Supreme Court quashes FIR and rebukes High Court for conditioning mediation on ₹25 lakh payment

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal against an order of the Allahabad High Court that had directed parties to proceed to mediation and, as a pre-condition, directed the appellant to hand over a demand draft of Rs.25,00,000 to the informant while restraining arrest pending mediation. The appeal challenged the High Court order insofar as it sought to convert a disputed commercial claim into a criminal recovery mechanism and prayed for quashing of the First Information Report registered on 09.01.2025 under Sections 60(b), 316(2) and 318(2) of the Bharatiya Nyaya Sanhita, 2023.

The Supreme Court allowed the appeal and quashed the impugned FIR. The Court held that the allegations, on the face of the FIR, did not disclose criminality and that the High Court erred in directing mediation by imposing payment as a condition precedent. The bench observed that "there has to be something more than prima facie on record to indicate that the intention of the accused was to cheat," and that criminal proceedings could not be used as a substitute for civil remedies. The Court, in its reasoning, observed: "The entire case is squarely covered by a recent pronouncement of this Court in the case of 'Delhi Race Club (1940) Limited vs. State of Uttar Pradesh' reported in (2024) 10 SCC 690. In the said decision, the entire law as to what constitutes cheating and criminal breach of trust respectively has been exhaustively explained. ... However, instead of looking into the matter on its own merits, the High Court thought fit to direct the petitioner to go for mediation and that too by making payment of Rs. 25,00,000/- to the 4th respondent as a condition precedent. We fail to understand, why the High Court should undertake such exercise. The High Court may either allow the petition saying that no offence is disclosed or may reject the petition saying that no case for quashing is made out. Why should the High Court make an attempt to help the complainant to recover the amount due and payable by the accused. It is for the Civil Court or Commercial Court as the case may be to look into in a suit that may be filed for recovery of money or in any other proceedings, be it under the Arbitration Act, 1996 or under the provisions of the IB Code, 2016."

Background The appellant, a co-founder and production head of M/s Karma Media and Entertainment LLP, faced an FIR lodged by the proprietor of M/s Polaroid Media (Respondent No.4) alleging cheating, criminal breach of trust and concealment of design to commit offence under the BNS, 2023. The dispute arose out of an oral commercial agreement and an alleged unpaid amount. The Allahabad High Court, while entertaining a writ under Article 226 seeking quashing of the FIR and a direction against arrest, directed the parties to mediation and required the appellant to deposit a demand draft of Rs.25 lakh with the informant and Rs.5,000 as mediation fees, while restraining arrest subject to cooperation in the investigation.

On appeal, the Supreme Court called for explanations on how the FIR disclosed cognizable offences and noted that the plain reading of the FIR did not disclose elements of cheating or criminal intention. The Court relied on its recent precedent in Delhi Race Club (2024) to reiterate the distinction between civil disputes and criminal offences and emphasised that recovery of money must proceed through civil, commercial or arbitration fora, not by police action. The Court observed that the High Court's order effectively assisted the complainant in recovering money and characterised such recourse as "abuse of process of law." The Supreme Court allowed the appeal, quashed the FIR and clarified that Respondent No.4 remained at liberty to pursue appropriate legal remedies in civil or other competent fora. Leave to appeal was granted and the earlier interim restraint on arrest, rendered otiose by quashing, ceased to operate.

Case Details: Case No.: CRIMINAL APPEAL NO.2963/2025 (@Petition for Special Leave to Appeal (Crl.) No.4880/2025) Case Title: SHAILESH KUMAR SINGH ALIAS SHAILESH R. SINGH v. STATE OF UTTAR PRADESH & ORS. Appearances: For the Petitioner(s): Ms. Sana Raees Khan, Advocate For the Respondent(s): Mr. Anand Mishra, Advocate (for Respondent No.4); Mr. Shaurya Krishna, Advocate (for State of U.P.)