TaxTMI 
TaxTMI 
2026 (9) TMI 726
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....'s-eye view, relevant facts as emerge from the pleadings adduced on record by the respective parties, are that respondent No. 2 (hereinafter referred to as the 'complainant'), who is one of the Director of the company, namely M/s Amba Shakti Ispat Limited, a company engaged in the manufacturing of MS Billets, TMT Bars, Angles and Channels at Plot No. 6 & 6-A, Industrial Area, Phase-II, Trilokpur Road, Kala Amb, District Sirmaur, Himachal Pradesh, approached the Superintendent of Police, District Sirmaur at Nahan, seeking investigation into the alleged fabrication and use of forged documents, bogus transactions, cheating and criminal conspiracy, invoking Sections 420, 466, 467, 468, 471, read with Section 120-B of the IPC. After conducting preliminary inquiry, FIR sought to be quashed came to be registered at Police Station detailed hereinabove, initially under Sections 420, 406, and 120-B of IPC (corresponding to sections 318(4), 316(2) read with Section 61(2) of the Bharatiya Nyaya Sanhita). 3. Complainant averred in the complaint that for manufacturing the products, as detailed above, company requires MS scrap (Melting Steel Scrap) as raw material and such scrap is procured th....
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.... the GST Department. During the inspection, complainant came to know that the transactions and tax invoices issued by M/s Mahesh Trading Company and M/s Rajshree Trading Company were considered bogus and illegal by the GST authorities. Complainant alleged in the complaint that petitioner-accused, despite being responsible under the agreement for indemnifying/compensating the company against the liabilities, did not compensate it and instead retained the commission recovered by him. Complainant also alleged that petitioner supplied material to the company through firm which were never in existence and got illegal invoices generated from the said firm. Complainant also alleged that petitioner-accused subsequently issued a demand notice for Rs.1,22,08,204/-, comprising a principal sum of Rs.1,04,67,903/- plus interest up to 15.02.2022 and instituted proceedings before the National Company Law Tribunal (NCLT), New Delhi. In the afore background, complainant asserted in the complaint that accused Nos. 1 to 3, acting individually and/ or in conspiracy with each other, had allegedly induced the complainant's company to part with substantial amounts on the basis of purportedly false and fa....
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....es to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the ends of justice require that the proceeding ought to be quashed. 10. Subsequently, in case titled State of Haryana and others v. Bhajan Lal and others, 1992 Supp (1) SCC 335, the Hon'ble Apex Court, while elaborately discussing the scope and competence of High Court to quash criminal proceedings under Section 482 Cr.PC laid down certain principles governing the jurisdiction of High Court to exercise its power. After passing of aforesaid judgment, issue with regard to exercise of power under Section 482 Cr.PC, again came to be considered by the Hon'ble Apex Court in case bearing Criminal Appeal No.577 of 2017 (arising out of SLP (CrL.) No. 287 of 2017) titled Vineet Kumar and Ors. v. State of U.P. and Anr., wherein it has been held that saving of the High Court's inherent powers, both in civil and criminal matters, is designed to achieve a salutary public purpose i.e. court proceedings ought not be permitted to degenerate into a weapon of harassment or persecution. 11. The Hon'ble Apex Court in Prashant Bharti v. State (NCT of Delhi), (2013) 9 SCC 293, relyin....
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....by the accused before the High Court is Section 482 Cr. P.C and that this Court is hearing an appeal from an order under Section 482 of Cr.P.C. Section 482 of Cr.P.C reads as follows:- "482. Saving of inherent power of the High Court.-Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent abuse of the process of any Court or otherwise to secure the ends of justice." 17. There is nothing in the words of this Section which restricts the exercise of the power of the Court to prevent the abuse of process of court or miscarriage of justice only to the stage of the FIR. It is settled principle of law that the High court can exercise jurisdiction under Section 482 of Cr.P.C even when the discharge application is pending with the trial court (G. Sagar Suri and Anr. V. State of U.P. and Others, (2000) 2 SCC 636 (para 7), Umesh Kumar v. State of Andhra Pradesh and Anr. (2013) 10 SCC 591 (para 20). Indeed, 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....
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.... do not disclose the commission of any offence and make out a case against the accused. (4) 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. (5) 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. (6) 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. (7) 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 a ....
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.... (iv) the dispute is civil in nature; (v.) the complaint contains vague and omnibus allegations; and (vi) the parties are willing to settle and compound the dispute amicably (State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335)." 15. Aforesaid law, clearly stipulates that court can exercise power under Section 482 of the Code of Criminal Procedure (now Section 528 of BNSS), to quash criminal proceedings, in cases, 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. 16. Now being guided by the aforesaid proposition of law laid down by the Hon'ble Apex Court, this Court would make an endeavor to examine and consider the prayer made in the instant petition vis-à-vis factual matrix of the case. 17. In nutshell, case of the petitioner, as has been projected in the petition and further canvassed by Mr. B.S.Chauhan, learned Senior Advocate, duly assisted by Ms. Aditi Rana, Advocate, is that dispute, if any, inter se petitioner and respondent No. 2 is to be governed b....
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....s without any conclusion of the investigation is causing serious prejudice and harassment to the petitioner and as such, prayer made on his behalf for quashment of FIR deserves to be allowed. 18. While specifically referring Clause 7 and 8 of agreements dated 01.07.0217 and 01.04.2019, which specifically deals with the statutory liability of the parties for indemnifications of principal party, Mr. Chauhan, submitted that respondent No. 2 cannot now circumvent the agreed contractual mechanism by setting the criminal law in motion against the petitioner merely to exert pressure upon him. In support of his aforesaid submissions, he placed reliance upon the recent judgment passed by Hon'ble Apex Court in case titled Vandana Jain & others vs. The State of Uttar Pradesh & others, Criminal Appeal No.1127 of 2026. 19. To the contrary, Mr. Rajan Kahol, learned Additional Advocate General representing the respondent-State and Mr. Karan Singh Kanwar, learned Senior Advocate, duly assisted by Ms. Upasana, Advocate representing respondent No. 2, vehemently argued that petitioner has attempted to dilute serious allegations leveled against him, which pertains to a conspiracy to cheat the co....
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....9 and 01.01.2021 for supplying MS scrap, either himself or through other firms/agencies to be arranged and managed by him. It is also not in dispute that petitioner, in his capacity as an agent, was entitled to a commission of Rs.50 per metric ton. In terms of the agreement dated 01.01.2021, petitioner agreed to arrange supplies through six companies, including two companies, namely M/s Mahesh Trading Company and M/s Rajshree Trading Company. To establish the genuineness of the transactions inter se company and the suppliers through which scrap was to be supplied, petitioner furnished KYC documents of the firms, their proprietors' identity, residence proofs including PAN and Aadhaar No., address proofs including GST registration certificates, cancelled cheques, bank statements, purchase invoices, e-way bills, billities and other related documents. Pursuant to the aforesaid agreements, suppliers made certain supplies and such transactions were duly reflected in the company's GSTR-2A and GSTR-2B for claiming the ITC on supplied material invoices. 21. It is also admitted case that pursuant to the supplies, company made payments towards the cost of material and IGST, amounting to Rs....
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.... arises due to any reason" firm not found on address", "GST not paid by supplier "purchase of supplier is bogus" or " any other reason not mentioned here" than Agent will be liable to pay full liability, indemnify to principle with an amount equal to GST liability (GST amount including interest and penalty) paid by principal. 8. Performance and Remedies:- Agent's failure to comply with any of the terms and conditions of this agreement shall be grounds for the exercise by principal of any one or more of the following remedies:- A. Cancellation of this Agreement:- B. Cancellation of all or any part of nay undelivered purchase order without notice; C. Termination of all current and future business relationship; D. Recovery from Agent and supplier of the firm of any damages sustained by principal as a result of agents breach or default, which amount may be withheld or offset against funds owned by Principal to Age; and These remedies are not exclusive and are in addition to all other remedies available to "Principal at law or in equity". Agreement dated 01.04.2019 "7. Performance and Remedies:- Agent's failure to c....
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....ny reason, like firm not found on address", "GST not paid by supplier "purchase of supplier is bogus" or "any other reason not mentioned here" than Agent will be liable to pay full liability, indemnify to principle with an amount equal to GST liability. As per Clause 8 of the agreement, Agent's failure to comply with any of the terms and conditions of the agreement shall be grounds for the exercise by the Principal of the following remedies: a) Cancellation of agreement; b) Cancellation of all or any part of undelivered purchase orders without notice; c) Termination of all current and future business relationships; d) Recovery from the Agent and supplier/firm of any damages sustained by the Principal as a result of the Agent's breach or default, which amount may be withheld or offset against funds owed by the Principal to the Agent and these remedies are not exclusive and are in addition to all other remedies available to the Principal at law or in equity. 26. Careful perusal of afore condition contained in the agreement clearly suggests that company, besides taking recourse to the aforesaid remedies, can also take recourse to other remedies a....
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....nal acts. Though, clauses, which is being relied upon themselves contemplate and fasten liability upon the petitioner in the event of bogus transactions, non-existing entities, or other irregularities, but allegations of financial fraud, manipulation of documents, bogus transaction, and the use of fictitious entities, which require a full and fair investigation cannot be decided in these proceedings. 30. Reply filed by the respondent-State clearly reveals that FIR discloses serious economic offences involving fraudulent misrepresentation, forgery, inducement and financial deception amounting to more than Rs.21 Crores, which squarely falls within the ambit of cognizable offences under the Indian Penal Code. The investigating agency, after completing the investigation, has prepared charge sheet for offences punishable under Sections 420, 467, 468, 469, 471, and 120B of IPC. 31. Leaving everything aside, certain conditions of the agreement refer to indemnity does not preclude criminal prosecution in the presence of criminality, rather forged documents, fake KYC, and GST registrations along with misrepresentation amount to offences under the IPC and mere civil agreements cannot b....
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....ntention at the time of making the initial promise, no offence under Section 420 of IPC is made out. However, in the instant case dishonest intention of the petitioner is apparent from the time of his entering into the agreement with the company to supply scrap through firms/companies, which were subsequently found to be bogus. 35. Though, the question whether non-fulfillment of promise/ commitment by the accused is a reflection of his or her dishonest intention at the time of making the promise is ordinarily a matter of trial, but yet High Court, in exercise of its inherent powers under the Code or under Article 226 of the Constitution, as the case may be, upon consideration of the attending circumstances, take a decision whether the dishonest intention existed or not at the time of making the promise and if it comes to the conclusion that the alleged conduct of the parties does not reflect a dishonest intention of the accused from the very beginning, it may quash the criminal complaint/proceedings and relegate the aggrieved party to civil remedies. 36. In the case at hand, the petitioner, being agent of the company, entered into an agreement for supplying MS Scrap either by....
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....e petitioner has caused substantial loss to the complainant's company by facilitating supply of MS scrap through bogus/ non-existing firms and has caused the complainant's company to part with substantial amounts. Similarly, material placed on record indicates that petitioner was not merely acting independently but in connivance with accused No. 2 and 3 and as such, necessary ingredients of Section 120-B IPC are met at this stage. However, whether requisite ingredients of Section 406 of IPC are established or whether the petitioner has acted in connivance with other accused is a matter of trial and cannot be adjudicated at this stage. 38. In case titled Vandana Jain and Others (supra), which has been pressed into service by learned counsel representing the petitioner, cannot be made applicable to the present facts and circumstances of the case. There cannot be any quarrel to the proposition of law laid down in the aforesaid case that where the dispute inter se parties is predominantly civil in nature, invocation of criminal law amounts to an abuse of the process of law. In the aforesaid case, High Court dismissed the writ petition in limine, vide impugned order, without consider....