In CRM-M-12548-2022-PUNJ HC- Financial dispute based upon breach of contract is of civil nature and should not be given criminal flavour, says P&H HC while rejecting bail plea of man accused of duping vendees of Rs 2 crore in land deals Justice Jasgurpreet Singh Puri [28-03-2022]

Read Order: Sanjay v. State of Haryana and another

Monika Rahar

Chandigarh, April 14, 2022: While dealing with an application for the grant of anticipatory bail to the petitioner who was accused of procuring Rs 2 crore to his credit from three different vendees in respect of the same parcel of land, the Punjab and Haryana High Court has held that a financial dispute between the parties based upon breach of contract is essentially of a case of civil nature and the same should not be given any criminal flavour. 

However, the Bench of Justice Jasgurpreet Singh Puri asserted that it does not mean that the provisions of Section 420 or 406 IPC cannot be invoked at all. There can not be a straight-jacket formula for the same as the subject matter of each and every case depends upon the facts and circumstances, asserted the Court. 

The bail plea was rejected in this case owing to the fact in the subsequent agreements i.e. the second and third agreement, the petitioner did not disclose the factum of the first agreement to sell, thus fulfilling the element of deception at the time of such execution as also while taking the earnest money. 

The petitioner approached the Court with a pre-arrest bail petition under Section 438 of the Code of Criminal Procedure, 1973 in respect of an FIR registered under Sections 406, 420, and 34 IPC against the petitioner. This FIR was lodged on the basis of orders passed by the Illaqa Magistrate under Section 156(3) of Cr.P.C. 

As per the prosecution case, the petitioner who is the owner of the property executed an agreement to sell with one Ishwar Singh and received a certain amount as earnest money from him. This agreement did not crystallize into a sale deed. Again, the petitioner executed an agreement to sell for which he received a certain sum as earnest money. This agreement to sell also did not mature into a registered sale deed, leading to the execution of a third agreement to sell with complainant Jaswant Singh. 

For this agreement, the petitioner received an amount of Rs. 70,00,000/- as earnest money. The last date of execution of the sale deed was mentioned as July 02, 2021, but thereafter the same was extended to October 02, 2021. This agreement to sell also did not crystallize into the registration of sale deed and, therefore, the present FIR has been lodged against the present petitioner. 

The Counsel for the petitioner, while admitting the three agreements argued that the present subject matter of the case pertained to civil liability if any and, therefore, the lodging of the FIR under Sections 420, 406 and 34 IPC was an abuse of the process of law. He further submitted that so far as the first agreement to sell is concerned, the last date for execution of the sale deed had expired and the proposed vendee did not get the execution of the sale deed conducted and, therefore, the earnest money stood forfeited. 

Regarding the second agreement, the Counsel submitted that although a certain sum of money was received as earnest money the proposed vendee did not come forward for the execution of the sale deed and, therefore, earnest money also stood forfeited and the same events transpired for the third agreement. He further submitted that in this way the petitioner is entitled to the grant of anticipatory bail. He also informed the Court that a compromise was offered to the complainant with regard to the disputed property as well as for an alternate land of his brother but of no avail. 

On the other hand, the State Counsel argued that the ingredients of Section 420 IPC were fulfilled since it was a case of cheating with an element of deception at the level of inception and, therefore, it could not be said that it was a case of civil liability. He further submitted that the gravity of the offence involving three persons where more than Rs. 2  crores has been taken by the petitioner by concealing material facts from the subsequently proposed vendees and, therefore, the petitioner does not deserve the concession of anticipatory bail.

He further submitted that in such cases for the purpose of elicitation of truth and to know the modus operandi adopted by the petitioner, the custodial interrogation of the petitioner is required and there is also reasonable apprehension that in case the petitioner is granted bail, he may even repeat the offence considering the background of this case and may even abscond. 

After considering these submissions, the Court noted that admittedly, the petitioner executed three agreements to sell in succession and he (the petitioner) took Rs. 2,13,25,000/- from three persons in succession. The Court further noted that neither the second agreement to sell nor the third agreement to sell discloses any of the earlier amounts of money taken by the petitioner or the factum of an agreement to sell.

Regarding the third agreement, the Court noted that the complainant specifically stated that earlier he did not enter into any agreement to sell pertaining the said land in favour of anyone. It was stated in the agreement to sell that the petitioner was in possession of the land whereas as per Senior Counsel for the complainant the same was given on lease to another person namely, Parteek Gupta. 

Also, the Court observed that so far as the second and third agreement to sell were concerned, the remedy of the subsequent vendees pertaining to filing a suit for specific performance or for any other remedy, the period of three years did not expire, although as of now as per the counsel for the parties none of the parties filed any suit for specific performance. However, the petitioner filed one suit for mandatory injunction against the present complainant which was pending. 

Next, on the facet of the law governing the lodging of FIR under Sections 420 and 406 IPC based upon contractual matters, the Court opined that a financial dispute between the parties based upon breach of contract is essentially of a case of civil nature and the same should not be given any criminal flavor. However, the Court added, it does not mean that the provisions of Section 420 or 406 IPC cannot be invoked at all. 

For invoking the above-stated provisions, the Court opined that there can be no straight jacket formula for the same, the subject matter of each and every case depends upon the facts and circumstances. In the present case, the Court observed that the petitioner undisputedly took Rs. 2,13,25,000/- (in total) as earnest money. 

Further, the argument raised by the counsel for the petitioner that with regard to the earlier two agreements the target date already expired and the earnest money stood forfeited, was not found sustainable by the Court in view of the fact that in the third agreement he specifically stated that there was no earlier agreement to sell and he was in possession of the property.

The Court categorically noted that no justifiable explanation came forth from the petitioner as to why at the inception level i.e. when the agreement to sell was executed, he concealed the earlier agreement and amount taken. Therefore, the arguments raised by the Deputy Advocate General, Haryana that even if the case pertains to a financial dispute between the parties but the elements sine qua non under Section 420 IPC were fulfilled because the element of deception at the time of execution of an agreement to sell and taking earnest money, was found plausible by the Court. Furthermore, the gravity and the magnitude of the present case were considered strong enough by the Court to refuse the grant of anticipatory bail to the petitioner. 

Consequently, the present bail plea was dismissed.