Karnataka High Court
M Divyalakshmi vs Station House Officer on 5 March, 2022
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 5TH DAY OF MARCH, 2022
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No.5788 OF 2021
BETWEEN
1. M. DIVYALAKSHMI
W/O. MADAN KUMAR K
AGED ABOUT 36 YEARS
NO.104, ELEGANCE APARTMENT
LALBAGH, SIDDAPURA
BENGALURU - 560 027
KARNATAKA
2. MADAN KUMAR K
S/O. A. S. KANNAN
AGED ABOUT 46 YEARS
NO.104, ELEGANCE APARTMENT
LALBAGH, SIDDAPURA
BENGALURU - 560 027
KARNATAKA
... PETITIONERS
[BY SRI. S. KALYAN BASAVARAJ, ADV.]
AND
1. STATION HOUSE OFFICER
BY SIDDAPURA POLICE STATION
JAYANAGAR SUB DIVISION
BENGALURU CITY
REP. BY SPP
HIGH COURT OF KARNATAKA
BENGALURU - 560 001
2
2. CHAITRA B. R.
D/O. RAVI KUMAR B. N.
AGED ABOUT 36 YEARS
NO.406, ELEGANCE APARTMENT
LALBAGH, SIDDAPURA
BENGALURU - 560 011
KARNATAKA
... RESPONDENTS
[BY SMT. YASHODA K.P., HCGP FOR R1;
SRI. K.NARASIMHA MURTHY, ADV. FOR R2]
THIS CRIMINAL PETITION IS FILED UNDER SECTION
482 OF CR.P.C., PRAYING TO QUASH THE FIR FIELD IN
CR.NO.58/2021 BY THE 1ST RESPONDENT ON THE FILE
OF THE 4TH A.C.M.M., COURT, NRUPATUNGA ROAD,
BENGALURU CTIY IN RESPECT OF THE OFFENCE
ALLEGEDLY COMMITTED BY P/U/S 406, 420, 427, 34 OF
IPC.
THIS CRIMINAL PETITION COMING ON FOR
ADMISSION THIS DAY, THE COURT MADE THE
FOLLOWING:
ORDER
The petitioners are before this Court calling in question the proceedings in Crime No.58/2021 pending before the 4th Additional Chief Metropolitan Magistrate, Nrupatunga Road, Bangalore registered for offences punishable under Sections 406, 420 and 427 read with Section 34 of IPC.
32. Heard Sri. S.Kalyan Basavaraj, learned counsel appearing for the petitioners, Smt. Yashoda K.P., learned HCGP for respondent No.1 and Sri.K. Narasimha Murthy, learned counsel for respondent No.2.
3. Brief facts leading to the filing of the present petition, as borne out from the pleadings, are as follows:
The petitioners claim to be owners of a property in an apartment complex in the name and style of "Elegance Lalbagh View", at Ward No.144 of Siddapura, Bangalore. Intending to sell the property the petitioners enter into an agreement of sale which was also registered before the competent Sub-Registrar, but without possession. The agreement of sale did not fructify into a sale deed. The 1st petitioner on 06.04.2021 without concluding the contract by entering into sale deed, repudiated the contract which was the agreement of sale and sought for cancellation of deed of 4 agreement of sale. It is the case of the petitioners that the 2nd respondent took illegal possession of the property due to which the petitioners had to knock the doors of the civil Court in O.S.No.3423 of 2021 under Order VII Rule 1 read with Section 6 of the Specific Relief Act. The suit is pending consideration before the civil court.
4. Legal notices were caused and exchanged between the petitioners and the 2nd respondent/complainant pursuant to which the contract was repudiated. Several factors which led to repudiation of contract are also indicated in the notice or its reply. After all these exchanges between the petitioner and the 2nd respondent, the 2nd respondent/complainant registers a complaint before the jurisdictional police and a crime is registered in Crime No.58 of 2021 on 27.03.2021 for offences punishable under Sections 406, 420 and 427 read with 5 Section 34 of the IPC. On registration of the crime, the petitioners have knocked the doors of this Court calling in question the proceedings in the said crime.
5. The learned counsel appearing for the petitioners would submit that repudiation of contract cannot result in registration of crime under Sections 406 or 420 or even under Section 427 IPC. A matter which is purely civil in nature is sought to be agitated by registration of the crime is the emphatic submission of the learned counsel. On the other hand, the learned counsel representing the 2nd respondent would submit that the petitioners have cheated the complainant by not executing the sale deed after delivering possession in terms of the agreement. Therefore, it amounts to criminal breach of trust as well. He submits that it is a matter for trial in which the petitioners have to come out clean.
66. I have given my anxious consideration to the submissions made by the respective learned counsel and perused the material on record.
7. The afore-narrated facts are not in dispute.
The submission of the learned counsel for the 2nd respondent that repudiation of contract does amount to either criminal breach of trust or cheating under Section 420 IPC is unacceptable as the complaint itself narrates exchange of money with possession or otherwise all of which spring from the contract. The contract is repudiated by the petitioners. The reason for repudiation even exists in the notices exchanged between the petitioners and the complainant. The complaint insofar as it is germane is extracted hereunder for the purpose of quick reference:
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The narration in the complaint is also to the effect that it is registered for repudiation of contract. The parties to the lis are before the civil Court in the aforementioned original suit on the very subject of repudiation of contract and possession. Neither the offence under Section 406 of IPC which deals with criminal breach of trust nor Section 420 of IPC which deals with cheating, the ingredients of which are found in Section 415 of IPC are not even met remotely in the case at hand as it is a contract between the parties entering into with eyes wide open. Any further observation with regard to the contract and possession being delivered or not would be beyond the scope of the present petition as both the parties are before the civil Court on the same issue. Repudiation of contract cannot be a subject matter of crime for breach of trust or cheating. The other allegation is with regard to Section 427 IPC. Section 427 IPC also cannot be invoked in the case on hand as the very issue is again 11 before the civil Court with regard to the possession or otherwise. Therefore, none of the facts alleged by the petitioners would become an offence under Sections 406, 420 or 427 of the IPC as purely a contract is given a colour of crime. The Apex Court in the case of MITESH KUMAR J.SHA v. STATE OF KARNATAKA -
2021 SCC Online SC 976 while delineating the very issue of contractual obligations being given a colour of crime has held as follows:
"27. In order to ascertain the veracity of contentions made by the parties herein, it is imperative to firstly examine whether the relevant ingredients of offences which the appellants herein had been charged with, are prima facie made out. The relevant sections read as follows:--
"405. Criminal breach of trust-- Whoever, being in any manner entrusted with property, or with any dominion over property, dishonestly misappropriates or converts to his own use that property, or dishonestly uses or disposes of that property in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract, express or implied, which he has made touching the discharge of such 12 trust, or wilfully suffers any other person so to do, commits "criminal breach of trust".
[Explanation [1].--A person, being an employer [of an establishment whether exempted under section 17 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), or not] who deducts the employee's contribution from the wages payable to the employee for credit to a Provident Fund or Family Pension Fund established by any law for the time being in force, shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.] [Explanation 2.--A person, being an employer, who deducts the employees' contribution from the wages payable to the employee for credit to the Employees' State Insurance Fund held and administered by the Employees' State Insurance Corporation established under the Employees' State Insurance Act, 1948 (34 of 1948), shall be deemed to have been entrusted with the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act, shall be deemed to have dishonestly used the amount of the said 13 contribution in violation of a direction of law as aforesaid.]
406. Punishment for criminal breach of trust--Whoever commits criminal breach of trust shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.
419. Punishment for cheating by personation--Whoever cheats by personation shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both.
420. Cheating and dishonestly inducing delivery of property-- Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine."
28. In the instant case, the complaint levelled against the Appellants herein is one which involves commission of offences of criminal breach of trust and cheating. While a criminal breach of trust as postulated under section 405 of the Penal 14 Code, 1860, entails misappropriation or conversion of another's property for one's own use, with a dishonest intention, cheating too on the other hand as an offence defined under section 415 of the Penal Code, 1860, involves an ingredient of having a dishonest or fraudulent intention which is aimed at inducing the other party to deliver any property to a specific person. Both the sections clearly prescribed 'dishonest intention', as a pre- condition for even prima facie establishing the commission of said offences. Thus, in order to assess the relevant contentions made by the parties herein, the question whether actions of the Appellants were committed in furtherance of a dishonest or fraudulent scheme is one which requires scrutiny.
29. Coming to the facts of the case at hands, the contested contention between the parties is that the builder company had sold four excess flats beyond its share, in terms of the JDA and supplementary agreement entered into between the parties. Respondent No. 2 contends that builder company which was entitled to sell only 9 flats in its favour, has instead executed sale deed for 13 flats in total. Thus, the company simply could not have sold the flats beyond 9 flats for which it was authorized and resultantly cannot evade criminal liability on a mere premise that a civil dispute is already pending between the parties.
1530. The Appellants on the other hand contend that in terms of a subsequent MoU dated 19.02.15, it was mutually agreed between the parties, that partial payment for a loan amount borrowed by Respondent No. 2 from Religare Finvest Ltd., would be paid out from the sale proceeds of the said development project undertaken by both the parties. Pursuant to this MoU, the Appellants had agreed to get an NOC for 15 flats by making payment of Rs. 40,00,000/- for each flat.
31. The key contention, and also the central point of dispute, made by the Appellants is that, it was specifically agreed between the parties that the Appellants would be entitled to sell additional flats beyond their share, as adjustments for payment made to Religare Finvest Ltd. on behalf of Respondent No. 2. It is further contended that Respondent No. 2 had also agreed to execute a ratification deed to the JDA and GPA eventually, which would have formally authorised the Appellants to sell additional apartments.
32. Nonetheless, the ratification deed was never made and Respondent No. 2 subsequently even revoked the GPA unilaterally, contending that the terms of JDA were not followed.
33. It was only after revocation of GPA that the company filed an application for arbitration seeking interim orders to restrain the Respondent No. 2 from alienating the disputed 16 property. Simultaneously, while this dispute was pending adjudication before the arbitrator Respondent No. 2 filed a criminal complaint against the Appellants.
34. At this juncture, it further becomes pertinent to mention that eventually though both the parties partly succeeded before the arbitrator, in terms of their respective claims, the arbitrator observed that GPA indeed could not have been revoked unilaterally at the instance of Respondent No. 2. Aggrieved, Respondent No. 2 thereafter even preferred a challenge to the award passed by the arbitrator. Moreover, pending arbitration proceedings issue regarding selling of excess flats at the instance of Appellants, was also withdrawn by Respondent No. 2 seeking liberty to pursue his claim with regard to selling of four excess flats in pending civil proceedings.
35. Upon a careful assessment of such facts, by no stretch can it be concluded that the Appellants herein have deceptively or intentionally tried to sell excess flats if any, as contended by Respondent No. 2. Here, it must also be borne in mind that subsequent to the revocation of GPA, it was the Appellants herein who had first resorted to arbitration proceedings on 02.03.16 for redressal of dispute between the parties, to which Respondent No 2 had accordingly filed his statement of objections dated 09.03.16. It was only on 29.03.16 that Respondent No. 17 2 had filed the FIR in question bearing Crime No. 185/2016 against the Appellants. Moreover, it was Respondent No. 2 who had withdrawn his prayer with respect to selling of four excess flats by the Appellants, only to pursue the same in civil proceedings.
36. At this stage, by placing reliance on the judgment of this Court in Priti Saraf v. State of NCT of Delhi (Supra) and Sri Krishna Agencies v. State of Andhra Pradesh (Supra), it has been further submitted by Respondent No. 2 that Appellants cannot evade a criminal case by merely contending that the person whose property has been sold has filed a civil suit for recovery of the property, or that the dispute had been referred to arbitration.
37. Although, there is perhaps not even an iota of doubt that a singular factual premise can give rise to a dispute which is both, of a civil as well as criminal nature, each of which could be pursued regardless of the other. In the instant case, the actual question which requires consideration is not whether a criminal case could be pursued in the presence of a civil suit, but whether the relevant ingredients for a criminal case are even prima facie made out. Relying on the facts as discussed in previous paragraphs, clearly no cogent case regarding a criminal breach of trust or cheating is made out.
38. The dispute between the parties, could at best be termed as one involving a 18 mere breach of contract. Now, whether and what, is the difference between a mere breach of contract and an offence of cheating has been discussed in the ensuing paragraphs.
Whether sale of excess flats even if made amounts to a mere breach of contract?
39. This Court in the case of Hridaya Ranjan Prasad Verma v. State of Bihar6, has observed:--
"15. ....that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise..."
40. Applying this dictum to the instant factual matrix where the key ingredient of having a dishonest or fraudulent intent under sections 405, 419 and 420 is not made out, the case at hand, 19 in our considered opinion is a suitable case necessitating intervention of this Court.
Whether the dispute is one of entirely civil nature and therefore liable to be quashed?
41. Having considered the relevant arguments of the parties and decisions of this court we are of the considered view that existence of dishonest or fraudulent intention has not been made out against the Appellants. Though the instant dispute certainly involves determination of issues which are of civil nature, pursuant to which Respondent No. 2 has even instituted multiple civil suits, one can by no means stretch the dispute to an extent, so as to impart it a criminal colour. As has been rightly emphasised upon by this court, by way of an observation rendered in the case of Indian Oil Corporation v. NEPC India Ltd.7, as under:--
"14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law."
42. It was also observed:--
20"13. While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors....There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure though criminal prosecution should be deprecated and discouraged."
43. On an earlier occasion, in case of G. Sagar Suri v. State of UP8, this Court has also observed:--
"8. Jurisdiction under Section 482 of the Code has to be exercised with a great care. In exercise of its jurisdiction High Court is not to examine the matter superficially. It is to be seen if a matter, which is essentially of civil nature, has been given a cloak of criminal offence. Criminal proceedings are not a short cut of other remedies available in law. Before issuing process a criminal court has to exercise a great deal of caution. For the accused it is a serious matter. This Court has laid certain principles on the basis of which High Court is to exercise its jurisdiction under Section 482 of the Code. Jurisdiction under this Section has to be 21 exercised to prevent abuse of the process of any court or otherwise to secure the ends of justice."
44. Furthermore, in the landmark judgment of State of Haryana v. Ch. Bhajan Lal9 regarding exercise of inherent powers under section 482 of CrPC, this Court has laid down following categories of instances wherein inherent powers of the can be exercised in order to secure the ends of justice. These are:--
"(1) where the allegations made in the First Information Report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused;
(2) where the allegations in the First Information Report and other materials, if any, accompanying the F.I.R. do not disclose a cognizable offence, justifying an investigation by police officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code;
(3) where the uncontroverted allegations made in the FIR or 'complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused;22
(4) where the allegations in the FIR do not constitute a cognizable offence but constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code;
(5) where the allegations made in the FIR or complaint are so absurd and inherently improbable on the basis of which no prudent person can ever reach a just conclusion that there is sufficient ground for proceeding against the accused;
(6) where there is an express legal bar engrafted in any of the provisions of the Code or the concerned Act (under which a criminal proceeding is instituted) to the institution and continuance of the proceedings and/or where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party;
(7) where a criminal proceeding is manifestly attended with mala fide and/or where the proceeding is maliciously instituted with an ulterior motive for wreaking vengeance on the accused and with a view to spite him due to private and personal grudge."
45. Applying this dictum to the instant factual matrix, it can be safely concluded that the present case clearly 23 falls within the ambit of first, third and fifth category of the seven categories enlisted in the above said judgment. The case therefore warrants intervention by this Court, and the High Court has erred in dismissing the petition filed by the Appellants under section 482 CrPC. We find that there has been attempt to stretch the contours of a civil dispute and thereby essentially impart a criminal color to it.
46. Recently, this Court in case of Randheer Singh v. The State of U.P.10, has again reiterated the long standing principle that criminal proceedings must not be used as instruments of harassment. The court observed as under:--
"33. ....There can be no doubt that jurisdiction under Section 482 of the Cr.P.C. should be used sparingly for the purpose of preventing abuse of the process of any court or otherwise to secure the ends of justice. Whether a complaint discloses criminal offence or not depends on the nature of the allegation and whether the essential ingredients of a criminal offence are present or not has to be judged by the High Court. There can be no doubt that a complaint disclosing civil transactions may also have a criminal texture. The High Court has, however, to see whether the dispute of a civil nature has been given colour of criminal offence. In such a situation, the High Court should not hesitate to quash the criminal 24 proceedings as held by this Court in Paramjeet Batra (supra) extracted above."
47. Moreover, this Court has at innumerable instances expressed its disapproval for imparting criminal color to a civil dispute, made merely to take advantage of a relatively quick relief granted in a criminal case in contrast to a civil dispute. Such an exercise is nothing but an abuse of the process of law which must be discouraged in its entirety."
The Apex Court has considered the entire spectrum of law in this regard including interference at the hands of this Court under Section 482 of the Cr.P.C.
Therefore, permitting any further proceedings to continue against the petitioners would become an abuse of the process of law and result in miscarriage of justice.
8. For the aforesaid reasons, the following:
ORDER i. Criminal Petition is allowed.
ii. FIR in Crime No.58/2021 filed by the first respondent and pending before the 4 th A.C.M.M., Court, Nrupatunga Road, Bengaluru City stands quashed.25
iii. The observations made in the course of this order is only for the purpose of consideration of the case of the petitioners under Section 482 of Cr.P.C., and the same shall not bind or influence any other proceedings pending between the parties.
Sd/-
JUDGE KG