Section 318 BNS | FIR Quashed As Court Finds Criminal Prosecution Being Used To Settle A Purely Civil Commercial Dispute: J&K High Court

"It is also a settled law that offence of cheating is made out if the fraudulent or dishonest intention of the accused is prevalent at the inception of the transaction." High Court of Jammu & Kashmir and Ladakh, in a significant ruling dated September 9, 2026, held that criminal proceedings cannot be sustained where a transaction is purely civil or commercial in nature and lacks the essential element of dishonest intention at the time of inception.

A bench of Justice Sanjay Dhar, while quashing an FIR registered under the Bharatiya Nyaya Sanhita (BNS), observed that the court must intervene when litigation is used as a tool to give a "criminal texture" to a private financial dispute.

The petitioners had sought the quashing of an FIR registered at Police Station Bakshi Nagar, Jammu, for offences under Sections 318(4) and 316(5) of the BNS. The complainant had alleged that the petitioners induced him to invest Rs. 15,00,000 for a property deal with the promise of a monthly return of Rs. 20,000 as rent. While the petitioners fulfilled these payment obligations for several years, the complainant alleged that the failure to continue payments post-November 2016 constituted criminal cheating and breach of trust.

The primary question before the court was whether the allegations made in the FIR disclosed the essential ingredients of the offence of cheating as defined under Section 318(1) of the BNS. Furthermore, the court had to determine whether the continuation of criminal proceedings in a dispute stemming from a failure to honour a financial agreement amounted to an abuse of the process of law.

Requirement of Dishonest Intention at Inception

The court emphasized that for a prosecution under Section 318 BNS to be valid, the accused must have harboured fraudulent or dishonest intent at the very start of the transaction. The bench noted that an offence of cheating is not established if the failure to keep a promise arises later due to changing circumstances, rather than a pre-existing plan to deceive.

Court Rejects Criminalization of Civil Disputes

The court observed that since the petitioners had successfully honoured their payment obligations for a significant period up to November 2016, it was legally untenable to argue that they possessed a dishonest intention at the time of entering into the agreement. Consequently, the bench concluded that the entire dispute was commercial, and the FIR was a mere attempt to apply criminal pressure.

"The present case falls in the same category. In view of the above, continuance of impugned proceedings against the petitioners would amount to abuse of process of law."

Settlement Between Parties

It is pertinent to note that during the proceedings, the complainant, who was represented by counsel, explicitly submitted that he had no objection if the impugned FIR was quashed. This, combined with the lack of criminal ingredients, reinforced the court’s decision to put an end to the litigation.

The High Court, while invoking its inherent powers, allowed the petition and quashed the FIR along with all subsequent proceedings emanating therefrom. The judgment reaffirms the established legal position that courts must remain vigilant against the growing trend of litigants seeking to convert civil and commercial grievances into criminal prosecutions.

Date of Decision: 09 September 2026