Babu C. George and Others v. State of Kerala and Another

**IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** ## **THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V** ## **WEDNESDAY, THE 9TH DAY OF NOVEMBER 2016/18TH KARTHIKA, 1938** **Crl.MC.No. 1783 of 2016** **------------------------CRIME NO. 206/2016 OF PALARIVATTOM POLICE STATION, ERNAKULAM** **....** **PETITIONER(S)/ACCUSED NO.1,2,4,5:** **---------------------------------** **1. BABU C.GEORGE, AGED 67 YEARS,** - **S/O.GEORGE, CHANDRATHIL HOUSE, BCG BUNGLOW ANNEX, VILLA A.H.NO.33/2030/D, AMBEDKAR ROAD, VENNALA P.O - 682 028.** **2. MARIYAMMA BABU,** - **AGED 65 YEARS, W/O.BABU C.GEORGE, CHANDRATHIL HOUSE, BCG BUNGLOW ANNEX, VILLA A.H.NO.33/2030/D, AMBEDKAR ROAD, VENNALA P.O - 682 028.** **3. REKHA C.BABU, AGED 41 YEARS, D/O.BABU.C.GEORGE, CHANDRATHIL HOUSE, BCG BUNGLOW ANNEX, VILLA A.H.NO.33/2030/D, AMBEDKAR ROAD, VENNALA P.O - 682 028.** ## **4. RENU C.BABU,** - **AGED 35 YEARS, D/O.BABU.C.GEORGE, CHANDRATHIL HOUSE, BCG BUNGLOW ANNEX, VILLA A.H.NO.33/2030/D, AMBEDKAR ROAD, VENNALA P.O - 682 028.** **BY ADVS.SRI.P.VIJAYA BHANU (SR.) SRI.THOMAS J.ANAKKALLUNKAL** ## **RESPONDENT(S)/2ND & 3RD RESPONDENT/DEFACTO COMPLAINANT:** **-------------------------------------------------------** **1. STATE OF KERALA, REPRESENTED BY SUB INSPECTOR OF POLICE, PALARIVATTOM POLICE STATION, PUBLIC PROSECUTOR, HIGH COURT OF KERALA, ERNAKULAM.** ## **2. MUHAMED M.I.,** - **S/O.IBRAHIM, MANATH HOUSE, KAKKANADU KARA, VAZHAKKALA VILLAGE, KANAYANOOR TALUK, ERNAKULAM.** **3. M.ABDUL RAZAK,** - **S/O.MOHAMMEDKUNJU, MANNANEZHATHU PUTHEN VEEDU, KOLVILA P.O., THEVALAKKARA.** **R1 BY PUBLIC PROSECUTOR SRI.M.R.DHANIL R2 BY ADVS. SRI.T.A.SHAJI (SR.)** **SRI.T.K.AJITHKUMAR (VALATH)** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 06-10-2016 THE COURT ON 09-11-2016, THE SAME DAY PASSED THE FOLLOWING:** **msv/** ## **Crl.MC.No. 1783 of 2016 ------------------------** ## **APPENDIX** ## **PETITIONER(S)' ANNEXURES:** **--------------------------** |**ANNEXURE-A1:**|<br>**TRUE PHOTOCOPY OF FIR IN CRIME NO.206/2016 OF**| |---|---| ||**PALARIVATTOM POLICE STATION.**| |**ANNEXURE-A2:**|<br>**TRUE PHOTOCOPY OF FI STATEMENT IN CRIME**| ||**NO.206/2016 OF PALARIVATTOM POLICE STATION.**| |**ANNEXURE-A3:**|<br>**TRUE PHOTOCOPY OF THE 'AGREEMENT FOR SALE**| ||**DATED 22.11.2012.**| |**ANNEXURE-A4:**|<br>**TRUE PHOTOCOPY OF 'SUPPLEMENTARY AGREEMENT FOR**| ||**SALE DATED 1.7.2013.**| |**ANNEXURE-A5:**|<br>**TRUE PHOTOCOPY OF THE NOTICE DATED 2.5.2015**| ||**ISSUED BY THE PETITIONERS.**| **RESPONDENT(S)' ANNEXURE -----------------------** ## **NIL** **//TRUE COPY//** **P.S.TO JUDGE** ## **msv/** **“CR”** ## **RAJA VIJAYARAGHAVAN, V., J.** ------------------------------------------ **Crl.M.C. No. 1783 of 2016** -----------------------------------------Dated this the 9[th] day of November, 2016 ## **O R D E R ~~~~~~~~** 1.The extraordinary inherent powers of this Court under Section 482 of the Code of Criminal Procedure, is sought to be invoked by the petitioners who are the accused Nos. 1, 2, 4 and 5 in Crime No.206 of 2016 of the Palarivattom Police Station to bring the criminal proceedings pending against them to a premature termination. The aforesaid Crime was registered on the strength of a complaint submitted by the respondent Nos. 2 and 3 before the Sub Inspector of Police, Palarivattom Police Station. The petitioners face allegations of having committed offences punishable Sections 406, 420 read with Section 34 of the IPC. ## **Crl.M.C. No.1783 of 2016** **-2-** 2.The complaint which is jointly filed by respondent Nos. 2 and 3 against the petitioners and one Raimol C. Babu has been produced as Annexure-A2. The aforesaid Raimol C.Babu has not joined the petitioners in this petition. - 3.Briefly stated , the facts necessary for the disposal of this petition may be encapsulated as under:- The respondent Nos. 2 and 3 are business men. The accused Nos.1 and 2 are the father and mother respectively of the accused Nos. 3 to 5. The accused approached the complainant in the month of October, 2012 and impressed upon them that they are the owners of property having a total extent of 118 Ares and offered to sell the said property. Negotiations were held in the office of the petitioners, and the respondent Nos. 2 and 3, after perusing the documents, got convinced about the title and possession of the petitioners over the property. They were informed that the 2[nd] petitioner herein was the **Crl.M.C. No.1783 of 2016 -3-** Power of Attorney Holder of the other petitioners and was empowered to execute the deed for and on his behalf. Believing the words of the petitioners, the respondent Nos. 2 and 3 decided to purchase the property for a consideration of Rs.4,10,000/- per cent. The petitioners undertook to obtain necessary permits from the Nedumbassery Panchayat and also the Airport authority for enabling the purchasers to carry out constructions in the said property. - 4.An agreement was consequently executed on 2.11.2012 and a sum of Rs.2.5 Crores was accepted by the petitioners towards part of sale consideration from respondents 2 and 3. The period of agreement was fixed at 8 months. Thereafter, on 1.3.2013, a further sum of Rs.1.5 Crores was accepted by way of advance. However, it is alleged that the petitioners reneged from their promise and did not act in terms of the express ## **Crl.M.C. No.1783 of 2016** **-4-** agreement. The money accepted towards advance was also not refunded. 5.Thereafter, on 1.7.2013, a supplementary agreement was executed, after much deliberations between the parties. As per the supplementary agreement, the parties decided to find out prospective buyers who were prepared to purchase the property for a consideration of Rs.5 lakhs per cent and it was further decided that the amount in excess of Rs.4,10,000/- per cent, received from the prospective buyer would be shared between the parties. As per the supplementary agreement, the period of original agreement was extended by a period of eight more months. - 6.After executing the supplementary agreement, a sum of Rs. 2 Crores was handed over by the party respondents to the petitioners, which meant that a total sum of Rs.6 Crores had changed hands. Though several **Crl.M.C. No.1783 of 2016** **-5-** prospective buyers came forward to purchase the property in terms of the supplementary agreement, the petitioners evaded giving one excuse or the other. According to the complainant, the property could not be sold because of the lapses of the petitioner. In the said circumstances, a legal notice was issued by the respondents 2 and 3 to the petitioners on 2.5.2015 demanding the refund of the advance amount. In reply, the petitioners issued a notice cancelling the agreement for the reason that the lapses of the party respondents were the cause of non performance of the terms of the agreement. However, they agreed to refund 80% of the advance accepted in 50 installments. According to the respondents 2 and 3, the acts of the petitioners would amount to offence under Section 420 of the IPC. - 7.I have heard Sri.P.Vijayabhanu, the learned Senior counsel appearing for the petitioners, Sri.T.A.Shaji, the **Crl.M.C. No.1783 of 2016 -6-** learned Senior counsel appearing for the respondents 2 and 3 and the learned Public Prosecutor. 8.Sri.P. Vijayabhanu , the learned Senior counsel appearing for the petitioner urged that a perusal of Annexure-2 would reveal that the case essentially involves a dispute of civil nature and the same should not be allowed to become the subject matter of a criminal proceeding. Elaborating further, it was submitted that the respondents 2 and 3 have already instituted O.S.No.35 of 2016 before the Sub Court, North Paravur praying for realizing a sum of Rs.6,61,10,882/- from the defendants/petitioners herein and charged over the property covered under the agreement. It is further urged that the property has been attached by the Sub Court on the basis of an application filed by the party respondents in the said suit. According to the learned counsel, the allegations, even if the same is accepted as true did not disclose the offence **Crl.M.C. No.1783 of 2016 -7-** under Section 420 or 406 of the IPC. A purely commercial transaction has been given the cloak of a criminal offence in disguise by the respondents 2 and 3 with the assistance of the police, is the submission. Taking this Court through Annexure-A2 complaint, it is submitted by the learned Senior counsel that in the absence of specific averments in the complaint, where from the ingredients of the offence could be made out, the Sub Inspector of Police ought not have registered the Crime. Referring to the agreement and the supplementary agreement executed by the parties, it is submitted that specific provisions are in the deed to enable the respondents 2 and 3 to realise the amount paid by way of advance by instituting appropriate proceedings. Finally, it is submitted that the Complainant has failed to comply with the directions issued by the Apex Court in **Priyanka Srivastava and Another V State of U.P. and Another** [2015 (6) SCC 287] and on that sole **Crl.M.C. No.1783 of 2016 -8-** ground the proceedings are to be terminated. The learned Senior Counsel placed profuse reliance on a catena of decisions to bring home the point that this is a fit case in which this Court would be justified in invoking powers under Section 482 of the Code of Criminal Procedure . - 9.Sri. T.A. Shaji, the learned Senior counsel appearing for the respondents 2 and 3, would refute the submissions and would contend that this Court, unless manifest injustice is brought out, will ordinarily refuse to interfere at the threshold stage. According to the learned Senior Counsel, an appraisal of the complaint and the other materials on record and looking into the facts of the case at this stage, it cannot be said that no offence is made out against the petitioners. It is vehemently urged that the submissions made at the bar relate to disputed questions of fact, which cannot be adjudicated upon by this Court under Section 482 Cr.P.C. Placing reliance on various ## **Crl.M.C. No.1783 of 2016** **-9-** precedents, it is submitted that at this stage only prima facie case is to be seen to have been made out. Specifically referring to the complaint, it is submitted that necessary allegations have been raised in the complaint which shows the complicity of the petitioners and the mode in which they had defrauded the respondents 2 and 3. There is no reason warranting interference is the submission. - 10.The learned Public Prosecutor endorse the submissions of respondents 2 and 3 and submitted that the power under Section 482 of the Code should be exercised sparingly and with circumspection and no interference is warranted. - 11.I have considered the rival submissions and have gone through the materials on record. - 12.Without adding or subtracting anything from the allegations in the complaint, it can be seen that the whole **Crl.M.C. No.1783 of 2016** **-10-** dispute revolves around an agreement for sale executed between the feuding parties involving a large extent of land. It is admitted in the complaint that the party respondents are business men and that they had entered into the agreement after satisfying themselves as regards the right and title of the petitioners over the property. There is no dispute with regard to this aspect. The agreement was entered into on 2.11.2012 and the terms have been reduced into writing. The period mentioned in the agreement expired on 1.5.2013. Towards part of sale consideration, a sum of Rs.4 Crores was also handed over. However, according to the party respondents, the petitioners did not comply with the terms and failed to execute the sale deed in terms of the agreement. They also failed to return the money advanced. At that stage, the party respondents did not have a case that the intention of the petitioner was to deceive them. It is also ## **Crl.M.C. No.1783 of 2016** **-11-** the admitted case of the parties that a supplementary agreement was executed on 1.7.2013 by which the parties decided to jointly find prospective purchasers for the property who were willing to purchase the same for a price of Rs.5,00,000/- per cent and it was agreed that the sale consideration in excess of Rs. 4,10,000/- received from the prospective purchaser shall be shared equally. A sum of Rs.2 Crores was also paid by the party respondents to the petitioners at the time of execution of the supplementary agreement. Though the respondents have a specific case that several prospective purchasers had come forward to purchase the property, according to them, due to the evasive attitude of the petitioners, the transaction could not be sealed. Annexure A3 agreement specifically provides that in the event of the petitioners failing to obtain necessary permits, they shall return the entire money received from the respondents 2 and 3 with ## **Crl.M.C. No.1783 of 2016** **-12-** 12% interest. It is admitted that O.S.No.35 of 2010 has been filed by the respondents 2 and 3 against the petitioners on 1.4.2016 praying for realizing a sum of Rs.6,61,10,882/- together with interest from the petitioners charged on the property covered under the agreement. 13.In order to attract the offence of cheating, essential ingredients of the offence will have to be made out, which are, (i) cheating; (ii) dishonest inducement to deliver property or to make, alter or destroy any valuable security or anything which is sealed or signed or is capable of being converted into a valuable security and (iii) mens rea of the accused at the time of making the inducement. The making of a false representation is one of the essential ingredients to constitute the offence of cheating under S.420 IPC. In order to bring a case for the offence of cheating, it is not merely sufficient to prove that a false **Crl.M.C. No.1783 of 2016** **-13-** representation had been made, but, it is further necessary to prove that the representation was false to the knowledge of the accused and was made in order to deceive the complainant. 14.Distinction between mere breach of contract and cheating would depend upon the intention of the accused at the time of alleged inducement. If it is established that the intention of the accused was dishonest at the very time when he made a promise and entered into a transaction with the complainant to part with his property or money, then the liability is criminal and the accused is guilty of the offence of cheating. On the other hand, if all that is established is that a representation made by the accused has subsequently not been kept, criminal liability cannot be foisted on the accused and the only right which the complainant acquires is the remedy for breach of contract in a Civil Court. Mere breach of contract cannot ## **Crl.M.C. No.1783 of 2016** **-14-** give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of the transaction. [ See **ARCI V Nimra Cerglass Technics ( P ) Ltd** [2016 (1) SCC 348 ] 15.It is also plain that for constituting an offence of criminal breach of trust, the following ingredients must be satisfied: - "(a) a person should have been entrusted with property, or entrusted with dominion over property; (b) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so; (c) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of **Crl.M.C. No.1783 of 2016** **-15-** any legal contract which the person has made, touching the discharge of such trust." (See: **Asoke Basak V State of Maharashtra** [2010 (10 ) SCC 660 ]. 16.In **Murari Lal Gupta v. Gopi Singh** [2005(13) SCC 699], the question was whether the failure to honour an agreement for sale in spite of issuance of three legal notices would amount to an offence under Section 406 and 420 of the IPC. It was held as follows in paragraph No.6 of the judgment. “6..........Having taken into consideration all the material made available on record by the parties and after hearing the learned counsel for the parties, we are satisfied that the criminal proceedings initiated by the respondent against the petitioner are wholly unwarranted. The complaint is an abuse of the process of the court and the proceedings are, therefore, liable to be quashed. Even if all the averments made in the complaint are taken to be correct, yet the case for prosecution under S.420 or S.406 of the Penal Code is not made out. The complaint does not make any averment so as to infer any fraudulent or dishonest **Crl.M.C. No.1783 of 2016** **-16-** inducement having been made by the petitioner pursuant to which the respondent parted with the money. It is not the case of the respondent that the petitioner does not have the property or that the petitioner was not competent to enter into an agreement to sell or could not have transferred title in the property to the respondent. Merely because an agreement to sell was entered into which agreement the petitioner failed to honour, it cannot be said that the petitioner has cheated the respondent. No case for prosecution under S.420 or S.406 IPC is made out even prima facie.” ( Emphasis supplied ) ## 17.In **Dalip Kaur and others V Jagnar Singh and** **Another** [2009(14) SCC 696], an identical issue came up for consideration before the Apex Court. The question posed was whether a breach of a contract of an agreement for sale would constitute an offence under section 406 or 420 of the IPC. It was observed as follows : “The High Court, therefore, should have posed a question as to whether any act of inducement on the part of the appellant has been raised by the second respondent **Crl.M.C. No.1783 of 2016 -17-** and whether the appellant had an intention to cheat him from the very inception. If the dispute between the parties was essentially a civil dispute resulting from a breach of contract on the part of the appellants by non refunding the amount of advance the same would not constitute an offence of cheating. Similar is the legal position in respect of an offence of criminal breach of trust having regard to its definition contained in S.405 of the Indian Penal Code. (See -- Ajay Mitra v. State of M.P. [2003 (3) SCC 11]” 18.As regards the submission of the learned Senior Counsel appearing for the party respondents that specific allegation has been raised in the complaint as regards the offence of cheating, it will be apposite to refer to the judgment of the Apex Court in In **Anil Mahajan v. Bhor Industries Ltd.** , [2005 (10) SCC 228]. In the said case, the Supreme Court had occasion to hold that in a case for quashing of the criminal complaint, the substance of the complaint is to be seen. Mere use of the expression 'cheating' in the complaint is of no consequence. Except **Crl.M.C. No.1783 of 2016 -18-** mention of the words 'deceive' and 'cheat' in the complaint filed before the Magistrate and 'cheating' in the complaint filed before the police, there is no averment about the deceit, cheating or fraudulent intention of the accused at the time of entering into the agreement where from it can be inferred that the accused had the intention to deceive the complainant. Though it is true that the petitioners had accepted a large sum of money towards part of sale consideration, that alone, in the absence of the allegation in the complaint will not attract the offence under Section 406 or 420 of the IPC. 19.After extensively going through the complaint and testing the same with the binding precedents of the Apex Court, I have no doubt in my mind that the entire complaint taken on a whole is indicative of a dispute which is purely of a civil nature. The next question is as to whether the petitioners are liable to face criminal proceeding in **Crl.M.C. No.1783 of 2016** **-19-** pursuance to the registration of the FIR. ## 20. In **Indian Oil Corpn. v. NEPC India Ltd** . [2006 (6) SCC 736], the Supreme Court has held that in a dispute arising from breach of contract wherein civil remedy has been availed by a party, the remedy in criminal law is not barred, if the allegation discloses a criminal offence. However, it was held that a purely civil dispute cannot be permitted to be converted into a criminal offence. Referring to **G. Sagar Suri v. State of U.P.** [2000 (2) SCC 636], it was held as follows : While on this issue, it is necessary to take notice of a growing tendency in business circles to convert purely civil disputes into criminal cases. This is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders / creditors. Such a tendency is seen in several family disputes also, leading to irretrievable breakdown of marriages / families. There is also an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of **Crl.M.C. No.1783 of 2016 -20-** imminent settlement. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged. 21.In **Ajay Mitra v. State of M.P.** [2003 (3) SCC 11], the Apex Court had occasion to consider a case wherein the FIR was sought to be quashed invoking the powers under section 482 of the Code of Criminal Procedure. The Supreme Court held thus : “19. The High Court has held that the petitions filed by the appellants for quashing the complaint and the FIRs registered against them are premature. The question which arises is that where the complaint or the FIR doe snot disclose commission of a cognizable offence, whether the same can be quashed at the initial stage. This question was examined by this Court in State of W.B. v. Swapan Kumar Guha, AIR 1982 SC 949 and it was held that the first information report which does not allege or disclose that the essential requirements of the penal provision are prima facie satisfied, cannot form the foundation or constitute the starting point of a lawful investigation. It is surely not within the province of the police **Crl.M.C. No.1783 of 2016** **-21-** to investigate into a report (FIR) which does not disclose the commission of a cognizable offence and the Code does not impose upon them the duty of inquiry in such cases. It was further held that an investigation can be quashed if no cognizable offence is disclosed by the FIR. The same question has been considered in State of Haryana v. Bhajan Lal, AIR 1992 SC 604 and after considering all the earlier decisions, the category of cases, in which the Court can exercise its extraordinary power under Art.226 of the Constitution or the inherent power under S.482, Cr. P.C. either to prevent abuse of the process of any Court or to secure the ends of justice, were summarised in AIR para 108 of the Report and sub-paras (1) to (3) thereof are being reproduced herein below (SCC p. 378, para 102) (1) Where the allegations made in the first information report or the complaint, even if they are taken at their face value and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused. (2) Where the allegations in the first information report and other materials, if any, accompanying the FIR do not disclose a cognizable offence, justifying an investigation by police officers under S.156 (1) of the Code except under an order of a **Crl.M.C. No.1783 of 2016** **-22-** Magistrate within the purview of S.166(2) of the Code. (3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.' ## 22.In **Madhavrao Jiwajirao Scindia** (AIR 1988 SC 709) ## (supra) the Supreme Court held thus : The legal position is well settled that when a prosecution at the initial stage is asked to be quashed, the test to be applied by the Court is as to whether the uncontroverted allegations as made prima facie establish the offence. It is also for the Court to take into consideration any special features which appear in a particular case to consider whether it is expedient and in the interest of justice to permit a prosecution to continue. This is so on the basis that the Court cannot be utilised for any oblique purpose and where in the opinion of the Court chances of an ultimate conviction are bleak and, therefore, no useful purpose is likely to be served by allowing a criminal prosecution to continue, the Court may while taking into consideration the special facts of a **Crl.M.C. No.1783 of 2016** **-23-** case also quash the proceeding even though it may be at a preliminary stage. 23.As such, I am of the firm view that the ingredients of the offence under Section 406 or Section 420 is clearly not made out. Therefore this is a fit case for interference under Section 482 of the Code of Criminal Procedure. In the result, this petition is allowed. Annexure-A1 FIR in Crime No.206 of 2016 of the Palarivattom Police Station and all further proceedings pursuant thereto against the petitioners are quashed. Sd/- **RAJA VIJAYARAGHAVAN, V. JUDGE** Ps/7/11/16