The Supreme Court has set aside a High Court order reviving criminal proceedings arising from a disputed Rs. 10 lakh payment for the alleged sale of a flat, holding that criminal proceedings cannot be converted into a mechanism for recovering money in what is essentially a civil dispute. 

The Bench of Justice J.B. Pardiwala and Justice K. Vinod Chandran emphasised that a person against whom allegations are made must be given an opportunity of being heard when a remand order at the pre-cognizance stage could prejudice that person.

The case arose from an allegation that the second respondent had been duped on the pretext of purchasing a flat. According to the complaint, the second respondent had paid a total of ₹10 lakh in two installments towards the proposed transaction.

The allegation was that neither was the money returned nor was the flat ultimately sold to the complainant. There was a further allegation that the appellant had subsequently summoned the complainant on the pretext of refunding the money and assaulted him. 

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The transaction allegedly took place during 2019-2020. However, the complainant approached the Superintendent of Police only in March 2023. When no response was received, he instituted Complaint Case No. 3412 of 2023 before the Chief Judicial Magistrate, Unnao. 

During the proceedings, statements of the complainant and certain witnesses were recorded under Section 202 of the Code of Criminal Procedure, 1973.

The police enquiry produced material which was significant to the dispute. The police found that there was no flat as pointed out by the appellant. The police also produced call data records indicating that the appellant was in Lucknow on March 6, 2023, which was the date on which the alleged assault was said to have taken place.

The record further disclosed proceedings under the Negotiable Instruments Act, 1881 concerning the same ₹10 lakh transaction and involving the wife of a land broker. 

After considering the material, the Chief Judicial Magistrate dismissed the complaint, concluding that the dispute was essentially civil in nature.

A criminal revision was subsequently filed. Following a remand, the Additional Chief Judicial Magistrate, Unnao reconsidered the matter and again dismissed the complaint.

That decision was thereafter challenged before the Additional District & Sessions Judge, Court No. 9, Unnao. The revisional court upheld the ACJM’s decision, particularly noting that the police enquiry and documentary evidence were contrary to the oral testimony relied upon by the complainant. 

The matter subsequently reached the High Court through an application under Section 482 of the CrPC.

The High Court allowed the application, leading to the challenge before the Supreme Court. 

The Supreme Court, however, found a significant procedural infirmity in the High Court proceedings.

The Court noted that the appellant, who had been impleaded as a respondent before the High Court, was not heard before the impugned order was passed. The High Court had dispensed with notice to the second respondent on the ground that he had no right to be heard at the pre-cognizance stage.

The Supreme Court held that the High Court ought to have considered the effect of its order. Where a remand results in an order refusing cognizance being set aside, the person against whom the allegations have been made could necessarily be prejudiced. 

The Supreme Court also addressed the substantive nature of the dispute.

It observed that the material showed the existence of a money transaction. Where the underlying grievance is essentially a demand for return of money, the appropriate remedy is to pursue civil proceedings for recovery, rather than use criminal prosecution as a means of enforcing repayment.

The Court specifically took note of the chronology. The second instalment was allegedly paid on January 27, 2020, whereas the first complaint before the Superintendent of Police was made on March 13, 2023. The Court observed that by then, the limitation period for filing a recovery suit had expired. 

In a significant observation, the Supreme Court reiterated that criminal proceedings are not a measure for recovery of money.

The Court cautioned against attempts to convert civil disputes into criminal prosecutions merely to exert pressure upon an accused to satisfy a monetary demand. It reiterated that civil disputes cannot be transformed into criminal cases as an “arm-twisting method” to coerce the accused into making payment. 

The observation reinforces the distinction between a genuine criminal offence and a dispute that essentially concerns contractual or monetary rights. The existence of a monetary transaction, by itself, does not justify criminal prosecution where the appropriate remedy is civil recovery.

After considering the entire matter, the Supreme Court found “absolutely no reason” to sustain the High Court’s impugned order.

The Court therefore set aside the High Court’s order and allowed the appeal. The earlier order refusing cognizance was restored, resulting in dismissal of the complaint. 

The Bench comprising Justice J.B. Pardiwala and Justice K. Vinod Chandran pronounced the order in New Delhi on August 5, 2026.

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