Research › Search › Judgment

Rajasthan High Court · body

2025 DIGILAW 374 (RAJ)

RAJESH SHARMA v. STATE of RAJASTHAN

2025-02-14

FARJAND ALI

body2025
Order : FARJAND ALI, J. 1. By way of filing this instant Criminal Miscellaneous Petition under Section 482 of the Code of Criminal Procedure, the petitioner seeks quashing of F.I.R. No. 53/2021, registered at Police Station Pachpadra, District Barmer, for alleged offenses under Sections 420 and 406 of the Indian Penal Code, 1860, on the ground that the allegations made in the FIR are false, baseless, and do not disclose the commission of any cognizable offense, thereby amounting to an abuse of the process of law. 2. The brief facts of the present case are that the petitioner no. 1 is the proprietor of D.S. Enterprise (hereinafter referred to as “DSE”), a firm engaged in civil construction work, and petitioner no. 2 is the power of attorney holder of the firm. DSE was awarded the civil work contract for the Barmer- Palanpur Pipeline Project by Hindustan Petroleum Corporation Limited (HPCL) at the Barmer Dispatch Terminal, amounting to Rs. 23,06,16,963/-. Upon securing the contract, DSE commenced mobilization activities at the project site. Subsequently, the complainant introduced himself as the proprietor of M/s. Godara Infratech & Power Industries (hereinafter referred to as “GIPI”) and expressed interest in executing the contract work. 3. Pursuant thereto, an Internal Memorandum of Financial Understanding (IMOFU) was executed between DSE and GIPI on 18.12.2012, followed by another IMOFU on 22.12.2012. As per these agreements, GIPI undertook the responsibility of arranging finances for the entire project and agreed to indemnify DSE against any liabilities arising therefrom. Additionally, GIPI was required to pay a 3.5% royalty to DSE, of which 2% was paid, while the remaining 1.5% was to be deducted from bills. However, GIPI failed to fulfill its obligations, resulting in delays in project execution. Consequently, DSE received notices from Mecon Limited on 12.11.2020 and 08.12.2020 and a letter from HPCL on 09.01.2021 regarding slow progress. Ultimately, GIPI halted the work entirely on 06.01.2021. 4. Despite multiple meetings between DSE and GIPI representatives on 06.01.2021, 07.01.2021, 09.01.2021, and 10.01.2021, urging resumption of work, GIPI failed to comply. When DSE attempted to undertake the work, the complainant allegedly obstructed entry, issued threats, and resorted to coercion by forcefully seizing documents and endangering the lives and property of DSE staff. In light of these developments, DSE suffered financial setbacks and issued a letter to GIPI on 12.01.2021, highlighting an investment of Rs. 1.05 crore and an outstanding amount of Rs. In light of these developments, DSE suffered financial setbacks and issued a letter to GIPI on 12.01.2021, highlighting an investment of Rs. 1.05 crore and an outstanding amount of Rs. 33 lakhs. Notices dated 27.01.2021 and 02.02.2021 were subsequently issued, seeking compensation for the delay and non-payment of dues. 5. Due to GIPI’s continued non-performance, HPCL terminated the contract on 12.03.2021, leading to the forfeiture of DSE’s bank guarantee and withholding of retention money. It has been stated by the petitioners that instead of fulfilling its financial obligations, the complainant filed an FIR at Police Station, Pachpadra against petitioner no. 1, leveling allegations against petitioner no. 2 regarding the non-opening of an escrow account, despite the IMOFU stipulating that the escrow account would be operational from RA Bill 4. 6. Upon investigation, the police authorities found the dispute to be civil in nature. Subsequently, a settlement was proposed, wherein DSE was to issue an NOC to HPCL, and GIPI was to pay Rs. 22,92,624/-, inclusive of GST. The settlement terms were confirmed by GIPI via WhatsApp and email on 03.06.2021 and 04.06.2021, respectively. However, when DSE’s representatives arrived in Pachpadra on 15.06.2021 for execution of the settlement agreement, the complainant and his associates allegedly confined them unlawfully and coerced them into signing the NOC under duress. Thereafter, the complainant reneged on the settlement terms. 7. The petitioners asserted that the impugned FIR was filed as a means to exert undue pressure, particularly after the police authorities found the dispute to be of a civil nature. Subsequently, the complainant allegedly manipulated the investigation process, securing its transfer to Pokran Circle to evade financial liabilities and coerce the petitioners. The petitioners maintain that no criminal offense under Sections 406 or 420 IPC has been committed and contend that the FIR constitutes an abuse of the process of law. Aggrieved, they have approached this Court under Section 482 Cr.P.C. seeking quashing of the FIR. 8. Heard the learned counsels present for the parties and gone through the materials available on record. 9. Upon a careful perusal of the records and arguments advanced by the learned counsels, this Court is of the considered view that the dispute between the parties is fundamentally civil in nature. 8. Heard the learned counsels present for the parties and gone through the materials available on record. 9. Upon a careful perusal of the records and arguments advanced by the learned counsels, this Court is of the considered view that the dispute between the parties is fundamentally civil in nature. The existence of an Internal Memorandum of Financial Understanding (IMOFU), the obligations stipulated therein, and the subsequent non- performance indicate that the matter primarily pertains to contractual liabilities and financial obligations rather than constituting an offense under Sections 406 and 420 of the IPC. The fortification of the civil nature of this dispute is further reinforced by the fact that even after the registration of the impugned FIR, both parties entered into a settlement agreement, confirming that the controversy emanates from financial arrangements and not from any fraudulent or criminal act. 10. It is well settled that a mere breach of contract does not ipso facto give rise to criminal liability unless it is demonstrably shown that there was fraudulent or dishonest intent from the inception. The allegations in the present FIR do not satisfy the essential ingredients of cheating (Section 420 IPC) or criminal breach of trust (Section 406 IPC), as there is no prima facie material to establish that the petitioners acted with mens rea at the time of entering into the contract. The records indicate that the complainant was fully aware of the financial arrangements and willingly participated in the agreement, thereby negating any suggestion of deception or dishonest inducement at the inception. 11. Furthermore, the settlement negotiations and communications between the parties post FIR registration further dilute the criminal allegations. The complainant, by entering into a settlement and subsequently reneging on the agreed terms, is attempting to give a cloak of criminality to what is essentially a contractual dispute. This Court cannot permit such abuse of criminal law where civil remedies are available and, in fact, had already been resorted to by the parties. The Supreme Court in Paramjeet Batra v. State of Uttarakhand, (2013) 11 SCC 673 , has categorically held that where a dispute is essentially civil, criminal proceedings should not be allowed to be used as a tool of harassment. The Supreme Court in Paramjeet Batra v. State of Uttarakhand, (2013) 11 SCC 673 , has categorically held that where a dispute is essentially civil, criminal proceedings should not be allowed to be used as a tool of harassment. The same principle was reiterated in Randheer Singh v. State of U.P., (2021) 14 SCC 626 , and Usha Chakraborty v. State of West Bengal, 2023 SCC OnLine SC 90, where it was observed that criminal proceedings cannot be sustained merely to exert pressure in civil disputes. 12. Additionally, this Court finds force in the petitioners’ contention that the FIR was lodged as a means to exert undue pressure and coerce financial gains, particularly in light of the police’s initial finding that the dispute was civil in nature. The subsequent transfer of the investigation to a different jurisdiction appears to be a strategic maneuver by the complainant to evade financial liabilities and to misuse the criminal justice system. Abuse of the criminal process in such a manner militates against the very principles of justice and necessitates the exercise of this Court’s inherent jurisdiction under Section 482 Cr.P.C. to prevent the miscarriage of justice. 13. It is well settled by the Supreme Court in Sarabjit Kaur v. State of Punjab, (2023) 5 SCC 360 , that every breach of contract does not amount to an offense of cheating unless fraudulent or dishonest intent is established at the outset. Similarly, in Vesa Holdings (P) Ltd. V. State of Kerala, (2015) 8 SCC 293 , the Court has drawn a clear distinction between civil breach and criminal culpability, observing that a mere contractual dispute cannot be transformed into a criminal case unless the intention to deceive was present ab initio. 14. In light of the foregoing discussion, it is evident that the FIR in the present case is an abuse of the process of law and is liable to be quashed. The criminal proceedings cannot be permitted to continue as a means of arm-twisting in a contractual dispute where a civil remedy is already available. Accordingly, this Court deems it just and proper to invoke its inherent jurisdiction under Section 482 Cr.P.C. and quash FIR No. 53/2021 registered at Police Station Pachpadra, District Barmer. 15. The criminal proceedings cannot be permitted to continue as a means of arm-twisting in a contractual dispute where a civil remedy is already available. Accordingly, this Court deems it just and proper to invoke its inherent jurisdiction under Section 482 Cr.P.C. and quash FIR No. 53/2021 registered at Police Station Pachpadra, District Barmer. 15. In view of the above observations, the present Criminal Miscellaneous Petition is allowed, and FIR No. 53/2021, registered at Police Station Pachpadra, District Barmer, along with all consequential proceedings arising therefrom, stands quashed. Pending applications, if any, also stand disposed of accordingly.