Police Doesn't Have Power To Recover Money Or Act As Civil Court For Money Recovery : Supreme Court

The Supreme Court reiterated that the contractual dispute or breach of contract per se should not lead to the initiation of a criminal proceeding.

“A prayer is made to the police for recovery of money from the appellants. The police is to investigate the allegations which discloses a criminal act. Police does not have the power and authority to recover money or act as a civil court for recovery of money.”, the Bench of Justices Sanjiv Khanna and Dipankar Datta said.

The respondent-complainant's only grievance is regarding the failure of the appellant to pay the outstanding amount despite repeated reminders made by the complainant.

An FIR was registered under Sections 405 and 506 of the Indian Penal Code against the appellant accused.

The High Court refused to quash the criminal proceedings against the appellant accused but granted protection from the arrest.

Against the High Court's decision to not quash the criminal proceedings the accused preferred plea before the Supreme Court.

At the outset, after perusing the contents of the F.I.R. and the impugned order of the High Court, the Supreme Court observed that the dispute between the parties arose out of a breach of a contract, where the sale of goods is involved.

“For the offence of cheating, dishonest intention must exist at the inception of the transaction, whereas, in case of criminal breach of trust there must exist a relationship between the parties whereby one party entrusts another with the property as per law, albeit dishonest intention comes later. In this case entrustment is missing, in fact it is not even alleged. It is a case of sale of goods.”, the Supreme Court said.

Further, the court noted that no criminal case is made out against the accused, as the ingredients to allege the offence are neither stated nor can be inferred from the averments made by the respondent-complainant.

Repeated Judgments of the Supreme Court Are Overlooked By High Courts

The Supreme Court expressed displeasure with the conduct of the High Court in not applying the repeated judgments of the Supreme Court which held that the High Court must exercise power under Section 482 Cr.P.C. to quash the criminal proceedings which arise out of the violation of the contractual terms or the breach of contract.

“This Court, in a number of judgments, has pointed out the clear distinction between a civil wrong in the form of breach of contract, non-payment of money or disregard to and violation of the contractual terms; and a criminal offence under Sections 420 and 406 of the IPC. Repeated judgments of this Court, however, are somehow overlooked, and are not being applied and enforced. We will be referring to these judgments.”, the Supreme Court said.

The Supreme Court reasoned that a person should not undergo harassment of litigation for a number of years when no criminal offence is made out, therefore the High Court should not hesitate to exercise its jurisdiction under Section 482 of the Cr.P.C. to quash such criminal proceedings which are initiated out of a breach of contract.

Accordingly, after noting that "the initiation of the criminal process for oblique purposes, is bad in law and amounts to abuse of the process of law", the Supreme Court set aside the impugned order of the High Court and quashed the pending criminal case against the appellant.

Case Details: LALIT CHATURVEDI & ORS. VERSUS THE STATE OF UTTAR PRADESH & ANR., Criminal Appeal No. 000660 / 2024

Citation : 2024 LiveLaw (SC) 150

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