Supreme Court Quashes FIR in Civil Dispute: State of Arunachal Pradesh vs. Kamal Agarwal (2024)

LEGAL ISSUE: Whether a criminal FIR can be registered for a dispute that is essentially civil in nature, particularly concerning a financial transaction and property transfer.

CASE TYPE: Criminal.

Case Name: The State of Arunachal Pradesh vs. Kamal Agarwal & Ors. ETC.

[Judgment Date]: 18 April 2024

Date of the Judgment: 18 April 2024

Citation: 2024 INSC 317

Judges: Vikram Nath, J., K.V. Viswanathan, J.

Can a dispute over a financial transaction and property transfer, lacking a written agreement, be grounds for a criminal FIR? The Supreme Court recently addressed this question, emphasizing the distinction between civil and criminal matters. This case involves a dispute over a sum of ₹1 crore, allegedly paid for a land/building purchase in Jaipur, Rajasthan, which led to a criminal FIR in Arunachal Pradesh. The Supreme Court, in this judgment, clarifies the limits of criminal jurisdiction in what it deems to be essentially a civil dispute. The judgment was delivered by a two-judge bench comprising Justice Vikram Nath and Justice K.V. Viswanathan.

Case Background

In 2016, M/s Shiv Bhandar transferred ₹1 crore to Chandra Mohan Badaya and others in four equal installments. According to the complainant, this was for the purchase of land/building in Jaipur, Rajasthan. However, Chandra Mohan Badaya claimed it was a loan. There was no written agreement specifying the purpose of the transfer. Chandra Mohan Badaya stated that he repaid ₹37 lakhs and executed two sale deeds for properties in Chaksu, Jaipur, in favor of the complainant’s representatives. The total sale consideration for these deeds was ₹1.08 crore, but only ₹54 lakhs was received. A criminal FIR was lodged on 23 November 2017, against several individuals, alleging cheating and conspiracy.

Timeline:

Course of Proceedings

The Gauhati High Court dismissed a petition to quash the FIR, stating no exceptional circumstances warranted such action. Conversely, the Rajasthan High Court quashed the FIR, asserting that no part of the cause of action arose in Arunachal Pradesh, thus the police and courts there lacked territorial jurisdiction. The complainant did not challenge the Rajasthan High Court’s order. The State of Arunachal Pradesh appealed to the Supreme Court against the Rajasthan High Court’s decision, while Chandra Mohan Badaya appealed against the Gauhati High Court’s order.

Legal Framework

The FIR was registered under Section 420 (cheating), Section 120B (criminal conspiracy), and Section 34 (acts done by several persons in furtherance of common intention) of the Indian Penal Code, 1860. The Supreme Court considered the nature of the dispute, whether it was a civil or criminal matter, and the territorial jurisdiction of the investigating authorities.

The relevant sections are:

• Section 420 of the Indian Penal Code, 1860:
  “Cheating and dishonestly inducing delivery of property.—Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.”
• Section 120B of the Indian Penal Code, 1860:
  “Punishment of criminal conspiracy.—(1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death, imprisonment for life or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in this Code for the punishment of such a conspiracy, be punished in the same manner as if he had abetted such offence. (2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished with imprisonment of either description for a term not exceeding six months, or with fine or with both.”
• Section 34 of the Indian Penal Code, 1860:
  “Acts done by several persons in furtherance of common intention.—When a criminal act is done by several persons in furtherance of the common intention of all, each of such persons is liable for that act in the same manner as if it were done by him alone.”

Arguments

The appellants (Chandra Mohan Badaya and others) argued that the dispute was purely civil, involving a financial transaction and property transfer, and should not be the subject of a criminal FIR. They contended that no part of the offense occurred in Arunachal Pradesh, as all the accused, properties, and transactions were in Rajasthan. They also argued that the FIR was a misuse of the legal process, citing the precedent set in State of Haryana vs. Bhajan Lal [(1992) suppl. 1 SCC 335].

The State of Arunachal Pradesh argued that the FIR was validly registered, as the complainant was based in Arunachal Pradesh. They contended that the accused had cheated the complainant and failed to transfer the land as agreed.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section but addressed the following implicitly:

• Whether the dispute was civil or criminal in nature.
• Whether the Arunachal Pradesh police had the territorial jurisdiction to register and investigate the FIR.
• Whether the FIR was a misuse of the process of law.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

• State of Haryana vs. Bhajan Lal [(1992) suppl. 1 SCC 335] – Supreme Court of India. The court cited this case to support its view that the FIR was a misuse of the process of law, as it was essentially a civil dispute.

Judgment

The Supreme Court held that the dispute was civil in nature and that the FIR was a misuse of the legal process. The court noted that there was no written agreement to indicate whether the amount transferred was a loan, an advance, or payment for property. The court stated that such a claim would require evidence in a civil court rather than a police investigation. The court also observed that the FIR did not disclose any cognizable offense.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the fact that the dispute was fundamentally civil in nature, arising from a financial transaction and property transfer without a clear written agreement. The Court emphasized that such matters should be resolved through civil proceedings, not criminal ones. The lack of territorial jurisdiction for the Arunachal Pradesh police was another crucial factor.

The court was also concerned that the FIR was being used as a tool to pressure the accused in what was essentially a commercial dispute. The Court noted that the complainant had not come forward to defend the FIR, which further strengthened the case that the dispute was civil in nature and the FIR was not appropriate.

The court reasoned that if the complainant believed there was a breach of contract, they should have filed a civil suit rather than a criminal complaint. The court also noted that the accused had already repaid a portion of the amount and transferred properties, which further supported the civil nature of the dispute.

The Supreme Court quoted from the judgment:

• “We are of the view that the matter was purely civil in nature. It was a case of money advancing for which no written document was executed to indicate its purpose or import as such whether it was a loan advance or an advance payment for transfer of property being land/building situate in Jaipur, is not borne out from any records.”
• “A simple reading of the FIR itself does not disclose any cognizable offence for which the FIR should be registered and maintained.”
• “The High Court of Rajasthan had rightly found as a matter of fact considering all aspects of the matter that the offence, if any, although according to us, no offence is made out, would be within the territorial jurisdiction of Rajasthan and not Arunachal Pradesh.”

The Supreme Court set aside the order of the Gauhati High Court and allowed the appeal of Chandra Mohan Badaya and quashed the entire proceedings arising out of FIR No.227 of 2017. The court also dismissed the three appeals filed by the State of Arunachal Pradesh.

Key Takeaways

• Civil disputes, especially those involving financial transactions and property transfers, should not be converted into criminal cases without clear evidence of criminal intent.
• The territorial jurisdiction of the police and courts is crucial, and an FIR should be registered and investigated in the jurisdiction where the cause of action arose.
• The misuse of criminal law to settle civil disputes is not permissible.

Directions

The Supreme Court did not provide any specific directions in this case, as the primary outcome was the quashing of the FIR and related proceedings.

Development of Law

The ratio decidendi of this case is that a dispute that is essentially civil cannot be converted into a criminal case. The Supreme Court reaffirmed the principle that the misuse of criminal law to settle civil disputes is not permissible. There was no change in the previous position of law.

Conclusion

The Supreme Court’s decision in this case reinforces the distinction between civil and criminal matters. The court’s emphasis on the lack of territorial jurisdiction and the abuse of the criminal process highlights the importance of proper legal procedures. The judgment serves as a reminder that civil disputes should be resolved through civil remedies, and criminal law should not be used as a tool for coercion in commercial matters. The Supreme Court quashed the FIR, emphasizing that the dispute was civil in nature and the FIR was an abuse of the legal process.

Category:

• Criminal Law
  • Section 420, Indian Penal Code, 1860
  • Section 120B, Indian Penal Code, 1860
  • Section 34, Indian Penal Code, 1860
• Jurisdiction
  • Territorial Jurisdiction
• Civil Law
  • Contract Law
  • Property Law
• Indian Penal Code, 1860
  • Section 420, Indian Penal Code, 1860
  • Section 120B, Indian Penal Code, 1860
  • Section 34, Indian Penal Code, 1860

FAQ

Q: What was the main issue in this case?

A: The main issue was whether a criminal FIR could be registered for a dispute that was essentially civil in nature, involving a financial transaction and property transfer without a written agreement.

Q: What did the Supreme Court decide?

A: The Supreme Court decided that the dispute was civil in nature and that the FIR was a misuse of the legal process. The court quashed the FIR and the related proceedings.

Q: What is the significance of this judgment?

A: This judgment reinforces the distinction between civil and criminal matters. It emphasizes that civil disputes should be resolved through civil remedies, and criminal law should not be used as a tool for coercion in commercial matters.

Q: What should I do if I have a similar dispute?

A: If you have a dispute involving a financial transaction or property transfer without a written agreement, you should seek civil remedies and file a civil suit, rather than a criminal complaint.

Q: What is territorial jurisdiction?

A: Territorial jurisdiction refers to the geographical area over which a court or police station has the authority to hear cases or conduct investigations. In this case, the Supreme Court emphasized that the Arunachal Pradesh police did not have jurisdiction, as all the events and parties were located in Rajasthan.