Judgment
(901) JUDGMENT WP-5364.25-II.DOCX lgc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL WRIT PETITION NO.5364 OF 2025 1] Tejas Shah ] Age : 52 years, Occ : Business ] R/at : 2303, Veer Tower, Dev Nagar ] New Saibaba Nagar, Kandivali (W), ] Mumbai – 400067 ] ] 2] Ketan Shah ] Age : 55 years, Occ : Business ] R/at : B-1606, Ekta Terrace, ] Mahavir Nagar, Kandivali (W) ] Mumbai – 400067 ]… Petitioners Versus.
1] The State of Maharashtra ] (Through Ghatkopar Police ] Station, Mumbai ] ] 2] Rajesh Champaklal Mehta ] Age : 58 years, Occ : Business ] Residing at : 801, Shreeji Tower, ] Rajawadi Hospital Road, ] Rajawadi, Ghatkopar (E), ] Mumbai.
]… Respondents.
----- Mr. Sanjog Parab, Senior Advocate a/w Advocates Nilesh Tribhuvann, Burzin Bharucha, Ruchi Pawar, Jhanavi Shah, Sakshi Baadkar, Mohan Rao, Sulbha Rane and, Sharad Bansal i/by White & Brief Advocates & Solicitors for the Petitioners.
Mr. Y. M. Nakhawa, APP for the Respondent No.1/State.
Mr. Kushal Mor a/w Vaibhav Hari, Tanmay Karmarkar, Mayuresh Deshmukh and Dikshit Jain i/by Advocate Marmik Shah for Respondent No.2.
------- This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 1 LAXMIKANT GOPAL CHANDAN Digitally signed by LAXMIKANT GOPAL CHANDAN Date:
2026.09.03 10:51:43 +0530
(901) JUDGMENT WP-5364.25-II.DOCX CORAM :
ASHWIN D. BHOBE, J.
DATED :
05 AUGUST 2026 ORAL JUDGEMENT :- 1.
Heard, Mr. Sanjog Parab, learned Senior Advocate for the Petitioners, Mr. Y. M. Nakhawa, learned APP for the Respondent No.1-State and Mr. Kushal Mor, learned Advocate for the Respondent No.2.
2.
Rule. Rule returnable forthwith and with consent of the parties, heard finally.
3.
By the present Petition filed under Article 226 of the Constitution of India read with Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS 2023”), the Petitioners seek to quash the FIR dated 12th June 2025, bearing C.R. No. 0585 of 2025, registered at Ghatkopar Police Station, Mumbai (“impugned FIR”), under Sections 316(2), 318(2), 318(4) and 3(5) of the Bharatiya Nyaya Sanhita, 2023 (“BNS, 2023”).
4.
In brief, the prosecution case is that Respondent No. 2, an authorised person of Vital Developers Private Limited (“said Company”), lodged a complaint on 12th June 2025, alleging that five (5) flats bearing Nos. A-901, A-902, B-1302, B-901 and B- 1301, on which said Company had created a lien, located in the Re-Development Project of “Chembur Lal Dunger Vaibhav Co. Op Housing Society”, were sold by the Petitioners without the consent of said Company, thereby committing the offence of cheating and This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 2
(901) JUDGMENT WP-5364.25-II.DOCX breach of trust against said Company and financial fraud in property worth Rs. 9,11,35,609/-.
5.
On 21st November 2025 this Court passed the following Order :- “Having regard to the order produced at page no.501 vide Annexure-R transmitted through email dated 27th February 2025, there shall be stay to further proceedings in First Information Report No.585 of 2025 lodged on 12th June 2025 with Ghatkopar Police Station, Mumbai.
2.
Post this matter on 6th January 2026.” 6.
This Order, dated 21st November 2025, was assailed by Respondent No. 2 before the Hon’ble Supreme Court in Special Leave Petition (Criminal) Diary No(s). 23945/2026. By Order dated 4th May 2026, the Hon’ble Supreme Court disposed of Special Leave Petition (Criminal) Diary No(s). 23945/2026 by the following order:
“Delay condoned.
We are not inclined to interfere with the impugned order.
However, we request the High Court to expedite the hearing of the main petition in Criminal Writ Petition No.5364/2025 either on the next date of hearing or within a period of two months thereafter.
The Special Leave Petition is, accordingly, dismissed.
Pending applications, if any, shall also stand disposed of.” 7.
The Order dated 4th May 2026 passed in Special Leave Petition (Criminal) Diary No(s). 23945/2026 was placed before this Court on 8th June 2026. Accordingly, the two-month period This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 3
(901) JUDGMENT WP-5364.25-II.DOCX granted by the Hon’ble Supreme Court for disposing of this Petition commenced on 08 June 2026.
8.
The material facts borne out by this petition, relevant to the adjudication of the present Petition, are as follows :- a. On 28th December 2010, a Joint Development Agreement (“JDA”) was entered into between the said Company and the Petitioners through their firm, “Rajyog Enterprises” (“Rajyog”). As per the JDA, amongst other clauses, the Petitioners were to receive 50% of the area constructed by Rajyog. The consideration for the same was Rs.12 crores;
b. Rectification Deed dated 13th September 2012 was executed, reducing the consideration amount payable by the Petitioners to the said Company from 12 crores to Rs.6 crores;
c.
In March 2015, the construction came to a halt for want of a Commencement Certificate above the 12th floor;
d. On 7th October 2016, the Petitioners and the said Company entered into a Supplementary Agreement under which the Petitioners were to advance Rs.6 crores as a loan to the said Company, refundable with interest at 18% p.a. The duration of the said loan was 18 months. Five (5) undated, unregistered Agreements for Sale were executed as security for the loan and handed over to the Petitioners by the said Company. The Supplementary Agreement refers to the five (5) flats in the Third Schedule A, B and C, which are referred to as “Charged units”;
This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 4
(901) JUDGMENT WP-5364.25-II.DOCX e.
On 10th October 2016, the said Company executed a Special Power of Attorney in favour of the Petitioners authorising them to appear before the Registrar in respect of the Charged units.
f.
A dispute regarding the performance / non-performance of the Supplementary Agreement dated 7th October 2016 arose between the Petitioners and the said Company.
g. The Petitioners sold 5 (five) Charged units. Transactions in respect of the Charged units were executed from 17th October 2018 to 26th December 2020.
h. The Petitioners invoked the arbitration clause in the Joint Development Agreement dated 28th December 2010. The Commercial Arbitration Petition (L) No. 9622 of 2024, filed by the Petitioners under Section 9 of the Arbitration and Conciliation Act, 1996 (“said Act”), was converted into a Section 11 Petition and a Sole Arbitrator was appointed to adjudicate the referred dispute.
i.
The proceedings commenced before the Sole Arbitrator. The Petitioners filed an Application under Section 17 of the said Act. After considering the respective cases of the Petitioners and the said Company, the Sole Arbitrator disposed of the Application on 27th February 2025 by granting an interim order.
j.
On 12 June 2025, the Respondent No.2 – the authorised representative of the said Company- filed a complaint which led to the registration of the impugned FIR.
This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 5
(901) JUDGMENT WP-5364.25-II.DOCX 9.
The arguments in this Petition were advanced on 3rd August 2026, 4th August 2026 and today.
10.
The following additional documents have been placed in this Petition during the course of the arguments. They are taken on record by consent of Mr. Sanjog Parab, learned Senior Advocate for the Petitioners and Mr. Kushal Mor, learned Advocate for Respondent No. 2, who make a categorical statement that they have no objection to taking the said documents on record and considering them in this Petition. Mr. Y. M. Nakhawa, learned APP for the Respondent-State, also does not oppose taking the said documents on record and considering them in this Petition.
11.
In view of the above-mentioned statements made by the learned Advocates for the parties, the following documents are taken on record and considered:
Sr.
No.
Particulars Marked as 1 Undated Counter Claim filed by M/s. Vital Developers Pvt. Ltd. before the learned Sole Arbitrator in the proceedings filed by M/s. Vital Developers Private Limited against M/s. Rajyog Enterprises (10 pages), the same is taken on record and marked with “X” for identification;
“X” 2 Special Power of Attorney dated 10 October 2016 (18 pages), the same is taken on record and marked with “X-1” for identification;
“X-1” This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 6
(901) JUDGMENT WP-5364.25-II.DOCX 3 Compilation of following documents :- (1) Letters sent by the Accused persons to the First Informant dated 05.09.2018, 28.09.2018, 26.10.2018, 28.06.2021 and 09.11.2023, the same are taken on record and marked with “X-2- Colly” for identification;
“X-2- Colly” (2) Table showcasing the sale of flats, the same is taken on record and marked with “X-3” for identification;
“X-3” (3) Index-2 of all the 05 flats sold, the same is taken on record and marked with “X-4” for identification;
“X-4” (4) Interest computation on the principal amount forwarded over a period of 20 months, the same is taken on record and marked with “X- 5” for identification;
“X-5” (5) MCA records evidencing the date of resignation on 01.03.2017 of Respondent no.02, the same is taken on record and marked with “X- 6” for identification;
“X-6” (6) Respondent No.02 filed a Police complaint to “X-7” This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 7
(901) JUDGMENT WP-5364.25-II.DOCX the Deputy Commissioner of police Zone 7, the same is taken on record and marked with “X-7” for identification; and (7) Minutes and Notes of Evidence dated 17.07.2025 of Cross Examination of CW-1 before Arbitrator (pages 1 to 63), the same is taken on record and marked with “X-8” for identification.
“X-8” 4 Translated copy of the FIR bearing No.0585 dated 12 June 2025, registered with Ghatkopar Police Station (Total pages 13), the same is taken on record and marked with “X-9” for identification.
“X-9” 12.
Mr. Sanjog Parab, learned Senior Advocate for the Petitioners, in addition to advancing oral arguments, has tendered a synopsis of Oral arguments dated 03 August 2026.
13.
Mr. Sanjog Parab, learned Senior Advocate for the Petitioners, submits that the impugned FIR was filed with mala fide intention, after giving a criminal colour to a purely civil and contractual dispute arising from a commercial relationship between the Petitioners and the said Company, spanning 16 years.
He submits that the trigger for filing the impugned FIR was the interim order dated 27th February 2025 passed by the Sole Arbitrator in the arbitration proceedings commenced by the This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 8
(901) JUDGMENT WP-5364.25-II.DOCX Petitioners against the said Company, wherein the said Company was restrained, as more particularly referred to therein. He submits that the criminal complaint lodged after the interim order is motivated by adverse observations made by the Sole Arbitrator. He submits that a perusal of the impugned FIR and the conduct of the said Company clearly indicates mala fides on the part of the said Company. He submits that Respondent No.2, who has filed the present complaint, had signed the Supplementary Agreement and executed the Special Power of Attorney in his capacity as Director and on behalf of the said Company. He submits that Respondent No.2 claims to have resigned as a Director, however, he is now acting as the authorised representative of the said Company. He submits that the allegations made against the Petitioners of having mischievously, falsely, mala fide, or for that matter, illegally sold the Charged units are claims of said Company -Respondent No.2 which are frivolous and at any rate, fallacious. He submits that the averments in the FIR, taken at their face value, clearly indicate a contractual dispute and at no rate, attract criminal liability. He submits that the alleged dishonest intention required at the inception is clearly absent in the impugned FIR. He submits that even if the contentions of Respondent No.2 are taken at their face value, they would, at the most, be in the realm of a breach of contract, for which the Petitioners and the said Company are already before the Sole Arbitrator, agitating their respective rights.
14.
Mr. Sanjog Parab, learned Senior Advocate, submits that the said Company was well aware of the sale of the 5 (five) Charged units and the allegations that the said Company was unaware or kept in the dark regarding the sale of the Charged units are false.
He submits that the said Company has defaulted in repaying the This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 9
(901) JUDGMENT WP-5364.25-II.DOCX loan amount of Rs.4 crores and 60 lakhs, as a result of which clause No.5 of the Supplementary Agreement dated 7th October 2016 was activated, consequently, the Petitioners acquired the right to deal with the Charged units. He refers to the letter dated 15th December 2017 issued by the Director of the said Company, wherein the Petitioners have been granted the right to deal in and sell the Charged units. He further refers to the complaint dated 13.08.2024, the authorised representative of the said Company, more particularly, paragraph 38, which, according to Mr. Sanjog Parab, clearly indicates that the said Company was kept informed about the sale of the Charged units by the Petitioners. He relies on the decision of the Hon’ble Supreme Court in the case of State of Haryana v. Bhajan Lal1. For all the said reasons, Mr. Sanjog Parab, learned Senior Advocate, submits that the impugned FIR is an abuse of the process of law and be quashed.
15.
Mr. Y. M. Nakhawa, learned APP for Respondent No.1-State, submits that the complaint filed by Respondent No.2 discloses a dispute involving claims and counter-claims for breach of contract and/or breach of reciprocal promises. He submits that upon receipt of the complaint, Respondent No.1 registered the FIR.
16.
Mr. Kushal Mor, learned Advocate for Respondent No. 2, has advanced oral arguments and tendered a synopsis of arguments dated 04 August 2026.
17.
At the outset, Mr. Kushal Mor, learned Advocate for the Respondent No.2, on submitted that the Respondent No.2 confines its case to the allegations and the offence under Section 316(2) {Criminal Breach of Trust} and does not insist upon or support the 1 1992 Supp (1) SCC 335 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 10
(901) JUDGMENT WP-5364.25-II.DOCX impugned FIR in relation to the offences charged under Sections 318(2) and 318(4) {Cheating} of the BNS, 2023.
18.
Mr. Kushal Mor, learned Advocate for Respondent No. 2, has prepared the following tabular format in support of his contention that the ingredients of Criminal Breach of Trust are made out in the complaint. At his request, the same is reproduced herein:- Sr.
No.
Ingredients for criminal breach of trust Factual aspects 1 Entrustment The Respondent No. 2 entrusted 5 undated un- registered Agreements for Sale of 5 flats to the Accused, but at all times continued to remain the owner of the said 5 flats.
2 Person handing over the property
must
have confidence in the person taking the property so as to create a fiduciary relationship between them Since the Respondent No. 2 was in business with the Applicants since December, 2010, he had confidence and trust in the Accused
persons
while entrusting the custody of the Agreements for Sale as lien.
3 Dishonest
mis- appropriation
and disposing off property The Accused persons without disbursing the entire loan of Rs.
6 Crores, not only sold off all the 5 flats for a price of almost Rs. 14 Crores but also misappropriated them to their benefit and the Respondent No.
2's wrongful loss.
4 Mens-rea The attending circumstances of not informing the Respondent No. 2 about the sale of all the 5 flats, despite more than 5 letters being exchanged between them shows
that
the Accused/Applicants did not have the bonafide intent of This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 11
(901) JUDGMENT WP-5364.25-II.DOCX disclosing the sale of the flats to the Respondent No. 2.
Misuse of undated unregistered Agreement to sale 19.
Mr. Kushal Mor has relies on the following decisions in support of his contentions regarding the ingredients of ingredients of Criminal Breach of Trust:- A) Kailash Kumar Sanwatia Vs. State of Bihar2 B) Omprakash Gupta Vs. State of Uttar Pradesh3 C) Sadhupati Nageswara Rao Vs. State of Andhra Pradesh4 D) Harihar Prasad Dubey Vs. Tulsi Das Mundhra and ors5 E) Jaikrishnadas Manohardas Desai & anr. Vs. State of Bombay6 F) Birendra Prasdad Lahiri Chaudhry and Anr. Vs. State7 G) Jaswantrai Manilal Akhaney Vs. State of Bombay8 H) State of Gujarat Vs. Jaswantlal Nathalal9 20.
Mr. Kushal Mor, learned Advocate for the Respondent No.2, submits that the mere initiation or pendency of civil proceedings, in the present case before the Arbitral Tribunal, which are parallel proceedings, would not be a ground to quash the impugned FIR.
He submits that the said Company -Respondent No.2 is entitled to 2 (2003) 7 SCC 399 3 (1957) 1 SCC 27 4 (2012) 8 SCC 547 5 (1980) 4 SCC 120 6 (1960) SCC OnLine SC 59 7 1956 SCC Online All 97 8 (1956) 1 SCC 753 9 1967 SCC OnLine SC 58 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 12
(901) JUDGMENT WP-5364.25-II.DOCX maintain a criminal complaint, as the Petitioners have committed a criminal wrong. He relies on the decisions in the case(s) of Trisuns Chemical Industry v Rajesh Agarwal and Ors10, Rajesh Bajaj v State of NCT Delhi and Ors11, Pratibha Rani v Suraj Kumar and Anr12 and Priti Saraf and Ors v State of NCT of Delhi and Ors13, in support of his submission.
21.
Mr. Kushal Mor, learned Advocate for Respondent No. 2, submits that the complaint filed by Respondent No. 2 makes out a case for registration of the impugned FIR, that a proper investigation to ascertain the alleged criminal offence by the Petitioners is required and that this Court should not interfere with the impugned FIR at this stage. He relies on the decision of the Hon’ble Supreme Court in the case of Accamma Sam Jacob v. State of Karnataka14, particularly paragraph 51 thereof which reads thus :- “51.
In our considered view, the fact that the judgment of the High Court dated 25th October, 2016 has already been set aside by this Court itself furnishes a sufficient ground to condone the delay and extend similar relief in the present batch of appeals. Upon a careful perusal of the judgments passed by the High Court i.e., one in the present appeals and the other in the case involving Joseph Chacko as the accused, we find that the reasoning adopted by the High Court in both cases proceeds on substantially identical lines and rests on the same foundational premise, namely, that the dispute between the parties is predominantly civil in nature and that criminal proceedings could not be sustained unless the registered sale deeds were first cancelled by resorting to proceedings under Section 31 of SRA. In such circumstances, the divergence in attribution cannot be a ground to discard the present complaints at the threshold. On the contrary, the existence of rival narratives in respect of the similar 10 (1999) 8 SCC 686 11 (1999) 3 SCC 259 12 (1985) 2 SCC 370 13 (2021) 16 SCC 142 14 2026 SCC OnLine SC 585 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 13
(901) JUDGMENT WP-5364.25-II.DOCX allegations underscores the necessity of a proper investigation to ascertain the identity and role of the persons involved.” 22.
Mr. Kushal Mor, learned Advocate for the Respondent No.2, by relying on the decisions of the Hon’ble Supreme Court in the case of Delhi Race Club (1940) Ltd. v. State of U.P.,15 more particularly paragraphs 40 and 41, submits that there is a difference between cheating and criminal breach of trust.
Paragraphs 40 and 41 read as under:- “40.
To put it in other words, the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case.
41.
The distinction between mere breach of contract and the offence of criminal breach of trust and cheating is a fine one. In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct, but for this, the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed.
Therefore, it is this intention, which is the gist of the offence.” 23.
Mr. Kushal Mor, learned Advocate for Respondent No. 2, in all fairness, submitted that although the Supplementary Agreement dated 7th October 2016 refers to 4 (four) Charged units, with the 5th Charged unit being dependent on payment, the said Company 15 (2024) 10 SCC 690 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 14
(901) JUDGMENT WP-5364.25-II.DOCX has registered a charge on all 5 (five) Charged units. To clarify, he submits that there is no dispute that the Charged units referred to in C.R. No. 0585 of 2025 are all 5 (five) units.
24.
According to Mr. Kushal Mor, the Petitioners have not disbursed the amount in full. To clarify, he submits that out of the total amount of Rs. 5 crores required to be paid, the Petitioners have paid only Rs. 4 crores and 60 lakhs.
25.
To conclude, Mr. Kushal Mor, learned Advocate for the Respondent No. 2 submits that the Respondent No.2 has made out a case of entrustment and that the Petitioners, having dishonestly disposed of the property by selling it first to themselves and thereafter to a third party, have violated the contract between the parties, thus making a case of breach of trust.
26.
The sum and substance of the contentions of Mr. Kushal Mor learned Advocate for the Respondent No. 2 are that, even in the event of default in repayment of the loan by the said Company, the Petitioners could not have sold the Charged units for more than one reason; first, the supplementary agreement dated 7th October 2016 does not confirm the title in favour of the Petitioners; second, the Petitioners neither intimated nor informed the said Company prior to execution of the sale deed; third, no compliance with the law was made while executing the sale deed; and fourth, the undated, unregistered agreement for sale could not have been acted upon by the Petitioners without informing the said Company.
27.
Mr. Sanjog Parab, learned Senior Advocate for the Petitioners, in rejoinder, by referring to document (X-7), particularly para 38, reiterated that the said Company was This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 15
(901) JUDGMENT WP-5364.25-II.DOCX informed of the sale undertaken by the Petitioners. By referring to the letter dated 15th December 2017, he submitted that the Petitioners were entitled to sell the flats after 30th June 2018 if the loan advanced by the Petitioners to the said Company remained unpaid. He specifically stated that the amount of Rs. 4 crores 60 lakhs paid to the said Company has not been returned by the said Company to the Petitioners and therefore the Petitioners have exercised their right under the valid and subsisting contract between the parties.
28.
Mr. Kushal Mor, learned Advocate for Respondent No. 2, in sur-rejoinder to the arguments of Mr. Sanjog Parab, learned Senior Advocate for the Petitioners, submitted that the letter dated 15th December 2017, relied upon by Mr. Sanjog Parab, learned Senior Advocate, must be read in the context of the entire letter, particularly the second-last paragraph, which states that the finality and binding nature of the letter would arise only in the event of payment of Rs. 2 crores. Mr. Khushal Mor clarifies that the case of Respondent No. 2 is that the Charged units could not have been sold by the Petitioners and at any rate, could not have been sold behind the back of the said Company. He submits that the contract governing the parties is the registered Supplementary Agreement dated 7th October 2016 and as such, the letter dated 15th December 2017, though issued by the said Company, could not be used to change the contractual term. He further relies on the observations made by the Sole Arbitrator in para 13 of the interim order dated 27th February 2025 passed under Section 17 of the said Act, wherein the Sole Arbitrator has made observations on the point of law as to the nature of reliance that can be placed on the This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 16
(901) JUDGMENT WP-5364.25-II.DOCX unregistered document, to submit that the said observations of the Sole Arbitrator are final, binding and conclusive.
29.
Perused the records with the assistance of the learned Advocates for the parties.
30.
The dispute at the core of the impugned FIR arises from the Supplementary Agreement dated 7th October 2016. The issue is whether the breach of contractual terms in the present case amounts to a criminal offence.
31.
There is no quarrel with the submissions made by Mr. Kushal Mor, learned Advocate for the Respondent No.2, that, in respect of the same transaction, a person is entitled to file civil proceedings as well as criminal proceedings, subject, however, to disclosure of criminality in the said transaction. The test in the present case is limited to ascertaining, from the impugned FIR, whether there is a disclosure of a cognisable offence satisfying the ingredients of Section 316(2) and 318(2) of the BNS, 2023.
32.
In the case of S. N. Vijyalakshmi v. State of Karnataka16, THE hon’ble Supreme court has in paragraph No. 42, it observed as follows:
“42. Coming to the second question i.e., whether civil and criminal proceedings both can be maintained on the very same set of allegations qua the same person(s), the answer stricto sensu, is that there is no bar to simultaneous civil and criminal proceedings. If the element of criminality is there, a civil case can co-exist with a criminal case on the same facts. The fact that a civil remedy has already been availed of by a complainant, ipso facto, is not sufficient ground to quash an FIR, as pointed out, inter alia, in P Swaroopa Rani v. M Hari Narayana, (2008) 5 SCC 765 and Syed Aksari Hadi Ali Augustine Imam v. State (Delhi Admn.), (2009) 5 SCC 528. The obvious caveat being that 16 2025 SCC OnLine SC 1575 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 17
(901) JUDGMENT WP-5364.25-II.DOCX the allegations, even if having a civil flavour to them, must prima facie disclose an overwhelming element of criminality. In the absence of the element of criminality, if both civil and criminal cases are allowed to continue, it will definitely amount to abuse of the process of the Court, which the Courts have always tried to prevent by putting a stop to any such criminal proceeding, where civil proceedings have already been instituted with regard to the same issue, and the element of criminality is absent. If such element is absent, the prosecution in question would have to be quashed. In this connection, Paramjeet Batra v.
State of Uttarakhand, (2013) 11 SCC 673 can be referred to:
‘12. … Whether a complaint discloses a criminal offence or not depends upon the nature of facts alleged therein.
Whether essential ingredients of criminal offence are present or not has to be judged by the High Court. A complaint disclosing civil transactions may also have a criminal texture. But the High Court must see whether a dispute which is essentially of a civil nature is given a cloak of criminal offence. In such a situation, if a civil remedy is available and is, in fact, adopted as has happened in this case, the High Court should not hesitate to quash the criminal proceedings to prevent abuse of process of the court.’ (emphasis supplied)” 33.
Though, Mr. Khushal Mor learned Advocate for the Respondent No.2 has submitted before this Court that the Respondent No.2 confines its case to the allegations and the offence under Section 316(2) {Criminal Breach of Trust} and does not insist upon or support the impugned FIR in relation to the offences charged under Sections 318(2) and 318(4) {Cheating} of the BNS, 2023, however, considering the allegation in the impugned FIR, the insistence of Respondent No. 2 on Respondent No. 1 for registration of offences under Sections 316(2) and 318(2) of the BNS, 2023, and the contentions of the parties before this Court, a useful reference can be made to the decision of the This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 18
(901) JUDGMENT WP-5364.25-II.DOCX Hon’ble Supreme Court in the case of Rikhab Birani v. State of U.P.17 Paragraphs 12 to 21 are reproduced herein:
“12. Thereupon, the appellants, Rikhab Birani and Sadhna Birani, preferred a petition under Section 482 of the Cr.P.C.
before the High Court,6 which was dismissed by the High Court, vide the impugned order dated 09.05.2024, notwithstanding the aforesaid facts, stating that at that stage, only a prima facie case was to be seen in the light of the law laid down by this Court.
13. We are constrained to pass this detailed speaking order, as it is noticed that, notwithstanding the law clearly laid down by this Court on the difference between a breach of contract and the criminal offence of cheating, we are continuously flooded with cases where the police register an FIR, conduct investigation and even file chargesheet(s) in undeserving cases.
14. During the last couple of months, a number of judgments/orders have been pronounced by this Court, especially in cases arising from the State of Uttar Pradesh, deprecating the stance of the police as well as the courts in failing to distinguish between a civil wrong in the form of a breach of contract, non-payment of money or disregard to and violation of contractual terms; and a criminal offence under Sections 420 and 406 of the IPC, the ingredients of which are quite different and requires mens rea at the time when the contract is entered into itself to not abide by the terms thereof.
15. In Lalit Chaturvedi v. State of Uttar Pradesh, this Court quoted an earlier decision in Mohammed Ibrahim v. State of Bihar, wherein, referring to Section 420 of the IPC, it was observed that the offence under the said Section requires the following ingredients to be satisfied:
“18. Let us now examine whether the ingredients of an offence of cheating are made out. The essential ingredients of the offence of “cheating” are as follows:
(i) deception of a person either by making a false or misleading representation or by dishonest concealment or by any other act or omission;
(ii) fraudulent or dishonest inducement of that person to either deliver any property or to 17 2025 SCC OnLine SC 823 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 19
(901) JUDGMENT WP-5364.25-II.DOCX consent to the retention thereof by any person or to intentionally induce that person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) such act or omission causing or is likely to cause damage or harm to that person in body, mind, reputation or property.” 16. Reference was also made to the decision in V.Y. Jose v.
State of Gujarat and it was observed:
“7. Similar elucidation by this Court in “V.Y.
Jose v. State of Gujarat”, explicitly states that a contractual dispute or breach of contract per se should not lead to initiation of a criminal proceeding. The ingredient of ‘cheating’, as defined under Section 415 of the IPC, is existence of a fraudulent or dishonest intention of making initial promise or representation thereof, from the very beginning of the formation of contract. Further, in the absence of the averments made in the complaint petition wherefrom the ingredients of the offence can be found out, the High Court should not hesitate to exercise its jurisdiction under Section 482 of the Cr.P.C. Section 482 of the Cr.P.C. saves the inherent power of the High Court, as it serves a salutary purpose viz. a person should not undergo harassment of litigation for a number of years, when no criminal offence is made out. It is one thing to say that a case has been made out for trial and criminal proceedings should not be quashed, but another thing to say that a person must undergo a criminal trial despite the fact that no offence has been made out in the complaint.
This Court in V.Y. Jose (supra) placed reliance on several earlier decisions in “Hira Lal Hari Lal Bhagwati v. CBI”, “Indian Oil Corporation v.
NEPC India Ltd.”, “Vir Prakash Sharma v. Anil Kumar Agarwal” and “All Cargo Movers (I) (P) Ltd. v. Dhanesh Badarmal Jain”.” 17. This Court, in Delhi Race Club (1940) Limited v. State of Uttar Pradesh, highlighted the fine distinction between the offences of criminal breach of trust and cheating, observing that the two are antithetical in nature and cannot coexist simultaneously. Police officers and courts must carefully apply their minds to determine whether the allegations genuinely constitute the specific offence alleged.
This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 20
(901) JUDGMENT WP-5364.25-II.DOCX 18. In Kunti v. State of Uttar Pradesh, this Court referred to Sarabjit Kaur v. State of Punjab wherein it was observed that a breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction.
Merely on the allegation of failure to keep a promise will not be enough to initiate criminal proceedings. Thus, the dishonest intention on the part of the party who is alleged to have committed the offence of cheating should be established at the time of entering into the transaction with the complainant, otherwise the offence of cheating is not established or made out.
19. It is the duty and obligation of the court to exercise a great deal of caution in issuing process, particularly when the matter is essentially of civil nature. The prevalent impression that civil remedies, being time-consuming, do not adequately protect the interests of creditors or lenders should be discouraged and rejected as criminal procedure cannot be used to apply pressure.14 Failure to do so results in the breakdown of the rule of law and amounts to misuse and abuse of the legal process.
20. In yet another case, again arising from criminal proceedings initiated in the State of Uttar Pradesh, this Court was constrained to note recurring cases being encountered wherein parties repeatedly attempted to invoke the jurisdiction of criminal courts by filing vexatious complaints, camouflaging allegations that are ex facie outrageous or are pure civil claims. These attempts must not be entertained and should be dismissed at the threshold. Reference was made to a judgment of this Court in Thermax Limited v. K.M. Johny, which held that courts should be watchful of the difference between civil and criminal wrongs, though there can be situations where the allegation may constitute both civil and criminal wrongs.
Further, there has to be a conscious application of mind on these aspects by the Magistrate, as a summoning order has grave consequences of setting criminal proceedings in motion. Though the Magistrate is not required to record detailed reasons, there should be adequate evidence on record to set criminal proceedings into motion. The Magistrate should carefully scrutinize the evidence on record and may even put questions to the complainant/investigating officer etc. to elicit answers to find out the truth about the allegations. The summoning order has to be passed when the complaint or chargesheet discloses an offence and when there is material that supports and constitutes essential ingredients of the offence. The summoning order should not be passed lightly or as a matter of course.
This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 21
(901) JUDGMENT WP-5364.25-II.DOCX 21. Lastly, we would refer to another detailed judgment of this Court in Sharif Ahmed v. State of Uttar Pradesh, which draws out the ingredients required to establish an offence under Sections 406, 415, 420, 503 and 506 of the IPC in the following terms:
“36. An offence under Section 406 of the IPC requires entrustment, which carries the implication that a person handing over any property or on whose behalf the property is handed over, continues to be the owner of the said property. Further, the person handing over the property must have confidence in the person taking the property to create a fiduciary relationship between them. A normal transaction of sale or exchange of money/consideration does not amount to entrustment. Clearly, the charge/offence of Section 406 IPC is not even remotely made out.
37. The chargesheet states that the offence under Section 420 is not made out. The offence of cheating under Section 415 of the IPC requires dishonest inducement, delivering of a property as a result of the inducement, and damage or harm to the person so induced. The offence of cheating is established when the dishonest intention exists at the time when the contract or agreement is entered, for the essential ingredient of the offence of cheating consists of fraudulent or dishonest inducement of a person by deceiving him to deliver any property, to do or omit to do anything which he would not do or omit if he had not been deceived. As per the investigating officer, no fraudulent and dishonest inducement is made out or established at the time when the agreement was entered.
38. An offence of criminal intimidation arises when the accused intendeds to cause alarm to the victim, though it does not matter whether the victim is alarmed or not. The intention of the accused to cause alarm must be established by bringing evidence on record. The word ‘intimidate’ means to make timid or fearful, especially : to compel or deter by or as if by threats. The threat communicated or uttered by the person named in the chargesheet as an accused, should be uttered and communicated by the said person to threaten the victim for the purpose of influencing her mind. The word This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 22
(901) JUDGMENT WP-5364.25-II.DOCX ‘threat’ refers to the intent to inflict punishment, loss or pain on the other. Injury involves doing an illegal act.
39. This Court in Manik Taneja v. State of Karnataka, had referred to Section 506 which prescribes punishment for the offence of ‘criminal intimidation’ as defined in Section 503 of the IPC, to observe that the offence under Section 503 requires that there must be an act of threating another person with causing an injury to his person, reputation or property, or to the person or reputation of any one in whom that person is interested. This threat must be with the intent to cause alarm to the person threatened or to do any act which he is not legally bound to do, or omit to do an act which he is entitled to do. Mere expression of any words without any intent to cause alarm would not be sufficient to bring home an offence under Section 506 of the IPC. The material and evidence must be placed on record to show that the threat was made with an intent to cause alarm to the complainant, or to cause them to do, or omit to do an act. Considering the statutory mandate, offence under Section 506 is not shown even if we accept the allegation as correct.” 34.
Useful reference can be made to the following undisputed documents relating to the case in the impugned FIR, which is referred to and relied upon by the parties to this Petition:- (a) Clause Nos. 3, 4, 5, 6, 7, 8, 11, 12, 13, 14 and 15 of the Supplementary Agreement dated 7
TH October 2016
;
3. To enable Vital to perform its roles under the First Agreement read with the Rectification Deed, Rajyog shall give the sum of Rs. 6,00,00,000/- (Rupees Six Crores Only) to Vital, as and by way of interest bearing refundable deposit (Refundable Deposit) in the manner as set out below:
a. Rs 100,00,000/- (Rupees One crore only) ("First Installment") simultaneously upon the execution of this Agreement;
This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 23
(901) JUDGMENT WP-5364.25-II.DOCX b. Rs. 2,00,00,000 (Rupees Two crores only) ("Second Installment") within 10 (Ten) days from the date hereof;
c. Rs. 1,50,00,000 (Rupees one crore fifty lacs only) ("Third Installment") on or before 30th November, 2016,.
d. Rs.1,50,00,000/- (Rupees One Crore Fifty Lakhs Only) on or before 31 December, 2016.
4. It is agreed between the Parties that the Refundable Deposit shall be used by Vital solely towards the completion of pending performance / fulfillment of its conditions and obligations under First Agreement read with the Rectification Deed and for no other purpose.
5. It is agreed between the parties that the Refundable Deposit will carry an interest of 18% p.a.. It is agreed between the Parties that the Refundable Deposit together with interest thereon shall be repaid by Vital to Rajyog on or before expiry of 18 (eighteen) months from the date of execution hereof.
6. In order to secure the repayment of the First and Second Installments of the Refundable Deposit, Vital hereby creates a charge / lien on 3 (three) number of Vital Premises, which are more particularly described in Part A of the Third Schedule hereunder written ("First Installment Charged Premises").
7. In order to secure the repayment of the Second Installment of the Refundable Deposit, Vital shall simultaneously upon the receipt of the Third Installment create a charge / lien on 1 (one) number of Vital Premises which are more particularly described in Part B of the Third Schedule hereunder written ("Second Installment Charged Premises").
8. In order to secure the repayment of the Third Installment of the Refundable Deposit, Vital shall simultaneously upon the receipt of the Third Installment create a charge / lien on 1 (one) number of Vital Premises, which are more particularly described in Part C of the Third Schedule hereunder written ("Third Installment Charged Premises"). The First Installment Charged Premises, Second Installment Charged Premises and Third Installment Charged Premises shall hereinafter be collectively referred to as the "Charged Units”.
This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 24
(901) JUDGMENT WP-5364.25-II.DOCX 11. Vital shall be entitled to sell the charged units during the period of 18 (Eighteen months from the date hereof being the maturity of this Agreement.
Provided, However that the sale proceeds of each unit on realization on such disposal shall not be less than the amount apportioned to the said unit in relation to the repayment of the refundable deposit and interest.
The same shall be sold with the prior written consent of Rajyog and the entire sale proceeds shall be directly arranged to be paid over to Rajyog for the appropriation thereof towards the amount payable under this Agreement.
12. It is agreed that in the event of Rajyog, for any reason, fail to pay the remaining installment as set out in Clause 3 herein above then all the provisions and securities created under this Agreement shall be applicable to the proportionate charged units and the same shall be without prejudice to the rights and securities of Rajyog.
13. It is agreed between the Parties that prior to any sale/ transfer/ disposal of the Charged Units or any one of them, Vital will obtain an 'in principal' consent letter from Rajyog and ensure that the receivables accruing from such transfer of the Charged Units or any one of them shall be first utilized to repay the such portion of the Refundable Deposit and interest thereon proportional to the sale value of the Charged Unit being sold / transferred.
14. Rajyog agrees and covenants that upon receipt of such proportionate amount of the receivables from the sale / transfer of the Charged Unit/s, there will be no charge tin respect of such sold / transferred Charged Unit and Rajyog shall simultaneously upon the receipt of such payment record the release of charge on such sold/transferred Charged Unit by issuing an unconditional 'release letter' in favour of the purchaser/transferee in respect thereof.
15. Rajyog covenants that `in principal’ consent letter, shall be issued by it as long as the receivables accruing from such transfer of the Charged Units or any one of them shall be first utilized to repay the such portion of the Refundable Deposit and interest thereon proportional to the value of the Charged Unit being sold/transferred and the same shall not be unreasonably withheld.” This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 25
(901) JUDGMENT WP-5364.25-II.DOCX (b) Paragraphs of the Letter dated 15
th December 2017 issued
by the said Company to Rajyog.
“Thus after above disbursement,we confirm that in terms of the Supplementary Agreement total 5 (five) nos of flats will be available to you as security and on our failure to repay the refundable deposit of Rs.5,00,00,000/- (Rupees Five Crores Only) together with Interest thereon @ 30% p.a., as mentioned in the Supplementary Agreement dated 07-10-2016 & read along with our undated letter. We agree to pay to you interest on outstanding deposit amount till the refund of refundable deposit or till the realization from the sale of all the above 5 Flats as referred to in the Supplementary Agreement dated 07.10.2016 and we undertake to refund the refundable deposit to you on or before 30.06.2018 and from 30.06.2018 if any deposit amount is balance then Proportionaly from the above.
referred flats shall be your absolute property forthwith.
We further confirm and put on records that you are entitled to deal with or dispose of all the remaining flats mention in schedule 3 (part A,B & C) in supplementary agreement dated 07.10.2016 from 30th June, 2018 as mentioned above.
This letter and assurance are final and binding on release of advance of Rs.2,00,00,000/- (Rupees Two Crores Only).” (c) Paragraph 38 of the complaint dated 13.08.2024 of the Respondent No.02 addressed to the Deputy Commissioner of Police (DCP-Zone 7):- “38. I state that very recently the Accused persons initiated frivolous Arbitration proceedings against Vital for certain alleged non-compliance of the Joint Venture Agreement. I state that during the process of internal scrutiny of all the documents we came across documents wherein we learnt that the Accused had very conveniently intimated vital about the sale of said flats by way of deception by mentioning them along with the other flats being sold by them in the project.” This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 26
(901) JUDGMENT WP-5364.25-II.DOCX (d) Paragraph (b) of the Special Power of Attorney dated 10th October 2016 executed by the said Company appointing the Petitioners as its constituted Attorney:- “(b) To appear before the concerned Sub-registrar of assurances and lodge and/or admit execution of the undertaking given by us as director of the said company to Municipal Corporation of Greater Mumbai, BSES Limited, Maharashtra State Electricity Board, reliance Infrastructure Limited and other state and local authorities.” (e) 2 nd last paragraph of the Resolution dated 4
th October
2016 passed by the BOD of the said Company :- “RESOLVED FURTHER THAT Mr. Rajesh C. Mehta, Director of the Company be and is hereby authorized to give power of attorney to Mr. Tejas H. Shah & Mr. Ketan V. Shah to lodge said Agreements for Sale/documents before the Sub Registrars of Assurances and appear before the same for registration and admit execution of such documents and further to do all such incidental acts and deeds as required in this regard.” 35.
Apparently, there is novation (Section 62 of the Indian Contract Act, 1972) of the Supplementary Agreement dated 7th October 2016, as evidenced by the issuance of the letter dated 15th December 2017. The effect of the letter dated 15th December 2017 prima facie , appears to be as follows:
(a) The amount which was payable under the Supplementary Agreement of Rs.6 crores was modified to Rs.5 crores;
(b) Though, as rightly submitted by Mr. Kushal Mor, learned Advocate for the Respondent No.2, the Supplementary Agreement dated 07th October 2016 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 27
(901) JUDGMENT WP-5364.25-II.DOCX did not confer a right to sell or give consent for sale, the letter dated 15th December 2017 specifically made a reference to the Petitioners being entitled to sell.
36.
The next question thus would be whether the Petitioners could have sold the Charged units as submitted by Mr. Kushal Mor, learned Advocate for the Respondent No.2, without complying with the requirements. This issue is squarely a civil matter requiring adjudication.
37.
Admittedly, the Petitioners and the said Company are before the Arbitrator seeking adjudication of the lis under the Supplementary Agreement dated 7th October 2016 - contract, wherein all the documents, some of which are produced before this Court, are being considered.
38.
In his arguments, Mr. Kushal Mor stressed that the sale of the Charged units is dishonest for the reasons recorded in his submissions. I am unable to accept the said contentions of Mr.
Kushal Mor, as the documents placed in this Petition, prima facie reveal that the Petitioners were given the right to sell the Charged units. Whether the sale complies with the conditions is a contractual dispute that falls within the realm of the parties' reciprocal promises. The element of criminality in the alleged breach of contract is missing.
39.
The Hon’ble Supreme Court in the case of Hridaya Ranjan Prasad Verma Vs. State of Bihar18 in paragraph 15 has observed as follows :- 18 (2000) 4 SCC 168 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 28
(901) JUDGMENT WP-5364.25-II.DOCX “15. In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed."
40.
As indicated in the Special Power of Attorney executed by the said Company, the Petitioners had the authority to lodge the agreement for registration before the Sub-Registrar. The Resolution of the said Company, attached to the Special Power of Attorney, records the company's resolution authorising the Petitioners to lodge the agreement. Thus, criminality is absent from the transaction which is the subject matter of the present proceedings.
Again, for the sake of record, acting contrary to contractual terms and dishonestly misappropriating property stand on different footing. In the present case, I find that the issue, at most, would be the performance of the reciprocal promises, with the said Company claiming that the Petitioners have defaulted, whereas the Petitioners claim that the said Company has defaulted. This issue is squarely before the Sole Arbitrator. The learned Sole Arbitrator has passed the following interim order under Section 17 of the said Act.
“10. Having heard both the learned Senior Advocates, the Tribunal is of the prima facie view that the Claimant This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 29
(901) JUDGMENT WP-5364.25-II.DOCX would be entitled to 50 percent of the saleable area in the free sale building, as per the plan sanctioned in the year 2015. The issue as to whether the Claimant accepted 50 flats as final consideration for its entitlement under the Joint Development Agreement can be adjudicated only after both sides have led their evidence in the matter. The entitlement being of immovable property, the Tribunal is of the considered opinion that the Claimant's right to 50 percent of the original saleable area must be protected.
The admitted position being that the Claimant has received premises admeasuring only 43900 sq.ft. out of the total entitlement of 45390 sq.ft., as per the original sanctioned plan, it stands to reason that the Claimant has adequately satisfied the test for grant of an injunction of premises admeasuring 1490 sq.ft. carpet area.
13. Further, insofar as the Claimant's calculation for payment of interest on the refundable deposit under the Supplemental Agreement is concerned, it is settled law that the terms of a registered document cannot be modified by an instrument that is not registered. If indeed the parties intended the rate of interest to be 30 percent per annum, the parties had sufficient access to correct legal advice and therefore could have amended the terms of the Supplemental Agreement in a manner that would accurately reflect the understanding arrived at between them. It is pertinent that even in the past the parties had executed registered Deed of Rectification and Supplemental Agreement to modify the terms of the Joint Development Agreement.
14. In view of the fact that the Claimant has contended that the payment of interest to be 30 percent per annum, the Claimant was directed to provide a detailed calculation as to how the working of the interest was arrived at. The working provided demonstrates that the interest is claimed at 30 percent per annum. The same is claimed until the Claimant sold the secured flats to itself. Some of the flats were sold by the Claimant to itself after a period of over four years. Therefore, the Tribunal is of the prima facie view that the Claimant has appropriated monies far more than what is contemplated under the Supplemental Agreement. In addition to the reasons set out above, the Tribunal is of the prima facie view that the Claimant having appropriated more monies than were due under the agreement, is disentitled from claiming any further injunctive reliefs.
15. In view of the discussion above, the present Application is disposed of with the following order:
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(901) JUDGMENT WP-5364.25-II.DOCX a. The Respondent is injuncted from selling premises admeasuring 1400 sq.ft. carpet area during the pendency of the present arbitration.
b. The Respondent is directed to intimate the Tribunal in writing of the premises which would be earmarked under the order of injunction within a period of 2 weeks from the date of receipt of the order.
c. The parties shall bear their respective costs for pursuing the present Application.” 41.
There is no dispute or quarrel regarding the proposition advanced by Mr. Kushal Mor, namely, that for every criminal breach of trust, a breach of contract follows. The issue is whether the transaction constituting the breach of trust has a criminal texture.
In view of the above, I do not make reference to the decisions referred by Mr. Kushal Mor, learned Advocate for the Respondent No.2.
42.
The said Company has filed a Counter-Claim before the Sole Arbitrator seeking the following reliefs :- “(a) This Hon ble Tribunal be pleased to declare that the Claimant has committed breach of the terms of the SA and was not entitled to enforce the security of the said 5 Charged Flats;
(b) This Hon'ble Tribunal be pleased to declare that Claimant has committed breach of the terms of MOU by not paying the entire consideration payable under the MOU;
(c) This Hon'ble Tribunal be pleased to declare that the registration of the 5 undated agreements for sale by the Claimant registered on 29th October, 2018 (A-901), 29th October, 2018 (A-902), 26th December, 2020 (B-1301), 17th October, 2018 (B-1302) and 26th December, 2020 (B- 901) is illegal and contrary to law;
(d) This Hon ble Tribunal be pleased to declare that the Claimant is liable to make payment of Income Tax demands along with interest and/or penalty together with any other charges in respect of agreements for sale This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 31
(901) JUDGMENT WP-5364.25-II.DOCX registered by the Claimant on 29th October, 2018 (A-901), 29th October, 2018 (A-902), 26th December, 2020 (B- 1301), 17th October, 2018 (B-1302) and 26th December, 2020 (B-901).
(e) This Hon'ble Tribunal be pleased to declare that the claimant is liable to make payment of GST demands along with interest and/or penalty in respect of the agreements for sale registered by the Claimant registered on 29th October, 2018 (A-901), 29th October, 2018 (A-902), 26th December, 2020 (B-1301), 17th October, 2018 (B-1302) and 26th December, 2020 (B-901).
(f) This Honble Court be pleased to pass an award of Rs.
9,58,42,424/- against the Claimant and direct the Claimant to pay to the Respondent an amount of Rs 9,58,42,424/ - together with further interest at rate of 18% pa on Rs.
7,21,95,280 / - from the date hereof, till payment and/or realisation as per the Particulars of the Claim Exhibit – `R' hereto;
(g) Costs;
(h) Such other further reliefs as nature and consequences of the matter would require from time to time.” 43.
In the present proceedings the dispute between the parties arise out of a contract i.e. Supplementary Agreement dated 07 October 2016 and the subsequent correspondence. The Petitioners have invoked the arbitration clause. The said Company is contesting the proceedings and has raised a counterclaim.
44.
The impugned FIR does not prima facie disclose commission of offence either under Section 316(2), 318(2) or 318(4) of the BNS, 2023. The allegations in the impugned FIR against the Petitioners are insufficient to proceed against the Petitioners.
45.
The said Company has converted a purely civil-commercial dispute into a criminal case solely because civil remedies are time- This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 32
(901) JUDGMENT WP-5364.25-II.DOCX consuming and because criminal prosecution may lead to a quick settlement, as it amounts to applying pressure on the accused.
46.
In the case of Mitesh Kumar Shah vs. State of Karnataka19, while dealing with the aspect of civil disputes being converted into criminal cases, the Hon’ble Supreme Court considered the cases of M/s. Indian Oil Corporation vs. M/s. NEPC Indian Ltd & Ors.20, G.
Sagar Suri & Anr. vs. State of Uttar Pradesh & Ors.21 and the case of Randheer Singh vs. State of Uttar Pradesh & Ors.22 and in para 44 observed as under:
"44. Moreover, this Court has at innumerable instances expressed its disapproval for imparting criminal color to a civil dispute, made merely to take advantage of a relatively quick relief granted in a criminal case in contrast to a civil dispute. Such an exercise is nothing but an abuse of the process of law which must be discouraged in its entirety" 47.
In the case of, Naresh Kumar & Anr. vs. State of Karnataka23, the Hon'ble Supreme Court has held that criminal proceedings cannot be used as a weapon of harassment in a dispute, which is essentially of a civil nature. Paragraph No. 9 of the reads as under:
9. 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 as we have already discussed above. We see no criminal element here and consequently the case here is nothing but an abuse of the process. We therefore allow the appeal and set aside the order of the High Court dated 02.12.2020. The criminal proceedings arising out of FIR No. 113 of 2017 will hereby stand quashed."
19 (2022) 14 SCC 572 20 (2006) 6 SCC 736 21 (2000) 2 SCC 636 22 Criminal Appeal No. 932 of 2021 decided on 02.09.2021 23 2024 SCC OnLine SC 268 This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 33
(901) JUDGMENT WP-5364.25-II.DOCX 48.
Considering the aforesaid facts and concluding that the subject matter of the impugned FIR is a civil dispute inter se between the Petitioners and Respondent No. 2, continuation of the criminal proceedings would be an abuse of process of law in terms of the guidelines laid down by the Hon’ble Supreme Court in the case of Bhajan Lal (supra). Therefore, this Petition is allowed.
Consequently, the impugned FIR is quashed and set aside.
49.
Rule is made absolute in the aforesaid terms.
50.
Observations in this order are restricted to the quashing of the impugned FIR.
51.
Criminal Writ Petition No.5364 of 2025 is disposed of.
(ASHWIN D. BHOBE, J.)
This judgment is corrected pursuant to the speaking to minutes of the order dated 02/09/2026 34