Availability of Civil Remedy is No Ground to Quash Criminal Proceedings Involving Forgery and Conspiracy: Himachal Pradesh High Court - 2025-07-04

Civil Remedy No Bar to Criminal Case in Alleged Liquor Fraud, HP High Court Refuses to Quash FIR

Shimla: The Himachal Pradesh High Court, in a significant ruling, has held that the availability of a civil remedy for recovery of money does not automatically bar the institution of criminal proceedings, especially when there are prima facie allegations of forgery, cheating, and conspiracy.

Justice RakeshKainthla dismissed a petition filed by liquor licensee Rajneesh Sharma seeking to quash an FIR registered against him for offences including cheating (Section 420 IPC), criminal conspiracy (Section 120B IPC), and corruption under the Prevention of Corruption (PC) Act.

---

Background of the Case

The case originated from a complaint that excise licensees, including the petitioner Rajneesh Sharma , had dishonestly induced officials to release liquor stock using fabricated payment passes and Unique Transaction Reference (UTR) numbers. The police investigation revealed that Sharma , who held licenses for four liquor vends in 2016-17, had allegedly obtained liquor worth ₹3.18 crores but failed to pay a balance of ₹6,20,223.

The investigation uncovered a conspiracy with depot officials who allegedly failed to verify the UTRs or make proper entries in the registers, thereby facilitating the supply of liquor without confirming payment. Consequently, a charge sheet was filed against Sharma and others for cheating, forgery, criminal conspiracy, and offences under the PC Act. Sharma approached the High Court under Section 482 of the Code of Criminal Procedure (Cr.P.C.) to quash the FIR and subsequent proceedings.

---

Arguments from Both Sides

Petitioner's Stance: Mr. Arvind Sharma , counsel for the petitioner, argued that the dispute was fundamentally civil in nature, concerning the recovery of money. He contended that criminal proceedings were being misused as a recovery mechanism, which amounts to an abuse of the process of the court. He insisted that the allegations were false and that a civil dispute should not be converted into a criminal matter.

State's Opposition: Mr. Ajit Sharma , the Deputy Advocate General, opposed the petition, stating that the case was not a simple civil dispute. He highlighted that the investigation had revealed the use of fabricated UTRs and the connivance of officials, leading to a loss to the public exchequer. He argued that these acts constituted serious criminal offences beyond a mere contractual breach.

---

Court's Analysis and Legal Principles

Justice Kainthla conducted a thorough review of the law on quashing FIRs, citing landmark Supreme Court judgments like State of Haryana v. Bhajan Lal and Neeharika Infrastructure (P) Ltd. v. State of Maharashtra .

The Court firmly rejected the petitioner's primary argument that the existence of a civil suit barred criminal action. It clarified the distinction between civil and criminal wrongs, stating that the same set of facts can give rise to both liabilities.

In a pivotal observation, the Court held:

"The given set of facts may make out a civil wrong as well as a criminal offence. Only because a civil remedy is available may not be a ground to quash criminal proceedings... simply because a remedy is provided under the civil law cannot lead to an inference that resort cannot be had to the criminal law or that the civil law remedy is the only remedy available to the parties."

The judgment underscored that the allegations in the FIR, taken at face value, pointed towards a criminal conspiracy. The Court noted:

"It was specifically asserted in the F.I.R. that forged UTR and Gate passes were used to obtain the liquor... These allegations, prima facie, show a conspiracy to defraud the informant by not maintaining the proper record."

Furthermore, addressing the seriousness of corruption allegations, the Court referenced the Supreme Court's stance in State of Chhattisgarh v. Aman Kumar Singh , emphasizing that courts must show "zero tolerance to corruption" and should adopt a "hands-off approach" in quashing FIRs in corruption cases, except in the rarest of circumstances.

---

Final Decision and Implications

Finding no merit in the petition, the High Court dismissed it, refusing to quash the FIR. The Court concluded that since the police had already filed a charge sheet, the trial court was the appropriate forum to appreciate the evidence and decide the matter.

The judgment reaffirms the principle that criminal law can be invoked in commercial disputes where elements of fraud, forgery, or criminal intent are present. It serves as a strong reminder that parties cannot seek to quash criminal proceedings merely by labeling a dispute as "civil" in nature, particularly when there are allegations of corruption and loss to the public exchequer. The observations made by the Court are confined to the disposal of the petition and will not influence the merits of the trial.