Misusing The Law: How Criminal Proceedings Deter Investors In Uttar Pradesh

The imposition of costs on the State in relation to the burgeoning trend of converting civil disputes into criminal prosecutions is a stark paradox, given the State's concerted efforts to attract investments. This development not only undermines the State's policy objectives but also necessitates immediate corrective measures. The Allahabad High Court's earlier directive in Soney Lal and others v State of U.P. and Others (CRLP No. 5948/2024) vide order dated April 18, 2024, assumes greater significance in this context, a pronouncement which underscored the need for the State to initiate remedial processes to address this malaise and ensure that its policies are not vitiated by such aberrations.

“15. In the light of aforesaid recent judgments of Supreme Court, this Court deem it appropriate to issue direction to the Director General of Police, U.P. to the following effect:-

(i) Where an F.I.R. is sought to be registered under Sections 406, 408, 420 / 467, 471 I.P.C. etc.,(Corresponding to 316(2), 316(4), 318(4), 338, 340(2) of Bhartiya Nyay Samhita) wherein, on the face of it, it appears that there is a commercial dispute or a civil dispute or a dispute arising out of different types of agreements or partnership deeds, etc. before registration of the F.I.R., an opinion will be taken in all such cases from the concerned District Government Counsel Deputy District Government Counsel in their respective Districts and only after obtaining a report, the F.I.R. will be registered. Such opinion will be reproduced in concluding part of F.I.R.

(ii) The D.G.P., U.P. will issue necessary instructions to all the S.S.P. in the State of Uttar Pradesh who will further instruct all Station House Officers of their respective police stations to ensure that prior to registration of the F.I.R. where a civil / commercial dispute is apparent, the opinion of the District / Deputy Government Counsel should be taken at the pre-cognizance stage.

(iii) Director Prosecution U.P. will also insure necessary directions to all Government counsels concerned.

(iv) It is made clear that in all cases where first information reports, which are to be registered after 01.05.2024, if no such legal opinion is taken by the concerned police official before registration of the F.I.R., as per (i) and (ii) above they may be liable to contempt proceedings.

(v) This direction will not apply where F.I.R's. are registered on direction of competent Court under Section 156(3) Cr.P.C. as these directions relates to precognizance stage.”

Regrettably, for reasons best known to them, the State of Uttar Pradesh challenged the aforementioned order in the Hon'ble Supreme Court through Special Leave Petitions (SLP Nos. 11302-11303/2024, State of U.P. v. Soney Lal). By an interim order dated August 14, 2024, the Supreme Court stayed the implementation and operation of paragraphs 15 to 17 of the impugned judgment. This interim order was subsequently extended for a period of four months vide order dated September 20, 2024. The matter was most recently listed on April 8, 2025, leaving the issue still pending resolution.

The Allahabad High Court's order in Soney Lal v. State of Uttar Pradesh was a response to the rising trend of civil disputes being weaponized through criminal prosecutions, effectively coercing parties into one-sided settlements. Regrettably, despite the High Court's directive, the police failed to adhere to the mandate, necessitating intervention of the author herein who moved a detailed representation before the Director General of Prosecution highlighting the concern and requesting for an urgent intervention, which , in any case, was not responded (Copy attached) . Instead of ensuring compliance to the far reaching directive, the State of Uttar Pradesh opted to challenge the order before the Hon'ble Supreme Court, which subsequently stayed the implementation of the directive. This stay has effectively perpetuated the status quo, rendering nugatory the High Court's efforts to curb the egregious misuse of the criminal justice system.

The Hon'ble Supreme Court , while passing the said judgment in Rikhab Biyani also noted “ We are constrained to pass this detailed speaking order, as it is noticed that, notwithstanding the law clearly laid down by this Court on the difference between a breach of contract and the criminal offence of cheating, we are continuously flooded with cases where the police register an FIR, conduct investigation and even file chargesheet(s) in undeserving cases.”

While passing the said stricture on the working of the Uttar Pradesh Police, the Hon'ble Supreme Court referred to the following pronouncements which were made earlier -

i. Lalit Chaturvedi and Others v. State of Uttar Pradesh and Another, 2024 SCC Online SC 171.

ii. Mohammed Ibrahim and Others v. State of Bihar and Another (2009) 8 SCC 751

iii. V.Y. Jose and Another v. State of Gujarat and Another (2009) 3 SCC 78

iv. Delhi Race Club (1940) Limited and Others v. State of Uttar Pradesh and Another, (2024) 10 SCC 690

v. Kunti and Another v. State of Uttar Pradesh and Another, (2023) 6 SCC 109

vi. Sarabjit Kaur v. State of Punjab and Another (2023) 5 SCC 360

vii. G. Sagar Suri and Another v. State of U.P. and Others, (2000) 2 SCC 636

viii. Vijay Kumar Ghai and Others v. State of West Bengal and Others, (2022) 7 SCC 124

ix. Deepak Gaba and Others v. State of Uttar Pradesh and Another (2023) 3 SCC 423

x. Thermax Limited and Others v. K.M. Johny and Others, (2011) 13 SCC 412

xi. Sharif Ahmed and Another v. State of Uttar Pradesh and Another, 2024 SCC OnLine SC 726

A conjoint reading of these judgments elucidates that a breach of contract does not ipso facto constitute criminal cheating unless a fraudulent or dishonest intention is demonstrable at the inception of the transaction. Mere failure to fulfill a promise is insufficient to initiate criminal proceedings. To establish the offence of cheating, it is essential to prove that the accused harboured a dishonest intention at the time of entering into the transaction with the complainant. Sans this crucial element, the offence of cheating cannot be said to be made out.

It is incumbent upon the courts to exercise utmost circumspection when issuing process, particularly in matters that are essentially civil in nature. The notion that civil remedies are inadequate or time-consuming and therefore warrant criminal proceedings should be discouraged and rejected, as criminal procedure cannot be leveraged to exert pressure. Failure to adhere to this principle undermines the rule of law and constitutes a gross misuse and abuse of the legal process.

The Supreme Court has expressed its dismay at the recurring trend in the State of Uttar Pradesh of parties invoking criminal proceedings through vexatious complaints, often disguising civil claims or outrageous allegations. The Court emphasized that such attempts must not be entertained and should be dismissed at the threshold, underscoring the need for gatekeeping by the courts to prevent abuse of the criminal justice system.

In all such matters, the Courts must be very sensitive and must vigilantly distinguish between civil and criminal wrongs, acknowledging that some allegations may encompass both. Magistrates must apply their minds judiciously, recognizing the profound consequences of summoning orders, which set criminal proceedings in motion. While detailed reasons may not be required, adequate evidence must exist on record to justify the initiation of proceedings. Magistrates should scrutinize the evidence carefully, posing questions to complainants and investigating officers as necessary to discern the veracity of allegations. Summoning orders should be issued only when the complaint or chargesheet discloses a prima facie offence, supported by material that constitutes the essential ingredients of the offence. Such orders should not be passed lightly or as a matter of routine, but rather with due deliberation and consideration of the evidence.

The Hon'ble Supreme Court, in the judgment aforesaid , also referred to the celebrated case of Sharif Ahmed and Another v. State of Uttar Pradesh and Another, which draws out the ingredients required to establish an offence under Sections 406, 415, 420, 503 and 506 of the IPC:-

a) Section 406 (criminal breach of trust) IPC , corresponding to Section 316(2) of the BNS requires entrustment and fiduciary relationship, not applicable in normal transactions.

b) Section 415 (cheating) IPC, corresponding to Section 318 of the BNS requires dishonest inducement at the time of agreement, which is not established here.

c) Section 503 and 506 (criminal intimidation)IPC Corresponding to Section 351(1) , 351(2) and 351(3) of BNS requires intent to cause alarm through threats, which is not made out without evidence of threat and intent.

In view of the persistent misuse of criminal proceedings to settle civil disputes, it is imperative for the State of Uttar Pradesh and its police to issue a comprehensive advisory to all investigating officers and field-level personnel. This advisory should strictly emphasize adherence to the Supreme Court's directives, ensuring that civil disputes pertaining to property, contracts, and related matters are not unwarrantedly converted into FIRs. By doing so, the State can uphold the rule of law, prevent abuse of the criminal justice system, and foster an environment conducive to investment and dispute resolution through appropriate legal channels.

The author is an Advocate at High Court Allahabad, Lucknow Bench . Views are personal.