In the case of Naresh Kumar & Anr. v/s The State of Karnataka & Anr, the Supreme Court of India dealt with the issue of the prevention of the misuse of criminal proceedings in cases that are fundamentally contractual or civil in nature, and held that High Courts must not hesitate to quash criminal proceedings lacking a genuine criminal element and essentially involving disputes of a civil nature.
The instant case involved a contractual dispute between the Appellants and Respondents regarding the assembly and delivery of bicycles, wherein the appellants, were accused of criminal breach of trust and cheating by the Respondent. The Appellants drew Court’s attention to a settlement reached through a Compromise Deed, where an additional amount was paid to the respondent, bringing the total payment to a certain sum. Despite this settlement, the FIR persisted, prompting the appellants to challenge the legal proceedings.
Initially, the High Court rejected the Appellants’ argument that the matter was civil in nature, finding prima facie evidence of cheating. However, the Supreme Court, in its judgment, disagreed with the High Court’s findings. The Hon’ble Court emphasized that the crux of the dispute revolved around the number of bicycles assembled, categorizing it as a civil matter. The Court also noted the settlement payment received by Respondent No. 2, leading to the conclusion that the FIR constituted an abuse of the legal process.
Furthermore, the Hon’ble Court also emphasized the need for High Courts to exercise their inherent powers under Section 482 of the Criminal Procedure Code to prevent the misuse of legal processes and ensure justice. The Court underscored that when a dispute is fundamentally civil in nature but is given the guise of a criminal offense, High Courts must intervene to prevent the abuse of the legal system.
The Apex Court while highlighting the importance of differentiating between civil and criminal disputes, held that when a dispute essentially pertains to civil matters, such as contractual disagreements or financial disputes, and lacks clear criminal elements, the High Court should not hesitate to quash criminal proceedings to prevent the misuse of legal mechanisms.
Ultimately, the Hon’ble Supreme Court allowed the appeal, thereby quashing the criminal proceedings stemming from the FIR.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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