Criminal Proceedings Arising from Commercial Disputes May Be Quashed After Settlement

Petitioner No. 1, a supplier of oils and related products, received an advance of USD 312,000 from respondent No. 2 against three invoices but did not deliver the goods within the agreed time. After part of the advance remained unpaid, respondent No. 2 complained to the police, resulting in registration of FIR No. 113/2026 under Sections 420/34 IPC.

The parties later executed a settlement agreement dated 3 October 2026. The principal amount had been refunded, and petitioner No. 2 agreed to pay a further AED 180,000 in full and final satisfaction of respondent No. 2’s remaining monetary claims; six post-dated cheques were issued for that amount.

The petition sought quashing of the FIR and withdrawal of a Look Out Circular (LOC); the State informed the Court that the LOC had already been lifted.

Whether the FIR under Sections 420/34 IPC and the proceedings arising from it should be quashed in view of the parties’ settlement.

Whether the Court should grant relief concerning the LOC issued against petitioner No. 2.

Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, corresponding to Section 482 of the Code of Criminal Procedure, 1973, empowers the High Court to quash criminal proceedings, including in respect of non-compoundable offences, where doing so would secure the ends of justice or prevent abuse of process.

Under Narinder Singh v. State of Punjab, (2014) 6 SCC 466, that power is to be exercised sparingly and with caution; predominantly civil disputes, particularly those arising from commercial transactions, may be quashed where the parties have resolved their disputes, subject to consideration of the nature of the offence and the likelihood of conviction.

The Court treated the dispute as a private commercial matter arising from a failed supply transaction and delayed refund, rather than one involving a category of serious offences for which settlement would not ordinarily justify quashing.

Respondent No. 2 confirmed that the settlement was voluntary, that the principal amount had been received, and that he had no objection to quashing the FIR.

The State raised no serious objection, while the Court preserved the parties’ ability to pursue remedies in accordance with law if the settlement terms were breached.

As to the LOC, the State stated that it had already been lifted, so no further direction was necessary.

The parties were held to the terms of the settlement agreement, with liberty to seek remedies in accordance with law in the event of non-compliance or breach.

The petition and pending application were disposed of; the Court noted that the LOC had already been lifted.