A developing problem was addressed by the Supreme Court of India in the major case of Rikhab Birani & Anr. v. State of Uttar Pradesh & Anr. The abuse of criminal law in circumstances that are basically civil in nature was the subject of the case.
The criminal proceedings that were begun over a failed property sale transaction were thrown aside by Justices Sanjiv Khanna and Sanjay Kumar in a thorough opinion dated April 16, 2025. They ruled that civil breaches cannot be criminalized unless it is established from the beginning that there was a clear dishonest or fraudulent motive.
Details on the situation
An oral agreement between Rikhab Birani and Sadhna Birani, who are the appellants, and Shilpi Gupta, who is the complainant, regarding the sale of a godown in Kanpur for ₹1.35 crore took place in June of 2020.
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This agreement led to the dispute that has arisen. In their statement, Shilpi Gupta and her husband said that they had made a payment of ₹19 lakh for this transaction. However, a check for ₹10 lakh that was issued by Shilpi Gupta was returned as unpaid, and the remaining money was not paid.
Because of the delay and the inability to successfully complete the deal, the Biranis decided to sell the property to another individual in September of 2021 for the price of ₹90 lakh. At this moment, neither side has begun any legal procedures against the other entity.
On the other hand, Shilpi Gupta made an effort to commence criminal proceedings by submitting an application under Section 156(3) of the Criminal Procedure Code. However, the Magistrate declared the case to be a civil issue. Following that, she submitted a second criminal complaint, which was similarly rejected for the identical reason when it was filed.
Finally, she was successful in obtaining a First Information Report (FIR) that was lodged under a number of different parts of the Indian Penal Code, including sections 420 (cheating) and 406 (criminal breach of trust).
Under Section 482 of the Criminal Procedure Code, the appellants were compelled to apply for anticipatory bail and thereafter petitioned the High Court to dismiss the First Information Report. As a result of the High Court’s refusal to provide relief, the current appeal has been filed with the Supreme Court.
Matters of Law That Are Before the Court
In the case that was brought before the Supreme Court, the primary issue that was being considered was whether or not a disagreement that was based on an oral property agreement, in which payments were made but the contract was not finalized, could be considered a criminal offense of deceit or breach of trust. To be more specific, the Court inquired about:
If the requirements of Section 420 of the Indian Penal Code (cheating) were satisfied.
When civil remedies were available but were not pursued, the question of whether or not there was a legitimate justification for assuming criminal cognizance was being considered.
When determining whether a matter warrants a civil or criminal proceeding, the Magistrate and the police have certain responsibilities.
At the moment of the transaction, the role that dishonest intention (mens rea) plays in the situation.
Provisions That Have Been Analyzed by the Court
During the process of reaching its ruling, the Supreme Court made reference to a number of statutes as well as previous decisions. These include the following:
Cheating is defined in Section 415 of the Indian Penal Code, which also covers dishonest persuasion and inflicting harm.
With regard to criminal breach of trust, Section 406 of the Indian Penal Code necessitates the presentation of evidence of entrustment and violation of fiduciary obligation.
According to Section 482 of the Criminal Procedure Code, High Courts have the authority to dismiss criminal proceedings where there is no evidence of an offense.
It is only possible for Magistrates to instruct police to investigate under Section 156(3) of the Criminal Procedure Code, but only where there is a prima facie case.
It was highlighted by the Court that criminal procedures should not be used as a weapon for pushing participants in a failed transaction, particularly in situations when civil law is the right course to take.
Statements made by the Court
At the outset of the agreement, the Court made it quite plain that there was no evidence to suggest that the appellants had any dishonest intentions. The basic component of cheating, which is receiving false enticement at the beginning of the process, was not satisfied. The First Information Report (FIR) and the chargesheet just restated the allegations that were submitted in the complaint, but they did not provide any substantial evidence to support the criminal accusations.
The acts of the police and the Magistrate with regard to taking cognizance without conducting an appropriate analysis were harshly condemned by the Court. It was brought to everyone’s attention that a civil dispute cannot be transformed into a criminal offense if the criminal claims are ambiguous and baseless.
Additionally, the Court’s decision said that the issuance of summonses and the beginning of criminal proceedings should not be done in a casual manner. In order to determine whether the charges constitute a criminal offense or only a civil wrong, judicial personnel are required to thoroughly assess the situation.
The Reaffirmation of More General Legal Principles
This case is an extension of a series of decisions made by the Supreme Court that establish a distinct boundary between civil law and criminal law. The stance that was adopted in prior decisions, such as V.Y. Jose v. State of Gujarat, Thermax Ltd. v. K.M. Johny, and Sharif Ahmed v. State of Uttar Pradesh, was reaffirmed by the Supreme Court. When it comes to cheating charges, these instances highlight the need of having fraudulent or dishonest intent at the moment of agreement in order for the allegation to be valid.
In addition, the verdict emphasized the role of the state and the police to maintain the integrity of the criminal justice system and to prevent its exploitation. The State of Uttar Pradesh was charged ₹50,000 by the Court for failing to respect the line between civil and criminal proceedings and for tolerating such exploitation of the legal process. The Court’s decision was based on the fact that the State failed to abide by the distinction.
