Summary
An FIR under Sections 406, 420, 467, 468, 471 and 34 IPC lodged by a sub-contractor against the directors of the main contractor over unpaid bills for sewerage plant work, and the chargesheet filed on it, were quashed. The allegations, taken at face value, disclosed only a commercial dispute over the balance due under a contract after admitted part payment, the forgery allegation was unsubstantiated by the inconclusive handwriting report, and the High Court's direction for a wide investigation into the appellants' finances rested on conjecture not supported by the Section 173(2) report.
Issues
- Whether the FIR and chargesheet against the appellants disclosed the ingredients of any offence, or merely clothed a civil dispute over payment under a sub-contract in criminal colour.
- Whether the High Court was justified in refusing to quash the FIR and in directing extensive investigation into the appellants' other contracts and loans on the basis of suspected financial irregularities.
Provisions considered
- Sections 406, 420, 467, 468, 471 and 34, Indian Penal Code, 1860The offences alleged in the FIR. The Court held that the complaint, which admitted receipt of part payment of Rs. 3,68,15,612 for work done under the sub-contracts, was in substance a claim for reimbursement of the balance under a contract and did not disclose the ingredients of any offence, let alone a cognizable one; the forgery allegation concerning the signatures of two engineers was not substantiated because the handwriting expert's report was inconclusive. (¶¶ 3, 18, 20)
- Section 482, Code of Criminal Procedure, 1973The appellants' quashing petition under Section 482 was dismissed by the High Court. The Supreme Court held that allowing the FIR and chargesheet to proceed would be a gross abuse of the process of the court and quashed them, following the principle that criminal proceedings cannot be used to settle civil disputes. (¶¶ 7, 19, 21, 22)
- Section 173(2), Code of Criminal Procedure, 1973The police report filed by the State in compliance with the Court's order contained no reference to the appellants misusing contracts or tenders to obtain undue gain from banks or the MIDC; after nearly ten years of investigation no evidence supported the High Court's conclusions on financial bungling beyond the disputed transaction with the complainant. (¶¶ 5, 16)
- Article 136, Constitution of IndiaReferred to the three-Judge Bench decision in Inder Mohan Goswami, where this Court, exercising jurisdiction under Article 136, quashed criminal proceedings arising from a contractual dispute in which part payment had been made. (¶ 19)
Held
- Where a complainant admits receiving substantial part payment for work executed under sub-contracts and claims the balance, the allegations disclose a dispute that is purely commercial and civil in nature; such a complaint does not disclose any offence and no FIR should have been registered on it. The police machinery cannot be used as a recovery agent for contractual dues. (¶¶ 18, 19)
- The High Court's conclusions that the appellants had a modus operandi of taking advances and raising loans on government projects without paying sub-contractors, and its direction that the State consider handing over investigation of all their contracts to a specialised agency, were based on conjecture; the Section 173(2) report filed after nearly ten years of investigation disclosed no such evidence, so the direction for extensive investigation was ex facie erroneous and illegal. (¶¶ 13, 14, 15, 16, 17)
- The allegation of forging the signatures of two engineers employed by the complainant was not substantiated, the handwriting expert's comparison of the questioned signatures having proved inconclusive. (¶ 20)
- Continuation of the FIR and the chargesheet filed on it would be a gross abuse of the process of the court; the High Court's order, the FIR and all consequential proceedings including the chargesheet were quashed, without precluding the investigating agency from investigating any financial irregularities disclosed during the investigation. (¶¶ 21, 22, 23)
Result
Appeals allowed; High Court order dated 08.10.2018 set aside; FIR No. 443 of 2015 and all proceedings arising from it, including the chargesheet, quashed; liberty to the investigating agency to investigate any financial irregularities disclosed during the investigation; pending applications disposed of.