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Case title: Naresh Kumar and Anr. vs State of Karnataka and Anr.

Case no.: SLP (CRL.) NO. 1570 OF 2021

Decided on: 12.04.2024

Quorum: Hon’ble Justice SUDHANSHU DHULIA, Hon’ble Justice PRASANNA B. VARALE

FACTS OF THE CASE:

The case in question involves a disagreement between two parties, the appellants and respondent no. 2, regarding a contract for the assembly, transportation, and delivery of bicycles. The appellants, who are the Assistant Manager (Marketing) and the Managing Director of a bicycle manufacturing company, entered into an agreement with respondent no. 2 for the assembly of bicycles at a rate of Rs. 122 per bicycle. Respondent no. 2 claimed to have assembled 83,267 bicycles and invoiced the appellants for Rs. 1,01,58,574.Later, a Chargesheet was filed against both appellants in court.

However, after the filing of the FIR, the appellants and respondent no. 2 reached a settlement through a Compromise Deed dated 27.12.2017. As part of the settlement, the appellants agreed to pay an additional amount of Rs. 26 lakhs to respondent no. 2, which was duly deposited in respondent no. 2’s account on 29.12.2017. This settlement was intended to resolve the dispute and bring peace between the parties. Despite this, the High Court refused to accept the appellants’ argument that the dispute was civil in nature. The High Court inferred from the payment of Rs. 62 lakhs by the appellants, which was more than the amount claimed by respondent no. 2, that there was an intention to cheat from the beginning. The High Court held that a prima facie case of cheating was made out against the appellants.

LEGAL PROVISIONS:

The legal provisions involved in the case are Section 482 of the Code of Criminal Procedure, which deals with inherent powers of the High Court to prevent abuse of process and secure ends of justice. The case also refers to Sections 406, 420, and 506 of the Indian Penal Code, which relate to criminal breach of trust, cheating, and criminal intimidation, respectively.

APPELLANTS CONTENTION:

The appellants contended that the dispute between the parties was primarily civil in nature and not criminal. They argued that the additional amount paid to the complainant was part of a settlement to bring peace and avoid litigation, and not an act of cheating. The appellants also claimed that the High Court’s findings of cheating were incorrect and that the criminal proceedings against them were an abuse of the legal process.

RESPONDENTS CONTENTION:

The respondent no. 2 contended that they were coerced into the settlement dated 27.12.2017 and that it was not reached by their free will. They argued that the criminal proceedings against the appellants were necessary as they believed the settlement was not entered into voluntarily. The respondent also claimed that the intention of the appellants was to cheat them from the beginning, based on the discrepancy in the number of bicycles assembled and the amount paid.

COURT ANALYSIS AND JUDGMENT:

The Supreme Court conducted a thorough analysis of the case and determined that the core issue between the parties was essentially civil in nature, revolving around a contractual dispute regarding the assembly and delivery of bicycles. The Court disagreed with the High Court’s conclusion that there was a prima facie case of cheating against the appellants. The Supreme Court emphasized that not every breach of contract automatically translates into a criminal offense, highlighting the necessity to establish fraudulent or dishonest intentions at the time of making the promise to prove cheating.

In light of these considerations, the Supreme Court found no criminal element in the case and characterized the legal proceedings as an abuse of the judicial process. Consequently, the Court allowed the appeal filed by the appellants and set aside the order issued by the High Court on 02.12.2020. The Supreme Court’s decision underscored the importance of distinguishing between civil and criminal matters, ensuring that criminal proceedings are not misused as a tool for harassment or to escalate civil disputes into criminal offenses.

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Judgement reviewed by– Ayush Shrivastava

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