The Supreme Court in the case Lalit Chaturvedi And Ors. versus The State Of Uttar Pradesh And Anr., observed and has reiterated that the contractual dispute or breach of contract per se should not lead to the initiation of a criminal proceeding.
The bench comprising of Justice Sanjiv Khanna and Justice Dipankar Datta in the case observed that the prayer is made to the police for recovery of money from the appellants. Thus, 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.
Therefore, the respondent-complainant’s only grievance is regarding the failure of the appellant to pay the outstanding amount despite repeated reminders made by the complainant.
In the present case, the FIR was registered section 405 and section 506 of the Indian Penal Code against the appellant accused.
The High Court in the case observed and has quashed the criminal proceedings against the appellant accused but granted protection from the arrest.
Therefore, against the High Court’s decision to not quash the criminal proceedings the accused preferred plea before the Supreme Court.
The Supreme Court after perusing the contents of the F.I.R. and the impugned order of the High Court in the case observed and has stated that the dispute between the parties arose out of a breach of a contract, where the sale of goods is involved.
The Supreme Court in the case stated that 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 the said case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods.
The court in the case also noted that no criminal case is made out against the accused, as the ingredients to allege the offence are neither stated nor can be inferred from the averments made by the respondent-complainant.
The repeated Judgments of the Supreme Court Are Overlooked By High Courts
The Supreme Court in the case observed and has expressed displeasure with the conduct of the High Court in not applying the repeated judgments of the Supreme Court which held that the High Court must exercise power under Section 482 of the Code of Criminal Procedure, CrPC to quash the criminal proceedings which arise out of the violation of the contractual terms or the breach of contract.
Further, the Supreme Court stated that 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 Section 420 and Section 406 of the Indian Penal Code, IPC.
The Supreme Court in the case also reasoned that a person should not undergo harassment of litigation for a number of years when no criminal offence is made out, therefore the High Court should not hesitate to exercise its jurisdiction under Section 482 of the CrPC. to quash such criminal proceedings which are initiated out of a breach of contract.
The court noted that the initiation of the criminal process for oblique purposes, is bad in law and amounts to abuse of the process of law.
Accordingly, the court set aside the impugned order of the High Court and has quashed the pending criminal case against the appellant.