Source: Supreme Court  

Why in News? 

Recently, Justices Bela M. Trivedi and Prasanna B. Varale  held that the High Court erred in quashing the FIR, emphasizing that allegations of routing monetary transactions through shell companies indicate a prima facie case of economic offence warranting investigation. 

• The Supreme Court held this in the matter of Dinesh Sharma v. Emgee Cables and Communication Ltd. & Anr. (2025). 

What was the Background of Dinesh Sharma v. Emgee Cables and Communication Ltd. & Anr. (2025) Case? 

• Dinesh Sharma was the authorized representative of BLS Polymers Ltd., a company engaged in manufacturing and supplying plastic compounds used in making wires and cables. 
• EMGEE Cables and Communications Ltd. was in the business of manufacturing copper alloys, wires, and conductors. 
• In 2012, EMGEE Cables, through its representatives, approached Dinesh Sharma's company for supply of PVC. 
• The respondents allegedly portrayed a positive financial position of their company, which led the appellant to supply goods on credit basis, with transactions continuing from 2012 to 2017. 
• Between April 2017 and July 2018, the appellant supplied goods worth Rs. 2,20,82,000/- against purchase orders signed by Respondent No. 3, who was the technical director. 
• The Respondent Company failed to make timely payments for the goods supplied. 
• Due to financial losses from overdue payments, the appellant repeatedly reminded the company directors to clear the dues, which led one director to issue three cheques against the due payment. 
• The first cheque presented by the appellant was dishonoured by the bank. 
• On April 2, 2018, the appellant visited the office of Respondent No. 1 and found it closed. His attempts to contact company representatives were initially unsuccessful. 
• The appellant subsequently filed FIR No. 218/2018 at Police Station Chomu, Jaipur, for offences punishable under Sections 420, 406, and 120B of the Indian Penal Code. 
• The appellant also sent legal notices under Section 138 of the Negotiable Instruments Act, 1881 and Form 4 Notices under Rule 5 of Insolvency and Bankruptcy Rules demanding repayment. 
• On 2nd May, 2018, Dena Bank filed separate FIR No. 135/2018 against Respondent No. 1 and its directors for offences under Sections 420, 406, 467, 468, 471, and 120B of IPC, alleging embezzlement and fraudulent activities. 
• Respondent No. 2 filed a petition under Section 482 of CrPC before the High Court seeking quashing of FIR No. 218/2018. 
• The High Court quashed the FIR, considering the matter purely civil in nature related to business transactions. 

What were the Court’s Observations? 

• The Supreme Court held that the High Court committed a serious error in quashing the proceedings, as it failed to appreciate that the creation of shell companies and circulation of funds through them indicated a clear intention to deceive. 
• The Court observed that when material evidence regarding criminal conspiracy was brought to the High Court's notice, it was necessary to allow the investigating agency to thoroughly investigate before the truth could be established through a proper trial. 
• The Supreme Court emphasized that economic offences constitute a class apart, affecting the economy as a whole and posing serious threats to the financial health of the country, and therefore should not be viewed lightly. 
• The Court concluded that while High Courts have wide powers under Section 482 CrPC, these powers should be exercised sparingly, and the High Court was not justified in quashing the FIR at the nascent stage of investigation. 
• The Court concluded that the High Court was not justified in exercising its jurisdiction under Section 482 of CrPC to quash the FIR, particularly at the nascent stage of investigation. 

What is Section 528 of Bharatiya Nagarik Suraksha Sanhita (BNSS)? 

• Section 528 of BNSS replaces the former Section 482 of Code of Criminal Procedure, preserving the High Court's inherent powers to prevent abuse of court process and secure justice. 
• This provision does not confer new powers but merely recognizes the High Court's pre-existing inherent powers to make necessary orders to give effect to any order under the Code. 
• Inherent powers under Section 528 cannot be invoked to quash police investigations following a cognizable FIR, interfere with statutory investigation rights, or question the reliability of FIR allegations. 
• Case law establishes that these powers can be exercised to quash proceedings where there is a legal bar, where allegations don't constitute an offence, or where evidence fails to support charges. 
• The Supreme Court cautions against entertaining Section 528 petitions if alternative remedies haven't been pursued and prohibits second petitions on grounds available when filing the first petition. 
• As a saving provision, Section 528 preserves the High Court's discretionary power to intervene in exceptional circumstances when ordinary remedies are inadequate for complete justice. 
• Exercise of powers under Section 528 requires judicial restraint, particularly in cases where investigations are at nascent stages. 
• When considering such petitions, courts must balance protecting individuals from unwarranted prosecution against allowing legitimate investigation, especially for economic offences. 
• These powers can prevent abuse where criminal proceedings are initiated with mala fide intentions or ulterior motives stemming from private grudges. 
• Courts are generally more cautious about quashing proceedings in economic offence cases under Section 528, recognizing their distinct nature and wider impact on the financial system.