[Cheating] Vires Of Section 420 IPC Challenged Before Allahabad High Court

A writ petition has been filed before the Allahabad High Court challenging the vires of Section 420 of IPC (Cheating and dishonestly inducing delivery of property) on the grounds that it is violative of Article 14 and Article 21 of the Constitution.Counsel for Petitioners argued that there is no material difference between the offence of cheating punishable under Section 417 IPC and offence of cheating concerning the delivery of property punishable under Section 420 IPC. However, he contended that Section 420 provides for higher punishment which is against personal liberty.Section 417 IPC prescribes that whoever cheats shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or with both.Section 420 IPC stipulates that whoever cheats and thereby dishonestly induces the person deceived to deliver any property 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.The punishments provided in two provisions covering the same offence cannot be starkly different, the Petitioners argued. Such difference is without any intelligible differentia and thus, the provision with higher punishment should be struck down as being violative of Article 14 and Article 21 of the Constitution, it is further contended.Petitioner, Indiabulls Housing Finance Ltd. (IHFL), sanctioned 16 loan facilities of Rs.2801.00 Crores to Shipra Group/ Borrowers for the purposes of construction and development of housing projects. Shares of various companies were pledged in favour of IHFL.M/s Kadam Developers Pvt. Ltd. was granted permission to mortgage its land allotted by Yamuna Expressway Industrial Development Authority (YEIDA) under its sub-lease with IHFL.100% equity shares (demated) of M/s Kadam Developers were pledged to secure the loan. Shipra Group committed default of approximately Rs.1763.00 Crores. Due to no response from Shipra Group, IHFL sold the pledged equity shares to one M/s Finalstep Developers Pvt. Ltd. with M3M India Pvt. Ltd. as confirming party for R.900.00 Crores. M/s. Kadam Developers conveyed the factum of the sale to YEIDA within 45 days. However, YEIDA lodged FIRs against IHFL and its officers for selling the shares of M/s. Kadam Developers as it caused it a loss of Rs. 200 crores. Petitioners challenged the ECIR as well as the FIRs lodged by the Enforcement Directorate and YEIDA against IHFL and its officers under Sections 420, 467, 468, 471 and 120-B IPC. Counsel for Petitioner argued that the dispute is of civil nature and institution of criminal proceedings is tainted with mala fides and the allegation made in the FIR do not constitute any cognizable offence. It was contended that YEIDA was made aware of the factum of sale in 2021, the belated action is highly arbitrary. Argument of the Counsel for Enforcement Directorate that the High Court did not have territorial jurisdiction since the FIR was lodged in Delhi, was turned down by the Court as the ECIR impugned was issued pursuant to the FIR lodged in Greater Noida. The bench comprising Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava noted that at this stage, the Petitioners only pressed prayer for interim relief. It was of the prima facie view that the dispute is civil in nature and is being given a criminal colour. No civil proceedings have been initiated by YEIDA against the Petitioners prior to lodging the impugned FIRs, it noted. Reliance was placed on Indian Oil Corporation Ltd. v. NEPC (India) Ltd. (2006 (6) SCC 736) wherein the Apex Court observed: “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.”Therefore, the High Court granted interim protection to IHFL and its directors and officers against any coercive measures, including summons. The matter is directed to be listed in the week commencing 28 August.Case Title: Niraj Tyagi and Another v. State Of U.P. and 3 Others [Criminal Misc. Writ Petition No. 10893/2023]Click Here to Read/Download Order

[Cheating] Vires Of Section 420 IPC Challenged Before Allahabad High Court

Upasna Agrawal

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