2018 (1) TMI 1742 - SC - Indian Laws

Supreme Court quashes criminal proceedings under Sections 406, 420, 467, 471, 34 IPC for fraud allegations from MoU breach

Anita Maria Dias and Ors. Versus The State of Maharashtra and Ors.

The SC allowed the appeal and quashed criminal proceedings under Sections 406, 420, 467, 471 and 34 of IPC involving fraud allegations arising from breach ... Fraud - offence punishable Under Sections 406, 420, 467, 471 and 34 of Indian Penal Code - Breach of terms of Memorandum of Understanding (MoU) - exercise of discretion by High Court - HELD THAT:- In a case like this, where the proceedings are still at initial and nascent stage, the High Court should have exercised its discretion in quashing the proceedings. Law in this behalf is well settled by catena of judgments of this Court including PARBATBHAI AAHIR @ PARBATBHAI BHIMSINHBHAI KARMUR AND ORS VERSUS STATE OF GUJARAT AND ANR. [2017 (10) TMI 1194 - SUPREME COURT] and GIAN SINGH VERSUS STATE OF PUNJAB & ANOTHER [2012 (9) TMI 1112 - SUPREME COURT]. This appeal succeeds and is allowed and proceedings lodged with Chatushrungi Police Station, Pune, Maharashtra are hereby quashed - Appeal allowed. Issues:Breach of Memorandum of Understanding (MoU) terms and subsequent legal actions taken by the parties.Detailed Analysis:The judgment involves a case where the Respondent lodged an FIR against the Appellants for various offenses under the Indian Penal Code (IPC) related to a business deal gone wrong. The Appellants, as Directors of a logistics company, entered into an MoU with the Respondent and another party for investment in the company. However, disputes arose regarding the payment terms of the MoU, leading to the Respondent initiating legal actions against the Appellants.The Respondent alleged that the Appellants breached the MoU terms by not honoring the payment schedule specified in the agreement. Subsequently, the Respondent deposited a partial amount and issued post-dated cheques, which were not honored. This resulted in the Respondent filing a case under Section 138 of the Negotiable Instruments Act, along with lodging an FIR for fraud and other offenses under the IPC.The Appellants sought anticipatory bail, which was granted by the High Court, and negotiations between the parties led to a settlement agreement. As per the settlement terms, the Appellants were required to deposit a specific amount with the High Court registry. However, due to financial constraints, the Appellants could not fulfill the entire settlement amount, leading to further discussions between the parties.Subsequent negotiations resulted in a revised settlement agreement, where the Respondent was to withdraw the deposited amount along with interest, and the Appellants were to pay an additional sum. Both parties agreed to approach the High Court to quash the FIR. However, the High Court dismissed the petition for quashing the FIR primarily due to procedural defects and the seriousness of the allegations against the Appellants.The Supreme Court, upon hearing the case, noted that the matter had been settled between the parties voluntarily. Citing established legal principles from previous judgments, the Court emphasized that in cases involving commercial transactions and civil disputes, where the possibility of conviction is remote and continuing the criminal case would cause oppression, the High Court should exercise discretion in quashing the proceedings.Based on the settlement between the parties and considering the stage of the proceedings, the Supreme Court allowed the appeal and quashed the proceedings arising from the FIR lodged against the Appellants. The judgment highlights the importance of voluntary settlements in appropriate cases and the discretion of the courts in quashing criminal proceedings to prevent injustice and promote harmony between the parties.