Court holds that cheating and false-statement charges were not made out where buyers failed to act on sale agreement within time and later turned to criminal case after civil suit.
The Supreme Court has quashed criminal proceedings arising out of a land transaction in Karnataka, holding that the dispute was essentially civil in nature and had been wrongly converted into a criminal case.
A Bench of Justices Satish Chandra Sharma and Nongmeikapam Kotiswar Singh set aside the Karnataka High Court’s order that had refused relief to Sudha Rakesh, who was named as an accused in FIR No. 121/2016. The Court held that since the FIR had already been quashed against the landowners, the petitioner, who was only a GPA holder and confirming party, could not be treated differently in the absence of any aggravated role.
The case concerned a parcel of land originally owned by Ganesh, which passed to his legal heirs after his death. On 5 October 2012, the landowners executed an agreement for sale in favour of the petitioner and also granted her a general power of attorney. Later, on 19 November 2012, the landowners, acting through the petitioner, entered into another agreement for sale with the complainant and another prospective buyer.
Under the agreement, the buyers were required to pay the balance consideration and complete the sale within seven months. However, they failed to do so and did not seek execution of the sale deed even after the stipulated period expired. Eventually, in February 2016, the landowners and the petitioner sold the property to a third party.
After that, the buyers filed a civil suit for specific performance and also lodged a criminal complaint alleging cheating, false statement in transfer documents, criminal conspiracy, and common intention. The Magistrate took cognizance, but the landowners later succeeded in getting the FIR quashed by the High Court. The petitioner’s separate quashing plea was, however, dismissed.
The Supreme Court found this distinction unsustainable. It observed that the sale deed was executed by the landowners themselves and the petitioner was only a confirming party. The Court said there was no material to show any higher degree of criminality against her than against the landowners, whose case had already been quashed.
On the charge of cheating, the Court held that the essential requirement of deception at the inception was missing. The amount paid under the agreement was not shown to have been induced by any fraudulent act. The subsequent sale to a third party nearly four years later could not, by itself, establish cheating.
The Court also rejected the invocation of Section 423 IPC, noting that there was no false statement as to consideration in the agreement or sale deed. It added that even if any such issue existed, it would affect the rights of the ultimate buyer, not the complainant under the earlier agreement.
Criticising the High Court’s reasoning, the Bench said it had relied on speculative factors such as the property being sold at a lower price and hypothetical questions about whether sale proceeds were transmitted to the landowners. The Court said these considerations were beyond the scope of the allegations.
Ultimately, the Supreme Court held that the criminal proceedings amounted to an abuse of process and that a purely civil dispute had been given criminal colour. It allowed the petition and quashed FIR/Crime No. 121/2016 and all consequential proceedings.
Bottom Line:
Agreement for sale not acted upon within stipulated time - Subsequent suit for specific performance followed by criminal complaint - Purely civil dispute cannot be given criminal colour - Where FIR against landowners was quashed, similarly placed GPA holder/confirming party was also entitled to same relief - Ingredients of cheating and Section 423 IPC not made out.
Statutory provision(s): Sections 420, 423, 120B, 34 of the Indian Penal Code, 1860
Sudha Rakesh v. State of Karnataka, (SC) : Law Finder Doc id # 2990933
