In what circumstances can a criminal proceeding be quashed? Supreme Court yet again answers the “hotly debated” question on scope of exercise of HCs’ power under Section 482 CrPC

Supreme Court: Answering the “hotly debated” question as to in what circumstances and categories of cases, a criminal proceeding may be quashed either in exercise of the extraordinary powers of the High Court under Article 226 of the Constitution, or in the exercise of the inherent powers of the High Court under Section 482 CrPC, the bench of Indu Malhotra* and Ajay Rastogi, JJ has held that in the matter of exercise of inherent power by the High Court, the only requirement is to see whether continuance of the proceedings would be a total abuse of the process of the Court

“… the exercise of inherent power of the High Court is an extraordinary power which has to be exercised with great care and circumspection before embarking to scrutinise the complaint/FIR/charge-sheet in deciding whether the case is the rarest of rare case, to scuttle the prosecution at its inception.”

The Court observed that in order to exercise powers under Section 482 CrPC, the complaint in its entirety shall have to be examined on the basis of the allegation made in the complaint/FIR/charge-sheet and the High Court at that stage was not under an obligation to go into the matter or examine its correctness. Whatever appears on the face of the complaint/FIR/charge-sheet shall be taken into consideration without any critical examination of the same. The offence ought to appear ex facie on the complaint/FIR/charge-sheet and other documentary evidence, if any, on record.

“The Criminal Procedure Code contains a detailed procedure for investigation, framing of charge and trial, and in the event when the High Court is desirous of putting a halt to the known procedure of law, it must use proper circumspection with great care and caution to interfere in the complaint/FIR/charge-sheet in exercise of its inherent jurisdiction.”

The Court was dealing with a case where a property, belonging to 2nd Respondent was mortgaged with State Bank of Patiala and the total legal liability payable to the Bank was Rs. 18 crores. In order to clear the said dues, 2nd respondent hatched a conspiracy with a broker so as to cheat and defraud the appellants/complainants and to further misappropriate the amounts paid by the complainants as part of the deal, the 2nd respondent breached the trust of the appellants/complainants deliberately and falsely stating to the appellants/complainants that the 2nd respondent would be liable to pay a sum of Rs. 25.50 crores to the complainant if the deal is not carried forward by the 2nd respondent.

While an FIR was lodged in the case at hand for offence of cheating, arbitral proceedings were also initiated at the instance of the appellants/complainants.

On a careful reading of the complaint/FIR/charge-sheet, the Court noticed that the ingredients of the offences under Sections 406 and 420 IPC cannot be said to be absent on the basis of the allegations in the complaint/FIR/charge-sheet.

“… whether the allegations in the complaint are otherwise correct or not, has to be decided on the basis of the evidence to be led during the course of trial. Simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of the process of the court for exercising inherent powers of the High Court under Section 482 CrPC for quashing such proceedings.”

The Court noticed that the facts narrated in the present complaint/FIR/charge-sheet indeed reveal the commercial transaction but that is hardly a reason for holding that the offence of cheating would elude from such transaction. In fact, many a times, offence of cheating is committed in the course of commercial transactions and the illustrations have been set out under Sections 415, 418 and 420 IPC. So far as initiation of arbitral proceedings is concerned, there is no correlation with the criminal proceedings.

The Court, hence, held that the issue involved in the matter under consideration is not a case in which the criminal trial should have been short-circuited. The High Court was not justified in quashing the criminal proceedings in exercise of its inherent jurisdiction. The High Court has primarily adverted on two circumstances,

(i) that it was a case of termination of agreement to sell on account of an alleged breach of the contract and

(ii) the fact that the arbitral proceedings have been initiated at the instance of the appellants.

The Court held that both the alleged circumstances noticed by the High Court are unsustainable in law.

[Priti Saraf v. State of NCT of Delhi, 2021 SCC OnLine SC 206, decided on 10.03.2021]

*Judgment by: Justice Indu Malhotra

Appearances before the Court by:

For appellants: Senior Advocate Mukul Rohatgi,

For Second Respondent: Senior Advocate P. Chidambaram,

For State: Additional Solicitor General  Aishwarya Bhati