Mere Non-Performance Of Agreement To Sell Doesn't Amount To Offence Of Cheating & Criminal Breach Of Trust: Supreme Court

The Supreme Court recently observed that mere non-performance of an Agreement to Sell by itself does not amount to the offences of cheating and criminal breach of trust. Quashing a criminal case against three persons for failing to execute a sale despite an agreement to sell a property, the Court observed :"Mere non-performance of an Agreement to Sell by itself does not amount to cheating and breach of trust. Respondent no.2 has adequate remedy of filing a Civil Suit for relief of specific performance of a contract which he has already availed and the suit is still pending. The FIR only appears to be an arm-twisting mechanism to pressurise the appellants to execute the Sale Deed or to extract money. Every civil wrong cannot be converted into a criminal wrong. As we find in the present case, respondent no.2 is trying to abuse the criminal machinery for ulterior motives", the court observed.A bench of Justice Vikram Nath and Justice Prasanna Bhalakrishna Varale held that dispute was of civil nature and the judicial process cannot be used as a tool to enforce specific performance of a contract.“The act of the appellant at best constitutes a civil wrong and does not call for any criminal action against them. A civil wrong cannot be given a criminal colour merely to coerce the appellants into registering the sale. The judicial process cannot be used as a tool to enforce specific performance of an agreement”, the court stated.The case stems from an Agreement to Sell dated June 29, 2020, between the appellants and complainant for the sale of a property in Rajgarh, Rajasthan for Rs. 5.11 crores. The complainant made an advance payment of Rs. 11 lakh, with Rs. 5 lakh paid in cash and Rs. 6 lakh through a cheque. The payment schedule agreed upon included a payment of Rs. 1 crore by September 30, 2020, with the remaining Rs. 4 crore to be paid over the following fifteen months, all within eighteen months of the agreement's execution.The sale, however, was not executed as per the terms of the agreement. On May 24, 2022, the complainant filed an FIR alleging that despite paying Rs. 1 crore, the appellants refused to execute the property registry. The complaint accused the appellants of cheating, claiming that they acted with dishonest intentions, in collusion with the appellant's brother, to defraud the complainant. The complaint further alleged that the appellants were openly refusing to execute the registry despite repeated requests, stating, "Do whatever you want, we will not execute the registry in your name."In June 2023, the complainant filed a civil suit seeking specific performance of the contract. The suit, which is still pending, is based on the same Agreement to Sell and mirrors the facts stated in the FIR.The appellants approached the Rajasthan High Court seeking to quash the FIR. The High Court, however, declined to quash the proceedings, leading the appellants to approach the Supreme Court in the present appeal.The Supreme Court observed that the complaint did not reveal any elements or ingredients necessary to constitute the offences of cheating or criminal breach of trust under Sections 420 and 406 of the IPC. It is not the complainant's case that the appellants duped him to pay the advance amount and entered into an Agreement to Sell, the court noted. The court outlined that an offence under Section 420 requires (i) fraudulent or dishonest inducement, (ii) intention to deceive, and (iii) dishonestly inducing the person to deliver property or alter valuable security. The court concluded that the FIR did not demonstrate any fraudulent inducement or deceitful intention on the part of the appellants.“Mere non-registration of the sale or its refusal cannot amount to cheating. The delivery of the advance payment towards consideration was made in furtherance of an Agreement to Sell and it is not the case of the respondent that he was in anyway deceived or duped to make such payments to the appellants”, the court observed.The court held that the commercial transaction in question was consensual, with both parties agreeing to the sale and part consideration being paid. The refusal to register the sale did not amount to cheating, and there was no indication that the respondent had been deceived into making the payment, the court held.For an offence under Section 406, the accused must have been entrusted with property and must have dishonestly misappropriated or converted it for their use. “The amount paid towards consideration cannot be said to have been entrusted with the appellants by respondent no. 2 (complainant). Additionally, merely because the appellants are refusing to register the sale, it does not amount to misappropriation of the advance payment”, the court said.The payment made was part of the agreed consideration under the contract, and the refusal to register the sale did not constitute misappropriation, the court concluded.The Supreme Court concluded that the FIR was an attempt by the complainant...

Mere Non-Performance Of Agreement To Sell Doesn't Amount To Offence Of Cheating & Criminal Breach Of Trust: Supreme Court

Amisha Shrivastava

The Court said that a civil wrong can't be given a criminal colour to coerce a party to sell the property.

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