The Madhya Pradesh High Court has affirmed that where parties to an economic offence have voluntarily compromised their dispute, and the compromise is duly verified by the court, the FIR may be quashed under Section 482 CrPC. This ruling reinforces the principle that not all criminal proceedings must proceed to trial when the harm is private and the parties have resolved their differences.
Background & Facts
The Dispute
The petitioner, Prakash Murkute, was named as an accused in FIR No. 364/2022, registered at Police Station Kirnapur, District Balaghat, Madhya Pradesh. The complaint, filed by Respondent No. 2, alleged that the petitioner, along with co-accused, induced members of the public to invest money with the promise of doubling their returns within a stipulated period. It was further alleged that the petitioner used forged cheques to secure these investments, thereby committing offences under Sections 409, 420, 467, 468, and 120-B of the Indian Penal Code, as well as Sections 21(1), 21(2), and 21(3) of the Banning of Unregulated Deposit Schemes Act, 2019.
Key Facts
- The alleged investments were made by private individuals, not the general public at large
- No evidence was presented indicating systemic fraud or widespread public harm
- The complainant, Respondent No. 2, is a private individual who allegedly suffered financial loss
- The petitioner denied all allegations and claimed to be falsely implicated
- The dispute was primarily financial and contractual in nature, without allegations of violence or public disorder
Procedural History
- 2022: FIR No. 364/2022 registered at Police Station Kirnapur, District Balaghat
- 2024: Petitioner filed Misc. Criminal Case No. 2847 of 2024 under Section 482 CrPC seeking quashing of FIR
- 03.02.2026: High Court directed Registrar (J-II) to record and verify compromise between parties
- 26.02.2026: Registrar (J-II) submitted report confirming voluntary compromise, with signed statements from both parties
- 01.04.2026: Judgment delivered by Justice B. P. Sharma
The Parties' Positions
For the Petitioner
The petitioner contended that he was falsely implicated in a purely private financial dispute. He submitted that the complainant had accepted repayment and mutually agreed to withdraw all allegations. He argued that the offences, being economic and non-violent, did not affect public order or societal interest, and therefore, the criminal process should not continue where the parties have settled.
For the Respondent/State
The State opposed the petition on the general ground that offences under IPC and the Banning of Unregulated Deposit Schemes Act are non-compoundable and must be prosecuted in public interest. However, the State did not contest the fact of compromise.
For Respondent No. 2 (Complainant)
The complainant supported the petition, confirming that a compromise had been reached voluntarily, without coercion, and that all financial claims had been settled.
Relief Sought
The petitioner sought quashing of FIR No. 364/2022 and all consequential proceedings, including any investigation, charge sheet, or trial, on the ground of compromise between the parties.
The Legal Issue
Can a criminal proceeding under Sections 409, 420, 467, 468, 120-B IPC and Sections 21(1)-(3) of the Banning of Unregulated Deposit Schemes Act, 2019 be quashed under Section 482 CrPC where the parties have entered into a voluntary, verified compromise, and the offences are primarily economic in nature without broader public ramifications?
Arguments Presented
For the Petitioner
The petitioner relied on the Supreme Court’s decision in Jitendra Raghuvanshi v. Babita Raghuvanshi (2013) 4 SCC 58, which held that courts may exercise inherent powers under Section 482 CrPC to quash proceedings in cases of compromise, particularly where the offences are of a private and economic nature. He argued that the compromise was genuine, voluntary, and verified by the Registrar (J-II), and that the offences did not impact public order or societal interest. He further submitted that continuing the prosecution would amount to abuse of process.
For the Respondent/State
The State contended that offences under Sections 409, 420, 467, 468, and 120-B IPC, as well as Sections 21(1)-(3) of the Banning of Unregulated Deposit Schemes Act, 2019, are non-compoundable and inherently public in nature. It argued that allowing quashing on compromise would undermine the deterrent effect of these provisions and set a dangerous precedent for financial fraud cases.
The Court's Analysis
The Court examined the nature of the offences alleged and the circumstances of the compromise. It noted that the complainant was a private individual, not a representative of the public or a regulatory body, and that the dispute arose from a private financial arrangement. The Court emphasized that the Banning of Unregulated Deposit Schemes Act, 2019, targets organized, large-scale, and predatory schemes affecting the public at large, not isolated transactions between individuals.
"The compromise has been recorded by the Registrar (J-II) of this Court, and both parties have affirmed under oath that the settlement was arrived at voluntarily, without any threat, inducement or coercion."
The Court distinguished this case from those involving public interest, fraud on the market, or systemic exploitation. It held that the Supreme Court’s ruling in Jitendra Raghuvanshi squarely applies: where the compromise is genuine, the offences are not of a heinous or public nature, and the parties have resolved their differences, the court may exercise its inherent powers to prevent abuse of process.
The Court further observed that the State did not oppose the compromise, and the complainant had affirmatively supported the petition. The verification by the Registrar (J-II) provided sufficient assurance of the compromise’s authenticity.
The Verdict
The petition was allowed. The High Court quashed FIR No. 364/2022, registered at Police Station Kirnapur, District Balaghat, for offences under Sections 409, 420, 467, 468, and 120-B IPC and Sections 21(1), 21(2), and 21(3) of the Banning of Unregulated Deposit Schemes Act, 2019, qua the petitioner. All consequential proceedings, including investigation and trial, were ordered to be terminated. The order was effective immediately.
What This Means For Similar Cases
Compromise Can End Economic Offence Prosecutions
- Practitioners may now file Section 482 petitions in cases involving private financial disputes under IPC Sections 409, 420, 467, 468, and 120-B where the complainant is an individual and not a public entity
- The burden shifts to the petitioner to prove the compromise is voluntary, genuine, and verified by the court
- Courts will assess whether the offence impacts public interest or is purely private
Verification by Court Registrar Is Critical
- A mere settlement deed is insufficient; verification by a court officer (e.g., Registrar J-II) is now a best practice for admissibility
- Signed affidavits from both parties, recorded in court, significantly strengthen the petition
- This procedure provides judicial oversight and prevents coercion claims
Banning of Unregulated Deposit Schemes Act Is Not Automatically Non-Compoundable
- The judgment clarifies that Section 21 offences under the Act are not per se non-compoundable if they involve isolated transactions without public harm
- Prosecution under the Act must be evaluated contextually - mass fraud vs. private breach
- Practitioners should argue for quashing where the complainant is a single investor and no systemic pattern is established
