A civil dispute does not warrant quashing where allegations prima facie disclose criminal intent.

The applicants sought quashing under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, of FIR C.R. No. 11207025240880 of 2024 registered at Godhra ‘A’ Division Police Station for offences under Sections 406 and 114 of the IPC, together with consequential proceedings.

The complainant Bank alleged that a loan facility had been availed by the partners of M/s. Taneja Electronics and that the applicants and their mother had executed mortgage documents, promissory notes and a memorandum/deed of deposit of title deeds in respect of land bearing Survey No. 398/5, admeasuring 62.70.97 square metres.

Despite knowledge of the mortgage and an undertaking not to alienate the property without clearing the Bank’s dues and obtaining its consent, the applicants allegedly transferred the mortgaged property to third parties.

The applicants relied on Regular Civil Suit No. 91 of 2012, which had been decreed in their favour on 4 November 2024, and contended that the FIR lodged on 20 November 2024, after an unexplained delay of nearly 13 years, was an abuse of process.

The charge-sheet had been filed and the criminal case was pending at the stage of framing of charge.

Whether the allegations in the FIR and the material collected during investigation prima facie disclosed the ingredients of criminal breach of trust under Section 406 IPC and the connected liability under Section 114 IPC, warranting continuation of the prosecution?

Whether the existence of the related civil suit, the decree in favour of the applicants, and the alleged delay in lodging the FIR justified exercise of the High Court’s inherent jurisdiction to quash the proceedings?

Whether the High Court should conduct an assessment of disputed factual and evidentiary matters at the pre-trial stage while exercising jurisdiction under Section 528 BNSS?

The Court applied Section 528 of the BNSS, 2023, governing the High Court’s inherent power to prevent abuse of process and secure the ends of justice.

For Section 405 IPC, punishable under Section 406 IPC, it identified the requirements of entrustment or dominion over property and dishonest misappropriation, conversion, use or disposal in violation of the terms of entrustment or a legal contract.

Section 114 IPC applies where an abettor, who would otherwise be liable for abetment, is present when the offence is committed.

The Court also referred to the principles concerning cheating and dishonest intention, observing that criminal liability may arise from a civil or contractual transaction where the allegations prima facie disclose dishonest intention.

Relying on Rocky v. State of Telangana, 2025 (0) JX (SC) 1486, and Dinesh Sharma v. Emgee Cables and Communication Ltd., 2025 SCC OnLine SC 929, the Court held that quashing is an exceptional remedy and that proceedings should not ordinarily be terminated where the FIR and charge-sheet disclose cognizable offences or require appreciation of evidence at trial.

The Court further relied on M/s. Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra, (2021) 19 SCC 401, in declining interim protection against the effect of its order.

The Court found that the applicants’ signatures appeared on the mortgage documents and that the property card recorded the Bank’s charge through Entry No. 2147, prima facie establishing the applicants’ knowledge of the mortgage.

Their alleged transfer of the mortgaged property to third parties without obtaining a No Objection Certificate or clearing the Bank’s dues was capable, at the threshold stage, of indicating dishonest disposal in violation of the mortgage arrangement.

The Court rejected the argument that the dispute was purely civil, holding that civil consequences do not preclude criminal prosecution where the allegations disclose the requisite dishonest intention.

It also held that the civil decree did not negate the prima facie criminal case: although the suit was decreed, the Civil Court had recognised the Bank’s enforceable rights over the separate parcel measuring 62.70.97 square metres, which was the property involved in the FIR.

Determining the precise effect of the documents, the applicants’ intent, and whether the offences were ultimately proved was held to be a matter for the Trial Court, not for adjudication in a quashing petition.

The application for quashing was therefore dismissed, and the FIR and consequential criminal proceedings were permitted to continue.

The applicants’ request to stay the order was also rejected.