Exercise of powers under Section 482 can’t extend to testing rival financial claims: HC

‘Disclosure of offence, not proof is the test at FIR stage’

*Says civil

consequences don’t rule out criminal offence

Excelsior Correspondent

JAMMU, Sept 1: Drawing a firm boundary around its inherent powers under Section 482 CrPC, the High Court of Jammu & Kashmir and Ladakh has held that the Court cannot use its quashing jurisdiction to test the correctness of rival financial records, determine disputed repayments or decide which version of a transaction is truthful while investigation is underway.

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Justice Wasim Sadiq Nargal made the observations while dismissing a petition filed by Satyavir Singh Arya seeking quashing of FIR No.07/2024 registered at Police Station, Economic Offences Wing, Crime Branch, Jammu under Sections 420 and 120-B IPC. The petitioner had also challenged the notice dated February 26, 2024 issued under Section 160 CrPC.

The Court framed two principal questions——whether the allegations in the FIR prima facie disclosed commission of a cognizable offence and whether the circumstances warranted interference under Section 482 CrPC.

On the first issue, the Court held that the allegations could not be said to be bereft of the essential factual foundation of the offences alleged. According to the FIR and status report, the petitioner and co-accused Jagdish Nain allegedly induced the complainant to part with money on a representation connected with the NH-40 road-maintenance contract.

The complainant alleged that an aggregate Rs 77 lakh was paid, including Rs 17 lakh in the account of Jagdish Nain and Rs 60 lakh in the account of Nain Enterprises, of which only Rs 17 lakh was subsequently returned.

The Court emphasised that the allegations were not confined to a mere failure to fulfill a contractual obligation or discharge a financial liability. The prosecution case was that the complainant was allegedly induced to part with money on the basis of a particular representation and that such inducement was allegedly part of a concerted design involving the petitioner and co-accused.

Applying the principles laid down by the Supreme Court, Justice Nargal held that the first and foremost enquiry while considering a prayer for quashing is whether the allegations in the FIR, if taken at their face value and accepted in their entirety, disclose commission of an offence.

If the allegations disclose a cognizable offence, the Court is ordinarily not required to examine their correctness or assess the material relied upon by the respective sides.

The Court found that the complainant had specifically alleged that money was parted with pursuant to a representation concerning the NH-40 road-maintenance contract, that the petitioner and co-accused were involved, that the complainant was allegedly to be made a 10% partner, and that the promised arrangement did not materialise and the amount allegedly remained unpaid. These allegations, it held, were sufficient to require investigation.

A significant aspect of the judgment concerned the competing versions of the financial transactions. The petitioner relied upon an agreement to sell dated October 30, 2020 concerning a Gurugram property, a subsequent agreement dated September 24, 2021, bank transactions and alleged repayments. The respondents disputed this description and maintained that the Gurugram transaction was wholly distinct from the NH-40 transaction forming the subject matter of the FIR.

The High Court described the situation as involving two competing factual versions and held that determining which version was correct would require examination of the underlying transactions, bank records, agreements and the circumstances in which amounts were paid and allegedly returned.

Such an exercise, the Court held, would necessarily involve appreciation of contemporaneous official record and was outside the scope and ambit of a petition under Section 482 CrPC.

The Court further held that it could not determine the correctness of either version by undertaking a comparative examination of documents or drawing inferences from bank transactions. “That exercise falls within the domain of investigation,” it said.

Relying upon Supreme Court precedent, Justice Nargal reiterated that while examining whether an FIR discloses a prima facie cognizable offence, the High Court cannot act like an investigating agency nor exercise powers like an appellate court. It cannot appreciate evidence or draw its own inferences from disputed material at that stage. Once the FIR discloses prima facie commission of a cognizable offence, the Court should stay its hand and allow the investigating machinery to undertake the probe.

The Court also rejected the contention that the dispute was essentially civil or commercial. It held that such a contention, at this stage, does not furnish a ground for holding that no cognizable offence is disclosed.

A transaction may have civil consequences and yet, depending upon the allegations and circumstances in which it was entered into, it may also disclose the ingredients of a criminal offence, the Court observed.

Whether the representation was actually made, whether the complainant was induced by it, whether the petitioner possessed the requisite dishonest intention and whether the amounts were subsequently returned were all matters requiring factual determination on the basis of evidence.

On the challenge to the jurisdiction of the Economic Offences Wing, Crime Branch, Jammu, the High Court declined to conclusively determine the issue on the pleadings. The petitioner’s assertion that he had not personally visited Jammu was not considered sufficient to settle the question. Whether the requisite territorial or statutory nexus existed was held to be a matter that could be examined in accordance with law on the basis of material collected during investigation, the High Court added.

The Court also reiterated that an FIR is not required to contain every minute detail of an alleged offence. Its purpose is to set the criminal law in motion, following which the investigating agency has to collect evidence and ascertain the truth.

On interim protection, Justice Nargal reiterated that the investigating agency has the right to investigate and that a stay of investigation under Section 482 can be granted only in the rarest of rare cases. “The power of quashing has to be exercised sparingly and with circumspection and in rare cases and the Court cannot enquire into the reliability or genuineness of allegations or conduct a mini-trial”, the judgment states.

Holding that the petitioner’s case rested on factual disputes concerning the accuracy of underlying transactions, the High Court dismissed the petition, vacated the March 27, 2024 interim order staying further investigation and permitted the investigating agency to proceed with and conclude the investigation in accordance with law expeditiously.