Read Time: 08 minutes

Synopsis

The Supreme Court has on March 12, 2024 said a mere breach of contract, by one of the parties, would not attract prosecution for criminal offence in every case, as it quashed criminal proceedings arising out of an FIR on dispute related to payment of money.

A bench of Justices Sudhanshu Dhulia and Prasanna B Varale allowed a plea filed by Naresh Kumar and another against the Karnataka High Court's order of December 2, 2020, dismissing his application filed under Section under Section 482 of the Criminal Procedure Code to quash the FIR lodged on May 24, 2017 in police station Doddaballapura, Bangalore Rural District under Sections 406, 420 and 506 of the IPC.

The two appellants were the Assistant Manager (Marketing) and the Manging Director of a company, manufacturer of bicycles. 

According to complainant, he was given a contract, for the assembly of bicycles, their transport and their delivery, at the rate of Rs 122 for each bicycle, and since they had assembled 83,267 bicycles, they raised invoices amounting to Rs 1,01,58,574. It was claimed instead, a payment of only Rs 35,37,390 was given by the appellants. 

However, a compromise deed was made on December 27, 2017. As a full and final settlement between the two parties, an additional amount of Rs 26 lakhs were paid on December 29, 2017. As of now, a total amount of Rs 62 lakhs as against Rs 1,01,58,574 was paid.

In the case, the bench said, "We are of the considered view that this is a case where the inherent powers should have been exercised by the High Court under Section 482 of the Criminal Procedure Code as the powers are there to stop the abuse of the process and to secure the ends of justice."

Though the complainant alleged he was coerced into a settlement, the bench, however, it looks unlikely for two reasons, first, there is no FIR or complaint about it, secondly, this amount was duly accepted by him.

"We are of the considered view that the findings of the High Court on this aspect are not correct. We do not agree with the findings arrived at by the High Court for two reasons. Firstly, the dispute between the parties is primarily, civil in nature. It is after all a question of how many bicycles the complainant had assembled and the dispute between the parties is only regarding the figure of bicycles and consequently of the amount liable to be paid," the bench said.

The court reiterated this is a civil dispute and the complainant has not been able to establish that the intention to cheat the complainant was there with the appellants right from the beginning. 

"Merely because the appellants admit that only 28,995 bicycles were assembled, but they have admittedly paid an amount of Rs 62,01,746 to the complainant, which is of a much higher number of bicycles, would not prove that the intention of the appellants right from the beginning was to cheat," the bench said. 

This amount i.e. the additional amount of Rs 26 lacs have been paid by the appellants pursuant to a settlement. The reasons and the logic for arriving at a settlement are quite different. In this case it seems, it is primarily to bring a quietus to the dispute and to have peace and to avoid litigation. The mere fact that the appellants have paid an additional amount pursuant to the settlement, cannot be presumed as an act of cheating, the bench said.

"In the case at hand, the dispute between the parties was not only essentially of a civil nature but in this case the dispute itself stood settled later. We see no criminal element here and consequently the case here is nothing but an abuse of the process," the bench said.