High Court Quashes FIR as Contractual Disputes Cannot Be Imparted Criminal Colour to Exert Commercial Pressure

The petitioner, a real estate developer, entered into multiple development agreements and a Memorandum of Agreement (dated 17.12.2019) with M/s Anant Investment and Respondent No. 2 (complainant) for residential projects in Jabalpur.

Disputes arose regarding financial settlements, investment amounts, and the transfer of plots.

On 25.10.2024, an FIR was registered against the petitioner alleging that he dishonestly transferred seven plots into his own name and misappropriated invested funds.

The petitioner seeks quashment of the FIR and subsequent proceedings under Section 482 Cr.P.C. (Section 528 BNSS), contending the dispute is purely civil/contractual.

1. Whether the allegations in the FIR constitute cognizable criminal offences or a dispute of a purely civil and commercial nature.

2. Whether the essential ingredients of cheating (Sec. 420 IPC) and criminal breach of trust (Sec. 409 IPC) are made out in the absence of dishonest intention at the inception of the contract.

The Court applied Section 482 of the Cr.P.C. regarding the inherent power to prevent abuse of the process of law.

It relied on Hridaya Ranjan Prasad Verma v. State of Bihar, establishing that for "cheating," fraudulent intent must exist at the time of the inducement.

It further cited Sarabjit Kaur v. State of Punjab and V.Y. Jose v. State of Gujarat to distinguish between a mere breach of contract and criminal offences.

Regarding "criminal breach of trust" under Section 409 IPC, the Court applied the principle from MNG Bharateesh Reddy v. Ramesh Ranganathan, requiring "entrustment" of property and dishonest misappropriation.

The "Bhajan Lal criteria" were used to evaluate whether the FIR prima facie disclosed a crime.

The Court observed that the relationship between the parties was founded on commercial development agreements and property transactions.

Upon reviewing the FIR, the Court found the allegations pertained to the refund of consideration and plot transfers—matters quintessentially civil in character.

Applying the Hridaya Ranjan test, the Court found no material suggesting the petitioner had a dishonest intention at the time the agreements were executed; rather, the parties had a long-standing business relationship.

Regarding Section 409 IPC, the Court held that the commercial dealings did not amount to "fiduciary entrustment" in the legal sense.

The Court determined that the criminal machinery was being misused as a tool for "arm-twisting" and coercive recovery in a contractual dispute.

The Court allowed the petition and quashed FIR Crime No. 536/2024 (Police Station Lordganj, Jabalpur) under Sections 420, 409, 294, and 506(2) IPC, along with the consequential charge-sheet and proceedings. It further directed that any amount deposited by the petitioner before the trial court would be subject to the final outcome of civil litigation.