Manoj Mamgaine & Anr. Vs State of Odisha & Anr (Orissa High Court)
Conclusion: FIR registered against officials and the liquidator of Punj Lloyd Ltd. (PLL), which alleged non‑payment of subcontractor dues and misuse of Goods and Services Tax (GST) input credits in connection with the Gas Authority of India Ltd (GAIL) pipeline project was quashed as mere breach of contractual obligations, delayed payments, GST disputes, or financial reconciliation issues did not constitute the offence of cheating unless fraudulent or dishonest intention existed from the inception of the transaction.
Held: FIR was filed by DSP Infracon Pvt. Ltd. against accused PLL’s representatives of withholding ₹3.28 crore payable under a subcontract while availing GST benefits on the same invoices. The complaint invoked Sections 418 and 420 of the IPC, claiming fraudulent intent. Assessee argued that the dispute was purely commercial, arising from a valid subcontract executed during PLL’s Corporate Insolvency Resolution Process (CIRP) and subsequent liquidation under the Insolvency and Bankruptcy Code (IBC). He contended that there was no dishonest inducement or fraudulent intent at the inception of the contract, and that the FIR was being used as a coercive tool for monetary recovery. He pointed out that GAIL had already paid over ₹10.71 crore to PLL’s sub‑vendors, including DSP Infracon, as disclosed in filings before the National Company Law Tribunal (NCLT). They maintained that any remaining dues were subject to liquidation proceedings and could not form the basis of criminal prosecution. Opposing the plea, the complainant argued that the FIR disclosed elements of cheating, citing GST Department records evidencing wrongful availment of input tax credit amounting to ₹18.74 lakh. It was alleged that the liquidator acted beyond his authority by issuing work orders despite GAIL’s contract prohibiting subcontracting. High Court held that criminal proceedings under Sections 418/420/34 IPC could not be sustained where the dispute essentially arose from non-payment of contractual dues under a commercial sub-contract executed during CIRP/liquidation proceedings under the Insolvency and Bankruptcy Code, 2016. The Court observed that mere breach of contractual obligations, delayed payments, GST disputes, or financial reconciliation issues did not constitute the offence of cheating unless fraudulent or dishonest intention existed from the inception of the transaction. Since the allegations in the FIR predominantly disclosed a civil and commercial dispute without foundational averments of initial deception or fraudulent inducement, continuation of the criminal prosecution amounted to abuse of process of law. Accordingly, the FIR and all consequential proceedings were quashed in exercise of inherent powers under Section 482 Cr.P.C./Section 528 BNSS.
