If Alleged Acts Constitute An Offence, Denying Criminal Action Solely Due To Pursuit Of Civil Remedy Would Be 'Travesty Of Justice': Kerala HC

The single bench of Justice G. Girish observed that care must be taken to prevent unwanted criminal prosecutions where the dispute between the parties is purely civil in nature. But the Court emphasized that the existence of a civil dispute does not preclude the possibility that objectionable acts committed during such a dispute may also constitute a criminal offence.

Court said, “…the fact that many of the issues relating to breach obligations are inseparably linked with the elements constituting the offences of criminal breach of trust and cheating, cannot be ignored by criminal courts. The mere fact that a dispute partakes the character of civil nature leading to the institution of a suit by one of the parties against his counterpart, does not mean that the objectionable acts alleged in that case could never constitute a criminal offence. It would amount to travesty of justice to shut out the doors of criminal court against a party for the sole reason that he had opted for civil remedy to mitigate the loss caused to him due to the wrongful acts committed by his opponent, which would also constitute specific criminal offences.”

The petitioners are accused of committing offences under Sections 420 (cheating and dishonestly inducing delivery of property), 120B (punishment for criminal conspiracy) read with Section 34 (acts done in furtherance of common intention) of the IPC. They approached the Court to quash all the proceedings against them.

As per facts, the petitioners extended a loan of rupees 12,50,000 to the de facto complainant, securing the amount by keeping her residential property as collateral by executing a document in their favour. It was stated that the document would be styled as a sale deed and would be reconveyed on clearing the loan liability. The amount was to be repaid within fifteen years with a reasonable rate of interest. Without the knowledge of the de facto complainant, the Petitioners took a loan of 25 lakhs from the bank using her property. Consequently, the bank initiated SARFEASI proceedings and the de facto complainant was served with a possession notice from the bank. It is stated that only then, the de facto complainant realised that the property which she had offered as security to the accused was encumbered with the bank without her knowledge and consent for availing loan.

The de facto complainant obtained interim orders from Debt Recovery Tribunal and has also instituted suit for establishing her title over the property.

The de facto complainant submitted that the Petitioners fraudulently and dishonestly offered the de facto complainant's residential property as security by pretending that they have the title over the property. It was submitted that the Petitioners obtained the sale deed in their favor by misleading the de facto complainant and subsequently defaulted loan repayment to the bank, having kept her property as collateral without her knowledge.

The Counsel for Petitioners submitted that this was a civil issue and suit was already pending and criminal proceedings were not maintainable. It was submitted that the Petitioners who were educated and well employed could not mistake the sale deed executed by them as merely a security document. It was submitted that Petitioners who has the title over the property permitted de facto complainant to reside in the property only as a licensee until she gets alternate accommodation.

The Court noted that the main contention of Petitioners were that the dispute between the parties were of civil nature and no criminal prosecution should have been initiated.

The Court noted that it was not possible to ignore the complaints made by the de facto complainant that the Petitioners defrauded her when she was in dire need of money. The Court noted that Petitioners obtained a loan of 25 lakh rupees using the de facto complainant's property as security, where the de facto complainant was only given 12,50,000 rupees. The Court further noted that the de facto complainant paid over rupees 5,00,000 as instalments to the Petitioners.

The Court stated that sometimes civil disputes are portrayed as criminal acts to unnecessarily harass the opposite party and to threaten them. It added that Courts must be vigilant of unwanted criminal prosecutions against the opposite party when the dispute was purely of a civil nature.

Court added, “It is true that Courts are to be vigilant against the nefarious attempts of unscrupulous litigants to drag the opponents in civil disputes to criminal prosecution by giving the colour of criminality to such disputes to pressurize and coerce them to accede to their demands. Such complaints where the core issue of civil liability is attempted to be portrayed as cheating or criminal breach of trust, are to be weeded out at the threshold, not only to avoid unnecessary harassment to the opposite party, but also to save the precious time of courts which is to be utilized for the resolution of genuine issues.”

However, in the facts of the case, Court stated that it cannot ignore the alleged fraudulent and dishonest intention of the petitioners which caused loss of residential house and property to the de facto complainant.

The Court thus concluded that the mere fact that a civil suit was pending before them cannot be reason to quash the criminal proceedings initiated against the Petitioners who committed cheating pursuant to criminal conspiracy.

As such, the Court dismissed the petition.

Counsel for Petitioners: Advocate N K Mohanlal

Counsel for Respondents: Advocate Varghese C Kuriakose, Public Prosecutor Sangeetharaj N R

Case Title: K R Harikrishnan v SI of Police

Case No: CRL.MC NO. 5000 OF 2019

Citation: 2025 LiveLaw (Ker) 169

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