Tendency To Colourize Civil Disputes Into Criminal Offences An Open Secret : Supreme Court

The Supreme Court has reiterated that a purely civil dispute cannot be converted into a criminal prosecution unless the foundational ingredients of the alleged offences are made out.

“The tendency of litigants to colourize civil disputes into criminal offences is an open secret in the present times. The courts have tried to put their foot down to prevent the litigants from obliterating the fine distinction between the two. We have done so to prevent the abuse of criminal process.”, observed a bench of Justice Satish Chandra Sharma and Justice Nongmeikapam Kotiswar Singh while quashing criminal proceedings against a power-of-attorney holder arising out of a failed agreement to sell land in Karnataka.

The case arose after prospective purchasers failed to complete a land transaction within the agreed period. The landowners subsequently sold the property to a third party, following which the prospective purchasers filed a civil suit for specific performance as well as a criminal complaint alleging offences under Sections 420, 423, 120-B and 34 IPC.

The Karnataka High Court had earlier quashed the FIR against the landowners, observing that the dispute was essentially civil in nature. However, it subsequently declined to quash the proceedings against the petitioner, who was the Power of Attorney holder of the landowner.

Setting aside the impugned order, the judgment authored by Justice Sharma observed that the alleged transaction was the same and the sale deed had been executed by the landowners, with the petitioner merely acting as the confirming party. There was no allegation that the petitioner had exceeded the authority granted under the power of attorney or acted behind the landowners' back.

“…we are of the clear view that the High Court has fallen into error, and a grave one. The FIR alleges the commission of offence by the landowners as well as the petitioner. The allegation is based on the execution of sale deed, and the sale deed was executed by the landowners themselves. The petitioner was only a confirming party. If no criminality could be attributed to the landowners by virtue of the execution of sale deed, it cannot be sustained against the petitioner as well.”, the Court said.

On the offence of cheating under Section 420 IPC, the Court held that deception and dishonest inducement must exist when the complainant parts with money or property. Here, the part consideration had been paid in 2012, when the property could legitimately have been transferred, whereas the subsequent sale in favour of a third party took place nearly four years later, after the prospective buyers failed to adhere to the timeline prescribed under the agreement to sell.

“Notably, the offence of cheating requires a deceptive act which leads to inducement for delivery of property/money. Even on bare perusal of the allegations, it becomes clear that the property (that is the amount transferred by respondent no. 2 at the time of agreement for sale dated 19.11.2012) was not transferred on the basis of any deception. At that time, the property could have legitimately been transferred in favour of respondent no. 2 and there was no deception. The subsequent sale took place in 2016, almost 4 years after the alleged delivery of money by respondent no. 2. Thus, the foundational ingredient of cheating is missing.”, the Court observed.

The Court also found Section 423 IPC inapplicable, observing that there was no false statement regarding consideration in the relevant instruments.

It further held that the petitioner's criminal liability could not be stretched beyond that of the landowners when the allegations against all arose from the same transaction.

Accordingly, the Court quashed the FIR and all consequential proceedings against the petitioner.

As a result, the plea was allowed.

Appearance:

For Petitioner(s) :Dr. Aditya Sondhi, Sr. Adv. Mr. Naveen Chawla, Adv. Mrs. Nayanatara Bg, Adv. Bedotroyi Gupta, Adv. Mr. Anubhav Kumar, Adv. Ms. Vaishnavi Soni, Adv. Mr. T. Mahipal, AOR

For Respondent(s) :Mr. Sanchit Garga, AOR Mr. Kunal Rana, Adv. Mr. Shashwat Jaiswal, Adv. Ms. Diksha Arora, Adv. Mr. Vijender Kumar, Adv. Mr. Bhanu Pratap Singh, Adv. Ms. Oorja Goel, Adv. Ms. Charulata Chaudhary, AOR