Supreme Court Quashes FIR Over Alleged Sale-Related Cheating, Emphasises Civil Dispute Not to Be Criminalised

A bench of Chief Justice Sanjiv Khanna and Justice Sanjay Kumar heard the criminal appeal arising out of SLP(Crl.) No.8592 of 2024 challenging the cognisance and summoning order in an FIR alleging offences under Sections 420, 406, 354, 504 and 506 IPC arising from a disputed oral agreement for the sale of a godown in Kanpur.

The Court allowed the appeal, set aside the High Court order and quashed the FIR and resultant proceedings, holding that the chargesheet was deficient and that the allegations disclosed a civil dispute rather than a criminal offence. The Court emphasised the need to distinguish between breach of contract and criminal cheating and observed that criminal process must not be invoked to apply pressure in contractual disputes. The Court, in its reasoning, observed: “The chargesheet in the present case is bereft of particulars and details required and mandated in terms of Section 173(2) of the Cr.P.C. It merely reproduces the contents of the FIR which makes reference to the payments made as well as the allegation that in the revenue records, the godown in question was recorded in the name of Rakesh Birani, the son of the appellant, Rikhab Birani. It is noted that the appellant, Rikhab Birani, informed the complainant that Rakesh Birani had expired. The complainant had then requested refund of money, etc. However, the FIR does not state the material and evidence available and collected during the course of the investigation to establish the offences under Sections 420, 406, 354, 504 and 506 of the IPC. Clearly, the ingredients of the aforesaid are not established and made out.” The Court also noted that “we are continuously flooded with cases where the police register an FIR, conduct investigation and even file chargesheet(s) in undeserving cases” and reiterated that “a breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction.”

Background The dispute arose from an oral agreement in June 2020 between Rikhab Birani and Sadhna Birani (appellants) and respondent Shilpi Gupta for the sale of Roti Godown No. 28/27, Birhana Road, Kanpur, for ₹1.35 crore. The respondent claimed part-payments totalling ₹19 lakh between June and September 2020 and alleged a 25% advance was due by 15.09.2020; a ₹10 lakh cheque bounced. The appellants maintained that the respondent failed to pay the agreed advance and that they later executed a registered sale deed on 03.09.2021 at a reduced price of ₹90 lakh, allegedly suffering a loss of ₹45 lakh.

The respondent first sought registration of an FIR under Section 156(3) Cr.P.C.; the Metropolitan Magistrate dismissed that application on 26.04.2022 as being civil in nature. A subsequent criminal complaint filed on 14.06.2022 was dismissed on 14.07.2023 after a Section 202 Cr.P.C. report. Undeterred, the respondent directly lodged FIR No.78/2023 on 22.07.2023. The appellants obtained anticipatory bail and the police filed a chargesheet on 12.09.2023. The Metropolitan Magistrate took cognisance and summoned the appellants on 17.01.2024. The appellants moved the High Court under Section 482 Cr.P.C., which dismissed their petition on 09.05.2024; this Court granted leave and heard the appeal.

Relying on this Court’s precedents, the bench reiterated that offences under Sections 415/420 and 406 IPC require evidence of dishonest or fraudulent intention at the time of entering the transaction and that mere failure to perform contractual obligations does not constitute cheating. The chargesheet was found to lack the particularity required by Section 173(2) Cr.P.C. and did not set out material collected in investigation to establish the ingredients of the offences alleged. The Court therefore quashed the FIR and the resultant proceedings and clarified that it did not express any view on the civil rights of the complainant. The Court imposed costs of ₹50,000 on the State of Uttar Pradesh to be paid within six weeks and directed the Registry to communicate the order to the Chief Secretary for ensuring payment; the Court left open the State’s option to conduct internal inquiries and recover the amount from responsible officers.

Case Details: Case No.: 2025 INSC 512 (Criminal Appeal arising out of SLP(Crl.) No.8592 of 2024) Case Title: Rikhab Birani & Anr. v. State of Uttar Pradesh & Anr. Appearances: For the Petitioner(s): Counsel not indicated in the judgment For the Respondent(s): Counsel not indicated in the judgment