The Supreme Court reaffirmed that a contractual dispute or breach of contract itself should not prompt the commencement of criminal proceedings.
A prayer is made to the police for recovery of money from the appellants. The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money.”, the Bench of Justices Sanjiv Khanna and Dipankar Datta said.
The complainant’s sole complaint pertains to the appellant’s failure to settle the outstanding amount despite repeated reminders. An FIR was lodged against the appellant accused under Sections 405 and 506 of the Indian Penal Code. Although the High Court declined to dismiss the criminal proceedings, it provided protection against arrest for the appellant accused.
Challenging the High Court’s refusal to quash the criminal proceedings, the accused appealed to the Supreme Court. Upon initial examination of the FIR and the High Court’s order, the Supreme Court noted that the dispute between the parties stemmed from a contractual breach related to the sale of goods.
“For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later. In this case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods.”, the Supreme Court said.
Moreover, the court observed that the accused is not implicated in any criminal case, as the essential elements to charge the offense are neither explicitly stated nor can be deduced from the allegations put forth by the complainant.
The Supreme Court expressed dissatisfaction with the High Court’s behavior, pointing out that it overlooked the consistent rulings of the Supreme Court emphasizing that the High Court should utilize its authority under Section 482 of the Criminal Procedure Code.
This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, non-payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC. Repeated judgments of this Court, however, are somehow overlooked, and are not being applied and enforced. We will be referring to these judgments.”, the Supreme Court said.
The Supreme Court justified that an individual should not endure the torment of prolonged litigation when no criminal offense is evident. Therefore, the High Court should not hesitate to utilize its authority under Section 482 of the Cr.P.C. to dismiss criminal proceedings arising from a breach of contract. Consequently, acknowledging that “initiating the criminal process for ulterior motives is legally flawed and constitutes an abuse of the legal process,” the Supreme Court annulled the High Court’s contested order and dismissed the ongoing criminal case against the appellant.
Case Details: LALIT CHATURVEDI & ORS. VERSUS THE STATE OF UTTAR PRADESH & ANR.,
Criminal Appeal No. 000660 / 2024
