* Author
[2024] 3 S.C.R. 740 : 2024 INSC 196
Naresh Kumar & Anr.
v.
The State of Karnataka & Anr.
(Criminal Appeal No. 1510 of 2024)
12 March 2024
[Sudhanshu Dhulia* and Prasanna B. Varale, JJ.]
Issue for Consideration
Refusal by High Court to quash criminal proceedings against
Appellants/Accused arising out of a civil transaction between
Appellants and Respondent No.2, if justified.
Headnotes
Code of Criminal Procedure, 1973 – s.482 – Powers of the
High Court under – Quashing of FIR filed by Respondent
No.2 against Appellants – Appellants, employees of a
bicycle manufacturing company engaged Respondent No.2
for assembling, transporting and delivering bicycles –
Respondent No.2 aggrieved by the fact of payment not being
commensurate with the service rendered - FIR filed under
Sections 406, 420, 506, Indian Penal Code – Subsequently,
settlement arrived at between the parties – Appellants paid
an additional amount of INR 26,00,000/- to Respondent No.2
as full and final settlement, duly accepted by Respondent
No.2 – Payment and receipt of settlement amount not
disputed by parties – Chargesheet filed against Appellants
– Appellants sought quashing of the FIR and proceedings
arising therefrom under Section 482, CrPC on the ground of
the dispute being civil in nature – Respondent No.2 objected
to settlement on the ground of it being vitiated by coercion
– High Court’s refusal to exercise powers under Section
482, CrPC on the ground of a prima facie case being made
out – Challenged:
Held: Section 482 empowers High Court to prevent abuse of
process and secure ends of justice – Though the power under
Section 482 should be exercised sparingly, the High Court
must not hesitate in quashing criminal proceedings which are
essentially of a civil nature – Judgement in Paramjeet Batra
[2024] 3 S.C.R. 741
Naresh Kumar & Anr. v. State of Karnataka
v. State of Uttarakhand (2013) 11 SCC 673 relied upon –
Reference to observations in Randheer Singh v. State of U.P.
(2021) 14 SCC 626 regarding misuse of criminal proceedings as
a weapon of harassment and also Usha Chakraborty & Anr.
v. State of West Bengal & Anr. 2023 SCC OnLine SC 90 for
exercise of the inherent powers of the High Court under Section
482 to quash civil disputes cloaked in criminal offence – High
Court erred in holding that a prima facie case was made out based
on the ground that Appellants’ intention to cheat Respondent
No.2 from the beginning was evident from the fact that the
Appellants had cumulatively paid Respondent No.2 an amount
much higher than what the latter was entitled to receive for the
services rendered by him – Additional amount paid in light of the
settlement, cannot be presumed as an act of cheating – Nature
of dispute in present case is civil and allegation of a coerced
settlement is unlikely – No FIR or Complaint by Respondent
No.2 alleging coercion, amount also duly accepted by him –
Mere breach of contract would not attract criminal prosecution in
every case, Sarabjit Kaur v. State of Punjab and Anr. (2023)
5 SCC 360 relied upon – Every breach of contract would not
amount to cheating and it must be proved that fraudulent or
dishonest intention to cheat existed while making the promise,
as held in Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8
SCC 293 – Present dispute was not only civil in nature but also
stood settled subsequently – In the instant case, no criminal
element present, only an abuse of process – Impugned Order
of the High Court set aside – FIR and criminal proceedings
quashed – Appeal allowed. [Para 4-8]
Case Law Cited
Paramjeet Batra v. State of Uttarakhand (2013) 11 SCC
673; Sarabjit Kaur v. State of Punjab and Anr. (2023)
5 SCC 360; Vesa Holdings (P) Ltd. v. State of Kerala
[2015] 4 SCR 27 : (2015) 8 SCC 293 - relied on.
Randheer Singh v. State of U.P. (2021) 14 SCC 626,
Usha Chakraborty & Anr. v. State of West Bengal & Anr.
2023 SCC OnLine SC 90 – referred to.
List of Acts
Code of Criminal Procedure, 1973; Penal Code, 1860.
742 [2024] 3 S.C.R.
Digital Supreme Court Reports
List of Keywords
Quashing of FIR; Inherent powers of the High Court; Criminal
case arising from civil dispute; Inherent powers; Criminal breach
of trust; Cheating; Settlement; Compromise.
Case Arising From
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.1510
of 2024
From the Judgment and Order dated 02.12.2020 of the High Court
of Karnataka at Bengaluru in CRLP No.8003 of 2019
Appearances for Parties
Aman Lekhi, Sr. Adv., Abhishek Gupta, Chaitanya Mahajan, Ms. Payal
Kakra, Ritwiz Rishabh, Ujjwal Sinha, Aniket Seth, Ms. Snehilsonam,
Snehil Sonam, Kunal K., Ms. Ishika Jain, Advs. for the Appellants.
Anand Sanjay M Nuli, Sr. Adv., D. L. Chidananda, Ravindera Kumar
Verma, Dharm Singh, Shiva Swaroop, M/s. Nuli & Nuli, Advs. for
the Respondents.
Judgment / Order of the Supreme Court
Judgment
Sudhanshu Dhulia, J.
Leave granted.
2. The appellants before this Court have challenged the order dated
02.12.2020 of the Karnataka High Court by which their petition
under Section 482 of Criminal Procedure Code for quashing the
FIR has been dismissed. The case of the appellants before the
High Court of Karnataka was that the FIR which was instituted by
the complainant i.e. respondent no. 2 is primarily a civil dispute and
has no criminal element and the entire criminal proceedings initiated
against the appellants is nothing but an abuse of the process and
consequently, they had invoked the extraordinary powers of the High
Court under Section 482 of the Criminal Procedure Code. The two
appellants before this Court are the Assistant Manager (Marketing)
and the Manging Director of a company, which is a manufacturer
of bicycles. Respondent no.2 was given a contract, as it has been
stated before this Court, for the assembly of bicycles, their transport
[2024] 3 S.C.R. 743
Naresh Kumar & Anr. v. State of Karnataka
and their delivery, at the rate of Rs.122/- for each bicycle, and
since they had assembled 83,267 bicycles, they raised invoices
amounting to Rs. 1,01,58,574/- and were liable to be paid the same.
However, respondent no.2 contends that instead, a payment of only
Rs.35,37,390/- was given by the appellants. Hence, it was a case
of criminal breach of trust and cheating and the First Information
Report No. 113 of 2017 against the appellant no. 1 was filed on
24.05.2017 under Sections 406, 420 and 506 of the Indian Penal
Code at P.S. Doddaballapura, Bangalore Rural District. Subsequently,
a Chargesheet dated 30.05.2019, was filed in the court where both
the appellants were made an accused.
3. Meanwhile, an important fact occurred, of which no importance
seems to have been given by the High Court. Subsequent to the
filing of FIR there is an admitted settlement between the appellants
and respondent No. 2 by a Compromise Deed dated 27.12.2017
by which as a full and final settlement between the two parties, an
additional amount of Rs. 26 lakhs were to be paid by the appellant,
which has been duly given and accepted. This amount was deposited
in the account of respondent no. 2 on 29.12.2017. This was done by
the appellants in order to give a quietus to the whole situation and
to bring peace, according to the appellants. Therefore, as of now, a
total amount of Rs.62 lakhs as against Rs. 1,01,58,574/- which was
claimed by the complainant has been admittedly paid. The case of
the respondent no. 2 against the settlement dated 27.12.2017 is that
the respondent no. 2 was coerced in entering into this settlement and
this is not a settlement arrived at by the free will of the complainant
and therefore the prosecution of the appellants is necessary under
the criminal law. The High Court has refused to accept the contention
of the appellants that the dispute between the parties in any case
is civil in nature. The High Court was of the opinion that since the
appellants had claimed that the complainant assembled only 28,995
bicycles, which would make them liable to pay only an amount of
Rs.35 lakhs, but instead the appellants had paid an amount of Rs.62
lakhs which shows that the actual number of bicycles which were
assembled by the complainant was much more than 28,995 bicycles,
as claimed by the appellants and therefore, the appellants had an
intention to cheat the complainant right from the beginning. Thus,
it was held by the High Court that prima facie a case of cheating is
made out against the appellants.
744 [2024] 3 S.C.R.
Digital Supreme Court Reports
4. Having heard the learned counsel for both the parties, we are of
the considered view that the findings of the High Court on this
aspect are not correct. We do not agree with the findings arrived at
by the High Court for two reasons. Firstly, the dispute between the
parties is primarily, civil in nature. It is after all a question of how
many bicycles the complainant had assembled and the dispute
between the parties is only regarding the figure of bicycles and
consequently of the amount liable to be paid. This is a civil dispute.
The complainant has not been able to establish that the intention
to cheat the complainant was there with the appellants right from
the beginning. Merely because the appellants admit that only
28,995 bicycles were assembled, but they have admittedly paid an
amount of Rs. 62,01,746/- to the complainant, which is of a much
higher number of bicycles, would not prove that the intention of the
appellants right from the beginning was to cheat. This amount i.e. the
additional amount of Rs. 26 lacs have been paid by the appellants
pursuant to a settlement. The reasons and the logic for arriving at
a settlement are quite different. In this case it seems, it is primarily
to bring a quietus to the dispute and to have peace and to avoid
litigation. The mere fact that the appellants have paid an additional
amount pursuant to the settlement, cannot be presumed as an act
of cheating. Moreover, the complainant does not deny the fact that a
settlement was reached between the parties though he says he was
coerced into the settlement. He does not dispute that the additional
amount paid by the appellants under the terms of the compromise
deed, which is an amount of Rs.25,75,442 (after deducting TDS) was
received by the complainant, as this amount has been received in a
bank transaction through NEFT on 29.12.2017. The allegation that
the complainant was coerced into a settlement, looks unlikely for
two reasons. First, there is no FIR or Complaint that the complainant
was coerced into this settlement. Secondly, this amount was duly
accepted by the complainant.
5. Under these circumstances, we are of the considered view that this
is a case where the inherent powers should have been exercised by
the High Court under Section 482 of the Criminal Procedure Code
as the powers are there to stop the abuse of the process and to
secure the ends of justice.
6. In the case of Paramjeet Batra v. State of Uttarakhand (2013) 11
SCC 673, this Court recognized that although the inherent powers of
[2024] 3 S.C.R. 745
Naresh Kumar & Anr. v. State of Karnataka
a High Court under Section 482 of the Code of Criminal Procedure
should be exercised sparingly, yet the High Court must not hesitate
in quashing such criminal proceedings which are essentially of a
civil nature. This is what was held:
“12. While exercising its jurisdiction under Section 482
of the Code the High Court has to be cautious. This
power is to be used sparingly and only for the purpose of
preventing abuse of the process of any court or otherwise
to secure ends of justice. Whether a complaint discloses
a criminal offence or not depends upon the nature of facts
alleged therein. Whether essential ingredients of criminal
offence are present or not has to be judged by the High
Court. A complaint disclosing civil transactions may
also have a criminal texture. But the High Court must
see whether a dispute which is essentially of a civil
nature is given a cloak of criminal offence. In such a
situation, if a civil remedy is available and is, in fact,
adopted as has happened in this case, the High Court
should not hesitate to quash the criminal proceedings
to prevent abuse of process of the court.”
(emphasis supplied)
Relying upon the decision in Paramjeet Batra (supra), this Court in
Randheer Singh v. State of U.P. (2021) 14 SCC 626, observed that
criminal proceedings cannot be taken recourse to as a weapon of
harassment. In Usha Chakraborty & Anr. v. State of West Bengal
& Anr. 2023 SCC OnLine SC 90, relying upon Paramjeet Batra
(supra) it was again held that where a dispute which is essentially
of a civil nature, is given a cloak of a criminal offence, then such
disputes can be quashed, by exercising the inherent powers under
Section 482 of the Code of Criminal Procedure.
7. Essentially, the present dispute between the parties relates to a
breach of contract. A mere breach of contract, by one of the parties,
would not attract prosecution for criminal offence in every case, as
held by this Court in Sarabjit Kaur v. State of Punjab and Anr.
(2023) 5 SCC 360. Similarly, dealing with the distinction between the
offence of cheating and a mere breach of contractual obligations,
this Court, in Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8
SCC 293, has held that every breach of contract would not give rise
746 [2024] 3 S.C.R.
Digital Supreme Court Reports
to the offence of cheating, and it is required to be shown that the
accused had fraudulent or dishonest intention at the time of making
the promise.
8. In the case at hand, the dispute between the parties was not only
essentially of a civil nature but in this case the dispute itself stood
settled later as we have already discussed above. We see no criminal
element here and consequently the case here is nothing but an abuse
of the process. We therefore allow the appeal and set aside the order
of the High Court dated 02.12.2020. The criminal proceedings arising
out of FIR No.113 of 2017 will hereby stand quashed.
Headnotes prepared by: Result of the case:
Niti Richhariya, Hony. Associate Editor Appeal allowed.
(Verified by: Kanu Agrawal, Adv.)
