Read Time: 08 minutes

Synopsis

The Supreme Court has on April 23, 2025 said, it is true that there is a growing tendency of parties to rope in their counterparts to harass and extract monetary transaction, but it is the duty of the court to consider the facts of each case, in its proper perspective and then arrive at the conclusion as to whether the case warrants investigation or the proceedings are required to be quashed.

A bench of Justices Bela M Trivedi and Prasanna B Varale allowed a plea against quashing the FIR in a case of fraud by all the directors of a company and duping the complainant for Rs 1.21 Crore under the guise of business transactions. 

The court said the peculiar facts and circumstances of the present case warranted thorough investigation as there was a huge amount involved, and subsequent to filing of the present special leave petition in this court, it seems that the investigation was concluded by filing the charge sheet.

Having gone through the factual aspects, the bench said, "In the present case, in our opinion, the High Court committed a serious error, in quashing the proceedings on a premise, that there were long business transactions between the parties, and initiation of criminal proceedings was an arm-twisting tactic to extract the pending dues from respondent company".

The court observed that another factum which lost the sight of the High Court was, the directors of the company had connived with each other so as to form the shell/dummy companies. 

"This is also an indicator of intention of deceit. It may not be out of place to state that the High Court has passed a vague and cryptic order. The High Court also failed to note that when certain basic material was brought to its notice about the criminal conspiracy hatched by the accused persons, it was necessary for the investigating agency to investigate thoroughly, in the process of unearthing the truth," the bench said.

The High Court thus should have refrained from quashing the FIR at the nascent stage of the investigation, the court noted.  

Brief Background

The appellant-original complainant, Dinesh Sharma challenged the judgment and order of January 31, 2023 by the Rajasthan High Court, which quashed the FIR of April 04, 2018 under Section 420, 406 and 120B of IPC. 

Sharma, the authorised representative of the M/s BLS Polymers Ltd engaged in the business of manufacturing and supplying plastic compounds such as PE, PVC, XLPE, HFFR etc, claimed the company supplied the goods on credit basis EMGEE Cables and Communications limited from 2012 to 2017. The appellant alleged that from April 01, 2017 to July 31, 2018, it supplied goods worth Rs 2,20,82,000 against the purchase order signed by Respondent no 3, Arun Maheshwari, a director, showing a rosy picture that they have a substantial turnover.

The appellant was constrained to file FIR before the Police Station Chomu, district Jaipur (West) for offences punishable under Section 420, 406, 120B of the IPC, after payment was not cleared by the company and its directors.

Separately, on May 02, 2018, Dena Bank also filed an against the company and its directors for offences under Section 420, 406, 467, 468, 471 and 120B of the IPC, alleging that they were involved in actions such as excess use of limit, siphoning off and embezzlement of funds, unilaterally changing the board of directors without the bank’s consent and disposing off the property which was under pledge to the bank.

Before the Top Court, the appellant submitted that the High Court erred in quashing the FIR as it was an established case of fraud by all the directors whereby they duped the appellant for Rs 1.21 Crore under the guise of business transactions. It was also stated that the attachment order of the Enforcement Directorate showcased the modus operandi of the respondent company as to how they hatched the conspiracy to siphoning off the funds. 

Case Title: Dinesh Sharma v. Emgee Cables and Communications Ltd. & Anr.