Introduction

Recently the Supreme Court of India in the case of Dinesh Gupta v. State of UP[1] quashed the criminal proceedings by interalia holding that “The core issue of the dispute, which involves financial transactions and agreements, clearly places it in the realm of civil and commercial law. Yet, the respondent chose to pursue criminal charges in a quest to abuse the criminal justice system with a motive to seek personal vengeance rather than seeking true justice. This unnecessary turning of a civil matter into a criminal case not only overburdens the criminal justice system but also violates the principles of fairness and right conduct in legal matters. The apparent misuse of criminal proceedings in this case not only damages trust in our legal system but also sets a harmful precedent if not addressed.” The Court while concluding that “Such ill intended acts of abuse of power and of legal machinery seriously affect the public trust in judicial functioning.” imposed costs to the tune of Rs 25 lakhs on the Complainant.

In another case of Naresh Kumar v. State of Karnataka[2], the Supreme Court quashed an FIR alleging breach of trust and cheating, by interalia holding that it was a civil dispute between the parties and further held that a mere breach of contract, by one of the parties, would not attract prosecution for criminal offence in every case. It was the case of the complainant that the Accused had given the complainant a contract for assembly of bicycles but after raising an invoice for its services, the Accused failed to pay the full amount as per the invoice and only made partial payment. The Hon’ble Court while relying on and reiterating the principles laid down in a catenae of its earlier decisions in the cases of Sarabjit Kaur v. State of Punjab[3], Vesa Holdings (P) Ltd. v. State of Kerala[4], Paramjeet Batra v. State of Uttarakhand[5], Randheer Singh v. State of U.P.[6], and Usha Chakraborty v. State of West Bengal[7], quashed the impugned FIR and held that in the present case the complainant has not been able to establish that the intention to cheat. The Hon’ble Court categorically stated that “every breach of contract would not give rise 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. 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.”

Similarly, in the case of Sarabjit Kaur v. The State of Punjab & Anr (supra) had criticized the practice of giving criminal colour to civil disputes to expedite money recovery. The Court observed, "The entire idea seems to be to convert a civil dispute into a criminal one and put pressure on the appellant (Accused) for return of the amount allegedly paid. The Criminal Courts are not meant to be used for settling scores or for pressurizing parties to settle civil disputes."

These decisions shed light on the growing tendency among litigants to misuse the process of law by giving a criminal colour to civil disputes by engaging in forum shopping in order to accomplish their oblique motives. "Forum shopping" refers to choosing a court based on the likelihood of a favourable outcome. In commercial disputes, criminal action is often perceived to yield quicker relief compared to civil remedies. Such acts result not only in undue hardship upon the person against whom criminal law is wrongly set in motion, but also puts an excessive burden on the judicial system. This article aims to highlight the trend of parties preferring criminal action over traditional civil remedies in commercial disputes.

Civil vs. Criminal Proceedings: A Comparative Analysis

Consider a scenario where A agrees to provide materials worth ₹10 lakhs to Z. A delivers the goods, but Z refuses to pay the full amount. If A opts for criminal proceedings, he might file a complaint alleging criminal breach of trust (under S. 316(2) of the Bharatiya Nyaya Sanhita) and cheating (under S. 318(4) of the BNS). In contrast, a civil remedy would involve filing a suit for recovery of dues.

The key differences between criminal and civil proceedings are multifaceted and significant. In criminal law, the state acts as the prosecuting party having a higher burden of proof - "beyond reasonable doubt" – indicative of grave consequences such as likelihood of imprisonment. The focus of criminal law is on maintaining social order and deterring future criminal conduct. Conversely, civil law adjudicates disputes between individuals or organizations, employing a lower evidentiary standard - "preponderance of probabilities." Civil proceedings typically result in monetary compensation or specific performance, aiming to restore the aggrieved party to their original position. In criminal proceedings i.e. once an FIR is registered, the potential for immediate arrest, attachment of properties, initiation of Look-Out Circulars that curb travel overseas and frequent summons to attend police stations for long hours of questioning creates a deterrent for the accused, often leading to quicker resolutions or settlements.

Personal Liberties and the Uphill Battle After Arrest

The utilization of criminal law in civil disputes has a propensity to impact personal liberties. There is a fundamental truth that personal liberty will always weigh more than any amount of money. The prospect of arrest and imprisonment, even for a short period, can have devastating consequences on an individual's life, reputation, and psyche. This fear is exploited by complainants to pressure the accused into settling civil disputes.

The uphill battle an accused faces after arrest in such cases is daunting. In the above scenario, if Z is arrested for the alleged offenses of criminal breach of trust and cheating, which are cognizable and non-bailable, the consequences are immediate and severe. Z may spend at least 24 hours in custody before being produced before a Magistrate. If the police require further custody for investigation, Z could face several days in police custody, followed by potential judicial custody in prison.

During this period, Z's personal and professional life is significantly disrupted. The social stigma associated with arrest leads to loss of reputation, employment difficulties, and personal relationships strain. Even if eventually acquitted, the process itself becomes a punishment, often irreparably damaging the accused's life. Furthermore, in regards to trial Courts granting bail, it was recently highlighted by the Supreme Court while granting bail to Aam Aadmi Party leader Mr Manish Sisodia[8], the bench of Justices B R Gavai and K V Viswanathan opined that “From our experience, we can say that it appears that the trial courts and the high court’s attempt to play safe in matters of grant of bail. The principle that bail is a rule and refusal is an exception is, at times, followed in breach," …"It is high time that the trial courts and the high courts should recognise the principle that 'bail is rule and jail is exception”.  

Similarly, the Chief Justice of India Dr D.Y Chandrachud stated that, "We have to encourage trial courts to be more receptive to the need for accommodating concerns of people who are seeking liberty," he said. "Unfortunately, the problem today is that we look at any grant of relief by trial judges with a degree of suspicion. That means the trial judges are increasingly playing it safe, not granting bail on important issues of serious crimes."[9] This reality underscores why many individuals, when faced with criminal charges in essentially civil matters, opt to settle quickly, even if they believe in their innocence.

Judicial Perspective on Misuse of Criminal Law

Indian courts have consistently held that criminal law should not be used to settle civil disputes. In Indian Oil Corporation v. NEPC India Ltd.,[10] the Supreme Court stated, “While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law.” Further, the court emphasized that this growing tendency in business circles stems from the perception that civil law remedies are time-consuming and inadequately protect creditors' interests.

Moreover, in Paramjeet Batra v. State of Uttarakhand (supra), the court while acknowledging that some civil disputes may have criminal overtones warranting police intervention, it cautioned against the indiscriminate use of criminal proceedings in essentially civil matters. The court stressed that Courts must assess whether civil disputes have been given a cloak of criminal nature and whether ingredients of the offences alleged have been made out. It further held that if for the same dispute, a civil remedy existed and was in fact adopted, Courts ought not to hesitate to quash the criminal proceedings.

Legal Remedies Against Misuse - Quashing of FIR and Consequent Criminal Proceedings

Both Article 226 of the Constitution of India and Section 528 of the Bharatiya Nagarika Suraksha Sanhita (BNSS) provides a remedy against the misuse of criminal law in civil disputes through the power of High Court to quash FIRs and all consequent criminal proceedings. This provision allows the High Court to exercise its inherent powers to prevent abuse and secure the ends of justice. However, courts have consistently held that this is an extraordinary power to be used sparingly and in the rarest of rare cases.

The accused can approach the High Court with a petition under Section 528 BNSS, demonstrating that the case against them interalia is false, frivolous, and vexatious, or an abuse of the legal process. The court will consider factors such as whether the allegations prima facie constitute an offence, the material presented before the court in support of the allegations, whether the proceedings initiated are an abuse of process, malafide and/or maliciously instituted, and whether the dispute is essentially civil in nature.

Conclusion

While it is legally permissible to file both civil and criminal complaints simultaneously, using criminal law to pressurise settlements in civil disputes when there is no criminality must be minutely scrutinized to prevent abuse. Courts and legal practitioners must be vigilant against such misuse, balancing the rights of complainants with abuse of the legal system. Despite recent legal reforms, more checks and balances are needed to address this issue effectively.

The misuse of criminal law in civil disputes represents a significant challenge to the Indian legal system. It not only burdens an already strained criminal justice system but also poses serious threats to individual liberties and the principles of justice. While the courts have consistently warned against this practice, its persistence indicates a need for more robust systemic changes.

Future reforms could include stricter penalties for frivolous criminal complaints in civil matters, enhanced scrutiny of complaints at the FIR stage, and expedited processes for identifying and quashing misused criminal proceedings. Ultimately, addressing this issue requires a delicate balance between protecting the rights of genuine victims and preventing the abuse of the criminal justice system. It calls for a concerted effort from all stakeholders in the legal system to uphold the integrity of both civil and criminal legal processes.

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