Court says criminal law cannot be used as a recovery tool; directs payment to charity and warns of recall if cost not paid
Mumbai: The Bombay High Court has quashed an FIR and all consequential criminal proceedings arising out of a commercial dispute between business parties after noting that the entire disputed amount had been fully repaid and accepted by the complainant company.
Justice Milind N. Jadhav, while hearing Criminal Application (ST) No. 18957 of 2026, observed that the dispute stemmed from outstanding payments linked to vendor invoices and business transactions. The Court was informed that the parties had reconciled their differences and that no further amount remained payable to the complainant.
The complainant’s Director and authorised signatory also joined the proceedings through video call, and the terms of settlement were placed on record. Since the parties had settled the matter completely and both sides wanted the criminal case to end, the Court held that continuation of prosecution would serve no useful purpose.
Referring to the inherent powers of the High Court under Section 482 of the Criminal Procedure Code and Section 528 of the Bharatiya Nagarik Suraksha Sanhita, the Court reiterated that such powers may be used to prevent abuse of process and secure the ends of justice. The judgment also relied on the Supreme Court’s decision in State of Haryana v. Bhajan Lal, which lays down the circumstances in which FIRs may be quashed.
The Court noted that while heinous offences such as murder, rape and dacoity ordinarily cannot be quashed on the basis of settlement, private civil, commercial and matrimonial disputes stand on a different footing. In this case, the dispute was found to be purely commercial and private in nature, with no larger societal impact.
Significantly, the High Court also addressed the issue of misuse of criminal law in settlement-driven cases. It observed that criminal proceedings should not be used as a bargaining chip or recovery mechanism after consuming public and judicial resources. The Court said that in “consent quashing” matters, costs may be imposed to discourage vexatious complaints and compensate for wastage of State machinery and judicial time.
Accordingly, the Court directed the applicant to pay Rs. 25,000 as costs to the corpus of A.K. Munshi Yojana, a charitable trust that runs medical centres, vocational training centres and a special school for children with special needs. The amount must be paid within two weeks. The Court further warned that non-compliance could lead to recall of the quashing order.
The FIR in question, registered at Baner Police Station, Pune City, had invoked offences under various provisions of the Bharatiya Nyaya Sanhita, 2023, along with Sections 65, 66C and 66D of the Information Technology Act, 2000. The Court also directed that any freeze on the applicant’s bank accounts, if imposed in connection with the FIR, be lifted.
The matter has been listed for compliance on October 9, 2026.
Bottom Line :
Quashing of FIR on settlement in commercial dispute - High Court can quash criminal proceedings arising out of private commercial dispute when entire amount is repaid and continuance of prosecution would not serve ends of justice - In consent quashing matters, Court can impose costs to prevent misuse of criminal law as a recovery tool and to compensate for wastage of public and judicial resources.
Statutory provision(s): Section 482, Criminal Procedure Code, 1973; Section 528, Bharatiya Nagarik Suraksha Sanhita, 2023; Sections 318(4), 316(4), 336(3), 340(2), 335, 344 and 319(2), Bharatiya Nyaya Sanhita, 2023; Sections 65, 66C and 66D, Information Technology Act, 2000
Kaustubh Shivkumar Vibhute v. State of Maharashtra, (Bombay) : Law Finder Doc id # 2985236
