Disputes Over Financial Settlements, Plot Transfers Are Matters For Civil Court: Madhya Pradesh High Court Quashes FIR
The Madhya Pradesh High Court has quashed an FIR for cheating and criminal breach of trust, observing that disputes arising out of commercial transactions, including financial settlements and plot transfers, are matters that should be adjudicated in a civil court.The bench of Justice BP Sharma observed; "In the present matter, the relationship between the parties was admittedly that of...
The Madhya Pradesh High Court has quashed an FIR for cheating and criminal breach of trust, observing that disputes arising out of commercial transactions, including financial settlements and plot transfers, are matters that should be adjudicated in a civil court.
The bench of Justice BP Sharma observed;
"In the present matter, the relationship between the parties was admittedly that of persons engaged in commercial dealings arising from development agreements and property transactions. The material available on record nowhere demonstrates entrustment of property in the legal sense contemplated under Section 409 IPC".
A petition was filed seeking to quash an FIR for cheating (Section 420), criminal breach of trust (Section 409), obscenity (Section 294) and criminal intimidation (Section 506) of the IPC.
The petitioner was engaged in real estate development in Jabalpur and had entered into several agreements with M/s Anant Investment and the complainant (respondent no 2) concerning the development of residential colonies, including the project named "Anand Parishar".
Disputes arose over the performance of contractual obligations, financial settlements, and the transfer of plots. While the petitioner had filed complaints alleging fraudulent conduct by the complainant, the complainant subsequently lodged an FIR alleging the misappropriation of investment funds and the dishonest transfer of plots.
The counsel for the petitioner argued that the dispute was purely civil and commercial, arising from contractual obligations and financial management. The counsel further argued that no fraudulent or dishonest intention existed at the inception of the agreement, and mere disputes over money, plot transfers or contract non-performance could not constitute criminal offences.
The counsel further highlighted that the element of entrustment necessary for criminal breach of trust under Section 409 IPC was absent, as the relationship was commercial and contractual.
The counsel for the respondent argued that the FIR discloses cognizable offences, alleging that the petitioner dishonestly transferred plots after obtaining investments, amounting to cheating and criminal breach of trust.
After examining the material on record, the court observed that the case represented yet another instance where a purely civil and contractual dispute had been given a criminal colour in an attempt to exert pressure upon the opposite party.
The court noted that the relationship between the parties arose from business transactions concerning property development and related financial arrangements, and therefore, the genesis of the dispute itself was contractual and commercial in nature.
The bench observed; "However, from a bare reading of the FIR and the documents accompanying the same, it becomes abundantly clear that the allegations pertain to disputes regarding the refund of the consideration of the respondents, which was assured by the petitioner to return the same. Such disputes are quintessentially civil in character and are amenable to adjudication before competent civil courts".
The court further found that there was no material in the FIR to indicate that, at the time of entering into agreements, the petitioner possessed any dishonest or fraudulent intention. On the contrary, the record demonstrated that the parties had maintained continuing commercial relations over a considerable period involving the execution of multiple agreements and financial transactions.
Thus, the court held that the allegations relating to the transfer of plots and settlement of accounts may, at best, give rise to civil consequences but could not by themselves constitute an offence of cheating.
The bench further held that the allegations concerning non-refund of the alleged balance amount arose entirely out of business arrangements and did not satisfy the statutory ingredients necessary to constitute criminal breach of trust.
The court also noted that the material placed on record by the petitioner indicated that amounts allegedly invested by the complainant had already been returned through M/s Anant Investment on different dates. Whether any further amount remained payable, or whether either party had breached the contractual arrangements, were matters squarely falling within the domain of civil adjudication and could not form the basis of criminal prosecution in the absence of foundational criminal ingredients.
Accordingly, the court held that the prosecution was a clear attempt to impart a criminal colour to a dispute fundamentally civil and contractual in nature. Consequently, the FIR, along with the consequential chargesheet against the petitioner were quashed.
Case Title: Pankaj Saraf v State of Madhya Pradesh, MCRC-4819-2025
For Petitioner: Advocate Arihant Tiwari
For State: Advocate Swatantra Pandey
For Complainant: Advocate Dolly Soni