J&K High Court Refuses to Quash FIR Against Accused in ₹77-Lakh NH-40 Contract Fraud Allegation

Justice Wasim Sadiq Nargal dismissed a Section 482 petition seeking to quash FIR No. 07/2024, holding that competing factual versions over an NH-40 road contract investment cannot be resolved at the quashing stage and that the interim stay on the EOW investigation must be lifted.

The High Court of Jammu & Kashmir and Ladakh at Jammu has dismissed a petition under Section 482 of the Code of Criminal Procedure seeking to quash FIR No. 07/2024, registered at Police Station, Economic Offences Wing, Crime Branch, Jammu, for offences under Sections 420 and 120-B of the Indian Penal Code. Justice Wasim Sadiq Nargal, sitting singly, also vacated an interim stay on investigation that had been in place since 27 March 2024. The court held that the FIR disclosed a prima facie cognizable offence rooted in an alleged inducement to invest in an NH-40 road-maintenance contract, and that the petitioner's defence — premised on a separate property transaction in Gurugram — raised disputed questions of fact that only an investigation could resolve, not a Section 482 proceeding.

The Dispute Before the Court

The petitioner, Satyavir Singh Arya, aged 61 years and resident of Dwarka, South West Delhi (presently at Jorhat, Assam), sought two reliefs: quashing of FIR No. 07/2024 under Sections 420 and 120-B IPC, and quashing of a notice dated 26 February 2024 issued to him under Section 160 of the Code of Criminal Procedure by the Investigating Officer, Economic Offences Wing, Crime Branch, Jammu.

The FIR was registered on the complaint of respondent No. 2, Pranav Gandhotra of Sarwal Chowk, Jammu. The complainant alleged that the petitioner and his partner, co-accused Jagdish Nain, induced him to invest money by representing that he would be made a 10% partner in a road-maintenance contract for NH-40 (Kadappa to Kurmool section in Andhra Pradesh). According to the prosecution case, the complainant paid approximately ₹77 lakhs in total — ₹17 lakhs into the account of Jagdish Nain and ₹60 lakhs into the account of Nain Enterprises — of which only ₹17 lakhs were subsequently returned, leaving approximately ₹60 lakhs unpaid. An affidavit dated 3 March 2021 was relied upon by the complainant, in which, according to respondents, the accused had assured repayment of the borrowed amount along with profit by 30 April 2021. The petitioner was also alleged to have furnished the original documents of his property at Najafgarh, New Delhi, measuring 366 square yards, as security to induce the complainant's confidence.

The petitioner's case was materially different. He described an entirely separate transaction: a jointly proposed purchase of a half-share in a plot at Gurugram, Haryana, to be registered in the names of his wife Rajpati and respondent No. 3 Shikha Malhotra, wife of respondent No. 2. An agreement to sell dated 30 October 2020 was executed by the plot owner. The Gurugram transaction ultimately fell through and was mutually cancelled by an agreement dated 24 September 2021. The petitioner stated that ₹61.59 lakhs had been returned to respondent Nos. 2 and 3 through banking channels and cash, and that an amount of ₹1.59 lakhs was in fact recoverable from the complainant. He denied that any meeting, negotiation, or transaction had taken place at Jammu, contending that the EOW had no territorial or statutory jurisdiction over the matter.

After the petition was filed, this Court, by order dated 27 March 2024, issued notice and stayed the investigation in the impugned FIR. The matter was reserved on 21 August 2026 and pronounced on 29 August 2026.

The Legal Contest

Senior counsel for the petitioner, Ms. Anshuja Tak, advanced four principal arguments. First, that the allegations, even if taken at face value, did not disclose the ingredients of cheating under Section 420 IPC because the FIR specified no particular representation, no date or place of inducement, and no material showing dishonest intention at the inception of the transaction. Second, that a subsequent failure to repay money, without fraud from the outset, cannot constitute cheating. Third, that the allegation of criminal conspiracy under Section 120-B IPC was made mechanically and could not survive in the absence of the basic ingredients of cheating. Fourth, that the EOW Crime Branch, Jammu had no jurisdiction, since the petitioner never visited Jammu and the underlying transaction was between private individuals without the specialized character contemplated by the applicable Government notifications.

Respondent No. 1 (U.T. of Jammu & Kashmir), through the Deputy Advocate General, Mr. Pawan Dev Singh, opposed the petition on the ground that the FIR disclosed cognizable offences, that the investigation had already yielded bank statements, documents and witness statements, and that the complainant's allegation of inducement and non-payment could not be resolved without factual inquiry. On jurisdiction, the State relied upon S.O. 232 dated 9 May 2022, contending that since the alleged amount exceeded ₹20 lakhs and the transactions had an inter-State character, the EOW was competent to investigate.

Counsel for respondent Nos. 2 and 3, Mr. Mandeep Singh, advanced a sharper factual counter. He argued that the petitioner was deliberately conflating two entirely separate transactions. The Gurugram plot transaction, according to the respondents, was an independent arrangement which was separately cancelled and in which the amounts paid were returned by M/s Akash Ganga Infrasolutions LLP under the agreement dated 24 September 2021. The NH-40 investment was a distinct transaction in which ₹77 lakhs were invested and only ₹17 lakhs returned. Several of the bank transfers relied upon by the petitioner were, according to respondents, payments made by co-accused Jagdish Nain or by entities unrelated to respondent No. 2's investment in the contract. There was also no contractual dispute pending at Delhi between the petitioner and respondent Nos. 2 and 3; any Delhi proceedings involved only the petitioner and co-accused Jagdish Nain.

How the Bench Reasoned

Justice Nargal framed two discrete questions: whether the FIR prima facie disclosed a cognizable offence, and whether the circumstances warranted interference under Section 482 CrPC.

On the first question, the court examined the FIR alongside the status report and found that the complainant's allegations were not confined to a mere contractual failure. The case, as reflected in the prosecution material, was that the complainant was induced to part with money pursuant to a specific representation about the NH-40 contract, that the petitioner and co-accused were allegedly involved in a concerted design, and that the promised partnership arrangement never materialised while the invested amount largely remained unpaid. Taken at face value, these allegations were sufficient to require investigation into the circumstances of the payment, the representations made and the role attributed to the accused.

The court found itself confronted with two competing factual versions: the petitioner's case that the documents relating to the Gurugram transaction demonstrated substantial repayment, and the complainant's position that those transactions were irrelevant to the NH-40 investment and had been relied upon to obscure the true state of accounts. To determine which version was correct would require comparative examination of agreements, bank records and the 3 March 2021 affidavit — precisely the kind of evidentiary assessment that Section 482 proceedings do not permit.

The court drew on the seven categories set out by the Supreme Court in State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, and held that the present case did not fall within any of them. The FIR was not bereft of a factual foundation; the allegations were not absurd or inherently improbable; and there was no express legal bar to investigation. The court also cited Dineshbhai Chandubhai Patel v. State of Gujarat, (2018) 3 SCC 104, for the proposition that at the stage of examining an FIR, the High Court cannot act as an investigating agency, cannot appreciate evidence, and cannot draw its own inferences from material that is itself disputed by the parties.

On the civil-versus-criminal contention, the court held that a transaction may have civil consequences and yet, depending on the circumstances at the inception, also disclose the ingredients of a criminal offence. The relevant question is not merely the nature of the underlying transaction but whether the allegations disclose the ingredients of the offence alleged. The allegations of inducement, substantial payment pursuant to that inducement, the promised 10% partnership, and subsequent non-payment, taken cumulatively, disclosed a prima facie case warranting investigation.

The jurisdictional challenge fared no better. The court noted that the respondents had placed a different factual position before it and that the status report referred to transactions the investigating agency considered relevant. Whether the requisite territorial or statutory nexus under S.O. 232 of 2022 was ultimately established was a matter to be examined on the basis of the material collected during investigation. The court declined to resolve this jurisdictional question on the basis of pleadings alone.

On the second question, the court surveyed the Supreme Court's treatment of Section 482 jurisdiction through Emperor v. Khwaja Nazir Ahmad, AIR 1945 PC 18, R.P. Kapur v. State of Punjab, AIR 1960 SC 866, State of Orissa v. Saroj Kumar Sahoo, (2005) 13 SCC 540, and most directly, M/s Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra, (2021) 19 SCC 401. From Neeharika Infrastructure, the court extracted the principle that a stay of investigation cannot be granted routinely, casually or mechanically, and that such an extraordinary measure is confined to the rarest of rare cases where no cognizable offence is disclosed at all.

The court also cited the Supreme Court's decision in Siddharth Mukesh Bhandari v. State of Gujarat, Criminal Appeal No. 1044 of 2022, decided on 2 August 2022, which reiterated that a stay of investigation under Section 482 can be granted only in the rarest of rare cases, and State of Odisha v. Pratima Mohanty & Ors., Criminal Appeal Nos. 1455–1456 of 2021, decided on 11 December 2021, which cautioned against conducting what the Supreme Court described as a “mini-trial” at the quashing stage.

Justice Nargal applied these authorities to the facts before him and concluded that what the petitioner was inviting the court to do was precisely a mini-trial: to compare the Gurugram agreements with the NH-40 allegations, examine the bank transfers, and determine whether the payments reflected in the petitioner's documents constituted repayment of the amount forming the subject matter of the FIR. That exercise — travelling beyond a plain reading of the FIR — was impermissible at the investigation stage.

The court found additional significance in the fact that by the time of the interim order in March 2024, the investigation had already progressed: bank statements had been analysed, witness statements recorded, and relevant records taken into possession. Permitting the investigation to proceed would enable the agency to test the competing versions, not to pursue a case that was ex facie non-criminal. The court also drew upon a coordinate bench decision in Khursheed Ahmad Mahajan & Anr. v. Government of J&K & Ors., CRM(M) No. 115/2022, decided on 20 March 2025, where an FIR under Sections 420 and 120-B IPC had similarly been declined quashing on the ground that disputed facts required a full-fledged trial rather than a Section 482 assessment.

The court synthesised the applicable body of precedent into three interlocking propositions: investigation is the statutory domain of the police; Section 482 jurisdiction extends only to a prima facie examination of the FIR and does not permit weighing rival documents or assessing probabilities; and an interim stay of investigation is an extraordinary measure, never to be granted as a matter of course. The petitioner's case rested entirely on a factual dispute about the accuracy and relevance of the underlying transactions, placing it well outside the rarest of rare category.

Outcome

Both questions were answered against the petitioner. The court held that FIR No. 07/2024 disclosed prima facie cognizable offences and that no exceptional circumstance warranting interference under Section 482 CrPC had been demonstrated. The petition was accordingly dismissed.

The interim order dated 27 March 2024 staying the investigation in FIR No. 07/2024 registered at Police Station, Economic Offences Wing, Crime Branch, Jammu stands vacated. The investigating agency is at liberty to proceed with and conclude the investigation in accordance with law, expeditiously.

The court explicitly clarified that its observations are confined to the Section 482 petition and shall not be construed as an expression of opinion on the merits of the allegations, the petitioner's defence, or the evidentiary value of the material relied upon by either side. The EOW is directed to undertake the investigation independently, fairly and strictly in accordance with law.