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Supreme Court of India ruled that High Courts of India are empowered to consider a petition seeking quashing of FIR even after filling of charge-sheet by the Investigative agencies.

Facts of the Case

Mr. Anand Kumar Mohatta (Appellant No.1) entered into a contract with Ansal Properties and Infrastructure Ltd. (Respondents) for development of property located in Lutyens Zone of New Delhi and owned by the Appellant No.1 and subsequently transferred to Appellant No.2. As per the contract it was agreed between the parties that the property in question would be developed by constructing a high-rise building comprising of flats. It was also agreed that Appellant would receive a sum of Rupees One-Crore from the Respondents. However, the agreement could not see the light of the day as under the new regulations which came into force after signing of the agreement construction of high-rise building in the Lutyens Bangalow Zone was prohibited. Appellant wrote a letter to the Respondent clearly mentioning that he does not wish to develop the property any further. Sum of Rs. One crore was retained by the Appellants.

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Respondent filed FIR against the Appellants accusing them of committing an offense under section 406 of Indian Penal Code. Appellants filed a petition under section 482 of the Criminal Procedure Code, 1973 seeking quashing of FIR. The High Court dismissed the petition of Appellants saying that case is at the stage of investigation and directed the Appellant to join the investigation. Aggrieved by this decision of the High Court, Appellants filed a Special Leave Petition in the Supreme Court of India. While the matter was pending in Supreme Court of India Police filed the charge sheet against the Appellant No.1 and Appellant no.2 was cleared in the investigation.

Arguments raised

Counsel for Applicant argued that keeping in mind the facts of the case, the dispute between the parties was of civil nature and it was wrong to file a criminal case under section 406 of the Indian Penal Code. Moreover, counsel also argued that under the terms of contract sum of Rs. One Crore could be returned only if the developer handed over the possession of owner’s share to the owner, since this did not happen, therefore the time when the sum became due to the Respondent never came.

Counsel for Respondent on other hand vehemently argued that Appellant No.1 was guilty of committing a crime under section 406 because Appellant No.1 transferred the subject matter property to Appellant No.2 and did not return the amount of Rs. One crore to the Respondents. It was also argued that since the charge sheet was filed, time for filing of the petition for quashing of FIR has lapsed.

The decision of the case

Division Bench of the Supreme Court of India consisting of Justice SA Bobde and Justice Nageshwar Rao ruled in favor of the Appellants. They ruled that argument of the Respondent that petition under section 482 seeking quashing of FIR cannot be entertained after filing of charge sheet was untenable as there is nothing in the section which restricts the exercise of power of Court to prevent the abuse of process of court or miscarriage of justice only to stage of the FIR. The bench further said that 

“High Court can exercise jurisdiction under section 482 of Cr.p.c even when the discharge application is pending with the trial court. It would be a travesty to hold that proceedings initiated against a person can be interfered with at the stage of FIR but not if it has advanced, and the allegations have materialized into a charge sheet.”

With regard to the unreturned amount of Rs. One Crore and transfer of property to Appellant No.2, The Bench agreed with the contentions of counsel for Appellants and held that offense under section 306 of the IPC could not be made out and held that Appellant could not be said to have been entrusted with property which he has dishonestly converted to his own use or disposed of in violation of any direction of law or contract. The act of transferring the said property by Appellant No.1 to Appellant No.2 also did not help the Respondent’s case.

Observations

The Bench in this case also observed that litigants are going for criminal cases even when the dispute is of civil nature.

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