Section 175(3) BNSS Cannot Be Used as a Mechanical Tool to Criminalise Debt-Recovery Disputes: FIR Quashed as Counterblast Where Core Ingredients of Sections 406/409/420 IPC Were Absent

Court: Bombay High Court (Criminal Appellate Jurisdiction)
Coram: M. S. Karnik & N. R. Borkar, JJ.
Date of pronouncement: 05-05-2026
Connected matters: Criminal Writ Petition Nos. 3205/2025, 3215/2025, 3216/2025, 3217/2025 (quashing); Criminal Writ Petition Nos. 3227/2025 & 3313/2025 (CBI transfer)

1) Introduction

The group of petitions arose from FIR No.0818 of 2025 and FIR No.0819 of 2025 registered at Bandra Police Station pursuant to orders of the learned JMFC, Bandra dated 29/05/2025 under Section 175(3) of the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) (analogous to Section 156(3) CrPC).

The principal petitioner in Writ Petition No.3205 of 2025 was Sashidhar Jagdishan, Managing Director and CEO of HDFC Bank Limited. Other petitions were by Phoenix ARC Private Limited and its senior personnel. The complainant was Mr. Prashant Kishore Mehta (respondent No.3), associated with the Lilavati Kirtilal Mehta Medical Trust (respondent No.4).

The background was a long-running set of debt recovery proceedings (including before the Debts Recovery Tribunal (DRT)) relating to defaulted loans of the complainant’s family’s business entities and personal guarantees. The complainant alleged that a photocopy of a “cash register/diary” showed large “cash payments” (including ~Rs.2.05 crores) purportedly made by erstwhile trustees of the Trust to bank/ARC officials, and alleged that recovery pressure and related conduct led to the death of his father.

Key issues before the High Court included:

  • Whether the Magistrate’s direction under Section 175(3) BNSS and the consequent FIRs disclosed cognisable offences under Sections 406, 409, 420 read with 34 IPC or constituted an abuse of process.
  • Whether the FIRs were a counterblast to recovery proceedings and other adverse judicial outcomes faced by the complainant’s side.
  • Whether investigation should be transferred to the CBI (in the connected transfer petitions).

2) Summary of the Judgment

The Bombay High Court:

  • Quashed the impugned JMFC order dated 29/05/2025 and the consequent FIRs (FIR No.0818 of 2025 and FIR No.0819 of 2025) as against the petitioners, holding that the criminal process was being misused and that, even taken at face value, the allegations did not disclose the essential ingredients of Sections 406, 409, 420 IPC.
  • Held that Section 175(3) BNSS does not create a mechanical right to compel FIR registration where allegations have been examined/repelled in substance and where the complaint is a product of a civil/recovery feud.
  • Emphasised that although courts are ordinarily slow to interfere at a nascent stage of investigation, they may do so where continuing the criminal process would itself be an abuse—particularly when personal vendetta is “writ large” and the complaint lacks bona fides.
  • Declined to transfer investigation to CBI in Writ Petition Nos.3227/2025 and 3313/2025, noting the request was made within two weeks of FIR registration and that the EOW was competent; liberty was left open to move later if circumstances justified.

The Court also clarified it was not expressing any opinion on allegations against the rest of the accused (erstwhile trustees).

3) Analysis

3.1 Precedents Cited (and their influence)

A. Quashing/abuse of process framework

  • State of Haryana v. Bhajan Lal
    The Court used Bhajan Lal as the controlling framework for quashing, particularly the categories relating to: (i) absence of an offence even if allegations are accepted, (ii) allegations being inherently improbable/absurd, and (iii) proceedings being manifestly malafide or instituted with an ulterior motive. The judgment’s conclusion that the complaint was a “counterblast” and an abuse of process is anchored in Bhajan Lal’s category (7) logic.
  • Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque
    Cited for the principle that criminal proceedings should not be permitted to degenerate into harassment where the dispute is essentially civil and the criminal law is used oppressively.
  • Janata Dal v. H.S. Chowdhary
    Relied upon to reiterate the restraint principle—High Courts should not stifle legitimate prosecution, but can intervene where facts are used to weaponise the process. The Court balanced this caution with its finding that the present complaint lacked bona fides and would deter legitimate recovery.
  • Imran Pratapgarhi v. State of Gujarat & Anr.
    Cited to negate any “blanket embargo” that High Courts cannot quash at the “nascent stage”. The Court relied on this to justify early intervention where no offence is made out on the face of the record.

B. Magistrate’s role under 156(3) CrPC / 175(3) BNSS and safeguards

  • Priyanka Srivastava v. State of U.P.
    Though the Court ultimately did not decide the matter on procedural infirmities, this precedent contextualises why applications for police-investigation directions are not meant to be filed casually and why courts scrutinise misuse. The judgment’s statement that Section 175(3) BNSS confers “no mechanical right” resonates with Priyanka Srivastava’s abuse-prevention rationale.
  • Anil Kumar v. M.K. Aiyappa and Pepsi Foods Ltd. v. Special Judicial Magistrate
    These authorities reinforce that judicial orders directing criminal process must reflect application of mind and cannot become instruments for harassment. While the Court did not rest its holding on technical invalidity, the reasoning aligns with the insistence on substantive judicial scrutiny.
  • Pradeep Wodeyar v. State of Karnataka, HDFC Securities Ltd. v. State of Maharashtra, Girish Kumar Suneja v. CBI, Anurag Bhatnagar v. State of NCT of Delhi
    These were relied upon by the Trust to argue that procedural lapses in the pre-conditions to 156(3)/175(3) are directory/curable and should not vitiate proceedings. The High Court expressly stated it was refraining from deciding the matter on these technicalities (given its substantive conclusion on abuse of process and lack of ingredients).

C. Mala fides and “let investigation proceed” line of cases

  • CBI v. Ravi Shankar Srivastava and State of Orissa v. Saroj Kumar Sahoo
    These were invoked by the complainant/Trust to contend that mala fides are not decisive at the threshold and that cognisable offences should ordinarily be investigated. The High Court accepted the principle in general terms, but held that on the present facts the complaint’s vendetta character and the absence of core offence ingredients justified quashing even at an early stage.

D. Banking/recovery disputes and criminalisation concerns

  • HDFC Bank Ltd. v. J.J. Manners, M/s Thermax Ltd. v. K.M. Johny, G. Sagar Suri v. State Of U.P., HDFC Bank Ltd. v. State of Gujarat, Vineet Kumar v. State of U.P.
    These authorities support the theme that criminal proceedings should not be used as a pressure tactic in commercial/recovery contexts and that courts should guard against abuse where the substance is civil/commercial. The Court’s concern that allowing such prosecution would “run the risk of deterring recovery proceedings” reflects this doctrinal line.

3.2 Legal Reasoning

(i) Substantive ingredients of the offences were missing

The Court held that even if the FIR allegations are taken “at face value”, they did not disclose:

  • Entrustment and consequent dishonest misappropriation essential to criminal breach of trust (Sections 406/409 IPC), especially when the narrative was driven by recovery proceedings and a disputed photocopy diary entry rather than a legally traceable entrustment and conversion.
  • Dishonest inducement at the inception—central to cheating under Section 420 IPC.

(ii) Section 175(3) BNSS is not a “mechanical right” to get an FIR registered

The Court’s key articulation was that Section 175(3) BNSS does not confer an automatic entitlement to registration of an FIR, particularly where the broader history shows repeated attempts to weaponise criminal process amidst civil/recovery disputes and where similar grievances have already been pursued.

(iii) “Counterblast” and abuse of criminal process in the shadow of binding recovery orders

The Court heavily relied on the chronology: DRT recovery certificate (2004), repeated obstruction by guarantors/borrowers, coercive orders including arrest warrants, delayed challenge dismissed, multiple complaints to regulatory/other fora found meritless or quashed, and then the criminal accusations against bank officials.

In that setting, the complaint was characterised as a fallout of recovery proceedings, driven by the complainant’s personal belief that recovery pressure caused his father’s death, and operationalised through a disputed “photocopy” cash diary. The Court considered this insufficient to justify a full-blown criminal investigation against recovery officials.

(iv) Quashing at a nascent stage: exceptional but permissible

While acknowledging the general restraint against interfering at an early stage, the Court applied Imran Pratapgarhi v. State of Gujarat & Anr. to hold that there is no absolute bar; where the complaint is not bona fide and no offence is made out, early quashing prevents abuse.

(v) CBI transfer refused as premature

The transfer petitions were filed within about two weeks of FIR registration. The Court held there was nothing to show that the EOW lacked capacity or resources; a CBI transfer at such an initial stage was unjustified, though liberty was reserved to move later if warranted.

3.3 Impact

  • Higher threshold against “criminalising recovery”: The judgment reinforces that debt recovery actions pursued under judicial orders (DRT/recovery certificates) should not be chilled by retaliatory criminal complaints premised on thin or suspicious material. The explicit concern about deterring recovery proceedings is likely to be cited in future quashing petitions involving lenders/ARCs.
  • Section 175(3) BNSS will be read purposively, not mechanically: Magistrates are reminded that directing FIR registration is not a default response, especially where the broader record suggests repetitive/ulterior litigation.
  • Nascent-stage quashing remains available: By relying on Imran Pratapgarhi v. State of Gujarat & Anr., the Court signals that “investigation is at an early stage” is not an all-purpose shield against quashing when the complaint fails Bhajan Lal scrutiny.
  • CBI transfer petitions face strict scrutiny for prematurity: Quick recourse to CBI, without demonstrable incapacity/bias of the state machinery, is unlikely to succeed, particularly in financially textured disputes where EOW competence is presumed.

4) Complex Concepts Simplified

  • Section 175(3) BNSS (like Section 156(3) CrPC): A power of a Magistrate to order police to register/investigate a cognisable offence. It is meant to ensure investigation where police wrongly refuse—but it is not meant to become a shortcut for converting civil feuds into criminal cases.
  • “Entrustment” (Sections 406/409 IPC): For criminal breach of trust, the accused must be shown to have been entrusted with property (or have dominion over it) and then dishonestly misappropriated/converted it. Alleging suspicious payments, without explaining the entrustment relationship and dishonest conversion, often fails at the threshold.
  • “Dishonest inducement” (Section 420 IPC): Cheating requires deception that induces the victim to deliver property/act to their detriment. The dishonest intention must exist at the time of inducement; later disputes or aggressive enforcement typically do not automatically become “cheating”.
  • “Counterblast” complaint: A retaliatory proceeding filed to pressurise the other side—commonly seen when one party is losing in civil/recovery proceedings and responds by initiating criminal allegations to gain leverage.
  • “Nascent stage of investigation”: The early phase after FIR registration. Courts usually hesitate to intervene then; however, if the complaint plainly does not disclose an offence or is abusive, quashing is still permissible.

5) Conclusion

The Bombay High Court’s decision crystallises a practical rule for the BNSS era: Section 175(3) BNSS cannot be deployed as a mechanical weapon to force FIR registration in what is essentially a recovery-driven feud, particularly where the FIR—read as a whole—fails to disclose the core ingredients of Sections 406, 409, 420 IPC and bears the hallmarks of a counterblast.

Equally, the judgment affirms two important boundaries: (a) banks/financial institutions have no blanket immunity from criminal law, but (b) criminal process cannot be permitted to deter lawful recovery backed by judicial orders. The Court’s approach—quashing at an early stage while declining CBI transfer as premature—illustrates a calibrated use of constitutional and inherent jurisdiction to prevent abuse without disabling legitimate investigation where it is genuinely warranted.