Supreme Court Quashes FIR in Cheating Case: Anita Maria Dias vs. State of Maharashtra (2018)

Introduction

Date of the Judgment: 19 January 2018

Citation: (2018) INSC 37

Judges: A.K. Sikri, J. and Ashok Bhushan, J.

Can a criminal case be quashed if the parties involved have settled their dispute? The Supreme Court of India recently addressed this question in a case involving allegations of cheating. The Court examined whether the High Court should have quashed the criminal proceedings when the complainant and the accused had reached a settlement. This case highlights the circumstances under which the Court can use its inherent powers to end criminal proceedings, particularly in matters that have a significant civil element. The judgment was delivered by a two-judge bench comprising Justice A.K. Sikri and Justice Ashok Bhushan.

Case Background

The case involves a dispute between Smt. Anita Maria Dias and another (the appellants), who are directors of M/s. Karl Logistics, and the State of Maharashtra along with a complainant (Respondent No. 2). The complainant had lodged a First Information Report (FIR) against the appellants for offenses under Sections 406, 420, 467, 471, and 34 of the Indian Penal Code (IPC).

M/s. Karl Logistics was in the business of logistics and iron ore supply. The complainant, who had an interest in investing, entered into a Memorandum of Understanding (MoU) with M/s. Karl Logistics and M/s. Consistent. According to the MoU, the complainant would invest Rs. 1.50 crores with M/s. Karl Logistics for one month, expecting a profit of Rs. 90 lakhs or Rs. 200 per tonne, whichever was higher. The payments were to be made through M/s. Consistent.

The complainant did not deposit the entire amount of Rs. 1.50 crores within one week as per the MoU, but deposited Rs. 1.46 crores in installments. Subsequently, the appellants issued two post-dated cheques to the complainant, which were later dishonored. The complainant then initiated proceedings under Section 138 of the Negotiable Instruments Act and lodged an FIR alleging fraud against the appellants.

Timeline

Course of Proceedings

The appellants applied for anticipatory bail, which was granted by the High Court of Judicature at Bombay. During this time, the parties engaged in settlement talks, which resulted in an agreement where the appellants were to deposit Rs. 1,42,50,000 with the High Court. The appellants deposited Rs. 87 lakhs but could not deposit the remaining amount due to financial difficulties.

The parties then reached another settlement where the complainant would withdraw the deposited Rs. 87 lakhs with interest, and the appellants would pay an additional Rs. 5 lakhs. Both parties filed a petition under Section 482 of the Code of Criminal Procedure (Cr.P.C.) to quash the FIR. However, the High Court dismissed the petition, citing a defective affidavit from the complainant and inconsistencies in the complainant’s statements. The High Court also noted that the allegations against the appellants involved cheating, making it unsuitable for quashing.

Legal Framework

The case primarily revolves around the inherent powers of the High Court under Section 482 of the Code of Criminal Procedure (Cr.P.C.). This section allows the High Court to make orders necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court, or otherwise to secure the ends of justice.

The offenses alleged against the appellants are under Sections 406 (criminal breach of trust), 420 (cheating), 467 (forgery of valuable security), 471 (using as genuine a forged document), and 34 (acts done by several persons in furtherance of common intention) of the Indian Penal Code (IPC).

Arguments

The appellants argued that the matter had been settled between the parties and that the High Court should have quashed the FIR. They contended that the dispute was primarily of a civil nature arising from a commercial transaction.

The complainant, initially, did not support the quashing of the FIR before the High Court, leading to the dismissal of the petition. However, before the Supreme Court, the complainant’s counsel stated that the matter had been settled and that the complainant had no objection to quashing the FIR.

The High Court had refused to quash the FIR, stating that the affidavit filed by the complainant was defective and that the complainant was not able to give answers consistent with the settlement. The High Court had also observed that since the allegations against the appellants were that they had connived and cheated the complainant, it was not a fit case for quashing the FIR.

Issues Framed by the Supreme Court

The primary issue before the Supreme Court was whether the High Court was correct in refusing to quash the FIR under Section 482 of the Cr.P.C., given that the parties had settled the matter.

Treatment of the Issue by the Court

Authorities

Judgment

How each authority was viewed by the Court?

✓ The Supreme Court relied on Parbatbhai Aahir & Ors. v. State of Gujarat & Anr. [(2017) 9 SCC 641]* and Gian Singh v. State of Punjab & Anr. [(2012) 10 SCC 303]* to emphasize that the High Court has the power to quash criminal proceedings even in non-compoundable cases, if the parties have settled the matter.

✓ The Court also relied on Narinder Singh & Ors. v. State of Punjab & Anr. [(2014) 6 SCC 466]* to underscore the principles that guide the High Court in exercising its powers under Section 482 of the Cr.P.C., particularly in cases where settlements have been reached.

What weighed in the mind of the Court?

The Supreme Court was primarily influenced by the fact that the parties had settled their dispute and the complainant had no objection to quashing the FIR. The Court also considered that the proceedings were at an initial stage and that the dispute had a significant civil element. The Court emphasized the need to secure the ends of justice and prevent the abuse of the legal process.

The Court noted that the High Court should have exercised its discretion to quash the proceedings, given the settlement and the nature of the dispute. The Court observed that in cases with an overwhelming civil character, especially those arising out of commercial transactions, the High Court should be more inclined to quash the proceedings when the parties have resolved their disputes.

Logical Reasoning:

The Supreme Court considered the following reasons for its decision:

• “We find that the matter is settled by the complainant out of his free will.”
• “In a case like this, where the proceedings are still at initial and nascent stage, the High Court should have exercised its discretion in quashing the proceedings.”
• “On the other hand, those criminal cases having overwhelmingly and predominantly civil character, particularly those arising out of commercial transactions or arising out of matrimonial relationship or family disputes should be quashed when the parties have resolved their entire disputes among themselves.”

Key Takeaways

• High Courts have the power to quash criminal proceedings under Section 482 of the Cr.P.C., especially in cases where the parties have settled their disputes.
• Criminal cases with a predominantly civil nature, such as those arising from commercial transactions, can be quashed if the parties have resolved their issues.
• The timing of the settlement plays a crucial role, and High Courts are more likely to accept settlements when the proceedings are at an initial stage.
• The Court’s decision emphasizes the importance of securing the ends of justice and preventing the abuse of the legal process.

Directions

The Supreme Court did not give any specific directions other than quashing the FIR.

Development of Law

The ratio decidendi of the case is that the High Court should exercise its inherent powers under Section 482 of the Cr.P.C. to quash criminal proceedings, especially in cases with a predominantly civil character, when the parties have settled their disputes, and the proceedings are at an initial stage. This judgment reinforces the principle that the courts should facilitate settlements to avoid unnecessary litigation, particularly in commercial disputes.

Conclusion

The Supreme Court allowed the appeal and quashed the FIR, holding that the High Court should have exercised its discretion to quash the proceedings given the settlement between the parties. The Court emphasized that in cases with a significant civil element, especially those arising from commercial transactions, the High Court should be more inclined to quash the proceedings when the parties have resolved their disputes. This judgment reinforces the importance of settlements in resolving disputes and prevents the abuse of the legal process.

Category

Parent Category: Criminal Law

Child Categories:

• Section 482, Code of Criminal Procedure
• Commercial Disputes
• Quashing of FIR

Parent Category: Code of Criminal Procedure, 1973

Child Category: Section 482, Code of Criminal Procedure, 1973

FAQ

Q: Can a criminal case be quashed if the parties have settled the matter?

A: Yes, the High Court has the power to quash a criminal case, especially if it has a predominantly civil nature, when the parties have settled their dispute.

Q: What is Section 482 of the Code of Criminal Procedure?

A: Section 482 of the Code of Criminal Procedure grants the High Court inherent powers to make orders to secure the ends of justice, prevent abuse of the process of the court, or give effect to any order under the Code.

Q: What kind of cases are more likely to be quashed based on a settlement?

A: Cases with a predominantly civil character, such as those arising from commercial transactions, matrimonial relationships, or family disputes, are more likely to be quashed if the parties have settled their issues.

Q: Does the timing of the settlement matter?

A: Yes, the timing of the settlement is crucial. High Courts are more inclined to accept settlements when the proceedings are at an initial stage.

Q: What was the outcome of the Anita Maria Dias case?

A: The Supreme Court quashed the FIR, emphasizing that the High Court should have exercised its discretion to quash the proceedings given the settlement between the parties.