Case Note & Summary
The dispute arose from a construction contract between Modern Asset (petitioner) and KNK Constructions Private Limited (2nd respondent). The 2nd respondent was awarded the contract in July 2018 for a project in Bengaluru. During the execution, the complainant sought and obtained permission to dispose of scrap steel and remove scaffolding material. The contract was extended until December 2019 and eventually terminated on 25 February 2020. Thereafter, the petitioner filed claims before the National Company Law Tribunal and an Interim Resolution Professional was appointed. The petitioner also registered a criminal complaint against the 2nd respondent for offences under Sections 465 and 471 of the Indian Penal Code, 1860, alleging forgery. That complaint (Crime No.20/2023) was challenged in a separate petition which was later withdrawn. Subsequently, on 15 June 2023, the 2nd respondent registered Crime No.77/2023 with Vyvalikaval Police Station, alleging that the petitioner had not returned steel worth Rs.3.17 crores and committed offences under Sections 34, 120B, 379, 403, 406 and 420 IPC. The petitioner approached the High Court under Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of the FIR. The petitioner contended that the complaint was a counterblast, filed after a legal notice invoking arbitration and demanding payment, and was purely for recovery of money. It was argued that criminal law cannot be used for recovery and that Sections 406 and 420 IPC cannot be invoked together. The respondent argued that the facts could give rise to both civil and criminal proceedings and that investigation was necessary as allegations of cheating and breach of trust were made out. The court examined the legal notice sent by the complainant, which invoked arbitration and sought recovery of dues, and noted that the entire dispute revolved around the contract. It found that the complaint was essentially for recovery of money and that the FIR was registered as a counterblast. Observing that criminal proceedings cannot be employed for recovery of money in a civil dispute, the court held that allowing investigation would be an abuse of process. Accordingly, the petition was allowed and the FIR in Crime No.77/2023 along with all further proceedings was quashed.
Headnote
A) Criminal Procedure - Quashing of FIR - Abuse of Process and Civil Nature - Code of Criminal Procedure, 1973, Section 482; Indian Penal Code, 1860, Sections 379, 403, 406, 420 - The dispute arose from a construction contract with an arbitration clause. The complainant had sent a legal notice invoking arbitration and demanding payment before registering the FIR. The complaint was for recovery of money and was filed as a counterblast to the petitioner’s earlier criminal complaint. Held, criminal law cannot be set in motion for recovery of money, and allowing investigation would be an abuse of process; FIR quashed. (Paras 7-10) B) Indian Penal Code, 1860 - Sections 406 and 420 - Breach of Trust and Cheating - Sections 406 and 420 cannot be invoked concurrently for recovery of money in a purely civil contractual dispute. Held, the FIR alleging both offences is not sustainable. (Paras 5, 8, 9) C) Criminal Procedure - Counterblast Complaints - Abuse of Process - Code of Criminal Procedure, 1973, Section 482 - Where a party files a criminal complaint in retaliation to a prior complaint and the dispute is essentially civil, such complaint is an abuse of process. Held, the FIR registered after the petitioner’s complaint and during the pendency of arbitration proceedings must be quashed. (Paras 5, 9)
Issue of Consideration
Whether the registration of FIR for offences under Sections 34, 120B, 379, 403, 406, 420 IPC in a purely civil contractual dispute can be permitted to continue, and whether such FIR amounts to an abuse of process liable to be quashed under Section 482 of the Code of Criminal Procedure, 1973.
Final Decision
Petition allowed. The FIR in Crime No.77/2023 of Vyvalikaval Police Station and all further investigation are quashed.
Law Points
- Criminal law cannot be set in motion for recovery of money
- Sections 406 and 420 IPC cannot be invoked concurrently for a civil dispute
- FIR can be quashed if it is a counterblast and abuse of process
- Existence of arbitration clause indicates civil nature of dispute
