ASHWINI MEHRA vs STATE OF ODISHA
- Court
- Odisha High Court
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Location: ORISSA HIGH COURT, CUTTACK
Date: 27-May-2026 15:45:01
IN THE HIGH COURT OF ORISSA AT CUTTACK
CRLMC No.3083 of 2025
along with
CRLMC Nos.3081, 3113 and 4083 of 2025
(Petitions under Section 528 of the Bharatiya Nagarik Suraksha
Sanhita, 2023 (BNSS) for quashing of investigation and F.I.R. No.644
dated 20.12.2024 registered at Kamakhya Nagar Police Station)
Manoj Mamgaine &Anr.
(in CRLMC No.3083 of 2025)
Ashwini Mehra
(In CRLMC No.3081 of 2025)
Rahul Maheshwari
(in CRLMC No.3113 of 2025)
Rajib Banerjee
(In CRLMC No.4083 of 2025)
…. Petitioner(s)
-versus-
State of Odisha & Anr. …. Opposite Party (s)
Advocates appeared in the case through Hybrid Mode :
For Petitioner(s) : Mr. Bijoy Anand Mohanti, Sr. Adv.
Along with associates
Ms. Mamta Tripathy, Adv.
Mr. Soumik Spandan Tripathy, Adv.
Mr. Pritam Pradhan, Adv.
For Opposite Party (s) : Mr. Udit Ranjan Jena, AGA
Mr. Biswajit Nayak, Adv.
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CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-24.02.2026
DATE OF JUDGMENT:-22.05.2026
Dr. Sanjeeb K Panigrahi, J.
1. Since the issues raised in all these CRLMCs referred to above involve
common question of fact and law, those were heard analogously and are
being disposed of by this common judgment. For the sake of
convenience and effective adjudication, CRLMC No.3083 of 2025 is
treated as the lead case.
2. The Petitioners, in CRLMC No.3083 of 2025, have made a prayer to
quash the F.I.R. No.644 dated 20.12.2024 registered at Kamakhya Nagar
Police Station under Sections 418/ 420/ 34 of the I.P.C. and all other
investigation/ proceedings (if any) arising therefrom.
I. F ACTUAL M ATRIX OF THE C ASE :
3. The brief facts of the case are as follows:
(i) As it transpires from the case record, the facts of the case, in a
nutshell, are that pursuant to a successful tender process, on
17.05.2018 a contract ("Main Contract") was entered into between
Punj Lloyd Ltd. (PLL) and the Gas Authority of India Ltd/ M/S Gail
(India) limited ("GAIL") for the work of laying and construction of
steel gas pipeline along with associated facilities from Dhamra to
Angul section of Jagatisinghpur-Haldia-Bokaro-Dhamra Pipeline
)
Project (JHBDPL Phase-II (i.e., 0 to 207 kms).
(ii) The NCLT passed an order dated 08.03.2019admitting the
application for initiating Corporate Insolvency Resolution Process
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("CIRP") in respect of PLL. Mr. Gaurav Gupta was appointed as
Interim Resolution Professional.
(iii) Subsequently, the Committee of Creditors of PLL at its meeting
held on 08.05.2019 nominated Mr. Ashwini Mehra ("Liquidator of
PLL")to act as a Resolution Processional ("RP") for PLL and the
NCLT approved the appointment of the RP vide its order dated
22.05.2019.
(iv) During the pendency of CIRP, owing to the contract between PLL
and GAIL, the RP of PLL started appointing subcontractors for
carrying out the works. On 08.01.2021, PLL issued a Work Order to
the Complainant's Company – DSP Infracon Pvt. Ltd. ("DSP"),
("Work Order")awarding the sub-contract work and setting out the
terms and conditions for the agreed scope of work including
execution of steel pipeline laying work from Dhamra to Angul in
the State of Odisha. The agreed sub contract price was INR
20,05,89,089 (excluding GST) and payments were to be made on the
basis of the actual work done and certification by PLL's
representative. Thus, the relationship between the PLL and
Complainant was purely commercial and contractual in nature.
(v) In view of the above, the Complainant raised invoices as per the
actual work done pursuant to the Work Order and PLL made
certain payments against such invoices. Since no resolution plan
for PLL was approved, an application under section 33(1) of the
Insolvency and Bankruptcy Code, 2016 ("IBC") was filed before the
NCLT seeking liquidation of PLL as a going concern, which was
allowed by the NCLT vide order dated 27.05.2022 and the RP was
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appointed as the Liquidator of PLL. Presently, PLL is under
liquidation as per the provisions of IBC.
(vi) On 07.06.2022, GAIL filed an Application before the National
Company Law Tribunal, Principal Bench inter alia seeking certain
monies from the liquidator {erstwhile RP). In these proceedings, an
Additional Affidavit dated 13.09.2022 had been filed by GAIL
wherein it has been disclosed that GAIL has paid a cumulative
sum of INR10,71,65,387 to sub-vendors of PLL and a list of vendors
is also annexed. Among these lists of vendors, even DSP is a
vendor whose dues have been fully paid. The Petitioners crave
leave to refer to the documents in the abovementioned proceedings
as and when produced.
(vii) On 16.04.2025, the Petitioners came to know thatthe FIR was
registered against the Petitioners, being the employees of PLL
under Sections 418,420 and 34 of the IPG by the Complainant at
Kamakhya Nagar Police Station. It appears that the FIR was filed
pursuant to a complaint dated 20.12.2024.
(viii) From the FIR, it appears that the Complainant has made on
baseless allegations which are devoid of truth. The contents of the
FIR that on account of PLL's contract with GAIL, PLL
subcontracted several works to sub-contractors, wherein the
Complainant was one such sub-contractor who had carried out
some work as per the Work Order. It is alleged that an amount of
INR3.28 crores remains outstanding and pending from PLL against
the total work carried out by the Complainant. It is also alleged
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that PLL is withholding these amounts while availing GST benefit
with the intention to cheat the Complainant.
(ix) Being aggrieved, the Petitioners are constrained to approach this
Court by way of the present criminal appeal seeking appropriate
relief.
UBMISSIONS N EHALF F HE ETITIONERS
II. S O B O T P :
4. The learned counsel for the Petitioners earnestly made the following
submissions in support of his contentions:
(i) The allegations in the FIR do not satisfy the essential ingredients of
Sections 418 or 420 of the IPC. Specifically, Section 418 IPC requires
“cheating” with the intent of wrongful gain or wrongful loss,
which is absent in the allegations.
(ii)
The FIR is absolutely silent on any fact which directly or indirectly
states or implies that the Petitioners have induced the Complainant
to deliver/retain any property. There is no averment or allegation
that the Petitioners have dishonestly with fraudulent intent
deceived the Complainant.
(iii) The agreement/ sub-contract between the Complainant and
Petitioners was a legally valid contract for a specific scope of work
which was being executed until the main Contract of the
Petitioners was terminated. It is pertinent to note that such
termination was beyond the control of the Petitioners, and
primarily due to the lapses of the Complainant.
(iv) There is no allegation that the sub-contract was illegal or not
mutually agreed upon by the Parties. Until termination of the Main
Contract, there was no issue that the Complainant faced or ever
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raised. Thus, it would be absurd now to assume that the Petitioners
from the inception of the Sub-contract had intended to deceive the
Complainant.
(v) Further, there is no wrongful gain caused to the Petitioners at the
behest of the Complainant through this sub-contract or otherwise.
Therefore, it is absolutely false and baseless to allege that the
Petitioners have intentionally deceived the complainant.
(vi) Similarly, Section 420 of the I.P.C. necessitates dishonest
inducement to deliver property or valuable security which is not
substantiated by the Complainant in any manner.
(vii) Further, the Supreme Court has emphasized that mere non-
performance of a contractual obligation does not amount to
cheating under Section 418g of I.P.C. unless there is deliberate
deception or fraud since the beginning. Therefore, as in the present
case, the matter involves a civil or financial dispute without the
necessary ingredients of cheating or fraudulent intention,
prosecution under Section 418 IPC cannot be maintainable.
(viii) The registration of FIR is also contrary to the settled position of law
which has been reiterated by the Supreme Court in Ramdev Food
1
Products Private Limited v. State of Gujarat , that courts exercise
caution to protect parties from malicious tendency of criminal
proceedings being used to settle disputes which are essentially civil
in nature.
1
(2015) 6 SCC 439
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(ix) The Supreme Court in Indian Oil Corporation v. NEPC India
2
Ltd. , cautioned criminal courts about converting purely civil
disputes into criminal cases and held that any effort to settle civil
disputes (which do not involve any criminal offence) by applying
pressure through criminal prosecution should be deprecated and
discouraged.
(x) The allegations in the FIR are so preposterous that any further
prolongation of prosecution would be tantamount to sheer
harassment. It is submitted that it is a gross violation of the
Petitioners’ rights if the rigmarole of criminal prosecution
continues for years. The present facts clearly show that it is purely
a civil dispute where no offences are disclosed against the
Petitioners. The Opposite Party No.2 has sought to wrongly give
the commercial disputes a colour of criminality.
(xi) The grievance raised by the Complainant appears to be purely
contractual in nature, arising from alleged non-payment of
outstanding dues in a contractual arrangement between the
Petitioners and the Complainant. As stated above, a claim for
recovery of money or financial grievances cannot be construed as a
penal offense requiring criminal prosecution.
(xii) ln Naresh Kumar and Another -vrs-. State of Karnataka and
3
Another ,the Supreme Court held that where the allegations clearly
stem from a contractual dispute, criminal proceedings in such
cases deserve to be quashed. Therefore, it is evident that the FIR in
2
(2006) 6 SCC 736
3
2024 SCC Online SC 268
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the present case is an abuse of process and is being used as a
coercive measure for monetary recovery, warranting interference
by this Court.
4
(xiii) The Supreme Court in ,
Chandrapal Singh -vrs.-Mohraj Singh
observed that frustrated litigants should not be permitted to vent
their frustration by cheaply invoking jurisdiction of the criminal
court.
(xiv) The Petitioner, Ashwini Meher in CRLMC No.3081 of 2025acting as
the official liquidator, is bound by legal procedures governing the
Liquidation process. It is settled position of law that the actions of
the liquidator appointed by the Court are not only in good faith
but are also in court monitored. Thus, it clearly lacks any dishonest
intention. The alleged non-payment of dues, even if admitted as
outstanding, there is an appropriate recourse available under the
civil laws to recover the dues, if any. Merely using criminal
prosecution as means of recovery of dues, baselessly making bald
allegations of fraudulent or dishonest actions against the court
appointed liquidator should not be permitted.
(xv) Similarly, the other petitioners also had no criminal intent
whatsoever. The alleged grievance of the Complainant pertains to
the amount of unpaid money in lieu of the sub-contract However,
the Complainant itself has stated that the main contract between
the PLL came to be terminated and the scope of work was given to
Complainant vide the Work Order on 08.01.2021. It is evident that,
the Work Order was subsequent to the initiation of the liquidation
4
(1982) 1 SCC 466
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process of PPL. Therefore, the functioning of the PLL was
entrusted to the petitioner (Ashwini Mehra) being the RP and/or
the liquidator of PLL. Ever since the RP was appointed by the
NCLT, the rest of the petitioners ceased to be responsible for
functioning of the PPL. Thus, they had no control or authority in
course of the Work Order/ sub contract awarded to the
Complainant. All these events were beyond the control of the
Petitioners and, thus, there is lack of criminal intent on the part of
the petitioners.
(xvi) It is further contended that there is no allegation or evidence to
imply that either of the petitioners have made any unlawful gains
from the transactions mentioned in the FIR. There is absolutely no
gain to the petitioners if any such alleged loss is caused to the
Complainant. Therefore, neither any motive was for the Petitioners
to commit the alleged offence nor was any intentions or any benefit
that the petitioners could have derived by cheating of the
Complainant, as alleged in the FIR.
(xvii) It is also submitted that filing of the FIR amounts to an abuse of
the criminal justice process, with an intent to pressurize the
Petitioners to fulfill the financial claims. The Complainant has
misused the Government machinery for achieving their ulterior
motives for their wrongful enrichment
5
(xviii) In Paramjeet Batra-vrs.- State of Uttarakhand , the Supreme
Court recognized that criminal proceedings arising from
5
(2013) 11 SCC 673
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essentially civil disputes are liable to be quashed under Section 482
of the Cr.P.C. to prevent abuse of process
(xix) It is also contended that continuation of the investigation and
prosecution under the FIR will cause undue harassment to the
Petitioners and disrupt the lawful liquidation proceedings, thereby
prejudicing the interests of all stake holders of PLL.
6
(xx) The Supreme Courtin the case of State of Haryana v. Bhajan Lal ,
identified that Court ought to interfere and quash a first
information report / Magistrate's order in cases where:
(a) the allegations made in the first information report or the
complaint, even if they are taken at their face value and
accepted in their entirety, do not prima facie constitute any
offence or make out a case against the accused;
(b)the allegations made in the first information report or
complaint are so absurd and inherently improbable on the basis
of which no prudent person can ever reach a just conclusion
that there is sufficient ground for proceeding against the
accused;
(c) the proceeding is maliciously instituted with an ulterior
motive to draw vengeance on the accused and with a view to
spite him due to private and personal grudge.
(xxi) The Supreme Court, in Chandrapal Singh -vrs.-Mahraj
7
Singh ,observed that frustrated litigants should not be permitted to
6
(1992) Supp (t) SCC 335
7
(1982) 1 SCC 466
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vent their frustration by cheaply invoking jurisdiction of the
criminal court.
(xxii) In view of the aforesaid submissions, the petitioners pray and
submit that FIR No.0644 of 2024 for commission of offences under
Section 418, 420 and 34 of the I.P.C. registered at Kamakhya Nagar
Police Station dated 20.12.2024 against the Petitioner and others
and all actions taken pursuant thereto/ in pursuance thereof, merits
quashing as ex facie. Admittedly, no offense far less any criminal
offence has been committed by the petitioners herein and the
NCLT, New Delhi is seized of the matter and further the police
have no authority to delve into the proceedings of the NCLT. In
this connection, the petitioners have relied on two relevant
judgments i.e. M/S Shikhar Chemicals v. The State of Uttar
8
Pradesh &Anr . and M/s Tuf Metallurgical Pvt. Ltd. v. M/s
9
AlbusIndia Ltd. (NCLT New Delhi) :
III. S UBMISSIONS O N B EHALF O F T HE O PPOSITE P ARTY N O .2:
5. Per contra , the learned counsel for the Opposite PartyNo.2 earnestly
made the following submission in support of his contentions:-
(i) The petitioners have merely filed a downloaded FIR form as
Annexure-5 and have not annexed the certified copy of the
impugned FIR which has been prayed to be quashed before this
Court. Most importantly, the contents of the FIR which is sought
to be quashed have not been filed along with the form of the FIR.
8
2025 INSC 945
9
in CP IB 1089/PB)/ 20l 8
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Only the form of the FIR has been annexed in the present
CRLMC. In absence of the impugned FIR, the very foundation of
the challenge is missing and no effective judicial review can be
undertaken.
(ii) It is trite that a petition seeking exercise of inherent jurisdiction
under Section 528 of BNSS must be, accompanied by the order
sought to be quashed /interfered with, and failure to annex the
impugned FIR is, by itself, a sufficient ground to reject the
petition at the very threshold. The petitioners, having chosen not
to place the impugned FIR on record, cannot be permitted to
maintain the present challenge on incomplete pleadings and
defective CRLMC.
(iii) In fact, the petitioners have separately filed I.A. only to seek
exemption from filing certified copy of FIR (Annexure-5),
showing that he is fully aware of the High Court Rules regarding
mandatory annexures yet has chosen not to place the complete
impugned order on record. A petitioner who withholds the very
order under challenge cannot invoke the inherent jurisdiction of
this Court. The CRLMC is, thus, liable tobe rejected at the
threshold for non-compliance with the Orissa High Court Rules
or suppression/ incompleteness of material record.
(iv) Even otherwise, the contention of the petitioners that the present
dispute is purely commercial is misconceived and premature, in
as much as the FIR specifically alleges that the accused persons,
including the petitioners particularly the petitioner in
CRLMCNo.3081 of 2025, Aswini Meher, has dishonestly withheld
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admitted dues of about Rs.3.2 crores, while simultaneously
availing GST credit on RA Bill No.13,thereby causing wrongful
loss to the informant and wrongful gain to themselves. These
allegations, taken on face value, clearly disclose the ingredients of
cheating under Sections 418 and 420 IPC at the stage of
registration of the F.I.R. and investigation.
(v) It is also submitted that the Investigating Officer issued Notice to
the GST Department for supplying the requisite data under
Section 94 of BNSS and the GST Department vide Letter dated
10.11.2025 supplied the information that the RP Aswini Meher
dishonestly availed net Input Tax Credit of Rs.18,74,563.40 in
respect of the invoice dated 11.03.2022 issued by the present
Informant.
(vi) The GST department further intimated the I.O. that action under
Rule 37 of the CGST Rules, 2017 will be initiated against the RP
Aswini Meher.
(vii)
It is contended that the State counsel failed to produce the case
diary and the instruction of the I.O before this Court. Therefore,
the status of the Investigation whether Charge Sheet has already
been filed or the Investigation is going on and the involvement of
the accused persons in the offences have not been produced
before this Court either by the Petitioners or by the State counsel
for better adjudication of the cases.
(viii) The GAIL has intimated the Investigating Officer that there is no
clause for sub-contract to third parties during the contract period
between GAIL and Punj Lloyd. Despite that the RP, Aswini
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Meher in connivance with the other petitioners with the intention
of wrongful gain has given work order to the present Informant
and in such a process the RP Aswini Meher availed the input GST
without giving payment to the Informant and cheated lakhs of
rupees.
(ix) The RP Aswini Meher has previous criminal antecedents similar
in nature to the present case. He is a habitual offender.
(x) The FIR narrates that the complainant had executed substantial
work under the work order dated08.01.2021, raised RA Bills
(including RA Bill No.l3),and that the accused, in spite of
receiving benefit and claiming GST input credit on such billed
amount, have deliberately withheld payment with dishonest
intention. The deliberate withholding of payment after deriving
fiscal benefit, coupled with the promise to settle and repeated
avoidance, prima facie indicates a fraudulent and dishonest
intention, which takes the matter out of the realm of a mere civil/
commercial dispute.
(xi)
Whether, at the conclusion of investigation and on appreciation of
entire materials, the offence of cheating is ultimately made out or
not is a matter for the Investigating Agency and, thereafter, the
trial court; at this nascent stage, this Court ought not to stifle a
legitimate investigation by branding the case as “purely civil” on
the basis of the petitioners’ unilateral version. The plea of
“commercial dispute” is a disputed factual defence which cannot
be adjudicated in a quashing petition.
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(xii) The reliance of the petitioner on his status as Liquidator and on
Section 233 of the IBC is also misconceived. The statutory
protection under Section233 is available only in respect of
bonafide acts done "in good faith” under the provisions of the
IBC; the said provision does not grant blanket immunity against
investigation into specific allegations of cheating and dishonest
conduct. Whether the acts were in good faith or were pan of a
criminal design is itself a matter for investigation and cannot be
pre-judged in a petition under Section 528 of BNSS.
(xiii) The petitioner has heavily relied upon his own emails,
reconciliations and internal records to contend that no amount is
due and that excess payment has been made by GAIL to the
complainant and its vendors. All such materials are purely
defensive in nature, emanate from the accused side and require
thorough investigation, verification from GAIL, examination of
vendors and scrutiny of GST records. These are matters of
evidence and factual adjudication; they cannot be made a basis to
quash an FIR at the threshold.
(xiv) The petitioner has selectively relied on certain Supreme Court
decisions concerning conversion of civil disputes into criminal
proceedings. However, those authorities proceed on the settled
principle that where the FIR itself does not disclose any dishonest
intention or inducement at inception, quashing may be justified.
In the present case, the FIR, read as a whole, does allege a
dishonest design in withholding admitted dues while enjoying
tax benefits and using criminal intimidation/coercion in
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negotiations; hence, the ratio of such cases is not attracted at this
preliminary stage.
(xv) It is further submitted that the petitioner has, on the one hand,
engaged with the informant through draft settlement agreements
and negotiations (as evident from the email correspondence), and
on the other hand, seeks to wash his hands off all liability by
terming the dispute as purely civil and hiding behind his
designation as Liquidator. Such conduct itself raises triable issues
as to the petitioner’s role, knowledge and intention, which can
only be appreciated after a full and fair investigation. On this
short ground alone, the present petition deserves to be rejected at
the admission stage.
(xvi) The FIR clearly alleges that the accused, including the present
petitioner, jointly withheld an admitted outstanding of about
Rs.3.28 crores (RA-13, retention and equipment rental) and
“deceitfully availed the GST amount of Rs.35.95 lakh against
Invoice RA-13” with the intention to cheat, thereby causing
financial distress to the complainant company.
(xvii) The email dated 14.04.2025, sent after the alleged coercive
detention of accused No.4 states that the company is committed to
ensuring that all payments are processed in a lawful manner and
that DSP’s rights and claims will be duly considered. This
indicates that the claim was never treated as “non-existent” or
“frivolous” by the petitioner at that time. The correspondence
around the draft settlement agreement and the detailed
calculations exchanged on29.04.2025 etc. show that, on facts, there
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was a serious dispute about admitted dues, timing and mode of
payment and the petitioner considered executing a settlement
while in parallel planning to pursue quashing of FIR. These
circumstances prima facie support the informant's stand that the
accused induced and prolonged negotiations instead of paying
admitted amounts, and that whether the conduct was bona fide or
dishonest is a matter for investigation and trial, not for summary
termination of proceedings.
(xviii) The petitioner claims that IBBI had sought clarifications on
DSP’s complaints and, after the petitioner's email dated
25.05.2023, “no further inquiry has been made”. Therefore, the
explanations “were found satisfactory” and “the matter was
considered closed”. There is nothing on record to show any
formal closure order in favour of the petitioner; it is only his
inference that the matter stood closed. In any case, an
administrative/regulatory exchange with IBBI on insolvency-
process issues cannot oust or nullify the jurisdiction of the police
to investigate a cognizable offence of cheating arising from the
same factual matrix; the two jurisdictions are distinct and can
proceed in parallel.
(xix) In view of the above submissions, it is submitted by the Opposite
Party the present CRLMCs are not maintainable, inter alia, on the
ground that the impugned FIR has not been annexed to the
petition either in certified or in photocopy form;
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OURT S EASONING AND NALYSIS
IV. C ’ R A :
6. Heard learned counsel for the parties at considerable length. Perused the
pleadings, the materials placed on record and the rival submissions
advanced on behalf of the parties with the depth of scrutiny the matter
demands. Since the present batch of CRLMCs arises out of the same
F.I.R., involves identical factual foundations and raises overlapping
questions concerning the interplay between contractual disputes,
insolvency proceedings and criminal prosecution for the offence of
cheating, all the matters were heard analogously and are being disposed
of by this common judgment, treating CRLMC No.3083 of 2025 as the
lead case.
7. The central issue which falls for consideration before this Court is
whether the allegations contained in the impugned F.I.R., taken at their
face value and accepted in their entirety for the limited purpose of
adjudication under Section 482 Cr.P.C./ Section 528 B.N.S.S., disclose the
commission of offences punishable under Sections 418/420/34 IPC, or
whether the criminal proceeding is merely an attempt to impart a colour
of criminality to what is essentially a contractual and commercial dispute
arising out of non-payment of alleged dues under a sub-contract
executed in the backdrop of insolvency and liquidation proceedings
under the Insolvency and Bankruptcy Code, 2016.
8. At the outset, this Court considers it necessary to remind itself of the
settled contours governing the exercise of inherent jurisdiction under
Section 482 Cr.P.C./ Section 528 B.N.S.S. The inherent powers of the High
Court are undoubtedly wide and are intended to secure the ends of
justice and prevent abuse of the process of Court. However, the very
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amplitude of such jurisdiction requires it to be exercised with great
circumspection, restraint and judicial discipline. The jurisdiction is
extraordinary in nature and cannot be permitted to become an
instrument either for prematurely stifling legitimate prosecution or for
converting the High Court into a forum for adjudication of disputed
factual controversies at the threshold stage itself
9. It is a settled principle of criminal jurisprudence that while exercising
jurisdiction for quashing of criminal proceedings, the Court is not
expected to undertake a meticulous appreciation of evidence, weigh the
sufficiency of materials collected during investigation, or adjudicate
upon the probable defence of the accused. The Court must proceed on
the basis that the allegations contained in the complaint or the F.I.R. are
prima facie true and determine whether the foundational ingredients of
the alleged offences are disclosed. At the same time, it is equally well
established that criminal law cannot be permitted to be weaponised for
exerting pressure in disputes which are overwhelmingly civil or
commercial in character. The criminal process cannot be utilised as a
substitute for recovery proceedings, contractual enforcement or debt
realisation. Courts have consistently cautioned that a mere breach of
contract or failure to honour a commercial obligation does not ipso facto
constitute the offence of cheating unless fraudulent or dishonest
intention existed from the very inception of the transaction.
10. The distinction between a mere contractual breach and the offence of
cheating is not merely technical but foundational to criminal
jurisprudence. The gravamen of the offence under Sections 418 and 420
IPC lies in the existence of dishonest or fraudulent intention at the very
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inception of the transaction. To attract the offence of cheating, it must
prima facie appear that the accused had deceitfully induced the
complainant to part with property or undertake an act which resulted in
wrongful loss, while harbouring dishonest intention from the very
beginning. Mere subsequent failure to keep a promise, inability to
discharge contractual liabilities or non-payment of outstanding dues,
without anything more, ordinarily gives rise to civil consequences and
not criminal culpability. Criminal law intervenes not because a promise
has been broken, but because the promise itself was allegedly false and
deceptive at the inception.
11. Tested on the aforesaid principles, this Court finds that the factual
substratum of the present dispute unmistakably emanates from a
commercial and contractual arrangement arising out of a sub-contract
awarded by Punj Lloyd Ltd. to the complainant company for execution
of pipeline laying work pursuant to the principal contract with GAIL.
The records reveal that work orders were issued, invoices were raised,
part payments were admittedly made and disputes subsequently arose
regarding alleged outstanding dues payable to the complainant. The
allegations in the F.I.R., when read in their entirety, fundamentally
pertain to non-payment or withholding of alleged contractual dues,
adjustment of accounts, GST liabilities and disputes relating to financial
reconciliation between the parties. Such matters, by their very nature, lie
predominantly within the realm of civil and commercial adjudication.
12. Significantly, the materials placed before this Court do not prima facie
indicate that at the inception of the contractual relationship the
Petitioners had harboured any fraudulent or dishonest intention to
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deceive the complainant. On the contrary, the undisputed circumstances
reveal that the work order was issued in the course of ongoing business
operations, substantial work was admittedly executed by the
complainant and payments were also released from time to time. The
continuation of contractual dealings over a prolonged period, exchange
of invoices, reconciliations, negotiations and settlement discussions
substantially militate against the theory that the transaction itself was
conceived as a fraudulent device from the very beginning. A subsequent
dispute regarding the quantum of outstanding dues or delayed payment
cannot, without more, retroactively convert a commercial transaction
into an offence of cheating.
13. This Court also finds considerable force in the contention advanced on
behalf of the Petitioners that the allegations primarily revolve around
recovery of alleged outstanding monetary claims. The complainant
asserts that certain amounts remain unpaid despite execution of work
and that GST benefits were availed by the accused persons. Even
assuming such allegations to be correct for the sake of argument, the
same would still require detailed examination of contractual obligations,
billing structures, GST adjustments, reconciliation statements, insolvency
proceedings and financial liabilities arising out of the sub-contract. These
are matters deeply embedded in commercial accounting and contractual
interpretation requiring adjudication before competent civil, arbitral or
insolvency forums. Criminal prosecution cannot ordinarily be invoked as
a coercive mechanism for enforcing disputed financial claims arising
from commercial transactions.
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14. The role of the Petitioner Ashwini Mehra, acting as Resolution
Professional/Liquidator under the supervision of the NCLT, also
assumes considerable significance. The materials on record prima facie
indicate that the affairs of Punj Lloyd Ltd. were being administered
under the framework of the Insolvency and Bankruptcy Code pursuant
to orders passed by the National Company Law Tribunal. Decisions
relating to disbursement of funds, treatment of operational creditors,
settlement of liabilities and continuation of contracts were necessarily
intertwined with the statutory insolvency process. Whether the
complainant’s dues stood admitted, disputed, adjusted or otherwise
payable are issues intrinsically connected with the liquidation
proceedings and cannot be simplistically isolated from the statutory
framework governing insolvency resolution.
15. The attempt of the complainant to attribute criminal intent solely on the
basis of alleged non-payment of dues and availing of GST credit does
not, in the considered opinion of this Court, prima facie satisfy the
foundational ingredients of Sections 418 or 420 IPC. Allegations of
wrongful withholding of payment, financial disputes regarding invoices
or even regulatory consequences under GST law may possibly give rise
to civil, contractual or statutory liabilities, but criminal prosecution for
cheating requires something more than mere non-payment. The element
of deception at inception remains the sine qua non for constituting the
offence. In the present case, the F.I.R. conspicuously lacks specific
averments demonstrating that the Petitioners induced the complainant
into entering the sub-contract by making representations which they
knew to be false from the very beginning.
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16. The chronology of events further weakens the prosecution narrative
regarding fraudulent intention at inception. The work order itself was
issued after commencement of CIRP proceedings and during the
subsistence of statutory supervision under the IBC regime. The
complainant was fully aware of the commercial framework within which
the contract was being executed. The continuation of business dealings,
issuance of running account bills, partial release of payments and
subsequent negotiations for reconciliation all indicate the existence of a
subsisting commercial relationship rather than a pre-designed criminal
conspiracy to cheat the complainant.
17. It is also trite that the pendency of civil remedies or insolvency
proceedings does not by itself bar criminal prosecution where genuine
ingredients of criminal offences are disclosed. However, the converse is
equally true that the existence of a civil dispute cannot be artificially
dressed in criminal colours merely to exert pressure for settlement or
recovery. Courts must remain vigilant against the growing tendency of
converting commercial disagreements into criminal litigation with a
view to compel financial settlements through coercive criminal process.
The criminal justice system cannot be permitted to become a tool of arm-
twisting in business disputes.
18. The reliance placed by the Opposite Party on alleged GST irregularities
and subsequent correspondence with authorities also does not materially
alter the core nature of the dispute at this stage. Whether GST input
credit was wrongly availed, whether statutory liabilities arose under the
CGST framework, or whether there existed accounting discrepancies are
matters which may attract examination under the relevant fiscal statutes.
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Such allegations, without clear and specific averments of initial
deception or fraudulent inducement, do not automatically elevate a
contractual payment dispute into the offence of cheating punishable
under Sections 418 and 420 IPC.
19. This Court is also unable to overlook the broader factual backdrop that
the company itself was undergoing CIRP and eventual liquidation under
orders of the NCLT. Commercial decisions undertaken during
insolvency proceedings are subject to statutory supervision, adjudicatory
oversight and competing claims of various stakeholders. The
complexities arising from insolvency administration, operational creditor
claims and contractual liabilities cannot ordinarily be compressed into
allegations of criminal cheating in the absence of clear material
disclosing mens rea of a criminal nature.
20. Having regard to the totality of circumstances, this Court finds that the
allegations made in the impugned F.I.R., even if accepted in their
entirety, predominantly disclose a commercial dispute relating to alleged
non-payment of contractual dues and financial reconciliation arising
from a sub-contract executed during insolvency proceedings. The
foundational ingredients constituting the offences under Sections 418
and 420 IPC, particularly the existence of fraudulent or dishonest
intention at the inception of the transaction, are conspicuously absent
from the prosecution narrative. Continuation of the criminal proceeding
in such circumstances would amount to permitting the criminal process
to be employed as a coercive mechanism for recovery of disputed
monetary claims, which is impermissible in law.
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21. In the considered opinion of this Court, the present case squarely falls
within the categories illustratively laid down by the Hon’ble Supreme
10
Court in State of Haryana v. Bhajan Lal , wherein interference is
warranted where the allegations, even if accepted at face value, fail to
disclose the commission of any offence or where the criminal proceeding
is manifestly attended with mala fide intent and instituted with an
ulterior motive for wreaking pressure or vengeance. The criminal
prosecution initiated against the Petitioners appears to be a clear attempt
to impart criminal colour to a fundamentally civil and commercial
dispute. Permitting such prosecution to continue would amount to abuse
of the process of Court
ONCLUSION
V. C :
22. In view of the discussions made hereinabove, this Court is of the
considered opinion that the impugned F.I.R. No.644 dated 20.12.2024
registered at Kamakhya Nagar Police Station under Sections 418/420/34
IPC and all consequential proceedings arising therefrom are
unsustainable in law and liable to be quashed.
23. Accordingly, the CRLMCs stand allowed and the impugned F.I.R.
together with all consequential proceedings arising therefrom are hereby
quashed.
24. Interim order, if any, passed earlier stands vacated.
(Dr. Sanjeeb K Panigrahi)
Judge
Orissa High Court, Cuttack,
nd
Dated 22 May, 2026/
10
(1992) Supp.(1) SCC 335
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