Economic Offences Stand On Different Footing, High Courts Should Be Cautious While Quashing Such FIRs At Early Stage : Supreme Court

The Supreme Court recently refused to quash an FIR against a company's director for their alleged involvement in the economic offences, noting that the High Court erred in quashing the case despite being apprised with a factum aspect that the directors of the company, established certain dummy/shell companies and the monetary transaction were circulated to these shell/dummy companies.

The bench comprising Justices Bela M. Trivedi and Prasanna B. Varale was hearing the case in which the High Court quashed the criminal proceedings against the respondent's director arising out of economic offences just because there had been long-standing business dealings between the appellant and respondent company and the dispute seemed purely civil (non-payment of dues).

Reversing the High Court's decision, the judgment authored by Justice Varale, placing reliance on the case of Kurukshetra University and Anr. v. State of Haryana and Anr., (1977) 4 SCC 451, observed that the High Court should have refrained from quashing the FIR at the nascent stage of the investigation.

“The High Court also failed to note that when certain basic material was brought to the notice of the High Court about the criminal conspiracy hatched by the accused persons, it was necessary for the investigating agency to investigate thoroughly, in the process of unearthing the truth before the Court. This aspect could have been tested only by conducting a proper trial.”, the court observed.

The Court reiterated that though the powers granted to the High Courts under Section 482 CrPC are wide and discretionary, they shall not be used arbitrarily to stifle legitimate investigations.

“It is true that there is a growing tendency of parties to rope in their counterparts to harass and extract monetary transaction, it is the duty of the Court to consider the facts of each case, in its proper perspective and then to arrive at the conclusion as to whether the case warrants investigation or the proceedings are required to be quashed. The peculiar facts and circumstances of the present case warrants thorough investigation as there was a huge amount involved. As we have already stated that when the petitioner approached the High Court for quashing of the FIR, the investigation was at its initial stage and subsequent to filing of the present Special Leave Petition in this Court it seems that the investigation was concluded by filing the chargesheet.”, the court observed.

Economic Offences Constitute a Separate Class, Quashing FIRs Requires Caution

“A profitable reference can be made to the case of Parbatbhai Ahir v. State of Gujarat and Anr. [2017 (9) SCC 641] wherein it was observed that economic offences by their very nature lie beyond the domain of mere dispute between private parties and the High Court would be justified in declining to quash where the offender is involved in an activity akin to a financial or economic fraud or misdemeanour. The consequences of the act complained of upon the financial or economic system will weigh in the balance. Thus, it can be concluded that economic offences by their very nature stand on a different footing than other offences and have wider ramifications. They constitute a class apart. Economic offences affect the economy of the country as a whole and pose a serious threat to the financial health of the country. If such offences are viewed lightly, the confidence and trust of the public will be shaken.”, the court said.

“we are of the view that the High Court was not justified in exercising its jurisdiction under Section 482 of CrPC. The appeals are accordingly allowed. It is clarified that the above-mentioned observations are only prima facie in nature and the trial court shall proceed without being influenced by this judgement/order and strictly in accordance with law.”, the court ordered.

The appeal was allowed accordingly.

Case Title: DINESH SHARMA VERSUS EMGEE CABLES AND COMMUNICATION LTD. & ANR.

Citation : 2025 LiveLaw (SC) 492

Click here to read/download the judgment

Appearance:

For Petitioner(s) Mr. Krishnamohan K., AOR Ms. Dania Nayyar, Adv.

For Respondent(s) Ms. Sansriti Pathak, A.A.G. Mr. Milind Kumar, AOR Mr. Aman Prasad, Adv. Mr. Shekhar Prit Jha, AOR Ms. Himani Mishra, Adv. Ms. Tamanna Swamy, Adv. Mr. Anurag Bansal, Adv.