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2021 (10) TMI 1423 - SC - Indian LawsAlleged sale of flats in excess of the share agreed between the parties - breach of contract or constitutes an offence of cheating - necessary ingredients of offences punishable under Sections 406, 419 and 420 are prima facie made out or not - civil nature dispute or otherwise. Whether the necessary ingredients of offences punishable under Sections 406, 419 and 420 are prima facie made out? - HELD THAT - Upon a careful assessment of such facts, by no stretch can it be concluded that the Appellants herein have deceptively or intentionally tried to sell excess flats if any, as contended by Respondent No. 2. Here, it must also be borne in mind that subsequent to the revocation of GPA, it was the Appellants herein who had first resorted to arbitration proceedings on 02.03.16 for redressal of dispute between the parties, to which Respondent No 2 had accordingly filed his statement of objections dated 09.03.16. It was only on 29.03.16 that Respondent No. 2 had filed the FIR in question bearing Crime No. 185/2016 against the Appellants. Moreover, it was Respondent No. 2 who had withdrawn his prayer with respect to selling of four excess flats by the Appellants, only to pursue the same in civil proceedings. In the instant case, the actual question which requires consideration is not whether a criminal case could be pursued in the presence of a civil suit, but whether the relevant ingredients for a criminal case are even prima facie made out. Relying on the facts, clearly no cogent case regarding a criminal breach of trust or cheating is made out - The dispute between the parties, could at best be termed as one involving a mere breach of contract. Whether sale of excess flats, even if made, amounts to a mere breach of contract or constitutes an offence of cheating? - HELD THAT - This Court in the case of Hridaya Ranjan Prasad Verma Ors. Vs. State of Bihar Anr. 2000 (3) TMI 1105 - SUPREME COURT OF INDIA has observed Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. Thus, where the key ingredient of having a dishonest or fraudulent intent under sections 405, 419 and 420 is not made out, the case at hand, in our considered opinion is a suitable case necessitating intervention of this Court. Whether the dispute is one of entirely civil nature and therefore liable to be quashed? - HELD THAT - Existence of dishonest or fraudulent intention has not been made out against the Appellants. Though the instant dispute certainly involves determination of issues which are of civil nature, pursuant to which Respondent No. 2 has even instituted multiple civil suits, one can by no means stretch the dispute to an extent, so as to impart it a criminal colour. The High Court has erred in dismissing the petition filed by the Appellants under section 482 CrPC - the impugned order passed by the High Court of Karnataka is set aside - Appeal allowed.
Issues Involved:
- Whether the necessary ingredients of offences punishable under Sections 406, 419, and 420 are prima facie made out. - Whether the sale of excess flats, even if made, amounts to a mere breach of contract or constitutes an offence of cheating. - Whether the dispute is one of entirely civil nature and therefore liable to be quashed. Issue-wise Detailed Analysis: 1. Whether the necessary ingredients of offences punishable under Sections 406, 419, and 420 are prima facie made out: The judgment examines whether the appellants' actions constitute criminal breach of trust and cheating. Section 405 IPC defines criminal breach of trust as dishonestly misappropriating or converting another's property for one's own use. Section 420 IPC involves cheating and dishonestly inducing delivery of property. Both sections require 'dishonest intention' as a pre-condition. The court notes that the builder company sold four excess flats beyond its share, which Respondent No. 2 contends was unauthorized. However, the appellants argue that a subsequent MoU allowed them to sell additional flats to adjust payments made to Religare Finvest Ltd. The court finds no evidence of deceptive or intentional misconduct by the appellants, emphasizing that the appellants first resorted to arbitration and that Respondent No. 2 withdrew his claim regarding the excess flats from the arbitration proceedings. Thus, the court concludes that no prima facie case of criminal breach of trust or cheating is made out. 2. Whether the sale of excess flats, even if made, amounts to a mere breach of contract or constitutes an offence of cheating: The court refers to the case of Hridaya Ranjan Prasad Verma & Ors. Vs. State of Bihar & Anr. (2000) 4 SCC 168, which distinguishes between mere breach of contract and the offence of cheating. The key factor is the intention at the time of inducement. The court finds that the appellants did not have a fraudulent or dishonest intention at the time of the transaction. The dispute arises from differing interpretations of the agreements and MoU, rather than any fraudulent intent. Therefore, the court concludes that the case involves a mere breach of contract, not an offence of cheating. 3. Whether the dispute is one of entirely civil nature and therefore liable to be quashed: The court emphasizes that the existence of dishonest or fraudulent intention has not been established against the appellants. The dispute is fundamentally civil, involving contractual disagreements and arbitration proceedings. The court cites several precedents, including M/s Indian Oil Corporation Vs. M/s. NEPC India Ltd & Ors. (2006) 6 SCC 736, which caution against converting civil disputes into criminal cases. The court also refers to the landmark judgment in State of Haryana & Ors. Vs. Ch. Bhajan Lal and Ors. (1992) SCC (Cri) 426, which outlines categories where inherent powers under Section 482 CrPC can be exercised to quash proceedings. The present case falls within these categories, warranting intervention to prevent abuse of the process of law. Conclusion: The court sets aside the impugned order dated 13.08.2019 by the High Court of Karnataka. The FIR No. 185/2016 and proceedings in C.C.No. 20609 of 2017 against the appellants are quashed. The appeal is allowed.
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