CIVIL DISPUTES SHOULD NOT BE GIVEN CRIMINAL CLOAKS.

Over the years, there have been a lot of unprecedented cases filed before the courts where a dispute which is solely of civil nature is given a cloak of criminal offence. Disputes especially related to contractual breaches are often given a criminal recourse for speedy resolutions of settlement due to the pressure criminal prosecution brings. 

It is also not disputed that civil disputes may also have a criminal texture and the courts should carefully examine to curl out the malafide intentions before exercising its jurisdiction under 482CrPc (Sec 528 BNSS) to quash any fraudulent criminal prosecution. The courts have time and again cautioned and depreciated when disputes of strictly civil nature are given a criminal recourse. 

The Apex court in In G. Sagar Suri v. State of U.P. [(2000) 2 SCC 636, the Supreme Court observed that “It is to be seen if a matter, which is essentially of a civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which the High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this section has to be exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice.”

In Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736, the Apex court while deciding whether existence or availment of civil remedy with respect to breach of contract bars remedy under criminal law has opined that

“no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law. One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power under Section 250 CrPc more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may.”

 

BREACH OF CONTRACTUAL OBLIGATION DOES NOT ALWAYS AMOUNT TO CRIMINAL PROSECUTION.

There is a difference between breach of contractual obligation and the offence of cheating. The SC in Vesa Holdings (P) Ltd. v. State of Kerela (2015) 8 SCC 293 has observed that a mere breach of contract would not attract the offence of cheating unless the complainant established a case of deception since inception or fraudulent or dishonest intention to cheat at the time of making promise or representation.

In Sarabjit Kaur v. State of Punjab, (2023) 5 SCC 360 the Supreme court while dealing with a similar issue 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 up promise will not be enough to initiate criminal proceedings.” The court then went on to observe that “The entire idea seems to be to convert a civil dispute into criminal and put pressure on the appellant for return of the amount allegedly paid. The criminal courts are not meant to be used for settling scores or pressurize parties to settle civil disputes. Wherever ingredients of criminal offence are made out, criminal courts have to take cognizance. The complaint in question on the basis of which FIR was registered was filed nearly three years after the last date fixed for registration of the sale deed. Allowing the proceedings to continue would be an abuse of process of the court.”

Reiterating Sarabjit (Supra), The SC in Jay Shri & Anr vs State of Rajasthan SLP (Crl) 14423/2023 granted an anticipatory bail to the petitioners who was falsely implicated in an FIR u/s 406/420 for merely a breach of contract.

The court while exercising its power under section 482 CrPc (528 BNSS) should first examine the nature of the facts alleged and if a civil remedy is available and adopted, the courts should not hesitate to quash such criminal proceedings which are of purely civil nature. (See Naresh Kumar & Anr vs. State of Karnataka & Anr 2024 SCC Online SC 268 & Paramjeet Batra v. State of Uttarkhand, (2013)11 SCC 673)

The Apex court in Randheer Singh vs State of UP (2021) 14 SCC 626 & Usha Chakraborty v. State of West Bengal 2023 SCC Online SC 90 reiterating the same principle opined it Paramjeet (supra) has observed that “criminal proceedings cannot be taken recourse to as a weapon of harassment.”

Recently, the SC in  has passed a detailed speaking order where despite multiple precedemts of the SC, there is still growing practice of turning civil disputes criminal. The court observed that "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. Failure to do so results in the breakdown of the rule of law and amounts to misuse and abuse of the legal process." The Apex court also differentiated between breach of contract and cheating and stressed that a breach of contract could attract the offence of cheating or criminal breach of trust only when there is an element of dishonest intention from the very beginning of the contractual agreement.

Thus, strictly civil disputes should be confined to civil remedies and if the parties tend to avail criminal recourse to expedite civil dispute then it is also the duty of the courts to exercise its powers under 250 CrPc and provide compensation for false prosecution even if the aggrieved party has not prayed for the same.