Supreme Court Quashes FIR in Bengaluru Property Dispute: Calls It Civil Matter Without Criminal Element Bench Led by Justices Sudhanshu Dhulia and Ahsanuddin Amanullah

The case deals with the protracted dispute of the property located in Bengaluru and involves both the civil and criminal sides of the case. These appealants are the relatives of the original property owners who had a litigation track record over the land with 1978 and 1982 being acquisition attempts by Bangalore Development Authority (BDA). The Government de-notified the land in the year 1992 but this was also challenged and the order of de-notification was quashed.

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It was a complainant, Keerthiraj Shetty, who was taken into the picture as a nominee of one Ravishankara Shetty, who was lending a helping hand to the appellants to fight against his legal causes. On or about November 30th 2015, the appellants entered into separate documents of Agreement to Sell (ATS) and General Power of Attorney (GPA) in favor of the complainant with a consideration of Rs. 3,50,000/-,000/-. At this, a deposit was made to the tune of Rs. 2,00,000/-. The complainant later acted to title-clear the property and this is what involved the writ petitions file. Once the title of the property got backed up as being marketable, the complainant went to the appellants to settle the sale but they declined to respect the ATS. The appellants thereafter withdrew the GPA, signed a release deed and later transferred property in the form of a gift to one of the appellants K.V. Krishnaprasad.

That prompted the complainant to pursue a civil claim (O.S. No. 4780/2022) with regards to specific performance of the ATS and with a view to invalidate the further actions performed. At the same time, a second complaint report (PCR) under Section 200 CrPC was filed by the complainant, which was subsequently passed on to the police and FIRs were registered under numerous offences of the Indian Penal Code (IPC), which included that related to cheating and criminal breach of trust.

Clash of Civil and Criminal Law

The main question to be answered by the Supreme Court was whether the criminal case against the appellants should proceed especially given that there was already a civil case on a similar issue. The appellants had maintained that the matter was not seen as a criminal case at all and that the complaint did not contain the ingredients of a criminal offence such as cheating, criminal breach of trust. They argued that the intention to cheat was never dishonest since its inception by the statement of the complainant that the cheating was commenced “after the increase in the market value.” The precedents too were used to show that a breach of a promise or a contract is not of a criminal nature. The appellants were also keen to point out that the High Court had not considered whether the offence ingredients of the said offences were made out properly.

The complainant and the State of Karnataka, however, stated that the complaint, at first glance, stated the committal of criminal offenses and thus the investigation and trial was legitimized. They cited facts that were realised at the investigation that indicated that the respondents had a fraudulent motive in the mind right at the start and that they had defrauded the complainant into assisting them in clearing the title of a property. They (alongside) insisted that the revocation of the GPA, as well as awarding the property as a gift thereafter was a calculated move to defraud the complainant of his rights. In his case, analyzing it, the Court (SC) observed that an individual cannot be slapped with separately criminal breach of trust (Section 406 IPC), and cheating (Section 420 IPC) in regard to the same transaction because they are mutually exclusive. This pointed to one of the most basic legal provisions that were centrally involved in the case.

Examination of Provisions and legal Principles

The court had to determine whether the facts mapped out in the case met the legal definitions of the crimes that were charged. The pertinent provisions of the IPC are:

• Section 120B (Criminal Conspiracy): This section concerns the arrangement of persons consisting of two or more individuals to do something illegal or to do something legal with something illegal. What the court had to decide was whether the behavior of the appellants when combined constituted an attempt to commit a conspiracy to commit the said crimes.
• Section 406 (Punishment for Criminal Breach of Trust): Key to the offence is the mistreatment of misappropriation or conversion of property placed in the custody of an individual in an illicit way. The most important is the umbrancy of trust. The appellants presented their arguments on the grounds that no entrustment of property occurred and this charge could not be applied.
• Section 420 (Cheating and Dishonestly Inducing Delivery of Property): In order to convict a person of an offense of cheating, there must be initial dishonest persuasion with the resultant delivery of property by the person. The primary line of argument presented by the appellants was that the culpable intent did not exist at the inception of the original agreement since the specific crime of cheating entailed that the act is carried out after the market value is on the rise, which is a critical component in the commission of such a crime.

The ruling also brought out about the legal aspect of whether a civil rather than a criminal-natured dispute could be transformed into a criminal one. The appellants banked on the fact that further breach of a promise cannot solely be reached upon as a criminal offence of cheating or criminal breach of trust. The Supreme Court has been cautious in making the distinction between a mere violation of contract, which is a civil wrong, on the one hand, and the criminal acts, which demand bad faith in intent at the outset. The case would represent a very huge influence on the broader ongoing criminal prosecution and the pending civil action wherein the principles of when a dispute between the parties who are engaged in a contractual relationship should be adjudicated or solved within the criminal justice system are drawn.