Criminal law can’t be used to recover money under private contracts: Calcutta High Court

Justice Rai Chattopadhyay noted that it appeared that the criminal proceedings were invoked for enforcing a civil liability arising out of a contractual relationship.

According to the FIR, the man was accused of approaching a person and posing as the owner of a plot of land and selling a plot of land to the complainant for Rs 1.60 Crores. However, after taking the money, the man allegedly never took any step to sign the transfer documents of the land in favour of the complainant. On July 25, 2023, the complainant filed an FIR against the man accusing him of cheating and criminal breach of trust.

‘Contractual relationship’

The high court noted that the investigation did not disclose any evidence to show payment of the alleged consideration amount of Rs 1.60 crore, but the charge sheet recorded that only a sum of Rs 40 lakh was credited to the man’s bank account. The court further noted the existence of the written loan agreement signed between the man and the complainant.

According to the court, “the existence of this written contractual arrangement fundamentally alters the complexion of the dispute,” and the “admitted documentary relationship between the parties is that of lender and borrower”. The high court stated that even if it was assumed that the man had failed to repay the balance amount given as a loan, “such failure, by itself, does not constitute a criminal offence.”

The high court observed that the criminal process seemed to have been started for enforcing a civil liability arising out of a contractual relationship and held that “criminal law cannot be employed as an instrument for enforcing recovery of contractual dues or for exerting pressure in what is essentially a civil dispute.” Accordingly, the high court set aside the FIR and the consequent criminal proceedings against the man.

‘Loan agreement’

Advocates Dr Arjun Chowdhury and Pratyusha Dutta Chowdhury, appearing for the man, argued that the allegation against the man is false. The counsel submitted that a ‘loan agreement’ was signed between the man and the complainant on November 20, 2019, as the man needed money. Hence, the complainant agreed to give a friendly loan of Rs 40 lakh to the man.

The counsel further contended that out of Rs 40 lakh, the man has already returned a sum of Rs 12 lakh to the complainant and that the rest of the money will also be refunded soon. The counsel further urged that the man was only a “bona fide”(in good faith) debtor and that the transaction was a friendly loan which was civil in nature.

Advocates Avrojyoti Das, Rajyashree Ghosh and Panchali Deb Sikder appeared for the state.