Nitin Chandulal Thakkar And Others vs. The State Of Maharashtra And Another

Held

The High Court allowed the application and quashed the FIR and consequential criminal proceedings. The Court found that the FIR predominantly suggested a dispute of a civil nature without any element of criminality. It noted that both parties had entered into a contractual obligation, and the dispute appeared to revolve around the cost reduction of supplied goods. The Court observed that the FIR and the documents placed before it lacked specific allegations attributing intentional deception from the inception of the transaction, indicating it was a matter of non-fulfillment of contractual liability. The Court emphasized that criminal proceedings cannot be used as a tool for settling contractual obligations. Citing Supreme Court judgments, the Court reiterated that the inherent powers under Section 482 of the Criminal Procedure Code should be exercised to prevent abuse of process and secure the ends of justice, particularly when a civil dispute is given a cloak of a criminal offense. Therefore, in the absence of a prima facie case making out ingredients for offences under Sections 406 and 420 of the Indian Penal Code, the Court invoked its jurisdiction to quash the FIR.

Facts

The applicants, directors of Narol Textile Infrastructure and Enviro Management (NTIEM), are seeking to quash an FIR and subsequent criminal proceedings. M/s. Rishabh Metals and Chemicals Private Limited (Rishabh Metals) alleged that NTIEM placed purchase orders for chemicals worth Rs. 44,09,234/- between July 21, 2019, and August 21, 2019. Rishabh Metals supplied the goods on credit, with payment assured within 30 days, and paid the GST component. However, NTIEM allegedly failed to clear the bills, leading Rishabh Metals to claim deception and a loss of Rs. 44,09,234/-. The FIR was registered for offences under Sections 406 and 420 read with Section 34 of the Indian Penal Code. NTIEM had previously made a payment of Rs. 1,45,33,055/-. A dispute arose over the cost of goods supplied during the period in question, with NTIEM seeking a credit note of Rs. 44,09,234/- which Rishabh Metals did not agree to.

Key Issues

1. Whether the FIR and consequential criminal proceedings for offences under Sections 406 (criminal breach of trust) and 420 (cheating) of the Indian Penal Code, 1860, are an abuse of the process of law, given that the dispute appears to be predominantly civil in nature? Petitioner's Arguments: The applicants argued that the FIR is false, frivolous, and lacks any element of criminality. They contended that they were falsely implicated without the company itself being arraigned as an accused. The dispute is primarily civil, stemming from a disagreement over the cost of goods, not deception at the inception of the transaction. They highlighted that NTIEM had made a substantial payment and that the issue was a non-fulfillment of contractual liability. They relied on Supreme Court judgments emphasizing that criminal proceedings should not be used to settle civil disputes. Revenue/State's Arguments: The respondents (State of Maharashtra and Rishabh Metals) vehemently opposed the application. They argued that the applicants, as directors responsible for NTIEM's business, induced Rishabh Metals to supply goods on credit. They contended that the applicants illegally withheld payment of Rs. 44,09,234/-, and their conduct demonstrated deceitful intentions. They asserted that there was sufficient material to establish deceitful intentions and triable material against the applicants, and therefore, the inherent powers under Section 482 of the Criminal Procedure Code should not be exercised, with parties being relegated to trial.