The Karnataka High Court quashed criminal proceedings against a company director accused of cheating and criminal intimidation, holding that a purely contractual dispute cannot be given the colour of a criminal prosecution. The Court observed that “in the absence of any dishonest intention at the inception of the transaction, pursuing both civil and criminal remedies amounts to an abuse of process of law.”
The case arose from a complaint lodged by a private company, which had entered into a sale-purchase agreement with Jambu Odisha Trade Private Limited, where the petitioner served as one of the directors. The complainant alleged that despite making payments for iron ore fines under the agreement, the materials were not delivered in full as per the terms. Claiming that the petitioner and the company had acted dishonestly, the complaint led to registration of a case for offences under Sections 420 and 506 of the Indian Penal Code.
Aggrieved by this, the petitioner approached the High Court seeking quashing of the proceedings. It was contended that he was arrayed as an accused merely by virtue of being a director, without the company itself being made the principal accused. It was further argued that the allegations, at best, disclosed a breach of contract, and that the dispute was civil in nature, incapable of sustaining criminal charges of cheating or intimidation.
On the other hand, counsel for the complainant argued that the materials on record indicated a dishonest intention from the very beginning, which justified registration of the case.
The High Court, after considering rival submissions and precedents, noted that the complaint itself acknowledged partial performance of the contractual obligations by Jambu Odisha Trade Pvt. Ltd. Referring to the law laid down by the Apex Court, the Court reiterated that, “In the absence of any element of criminality or dishonest intention at the inception of the transaction, a party cannot be permitted to pursue both civil and criminal remedies simultaneously, for such parallel proceedings would amount to an abuse of the process of law.”
The Court observed that the essence of the dispute lay in the performance of contractual obligations and could only be adjudicated before a competent civil forum. Permitting the prosecution to continue would, in its view, amount to misuse of criminal law for resolving a private contractual dispute.
Allowing the petition, the Court quashed the FIR registered against the petitioner and all consequential proceedings pending before the trial court. However, it clarified that the complainant company remains at liberty to initiate appropriate civil proceedings to enforce its contractual rights in accordance with law.
Case Title: Sailen Das vs. State by Kodigehalli Police Station & Anr.
Case No.: Writ Petition no.26873 of 2024
Coram: Justice Sachin Shankar Magadum
Advocate for Petitioner: Adv. Shravanth Arya Tandra
Advocate for Respondent: Adv. Anoop Kumar, K.Divakara (Senior Advocate), Aditya D
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