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Tuesday, August 31, 2021

issuing an oral direction restraining the arrest of the first respondent was irregular.-Oral directions of this nature by the High Court are liable to cause serious misgivings. Such a procedure is open to grave abuse. Most High Courts deal with high volumes of cases. Judicial assessments change with the roster. Absent a written record of what has transpired in the course of a judicial proceeding, it would set a dangerous precedent if the parties and the investigating officer were expected to rely on unrecorded oral observations. 25. We are conscious of the fact that in civil proceedings, Counsel appearing on behalf of the contesting parties do in certain cases mutually agree before the court to an ad interim arrangement and agree among themselves to record the terms of the arrangement by an exchange of correspondence between the advocates. This can typically happen when civil disputants are attempting an amicable settlement. Civil cases involve disputes between two private contestants.

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

Criminal Appeal No. 884 of 2021

Arising out of SLP (Crl) No.4617 of 2021

Salimbhai Hamidbhai Menon …Petitioner

Versus

Niteshkumar Maganbhai Patel & Anr. …Respondents

O R D E R

Dr Dhananjaya Y Chandrachud, J

1. This appeal arises from a judgment dated 31 March 2021 of a Single Judge of

the High Court of Gujarat.

2. On 10 October 2010, the appellant and the first respondent entered into a

deed of partnership under which a firm by the name of Calla Associates was

constituted. The share of the first respondent in the profit / loss is alleged to be 55

per cent while the share of the appellant, 45 per cent. On 21 June 2017, a document 

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styled as ‘’sammati-lekh’’ was allegedly entered into by the appellant consenting to

the execution of a sale deed in favour of a third party and the appellant agreed not to

make any claim in the amount of Rs 3.89 crores from his capital investment.

3. On 23 August 2017, an addendum to the “sammati-lekh” is alleged to have

been executed in terms of which certain amounts were to be adjusted and an

amount of Rs 5.03 crores was to be paid by the first respondent to the appellant. It

has been alleged that under the terms of the addendum, a sale deed of certain land

situated at Mouje Samiyala was to be executed in favour of the appellant.

4. It has been alleged that on 4 September 2017, a document was prepared and

notarised on 8 September 2017 pertaining to record the relinquishment of rights by

the appellant from a parcel of land belonging to the firm. The allegation of the

appellant is that under the terms of the original document, the appellant agreed to

relinquish rights only in certain land situated at Akota, Vadodara. However, it is

alleged that the first respondent forged the internal pages of the document and

added additional survey numbers of land, over and above what was agreed to be

relinquished.

5. On 1 November 2017, an advocate’s notice was issued by the appellant to

the first respondent which was followed by a public notice on 2 January 2018

alleging misappropriation of the amount invested by the appellant. In a reply dated 5

January 2018, the respondent suggested that partnership had been mutually

dissolved and documents had been executed to that effect. 

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6. On 25 January 2018, a legal notice was issued by the appellant complaining

of the dishonour of a cheque of Rs 1.47 crores and on 7 January 2018, of another

cheque in the amount of Rs 81.31 lacs.

7. On 31 January 2018, the appellant addressed a communication to the

bankers to cease all transactions in the account of the partnership firm due to

disputes between the parties.

8. On 22 February 2018, the appellant received a communication from HDFC

Bank recording that the bank had received a document allegedly executed on 8

September 2017 by which the appellant had relinquished all his rights in the firm in

favour of the first respondent. The appellant alleges that it was then that he came to

know that the first respondent has fabricated the deed of dissolution of partnership

dated 10 February 2018. This forged deed allegedly contained a reference to

another forged document dated 8 September 2017. According to the appellant, his

signature on the deed of dissolution of partnership is forged and another copy of the

document without his signature was notarised on 23 February 2018.

9. On 25 February 2018, the investigating officer at JP Road Police Station

conducted a preliminary enquiry into a complaint lodged by the appellant, which is

stated to have been disposed of on the ground that the first respondent was ready to

settle the accounts in the presence of a mediator and that the allegations were of a

civil nature. 

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10. On 12 March 2018, a settlement was arrived at between the appellant and the

first respondent in terms of which it was agreed that the partnership be dissolved

and a sum of Rs 26.03 crores be paid to the appellant. Post-dated cheques were

issued to the appellant. One of Rs 50 lacs was honoured while the remaining

cheques were dishonoured, leading to the initiation of proceedings under the

Negotiable Instruments Act 1881.

11. On 20 June 2018, the appellant instituted a complaint before the Gotri Police

Station against the first respondent making allegations of forgery and cheating.

12. On 24 December 2018, a fresh MoU was entered between the appellant and

the first respondent which acknowledged that an amount of Rs 50 lacs was paid,

while a balance of Rs 25.52 crores remained due. The terms of the MoU envisaged

that certain lands would be transferred to the appellant in lieu of the outstanding

amount. The appellant has alleged that fresh cheques issued to him also returned

unpaid on 6 March 2020 and the sale deeds which were executed by the first

respondent were in respect of lands whose title was not marketable. The complaint

filed by the appellant was disposed of by the Gotri Police Station on 25 August 2019

in view of the settlement dated 24 December 2018 on the ground that despite

repeated requests, the appellant had not come forth to record his statement and it

appeared that the matter involved monetary transactions for which the appellant

would have to seek redressal before the appropriate court. 

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13. On 9 July 2020, the first respondent got an FIR registered before the

Vadodara City Police Station alleging an act of forgery on the part of the appellant.

On 9 October 2020, the investigating officer filed a ‘B’ summary report recording that

the alleged document dated 8 September 2017 had not been forged by the appellant

but by the first respondent.

14. On 6 December 2020, the FIR which forms the basis of the present

proceedings was registered, alleging the commission of offences punishable under

Sections 405, 420, 465, 467, 468 and 471 of the Penal Code. The gravamen of the

allegations in the FIR is that:

a. The deed of relinquishment which was prepared in relation to certain lands

situated at Akota had been interpolated and forged by the first respondent;

b. The deed of dissolution of partnership has been fabricated; and

c. Despite the settlement dated 24 December 2018, the amount due to the

appellant had not been paid and the title to the lands which were purported to

be transferred in favour of the appellant is in dispute.

15. The first respondent instituted proceedings under Section 482 of the Code

of Criminal Procedure 1973 (“CrPC”) for quashing the FIR, being Criminal Misc.

Application No 19358 of 2020.

16. On 23 December 2020, when the proceedings were initially moved before the

High Court, an order was passed by the Single Judge recording that :

“ The matter is between the partners and there appears

allegation that some of the partners have taken advantage 

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and siphoned away amount as well as also made falsification

of documents. “

Counsel appearing on behalf of the first respondent urged that he was willing to offer

a settlement. Since Counsel for the parties sought time to explore the possibility of a

settlement, the proceedings were adjourned to 10 February 2021. On 8 March 2021,

the first respondent was arrested. When the proceedings were taken up by the

Single Judge on 9 March 2021, the Court recorded the submission of the first

respondent that on 23 December 2020, an oral direction had been issued by the

Court restraining the arrest of the first respondent. Recording that this statement

was not disputed on behalf of the appellant, the Single Judge directed that the first

respondent should forthwith be released by the Vadodara Police Station if he was

arrested in connection with the FIR which was the subject matter of the petition for

quashing. The proceedings were adjourned to 15 March 2021. On 15 March 2021,

the proceedings were adjourned to 22 March 2021 with a direction that no steps

should be taken against the first respondent till 23 March 2021. Eventually, on 31

March 2021, the Single Judge recorded that:

“5. … prima facie it appears that the complaints are with

respect to business transactions between both the parties. It

further appears that there are some dues which are payable

by the present applicant and FIR came to be filed against

applicant. On 6.12.2020 by the respondent No.2 which is

subject matter of present petition. It is alleged that the

documents dated 8.9.2017 and 10.2.2018 are forged

documents. There was one complaint filed by the present

application against respondent No.2 on 9.7.2020 wherein B

Summary report was filed which is at pages 38 to 57. The

said report has culminated in a proceedings before the

learned Magistrate Court, Vadodara. Those proceedings are

also pending.” 

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The Single Judge noted that previously the appellant had filed a similar complaint

which was disposed of by the investigating officer and it was then that a new

settlement was arrived at which, formed the basis of the FIR in question. After

extracting the earlier orders dated 23 December 2020 and 9 March 2021, the Single

Judge issued the following directions in paragraph 9 of the impugned order:

“9. At this juncture when the proceedings are clearly pending

between the parties and both of them have set the criminal

machinery in action, to strike a balance between both the

parties the investigation is required to be proceeded, however

the present applicant be not arrested till next date of hearing,

S.O. to 28.4.2021.”

17. This order has given rise to the appeal before this Court.

18. We have heard Mr Anshin H Desai, Senior Counsel appearing on behalf of

the appellant, Mr Manoj Swarup, Senior Counsel for the first respondent and Mr

Kanu Agrawal, Counsel for the State of Gujarat.

19. Mr Desai, Senior Counsel appearing on behalf of the appellant submits that:

(i) An FIR was lodged on 6 December 2020 containing serious allegations

involving:

a. Interpolation of the deed of relinquishment executed by the appellant

with the consequence that whereas the interest in only one property at

Akota was relinquished, several additional properties have been

included and the nature of the interpolation would be obvious on a bare

perusal of the documents which have been annexed to the paper book;

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and

b. The deed of dissolution of partnership is purported to have been

executed on a day when the appellant was not present in India but was

traveling to Dubai;

(ii) The FIR has been registered on the basis of the above allegations

implicating the commission of offences punishable under Sections 405,

420, 465, 467, 468 and 471 of the Penal Code;

(iii) On the representation made by the first respondent, successive

Memorandum of Understandings (“MoU” or “MoUs”) were entered into

between the appellant and the first respondent; and

(iv) Pursuant to the settlement, the cheques which were issued by the first

respondent have been dishonoured and the title to the lands which were

purported to be transferred to the appellant is under a cloud and is not

marketable.

In this backdrop, it was urged that in view of the consistent position in law laid down

by this Court, the High Court was not justified in issuing a direction restraining the

arrest of the first respondent till the next date of listing without reasons .

20. On the other hand, Mr Manoj Swarup, learned Senior Counsel appearing on

behalf of the first respondent submitted that:

(i) In terms of the MoU several parcels of land have been transferred to the

appellant, details of which have been tabulated as followed in the Counter

Affidavit:

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(ii) These parcels of land have been transferred to the appellant in terms of

the MoUs executed on 12 March 2018 and 24 December 2018 in addition

to which a payment of Rs 50 lacs has been made by cheque. As a result,

out of the agreed payment of Rs 26.02 crores to be made to the appellant,

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25.52 crores have been paid or value has been received;

(iii) The appellant has received the benefit of the settlements which have been

arrived at between the parties and lands have been transferred to him;

(iv) On the earlier complaint lodged by the appellant, a ‘B’ summary was filed

by the Gotri Police Station recording that the appellant had not come forth

to record his statement and the transaction between the parties appeared

to be of a monetary nature;

(v) By August 2019, these parcels of land were transferred to the appellant in

pursuance of the settlements dated 12 March 2018 and 24 December

2018; and

(vi) The order of the High Court dated 31 March 2021 continued to remain in

operation due to the general orders operating during the second wave of

the pandemic.

21. Mr Kanu Agrawal, learned Counsel appearing on behalf of the State of

Gujarat has submitted that the impugned order of the High Court refers to the

submission of the police report by the APP which was taken on the record and that

the police report has adverted to the forgery of two valuable documents namely, the

deeds of relinquishment and dissolution of partnership.

22. After the High Court was moved in proceedings under Section 482 of the

CrPC for quashing the FIR, an order was initially passed on 23 December 2020,

recording the statement of Counsel for the first respondent that he was ready and

willing to offer a settlement. Since Counsel for the parties desired to explore the 

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possibility of a settlement, the proceedings were adjourned to 10 February 2021.

The text of the order of the High Court did not contain any direction restraining the

arrest of the first respondent. But it appears from the subsequent order dated 9

March 2021 that an oral direction was issued by the Single Judge not to arrest the

first respondent. In its order dated 9 March 2021, the High Court adverted to the

submission of Counsel for the first respondent that such a direction was previously

issued, which was not disputed by the appellant. Since the first respondent was

arrested on 8 March 2021, he was directed to be released forthwith.

23. The procedure followed by the High Court of issuing an oral direction

restraining the arrest of the first respondent was irregular. If after hearing the parties

on 23 December 2020, the High Court was of the view that an opportunity should be

granted to Counsel for the appellant and the first respondent to explore the

possibility of a settlement and, on that ground, an interim protection against arrest

ought to be granted, a specific judicial order to that effect was necessary. Oral

observations in court are in the course of a judicial discourse. The text of a written

order is what is binding and enforceable. Issuing oral directions (presumably to the

APP) restraining arrest, does not form a part of the judicial record and must be

eschewed. Absent a judicial order, the investigating officer would have no official

record emanating from the High Court on the basis of which a stay of arrest is

enforced. The administration of criminal justice is not a private matter between the

complainant and the accused but implicates wider interests of the State in

preserving law and order as well as a societal interest in the sanctity of the criminal 

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justice administration. Though in a different context, the principle was set down by

this Court in Zahira Habibulla H. Sheikh v State of Gujarat1 :

“35. This Court has often emphasized that in a criminal case

the fate of the proceedings cannot always be left entirely in

the hands of the parties, crimes being public wrongs in

breach and violation of public rights and duties, which affect

the whole community as a community and are harmful to the

society in general. The concept of fair trial entails familiar

triangulation of interests of the accused, the victim and the

society and it is the community that acts through the State

and prosecuting agencies. Interests of society are not to be

treated completely with disdain and as persona non grata.

Courts have always been considered to have an overriding

duty to maintain public confidence in the administration of

justice — often referred to as the duty to vindicate and uphold

the “majesty of the law”…..”

24. Oral directions of this nature by the High Court are liable to cause serious

misgivings. Such a procedure is open to grave abuse. Most High Courts deal with

high volumes of cases. Judicial assessments change with the roster. Absent a

written record of what has transpired in the course of a judicial proceeding, it would

set a dangerous precedent if the parties and the investigating officer were expected

to rely on unrecorded oral observations.

25. We are conscious of the fact that in civil proceedings, Counsel appearing on

behalf of the contesting parties do in certain cases mutually agree before the court

to an ad interim arrangement and agree among themselves to record the terms of

the arrangement by an exchange of correspondence between the advocates. This

can typically happen when civil disputants are attempting an amicable settlement.

Civil cases involve disputes between two private contestants. In criminal

 1 (2004) 4 SCC 158

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proceedings, apart from the accused and the complainant, there is a vital interest of

the State and of society in the prosecution of crime. The procedure which was

followed by the Single Judge must therefore be eschewed in the future. Judges

speak through their judgments and orders. The written text is capable of being

assailed. The element of judicial accountability is lost where oral regimes prevail.

This would set a dangerous precedent and is unacceptable. Judges, as much as

public officials over whose conduct they preside, are accountable for their actions.

26. The Single Judge, by the impugned order dated 31 March 2021 issued an ad

interim protection against arrest till the next date of listing. The only reasons which

are to be found in the order of the Court are that:

(i) Proceedings are pending between the parties; and

(ii) Both of them have set the criminal machinery in action.

27. Having recorded this, the Single Judge has granted a stay of arrest “to strike”

a balance between both the parties while observing that the investigation may

proceed. How this would strike a balance between both the parties is unclear from

the reasons which have been adduced. The FIR contains grave allegations

involving:

(i) The interpolation of a deed of relinquishment so as to cover a significantly

larger number of properties than the sole property which was agreed to be

relinquished; and

(ii) The fabrication of a deed of dissolution of partnership. 

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28. The offences which are alleged to be involved are punishable under the

provisions of Sections 405, 420, 465, 467, 468 and 471 of the Penal Code. These

offences are of a serious nature. The APP had evidently apprised the Single Judge

of the police report dated 31 March 2020, to which a reference has been made by

the Counsel of the State of Gujarat, as noted earlier. While an order granting a stay

of arrest in a proceeding under Section 482 of the CrPC lies within the jurisdiction of

the High Court, the grant of such relief must be after a judicious application of mind,

which must emerge from the reasons which are recorded by the Judge. The

formulation of reasons in a judicial order provides the backbone of public confidence

in the sanctity of the judicial process. While directing that the proceedings are to be

listed on a future date, the High Court is undoubtedly not expected to deliver a

detailed judgment elaborating upon reasons why a stay of arrest has been granted.

But the reasons recorded by the Court must reflect an application of mind to relevant

facts and circumstances, including:

(i) The nature and gravity of the allegations;

(ii) The seriousness of the alleged offence(s);

(iii) The position of the accused and the likelihood of their availability for

investigation; and

(iv) The basis on which a stay of arrest has been granted till the next date.

29. The High Court has not alluded to the allegations made in the FIR. This

constitutes a serious deficiency. The petition before the High Court is for quashing

the FIR under section 482. While determining whether to grant ad-interim relief in 

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such a case, involving a stay of arrest, the High Court must bear in mind the

parameters for the exercise of the jurisdiction for quashing, which has been invoked.

The interim order of a stay of arrest is in aid of the final relief which is sought in the

petition. Hence, the considerations germane to the exercise of the jurisdiction to

quash an FIR must be present to the mind while deciding whether an interim stay of

arrest is warranted. What is present to the mind must emerge from the text of the

order. In the recent judgment in Neeharika Infrastructure Pvt Ltd. v. State of

Maharashtra2

, this Court through one of us (Justice MR Shah) formulated the

principles which have to be borne in mind by the High Court, when its intervention is

sought under Section 482 of the CrPC to quash an FIR. After setting out the

principles, the Court observed:

“59. Before passing an interim order of staying further

investigation pending the quashing petition under Section 482

Cr.P.C. and/or Article 226 of the Constitution of India, the

High Court has to apply the very parameters which are

required to be considered while quashing the proceedings in

exercise of powers under Section 482 Cr.P.C. in exercise of

its inherent jurisdiction, referred to hereinabove.”

30. Expressing a caution, which requires the High Courts to be circumspect in

interfering with investigation, the Court noted:

“60. In a given case, there may be allegations of abuse of

process of law by converting a civil dispute into a criminal

dispute, only with a view to pressurize the accused. Similarly,

in a given case the complaint itself on the face of it can be

said to be barred by law. The allegations in the FIR/complaint

may not at all disclose the commission of a cognizable

offence. In such cases and in exceptional cases with

circumspection, the High Court may stay the further

investigation. However, at the same time, there may be

genuine complaints/FIRs and the police/investigating agency

 2 2021 SCC OnLine SC 315

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has a statutory obligation/right/duty to enquire into the

cognizable offences. Therefore, a balance has to be struck

between the rights of the genuine complainants and the FIRs

disclosing commission of a cognizable offence and the

statutory obligation/duty of the investigating agency to

investigate into the cognizable offences on the one hand and

those innocent persons against whom the criminal

proceedings are initiated which may be in a given case abuse

of process of law and the process. However, if the facts are

hazy and the investigation has just begun, the High Court

would be circumspect in exercising such powers and the High

Court must permit the investigating agency to proceed further

with the investigation in exercise of its statutory duty under

the provisions of the Code. Even in such a case the High

Court has to give/assign brief reasons why at this stage the

further investigation is required to be stayed. The High Court

must appreciate that speedy investigation is the requirement

in the criminal administration of justice.”

This Court observed that while there may be some cases where the initiation of the

criminal proceedings may be an abuse of law, it is in cases of an exceptional nature,

where it is found that absence of interference would result in a miscarriage of justice,

that the Court may exercise its jurisdiction under Section 482 of the CrPC and Article

226 of the Constitution. This Court has disapproved of interim orders of High Courts

which grant stay of arrest or which direct that no coercive steps must be taken

against the accused, without assigning reasons. The impugned order of the High

Court cannot be sustained on the touchstone of the principles which have been

consistently laid down by this Court and reiterated in the above decision.

31. In Parbatbhai Aahir alias Parbatbhai Bhimsinhbhai Karmur v. State of

Gujarat3

, this Court formulated the governing principles to guide the exercise of

powers under Section 482 of the CrPC. Speaking for the three judge Bench, one of

 3 (2017) 9 SCC 641

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us (Dr DY Chandrachud) observed:

“(1) Section 482 CrPC preserves the inherent powers of the

High Court to prevent an abuse of the process of any court or

to secure the ends of justice. The provision does not confer

new powers. It only recognise and preserves powers which

inhere in the High Court.

(2) The invocation of the jurisdiction of the High Court to

quash a first information report or a criminal proceeding on

the ground that a settlement has been arrived at between the

offender and the victim is not het same as the invocation of

the jurisdiction for the purpose of compounding an offence.

While compounding an offence, the power of the court is

governed by the provisions of Section 320 CrPC. The power

to quash under Section 482 is attracted even if the offence is

non-compoundable.

(3) In forming an opinion whether a criminal proceeding

or complain should be quashed in exercise of its jurisdiction

under Section 482, the High Court must evaluate whether the

ends of justice would justify the exercise of the inherent

power.

(4) While the inherent power of the High Court has a wide

ambit and plenitude it has to be exercised (i) to secure the

ends of justice, or (ii) to prevent an abuse of the process of

any court.

(5) The decision as to whether a complaint or first information

report should be quashed on the ground that the offender and

victim have settled the dispute, revolves ultimately on the

facts and circumstances of each case and no exhaustive

elaboration of principles can be formulated.

(6) In the exercise of the power under Section 482 and

while dealing with a plea that the dispute has been settled,

the High Court must have due regard to the nature and

gravity of the offence. Heinous and serious offences involving

mental depravity or offences such as murder, rape and deceit

cannot appropriately be quashed though the victim or the

family of the victim have settled the dispute. Such offences

are, truly speaking, not private in nature but have a serious

impact upon society. The decision to continue with the trial in

such cases is founded on the overriding element of public

interest in punishing persons for serious offences.

(7) As distinguished from serious offences, there may be

criminal cases which have an overwhelming or predominant

element of a civil dispute. They stand on a distinct footing

insofar as the exercise of the inherent power to quash is

concerned. 

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(8) Criminal cases involving offences which arise from

commercial, financial, mercantile, partnership or similar

transactions with an essentially civil flavour may in

appropriate situations fall for quashing where parties have

settled the dispute.

(9) In such a case, the High Court may quash the

criminal proceeding if in view of the compromise between the

disputants, the possibility of a conviction is remote and the

continuation of a criminal proceeding would cause oppression

and prejudice; and

(10) There is yet an exception to the principle set out in

Propositions (8) and (9) above. Economic offences involving

the financial and economic well-being of the State have

implications which lie beyond the domain of a mere dispute

between private disputants. The High Court would be justified

in declining to quash where the offender is involved in an

activity akin to a financial or economic fraud or

misdemeanour. The consequences of the act complained of

upon the financial or economic system will weigh in the

balance.”

32. We are conscious of the fact that in the present case the petition for quashing

is still pending before the High Court. At the same time, the High Court was moved

for the grant of ad interim relief in a petition for quashing the FIR. The considerations

which ought to weigh in whether or not to exercise the jurisdiction to quash must be

present in the mind of the Judge while determining whether an interim order should

be made. That these considerations have been borne in mind can only be evident

from the reasons, however brief, which have been indicated in the order of the High

Court. This does not emerge from the impugned order of the High Court. 

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33. We accordingly allow the appeal and set aside the impugned order of the

High Court dated 31 March 2021. The High Court, it is clarified would be at liberty to

proceed to deal with the petition under Section 482 of the CrPC which is pending

consideration. The appeal is disposed of in the above terms.

34. Pending application(s), if any, stand disposed of.

…………...…...….......………………........J.

 [Dr Dhananjaya Y Chandrachud]

…..…..…....…........……………….…........J.

 [MR Shah]

New Delhi;

August 31, 2021.