Departmental Irregularity Not Proof Of Crime, Says MP High Court While Quashing Corruption Case

The Madhya Pradesh High Court has quashed criminal proceedings against a Bhopal-based supplier firm and its proprietor, holding that a departmental irregularity in a government procurement process cannot, by itself, be treated as proof of criminal liability against contractors who merely supplied goods under a sanctioned contract.

A Division Bench of Justice Subodh Abhyankar and Justice Alok Awasthi allowed a criminal revision filed by Ms Geeta Infotech Sales and Service, Bhopal, through its proprietor Pankaj Soni, along with other petitioners, setting aside a trial court order refusing to accept a closure report filed in their favour.

The case traces back to a 2015 communication from the state's General Administration Department flagging irregularities allegedly committed by S.M. Kumbhare, then Principal of the Industrial Training Institute, Ujjain, and In-charge Deputy Director, Regional Skill Development Department. It was alleged that Kumbhare had purchased torches, equipment and other materials worth Rs 96.23 lakh through limited tenders instead of open tenders, from firms said to belong to the same person, in violation of the MP Store Purchase Rules and Financial Code.

Acting on this, the Economic Offences Wing registered a case against Kumbhare and several supplier firms, including Geeta Infotech Sales, Hanumant Trading Company and Karan Enterprises, under Sections 420 and 120-B of the IPC and Sections 13(1)(d) and 13(2) of the Prevention of Corruption Act. After investigation, a closure report was filed in the petitioners' favour, but it was rejected by the Special Judge on three separate occasions, most recently through the impugned order dated February 12, 2026, in MJC No. 11/2022 by the Special Judge, Ujjain.

The petitioners had earlier challenged the second rejection before the High Court, which remanded the matter for fresh consideration in light of the Supreme Court's ruling in Abhinandan Jha and Others v. Dinesh Mishra, holding that a magistrate is not bound to accept the police's final report and may direct further investigation. On remand, the Special Judge again declined to accept the closure report, prompting the present revision.

Appearing for the petitioners, advocate Prasanna Namdeo argued that the contract for supply of goods was issued by the department itself, that the materials were duly delivered, and that under Rule 121 of the MP Financial Code, it was the receiving government servant's responsibility to examine, certify and record the goods, so any lapse in verification could not be shifted onto the suppliers. Advocates Lokendra Joshi and Vaishali Baurasi appeared for the respondents and supported the impugned order as legally sound.

The bench, however, disagreed. It observed that "closure reports were submitted on three occasions, but on each occasion, the learned Special Judge did not accept the closure report and directed the Investigating Officer to conduct further investigation," adding that this repeated non-acceptance "cannot indicate that the allegations against the petitioners were proved or there was sufficient material to prosecute them."

Examining the merits, the Court held that the essential requirement for an offence under Section 420 IPC is "fraudulent or dishonest intention at the very beginning of the transaction," and that mere irregularity in a procurement process cannot, without more, constitute cheating. On the conspiracy charge, it noted that an allegation under Section 120-B "cannot be sustained merely because a person was connected with a transaction," and that mere association as a contractor or supplier does not establish an agreement to commit an unlawful act.

The Court further drew a clear line between administrative failure and criminal wrongdoing, holding that responsibility for any procedural lapse lies with the official required to follow the rules, and that such a lapse "cannot automatically be shifted on the shoulder of the petitioners merely because they were contractors or suppliers."

Finding no fresh material showing the petitioners' active participation in the alleged offence, the bench held their continued prosecution could not be justified on departmental irregularities alone, and set aside the February 12, 2026 order, quashing all consequential proceedings and allowing the revision.

Case Title: Ms Geeta Infotech Sales and Service Bhopal Proprietor Pankaj Soni and Others v. The State of Madhya Pradesh through Economic Offence Wing and Others

Date of Order: September 21, 2026

Bench: Justice Subodh Abhyankar and Justice Alok Awasthi