J&K&L High Court Quashes FIR Over Railway Contract Dispute; Says Signing Agreement In Own Capacity Without Claiming Authority Is Not Forgery

The Court held that an agreement executed by Mohd. Ashraf Beigh on October 16, 2021, could not be treated as a forged document merely because he allegedly lacked authority to execute it on behalf of a private construction company. The agreement itself disclosed that he was representing the company as the father of its Managing Director, and nowhere claimed that he held any independent authorisation to act on its behalf.

Justice Sanjay Dhar further found that the underlying dispute concerned payments, alleged contractual breaches and termination of a commercial sub-contract. Observing that the investigating agency had effectively assumed the role of a recovery agent for the complainant, the Court held that the criminal proceedings were an abuse of the process of law.

Background

The petitions were filed by Mohd. Ashraf Beigh, Imran Beigh and Abid Beigh under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, challenging the FIR registered for offences under Sections 379, 419, 420, 465, 467, 468, 471 and 120-B of the IPC, along with the charge-sheet arising from it.

The dispute originated from a railway construction project involving an underground excavation tunnel at Banihal. The work had been allotted by IRCON International Pvt. Ltd. to M/s Beigh Construction Company Pvt. Ltd. (BCC), whose Managing Director was Imran Beigh.

According to the prosecution, in May 2020, Imran Beigh approached Ghulam Rasool Wani and offered to sublet the railway work to him. A work order was issued on August 20, 2020, followed by an agreement dated December 20, 2020, with retrospective effect from September 27, 2020. Under the arrangement, Wani furnished a bank guarantee of ₹1 crore.

The prosecution alleged that although Wani executed work worth approximately ₹3.78 crore, the payments released by IRCON were credited directly into BCC's account instead of the designated escrow account. It was alleged that the petitioners withheld Wani's agreed 76 per cent share of the payments.

The contract was subsequently terminated on March 13, 2021. The prosecution further alleged that the parties entered into fresh arrangements under which a portion of the bank guarantee was to be returned and Wani was to receive a partnership interest in the ongoing project. Wani allegedly invested a further ₹31 lakh, but the agreed payments were not fully released.

Another agreement in October 16, 2021, was executed by Mohd. Ashraf Beigh. The investigating agency alleged that Ashraf had no authority to execute the agreement on behalf of BCC and that the document was therefore fabricated. Under the agreement, BCC had undertaken to pay ₹42 lakh either to Wani or to the vendors from whom he had procured material and equipment on credit.

The prosecution also alleged that the petitioners subsequently removed machinery and equipment from the project site and furnished falsified records during the investigation. It further relied upon settlement agreements and undertakings concerning repayment of the outstanding amount, including an arrangement involving the handover of possession of a house at Bathindi.

The petitioners, however, maintained that the dispute was purely commercial and arose from disagreements over the execution of the sub-contract, payments and termination of the work. They alleged that criminal proceedings had been initiated to pressurise them into accepting a settlement favourable to the complainant.

Court's Observation

The Court examined the allegations offence-wise and found that the essential ingredients of several offences invoked by the investigating agency were not disclosed by the material on record.

The investigating agency had invoked Section 379 IPC on the allegation that the petitioners had unlawfully removed machinery and equipment from the project site.

However, the Court noted that the initial sub-contract expressly provided that BCC would make available the machinery already present at the site for execution of the work. It also considered two civil court orders: one passed by the Sub-Judge, Ramban, on October 18, 2021, and another by the Munsiff, Banihal, on February 1, 2022, concerning interference with the project and removal of machinery.

The Court found that the machinery and equipment belonged to BCC. Even if their removal amounted to a violation of the civil court's order, the act could not be converted into theft of property belonging to the company itself. It observed that “A person cannot be prosecuted for having committed theft of his own property.”

Signing agreement in own capacity does not amount to impersonation

The Court next examined the allegation of cheating by personation under Section 419 IPC against Mohd. Ashraf Beigh.

The investigating agency's case was that Ashraf had executed the agreement dated October 16, 2021, on behalf of BCC without possessing authority to do so and had thereby impersonated an authorised representative of the company.

Rejecting this reasoning, the Court noted that the agreement clearly mentioned that Ashraf was representing BCC as the father of Imran Beigh, its Managing Director. It nowhere stated that Ashraf held any written or other authority to execute the agreement on behalf of the company.

The Court held that there was no false representation or misrepresentation by Ashraf at the time of execution of the document. It also noticed that the agreement had been executed by Waseem Wani on behalf of his father, Ghulam Rasool Wani, even though the special power of attorney in his favour had been executed only on September 17, 2022, whereas the agreement was dated October 16, 2021.

The Court observed that if the investigating agency's reasoning regarding lack of authority were accepted, Waseem Wani would also be liable on the same basis. It accordingly held that the ingredients of Section 419 IPC were not attracted.

Examining the allegations under Sections 415 and 420 IPC, the Court reiterated that dishonest or fraudulent intention must exist from the very inception of the transaction. Mere failure to honour contractual obligations or subsequent withholding of payments would not, by itself, constitute cheating.

The Court considered the allegation that BCC had entered into the sub-contract despite lacking prior written permission from IRCON. It noted that the contractual arrangement between IRCON and BCC did not, by itself, establish that Wani had been defrauded. The material showed that even after termination of Wani's sub-contract, BCC continued executing the work under its subsisting contract with IRCON.

In these circumstances, it found no material to suggest that the petitioners had intended to cheat the complainant from the inception of the transaction. The Court observed that “the petitioners had no fraudulent intention to cheat the complainant party at the inception of the transaction.”

It further held that the subsequent disputes over payments and contractual performance could not retrospectively establish the dishonest intention necessary to constitute cheating.

The Court then turned to the allegations of forgery under Sections 465, 467, 468 and 471 IPC, which were founded on the claim that Mohd. Ashraf Beigh had no authority to execute the agreement dated October 16, 2021, on behalf of BCC.

Examining Sections 463 and 464 IPC, the Court explained that the offence of forgery requires the making of a false document in the manner contemplated by Section 464. Relying upon the Supreme Court's judgment in Mohd. Ibrahim v. State of Bihar, (2009) 8 SCC 751, the Court highlighted the distinction between a person executing a document in his own capacity and one who impersonates another person or falsely claims authority to execute a document on someone else's behalf.

Applying that principle, the Court held,

“From the aforesaid analysis of the legal position, it is clear that when a person executes a document in his own capacity and does not claim that he is authorized by someone else, it cannot be stated that he has made a false document.”

It accordingly concluded that the agreement could not be termed forged and that the investigating agency had “grossly erred in invoking the offences defined under Sections 465, 467, 468 and 471 of the IPC.”

In its concluding analysis, the Court examined the nature of the dispute between the parties. It noted that the complainant alleged wrongful termination of the contract and withholding of payments, whereas the petitioners maintained that the work had not been executed in accordance with the contractual terms and that the quality of work was substandard.

The Court observed that the real controversy was which party had breached the contractual arrangement and what monetary liability, if any, followed from such breach.

Holding that the dispute was essentially commercial, the Court made a strong observation on the manner in which the criminal investigation had proceeded:

“A criminal investigation cannot be resorted to for determination of such dispute. However, the investigating agency, it seems, has converted this purely commercial dispute into a criminal case by assuming the role of a recovery agent on behalf of the complainant.”

In alignment with the above findings the court allowed both petitions and quashed the FIR.