated January 15, 2023, registered under Sections 420 and 120-B of the Indian Penal Code (IPC) for cheating and criminal conspiracy. Filed under Section 482 of the Code of Criminal Procedure (Cr.P.C.) by Jagsir Singh Dhiman and another, the petition contended that the FIR was an abuse of criminal process, as it arose purely from a financial disagreement. The Court agreed, quashing the FIR and all related proceedings.

The FIR was registered based on a complaint by Avtar Singh, who alleged that Jagsir Singh, his former business associate, had wrongfully withheld a sum of ₹9,50,000. Avtar Singh contended that the amount was due from a business transaction in manufacturing agricultural tools, which they initially undertook as partners before disagreements arose. The petitioners argued that this was a civil dispute improperly framed as a criminal case, relying on precedents cautioning against the use of criminal law in purely financial matters.

The High Court emphasized that using criminal law to resolve civil or business disputes is a misuse of judicial process. The Court, citing precedents, underscored that financial disputes without criminal elements should not be adjudicated under criminal law.
Observation: "Business or contractual conflicts without criminal elements should not proceed under criminal law," the Court remarked, aligning with the Supreme Court’s stance in M/s Indian Oil Corporation vs. M/s NEPC India Limited.
The Court reviewed the complaint and found no fraudulent or dishonest intent at the outset, which is essential for an offense under Section 420. According to the Court, mere failure to fulfill a financial obligation does not constitute cheating without proof of deception from the start of the agreement.
Court’s Analysis: "To hold a person guilty of cheating, it is necessary to show fraudulent intent at the time of making the promise," the Court noted, highlighting that no such intent was evident in this case.
Section 482 Cr.P.C. empowers the High Court to prevent abuse of judicial processes. The Court highlighted that these powers are essential for ensuring justice, especially in cases where criminal proceedings are initiated for ulterior motives, such as exerting pressure in financial matters.
Judgment Quote: "The power possessed by the High Court under Section 482 Cr.P.C is of wide amplitude... but it requires exercise with caution to prevent misuse of the judicial process."
Gian Singh vs. State of Punjab (2012): The Supreme Court held that the High Court has an obligation to prevent misuse of criminal proceedings, especially when civil matters are given a criminal guise.
M/s Indian Oil Corporation vs. M/s NEPC India Limited (2006): The Supreme Court highlighted the increasing trend of converting civil disputes into criminal cases and emphasized that this should be discouraged.
State of Karnataka vs. L. Muniswamy (1977): The Supreme Court affirmed that Section 482 Cr.P.C. can be invoked to quash proceedings that constitute an abuse of process.
On Misuse of Judicial Process: "Criminal proceedings are not a shortcut for civil remedies," the Court reiterated, preventing the complainant from using criminal law to settle a financial dispute.
On Judicial Caution: "The High Court's power under Section 482 Cr.P.C. should be used sparingly... and only to prevent misuse of the judicial process."
The Court found that the essential ingredients of cheating and conspiracy were lacking in the FIR, which was rooted in a financial disagreement, not a criminal act. Consequently, the Court quashed the FIR, stating that allowing the case to proceed under criminal law would be an abuse of judicial process.

Date of Decision: November 4, 2024