Dr. K. V. K. Rao vs. State Of Chhattisgarh

Facts

The petitioner, Dr. K.V.K. Rao, approached the High Court seeking to quash an FIR registered against him. The FIR was filed by Anil Kumar Goyal (respondent no. 3) alleging offences under Sections 406 and 420 of the Indian Penal Code (IPC). Goyal claimed that he entered into an agreement with the petitioner's firm, M/s. Kedhari Traders, for the purchase of scrap material of power plant equipment on "as is where is basis" for INR 30 Crores. Goyal alleged that he paid INR 7.5 Crores, but the petitioner only allowed him to lift material worth INR 1.89 Crores and subsequently stopped providing material, demanding more money and refusing a refund. The petitioner contended that the dispute was purely contractual, arising from Goyal's default in making timely payments as per the agreement dated 14/08/2018. The petitioner further stated that the agreement was terminated on 20/11/2018 due to Goyal's breaches, and a complaint was filed against Goyal's partner for unauthorized lifting of material. The petitioner also claimed that allegations of GST non-payment were false and that the dispute was civil in nature.

Held

The Court held that the dispute between the parties is purely commercial and of a civil nature, which has been wrongly converted into a criminal dispute. The Court relied on Supreme Court judgments in Vinod Natesan v. State of Kerala and Sachin Garg v. State of U.P. to emphasize that continuing criminal proceedings for a civil dispute amounts to an abuse of the process of law. The Court found that the allegations in the FIR, even when scrutinized, do not satisfy the ingredients of Sections 406 and 420 IPC. The petitioner's contention that the complainant defaulted in payment and that the agreement was terminated according to its terms was noted. The Court concluded that the machinery of the criminal courts should not be invoked for a dispute that is commercial in nature and ought to be resolved through civil remedies, such as arbitration, as provided in the agreement. Therefore, the FIR and all consequential proceedings were quashed.

Key Issues

1. Whether the allegations in FIR No. 0187/2019 dated 30/05/2019, registered at PS Deendayal Nagar (DD Nagar), Raipur, disclose the commission of cognizable offences under Sections 406 and 420 of the IPC against the petitioner, thereby warranting quashing of the FIR and consequential proceedings. Petitioner's arguments: The petitioner argued that the FIR does not disclose any cognizable offence as all actions were in accordance with the agreement. The FIR was registered mechanically to falsely implicate him and pressurize him for a refund he was not entitled to. There was no dishonesty, misrepresentation, or breach of trust, nor any wrongful loss caused to the complainant, thus no offence under Sections 406 and 420 IPC is made out. The petitioner asserted that the complainant defaulted on payments, leading to the lawful termination of the agreement, and that the dispute is purely civil, with an arbitration clause available. The registration of the FIR was a misuse of the process of law. Revenue/State's arguments: The judgment does not record specific arguments made by the State/respondents regarding the allegations in the FIR.