Author: Ayushi Mendhiratta, Panjab University
Legal Article on:- Drawing the Line: Supreme Court on FIR Misuse in Civil Disputes
ABSTRACT:- To protect individuals, especially businessmen, from unnecessary exploitation and mental harassment, the Apex court of our Country barred the High Court from misusing its inherent powers under Article 226 of the Indian Constitution and section 528 of BNSS, when the filed FIR exhibits the case which is solely civil or commercial. The court should not undermine the jurisdictional power of civil and commercial courts for the recovery of debt and execution of a decree for specific performance. Nonetheless, the court must be vigilant and not turn a blind eye to the rights of genuine complainants seeking redress for legitimate grievances. The article highlights the demarcation between civil and criminal disputes, in addition to the judicial and constitutional duty of the HC while exercising its powers. Moreover, the articles exhibit the need for a shift in policy mechanisms by encompassing the training of law enforcement officers in discerning between civil and criminal disputes. The rulings of the Supreme Court on various occasions disclose the failure of the HC to prevent the abuse of judicial proceedings. Lastly, the judgments portrayed that the court should not be used as a coercive tool by pressuring the individual to foster the payment of dues in civil disputes.
INTRODUCTION: CONDONING THE FILING OF FIR IN CASES OF CIVIL DISPUTE:-
Over the past few years, India has witnessed a significant increase in the number of criminal proceedings filed in civil dispute cases. This has led to the abuse of the judicial process and the criminal justice system. Filing an FIR in civil disputes is nothing but mental harassment. Charges should not be framed unless there is a prima facie case or direct averments of involvement of a person in an offence. To curb misuse of the criminal justice system in civil dispute cases, the Supreme Court gave a stern warning to lower courts, highlighting the distinction between contractual disputes and cheating under section 420 IPC/318 BNS.
DISCERNING THE DIVIDING LINE BETWEEN CIVIL BREACH AND CRIMINAL WRONG:-
The Apex court of India, in several rulings, accentuated the difference between breach of contract and cheating. The court emphasised the element of criminal intent or mens rea at the inception of the transaction to constitute criminal proceedings. Criminal offences are performed against the state and involve deception, fraud, harm, or injury as key elements of crime.. In cases of breach of contractual obligation, an individual is entitled to avail remedies, particularly monetary compensation or specific performance in civil courts. Mere failure to repay the debt amount or insufficiency in performing contractual obligations does not constitute a criminal wrong.
In the recent case of Shailesh Kumar Singh Alias Shailesh R. Singh v. State of Uttar Pradesh & Ors (2025), the Supreme Court slammed HC for passing orders under section 482 of CrPC, directing the film producer Shailesh Kumar Singh to pay Rs. 25 lakh to the complainant while referring the dispute to mediation for further settlement.
The Supreme Court expressed its frustration with recurring violations of criminal proceedings by asserting its discontentment with the HC for misusing the powers inherited under section 482 of the CrPC.
The apex court criticised the approach adopted by the HC and stated that the HC should look into the averments and allegations pronounced in the FIR. If no criminality is disclosed by plain reading of the FIR, the HC should either quash the FIR or reject the plea of the accused.
The court should refrain from adjudicating the matters that fall within the ambit of civil or commercial courts, particularly for the recovery of debt or loan amounts.
While preserving the integrity of civil and commercial cases, the SC in the case of Anil Mahajan v. Bhor Industries Ltd. & Anr., (2005) 10 SCC 228, held that criminal proceedings cannot be engaged as a tactic to pressure and mentally harass a person in cases of financial disagreements.
The intention of deception to constitute a criminal offence or wrong should be inferred from the inception of transactions.
However, if the case or FIR shows prima facie evidence of fraud, deception, or misrepresentation, then criminal charges and civil suits can proceed simultaneously, as held in the case of Punit Beriwala v. State of NCT of Delhi (2023).
POLICE PERSONNEL LACKING THE LEGAL CLARITY TO DIFFERENTIATE BETWEEN CIVIL BREACHES AND CRIMINAL WRONGDOINGS-
Police officers play a crucial role in preventing the abuse of court proceedings. The police must perform a preliminary check to determine whether the complaint is criminal or merely arises from contractual or financial disagreements. However, personnel often lack the clarity to distinguish between these cases. They often perceive averments or allegations of non-performance of obligations as cheating under section 420 of the IPC or 318 of the BNS, opening the gate for complainants to misuse or abuse the processes of the criminal justice system.
In the case of Hridaya Ranjan Prasad Verma v. State of Bihar (2000) 4 SCC 168, the Supreme Court directed the police officers to ensure that there are clear allegations demonstrating the fraudulent intent from the inception of the transaction while filing the FIR.
Similarly, in the case of V.Y. Jose v. State of Gujarat (2009) 3 SCC 78, the SC quashed the FIR of criminal complaint for a failed business transaction and asserted that the law enforcement officers should be careful and attentive while filing an FIR in cases of civil disputes.
The court also highlighted the need for a shift in policy mechanism by encompassing the training of law enforcement officers in discerning between civil and criminal disputes.
QUASHING WITH CARE: HIGH COURT’S DUTY UNDER ARTICLE 226 OF INDIAN CONSTITUTION AND SECTION 482 CRPC/ 528 BNSS:-
While exercising its inherent power under Article 226 of the Indian Constitution and Section 528 of the Bnss, the HC needs to be cautious while quashing an FIR. The court should not be used as a coercive tool to settle financial disputes with judicial pressure. The appellate court is duty-bound to prevent the abuses of the legal proceedings by quashing the FIR on merits if the case portrays no evidence of criminal intent from the beginning.
The court should not undermine the jurisdiction of civil and commercial courts for handling cases of a civil or contractual nature. It is the constitutional and judicial duty of the court to warrant that criminal law is not misapplied for pursuing any ulterior motive. The HC cannot be used as an alternative forum for the settlement of disputes on a compromise, directing the parties to apply for conciliation or mediation.
In the case of G. Sagar Suri & Anr. v. State of U.P. & Ors., (2000) 2 SCC 636, the FIR involved the accusations of cheating while recovering the debt of a loan agreement. The Apex court highlighted the duty of the HC by stating that a civil dispute should not be given the colour of a criminal offence, using it as a dirty tactic to pressurise the accused in cases of civil dispute. The intent to cheat or deceive should be evident from the inception of the agreement or transaction.
COUNTERBALANCING THE NEED OF PROTECTION FOR GENUINE VICTIMS:-
In addition to the prevention of abuse of judicial process, the court must uphold the legal principles of equality, justice while guarding the needs of genuine victims. It is equally important that bona fide complainants are not denied access or recourse to criminal actions, thus allowing the legitimate prosecution of white- collar crimes.
In the case of Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736, SC advised HC to carefully examine the FIR while exercising its inherent powers under CrPC ( now BNSS). A Civil Dispute may incorporate the proceedings of criminal wrong, when it is evident that mens rea was present when the parties signed an agreement.
Similarly, in the case of Rajesh Bajaj v. State NCT of Delhi, (1999) 3 SCC 259, the court observed that merely because the case exhibits a dispute of civil nature, it does not denude it of its criminal profile. Both cases can exist simultaneously, giving rise to civil and criminal liabilities.
In this case, the complainant alleged that the accused purchased a consignment of computers by deceiving them, making false promises of payment later. Thus, the criminal intent to deceive was present from the beginning of the transaction. Resultantly, the HC cannot quash the criminal proceedings when the case portrays a prima facie allegation of intent to deceive.
CONCLUSION ( way forward ) –
To deduce, the rulings of the Supreme Court emphasize the role of HC and other legal professionals while dealing with civil and criminal complaints. The judgments, while guarding the genuine victims by gaining access to criminal recourse, protect the interests of individuals, especially businessmen, from fearing entering into transactions of a commercial nature.
The legal personnel should maintain a clear demarcation of civil and criminal cases. If the complaint discloses the elements of a civil dispute, it should be filed in civil or commercial courts for recovery of damages or a suit for specific performance. By mapping out the difference between the two types of cases, the court has protected the innocent individuals from exploitation and breakdown of the rule of law.
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