In CRIM. APPEAL No. 581 of 2023-SC- Breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at beginning of transaction: Supreme Court
Justices Abhay S. Oka & Rajesh Bindal [01-03-2023]

Read Judgment: Sarabjit Kaur Vs. The State Of Punjab & Anr 

Tulip Kanth

New Delhi, March 3, 2023: Criminal Courts are not meant to be used for settling scores or pressurise parties to settle civil disputes,the Supreme Court has observed while quashing the FIR registered u/s 420 IPC in a case where a civil dispute was being converted into a criminal one to put pressure on the appellant for return of the amount allegedly paid. 

“The entire idea seems to be to convert a civil dispute into criminal and put pressure on the appellant for return of the amount allegedly paid. The criminal Courts are not meant to be used for settling scores or pressurise parties to settle civil disputes. Wherever ingredients of criminal offences are made out, criminal courts have to take cognizance”, the Division Bench of Justice Abhay S. Oka and Justice Rajesh Bindal asserted.

The appellant had put forth the case that the appellant had entered into an agreement to purchase a plot with Malkit Kaur, wife of Surender Singh resident of Dhillon Colony, in Ludhiana District of Punjab in the year 2013. 

On the basis thereof, the appellant entered into an Agreement to Sell the same to Sarabjit Kaur wife of Darshan Singh (second respondent). It was categorically mentioned in the Agreement to Sell that at present the vendor was not the owner of the property. The appellant received a sum of Rs 5 lakh as earnest money and the date of registration of sale deed was fixed as June 25, 2014. 

The date for execution of sale deed was extended on receipt of additional sum of Rs 75,000. A complaint was filed by Darshan Singh (complainant/ second respondent), son of Jangir Singh with reference to the same alleged Agreement to Sell however against property dealers Manmohan Singh, son of Prakash Singh and Ranjit Singh alias Billa, son of Pal Singh.In this complaint, reference was made to two other transactions entered into by Darshan Singh and prayer was that an amount of Rs 29,39,500 should be recovered from the property dealers. 

The aforesaid complaint was investigated and it was opined that the dispute being civil in nature, no police action was required. Darshan Singh made another complaint with the same allegations without disclosing the fate of his earlier complaint. Referring to the earlier enquiry made, the aforesaid complaint was consigned to record. Thereafter, another complaint was made by Darshan Singh against the appellant, Ranjit Singh and Manmohan Singh. It was on the basis thereof that F.I.R. in question was registered under Sections 420, 120-B and 506 IPC against the appellants.

The Bench took note of the fact that  nothing was placed on record by the complainant or the State to show that besides filing of the criminal complaint, the second respondent had initiated any civil proceedings for execution of sale deed on the basis of Agreement to Sell or in the alternative return of the earnest money.

“On the facts of the case in hand, it is evident that the effort of respondent No.2 was merely to put pressure on appellant while involving her in a criminal case to get his money back whereas there is nothing pleaded that respondent No. 2 that he was ever ready and willing to get the sale deed registered”, the Bench said while also adding that there was no effort made by the second respondent or the vendee in the Agreement to Sell to initiate any civil proceedings to get the sale deed executed on the basis of the Agreement to Sell. 

The Bench further stated, “A breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings.”

From the facts available on record, it was evident before the Top Court that the second respondent had improved his case ever since the first complaint was filed in which there were no allegations against the appellant rather it was only against the property dealers which was in subsequent complaints that the name of the appellant was mentioned. 

On the first complaint, the only request was for return of the amount paid by the second respondent. When the offence was made out on the basis of the first complaint, the second complaint was filed with an improved version making allegations against the appellant as well which was not there in the earlier complaint. 

Noting that the complaint in question on the basis of which F.I.R. was registered,  was filed nearly three years after the last date fixed for registration of the sale deed, the Bench held that allowing the proceedings to continue would be an abuse of process of the Court and  allowed the petition filed by appellant for quashing of F.I.R.