The Calcutta High Court held that criminal law cannot be invoked merely to recover business dues and accordingly quashed criminal proceedings that were instituted on allegations of cheating and criminal breach of trust in connection with commercial transactions. The Division Bench of the High Court considered a petition challenging the continuation of criminal proceedings arising from a complaint filed by a businessman against another businessman, where it was alleged that the respondent had induced the complainant to supply goods on credit, failed to pay for the supplied goods, and thereafter utilised the goods without payment, giving rise to claims of cheating and criminal breach of trust. The criminal case had been registered pursuant to the complaint and the respondent was arrayed as accused facing trial on serious offences. The petition before the High Court sought quashing of the First Information Report (FIR), subsequent chargesheet, and all consequential proceedings on the ground that the allegations essentially arose out of contractual and commercial disputes over payment for goods supplied and that the ingredients of the offences alleged were not made out. The High Court examined the pleadings, transactions, and documentary evidence placed on record, including purchase orders, invoices, delivery receipts, and correspondence between the parties concerning supply of goods and payment terms.
The Court observed that the parties were engaged in commercial dealings where the complainant had supplied goods to the respondent pursuant to agreed terms, and that the dispute essentially related to non-payment of dues allegedly outstanding for the goods supplied. The High Court noted that non-payment of contractual dues, without more, does not automatically constitute an offence punishable under criminal law, and that civil remedies such as recovery of money or enforcement of contracts are the appropriate forum to resolve such disputes. The bench referred to established legal principles that criminal prosecution for cheating or criminal breach of trust requires the existence of dishonest intention or mens rea at the time of making representations or receiving property, which cannot be imputed merely on the basis of failure to discharge contractual obligations or delays in payment. The Court observed that in the present case, the materials on record did not prima facie disclose any conduct that would satisfy the necessary elements of the offences alleged, such as dishonest intention to deceive or misappropriate the supplied goods at the relevant time.
In reaching its conclusion, the High Court analysed the nature of the transactions, noting that there was no clear evidence to suggest that the respondent had promised to pay while intending not to do so, nor was there evidence that the goods were misappropriated in a manner consistent with criminal breach of trust. The Court emphasised that mere assertion of non-payment or dispute over amounts due cannot be equated with criminal conduct, and that commercial disputes must be adjudicated through the appropriate civil processes. The bench further highlighted that permitting criminal law to be utilised as a vehicle for debt recovery would amount to misuse of the criminal justice system and result in harassment of businessmen engaged in legitimate commercial activities.
The Calcutta High Court also took into account the fact that civil remedies were available to the complainant, including filing of a suit for recovery of money or invoking arbitration or other contractual dispute resolution mechanisms as provided under the relevant agreements. The existence of such alternative forums for redress indicated that criminal proceedings were neither necessary nor appropriate in the circumstances. The bench reiterated that the overarching principle governing the exercise of powers under Section 482 of the Code of Criminal Procedure is to prevent abuse of the process of any court and to secure the ends of justice. In the present matter, continuation of the criminal case would amount to abuse of process, as the allegations fundamentally pertained to a contractual dispute rather than a criminal wrong.
Accordingly, the High Court allowed the petition, quashed the FIR, the chargesheet, and all subsequent criminal proceedings arising from the complaint. The Court’s order effectively put an end to the criminal prosecution against the accused in respect of the alleged cheating and criminal breach of trust, with the understanding that the complainant remains at liberty to pursue appropriate civil remedies for recovery of his dues. The judgment underscores the judiciary’s approach to distinguish between commercial disputes and genuine criminal offences, and reinforces the principle that criminal law is not to be used as a substitute for civil remedies in matters of debt recovery.
The High Court’s reasoning emphasised the need for courts to scrutinise the factual matrix and legal characterisation of complaints before allowing criminal proceedings to proceed, particularly in the context of business disputes where the line between civil obligations and criminal conduct can often be blurred. By quashing the criminal proceedings, the Court reinforced the legal position that invocation of criminal law for recovery of business dues is impermissible in the absence of clear evidence of dishonest intent or criminal misappropriation. The decision serves as a reminder that contractual disputes should be resolved within the civil justice framework, and that criminal prosecutions should be reserved for cases where the statutory ingredients of the offences alleged are clearly made out.
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