FIR cannot be quashed where allegations disclose cognizable offences requiring adjudication of disputed facts.

Respondent No. 4, the Branch Manager of Geo Chem Laboratories Pvt. Ltd., lodged FIR No. 334/2016 at Police Station Dabhra against the appellants and other accused persons for offences under Sections 420, 467, 468 and 471 read with Section 34 of the IPC.

The allegation was that, in connivance with borrowers and the company’s surveyor, the appellants submitted forged Storage Receipts showing inflated or incorrect quantities and quality of rice stored in their godown, thereby obtaining commodity loans from IDBI Bank and HDFC Bank.

The appellants obtained loans of ₹45 lakhs and ₹50 lakhs respectively against hypothecated rice.

Following defaults, the banks initiated recovery proceedings under the SARFAESI Act before the Debts Recovery Tribunal, and alleged discrepancies were subsequently found between the stock reflected in the Storage Receipts and the stock actually available.

The appellants contended that the stock had been verified by the banks and Geo Chem, that the hypothecated stock was later sold by the banks, and that the FIR was based on vague allegations and disputed commercial issues.

The appellants’ petition under Article 226 of the Constitution and Section 482 Cr.P.C., seeking quashing of the FIR and consequential proceedings, was dismissed by the learned Single Judge in WPCR No. 290 of 2018 on 7 September 2021.

The present writ appeal challenged that order.

The Single Judge held that the allegations involved disputed questions concerning the quantity and quality of rice, the correctness of the Storage Receipts, and the roles of the appellants, bank officials and Geo Chem personnel, which could not be adjudicated in writ jurisdiction.

1. Whether the FIR, even if taken at face value, disclosed the commission of cognizable offences under Sections 420, 467, 468 and 471 read with Section 34 IPC so as to justify continuation of the investigation?

2. Whether the High Court ought to exercise its extraordinary jurisdiction under Article 226 of the Constitution and/or Section 482 Cr.P.C. to quash the FIR on the ground that the allegations involved a loan-recovery dispute, disputed stock discrepancies, and alleged mala fides?

3. Whether the disputed questions concerning the actual quantity and quality of rice, the genuineness of the Storage Receipts, and the respective roles of the parties could be determined at the threshold without investigation or trial?

The Court applied the principle that the High Court’s powers under Article 226 of the Constitution and Section 482 Cr.P.C. to quash criminal proceedings are extraordinary and must be exercised sparingly.

Under the principles stated in State of Haryana v. Bhajan Lal, interference may be justified where the FIR, even accepted on its face, does not disclose an offence or where the proceedings are manifestly mala fide or instituted for an ulterior purpose.

The Court further relied on State of M.P. v. Kunwar Singh, Kaptan Singh v. State of Uttar Pradesh, Priti Saraf v. State of NCT of Delhi, State of A.P. v. Golconda Linga Swamy, and Rajiv Thapar v. Madan Lal Kapoor for the rule that the High Court cannot conduct a roving inquiry, appreciate disputed evidence, or determine the truthfulness of allegations at the stage of quashing.

The decision in Virupaksha v. State of Karnataka, relied upon by the appellants, was distinguished on facts because the present FIR contained specific allegations that credit facilities had been obtained on the basis of discrepancies between the actual stock and the stock recorded in the Storage Receipts.

The Division Bench found that the FIR contained specific allegations of forged Storage Receipts, misrepresentation of the quantity and quality of rice, and procurement of bank credit on that basis, thereby prima facie disclosing cognizable offences.

The appellants’ reliance on bank verification, subsequent auction of the stock, recovery proceedings, and alleged involvement of bank or Geo Chem officials raised factual matters requiring investigation and appreciation of evidence.

Those contentions could not establish, at the threshold, that the FIR was legally unsustainable or manifestly mala fide.

Since determining the actual stock, the genuineness of the receipts, and the respective liability of the parties would require examination of documents and evidence, the case did not fall within the exceptional categories warranting quashing under Bhajan Lal.

The writ appeal was found devoid of merit and was accordingly dismissed, with no order as to costs.