2025 (4) TMI 1529 - SC - Indian Laws

Dismissal of appellant s petition under Section 482 of the Code of Criminal Procedure - appellant who was not the authorized officer at the relevant time of the auction and issuance of sale certificate under the SARFAESI Act can be held criminally liable for the alleged cheating and forgery in relation to the sale of mortgaged property or not - HELD THAT - It is evident that the sale certificate was issued by the appellant s predecessor and at the relevant time the appellant was not the authorized officer empowered to issue the certificate. In fact right from the initiation of the auction process to the issuance of sale certificate no direct involvement of the appellant can be seen as he was not the authorized officer during the said period and assumed the office of Manager only in November 2014. Therefore it becomes clear as day that the appellant had no role to play in the transaction leading to the FIR as he was not a signatory to the sale certificate. Since the appellant was neither the authorized officer at the relevant time nor responsible for the auction process or issuance of the sale certificate the allegations against him are baseless and do not attract criminal liability. The continuation of the instant criminal proceedings against the appellant shall lead to abuse of process of law cause nothing but miscarriage of justice and inordinately harass the appellant who has been implicated without due cause. Conclusion - The criminal proceedings against the appellant are quashed as he was not the authorized officer or involved in the auction or sale transaction at the relevant time and continuation of proceedings would constitute abuse of process and miscarriage of justice. Appeal allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court were:

(a) Whether the appellant, who was not the authorized officer at the relevant time of the auction and issuance of sale certificate under the SARFAESI Act, can be held criminally liable for the alleged cheating and forgery in relation to the sale of mortgaged property;

(b) Whether the criminal proceedings initiated against the appellant amount to an abuse of the legal process, given the civil dispute and consumer complaint already adjudicated;

(c) Whether the protection under Section 32 of the SARFAESI Act, which grants immunity to secured creditors and their officers for actions taken in good faith, applies to the appellant;

(d) Whether the concealment of acquisition of the property by the Tamil Nadu Housing Board and the sale of the property to the complainant without disclosure constitutes cheating and forgery under the Indian Penal Code;

(e) Whether the High Court was justified in refusing to quash the chargesheet and allowing the criminal proceedings to continue against the appellant.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Liability of the appellant who was not the authorized officer at the relevant time

The relevant legal framework included Rule 2(a) of the Security Interest (Enforcement) Rules, 2002, which defines an "authorized officer" as an officer not less than a chief manager or equivalent, authorized by the secured creditor to exercise rights under the SARFAESI Act. The appellant's appointment as Manager at the Head Office was only on 03.11.2014, whereas the auction and sale certificate issuance occurred in 2012 by his predecessor.

The Court noted that the appellant was only an Assistant Manager at the time of the auction and had no authority to initiate SARFAESI proceedings or issue sale certificates. There was no evidence of his involvement in the auction process or signing the sale certificate. The Court reasoned that criminal liability cannot be fastened on a person who was not empowered or involved in the transaction. The appellant's role post-dated the events leading to the FIR, and thus, continuation of criminal proceedings against him would be an abuse of process and cause miscarriage of justice.

Competing arguments by the prosecution that the appellant was involved were rejected on the basis of documentary evidence and timelines. The Court concluded that the allegations against the appellant lacked foundation and did not attract criminal liability.

Issue (b): Abuse of legal process and civil dispute resolution

The appellant argued that the consumer complaint filed by the complainant had been dismissed by the District Consumer Disputes Redressal Commission, which found that the complainant was aware of the acquisition process before participating in the auction. The appellant contended that the criminal proceedings were an attempt to harass and pressurize him to return the sale consideration, despite the complainant enjoying possession of the property.

The Court observed that while civil remedies and consumer complaints provide a forum to resolve disputes, they do not automatically preclude criminal proceedings if allegations of cheating and forgery are prima facie made out. However, in this case, since the appellant was not involved in the auction process, the criminal proceedings against him would amount to an abuse of process. The Court balanced the interests and found that quashing the proceedings was necessary to prevent harassment.

Issue (c): Applicability of Section 32 of the SARFAESI Act

Section 32 of the SARFAESI Act provides immunity to secured creditors and their officers for actions taken in good faith under the Act. The appellant relied on this provision and a precedent where the Court held that once SARFAESI proceedings are initiated and concluded, criminal proceedings on the same subject matter cannot be entertained.

The prosecution countered that the appellant's actions were not in good faith, citing concealment of the property's acquisition status and misrepresentation to the auction purchaser as evidence of fraudulent conduct. Therefore, immunity under Section 32 was not applicable.

The Court, however, found that since the appellant was not the authorized officer or involved at the relevant time, the question of good faith or bad faith in his actions did not arise. Thus, the immunity provision was not determinative in his case, and the focus remained on his lack of involvement.

Issue (d): Allegations of cheating and forgery due to concealment of acquisition

The FIR alleged that the accused suppressed the fact that the property was already acquired by the Tamil Nadu Housing Board and sold it to the complainant by inducing her to participate in the auction. The prosecution invoked Sections 197, 417, 418, 467, 468, and 420 of the IPC, covering cheating, forgery, and issuance of false certificates.

The Court noted that the complainant was unaware of the acquisition until she approached the Sub-Registrar for registration. The prosecution argued that the concealment amounted to cheating and forgery. The respondent relied on Section 55 of the Transfer of Property Act and relevant precedents to assert that the sale could not be on an "as is where is" basis to absolve responsibility.

However, as regards the appellant, the Court found no evidence of his involvement in the concealment or sale process. The allegations were directed at the authorized officer and the branch manager at the time. Hence, the Court did not find the appellant prima facie guilty of these offences.

Issue (e): Justification of the High Court's refusal to quash chargesheet

The High Court had refused to quash the chargesheet against the appellant, holding that a prima facie case was made out and it was not a fit case for quashing at the threshold. The Court had observed that the appellant dishonestly suppressed the acquisition and made false promises, thereby cheating the complainant.

On appeal, the Supreme Court carefully examined the timeline and the appellant's role. It found that the High Court had erred in holding the appellant liable without considering that the appellant was not the authorized officer at the relevant time and had no role in the auction or issuance of sale certificate. The Supreme Court concluded that the continuation of proceedings against the appellant would be an abuse of process and quashed the chargesheet against him.

3. SIGNIFICANT HOLDINGS

"It is evident that the sale certificate was issued by the appellant's predecessor and, at the relevant time, the appellant was not the authorized officer empowered to issue the certificate. In fact, right from the initiation of the auction process to the issuance of sale certificate, no direct involvement of the appellant can be seen as he was not the authorized officer during the said period and assumed the office of Manager only in November, 2014."

"Since the appellant was neither the authorized officer at the relevant time nor responsible for the auction process or issuance of the sale certificate, the allegations against him are baseless and do not attract criminal liability."

"The continuation of the instant criminal proceedings against the appellant shall lead to abuse of process of law, cause nothing but miscarriage of justice and inordinately harass the appellant who has been implicated without due cause."

Core principles established include the necessity of establishing the accused's role and authority at the relevant time before imposing criminal liability in cases arising from SARFAESI Act proceedings, and the protection against abuse of legal process by initiating criminal proceedings against persons not involved in the alleged wrongdoing.

Final determination: The criminal proceedings against the appellant were quashed as he was not the authorized officer or involved in the auction or sale transaction at the relevant time, and continuation of proceedings would constitute abuse of process and miscarriage of justice.

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