The High Court of Madhya Pradesh at Jabalpur has quashed a complaint filed with the Economic Offences Wing (EOW) against Power Mech Projects Ltd. , ruling that the criminal process cannot be weaponized to resolve purely commercial and contractual disagreements. In a significant decision, the court held that attempts to use the machinery of criminal law to exert pressure in business matters, particularly when the underlying issues have already been subjected to arbitration, constitute an abuse of the judicial process .

The dispute originated from a 2019 tender floated by the Madhya Pradesh State Mining Corporation for sand extraction projects across Narmadapuram, Sehore, and Bhind. In January 2020 , M/s Power Mech Projects Ltd. , Mapaex Minerals , and M/s Anshika Builders entered into a Memorandum of Understanding to distribute financial commitments. Under this arrangement, Power Mech agreed to bear 60 percent of the financial obligations. However, performance disputes surfaced, leading Mapaex to invoke arbitration in September 2022 . The High Court subsequently appointed former Justice Alok Verma as the sole arbitrator in April 2023 . By July 2025 , the arbitrator had dismissed both the claims and counter-claims of the parties, a decision that remains under challenge before the competent Commercial Court .

While the arbitration was ongoing, Mapaex lodged a criminal complaint with the EOW in November 2022 , alleging fraud , criminal breach of trust , and the diversion of funds . Between September 2025 and February 2026 , the EOW issued multiple notices to Power Mech, compelling the company to produce extensive financial documentation. Power Mech challenged these proceedings under Article 226 of the Constitution , arguing that the dispute was strictly contractual and had already been addressed through the established arbitral forum.

Examining the Limits of Criminal Oversight

In his detailed order, Justice Himanshu Joshi emphasized that the mere existence of civil or arbitral proceedings does not categorically bar a criminal investigation. However, he clarified that the court must scrutinize whether the allegations, taken at face value, disclose the basic ingredients of a criminal offence or merely repackage a civil dispute to force a favorable settlement. The court noted that in the current business climate, there is a recurring tendency to label contractual breaches as criminal misconduct.

“In the present case, permitting the EOW inquiry to continue merely because the complaint uses allegations of fraud and diversion of funds , in circumstances where the underlying dispute is contractual and the essential ingredients of the alleged offences are not disclosed, would amount to permitting the criminal process to be utilised as a means of exerting pressure in a commercial dispute,” the court observed.

The Bench highlighted that for an offence of cheating or criminal breach of trust to be sustained, there must be evidence of a fraudulent or dishonest intention at the inception of the transaction. The court found no such material in the present case, noting that the disagreement over account adjustments and the failure to meet specific financial commitments were traditional hallmarks of a civil dispute rather than a criminal one.

The Relevance of Arbitral Findings

Addressing the role of the Arbitral Award in criminal matters, the court observed that while an award does not function as an absolute shield against criminal prosecution, it serves as a critical reference point for assessing the true nature of a conflict. The court reasoned that when the parties have already engaged in a formal adjudicatory process, the resulting findings and the nature of the dispute are vital indicators of whether the parallel invocation of criminal law is genuine or malicious.

The court reiterated the principle established in precedent that the legal system must remain vigilant against the improper use of police power. Justice Joshi referenced the decision in G. Saminathan v. State , noting that where parties have already moved an agreed forum for dispute resolution, continuing a criminal investigation into the same core issues often defies the spirit of justice.

The EOW and Mapaex had argued that the investigation was at a nascent stage and that civil and criminal remedies could operate concurrently. However, the High Court rejected the notion that it was premature to intervene simply because no First Information Report (FIR) had been formally registered. It affirmed that the High Court’s extraordinary jurisdiction under Article 226 allows for the quashing of an inquiry when the foundation of the complaint fails to support the criminal charges levied against the petitioner.

Final Order and Future Implications

By allowing the petition, the court effectively halted the ongoing inquiry into Complaint No. 414/2022. The ruling underscores a strict judicial stance against the criminalization of commercial conflicts, reinforcing the message that contract law, not the penal code, is the appropriate arena for settling disputes regarding financial contributions, project performance, and accounting disagreements.

The court explicitly clarified that its decision should not be viewed as a final judgment on the civil or contractual liabilities of the parties. It stated that the ruling would have no prejudicial effect on the ongoing proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 , or any other legal avenues open to the parties. The disposal of the writ petition marks a clear conclusion to the EOW inquiry, emphasizing that the misuse of criminal processes for recovery or leverage will be addressed with judicial scrutiny. The parties are now left to pursue their remedies through the established commercial and arbitral channels, as originally agreed under their contractual framework.