The Jharkhand High Court has reaffirmed that economic fraud involving deliberate deception to secure large-scale financial transactions cannot be dismissed as a mere civil dispute, even when contractual elements are present. This ruling clarifies the threshold for quashing FIRs under the Bharatiya Nagarik Suraksha Sanhita, 2023, and reinforces the judiciary’s stance against treating financial fraud as a private contractual breach.
Background & Facts
The Dispute
The petitioner, Awadhesh Kumar, is accused of orchestrating a fraudulent scheme to deceive an informant into paying Rs. 85,00,000 for the purchase of medicines purportedly authorized for distribution to the governments of Jharkhand and Bihar. The petitioner, along with co-accused, falsely represented themselves as authorized sellers of Arihant Drug House and claimed PSI India Private Ltd. was an associate of a reputable NGO. The informant, relying on these representations, transferred the full amount. The petitioner delivered medicines worth Rs. 84,99,547 but later induced the informant to return the unsold stock, promising full refund within 60 days. No refund was made.
Procedural History
- 2025: FIR No. 179 of 2025 registered at Kotwali P.S., Ranchi, under Section 316(2), Section 318(2), and Section 3(5) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS), for cheating and criminal breach of trust.
- 2026: Petitioner filed Cr.M.P. No. 139 of 2026 under Section 528 of BNSS seeking quashing of the FIR.
- 2026: Charge sheet not yet filed; investigation ongoing.
Relief Sought
The petitioner sought quashing of the entire criminal proceeding, arguing that the matter was purely a civil dispute arising from breach of contract and non-refund of advance, not criminal fraud.
The Legal Issue
The central question was whether allegations of fraudulent inducement, followed by non-refund of proceeds after return of goods, constitute a criminal offence under BNSS Sections 316(2) and 318(2), or whether such conduct can be dismissed as a civil breach of contract.
Arguments Presented
For the Petitioner
The petitioner’s counsel relied on Dalip Kaur v. Jagnar Singh and Vesa Holdings v. State of Kerala, arguing that absence of dishonest intent at the inception of the transaction renders the conduct non-criminal. It was contended that the petitioner was himself a victim of PSI India Pvt. Ltd., and the dispute arose from failure to refund after return of goods - a classic civil breach, not criminal cheating.
For the Respondent/State
The State countered that the petitioner’s representations were knowingly false from the outset, with intent to deceive. The State relied on Rajesh Bajaj v. NCT of Delhi to argue that detailed pleading of every ingredient is unnecessary at the FIR stage, and on Dinesh Sharma v. Emgee Cables to emphasize that economic fraud has broader societal consequences and cannot be equated with private contractual disputes.
The Court's Analysis
The Court examined whether the allegations, if taken at face value, disclosed a prima facie case of cheating and criminal breach of trust. It rejected the petitioner’s reliance on civil dispute precedents, distinguishing them on factual grounds. While Dalip Kaur and Vesa Holdings apply where intent to defraud is absent at inception, here the petitioner allegedly misrepresented the legal status of PSI India Pvt. Ltd. as a government-authorized vendor - a fact within his knowledge and deliberately concealed.
"The undisputed fact remains that the petitioner has received back the medicines worth Rs. 84,99,547/- from the informant and it has also remained undisputed that even after receiving back the medicines the petitioner has not returned the value of such medicines to the informant and this is sufficient to constitute the offence..."
The Court emphasized that economic offences, by their nature, affect public trust and financial systems. Citing Dinesh Sharma, it held that such cases stand apart from ordinary contractual disputes and warrant judicial restraint in quashing. The Court noted that the complainant’s allegations, though not verbatim quoting statutory ingredients, provided sufficient factual foundation to proceed. Quashing at the investigation stage would undermine the state’s duty to investigate economic crimes.
The Verdict
The petitioner’s application was dismissed. The Court held that fraudulent inducement coupled with deliberate non-refund after return of goods constitutes a prima facie case of economic fraud, and FIRs in such cases cannot be quashed merely on the ground of alleged civil dispute.
What This Means For Similar Cases
Economic Fraud Is Not a Civil Matter
- Practitioners must now argue that any transaction involving deliberate misrepresentation of authority, affiliation, or regulatory status to secure payment falls squarely within economic fraud.
- Merely returning goods or promising refund does not negate criminal intent if deception occurred at inception.
FIR Quashing Requires More Than Contractual Dispute Claims
- Applications under Section 528 BNSS must demonstrate that the complaint is devoid of even basic factual ingredients of the offence.
- Courts will not entertain quashing petitions where the allegations suggest organized deception, especially involving public health supply chains.
Burden of Proof Shifts to the Accused at Pre-Trial Stage
- While the prosecution need not prove intent beyond doubt at the FIR stage, the accused must present credible, documentary evidence of bona fide intent to rebut the prima facie case.
- Oral claims of being a "victim" of a third party will not suffice without corroborative proof of lack of knowledge or involvement.
