'Mere Breach Of Contract By One Party Would Not Attract Prosecution For Criminal Offence In Every Case': Gujarat High Court Reiterates

Quashing an FIR arising out of a dispute related to payment of money, the Gujarat High Court has reiterated that a mere breach of contract by one of the parties would not attract criminal prosecution in every case.

Justice Divyesh A Joshi observed, “the question is what the complainant was doing during the interregnum period. Why he kept mum and not instituted any legal proceedings during that period. He had a remedy available with him by filing a civil suit in the competent civil court for specific performance of contract, if there was any breach of condition of the agreement at the end of the applicants.”“mere breach of contract, by one of the parties, would not attract prosecution for criminal offence in every case. The aforesaid factual position thus would reveal that the genesis as also the purpose of instituting the criminal proceedings are nothing but a sheer abuse of process of law to put the applicants herein under fear and further that the dispute involved is essentially of civil nature. A criminal texture is being given to purely a civil dispute.”

The ruling came in response to an application filed under Section 482 of the Code of Criminal Procedure, 1973. The applicants sought to invoke the Court's inherent powers to quash the FIR registered under Sections 406, 420, and 114 of the Indian Penal Code.

According to the case's factual matrix, the complainant and his brother purchased parcels of land from the applicants in 2011, with an agreement to sell executed by the applicants in their favor.

The complaint alleged that 30% of the total sale consideration was paid by the complainant and his brother at the time of the sale deed's execution.

The agreement stipulated that it would remain in operation until the applicants cleared the land title. The complaint further alleged that the applicants made excuses and refused to execute the sale deed, demanding the prevailing price of Rs. 5,00,000 per acre instead of the originally agreed Rs. 2,25,551 per acre. This, the complaint claimed, constituted criminal breach of trust and cheating.

After hearing the counsels for the parties and considering the materials on record, the Court addressed the question of whether the proceedings should be quashed.

The Court reiterated that the power under Section 482 of the Code must be exercised sparingly, carefully, and with caution, only when justified by the tests laid down in the Section itself. It was further reiterated that Section 482 of the Code does not confer any new power on the High Court but merely preserves the inherent power that the Court possessed before the enactment of the Criminal Procedure Code.

“There are three circumstances under which the inherent jurisdiction may be exercised, namely (i) to give effect to an order under the Code, (ii) to prevent abuse of the process of Court, and (iii) to otherwise secure the ends of justice,” the Court observed.

The Court agreed with the decision cited by the advocate for the applicant in the case of Naresh Kumar & Anr. vs. State of Karnataka & Anr., reported in 2024 (3) SCR 740, where the Supreme Court held that a mere breach of contract by one of the parties would not warrant prosecution for a criminal offence in every case. “Thus, in my view, the said ratio is squarely applicable to the case on hand,” the Court opined.

The Court noted, “A plain reading of the FIR reveals that the allegations levelled by the respondent No.2 are quite vague, general and sweeping, specifying no instances of criminal conduct. It is worthwhile to take note of the fact that the respondent herein has alleged commission of offences under Sections 406, 420 and 114 of IPC against the applicants. In this regard, let me refer to the ingredients to constitute such offences.”

The Court observed that the materials on record suggested there was an agreement to sell between the applicants and the complainant for respective parcels of land.

The Court stated, “It is not in dispute that the complainant has already paid the 30% of the total sale consideration at the time of execution of the agreement to sell. It also appears that the agreement to sell came to be executed in the year 2011 and the impugned FIR came to be filed in the year 2013, i.e., after lapse of almost one and a half year.”

The Court noted that the original complainant, instead of seeking the civil remedy provided by law, had immediately filed the criminal complaint against the applicants, which could undoubtedly be seen as an attempt by the second respondent to use the criminal proceedings as a tool of harassment against the appellants.

“For the foregoing reasons, I hold that if the criminal proceedings are allowed to continue, then it will be nothing short of abuse of process of law and travesty of justice. This is a fit case wherein the inherent powers under Section 482 of the Code should be exercised for the purpose of quashing the FIR,” the Court held, allowing the application and quashing the FIR.

Case Title: Harunbhai Fakirmahmad Rathod & Ors. Versus State Of Gujarat & Anr.

LL Citation: 2024 LiveLaw (Guj) 93

Click Here To Read Judgement