Supreme Court Decries FIRs Over Civil Disputes, Reiterates Difference Between 'Cheating' & 'Breach Of Contract'

The Supreme Court recently expressed grave concern over the police allowing civil disputes to be wrongly converted into criminal proceedings. The Court also 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. The Court noted that it was noticing this trend in several cases coming from the State of Uttar Pradesh."During the last couple of months, a number of judgments/orders have been pronounced by this Court, especially in cases arising from the State of Uttar Pradesh, deprecating the stance of the police as well as the courts in failing to distinguish between a civil wrong in the form of a breach of contract, non-payment of money or disregard to and violation of contractual terms; and a criminal offence under Sections 420 and 406 of the IPC, the ingredients of which are quite different and requires mens rea at the time when the contract is entered into itself to not abide by the terms thereof." The bench of CJI Sanjiv Khanna and Justice Sanjay Kumar was hearing a plea seeking quashing of criminal proceedings against the petitioner for the offences under sections 420, 406, 354, 504, 506 IPC. It was the case of the complainant that the petitioners allegedly cheated him of Rs.19 Lakhs over the false promise to execute a sale deed of certain house property. The Appellants then moved the Allahabad High Court under S. 482 petition seeking to quash the charges. The High Court refused to quash the charges in the petition under S. 482 CrPC in the prima facie view that "at this stage, it cannot be said that no offence is made out against the applicants."The bench at the outset flagged the issue of the continuous trend where civil disputes are been converted into criminal proceedings by the UP Police. "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."The bench also held that there was a stark difference between breach of contractual obligations and crime of breach of trust or cheating. The Court also negated the perception of the public that, just because civil remedies appear to be time-consuming, opting for criminal procedure would be better. The bench held that the Courts need to be careful in these matters as allowing such criminal proceedings would mean a breakdown of rule of law. "It is the duty and obligation of the court to exercise a great deal of caution in issuing process, particularly when the matter is essentially of civil nature. 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."In another case from UP, namely Deepak Gaba and Others v. State of Uttar Pradesh , the Supreme Court noticed a growing problem where people were misusing the criminal justice system by filing false or misleading complaints. These complaints often hid outrageous claims or were actually about civil disputes, not criminal ones. The Court said such cases should be thrown out early and not be allowed to continue.In Deepak Gabba, the Court observed that a summoning order under Section 204 CrPC should not be passed lightly or as a matter of course. In this case, the complainant had invoked Sections 405, 420, 471, and 120B of the IPC against the accused. However, the Magistrate directed summons to be issued only under Section 406 of the IPC, and not under Sections 420, 471 or 120B of the IPC. This summoning order was challenged before the Allahabad High Court unsuccessfullly."In yet another case, again arising from criminal proceedings initiated in the State of Uttar Pradesh, this Court was constrained to note recurring cases being encountered wherein parties repeatedly attempted to invoke the jurisdiction of criminal courts by filing vexatious complaints, camouflaging allegations that are ex facie outrageous or are pure civil claims.These attempts must not be entertained and should be dismissed at the threshold." It referred to the decision in Thermax Ltd. v. K.M. Johny, which explained that courts must clearly understand the difference between civil and criminal matters, though sometimes a situation might involve both. Further, the bench clarified that before issuing a summons (which starts a criminal case), the Magistrate must think carefully and check if there's enough evidence. Even if detailed reasons aren't needed, there must be a solid basis for moving forward. The Magistrate can...

Supreme Court Decries FIRs Over Civil Disputes, Reiterates Difference Between 'Cheating' & 'Breach Of Contract'

Anmol Kaur Bawa

Magistrates have to be cautious before issuing summons to the accused in disputes of civil nature, the Court reminded.

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