A Supreme Court bench, consisting of Chief Justice of India (CJI) Sanjiv Khanna and Justice Sanjay Kumar, was recently hearing a petition to dismiss charges of fraud and breach of trust. “This is another case where a civil dispute has been turned into a criminal one. Happening rampant(ly) in many States and especially your State (State of Uttar Pradesh). Please know it’s a wrong practice and should not happen,” CJI Khanna said.
The Court considered an appeal from the accused, following the Allahabad High Court’s denial of their motion to dismiss criminal charges. The charges stemmed from allegations that the accused fraudulently induced an individual to relinquish funds under false pretences related to a purported sale deed. Consequently, the accused faced charges, including fraud, breach of trust, outraging a woman’s modesty, and criminal intimidation. The defendants asserted that their implication was erroneous.
Nevertheless, the High Court, on May 9 this year, determined that sufficient evidence existed to proceed with the charges and refused to dismiss them. Consequently, the defendants sought redress from the Supreme Court. The defendants argued before the Court that the matter constituted a straightforward breach of contract, devoid of any fraudulent activity. On November 11, the Supreme Court issued a notice, temporarily suspending the criminal proceedings in the lower court.
This is not the first time that the Supreme Court has raised this issue. On November 28, the Court came down heavily on the Uttar Pradesh police for routinely harassing people involved in civil disputes by converting them into criminal cases. The Court warned the police that if the practice did not stop, it would pass orders that the UP Director General of Police (DGP) would remember “for the rest of his life”. A bench of Justices Surya Kant and Ujjal Bhuyan were hearing an anticipatory bail plea filed by a person against whom a dozen cases related to various land disputes had been filed by the police. Appearing for the Uttar Pradesh government, Senior Advocate Rana Mukherjee argued that the accused had not joined the investigations and was instead seeking protection from arrest.
The Court remarked that the accused was probably afraid that the police would slap another case against him if he appeared. “He must not be appearing because he knows that you will register another false case and arrest him there.
You can convey your DGP the moment he (Dubey) is touched, we will pass such a drastic order he will remember his whole life. Every time you come with a new FIR against him! How many cases can prosecution uphold? It’s very easy to allege land-grabbing. Someone who purchased by a registered sale deed, you say land grabber! Is it a civil dispute or criminal dispute?” the Court thundered.
“UP Police are entering into a dangerous area. You register criminal cases in purely civil disputes. Tell your DGP that if this practice does not stop immediately, we will pass such drastic orders, he will remember for his whole life,” the bench said.
When Mukherjee said that if the police did not abide by the Court’s instructions, he would return the case to the government, the Court said that the remarks were aimed at the police’s conduct and told Mukherjee that he should use his office to drive home the Court’s message. “Let him join the investigation but don’t arrest him. And if you think that in a particular case, arrest is required, then come and tell us that these are the reasons. But if the police officers are doing, you take it from us, we will not only suspend them, they will lose something more, the Court said. The police was also instructed to send summons to the accused on his mobile phone, specifying the date, time and place where he should appear before the investigating officer.
Previously, the Supreme Court had also reiterated that criminal cases having overwhelmingly and predominantly civil character should be quashed when the parties have resolved their entire disputes among themselves. The Court quashed the criminal proceedings against two women arraigned as wives of the accused involving allegations of using forged and fabricated documents to secure credit facilities amounting to crores of rupees. The Court noted that after the receipt of the amount under One Time Settlement (OTS), the Indian Bank had also decided to close the loan account.
A bench of Justices BR Gavai and KV Viswanathan observed: “It could thus be seen that this Court reiterates the position that the criminal cases having overwhelmingly and predominantly civil character, particularly those arising out of commercial transactions or arising out of matrimonial relationship or family disputes should be quashed when the parties have resolved their entire disputes among themselves.”
The prosecution alleged that a company owned by the accused had failed to repay credit facilities granted by the Bank. After the loans were declared Non-Performing Assets, the Bank pursued legal recovery through the Debts Recovery Tribunal. During the proceedings, it was noticed that the title documents submitted for mortgage were forged. As a result, the Central Bureau of Investigation’s Economic Offence Wing had registered an FIR against the accused under Sections 120-B read with 420, 409, 467, 468 and 471 of the IPC along with charges under the Prevention of Corruption Act. However, the Bank accepted a settlement offer of Rs 3.8 crores from the accused in 2015, following which it issued a “No Dues Certificate”, closing the loan account. In spite of this, the criminal proceedings were not quashed. Therefore, the accused sought quashing of the charge sheet under Section 482 of the CrPC.
The Telangana High Court had also refused to exercise its jurisdiction under Section 482 of the CrPC to quash the proceedings noting that a serious offence under Section 307 of the IPC was involved.
The Supreme Court referred to its decision in BS Joshi vs State of Haryana (2003), wherein the apex court found that in view of a compromise arrived at between the company and the Bank, it was a fit case where a technicality should not be allowed to stand in the way of quashing of criminal proceedings. The Court found that in view of the settlement arrived at between the parties, the continuance of the same would be an exercise in futility. The Court observed: “Undisputedly, the FIR and the charge sheet are pertaining to the dispute concerning the loan transaction availed by the accused persons on one hand and the Bank on the other hand. Admittedly, the Bank and the accused persons have settled the matter… The dispute involved predominantly had overtures of a civil dispute.” The Court pointed out that there were certain offences “overwhelmingly and predominantly” bearing a civil flavour having arisen out of civil, mercantile, commercial, financial, partnership, where the wrong was basically to the victim, and the offender and the victim having settled all disputes between them amicably, the High Court would be “justified in quashing the criminal proceedings, even if the offences have not been made compoundable.”
In November, 2021, a bench of Justices Abdul S Nazeer and Krishna Murari also endorsed the Supreme Court’s long-standing position that entities or persons which employ the criminal law unnecessarily in what is entirely a civil dispute should be held accountable. The observations came in a judgment, authored by Justice Murari, dealing with a case in which a builder company sold flats in excess of the number originally decided as per an agreement with the owner of the property. The latter filed a criminal case of cheating against the builder. The bench said the case was not of cheating, but simply a breach of contract by the builder. The Court said: “While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings”.
The apex court said High Courts should wisely use their power to quash criminal cases under Section 482 of the CrPC. The High Courts should keep a wary eye for cases which are essentially of civil nature, but have been given a cloak of criminal offence. “Criminal proceedings are not a shortcut for other remedies available in law… a criminal court has to exercise a great deal of caution. For the accused it is a serious matter,” the judgment said.
The Supreme Court has consistently affirmed that the High Court should utilize its inherent powers, as granted under Section 482 of the CrPC, to dismiss criminal proceedings characterized as fundamentally civil in nature.
—By Abhilash Kumar Singh and India Legal Bureau