Court’s Decision
The Bombay High Court quashed a First Information Report (FIR) filed in 2015 under Sections 406, 420, and 506 of the Indian Penal Code, finding that no ingredients of the alleged offences were made out. The Court observed that the FIR was filed as a pressure tactic in a civil dispute over return of consideration money paid in a failed land deal. The High Court held:
“The failure to return money received in a transaction does not by itself constitute an offence under Section 406 or 420, unless fraudulent intent is present from the inception.”
Facts
The matter stemmed from a 2014 transaction between the complainant and the petitioner for purchase of certain land. The complainant paid approximately ₹40 lakhs towards the proposed transaction. However, due to lack of necessary permissions and approvals, the transaction could not be completed. The petitioner cited inability to procure required clearances and expressed willingness to refund the amount.
Subsequently, the complainant filed a complaint in 2015 alleging that the petitioner had induced him into paying money with no intention of completing the transaction and thus committed offences of cheating, criminal breach of trust, and criminal intimidation.
After registration of FIR and prolonged investigation, no chargesheet was filed for over 8 years. The petitioner approached the High Court under Section 482 of the Code of Criminal Procedure seeking quashing of the FIR.
Issues
- Whether the allegations in the FIR, even if taken at face value, disclosed the commission of any cognizable offence under Sections 406, 420, or 506 of the Indian Penal Code.
- Whether a civil dispute relating to refund of money in a land transaction can give rise to criminal proceedings.
- Whether continuation of investigation after inordinate delay without filing chargesheet amounted to abuse of process of law.
Petitioner’s Arguments
The petitioner contended that the FIR arose purely from a commercial transaction which failed due to non-availability of land use permissions. There was no dishonest intention at the inception of the transaction, and he had made efforts to refund the amount. The transaction was governed by an agreement, and the remedy, if any, lay in a civil suit for recovery of money.
He submitted that the complaint was filed after the transaction failed and was intended to pressurize him into paying up under threat of criminal proceedings. He also highlighted the fact that although the FIR was registered in 2015, no chargesheet had been filed till 2023, thereby violating his right to speedy investigation and fair trial under Article 21 of the Constitution.
Respondent’s Arguments
The complainant claimed that the petitioner lured him into a land transaction and took a large sum of money under the pretense of having control over the property. It was alleged that from the beginning, the petitioner never intended to complete the transaction and deliberately withheld the amount. The complainant also claimed that he was threatened when he demanded his money back and hence Section 506 IPC was invoked.
The complainant opposed the quashing, arguing that the investigation had not yet concluded and the matter required trial.
Analysis of the Law
The Court extensively examined the ingredients of the offences invoked in the FIR:
- For an offence under Section 420 IPC (cheating), the prosecution must establish that the accused had dishonest or fraudulent intention at the time of making the promise or representation.
- For Section 406 IPC (criminal breach of trust), it must be shown that there was entrustment of property and dishonest misappropriation of that property.
- Section 506 IPC (criminal intimidation) requires proof of a deliberate threat with intent to cause alarm.
The Court noted that none of these ingredients were even prima facie established in the complaint. There was no evidence of fraudulent intent at the inception of the transaction. The allegations revealed at best a failed business transaction.
Precedent Analysis
The Court relied on several Supreme Court precedents:
- Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168: It was held that fraudulent or dishonest intention must exist at the inception of the transaction to attract the offence of cheating.
- Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736: The Supreme Court cautioned against the misuse of criminal law in purely civil disputes.
- G. Sagar Suri v. State of U.P., (2000) 2 SCC 636: The Court emphasized that criminal prosecution should not be used to settle private disputes or as a pressure tactic.
- Paramjeet Batra v. State of Uttarakhand, (2013) 11 SCC 673: The Supreme Court reiterated that mere breach of contract, without mens rea, does not constitute cheating.
The Court held that the present case fell squarely within the four corners of these precedents, where allegations of civil wrongs were sought to be given a criminal color.
Court’s Reasoning
The Court reasoned that the essence of cheating lies in the intention of the accused. Here, there was no material to show that the petitioner did not intend to return the money or that he misrepresented facts at the time of accepting payment. The High Court also observed that the delay of 8 years without filing chargesheet amounted to denial of justice and constituted an abuse of process.
It concluded that the complainant had civil remedies available and had chosen to initiate criminal proceedings only to exert undue pressure. The ingredients of the offences were not made out even prima facie, and allowing the FIR to survive would serve no purpose.
Conclusion
The Bombay High Court allowed the petition and quashed the FIR and all related proceedings. The Court observed that criminal law should not be used as a tool to settle scores in civil disputes and reiterated that:
“A person should not be made to undergo criminal trial merely because a transaction did not fructify.”
Implications
This judgment reinforces the distinction between civil and criminal remedies and prevents misuse of criminal law for recovery of money in failed business deals. It reiterates that criminal prosecution must be founded on clear allegations of intent to deceive or misappropriate. The ruling is also significant in asserting the right to speedy investigation and curbing harassment due to prolonged pendency of cases.
Cases Referred
- Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168 – Emphasized the requirement of fraudulent intent from inception.
- Indian Oil Corporation v. NEPC India Ltd., (2006) 6 SCC 736 – Civil disputes must not be criminalized.
- G. Sagar Suri v. State of U.P., (2000) 2 SCC 636 – FIRs in commercial matters must be scrutinized.
- Paramjeet Batra v. State of Uttarakhand, (2013) 11 SCC 673 – Cheating requires mens rea; civil disputes must not masquerade as criminal offences.
FAQs
1. Can a person be prosecuted under criminal law for failing to return money in a land deal?
Not unless there is fraudulent intention or misrepresentation from the beginning of the transaction.
2. What does it take to establish a case under Section 406 IPC?
There must be entrustment of property and dishonest misappropriation, not just failure to return money.
3. Can the High Court quash FIRs in civil-commercial disputes?
Yes, under Section 482 CrPC, FIRs can be quashed when they are manifestly an abuse of process and no criminal offence is disclosed.
