Criminal prosecution was unwarranted for a contractual dispute covered by an arbitration clause.

M/s Shanti Creation Pvt. Ltd. alleged that it entered into a registered development agreement with Arun Kumar on 23 May 2011 concerning 6 katha, 16 dhur of land at Dhanaut, Patna.

The complainant later discovered that a family partition dated 25 September 2013 had allotted the disputed land to Kumar’s sister, and claimed a loss of ₹50 lakh.

Kumar responded to a legal notice by referring to the arbitration clause in the agreement and maintained that the complainant had subsequently entered into an agreement with his sister and completed the structure.

The Magistrate took cognizance on 26 August 2014 in Complaint Case No. 27409(C) of 2014.

Kumar sought quashing of that order; the High Court stayed further proceedings and heard both sides.

1. Whether the cognizance order should be quashed where the dispute arose from a development agreement and the agreement provided for arbitration.

2. Whether the complainant’s allegations warranted continuation of criminal proceedings, rather than resolution through the available contractual remedy.

The Court applied the general principle that criminal prosecution is not a remedy for every dispute and that criminal jurisdiction should not be invoked to resolve a dispute that is essentially contractual where an alternative remedy is available.

It also relied on the arbitration clause in the development agreement, which the judgment identifies as clause 20.

The judgment cites no specific statute or named precedent.

The Court considered that, even if the development agreement and subsequent family partition were both genuine, they might show a notional loss to the complainant.

It also noted the complainant’s account that relations had deteriorated after the agreement and that little had been done thereafter.

Given the age of the dispute, the Court’s view that no serious loss had been caused, and the availability of arbitration under clause 20, it treated the matter as one appropriately addressed through the contractual remedy rather than criminal prosecution.