Section 156(3) relief is unwarranted where a contractual dispute lacks prima facie fraudulent intent at inception.

The petitioner, an Australia-based exporter dealing in steel scrap, alleged that Respondent No. 1 induced him to enter into commercial relations by initially placing small orders and making advance payments.

Respondent No. 1 thereafter placed an order for 420 tonnes of steel scrap under Sale Contract No. 156748 dated 7 November 2005 and allegedly assured payment after shipment.

After further consignments were dispatched, Respondent No. 1 allegedly sought alterations in the description of goods and shipping documents, demanded USD 20,000 for customs clearance, failed to make payment, and caused the petitioner financial loss of approximately USD 193,882.

The petitioner lodged police complaints in 2015 alleging dishonest inducement and cheating.

Although a Vigilance Enquiry Report dated 2 May 2016 allegedly found cognizable offences and referred the matter to the concerned police station, the Investigating Officer filed a closure report dated 26 August 2016, treating the dispute as civil and contractual in nature.

The petitioner subsequently filed an application under Section 156(3) CrPC seeking registration of an FIR.

The Metropolitan Magistrate dismissed both the Section 156(3) application and the complaint under Section 200 CrPC on 8 May 2019.

The Revisional Court dismissed the petitioner’s challenge on 28 November 2022.

The petitioner challenged both orders before the High Court under Section 528 BNSS.

1. Whether the Magistrate erred in refusing to direct registration of an FIR under Section 156(3) CrPC in respect of the petitioner’s allegations arising from the commercial transaction?

2. Whether the complaint and accompanying documents prima facie disclosed dishonest or fraudulent intention at the inception of the transaction so as to constitute a cognizable criminal offence, rather than merely a contractual or civil dispute?

3. Whether the High Court should exercise its inherent jurisdiction under Section 528 BNSS to interfere with the orders of the Magistrate and the Revisional Court?

The Court applied Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023, concerning the High Court’s inherent jurisdiction, and Sections 156(3) and 200 of the Code of Criminal Procedure, 1973.

The Court held that the power under Section 156(3) CrPC is discretionary and cannot be exercised mechanically; the Magistrate must be satisfied that the complaint discloses a cognizable offence and that police investigation is necessary.

Where the dispute arises from a commercial or contractual transaction and the relevant documents are already in the complainant’s possession, registration of an FIR is not ordinarily warranted unless police investigation is demonstrably required.

Mere breach of contractual obligations or resulting financial loss does not constitute cheating in the absence of prima facie material establishing dishonest or fraudulent intention at the inception of the transaction.

A vigilance or preliminary enquiry report is only one piece of material and does not bind the Magistrate, who must independently assess the complaint, the Action Taken Report, and the supporting documents.

The Court found that the petitioner’s allegations were founded substantially on the Sale Contract, correspondence, shipping documents, DGFT proceedings, the Vigilance Enquiry Report, and the closure report—all documentary materials already known to and possessed by the petitioner.

Consequently, no material was shown to require custodial or police investigation.

The Vigilance Enquiry Report, even if it indicated cognizable offences, did not compel the Magistrate to order registration of an FIR because the Magistrate was required to independently evaluate the entire record.

The underlying dispute concerned non-payment and alleged breach of obligations arising from a commercial transaction, and the petitioner failed to demonstrate prima facie dishonest intention from the beginning of the transaction.

The alleged financial loss and non-performance, without more, could not convert the contractual dispute into a criminal offence.

The High Court therefore found no illegality, perversity, or jurisdictional error in the concurrent orders of the subordinate courts.

The materials disclosed, at most, a commercial and contractual dispute and did not prima facie establish dishonest or fraudulent intention at the inception of the transaction.

Finding no ground for interference under Section 528 BNSS, the Court dismissed the petition and disposed of any pending applications.