The Gauhati High Court has affirmed that allegations of large-scale financial fraud, even when a related criminal case is pending, cannot be dismissed merely on grounds of procedural overlap. The Court directed the registration of a fresh FIR to ensure that the full scope of alleged deception involving public funds and shell entities is independently probed.
Background & Facts
The Dispute
The dispute arises from a series of alleged fraudulent transactions between Sabharwal Trading India Pvt. Ltd. (STIPL) and the Matak Autonomous Council in Assam. STIPL, represented by Kamal Sabharwal, Mohit Kalra, and Rajinder Sharma, claimed to have supplied school bags, blankets, and mosquito nets under purchase orders worth Rs. 110.5 crore and Rs. 31.32 crore. The Council paid Rs. 4.4 crore and withheld Rs. 59 crore pending government stamp approvals. STIPL filed an FIR (CID P.S. Case No. 16/2023) alleging that the petitioner, Pavanjit Gulati, and others - Harish Bansal and Khushdeep Bansal - had conspired to defraud them by fabricating the existence of the Council and its orders.
Key Facts
- STIPL alleged that the Matak Autonomous Council was a sham entity with no physical office or personnel
- The petitioner, Pavanjit Gulati, and the Bansals were arrested on 04.02.2024 in connection with CID Case No. 16/2023, but later released
- The petitioner claims the entire transaction was a fraud perpetrated by STIPL to facilitate GST evasion and false billing
- The suppliers named in the purchase orders - Radha Krishna Enterprises (jute bags), Supreme Steel & Udyog (steel items), Guru Nanak Enterprises (plastic shoes), and Himalaya Traders (soap) - have no capacity to supply school bags or mosquito nets
- These entities are alleged to be shell companies created solely to generate false invoices and claim input tax credit
- On 28.03.2025, the petitioner filed an FIR with the Special Director General of Police, CID, Assam, detailing the fraud
- The CID refused to register the FIR, citing a pending investigation in CID Case No. 16/2023
- Smt. Mamta Aggarwal, wife of Harish Bansal, had previously filed a complaint, which was dismissed on 06.06.2025
Procedural History
- October - December 2022: Alleged supply of goods to Matak Autonomous Council
- 2023: STIPL files FIR (CID P.S. Case No. 16/2023) against petitioner and Bansals
- 04.02.2024: Arrest of petitioner, Harish Bansal, and Khushdeep Bansal
- Late 2023 - Early 2024: Release of accused on bail
- 28.03.2025: Petitioner files FIR with CID, Assam, alleging fraud by STIPL
- 06.06.2025: Chief Judicial Magistrate, Kamrup (M), dismisses petitioner’s prayer for FIR registration, citing pending enquiry into Smt. Mamta Aggarwal’s complaint
- 08.08.2025: Magistrate rejects application for further investigation in CID Case No. 16/2023
- 17.03.2026: Gauhati High Court delivers judgment on Crl.Pet. 761/2025 and Crl.Pet. 1189/2025
The Parties' Positions
Petitioner (Pavanjit Gulati): Argues that the original FIR is a fabrication to shield STIPL’s own fraud. Claims the transaction was paper-only, with no actual delivery of goods. Seeks independent investigation to expose the real perpetrators and prevent further GST fraud.
Respondents (STIPL, CID Assam, State of Assam): Contend that the petitioner’s FIR is a delayed, retaliatory tactic to derail an ongoing investigation. Assert that the petitioner was complicit in introducing STIPL to the Council and now seeks to shift blame.
Relief Sought
The petitioner sought:
- Registration of his FIR dated 28.03.2025
- A fair and independent investigation into the alleged fraud by STIPL and its associates
- Quashing of the order dated 06.06.2025 dismissing his FIR application
- Direction to the CID to investigate the role of shell companies in the transaction
The Legal Issue
Can a police authority refuse to register an FIR alleging fraud on the ground that a related FIR is already pending, even when the new allegations point to a distinct and potentially larger scheme of financial deception?
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that the original FIR filed by STIPL is based on a fabricated narrative. The suppliers named in the purchase orders are engaged in unrelated businesses and cannot have supplied the goods. The absence of any physical presence of the Matak Autonomous Council, coupled with the use of shell entities, indicates a systematic GST fraud. The petitioner’s FIR is not a repetition but a revelation of the true nature of the transaction. Relying on Lalita Kumari v. Government of Uttar Pradesh, he contended that registration of an FIR is mandatory when a cognizable offence is disclosed, regardless of pending proceedings.
For the Respondent
The State’s counsel argued that the petitioner’s FIR is an afterthought, filed only after the accused were arrested and released. The same allegations could have been raised during the trial of CID Case No. 16/2023. The complaint by Smt. Mamta Aggarwal had already been examined and dismissed, making the petitioner’s application redundant. Allowing a second FIR would lead to multiplicity of proceedings and abuse of process.
The Court's Analysis
The Court examined the nature of the allegations in both FIRs and found that while CID Case No. 16/2023 focuses on the accused’s alleged role in defrauding STIPL, the petitioner’s FIR alleges that STIPL itself orchestrated a larger fraud involving fake entities, forged documents, and illicit GST claims. The Court emphasized that the two FIRs are not identical in substance; one accuses the petitioner of cheating STIPL, while the other accuses STIPL of cheating the State and the tax system.
"The existence of a pending investigation does not extinguish the duty of the police to register an FIR when a cognizable offence is disclosed, particularly when the allegations point to a different set of perpetrators and a distinct fraudulent scheme."
The Court noted that the dismissal of Smt. Mamta Aggarwal’s complaint does not preclude a fresh FIR if it raises new facts. The petitioner’s allegations regarding shell companies, mismatched business profiles, and absence of physical delivery constitute a prima facie case of criminal conspiracy, cheating, and forgery under Sections 420, 467, 468, 471, and 120B IPC, as well as potential violations of the CGST Act.
The Court further held that the principle of laches or delay cannot override the public interest in uncovering large-scale financial fraud involving public funds and tax evasion. The CID’s refusal to register the FIR was based on procedural grounds without substantive evaluation of the allegations.
The Verdict
The petitioner succeeded. The Court set aside the order dated 06.06.2025 and directed the registration of the FIR filed by Pavanjit Gulati on 28.03.2025. The CID, Assam, was directed to investigate the matter independently, including the role of shell companies, the authenticity of the Matak Autonomous Council, and the GST implications. The investigation must be completed within 12 weeks. The Court also directed that the investigation be conducted by a team not previously involved in CID Case No. 16/2023 to ensure impartiality.
What This Means For Similar Cases
FIR Registration Is Mandatory Even Amid Pending Cases
- Practitioners must file applications under Section 154 CrPC if police refuse to register an FIR alleging a distinct fraudulent scheme, even if another case is pending
- Courts will not permit procedural convenience to override the duty to investigate cognizable offences
- The mere existence of a related FIR does not negate the obligation to register a new one if it discloses a separate offence
Shell Entities and Mismatched Business Profiles Are Red Flags
- In fraud cases involving supply contracts, the nature of the supplier’s business must be scrutinized
- If a supplier’s registered activity is unrelated to the goods supplied (e.g., a jute bag dealer supplying school bags), this is strong evidence of fabrication
- Such mismatches should be raised in bail applications, discharge petitions, and applications for further investigation
Independent Investigation Must Be Sought When Bias Is Apparent
- When the investigating agency is linked to the complainant (e.g., CID investigating its own referral), courts may direct transfer of investigation
- Petitioners should seek appointment of a special investigation team (SIT) or external agency in cases of apparent conflict
- The Court’s directive to assign a new team in this case sets a precedent for future applications
