NARESH KUMAR & ANR. versus THE STATE OF KARNATAKA & ANR.
[2024] 3 S.C.R. 740, Supreme Court of India, 2024
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
* Author
[2024] 3 S.C.R. 740 : 2024 INSC 196
Naresh Kumar & Anr. 
v.  
The State of Karnataka & Anr.
(Criminal Appeal No. 1510 of 2024)
12 March 2024
[Sudhanshu Dhulia* and Prasanna B. Varale, JJ.]
Issue for Consideration
Refusal by High Court to quash criminal proceedings against 
Appellants/Accused arising out of a civil transaction between 
Appellants and Respondent No.2, if justified.
Headnotes
Code of Criminal Procedure, 1973 – s.482 – Powers of the 
High Court under – Quashing of FIR filed by Respondent 
No.2 against Appellants – Appellants, employees of a 
bicycle manufacturing company engaged Respondent No.2 
for assembling, transporting and delivering bicycles – 
Respondent No.2 aggrieved by the fact of payment not being 
commensurate with the service rendered - FIR filed under 
Sections 406, 420, 506, Indian Penal Code – Subsequently, 
settlement arrived at between the parties – Appellants paid 
an additional amount of INR 26,00,000/- to Respondent No.2 
as full and final settlement, duly accepted by Respondent 
No.2 – Payment and receipt of settlement amount not 
disputed by parties – Chargesheet filed against Appellants 
– Appellants sought quashing of the FIR and proceedings 
arising therefrom under Section 482, CrPC on the ground of 
the dispute being civil in nature – Respondent No.2 objected 
to settlement on the ground of it being vitiated by coercion 
– High Court’s refusal to exercise powers under Section 
482, CrPC on the ground of a prima facie case
being made 
out – Challenged:
Held: Section 482 empowers High Court to prevent abuse of 
process and secure ends of justice – Though the power under 
Section 482 should be exercised sparingly, the High Court 
must not hesitate in quashing criminal proceedings which are 
essentially of a civil nature – Judgement in Paramjeet Batra
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Naresh Kumar & Anr. v.  State of Karnataka 
v. State of Uttarakhand (2013) 11 SCC 673 relied upon – 
Reference to observations in Randheer Singh v. State of U.P. 
(2021) 14 SCC 626 regarding misuse of criminal proceedings as 
a weapon of harassment and also Usha Chakraborty & Anr. 
v. State of West Bengal & Anr. 2023 SCC OnLine SC 90 for 
exercise of the inherent powers of the High Court under Section 
482 to quash civil disputes cloaked in criminal offence – High 
Court erred in holding that a prima facie case was made out based 
on the ground that Appellants’ intention to cheat Respondent 
No.2 from the beginning was evident from the fact that the 
Appellants had cumulatively paid Respondent No.2 an amount 
much higher than what the latter was entitled to receive for the 
services rendered by him – Additional amount paid in light of the 
settlement, cannot be presumed as an act of cheating – Nature 
of dispute in present case is civil and allegation of a coerced 
settlement is unlikely – No FIR or Complaint by Respondent 
No.2 alleging coercion, amount also duly accepted by him – 
Mere breach of contract would not attract criminal prosecution in 
every case, Sarabjit Kaur v. State of Punjab and Anr. (2023) 
5 SCC 360 relied upon – Every breach of contract would not 
amount to cheating and it must be proved that fraudulent or 
dishonest intention to cheat existed while making the promise, 
as held in Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8
SCC 293 – Present dispute was not only civil in nature but also 
stood settled subsequently – In the instant case, no criminal 
element present, only an abuse of process – Impugned Order 
of the High Court set aside – FIR and criminal proceedings 
quashed – Appeal allowed. [Para 4-8]
Case Law Cited
Paramjeet Batra v. State of Uttarakhand (2013) 11 SCC 
673; Sarabjit Kaur v. State of Punjab and Anr. (2023) 
5 SCC 360; Vesa Holdings (P) Ltd. v. State of Kerala 
[2015] 4 SCR 27 : (2015) 8 SCC 293 - relied on.
Randheer Singh v. State of U.P. (2021) 14 SCC 626, 
Usha Chakraborty & Anr. v. State of West Bengal & Anr. 
2023 SCC OnLine SC 90 – referred to.
List of Acts
Code of Criminal Procedure, 1973; Penal Code, 1860.
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List of Keywords
Quashing of FIR; Inherent powers of the High Court; Criminal 
case arising from civil dispute; Inherent powers; Criminal breach 
of trust; Cheating; Settlement; Compromise.
Case Arising From
CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No.1510 
of 2024
From the Judgment and Order dated 02.12.2020 of the High Court 
of Karnataka at Bengaluru in CRLP No.8003 of 2019
Appearances for Parties
Aman Lekhi, Sr. Adv., Abhishek Gupta, Chaitanya Mahajan, Ms. Payal 
Kakra, Ritwiz Rishabh, Ujjwal Sinha, Aniket Seth, Ms. Snehilsonam, 
Snehil Sonam, Kunal K., Ms. Ishika Jain, Advs. for the Appellants.
Anand Sanjay M Nuli, Sr. Adv., D. L. Chidananda, Ravindera Kumar 
Verma, Dharm Singh, Shiva Swaroop, M/s. Nuli & Nuli, Advs. for 
the Respondents.
Judgment / Order of the Supreme Court
Judgment
Sudhanshu Dhulia, J.
Leave granted. 
2.	
The appellants before this Court have challenged the order dated 
02.12.2020 of the Karnataka High Court by which their petition 
under Section 482 of Criminal Procedure Code for quashing the 
FIR has been dismissed. The case of the appellants before the 
High Court of Karnataka was that the FIR which was instituted by 
the complainant i.e. respondent no. 2 is primarily a civil dispute and 
has no criminal element and the entire criminal proceedings initiated 
against the appellants is nothing but an abuse of the process and 
consequently, they had invoked the extraordinary powers of the
High 
Court under Section 482 of the Criminal Procedure Code. The two 
appellants before this Court are the Assistant Manager (Marketing) 
and the Manging Director of a company, which is a manufacturer 
of bicycles. Respondent no.2 was given a contract, as it has been 
stated before this Court, for the assembly of bicycles, their transport
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Naresh Kumar & Anr. v.  State of Karnataka 
and their delivery, at the rate of Rs.122/- for each bicycle, and 
since they had assembled 83,267 bicycles, they raised invoices 
amounting to Rs. 1,01,58,574/- and were liable to be paid the same. 
However, respondent no.2 contends that instead, a payment of only 
Rs.35,37,390/- was given by the appellants. Hence, it was a case 
of criminal breach of trust and cheating and the First Information 
Report No. 113 of 2017 against the appellant no. 1 was filed on 
24.05.2017 under Sections 406, 420 and 506 of the Indian Penal 
Code at P.S. Doddaballapura, Bangalore Rural District. Subsequently, 
a Chargesheet dated 30.05.2019, was filed in the court where both 
the appellants were made an accused. 
3.	
Meanwhile, an important fact occurred, of which no importance 
seems to have been given by the High Court. Subsequent to the 
filing of FIR there is an admitted settlement between the appellants 
and respondent No. 2 by a Compromise Deed dated 27.12.2017 
by which as a full and final settlement between the two parties, an 
additional amount of Rs. 26 lakhs were to be paid by the appellant, 
which has been duly given and accepted. This amount was deposited 
in the account of respondent no. 2 on 29.12.2017. This was done by 
the appellants in order to give a quietus to the whole situation and 
to bring peace, according to the appellants. Therefore, as of now, a 
total amount of Rs.62 lakhs as against Rs.
1,01,58,574/- which was 
claimed by the complainant has been admittedly paid. The case of 
the respondent no. 2 against the settlement dated 27.12.2017 is that 
the respondent no. 2 was coerced in entering into this settlement and 
this is not a settlement arrived at by the free will of the complainant 
and therefore the prosecution of the appellants is necessary under 
the criminal law. The High Court has refused to accept the contention 
of the appellants that the dispute between the parties in any case 
is civil in nature. The High Court was of the opinion that since the 
appellants had claimed that the complainant assembled only 28,995 
bicycles, which would make them liable to pay only an amount of 
Rs.35 lakhs, but instead the appellants had paid an amount of Rs.62 
lakhs which shows that the actual number of bicycles which were 
assembled by the complainant was much more than 28,995 bicycles, 
as claimed by the appellants and therefore, the appellants had an 
intention to cheat the complainant right from the beginning. Thus, 
it was held by the High Court that prima facie a case of cheating is 
made out against the appellants.
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4.	
Having heard the learned counsel for both the parties, we are of 
the considered view that the findings of the High Court on this 
aspect are not correct. We do not agree with the findings arrived at 
by the High Court for two reasons. Firstly, the dispute between the 
parties is primarily, civil in nature. It is after all a question of how 
many bicycles the complainant had assembled and the dispute 
between the parties is only regarding the figure of bicycles and 
consequently of the amount liable to be paid. This is a civil dispute. 
The complainant has not been able to establish that the intention 
to cheat the complainant was there with the appellants right from 
the beginning. Merely because the appellants admit that only 
28,995 bicycles were assembled, but they have admittedly paid an 
amount of Rs. 62,01,746/- to the complainant, which is of a much 
higher number of bicycles, would not prove that the intention of the 
appellants right from the beginning was to cheat. This amount i.e. the 
additional amount of Rs. 26 lacs have been paid by the appellants 
pursuant to a settlement. The reasons and the logic for arriving at 
a settlement are quite different. In this case it seems, it is primarily 
to bring a quietus to the dispute and to have peace and to avoid 
litigation. The mere fact that the appellants have paid an additional 
amount pursuant to the settlement, cannot be presumed as an act 
of cheating.
Moreover, the complainant does not deny the fact that a 
settlement was reached between the parties though he says he was 
coerced into the settlement. He does not dispute that the additional 
amount paid by the appellants under the terms of the compromise 
deed, which is an amount of Rs.25,75,442 (after deducting TDS) was 
received by the complainant, as this amount has been received in a 
bank transaction through NEFT on 29.12.2017. The allegation that 
the complainant was coerced into a settlement, looks unlikely for 
two reasons. First, there is no FIR or Complaint that the complainant 
was coerced into this settlement. Secondly, this amount was duly 
accepted by the complainant. 
5.	
Under these circumstances, we are of the considered view that this 
is a case where the inherent powers should have been exercised by 
the High Court under Section 482 of the Criminal Procedure Code 
as the powers are there to stop the abuse of the process and to 
secure the ends of justice.
6.	
In the case of Paramjeet Batra v. State of Uttarakhand (2013) 11 
SCC 673, this Court recognized that although the inherent powers of
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Naresh Kumar & Anr. v.  State of Karnataka 
a High Court under Section 482 of the Code of Criminal Procedure 
should be exercised sparingly, yet the High Court must not hesitate 
in quashing such criminal proceedings which are essentially of a 
civil nature. This is what was held:
“12. While exercising its jurisdiction under Section 482 
of the Code the High Court has to be cautious. This 
power is to be used sparingly and only for the purpose of 
preventing abuse of the process of any court or otherwise 
to secure ends of justice. Whether a complaint discloses 
a criminal offence or not depends upon the nature of facts 
alleged therein. Whether essential ingredients of criminal 
offence are present or not has to be judged by the High 
Court. A complaint disclosing civil transactions may 
also have a criminal texture. But the High Court must 
see whether a dispute which is essentially of a civil 
nature is given a cloak of criminal offence. In such a 
situation, if a civil remedy is available and is, in fact, 
adopted as has happened in this case, the High Court 
should not hesitate to quash the criminal proceedings 
to prevent abuse of process of the court.” 
(emphasis supplied)
Relying upon the decision in Paramjeet Batra (supra), this Court in 
Randheer Singh v. State of U.P. (2021) 14 SCC 626, observed that 
criminal proceedings cannot be taken recourse to as a weapon of 
harassment. In Usha Chakraborty & Anr. v. State of West Bengal 
& Anr. 2023
SCC OnLine SC 90, relying upon Paramjeet Batra 
(supra) it was again held that where a dispute which is essentially 
of a civil nature, is given a cloak of a criminal offence, then such 
disputes can be quashed, by exercising the inherent powers under 
Section 482 of the Code of Criminal Procedure. 
7.	
Essentially, the present dispute between the parties relates to a 
breach of contract. A mere breach of contract, by one of the parties, 
would not attract prosecution for criminal offence in every case, as 
held by this Court in Sarabjit Kaur v. State of Punjab and Anr. 
(2023) 5 SCC 360. Similarly, dealing with the distinction between the 
offence of cheating and a mere breach of contractual obligations, 
this Court, in Vesa Holdings (P) Ltd. v. State of Kerala, (2015) 8 
SCC 293, has held that every breach of contract would not give rise
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to the offence of cheating, and it is required to be shown that the 
accused had fraudulent or dishonest intention at the time of making 
the promise.
8.	
In the case at hand, the dispute between the parties was not only 
essentially of a civil nature but in this case the dispute itself stood 
settled later as we have already discussed above. We see no criminal 
element here and consequently the case here is nothing but an abuse 
of the process. We therefore allow the appeal and set aside the order 
of the High Court dated 02.12.2020. The criminal proceedings arising 
out of FIR No.113 of 2017 will hereby stand quashed.
Headnotes prepared by: 
Result of the case: 
Niti Richhariya, Hony. Associate Editor
Appeal allowed. 
(Verified by: Kanu Agrawal, Adv.) 