1. Supply of goods on credit — Non-payment of dues — Alleged fraud and conspiracy — FIR under Sections 420, 406, and 120B of the Indian Penal Code. (Para 3 , 4 , 5 , 6 , 7 , 8 )
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2025 Supreme(SC) 717
SUPREME COURT OF INDIA
BELA M. TRIVEDI, PRASANNA B. VARALE, JJ.
Dinesh Sharma – Appellant
VERSUS
Emgee Cables And Communication Ltd. & Anr. – Respondents
Criminal Appeal No(s). 2138-2139 of 2025 (@ Special leave to Appeal (Crl.) No(s). 10744-1074 of 2023)
Decided On : 23-04-2025
Important Points
IMPORTANT POINTS
(1) Economic offences stand on a different footing than other offences and have wider ramifications – They constitute a class apart.
(2) Power conferred by Section 482., Cr.P.C. is expected to be used very sparingly and only in exceptional circumstances.
(1) Economic offences stand on a different footing than other offences and have wider ramifications – They constitute a class apart.
(2) Power conferred by Section 482., Cr.P.C. is expected to be used very sparingly and only in exceptional circumstances.
Subject
Criminal Law - Economic Offences
Act Referred
CRIMINAL PROCEDURE CODE : S.155(2), S.156(1), S.482
INDIAN PENAL CODE : S.120(b), S.406, S.420, S.467, S.468, S.471
INSOLVENCY AND BANKRUPTCY RULES : R.5
NEGOTIABLE INSTRUMENTS ACT : S.138
INDIAN PENAL CODE : S.120(b), S.406, S.420, S.467, S.468, S.471
INSOLVENCY AND BANKRUPTCY RULES : R.5
NEGOTIABLE INSTRUMENTS ACT : S.138
Headnote
(A) Criminal Procedure Code, 1973 – Section 482 – Inherent Jurisdiction – Exercise of – Though High Court has unfettered powers conferred by Cr.P.C. for exercising its inherent jurisdiction under Section 482., same is expected to be used very sparingly and only in exceptional circumstances – There cannot be any straitjacket formula as to when High Court would be justified to exercise jurisdiction under Section 482 of CrPC and each case is required to be dealt with on its own merits. (Para 18)
(B) Indian Penal Code, 1860 – Sections 420, 406 and 120B – Criminal Procedure Code, 1973 – Section 482 – Cheating, criminal breach of trust and conspiracy – Economic offences by their very nature stand on a different footing than other offences and have wider ramifications – They constitute a class apart – High Court quashed proceedings on a premise that there were long business transactions between parties and initiation of criminal proceedings was an arm-twisting tactic to extract pending dues from respondent company – High Court failed to appreciate the factum that act of company creating/establishing shell companies and circulating monetary transaction through these companies itself was indicator of intention of deceit – When petitioner approached High Court for quashing of FIR, investigation was concluded by filing charge-sheet – High Court should have refrained from quashing FIR at nascent stage of investigation – Trial Court shall proceed. (Paras 19, 20, 21, 23, 24 and 25)
Facts of the case:
Appellant (Original Complainant) by way of these appeals has challenged common judgment and order dated 31.01.2023 passed by High Court of Judicature for Rajasthan, Bench at Jaipur, in SB Criminal Miscellaneous (Petition) No. 6995/2018 connected with S.B. Criminal Miscellaneous (Petition) No. 7689/2018, whereby High Court quashed and set aside First Information Report No. 218/2018 dated 04.04.2018 under Section 420, 406 and 120B of Indian Penal Code, 1860 filed by appellant seeking investigation against alleged dishonest and fraudulent acts of Respondent No. 1/Company and its concerned Directors/Decision makers including Respondent No. 2.
Findings of Court:
Present observations are only prima facie in nature and Trial Court shall proceed without being influenced by this Judgement/order and strictly in accordance with law.
Result : Appeals allowed.
Legal Category Hierarchy
- crime and sentencing
- practice and procedure
- other laws
Advocates appeared:
For the Petitioner(s): Krishnamohan K., AOR Ms. Dania Nayyar, Adv.
For the Respondent(s): Ms. Sansriti Pathak, AAG Mr. Milind Kumar, AOR Mr. Shekhar Prit Jha, AOR Ms. Preeti Kumari, Adv.
For the Petitioner(s): Krishnamohan K., AOR Ms. Dania Nayyar, Adv.
For the Respondent(s): Ms. Sansriti Pathak, AAG Mr. Milind Kumar, AOR Mr. Shekhar Prit Jha, AOR Ms. Preeti Kumari, Adv.
Table of Contents
2. Whether the dispute is purely civil in nature or constitutes a criminal offense involving fraud, conspiracy, and siphoning of funds through shell companies. (Para 11 , 12 , 13 , 14 , 15 )
3. Use of shell companies indicates deceit; economic offenses have wider ramifications and should not be quashed at the nascent stage of investigation. (Para 19 , 20 , 21 , 22 , 23 , 24 )
4. Economic offenses involving financial fraud constitute a class apart and should not be quashed under Section 482 CrPC if deceit is prima facie apparent. (Para 23 )
5. Appeals allowed — High Court order quashing the First Information Report set aside — Trial court to proceed in accordance with law. (Para 25 )
6. Under what circumstances can the High Court exercise inherent powers under Section 482 CrPC to quash an FIR?
The High Court may exercise these powers sparingly in exceptional cases, such as when allegations do not prima facie constitute an offense, are inherently improbable, or the proceedings are maliciously instituted to wreak vengeance. (Para 17 , 18 )
7. Does a long-term business relationship preclude the initiation of criminal proceedings for fraud?
No. A prior business relationship does not justify quashing proceedings if there are indicators of deceit, such as the establishment of shell companies to circulate monetary transactions. (Para 20 )
8. How should courts treat economic offenses compared to private disputes?
Economic offenses are a class apart from private disputes because they affect the economy of the country and pose a serious threat to financial health, warranting a stricter approach against quashing. (Para 23 )
9. Can an FIR be quashed at the nascent stage of investigation if a criminal conspiracy is alleged?
No. When material suggests a criminal conspiracy, the investigating agency must be allowed to investigate thoroughly to unearth the truth, as such allegations can only be tested during a proper trial. (Para 21 )
JUDGMENT
PRASANNA B. VARALE, J.
1. Leave granted.
2. The appellant (Original Complainant) by way of these appeals has challenged the common judgment and order dated 31.01.2023 passed by the High Court of Judicature for Rajasthan, Bench at Jaipur, in SB Criminal Miscellaneous (Petition) No. 6995/2018 connected with S.B. Criminal Miscellaneous (Petition) No. 7689/2018, whereby the High Court quashed and set aside the First Information Report No. 218/2018 dated 04.04.2018 under Section 420, 406 and 120B of Indian Penal Code, 1860 (hereinafter ‘IPC’) filed by the appellant seeking investigation against alleged dishonest and fraudulent acts of Respondent No. 1/Company and its concerned Directors/Decision makers including Respondent No. 2.
FACTS:
3. One Dinesh Sharma (hereinafter referred as ‘Appellant’) was the authorised representative of the Company M/s BLS Polymers Ltd. According to the case of the appellant, the abovementioned company was engaged in the business of manufacturing and supplying plastic compounds such as PE, PVC, XLPE, HFFR etc used in making of wires and cables. EMGEE Cables and Communications limited (hereinafter referred as ‘Respondent No. 1’) was the Company engaged in the business of manufacturing Copper alloys, wires, conductors, etc. It is stated that one Arun Maheshwari (hereinafter referred as ‘Respondent No. 3’) was the technical director of Respondent No. 1 and in 2012, Respondent No. 1 through its representatives which also included the Respondent No. 2 approached the Appellant’s Company for supply of PVC.
4. It was averred that the respondents showed a rosy picture that they have a substantial turnover which led the appellant to supply the goods on credit basis and hence the parties into transactions from 2012 to 2017. It is the case of the appellant that from 01.04.2017 to 31.07.2018, the appellant supplied goods worth Rs. 2,20,82,000/- (Two crore twenty lakh and eighty-two thousand Rupees) against the purchase order signed by Respondent no 3.
5. It was averred that the payment for the goods was not cleared timely by the Respondent Company. As the appellant was facing financial loss due to the non-payment of overdue payments, he was required to constantly remind the accused directors of the company to clear the dues failing which he will be left with no other alternative than to file a police complaint which led one Shirpal Chowdhary, Director of Respondent No. 1 to issue three cheques against the due payment. The appellant stated that the first cheque which was presented in the bank was returned as dishonoured. The appellant was required to repeatedly contact accused persons for clearing the due payment, but he was given false and vague promises about the clearance of the same.
6. The appellant stated that on 02.04.2018, the appellant reached the office of Respondent No. 1 which was found to be closed. When the appellant tried to contact one Mr. Abhinav and Mr. Shripal, his calls were unanswered in the beginning and once again he was given false promises about the clearance of his due payment.
7. Due to the abovementioned acts, appellant was constrained to file FIR before the Police Station Chomu, district Jaipur (West) bearing FIR No. 218/2020 for offences punishable under Section 420, 406, 120B of the IPC. Subsequently, the appellant also sent legal notice under Section 138 of Negotiable Instruments Act and Form 4 Notices under Rule 5 of Insolvency and Bankruptcy Rules demanding the repayment of the due amount.
8. On 02.05.2018, Dena Bank filed FIR No. 135/2018 against Respondent No. 1 and its directors for offences under Section 420,406,467,468,471 and 120B of the IPC. It was alleged in the FIR that the company was involved in actions such as excess use of limit, siphoning off and embezzlement of funds, unilaterally changing the board of directors without the bank’s consent and disposing off the property which was under pledge to the bank.
9. On 10.07.2018, the Appellant filed a Petition under Section 482
