FIR Filed With "Oblique Motive” To Circumvent Arbitral Award: J&K&L High Court Quashes FIR In Contract Dispute

The Jammu & Kashmir and Ladakh High Court quashed an FIR against a company and its director in a government contract dispute, holding that the prosecution was “nothing but an abuse of process of law” and aimed at creating a defence to an arbitral award passed against the department.

A bench of Justice Sanjay Dhar noted that the letter at the heart of the controversy was issued in October 2014 and had been part of the arbitration proceedings, with the department responding to it before the Arbitral Tribunal in 2017. The tribunal, after deliberating on its legality, delivered an award in March 2019.

However, the FIR was lodged only in 2023, nine years later, without any explanation, despite the department's continuous knowledge of the letter's existence.

The court found the delay “unexplained and deliberate,” holding that the department's action was an “oblique motive” to circumvent the arbitral award and pending Section 34 challenge.

Senior Advocates Z. A. Shah, Syed Faisal Qadiri and Advocate Arif Sikandar Mir appearing for the petitioners, argued that the FIR was nothing but a ploy by the department to wriggle out of the arbitral award. They submitted that the issues raised in the FIR had already been adjudicated upon by the Arbitral Tribunal, and that the continuation of criminal proceedings would amount to the investigating agency sitting in appeal over the arbitral award.

It was further contended that the letter of 18 October 2014 was fully within the knowledge of the department since 2015, yet no complaint was lodged for nine years. The counsels stressed that the FIR was a clear abuse of process, aimed only at scuttling the arbitration challenge pending under Section 34 of the Arbitration and Conciliation Act.

On the other hand, Senior AAG Mohsin Qadiri, representing the respondents, maintained that the FIR disclosed serious allegations of criminal misconduct and conspiracy. He argued that petitioner Raman Puri, the then Chief Engineer, had no authority to alter the terms of the contract without the approval of the competent authority and that by doing so, he conferred undue benefit upon the company, causing loss to the public exchequer.

He further submitted that criminal liability operates in a separate domain from civil liability, and arbitration proceedings cannot shield the petitioners from investigation when cognizable offences are made out.

The dispute stemmed from a letter dated 18 October 2014, whose validity and effect were being contested. The State alleged that the petitioner-director had no authority to vary the terms of the contract without higher approval. The company, however, maintained that the Chief Engineer, as the authorised signatory, had full authority to execute the letter.

Relying on Prakash Aggarwal v. Ganesh Benzoplast Ltd. (2023), the court ruled that the dispute was “purely civil in nature having no criminal texture” and that continuing the criminal proceedings would amount to permitting the investigating agency “to sit in appeal” over the arbitral award.

Significantly, the Court noted that the same issues were already adjudicated in arbitration, resulting in an award, and are now pending challenge under Section 34 of the Arbitration and Conciliation Act before the District Judge.

It added that allowing the criminal investigation to proceed, the Court held, would amount to “permitting the Investigating Agency to sit in appeal over the findings of the Arbitral Tribunal,” which is impermissible in law.

“In both eventualities, whether the arbitral proceedings succeed or fail, no offence can be stated to have been made out against the petitioners,” the Court ruled, quashing the FIR in its entirety.

APPEARANCE:

Case-Title: RAMAN PURI HINDUSTAN CONSTRUCTION COMPANY LTD vs SENIOR SUPERINTENDENT OF POLICE AND OTHERS & Anr, 2025

Mr. Z. A. Shah, Sr. Advocate, with Mr. Arif Sikandar, Advocate

Mr. Syed Faisal Qadiri, Sr. Advocate, with

Mr. Salih Pirzada, Advocate for Petitioner

Mohsin Qadiri, Sr. AAG, with Ms. Nadiya Abdullah, Assisting Counsel, vice for Respondents.

Click Here To Read/Download Order