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Breaking: Supreme Court Dismisses Andhra Govt.'s Plea Against Quashing Of Criminal Cases Related To Alleged "Amaravati Land Scam"

Mehal Jain
19 July 2021 3:03 PM GMT
Breaking: Supreme Court Dismisses Andhra Govt.s Plea Against Quashing Of Criminal Cases Related To Alleged Amaravati Land Scam

In a blow to Andhra Pradesh Chief Minister Jagan Mohan Reddy, the Supreme Court on Monday dismissed the state's SLPs against the quashing of criminal cases filed in connection with the alleged 'insider trading' in land transactions at Amaravati.The bench of Justices Vineet Saran and Dinesh Maheshwari was hearing the SLPs at the instance of the AP state government against the January...

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In a blow to Andhra Pradesh Chief Minister Jagan Mohan Reddy, the Supreme Court on Monday dismissed the state's SLPs against the quashing of criminal cases filed in connection with the alleged 'insider trading' in land transactions at Amaravati.

The bench of Justices Vineet Saran and Dinesh Maheshwari was hearing the SLPs at the instance of the AP state government against the January 19 judgment of the Single Judge of the AP High Court observing that private sale transactions cannot be criminalised and that the concept of the offence of "insider trading", which is essentially an offence in the field of stock market relating to selling and buying the securities and bonds, cannot be applied to the offences under Indian Penal Code and cannot be read into Section 420, IPC or into any provisions in the scheme of IPC. The state had filed criminal cases alleging that the respondents before the Supreme Court had purchased lands in Amaravati after being privy to the information from the then-Chandrababu Naidu government that the area was being developed as state capital after the bifurcation of the erstwhile State of Andhra Pradesh in 2014.

On Monday, Senior Advocate Dushyant Dave, for the state, strenuously argued that provisions of section 418, IPC read with section 55(5) of the Transfer of Property Act would be attracted in the instant case, which has been overlooked by the High Court.

"As regards section 418, we may observe that the said provision would not be attracted in the facts of the present case. There is no question of any loss being caused to any person or to the sellers or of any cheating by the buyers. Neither by law nor by a legal contract were the buyers obliged to disclose any facts. In any case, the said question was neither argued before the High Court nor are there any pleadings in this regard in this petition nor has this ground been taken. So this argument is noted only to be rejected. There was no such relationship between the buyer and seller for which the buyer was bound to protect the seller", said the bench on Monday.

Secondly, it was argued that in a criminal case, the High Court need not have gone into the facts of the matter and should have left it to the investigating agency and the trial court to see whether any criminal act was involved.

"As regards the submission that the High Court ought not to have gone into the facts of the case and arrived at factual findings, we find that without considering the facts of the case, the question whether any criminal case is made out could not have been decided. Then, in no case can the court go into the question as to whether the FIR is to be quashed or not. Even considering the law laid down in Bhajan Lal, in a petition for quashing, the court has to see the averments in the FIR to determine if a criminal case is made out or not. There is no perversity or illegality in the findings recorded by the High Court", said the bench on Monday, dismissing the SLPs.

"Five sets of SLPs have been filed by the state of Andhra Pradesh against the buyers of the properties, who are petitioners in the High Court, challenging the judgement of the High Court by which FIRs under sections 420, 409, 406 and 120 B, IPC and all proceedings initiated pursuant thereto have been quashed. Very briefly, the facts of this case are that the respondent-buyers had purchased land from third parties- from sellers who were not party to these proceedings. The said sales were executed sometime in 2014-15. The FIRs have been lodged on 16.10.2020 on the basis of the complaint dated 7.9.2020. The main allegation in the FIR is that the buyers were in the know of the fact that the capital city will be created at the location where the land has been purchased and thereupon, the value of the land would increase and, not disclosing the aforesaid fact, they purchased the said land from the sellers and, as such, cheated the sellers. By the impugned judgement, the High Court has first considered the aspect of locus standi of the de facto complainant who lodged the report with the police, as the complainant was neither the seller nor any other party. However, observing that the concept of locus does not arise in criminal proceedings, the High Court noted the fact that the de facto complainant had lodged the FIR after a lapse of six years. The concept of insider trading in property dealings has also been dealt with by the High Court and has been found to be alien to proceedings under IPC, observing it to be a concept only in company stock. The High Court also found that the the right to acquire and own property is a constitutional right, legal right and human right, so no criminal liability can be fastened to any persons who purchased lands in the proposed capital region. The High Court was of the opinion that sections 420 and 415 of the IPC would not be attracted. After making a recital of the sale deeds, in view of the version of the sellers that they were misinformed about the value of the property, the High Court delved into details with regard to the information relating to location of the capital which, according to the finding of the High Court, was very much in public domain. The High Court also discussed the question of the applicability of sections 406 and 409 of the IPC to the facts of the case. It opined that the same would not be attracted. It was found section 120B would also not be attracted. After considering the law laid down by this court in Bhajan Lal and other cases, the High Court found that it was a fit case for quashing the FIR and the proceedings initiated in pursuance of the same", recorded the bench on Monday.

The courtroom exchange as it transpired on Monday was as follows:

Mr. Dave had urged that in the impugned judgement, section 418 of IPC and section 55(5) of the TPA have been completely overlooked by the High Court, which he has termed a "very serious mistake". Section 418 provides that Whoever cheats with the knowledge that he is likely thereby to cause wrongful loss to a person whose interest in the transaction to which the cheating relates, he was bound, either by law, or by a legal contract, to protect, shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both. Section 55 deals with right and liabilities of the buyer and the seller and clause (a) of its Paragraph (5) stipulates that the buyer is bound to disclose to the seller any fact as to the nature or extent of the seller's interest in the property of which the buyer is aware, but of which he has reason to believe that the seller is not aware, and which materially increases the value of such interest.

He indicated the impugned judgment where the High Court had observed that the necessary ingredients which are essential for the offence of cheating under section 420, IPC, being false representation made to deceive one to deliver property resulting in loss to the said person, are conspicuously absent in the facts of the case.

"418 straightaway brings in the offence of cheating. The entire case of the complainant is that the buyer was fully aware of the exact location of the new capital but the sellers were not aware. This finds full support in the judgement of the High Court- In context of the news report relied upon by the High Court, the Single Judge states that 'the above news also bears ample testimony of the fact that there is widespread speculation and anticipation among the people in the public circle that the capital city is going to be located between the Krishna and Guntur Districts by the side of Krishna river and by the side of the highway'. So it was anticipated, it was speculated! And while the buyers were clearly aware because of their proximity to the government, the sellers were not! Section 55 says you have an obligation to tell the seller and if you don't, it is fraudulent. Then, section 418 comes into play because the buyer was obliged. Section 418 makes it an offence. It is cheating per se", Mr. Dave had argued.

The grounds on which the FIR is liable to be quashed under Section 482 CrPC and under Article 226 of the Constitution of India are enumerated by the Supreme Court in the case of State of Haryana v. Bhajan Lal, which was relied upon by the High Court in concluding that "in the said facts and circumstances of the case, the prosecution of the petitioners for the alleged offences for which the FIR was registered is wholly unjustifiable and clearly opposed to all cannons and basic tenets of criminal law and it amounts to sheer abuse of process of law warranting interference of this Court in exercise of its inherent powers under Section 482 Cr.P.C. to quash the same"

"Right from the 50s, Your Lordships have said that embarking on a factual enquiry is not the job of the High Court under 482. That is for the trial court to do. Appreciation of facts is impermissible as per law declared by Your Lordships' court. Bhajanlal is not a license for every High Court under 482 to go into complaints and start re-examination of facts, taking away the power of police and trial court", argued Mr. Dave.

He relied on decisions of the Supreme Court to contend that the power of quashing may be exercised only in the rarest of rare cases so as to not scuttle prosecution in courts. "This is not the rarest of rare case! There is an alternative remedy- once the investigation is completed and the report filed, then there is a right of the accused to move for discharge. Quashing was unwarranted by the facts of this case", he contended.

He further argued that merely because it is also a case of breach of contract does not warrant the exercise of 482 power. He cited a constitution bench decision of the apex court to submit that even if it is a civil dispute, from the same facts, a criminality may arise, and both proceedings can continue together. "Your Lordships have said that a civil suit drags on for years and it is undesirable that the criminal prosecution should wait until such time by when everybody has forgotten about the crime. Your Lordships have said that the criminal justice system should be swift and the guilty should be punished while the events are still fresh in the public mind. This is where the High Court has fallen into serious error. There is no point to scuttle the case at the threshold stage, however impressed you may be. It may be true that they are innocent but let the trial court and the investigation decide this", he advanced.

"Today, the value of these lands is 20 times more than what was paid. These are poor farmers we are dealing with. Public interest demands that they be protected. We are not saying anybody is guilty at this stage. The only question is should the investigation continue. We are at the admission stage right now (before the Supreme Court); it does require consideration, and atleast a case is made out for issuance of notice", he pleaded.

Senior Advocate Paras Kuhad, for the de-facto complainant, adopted the submissions made by Mr. Dave. In addition, he said that the High Court wrongly relied on the 1905 decision of the Allahabad High Court in Emperor v. Bishen Das, which, according to him, had not been approved by the division bench of the High Court in 1926. Noting that in Bishen Das, it was held while dealing with Section 415 IPC that sale of immovable property without mentioning encumbrances does not amount to cheating unless it is shown that the accused was asked by the vendee whether the property was encumbered and he said that it was not, the AP High Court had concluded in the impugned judgment that "when there is absolutely no legal obligation on the part of the buyer to disclose the said fact to the seller at the time of sale of the land that it does not amount to dishonest concealment of fact as contemplated under Explanation appended to Section 415 IPC"

Section 415 defines "cheating"

"This test that unless there is a statutory duty to make disclosures, the failure to make disclosure may have civil consequences but it may not constitute an offence under 415, is the narrow test. This narrow test has been found to be incorrect and since 1919 there are four different judgements of four different high courts, holding consistently for the last 80 years that the test is not whether there is a duty to disclose. The test of the High Courts is whether the intention was there to deceive, the intention to deceive is the key factor. There is a hundred years' consistent stand that the decision in Bishen Das laid down the law incorrectly and that is not the interpretation of 415. As per Bishen Das, the interpretation of expression 'deception' occurring under the Explanation to section 415 is completely independent of section 55. Further, the broader test laid down by the Supreme Court is the test of relevance of information concealed", he had argued.

He pressed that there was concealment by the respondent-buyers with regard to the location of the capital city and thus, the price of the land sold was much higher.

"The High Court says the information was in public domain since June 2014. As per the news items which the court relies upon, the first time the speculation happened was on October 21, 2015. The transactions in question are of June, July, August, September and October. For the first time, the capital region came to be notified by the government notification in December, 2014. There might have been disclosures regarding some villages they were not binding and the government was free to change them. The conclusive determination according to the published information happened on 30.12.2014. These are not the facts on the basis of which the court could have held no case is made out", Mr. Kuhad had urged.

Senior Advocate Shyam Diwan, for some of the respondent-buyers on caveat, argued that the judgement is extremely fair and well-balanced. "When we delve below the surface, we will find that there is a gross abuse of the process and the High Court was duty-bound to interfere in the facts and circumstances. One, September 7, 2020 is the date of the complaint and October 16, 2020 is the FIR. Two, the complainant is not the seller of the land at all. Locus, though irrelevant in criminal matters, becomes an important consideration when you are examining the matter under Article 136. This is not a situation where the parties who sold the land are complaining at all. This is a case where some third party on the basis of some so-called skimpy investigation six years down the line makes a complaint. And three, the complaint is in relation to a set of transactions which took place in 2014", he had advanced.

"The linchpin of the judgement will be the basis of information. If this is information which is generally understood and generally available, where is the question of any cheating or breach of trust? Insider trading and insider information is totally alien to the process! Of course, there was some degree of speculation. The people did not know the exact property till the notification came. But that does not mean that the information about the general location of the land was not in the public domain", he continued.

He urged that the buyer's statutory obligations under section 55 of the TPA are extremely limited- "If you are in a fiduciary relationship with the seller or have some special knowledge about the person's entitlement, like if the buyer knows that the mortgage, which the seller believes encumbers the property, has already been redeemed and that his title is complete, then you are under a duty to tell the seller.

I would respectively submit that the clauses under section 55 are completely alien so far as this FIR is concerned. There is absolutely no foundation or basis, nothing to suggest a deficient interest on the part of the seller which the buyer was duty-bound to disclose"

"It is surprising that the state of Andhra Pradesh is coming up in a matter like this and canvassing the position so strongly when the transactions took place in 2014 and God knows how many onward transactions have taken place subsequently", he concluded.

Senior Advocate Siddharth Luthra, also for the respondent-buyers on caveat, advanced that clearly sections 409 and 406 cannot be attracted as there was no entrustment of any property and hence, no breach of trust. "418 not invoked in the FIR. But let's not labour on that point. 418 requires the ingredients of 415. The High Court noted that as per the recitals of the sale deeds, the people were selling their lands for their own needs and the buyers did not approach the sellers of the land. There was no civil suit filed, they never went back to the registrar to say that the deed was registered under pressure or coercion. This is not land acquisition; this is voluntary, it is the land pooling scheme. After the government changed, there has been a flurry of prosecutions against certain people. 415 can by no means override a registered sale deed where both parties had agreed. If 415 is not made out, 418 and 420 all failed", he argued.

"If I buy from a person who believes he is not a freeholder, but I know that person has the right, then there will be an obligation. But in my case, it is very clear there is a buyer and a seller and this exercise of where the capital was to be located was in the public domain. The matter was debated in the Parliament in February, 2014, it is part of the manifesto of the party which comes to power at that point, it is part of the news report!", he concluded.

Mr. Luthra went on to discuss Paragraph (6) of section 55 which says that The buyer is entitled—(a) where the ownership of the property has passed to him, to the benefit of any improvement in, or increase in value of, the property. "The principle in 55 is that the buyer must beware and must be aware of the nature of interest that he is buying. Tomorrow, whether the value goes up or down, the buyer would have that value because the title has been transferred to them", he said.

In his rejoinder, Mr. Dave contended that under section 154 of the CrPC, anybody can bring information about an offence. Secondly, it was on April 23, 2015 that the actual notification was issued by which the government for the first time declared the region between Vijayawada and Guntur district as the capital city. Thirdly, he urged that the state government had changed only in 2019 and that is why the complaint is late as the allegation is against officers of that government. "So delay can't stand in my way especially in a criminal trial", was his case.

CORAM: Justice Vineet Saran and Dinesh Maheshwari
CITATION: LL 2021 SC 316

Click here to Read/Download Judgment

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