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Quashing Criminal Proceedings Merely Because of the Presence of Civil Remedies Is Insufficient: Supreme Court

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The Supreme court in a judgement on 10 March 2021 observed that simply the presence of civil remedies did not become a ground to quash criminal proceedings.

Facts of the Case

In this case, the owner of the subjected property was the 2nd Respondent who had mortgaged the property with the State Bank of Patiala and was legally liable to pay the amount of Rs.18 Crores to the bank. To defraud and cheat with the appellant/complainant, the 2nd Respondent conspired with a broker Ashok Kumar. To further misappropriate the amount, the Respondent deliberately breached the trust of the Appellant and falsely stated that he would be liable to pay the sum of Rs.25.50 Crores to the Appellant if the deal was not carried forward by him. Keeping everything in mind, the agreement to sell took place between the Respondent and the 1st Appellant and a compulsory requirement needed to be fulfilled by the 2nd respondent as per the clause of the agreement. Even though the requirements were not fulfilled by the second Respondent, the first Appellant paid the amount of 5.40 Crore by cheque on demand and the 2nd Respondent handed over the post-dated cheque of Rs.25.50 Crore as a security which was later found to be invalid.

To cheat 1st Appellant which was the intention of the Respondent from the very inception, the Respondent illegally terminated the agreement to sell and when the agreement to sell was executed after every trial of the Appellant to settle the matter, nothing materialized. As a result, a complaint was filed under Section 200/190 Cr. P. C. for the offence committed by the 2nd Respondent. The Delhi Court directed the police to file FIR against the 2nd Respondent and Broker Ashok Kumar after which investigation took place and a charge-sheet was filed. Many misdeeds of the 2nd Respondent later came to light.

The Order was challenged by 2nd Respondent in the High court, where the judge, even after noticing the facts and the misdeeds of the Respondent had only taken note of the agreement to sell and its termination and held it as a simple case of breach of contract, which as a civil dispute could not be converted in a criminal case and hence, quashed all the criminal proceedings. 

Pleadings before the Court

It was submitted by the learned senior Counsel on behalf of the appellant that the charge-sheet disclosed the offence of the 2nd Respondent under Sections 406,420 and 32 of IPC and was also placed on the record according to the Order of the High Court, still, the learned judge of High Court made no reference of the same in the impugned judgement. It was further submitted that the power of the High Court under Section 482 Cr.P.C. is an exceptional power and the Court should take greater care in scrutinizing the FIR/Charge Sheet while deciding the rarest of rare case. It was also contended that the High Court had committed a major error in ignoring the material facts on record which made the Order very susceptible.

On the other hand, the learned Counsel on behalf of the Respondent submitted that an agreement to sell disclosed all the facts about the property and the terms and conditions. The agreement to sell was terminated because the Appellant refused to carry out its duty under the terms and conditions of the agreement to sell, empowering the 2nd Respondent to forfeit the earnest money deposited under the agreement, and it was solely a civil dispute. 

Court’s Observation

The bench of the Supreme Court comprising Justices Indu Malhotra and Ajay Rastogi observed that plainly because a remedy was provided for breach of contract or arbitral proceedings initiated at the request of the complainant did not entitle the Court to conclude that civil remedy was the only remedy available and that the initiation of criminal proceedings, in any form, was an abuse of the Court’s process for exercising inherent powers of the High Court. 

It was further observed that it was a well-established legal principle that to exercise powers under Section 482 Cr.P.C., the case in its entirety must be investigated based on the allegations made in the  complaint/FIR/charge-sheet, and the High Court was not obligated to investigate or review the matter at that time. Without any critical scrutiny, whatever appeared on the face of the complaint/FIR/charge-sheet should be taken into account.

Court’s Judgment

The Supreme Court set aside the judgment of the High Court and allowed the appeal filed by the Appellant/complainant. It also made it clear that the observations made by the Court, in this case, were only to dispose of the case at hand and the trial Court could proceed expeditiously without being influenced by the judgement made in this case.

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