Karnataka High Court
Patel Engineering Limited vs The State Of Karnataka on 6 August, 2024
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 23.07.2024
Pronounced on : 06.08.2024
R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 06TH DAY OF AUGUST, 2024
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CRIMINAL PETITION No. 6513 OF 2024
BETWEEN:
1. PATEL ENGINEERING LIMITED
A 'COMPANY' WITHIN THE MEANING OF
THE COMPANIES ACT, 2013
HAVING ITS REGISTERED ADDRESS AT:
PATEL ESTATES V ROAD
JOGESHWARI (WEST) MUMBAI - 400 102
REPRESENTED BY ITS
AUTHORIZED SIGNATORY
SHRI BABASAHEB MANYASAHEB
GHORPADE
2. SHRI RUPEN PATEL
S/O PRAVINBHAI PATEL
MANAGING DIRECTOR
PATEL ENGINEERING LIMITED
AGED ABOUT 58 YEARS,
HAVING OFFICE AT PATEL ESTATES V ROAD
JOGESHWARI (WEST)
MUMBAI - 400 102.
3. SMT. KAVITA S.SHIRVAIKAR
(NAME INCORRECTLY STATED IN FIR AS
'KAVITHA SHIRVAIKAR')
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W/O SHRI SANJIV SHIRVAIKAR
DIRECTOR AND CHIEF FINANCIAL OFFICER
PATEL ENGINEERING LIMITED
AGED ABOUT 53 YEARS,
HAVING OFFICE AT PATEL ESTAES V ROAD
JOGESHWARI (WEST)
MUMBAI - 400 102.
4. SHRI RAHUL A. AGARWAL
S/O SHRI ARUN KUMAR AGARWAL
SENIOR GENERAL MANAGER- FINANCE
PATEL ENGINEERING LIMITED
AGED ABOUT 42 YEARS
HAVING OFFICE AT PATEL ESTAES V ROAD
JOGESHWARI (WEST)
MUMBAI - 400 102.
5. SHRI AMOL S. WARKE
S/O SURESH WARKE
JOINT GENERAL MANAGER-FINANCE
PATEL ENGINEERING LIMITED
AGED ABOUT 44 YEARS
HAVING OFFICE AT: PATEL ESTAES V ROAD
JOGESHWARI (WEST)
MUMBAI - 400 102.
6. SHRI SANDEEP S. SHETTY
S/O SHRI SEENA SHETTY
CONSULTANT FOR
PATEL ENGINEERING LIMITED
AGED ABOUT 51 YEARS
HAVING OFFICE AT PATEL ESTAES V ROAD
JOGESHWARI (WEST)
MUMBAI - 400 102.
... PETITIONERS
(BY SRI K.G.RAGHAVAN, SR.ADVOCATE A/W
SRI MANU P.KULKARNI, ADVOCATE)
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AND:
1. THE STATE OF KARNATAKA
THROUGH HEBBAGODI POLICE STATION
NEAR HEBBAGODI BUS STOP
HEBBAGODI TOWN, ANEKAL TALUK
BENGALURU - 562 125
REPRESENTED BY
STATE PUBLIC PROSECUTOR
HIGH COURT OF KARNATAKA
BENGALURU - 560 001.
2. SHRI SALMAN KHAN
S/O REHAMAN KHAN
AGED ABOUT 28 YEARS,
RESIDING AT KAVERIYAPPA LAYOUT
MILLERS TANK BUND ROAD
BENGALURU - 560 052.
... RESPONDENTS
(BY SRI B.N.JAGADEESH, ADDL.SPP FOR R-1;
SRI KIRAN S.JAVALI, SR.ADVOCATE A/W
SRI GAURAV N., ADVOCATE FOR R-2)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 482 OF
CR.P.C., PRAYING TO A. QUASH THE FIR NO.422/2024 DATED
26.06.2024 REGISTERED BY HEBBAGODI POLICE STATION,
ANEKAL SUB-DIVISION BENGLAURU DISTRICT (ANNEXURE A) IPC
1860 (U/S.406, 420, 506(2) IN 2nd ADDITIONAL CIVIL JUDGE (Jr.
Dn.) AND JMFC COURT ANEKAL BENGALURU RURAL DISTRICT; B.
QUASH THE COMPLIANT DATED 26.06.2024 FILED BY THE
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RESPONDENT NO.2 BEFORE THE RESPONDENT NO.1 POLICE
(ANNEXURE B).
THIS CRIMINAL PETITION HAVING BEEN HEARD AND
RESERVED FOR ORDERS ON 23.07.2024, COMING ON FOR
PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
(PER: THE HON'BLE MR JUSTICE M.NAGAPRASANNA)
The petitioners/accused 1 to 6 are before this Court calling in
question a crime in Crime No.422 of 2024 registered for offences
punishable under Sections 406, 420 and 506(2) of the IPC pending
before the II Additional Civil Judge (Junior Division) and JMFC,
Anekal, Bengaluru.
2. Facts, in brief, germane are as follows:-
1st petitioner/Patel Engineering Company ('the Company' for
short) is a Company incorporated under the provisions of the
Companies Act, 2013 and is said to be engaged in construction of
dams, bridges, tunnels, roads, piling works, industrial structures,
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real estate and is said to be a public limited company in the
Bombay Stock Exchange and the National Stock Exchange. The 2nd
respondent is the complainant. The Company and the 2nd
petitioner/the Chairman and Managing Director of the Company
who is now said to be no more, owned certain properties measuring
about 103 acres in various survey numbers in Hulimangala,
Thirupalya and Maragondanahalli, Jigani Hobli, Anekal Taluk,
Bengaluru ('the aggregate property') and desirous of developing
into an integrated township on the property had applied to the
State Government seeking requisite permission to develop the
lands as integrated township in the name and style of 'Neotown'.
3. One Gulam Mustafa, of Gulam Mustafa Enterprises Pvt.
Ltd., approached petitioners 1 and 2 being desirous of developing
the said aggregate property. In terms of talks of the 2nd petitioner
indulged with Gulam Mustafa, they enter into a Memorandum of
Understanding ('MoU' for short) on 15-03-2016. The MoU was for
the purpose of development of the property as noticed hereinabove.
Post execution of MoU, the parties enter into sale deed and Joint
Development Agreements ('JDAs' for short) with regard to various
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packets or parcels of lands in the property. Of the agreements so
entered, the subject lis concerns two particular agreements in
Sy.No.30/1 measuring 32 guntas, Sy.No.30/3 measuring 33
guntas, Sy.No.31 measuring 1 acre 6 guntas, Sy.No.43 measuring
1 acre 32 guntas, Sy.No.44/6 measuring 35 guntas of
Maragondanalli Village, Jigani Hobli ('the Schedule property') and
Sy.No.352 measuring 4 acres 38 guntas situated at Hullimangala
Village, Jigani Hobli, Anekal Taluk, Bengaluru ('Townsville
property').
4. On 21-11-2017 the Company and Gulam Mustafa Infinite
Dwelling (India) Private Limited ('GM infinite') took finance
assistance from State Bank of India for sanction of loan facility. The
Company which was the legal owner of the land was insisted by the
Bank to give a corporate guarantee towards the finance availed of
by the other parties to the JDA. Based on the representations of all
the parties, the Company agreed to give a corporate guarantee.
The corporate guarantee was submitted by the Company to the
Bank on 06-07-2018. After about 5 years of the JDA availing of the
loan, the GM Infinite is said to have approached the Company
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expressing its intention to purchase the schedule property through
its group Company Azeem Infinite Dwelling (India) Private Limited
('Azeem Infinite' for short). These are the broad focus of the
agreements that are entered into between the parties.
5. On 08-12-2022 another agreement or a term sheet comes
to be signed for a buyout of certain packets of property as
aforesaid. Since the Company had mortgaged the properties to
State Bank of India and the loan became sticky, the Bank initiated
SARFAESI proceedings in respect of the said property and sought to
invoke the guarantee given by the Company to the full extent of
` 64,08,12,642/-. Since several disputes were impending between
the parties, the Company sought to enforce the arbitration clause in
the agreement by filing a petition under Section 9 of the Arbitration
and Conciliation Act before the Commercial Court at Bengaluru in
Commercial A.A.No.353 of 2023. Simultaneously the Company also
filed a Commercial Original Suit in O.S.No.1159 of 2023 before the
Commercial Court against State Bank of India seeking a declaration
that no liability accrues upon the Company under a corporate
guarantee and sought to determine the liability of the Company
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under the guarantee. The said suit is pending before the concerned
Court. The State Bank of India filed an insolvency petition invoking
Section 7 of the Insolvency and Bankruptcy Code, 2016 against the
Company/1st petitioner before the NCLT, Mumbai. The said
proceedings are pending. During the pendency of all these
proceedings comes the impugned crime being registered by the 2nd
respondent/complainant.
6. It is the averment in the petition that in the first week of
June 2024 meetings were held between the 2nd petitioner, Mr. Yusuf
Shareef and Mr. Gulam Mustafa and certain agreements were
drawn between the parties. Alleging breach of those agreements
and coercion in signing those agreements, the complainant
registered the impugned complaint for offences punishable under
Sections 406 and 420 of the IPC. Immediately on registration of
the complaint, the Company and its office bearers are before this
Court in the subject petition. During the subsistence of the petition,
it appears that the 2nd petitioner dies. Therefore, the signatory to all
the documents i.e., the 2nd petitioner is no more.
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7. Heard Sri K.G. Raghavan, learned senior counsel appearing
for the petitioners, Sri B.N. Jagadeesh, learned Additional Special
Public Prosecutor for respondent No.1 and Sri Kiran S.Javali,
learned senior counsel appearing for respondent No.2.
8. The learned senior counsel Sri K.G. Raghavan appearing
for the petitioners would vehemently contend that a pure
commercial transaction between the two is projected to be a crime
by setting the criminal law into motion. The facts of the case would
not attract even an iota of ingredients of Sections 406 and 420 of
the IPC. He would submit that such commercial transactions which
have been rendered a colour of crime should not be permitted to be
continued, as it would become abuse of the process of law. He
would further contend that crux of the complaint is that of `36/-
crores that the complainant is said to have handed over pursuant to
an agreement which was signed with eyes wide open and, therefore
he cannot wriggle out of the agreement, that too by registration of
the complaint. He would seek allowing of the petition.
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9. Per contra, the learned senior counsel Sri Kiran S.Javali
appearing for the 2nd respondent/complainant would vehemently
refute the submissions to contend that it is not purely a commercial
transaction but breach of trust. `36/- crores are handed over to
the Company. The Complainant did not know that he had to fulfill
the corporate guarantee or discharge the guarantee with the Bank.
It is his submission that the complainant is an illiterate; he does not
know what is in the agreement that he was forced to sign it.
Therefore, it is a matter of trial for the petitioners to come out
clean. It is his submission that given fact may give rise both civil
and criminal laws. Merely because the action appears to be civil,
the criminal proceedings should not be quashed. Both the learned
senior counsel representing the petitioners and the respondents
have relied on several judgments which would all bear
consideration in the course of the order qua their relevance.
10. I have given my anxious consideration to the
submissions made by the respective learned counsel and have
perused the material on record.
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11. The afore-narrated facts are a matter of record, and too
intricate they are. The agreements between the parties, the
proceedings before the civil Court, commercial Court and their
pendency are all a matter of record. A complaint comes to be
registered by the 2nd respondent/complainant on 26-06-2024
alleging all the offences against the 2nd petitioner one Rupen Patel
who is no more today. Since the entire issue now springs from the
complaint, I deem it appropriate to notice it. It reads as follows:
"ZUMERA
CONSTRUCTION PRIVATE LIMITED
TO: Date: 26-06-2024
Hebbagodi Police Station,
Electronicy City,
Bommasandra,
Bengaluru,
Karnataka 560 009.
FROM:
Mr.Salman Khan,
Authorized Signatory of M/s Zumera Construction (P) Ltd.
Aged about 28 years,
Having office at No.22/1,
Kaveriappa Lay-out, Millers Tank Bund Road,
Bangalore-560052
Mob No:9845956999
Sub: Complaint against Patel Engineering Limited, Mr.
Rupen Patel, Kavitha Shirvaikar, Rahul Agarwal,
Amol Warke, Sandeep Shetty, Tamoojith (ICICI
Bank Chief Manager) and their 17 banks
consortium lenders for criminal conspiracy and
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cheating to a sum of Rs.36,00,00,000/- (Rupees
Thirty Six Crores only) in the form of sale
consideration inducing us to buy the property
bearing Sy.No.43, 35, 30/1, 30/3 & 31 measuring
5 acres 18 guntas of Maragondanahalli and
Thirupalya village, Jigani Hobli, Anekal Taluk and
after full payment the aforesaid persons did not
come forward to execute sale deed reg...
Respected Sir,
With reference to the above subject matter, we would like
to submit your kind notice that, we have submitted a
representation to the ICICI Bank and Mr. Rupen Patel on 04-07-
2023 expressing our interest to purchase the subject property
for a total sale consideration of Rs.36/- crores along with EMD
(Earned Money Deposit) of Rs.3,60,00,000/- (Rupees Three
Crore Sixty Lakhs Only) deposited on the very same day and
after detailed discussions held between me and Mr. Rupen Patel
he agreed to sell the subject property for a sum of Rs.36 crores
and simultaneously requested to the ICICI Bank vide his letter
dated 28-07-2023 for issuance of NOC for sale of the subject
property in favour of us.
Simultaneously, the ICICI Bank issued a letter to Zumera
Construction Pvt. Ltd. and Mr. Rupen Patel who is the director
Patel engineering Limited stating that the Bank will issue a NOC
subject to deposit of the total sale consideration of
Rs.36,00,00,000/- (Rupees Thirty Six Crores only) in the escrow
account No.039305006415 maintained with ICICI Bank Limited.
Thus, we have deposited entire sale consideration of
Rs.36/- crores to the ICICI Bank and requested to Rupen Patel
to execute the sale deed in the name of M/s Zumera
Constructions Pvt. Ltd. and in this regard, the meeting was
called on by Mr. Rupen Patel in his office at Mumbai and
accordingly, I went to their office on 6th May and requested to
execute a sale deed in respect of the subject property.
Immediately, Mr. Rupen Patel pointed his gun at my head
and threatened me to sign the document papers which was
already prepared by him and I have signed the documents
shown by him under the threat of death and thereafter the
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aforesaid Mr. Rupen Patel handed over one set of original
papers to me. I am an un-educated and not even to write or
read the contents of the said documents. Immediately, I went
to my advocate office and shown the above said document and
after gone through the said documents, I came to know that the
aforesaid Rupen Patel has played fraud on me by imposing
several conditions in order to execution of sale deed in the
following manner:
a) Discharge, Mr. Rupen Patel from the Corporate
Guarantee dated 06-07-2018 execute by Patel
Engineering in favour of the State Bank of India by
making payment of Rs.45/- Crores or such amount
required by the State Bank of India to discharge the
corporate guarantee.
b) Mr. Yousuf Shariff has given a guarantee to Mr. Rupen
Patel that on the failure on the part of GM Infinite
Dwelling (India) Private Limited/ Mr. Gulam Mustafa
to pay an amount of Rs.45/- Crores to State Bank of
India on such an event Mr. Yousuf Shariff is under
obligation to pay the aforesaid amount to the SBI and
after payment of the aforesaid sum, Mr. Rupen Patel
shall execute a formal sale deed in respect of the
subject property.
It is submitted that during the time of purchase of
the subject land there was no conditions regarding to the
payment of discharge the above said debts which was
entered between Mr. Rupen Patel and Gulam Mustafa and
we have no way concerned to the aforesaid GM Infinite/
Gulam Mustafa and also no knowledge regarding the
internal communications /documents executed between
Mr. Rupen Patel and Gulam Mustafa, hence the aforesaid
conditions would not apply for the execution of sale deed
and I have signed the aforesaid bogus documents under
threat of death and hence the said documents would not
consider as a valid documents and hence my advocate
directed me to file a criminal case against him and
therefore there was some delay for filing of this
complaint.
It is submitted that the ICICI Bank and their
consortium lenders (17 Banks) has received total sale
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consideration of Rs.36/- crores on behalf of Mr. Rupen
Patel and after receipt of the entire consideration, we
have submitted several letters through e-mail
communications directing them to direct Mr. Rupen Patel
to execute sale deed in the name of M/s Zumera
Construction Pvt. Ltd. but till date there was no action
taken in this regard and hence all of them have cheated
to us by inducing me to pay the huge amount of Rs.36/-
crores and after full payment they are not ready to
complete the sale transactions in order to cheat us.
He has also frauded to many banks and cheated
many other public persons also has many other cases
under criminal and other offences against him, Cases
mentioned below;
I. Crime No.574/2014 filed in additional Civil Judge Junior
Division, Anekal, Bangalore Rural District for the offence
under Section 323, 406, 420, 506 read with Section 149
of IPC.
II. The CBI has registered the case against him and the F.I.R
No.RC0042022 A0005 dated 20-04-2022 for the offence
punishable under Section 5(1)(D) and Section 5(2) of the
Jammu Kashmir Prevention of Corruption Act and under
Section 120(b) of IPC.
III. W.P.No.(C) 699 of 2024 filed in High Court of Jammu
Kashmir and Ladak at Jammu.
IV. The securities of exchange board of India have registered
the case against Rupen Patel UTM/GM/CFD28/2019-20
UNDER SECTION 11(1) AND 11(2) h of securities of
exchange board of India act.
V. Income tax Appellate Tribunal has registered the case
against Rupen Patel, Deputy Commissioner of Income-
Tax CC25 ayakharbhavan M.K. Road, Mumbai. And its ITA
No.3071 and 3072/2015 Mumbai for the offence
punishable under Section 135 (c) of IT Act.
VI. Commercial appeal No.60 of 2024 in High Court of
Karnataka.
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VII. Income tax Appellate Tribunal has registered the case
against Rupen Patel under ITA No.2845/ & 2068/
MUM/2017 and C.O. No.265 & 355/MUM/2018 and ITA
No.7260/MUM/2018 in Mumbai appeal Between Patel
Engineering Limited v. Praham India LLP and others.
Hence, we are requesting you to register the complaint
against Patel Engineering Limited, Mr. Rupen Patel,
Kavitha Shivaikar, Rahul Agarwal, Amol Warke,Sandeep
Shetty, Tamoojith (ICICI Bank Chief Manager), Angan
and their 17 banks consortium lenders for the offence
punishable under Section 420, 406, 505(2) and other
provisions of Indian Penal Code for criminal conspiracy,
cheating and other offences in the ends of justice.
Thanking you,
Yours truly,
M/s Zumera Construction Pvt. Ltd.
Sd/-
Authorised Signatory."
(Emphasis added)
The complaint is registered before the jurisdictional Police on the
score that the 2nd petitioner has defrauded many Banks, cheated
many other persons and cases against him are pending all over.
Therefore, it is urged that investigation be conducted on
registration of the complaint against several persons who are all
office bearers of the 1st petitioner/Company. The complaint has a
history, facts of which are narrated hereinabove. What led to
registration of crime is the agreement that is entered into between
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the parties on 06-06-2024. Certain covenants of the agreement are
germane to be noticed and they read as follows:
"NOW THIS AGEEEMENT FOR SALE WITNESSETH AS
UNDER:-
1. The Recitals above form an integral part of this
Agreement and are not repeated in the operative part
only for the sake of brevity and should be deemed to be
incorporated in the operative part also as if the same
were set out hereunder and reproduced verbatim.
2. In the premises aforesaid and in consideration of the
aggregate sum of Rs.36,00,00,000/- (Rupees Thirty Six
Crores only) agreed to paid by the Purchaser to the
Second Vendor, the Vendors do and each of them doth
hereby irrevocably agreed to sell, assign, transfer and
convey all their respective right, title, interest, share,
claim and demand in to upon the Schedule Property on
'as is where is' basis together with the benefits of the
Said Approvals and all rights of and incidental thereto.
3. That in pursuance of the foregoing covenants, the
Purchaser, as agreed have on this day paid and deposited
the Total Sale Consideration of Rs.36,00,00,000/-
(Rupees Thirty Six Crores only) to the ICICI Bank
(less TDS thereon of Rs.36,00,000), on behalf of Vendors
towards the purchase of the Schedule Property in the
following manner:
A) Rs.3,60,00,000/- (Rupees Three Crores Sixty Lakhs
only) dated 10-07-2023 paid by way of Demand Draft
vide DD No.007761 drawn on HDFC Bank, Millers bhRoad
Branch, Bangalore.
B) Rs.4,00,00,000/- (Rupees Four Crores only) paid by
way of RTGS vide UTR No.HDFCR52023091688317397
dated 16-09-2023 drawn on HDFC Bank, Millers Road
Branch, Bangalore.
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C) Rs.1,40,00,000/- (Rupees One Crore Forty Lakhs
only) paid by way of RTGS vide UTR No.
HDFCR52023092500363089 dated 25-09-2023 drawn on
HDFC Bank, Millers Road Branch, Bangalore.
D) Rs.1,50,00,000/- (Rupees One Crore Fifty Lakhs
only) paid by way of RTGS vide UTR No.HDFCR
520203092790957561 dated 27-09-2023 drawn on HDFC
Bank, Millers Road Branch, Bangalore.
E) Rs.19,14,00,000/- (Rupees Nineteen Crore
Fourteen Lakhs only ) paid by way of RTGS vide UTR
No.HDFCR5202404159826700 Dated 15-04-2024 drawn
on HDFC Bank, Millers Road Branch, Bangalore.
F) Rs.6,00,00,000/- (Rupees six crore only) paid by
way of RTGS vide UTR No.HDFCR52024060162515151
dated 01-06-2024 drawn on HDFC Bank, Millers Road
Branch, Bangalore.
G) Rs.36,00,000/- (Rupees Thirty Six Lakhs only) is the
total sale consideration amount and it will be paid
towards Income Tax within a stipulated period as per the
provisions of Section 194-1A of the Income Tax Act, 1961
before registration of Deed.
H) The physical possession is being handed over to the
Purchaser from the date of this Agreement.
4. The Vendors shall, in fulfillment of the following condition
for which the Purchaser and its Chairman Mr. Yousuf
Shairff has given a guarantee to Vendor No.2 that on
failure on the part of GM Infinite Dwelling (India) Private
Limited/Mr. Gulam Mustafa to pay within a period of 60
days from the execution of the present Agreement, the
Purchaser shall pay the said dues as per the below
mentioned conditions within a period of 15 days and shall
execute and enter into a formal Sale Deed in favour of the
Purchaser and shall put the Purchaser in quiet, vacant,
exclusive and peaceful possession of the Schedule
Property, free from any lien, attachments, acquisitions,
encumbrance, assignments or trust of any nature
whatsoever and shall also simultaneously hand over to
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the Purchaser all original title deeds pertaining to the
Schedule property:-
(i) discharge the Vendor No.2 from the Corporate
Guarantee dated 6th July, 2018 executed by the
Vendor No.2 along with others in favour of the
State Bank of India by making payment of
Rs.45,00,00,000/- (Rupees Forty Five Crores
only) or such amounts required by the State
Bank of India to discharge the Corporate
Guarantee.
5. The Vendors agree that the Purchaser shall have an
option to sell the schedule property to a third party,
if the third party is willing to make the payment of
Rs.45,00,00,000/- (Rupees Forty Five Crores) or
such amounts required by the State Bank of India
to discharge the Corporate Guarantee of PEL. The
Vendor No.2 shall have an option to issue a letter to
the Purchaser to negotiate for the sale of the said
Schedule Property to a third party at no cost and
damages to the Vendors."
(Emphasis added)
The conditions in the agreement are as afore-noted. One such
condition is discharge of Vendor No.2, the 1st petitioner herein from
the corporate guarantee dated 06-07-2018 executed by him in
favour of State Bank of India by making a payment of ` 45/- crores.
The party agreed to the said condition. After execution of the
document comes the afore-quoted complaint on the score that the
complainant has been defrauded by inclusion of a clause, which the
complainant did not know.
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12. The Company and the complainant are in dispute in
several proceedings. The 2nd petitioner is no more today and
nothing can be driven against the 2nd petitioner, who is the
signatory to all the documents. Who are caught in the cross-fire are
the office bearers of the Company. The cross-fire needs to be
doused not by setting the criminal law into motion, but by
other methods available in law, as this is purely a commercial
transaction arising out an agreement between the parties and the
allegation is regarding the contents of the agreement. What is
alleged is violation of Sections 406 and 420 of the IPC. The said
sections read as follows:
"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.
... ... ...
"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."
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For an offence under Section 406, the ingredients under Section
405 are necessary to be present and for an offence under Section
420, the ingredients of Section 415 are required to be present.
They 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 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 contribution in violation
of a direction of law as aforesaid.
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... ... ...
415. Cheating.--Whoever, by deceiving any person,
fraudulently or dishonestly induces the person so deceived to
deliver any property to any person, or to consent that any
person shall retain any property, or intentionally induces the
person so deceived to do or omit to do anything which he would
not do or omit if he were not so deceived, and which act or
omission causes or is likely to cause damage or harm to that
person in body, mind, reputation or property, is said to "cheat".
Explanation.--A dishonest concealment of facts is a
deception within the meaning of this section."
Section 405 mandates entrustment of a property and its
misappropriation with dishonest intention. There is neither
entrustment nor misappropriation, as the parties have agreed to
certain terms and conditions. An agreement between the parties
would not mean the offence or cannot be alleged of criminal breach
of trust merely because there is breach of conditions of agreement.
Section 415 mandates luring of the complainant by the accused
with a dishonest intention right from the inception. This is again
would not become applicable to the facts of the case at hand, as
the dispute arises out of an agreement.
13. As observed in the course of the order, there are several
proceedings pending between the parties. It was always open to the
22
complainant to initiate civil proceedings in a manner known to law
and not set the criminal law into motion on breach of agreements,
on the specious plea that he is unlettered. On the said the score,
permitting further investigation even, in the case at hand, would
run foul of the judgment of the Apex Court in the case of VIJAY
KUMAR GHAI v. STATE OF WEST BENGAL1 where in it is held as
follows:
"27. Section 405 IPC defines "criminal breach of trust"
which reads as under:
"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 trust, or
wilfully suffers any other person so to do, commits "criminal
breach of trust"."
The essential ingredients of the offence of criminal breach of
trust are:
(1) The accused must be entrusted with the property or with
dominion over it,
(2) The person so entrusted must use that property, or;
(3) The accused must dishonestly use or dispose of that
property or wilfully suffer any other person to do so in
violation,
1
(2022) 7 SCC 124
23
(a) of any direction of law prescribing the mode in which
such trust is to be discharged, or;
(b) of any legal contract made touching the discharge of
such trust.
28. "Entrustment" of property under Section 405 of
the Penal Code, 1860 is pivotal to constitute an offence
under this. The words used are, "in any manner entrusted
with property". So, it extends to entrustments of all kinds
whether to clerks, servants, business partners or other
persons, provided they are holding a position of "trust". A
person who dishonestly misappropriates property
entrusted to them contrary to the terms of an obligation
imposed is liable for a criminal breach of trust and is
punished under Section 406 of the Penal Code.
29. The definition in the section does not restrict
the property to movables or immovables alone. This Court
in R.K. Dalmia v. Delhi Admn. [R.K. Dalmia v. Delhi
Admn., (1963) 1 SCR 253 : AIR 1962 SC 1821] held that
the word "property" is used in the Code in a much wider
sense than the expression "movable property". There is
no good reason to restrict the meaning of the word
"property" to movable property only when it is used
without any qualification in Section 405.
30. In Sudhir Shantilal Mehta v. CBI [Sudhir Shantilal
Mehta v. CBI, (2009) 8 SCC 1: (2009) 3 SCC (Cri) 646] it was
observed that the act of criminal breach of trust would, inter alia
mean using or disposing of the property by a person who is
entrusted with or has otherwise dominion thereover. Such an
act must not only be done dishonestly but also in violation of
any direction of law or any contract express or implied relating
to carrying out the trust.
31. Section 415 IPC defines "cheating" which reads as
under:
"415. Cheating.--Whoever, by deceiving any
person, fraudulently or dishonestly induces the person so
deceived to deliver any property to any person, or to
consent that any person shall retain any property, or
intentionally induces the person so deceived to do or omit to
24
do anything which he would not do or omit if he were not so
deceived, and which act or omission causes or is likely to
cause damage or harm to that person in body, mind,
reputation or property, is said to "cheat"."
The essential ingredients of the offence of cheating are:
1. Deception of any person
2. (a) Fraudulently or dishonestly inducing that
person--
(i) to deliver any property to any person; or
(ii) to consent that any person shall retain any
property; or
(b) intentionally inducing that person to do or omit to do
anything which he would not do or omit if he were no
so deceived, and which act or omission causes or is
likely to cause damage or harm to that person in
body, mind, reputation or property.
32. A fraudulent or dishonest inducement is an essential
ingredient of the offence. A person who dishonestly induces
another person to deliver any property is liable for the offence of
cheating.
33. Section 420 IPC defines "cheating and dishonestly
inducing delivery of property" which reads as under:
"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."
34. Section 420 IPC is a serious form of cheating
that includes inducement (to lead or move someone to
happen) in terms of delivery of property as well as
valuable securities. This section is also applicable to
25
matters where the destruction of the property is caused
by the way of cheating or inducement. Punishment for
cheating is provided under this section which may extend
to 7 years and also makes the person liable to fine.
35. To establish the offence of cheating in inducing
the delivery of property, the following ingredients need to
be proved:
(i) The representation made by the person was false.
(ii) The accused had prior knowledge that the
representation he made was false.
(iii) The accused made false representation with
dishonest intention in order to deceive the person to
whom it was made.
(iv) The act where the accused induced the person to
deliver the property or to perform or to abstain from
any act which the person would have not done or had
otherwise committed.
36. As observed and held by this Court in R.K.
Vijayasarathy v. Sudha Seetharam [R.K. Vijayasarathy
v. Sudha Seetharam, (2019) 16 SCC 739 : (2020) 2 SCC (Cri)
454] , the ingredients to constitute an offence under Section
420 are as follows:
(i) a person must commit the offence of cheating under Section
415; and
(ii) the person cheated must be dishonestly induced to:
(a) deliver property to any person; or
b) make, alter or destroy valuable security or
anything signed or sealed and capable of being
converted into valuable security. Thus, cheating is
an essential ingredient for an act to constitute an
offence under Section 420 IPC.
37. The following observation made by this Court in Uma
Shankar Gopalika v. State of Bihar [Uma Shankar
Gopalika v. State of Bihar, (2005) 10 SCC 336 : (2006) 2 SCC
26
(Cri) 49] with almost similar facts and circumstances may be
relevant to note at this stage : (SCC pp. 338-39, paras 6-7)
"6. Now the question to be examined by us is as to
whether on the facts disclosed in the petition of the
complaint any criminal offence whatsoever is made out
much less offences under Sections 420/120-BIPC. The only
allegation in the complaint petition against the accused
persons is that they assured the complainant that when
they receive the insurance claim amounting to Rs 4,20,000,
they would pay a sum of Rs 2,60,000 to the complainant
out of that but the same has never been paid. ... It was
pointed out on behalf of the complainant that the accused
fraudulently persuaded the complainant to agree so that the
accused persons may take steps for moving the consumer
forum in relation to the claim of Rs 4,20,000. It is well
settled that every breach of contract would not give rise to
an offence of cheating and only in those cases breach of
contract would amount to cheating where there was any
deception played at the very inception. If the intention to
cheat has developed later on, the same cannot amount to
cheating. In the present case, it has nowhere been stated
that at the very inception that there was intention on behalf
of the accused persons to cheat which is a condition
precedent for an offence under Section 420IPC.
7. In our view petition of complaint does not disclose
any criminal offence at all much less any offence either
under Section 420 or Section 120-BIPC and the present
case is a case of purely civil dispute between the parties for
which remedy lies before a civil court by filing a properly
constituted suit. In our opinion, in view of these facts
allowing the police investigation to continue would amount
to an abuse of the process of court and to prevent the same
it was just and expedient for the High Court to quash the
same by exercising the powers under Section 482CrPC
which it has erroneously refused."
38. There can be no doubt that a mere breach of
contract is not in itself a criminal offence and gives rise to
the civil liability of damages. However, as held by this
Court in Hridaya Ranjan Prasad Verma v. State of
Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar,
(2000) 4 SCC 168 : 2000 SCC (Cri) 786] , the distinction
between mere breach of contract and cheating, which is
criminal offence, is a fine one. While breach of contract
27
cannot give rise to criminal prosecution for cheating,
fraudulent or dishonest intention is the basis of the
offence of cheating. In the case at hand, complaint filed
by Respondent 2 does not disclose dishonest or
fraudulent intention of the appellants."
(Emphasis supplied)
Later, the Apex Court in the case of MITESH KUMAR J.SHA v.
STATE OF KARNATAKA2 has held as follows:
"Issues
24. Having perused the relevant facts and contentions
made by the appellants and the respondents herein in our
considered opinion, the following three key issues require
determination in the instant case:
(i) Whether the necessary ingredients of the
offences punishable under Sections 406, 419 and
420 are prima facie made out?
(ii) Whether sale of excess flats, even if made, amounts to
a mere breach of contract or constitutes an offence of
cheating?
(iii) Whether the dispute is one of entirely civil nature and
therefore liable to be quashed?
Whether the necessary ingredients of offences
punishable under Sections 406, 419 and 420 are prima
facie made out?
25. 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:
2
(2022)14 SCC 572
28
"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 trust, or
willfully 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 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
29
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."
26. 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 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 precondition for even prima
facie establishing the commission of the 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.
27. 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 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 authorised and resultantly cannot evade criminal liability on
a mere premise that a civil dispute is already pending between
the parties.
30
28. The appellants on the other hand contend that in
terms of a subsequent MoU dated 19-2-2015, it was mutually
agreed between the parties, that partial payment for a loan
amount borrowed by Respondent 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.
29. 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
2. It is further contended that Respondent 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.
30. Nonetheless, the ratification deed was never made
and Respondent 2 subsequently even revoked the GPA
unilaterally, contending that the terms of JDA were not followed.
It was only after revocation of GPA that the company filed an
application for arbitration seeking interim orders to restrain
Respondent 2 from alienating the disputed property.
Simultaneously, while this dispute was pending adjudication
before the arbitrator Respondent 2 filed a criminal complaint
against the appellants.
31. 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 2. Aggrieved, Respondent 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 the appellants, was also withdrawn by
Respondent 2 seeking liberty to pursue his claim with
regard to selling of four excess flats in pending civil
proceedings.
31
32. 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 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 2-3-
2016 for redressal of dispute between the parties, to which
Respondent 2 had accordingly filed his statement of objections
dated 9-3-2016. It was only on 29-3-2016 that Respondent 2
had filed the FIR in question bearing Crime No. 185/2016
against the appellants. Moreover, it was Respondent 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.
33. At this stage, by placing reliance on the judgment of
this Court in Priti Saraf v. State (NCT of Delhi) [Priti
Saraf v. State (NCT of Delhi), (2021) 16 SCC 142 : 2021 SCC
OnLine SC 206] and Sri Krishna Agencies v. State of A.P. [Sri
Krishna Agencies v. State of A.P., (2009) 1 SCC 69 : (2009) 1
SCC (Civ) 18 : (2009) 1 SCC (Cri) 241] , it has been further
submitted by Respondent 2 that the 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.
34. 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.
35. The dispute between the parties, could at best be
termed as one involving a 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.
32
Whether sale of excess flats even if made amounts to a
mere breach of contract?
36. This Court in Hridaya Ranjan Prasad Verma v. State
of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000)
4 SCC 168 : 2000 SCC (Cri) 786] , has observed : (SCC p. 177,
para 15)
"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."
37. 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, 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?
38. 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 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 Indian Oil
Corpn. v. NEPC India Ltd. [Indian Oil Corpn. v. NEPC India
33
Ltd., (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188] , as
under : (SCC p. 749, para 14)
"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."
39. It was also observed : (Indian Oil Corpn. case [Indian
Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736 : (2006) 3 SCC
(Cri) 188] , SCC pp. 748-49, para 13)
"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."
40. On an earlier occasion, in G. Sagar Suri v. State of
U.P. [G. Sagar Suri v. State of U.P., (2000) 2 SCC 636 : 2000
SCC (Cri) 513] , this Court has also observed : (SCC p. 643,
para 8)
"8. Jurisdiction under Section 482 of the Code
has to be exercised with great care. In exercise of its
jurisdiction the 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
the High Court is to exercise its jurisdiction under
34
Section 482 of the Code. Jurisdiction under this
section has to be exercised to prevent abuse of the
process of any court or otherwise to secure the ends
of justice."
41. Furthermore, in the landmark judgment of State of
Haryana v. Bhajan Lal [State of Haryana v. Bhajan Lal, 1992
Supp (1) SCC 335 : 1992 SCC (Cri) 426] regarding exercise of
inherent powers under Section 482CrPC, this Court has laid
down the following categories of instances wherein inherent
powers of the Court can be exercised in order to secure the
ends of justice. These are : (SCC pp. 378-79, para 102)
"102. ... (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 FIR 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.
(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 Act concerned
(under which a criminal proceeding is instituted) to the
35
institution and continuance of the proceedings and/or where
there is a specific provision in the Code or the Act
concerned, 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."
42. Applying this dictum to the instant factual
matrix, it can be safely concluded that the present case
clearly falls within the ambit of first, third and fifth
category of the seven categories enlisted in the
abovesaid 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 482CrPC. We find that there has been attempt to
stretch the contours of a civil dispute and thereby
essentially impart a criminal colour to it."
(Emphasis supplied)
Following the aforesaid judgments, the Apex Court in the case of
KUNTI v. STATE OF UTTAR PRADESH3 has held as follows:
".... .... ....
6. Vide the impugned judgment dated 18-10-2019
[Kunti v. State of U.P., 2019 SCC OnLine All 7183], the learned
Single Judge dismissed the application under Section 482CrPC,
not accepting the argument on the part of the appellant, that
the present Respondent 2 had an alternative remedy in the
nature of a civil suit for the execution of the sale agreement.
Relying on, in V. Ravi Kumar v. State [V. Ravi Kumar v. State,
(2019) 14 SCC 568: (2020) 1 SCC (Cri) 401] , the prayer for
quashing has been refused.
3
(2023) 6 SCC 109
36
7. It has been urged by way of this appeal arising out of
SLP, that the agreement to sell was void ab initio, in light of
Section 157-A, Uttar Pradesh Zamindari Abolition & Land
Reforms Act, 1950, whereby a person belonging to a Scheduled
Caste cannot transfer property to any person not of a Scheduled
Caste without prior permission of the Collector or District
Magistrate concerned. Further it has been urged that the instant
FIR has been lodged four years after the slated date of the
execution of the sale deed. It is also submitted that the present
agreement to sell is forged and in respect thereof, a report to
the Senior Superintendent of Police stands filed.
8. We notice that the agreement to sell had been
duly registered at the office of the Deputy Registrar, 1st,
Office at Bulandshahr, and the complaint filed by the
appellant, purporting that the same was forged, was filed
on 11-5-2012, which is, incidentally, the same as the date
of the reply to the legal notice sent by Respondent 2
herein, dated 8-5-2012, and is also four years from the
date of the agreement.
9. However, we do not find the need to engage with
the grounds as urged, because a perusal of the record in
no uncertain terms reflects the dispute as being of a civil
nature. This Court recently, in Sarabjit Kaur v. State of
Punjab [Sarabjit Kaur v. State of Punjab, (2023) 5 SCC
360] , observed that : (SCC p. 363, para 13)
"13. A breach of contract does not give rise to
criminal prosecution for cheating unless fraudulent or
dishonest intention is shown right at the beginning of the
transaction. Merely on the allegation of failure to keep up
promise will not be enough to initiate criminal proceedings."
10. A two-Judge Bench of this Court in ARCI v. Nimra
Cerglass Technics (P) Ltd. [ARCI v. Nimra Cerglass Technics (P)
Ltd., (2016) 1 SCC 348 : (2016) 1 SCC (Cri) 269] , while
deliberating upon the difference between mere breach of
contract and the offence of cheating, observed that the
distinction depends upon the intention of the accused at the
time of the alleged incident. If dishonest intention on the part of
37
the accused can be established at the time of entering into the
transaction with the complainant, then criminal liability would be
attached.
11. In Vijay Kumar Ghai v. State of W.B. [Vijay Kumar
Ghai v. State of W.B., (2022) 7 SCC 124 : (2022) 2 SCC (Cri)
787] , one of us, (Krishna Murari J.) observed in reference to
earlier decisions as under : (SCC pp. 139-40, paras 24-25)
"24. This Court in G. Sagar Suri v. State of U.P. [G.
Sagar Suri v. State of U.P., (2000) 2 SCC 636 : 2000 SCC
(Cri) 513] observed that it is the duty and obligation of the
criminal court to exercise a great deal of caution in issuing
the process, particularly when matters are essentially of
civil nature.
25. This Court has time and again cautioned about
converting purely civil disputes into criminal cases. This
Court in Indian Oil Corpn. [Indian Oil Corpn. v. NEPC India
Ltd., (2006) 6 SCC 736 : (2006) 3 SCC (Cri) 188] noticed
the prevalent impression that civil law remedies are time
consuming and do not adequately protect the interests of
lenders/creditors. The Court further observed that : (Indian
Oil Corpn. [Indian Oil Corpn. v. NEPC India Ltd., (2006) 6
SCC 736: (2006) 3 SCC (Cri) 188] , SCC p. 749, para 13)
'13. ... Any effort to settle civil disputes and claims,
which do not involve any criminal offence, by applying
pressure through criminal prosecution should be deprecated
and discouraged.' "
12. Having regard to the above well-established
principles and also noting that the present dispute is
entirely with respect to property and more particularly
buying and selling thereof, it cannot be doubted that a
criminal hue has been unjustifiably lent to a civil natured
issue.
13. In view of the above, the impugned judgment and
order dated 18-10-2019 [Kunti v. State of U.P., 2019 SCC
OnLine All 7183] passed by the High Court of Judicature at
Allahabad, refusing to quash the FIR in question and Case No.
6695 of 2012 arising out of Case Crime No. 421 of 2012 under
38
Sections 406, 420, 467, 468, 417 and 418IPC bearing No.
32337 of 2013 is set aside. The appeal is allowed."
(Emphasis supplied)
The Apex Court in the case of VIJAY KUMAR GHAI (supra) has
held that breach of agreement can never be a subject matter of
criminal law set into motion, as such cases would be unjustifiably of
a civil nature. In the light of the facts obtaining in the case at hand,
as narrated hereinabove and the judgments rendered by the Apex
Court quoted supra, if further proceedings are permitted to
continue, it would undoubtedly become an abuse of the process of
law and result in miscarriage of justice. The issue would be whether
a FIR without permitting investigation could be quashed in such
cases. This is also answered by the Apex Court in the case of
MITESH KUMAR J.SHA (supra) holding that where the dispute is
one of entirely civil nature, the crime should not be permitted to be
investigated even.
14. In the aforesaid facts, it becomes germane to notice the
judgment of the Apex Court in the case of MAHMOOD ALI v.
39
STATE OF UTTAR PRADESH4 wherein the Apex Court has held as
follows:
".... .... ....
13. At this stage, we would like to observe something
important. Whenever an accused comes before the Court
invoking either the inherent powers under Section 482 of
the Code of Criminal Procedure (CrPC) or extraordinary
jurisdiction under Article 226 of the Constitution to get
the FIR or the criminal proceedings quashed essentially
on the ground that such proceedings are manifestly
frivolous or vexatious or instituted with the ulterior
motive for wreaking vengeance, then in such
circumstances the Court owes a duty to look into the FIR
with care and a little more closely. We say so because
once the complainant decides to proceed against the
accused with an ulterior motive for wreaking personal
vengeance, etc., then he would ensure that the
FIR/complaint is very well drafted with all the necessary
pleadings. The complainant would ensure that the
averments made in the FIR/complaint are such that they
disclose the necessary ingredients to constitute the
alleged offence. Therefore, it will not be just enough for
the Court to look into the averments made in the
FIR/complaint alone for the purpose of ascertaining
whether the necessary ingredients to constitute the
alleged offence are disclosed or not. In frivolous or
vexatious proceedings, the Court owes a duty to look into
many other attending circumstances emerging from the
record of the case over and above the averments and, if
need be, with due care and circumspection try to read in
between the lines. The Court while exercising its
jurisdiction under Section 482 of the CrPC or
Article 226 of the Constitution need not restrict itself only
to the stage of a case but is empowered to take into
account the overall circumstances leading to the
initiation/registration of the case as well as the materials
collected in the course of investigation. Take for instance
4
2023 SCC OnLine SC 950
40
the case on hand. Multiple FIRs have been registered
over a period of time. It is in the background of such
circumstances the registration of multiple FIRs assumes
importance, thereby attracting the issue of wreaking
vengeance out of private or personal grudge as alleged.
14. In State of Andhra Pradesh v. Golconda Linga
Swamy, (2004) 6 SCC 522, a two-Judge Bench of this Court
elaborated on the types of materials the High Court can assess
to quash an FIR. The Court drew a fine distinction between
consideration of materials that were tendered as evidence and
appreciation of such evidence. Only such material that
manifestly fails to prove the accusation in the FIR can be
considered for quashing an FIR. The Court held:--
"5. ...Authority of the court exists for advancement of
justice and if any attempt is made to abuse that authority
so as to produce injustice, the court has power to prevent
such abuse. It would be an abuse of the process of the
court to allow any action which would result in injustice and
prevent promotion of justice. In exercise of the powers
court would be justified to quash any proceeding if it finds
that initiation or continuance of it amounts to abuse of the
process of court or quashing of these proceedings would
otherwise serve the ends of justice. When no offence is
disclosed by the complaint, the court may examine the
question of fact. When a complaint is sought to be
quashed, it is permissible to look into the materials to
assess what the complainant has alleged and whether
any offence is made out even if the allegations are
accepted in toto.
6. In R.P. Kapur v. State of Punjab, AIR 1960 SC
866 : 1960 Cri LJ 1239, this Court summarised some
categories of cases where inherent power can and should be
exercised to quash the proceedings : (AIR p. 869, para 6)
(i) where it manifestly appears that there is a legal bar
against the institution or continuance e.g. want of
sanction;
(ii) where the allegations in the first information report or
complaint taken at its face value and accepted in their
entirety do not constitute the offence alleged;
41
(iii) where the allegations constitute an offence, but
there is no legal evidence adduced or the
evidence adduced clearly or manifestly fails to
prove the charge.
7. In dealing with the last category, it is
important to bear in mind the distinction between a
case where there is no legal evidence or where there
is evidence which is clearly inconsistent with the
accusations made, and a case where there is legal
evidence which, on appreciation, may or may not
support the accusations. When exercising jurisdiction
under Section 482 of the Code, the High Court would
not ordinarily embark upon an enquiry whether the
evidence in question is reliable or not or whether on a
reasonable appreciation of it accusation would not be
sustained. That is the function of the trial Judge.
Judicial process, no doubt should not be an instrument of
oppression, or, needless harassment. Court should be
circumspect and judicious in exercising discretion and
should take all relevant facts and circumstances into
consideration before issuing process, lest it would be an
instrument in the hands of a private complainant to unleash
vendetta to harass any person needlessly. At the same time
the section is not an instrument handed over to an accused
to short-circuit a prosecution and bring about its sudden
death....."
(Emphasis supplied)
15. In the result, this appeal succeeds and is hereby
allowed. The impugned order passed by the High Court of
Judicature at Allahabad is hereby set aside. The criminal
proceedings arising from FIR No. 127 of 2022 dated 04.06.2022
registered at Police Station Mirzapur, Saharanpur, State of U.P.
are hereby quashed."
(Emphasis supplied)
The Apex Court holds that when petitions are filed under Section
482 of the Cr.P.C., or under Article 226 of the Constitution to get
the FIR quashed, essentially on the ground that it is either
frivolous, vexatious or instituted with ulterior motives to wreak
42
vengeance or civil disputes or commercial transactions are
projected to be a crime, the Court while exercising its jurisdiction
under Article 482 of the Cr.P.C., should not restrict itself only to
such of the cases, but is empowered to take into account overall
circumstances and answer whether the crime should be permitted
to be investigated into or not.
15. In the light of the afore-elucidated law by the Apex Court,
I deem it appropriate to exercise the jurisdiction under Section 482
of the Cr.P.C. and obliterate the Damocles sword that hangs on
the head of these petitioners, in the light of the fact that a pure
commercial transaction or breach of an agreement between the
parties is sought to be given a colour of crime; added to the fact
that the signatory to all the documents, the 2nd petitioner is no
more.
16. For all the aforesaid reasons, the following:
ORDER
(i) Criminal Petition is allowed.
43(ii) The crime in Crime No.422 of 2024 registered by Hebbagodi Police Station, Anekal Sub-Division, Bangalore District and pending before the II Additional Civil Judge (Junior Division) & JMFC, Anekal, Bangalore Rural District stands quashed.
(iii) The quashment of the proceedings will not come in the way of any mode of resolution of dispute to be instituted by the complainant against the petitioners.
(iv) The observations made in the course of the order are only for the purpose of consideration of the case of the petitioners under Section 482 of the Cr.P.C., which would not bind, guide or influence any pending or to be instituted proceedings before any fora between the parties.
Sd/-
(M. NAGAPRASANNA) JUDGE Bkp CT:MJ