Sanchayita Lahkar

The High Court of Jammu & Kashmir and Ladakh Single Bench of Justice Sanjay Dhar quashed the First Information Report registered under Sections 420, 406, and 109 of the Indian Penal Code. The Court held that the dispute was of a civil nature and did not disclose the essential ingredients of criminal offences. The FIR, filed in connection with an alleged investment fraud, was found to be an attempt to recover money rather than a case involving dishonest intention at the inception. The petition was accordingly allowed and the FIR was quashed.

The petitioners approached the High Court under Section 482 of the Code of Criminal Procedure, challenging FIR No. 431/2023 registered at Police Station Kathua. The FIR was filed pursuant to an order dated 22.11.2022 passed by the District Mobile Magistrate Kathua, on an application moved by respondent no. 4 under Section 156(3) Cr.P.C. The complainant, respondent no. 4, and petitioner no. 1 were both serving members of the Police Department.

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The complaint alleged that in 2019, petitioner no. 1, along with other petitioners, approached the complainant at his village with an investment proposal offering 18% annual returns. Believing in the scheme, the complainant claimed to have transferred a total of ₹96,49,980 to an account in the name of the petitioners from 2019 to November 2022. Of this, an amount of ₹37,50,700 was allegedly returned, leaving a balance of ₹58,99,280, which the complainant claimed had been misappropriated.

The complainant submitted that despite a direction from the Magistrate, the police failed to promptly register the FIR, leading him to file a contempt petition before the same court. It was during the pendency of that petition that the impugned FIR was finally registered.

In response, the petitioners asserted that the FIR did not disclose any criminal offence and that the matter was purely civil. They contended that the partial repayment indicated the absence of dishonest intention from the beginning, which is essential to attract charges under Sections 420 and 406 IPC. They further submitted that a compromise was reached during the pendency of the contempt proceedings, wherein respondent no. 4 agreed not to pursue any criminal or civil proceedings and acknowledged that no claims were pending.

The petitioners produced documents including a notarized compromise deed dated 29.01.2023 and a statement by respondent no. 4 recorded during police verification, wherein he stated that he did not intend to pursue any legal action. Respondent no. 4, however, claimed that his signatures had been obtained on blank papers and that he had challenged the validity of the compromise agreement by filing a civil suit before the Munsiff Court, Kathua. An interim order had been passed in that suit on 27.04.2023, keeping the compromise deed in abeyance.

The State filed a status report reiterating the allegations in the FIR and attributing the lack of investigation to a stay granted by the Court. Respondent no. 4 also filed a reply maintaining that the FIR disclosed fraudulent and deceitful conduct from the inception of the transaction.

The petitioners urged that the grievance was essentially about non-payment of an investment amount, which did not constitute a criminal offence. They submitted that the complaint was a tactic to recover money and not a genuine criminal grievance.

The Court recorded the legal framework governing quashing of criminal proceedings under Section 482 Cr.P.C., stating:

“The legal position is well settled that when the prosecution at initial stage is asked to be quashed, the test to be applied by the court is as to whether the uncontroverted allegations prima facie establish the offence.”

Referring to the judgment in Madhavrao Jiwaji Rao Scindia v. Sambhajirao Chandrojirao Angre, the Court held that criminal proceedings can be quashed if they are found to be an abuse of process or if the FIR fails to disclose any offence.

Discussing the elements of the offences alleged, the Court stated:

“To establish an offence under section 420 IPC, it must be shown that there was a fraudulent and dishonest intention at the time of commission of the offence and the person practising deceit had obtained property by fraudulent inducement.”

The Bench noted the requirement of dishonest intention at the inception for Section 406 IPC as well:

“From a perusal of the aforesaid provision, it is clear that it entails misappropriation or conversion of another’s property for one’s own use with a dishonest intention.”

On the nature of the dispute, the Court cited M/S Indian Oil Corporation vs. M/S NEPC India Ltd.:“The mere fact that complaint relates to a commercial transaction or breach of contract, for which a civil remedy is available, is not by itself a ground to quash the criminal proceedings.”

However, applying this test to the facts, the Court found no evidence of dishonest inducement:“According to the complainant, petitioner No. 1 made payment of Rs. 37,50,700/- whereafter, the petitioners defaulted. This clearly shows that the petitioners at the inception were having the intention of honouring their commitments.”

Referring to precedents, the Court stated: “The Supreme Court in the case of Anil Mahajan v. Bhor Industries Ltd. has held that from a mere denial of a person to keep up promise subsequently, a culpable intention right at the beginning cannot be presumed.”

The Court also took note of the compromise deed and respondent no. 4’s earlier statement to the police: “The material on record goes on to show that the parties had tried to settle the matter amicably without resorting to criminal prosecution.”

Although respondent no. 4 contested the validity of the compromise, the Court noted:

“The fact that the respondent No. 4 has challenged the compromise deed in a civil proceeding goes on to support the contention of the petitioners that the transaction between the parties was purely of civil nature.”

Addressing the apparent motive behind the FIR, the Court stated: “It appears to be more a case of recovery of money than a case of cheating or criminal breach of trust.”

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The Court concluded: “Such an exercise is nothing but an abuse of process of law which must be discouraged in its entirety.”

The Court issued the following direction:

“In view of the above discussion, it is clear that the present case is a fit one in which this Court should exercise its power under section 482 Cr.P.C. to prevent the abuse of process of law and to secure the ends of justice.”

Accordingly, the Court held: “The FIR impugned bearing No. 431/2023 of Police Station Kathua is quashed.”

Advocates Representing the Parties

For the Petitioners: Mr. Mayank Gupta, Advocate
For the Respondents: Mr. Suneel Malhotra, Government Advocate; Mr. Jagmohan Singh, Advocate

Case Title: Susheel Kumar Rana and Others v. UT of J&K and Others
Case Number: CRM(M) No. 905/2023
Bench: Justice Sanjay Dhar

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