2025 INSC 571 1

NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL No(s) . OF 2025

(@ Special leave to Appeal (Crl.) No(s). 10744 -10745/2023)

DINESH SHARMA ……. APPELLANT (S)

VERSUS

EMGEE CABLES AND COMMUNICATION

LTD. & ANR. …….RESPONDENT(S)

J U D G M E N T

PRASANNA B. VARALE, J.

1. Leave granted.

2. The appellant (Original Complainant) by way of these appeals

has challenged the common judgment and order dated 31.01.2023

passed by the High Court of Judicature for Rajasthan, Bench at

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Jaipur, in SB Criminal Miscellaneous (Petition) No. 6995/2018

connected with S.B. Criminal Miscellaneous (Petition) No.

7689/2018, whereby the High Court quashed and set aside the

First Information Report No. 218/2018 dated 04.04.2018 under

Section 420, 406 and 120B of Indian Penal Code, 1860 (hereinafter

‘IPC’) filed by the appellant seeking investigation against alleged

dishonest and fraudulent acts of Respondent No. 1/Company and

its concerned Directors/Decision makers including Respondent

No. 2.

FACTS:

3. One Dinesh Sharma (hereinafter referred as ‘Appellant’) was

the authorised representative of the Company M/s BLS Polymers

Ltd. According to the case of the appellant, the abovementioned

company was engaged in the business of manufacturing and

supplying plastic compounds such as PE, PVC, XLPE, HFFR etc

used in making of wires and cables. EMGEE Cables and

Communications limited (hereinafter referred as ‘Respondent No.

1’) was the Company engaged in the business of manufacturing

Copper alloys, wires, conductors, etc. It is stated that one Arun

Maheshwari (hereinafter referred as ‘Respondent No. 3’) was the

technical director of Respondent No. 1 and in 2012, Respondent

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No. 1 through its representatives which also included the

Respondent No. 2 approached the Appellant’s Company for supply

of PVC.

4. It was averred that the respondents showed a rosy picture

that they have a substantial turnover which led the appellant to

supply the goods on credit basis and hence the parties into

transactions from 2012 to 2017. It is the case of the appellant that

from 01.04.2017 to 31.07.2018, the appellant supplied goods

worth Rs. 2,20,82,000/- (Two crore twenty lakh and eighty-two

thousand Rupees) against the purchase order signed by

Respondent no 3.

5. It was averred that the payment for the goods was not cleared

timely by the Respondent Company. As the appellant was facing

financial loss due to the non-payment of overdue payments, he

was required to constantly remind the accused directors of the

company to clear the dues failing which he will be left with no other

alternative than to file a police complaint which led one Shirpal

Chowdhary, Director of Respondent No. 1 to issue three cheques

against the due payment. The appellant stated that the first

cheque which was presented in the bank was returned as

dishonoured. The appellant was required to repeatedly contact

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accused persons for clearing the due payment, but he was given

false and vague promises about the clearance of the same.

6. The appellant stated that on 02.04.2018, the appellant

reached the office of Respondent No. 1 which was found to be

closed. When the appellant tried to contact one Mr. Abhinav and

Mr. Shripal, his calls were unanswered in the beginning and once

again he was given false promises about the clearance of his due

payment.

7. Due to the abovementioned acts, appellant was constrained

to file FIR before the Police Station Chomu, district Jaipur (West)

bearing FIR No. 218/2020 for offences punishable under Section

420, 406, 120B of the IPC. Subsequently, the appellant also sent

legal notice under Section 138 of Negotiable Instruments Act and

Form 4 Notices under Rule 5 of Insolvency and Bankruptcy Rules

demanding the repayment of the due amount.

8. On 02.05.2018, Dena Bank filed FIR No. 135/2018 against

Respondent No. 1 and its directors for offences under Section

420,406,467,468,471 and 120B of the IPC. It was alleged in the

FIR that the company was involved in actions such as excess use

of limit, siphoning off and embezzlement of funds, unilaterally

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changing the board of directors without the bank’s consent and

disposing off the property which was under pledge to the bank.

9. On 10.07.2018, the Appellant filed a Petition under Section

482 of Code of Criminal Procedure, 1973 (hereinafter referred as

‘CrPC’) before the High Court seeking fair and impartial

investigation in the FIR No. 218/2018 which was disposed of and

direction was given to the state machinery to conduct investigation

within a period of two months. The Respondent No. 2 invoked the

inherent jurisdiction of the High Court by filing a Petition under

Section 482 of the CrPC for quashing of the FIR No. 218/2018.

10. While passing the impugned order the High Court observed

as follows:

“It has been alleged by the complainant that the accused

company and its directors have cheated by receiving raw

material from the complainant from time to time stating that

their company reputation and turnover is good, but later they

have not paid. According to the ledger accounts. It is clear

that there has been a business transaction between two

parties since the year 2012, and the accused company has

also failed for the goods supplied from time to time, but the

payment for the good supplied was made around the year

2016-2017. The accused company did not pay the amount

to the complainant company and at present rupees

1,21,51,840 is said to be pending. There have been

conflicting allegations and counter allegations from both the

sides regarding the payment due to some of the good supply

and being substandard and other reasons. It has been

alleged against the accused company that they have illegally

transferred funds by dealing with dummy companies in

relation to which action has been taken by the enforcement

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director on the basis of subsequent incident, the business

transaction which was going on for the last five years. It

cannot be called deceptive. Bankruptcy proceedings are

pending before the competent authority in respect of the

accused company in which also the claim has been

presented by the complainant company in respect of the

dues.

In the above circumstances, there is no fraudulent intention

of the accused company at the time of commencement of

business transaction or at the time of receipt of loan goods

by the accused Company at the later stage, but this case is

completely and purely related to payment of dues and

business transaction, it is purely civil in nature and has been

given a criminal colour just to pressurise for payment which

is not permissible and appropriate as per law

Since the element of any cognizable offences are not

appearing in this case, it seems appropriate to set aside the

handheld first information report in exercise of the inherent

powers under section 482 of the code of criminal procedure

Therefore, both the petitions are accepted and first

information report number 218/2018 crime registered

against the petitioner accused in police station, Chomu

district Jaipur under section 420, 406 and 120 B of IPC and

its ancillary proceedings are set aside.”

(Emphasis supplied)

SUBMISSIONS

11. The Ld. Counsel for the Appellant submitted that the High

Court erred in quashing the FIR as this is an established case of

fraud by all the directors whereby they have duped the appellant

for Rs. 1.21 Crore under the guise of business transactions. The

Ld. Counsel for the appellant submits that none of the accused

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persons who are the directors in the Respondent Company had

filed a petition to quash the subject FIR.

12. He further submitted that the attachment order of the

Enforcement Directorate showcased the modus operandi of the

Respondent company as to how they hatched the conspiracy to

siphoning off the funds. The learned Counsel stated that the

Respondent No. 3 direct role in fraud is apparent as he continued

to represent as the technical director and signed the purchase

orders despite his purported pre resignation. The learned counsel

also stated that the chargesheet filed in Dena Bank’s FIR

showcased that the appellant and other creditors were cheated and

the directors of the Respondent Company personally gained from

the money transactions and issued cheques to the creditors from

accounts with insufficient funds. The learned counsel submitted

that it is a settled law of this Court that economic offenders should

not be given any leniency and that offences of such nature should

not be quashed.

13. Learned AAG for Respondent No. 2/State of Rajasthan

supporting the case of the appellant submitted that the high Court

ought not have exercised its extraordinary jurisdiction to quash

the proceedings merely because the transaction involved

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contractual obligation and it is a settled position of law that the

availability of remedy under civil law and criminal law are distinct.

14. Ld. Counsel for Respondent No. 3 submitted that the High

Court observed that there were business transactions going on

between the parties for 7 years and concluded that the dispute is

predominantly civil in nature which has been given a criminal

colour only to harass the accused.

15. The Counsel further stated that Respondent No. 3 was merely

an employee of Respondent No. 1 and he resigned from the post of

technical director on 06.05.2016 and even after that the Appellant

Company engaged in the business transaction with the

Respondent No. 1. The Counsel further submitted that the

appellant is relying on allegations and material which is arising

out of the FIR which was filed by Dena bank and hence the present

FIR is not sustainable in the eyes of law.

ANALYSIS

16. We have heard the arguments and perused other relevant

documents as also the judgment passed by the High Court.

17. No discussion is complete on the use of inherent powers of

the High Court under Section 482 of CrPC without referring to the

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decision of this court in State of Haryana v. Bhajan Lal

1 wherein

this Court had enumerated certain circumstances where the

powers under Section 482 of the CrPC can be exercised to prevent

abuse of the process of the court or to secure the ends of justice.

“ (a) where the allegations made in the First Information

Report or the complaint, even if they are taken at their face

value and accepted in their entirety do not prima facie

constitute any offence or make out a case against the

accused;

(b) where the allegations in the First Information Report and

other materials, if any, accompanying the F.I.R. do not

disclose a cognizable offence, justifying an investigation by

police officers under Section 156(1) of the Code except under

an order of a Magistrate within the purview of Section 155(2)

of the Code;

(c) where the uncontroverted allegations made in the FIR or

'complaint and the evidence collected in support of the same

do not disclose the commission of any offence and make out

a case against the accused;

(d) where the allegations in the FIR do not constitute a

cognizable offence but constitute only a non-cognizable

offence, no investigation is permitted by a police officer

without an order of a Magistrate as contemplated under

Section 155(2) of the Code;

(e) where the allegations made in the FIR or complaint are so

absurd and inherently improbable on the basis of which no

prudent person can ever reach a just conclusion that there is

sufficient ground for proceeding against the accused;

(f) where there is an express legal bar engrafted in any of the

provisions of the Code or the concerned Act (under which a

criminal proceeding is instituted) to the institution and

continuance of the proceedings and/or where there is a

specific provision in the Code or the concerned Act, providing

efficacious redress for the grievance of the aggrieved party;

1

(1992) SCC (Cri) 426

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(g) where a criminal proceeding is manifestly attended with

mala fide and/or where the proceeding is maliciously

instituted with an ulterior motive for wreaking vengeance on

the accused and with a view to spite him due to private and

personal grudge.”

18. Though the High Court has unfettered powers conferred by

the CrPC for exercising its inherent jurisdiction under Section

482., the same is expected to be used very sparingly and only in

exceptional circumstances. There cannot be any straight jacket

formula as to when the High Court would be justified to exercise

jurisdiction under Section 482 of CrPC and each case is required

to be dealt with on its own merits.

19. In the present case, the High Court quashed the proceedings

on the premise that there were long business transactions between

the parties and initiation of criminal proceedings was an arm-

twisting tactic to extract the pending dues from Respondent

Company. The Court further observed that there are allegations

against the Directors of the company that they used to circulate

the transactions through shell companies; however, separate

proceedings under Prevention of Money Laundering Act, 2002

(hereinafter referred as ‘PMLA’) are initiated against them and

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hence the prior transactions between the Appellant and

Respondent company cannot be put into question.

20. In the present case, in our opinion, the High Court committed

a serious error, in quashing the proceedings on a premise, that

there were long business transactions between the parties, and

initiation of criminal proceedings was an arm-twisting tactic to

extract the pending dues from respondent company. It may not be

out of place to state the High Court was apprised with a factum

aspect that the directors of the company, established certain

dummy/shell companies and the monetary transaction were

circulated to these shell/dummy companies. It was also brought

to the notice of the High Court, that the High Court records the

fact proceedings under the PMLA and initiated against the director

of companies and observed that even prior to these proceedings

there were monetary transaction between the appellant and the

respondent company. Now the High Court failed to appreciate the

factum that the act of the company creating/establishing shell

companies and circulating monetary transaction through these

companies itself was an indicator of an intention of deceit. In this

backdrop, the High Court erred in giving an undue weightage to

the fact that there was an earlier transaction between the appellant

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and respondent so as to quash the proceedings. A profitable

reference can be made to the case of Kurukshetra University and

Anr. v. State of Haryana and Anr.

2 wherein this Court observed

that

“ It surprises us in the extreme that the High Court thought

that in the exercise of its inherent powers under Section

482 of the CrPC, it could quash a First Information Report.

The police had not even commenced investigation into the

complaint filed by the Warden of the University and no

proceeding at all was pending in any court in pursuance

of the F.I.R. It ought to be realized that inherent powers do

not confer an arbitrary jurisdiction on the High Court to act

according to whim or caprice. That statutory power has to

be exercised sparingly, with circumspection and in the

rarest of rare cases.”

21. Another factum which lost the sight of the High Court is that

the directors of the company have connived with each other so as

to form the shell/dummy companies. This is also an indicator of

intention of deceit. It may not be out of place to state that the High

Court has passed a vague and cryptic order. The High Court also

failed to note that when certain basic material was brought to the

notice of the High Court about the criminal conspiracy hatched by

the accused persons, it was necessary for the investigating agency

to investigate thoroughly, in the process of unearthing the truth

before the Court. This aspect could have been tested only by

2

(1977) 4 SCC 451

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conducting a proper trial. The High Court thus should have refrain

from quashing the FIR at the nascent stage of the investigation.

22. We are also deeply concerned by the averments made by

Respondent No. 3 on whose instance the FIR filed by the Appellant

was quashed by the High Court. It was submitted before the High

Court that Respondent No. 3 had resigned from his post on

06.05.2016. The pursual of the material placed before this Court

show that this statement was only partially true though the

Respondent no. 3 had resigned as a director of the company on

06.05.2016. He was still attached to the company in the capacity

of technical director. This fact is being supported by the perusal

of the material namely a purchase order dated 21

st March, 2017

signed by Respondent no. 3 as technical director. It may not be

out of place to state here that in the provisional attachment order

of the Enforcement Directorate under Section 50 of the PMLA, it is

mentioned that when statement of Respondent no. 3 admitted that

he was working as a technical director.

23. A profitable reference can be made to the case of Parbatbhai

Ahir v. State of Gujrat and Anr.

3 wherein it was observed that

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2017 (9) SCC 641

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economic offences by their very nature lie beyond the domain of

mere dispute between private parties and the High Court would be

justified in declining to quash where the offender is involved in an

activity akin to a financial or economic fraud or misdemeanour.

The consequences of the act complained of upon the financial or

economic system will weigh in the balance. Thus, it can be

concluded that economic offences by their very nature stand on a

different footing than other offences and have wider ramifications.

They constitute a class apart. Economic offences affect the

economy of the country as a whole and pose a serious threat to the

financial health of the country. If such offences are viewed lightly,

the confidence and trust of the public will be shaken.

24. It is true that there is a growing tendency of parties to rope

in their counterparts to harass and extract monetary transaction,

it is the duty of the Court to consider the facts of each case, in its

proper perspective and then to arrive at the conclusion as to

whether the case warrants investigation or the proceedings are

required to be quashed. The peculiar facts and circumstances of

the present case warrants thorough investigation as there was a

huge amount involved. As we have already stated that when the

petitioner approached the High Court for quashing of the FIR, the

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investigation was at its initial stage and subsequent to filing of the

present Special Leave Petition in this Court it seems that the

investigation was concluded by filing the chargesheet.

25. Be that as it may, for the reasons stated above, we are of the

view that the High Court was not justified in exercising its

jurisdiction under Section 482 of CrPC. The appeals are

accordingly allowed. It is clarified that the above-mentioned

observations are only prima facie in nature and the trial court shall

proceed without being influenced by this judgement/order and

strictly in accordance with law.

26. Pending application(s), if any, shall be disposed of

accordingly.

.................................J.

[BELA M. TRIVEDI]

.….............................J.

[PRASANNA B. VARALE]

NEW DELHI;

APRIL 23, 2025.