Quash: Cheating: Since the complainant’s filing of the FIR appears to be an attempt to misuse criminal law accused acquitted

Appeal against the Hon’ble Madras High Court of judgment

2. The instant appeal by special leave is filed against the judgment dated 23rd April, 2018 passed by learned Single Judge of the Madras High Court, Madurai Bench dismissing the CRL.O.P.(MD) No. 3846 of 2013 preferred by the appellants herein seeking quashing of proceedings of Criminal Case No. 250 of 2012 pending in the Court of learned Judicial Magistrate No. II, Kovilpatti for offences punishable under Sections 420 read with Section 120B, Section 294(b), Section 506(ii) read with Section 114 of the Indian Penal Code, 1860 (hereinafter being referred to as the ‘IPC’).

Brief facts

3. Respondent No. 3(hereinafter being referred to as the ‘complainant’) lodged a complaint in the Court of learned Judicial Magistrate No. II, Kovilpatti alleging inter alia that he was having a qualification of M.Sc., MD Graduate. He was appointed as a Government teacher on 8th October, 2007. Before being appointed as a Government teacher, the complainant was doing real estate business for earning his livelihood for past 16 years.
4. The complainant was knowing Kannabiran(hereinafter being referred to as ‘A-3’) who was working as a Manager in the State Bank of India(SBI), Kovilpatti Branch. While being engaged in the real estate business, the complainant came into contact with Subbiah @ Kadambur Jeyaraj(hereinafter being referred to as ‘A1’) and his wife A. Vijaya(hereinafter being referred to as ‘A-2’). Through A-1 and A-2, the complainant came into contact with Chandrasekar(hereinafter being referred to as ‘A-4’), his son Pandiyaraj(hereinafter being referred to as ‘A-6’), his wife(S. Pandiyammal, hereinafter being referred as ‘A-5’), and his brother (K.Shanmugiah, hereinafter being referred as ‘A-8’) who were also engaged in real estate business.
5. The complainant claimed that he always trusted his partners in business. Taking undue advantage of the trusting nature of the complainant, the accused persons induced him to join their real estate business claiming that they had strong political connections. The accused allured and induced the complainant to enter into land deals with the intention to defraud the complainant right at the inception of the transactions. The complainant was told that the documents need not be registered in his own name and instead the registration may be carried out in the name of his sister-in-law. An alternative option was given that if the documents were registered in the names of the accused, the plots could be sold immediately to earn higher profits. By flaunting their political connections, the accused influenced the complainant to make investments into lands assuring that he would reap huge benefits out of these deals.
6. The complainant was also fraudulently induced to believe that out of the chunks of lands so purchased, smaller plots would be carved out and sold to different persons which would frequently require physical presence of the seller and since the complainant was a teacher, he would face inconvenience if the land parcels were to be registered in his name. In this manner, the complainant was not allowed to get the purchased properties registered in his name despite he making the investments. The complainant was given assurances that the plots would be sold for huge profit in a very short duration and he would be given his share. By using this mode of inducement, A-1, A-3, A-4, and A-6 infused a sense of trust in the complainant with the ulterior motive to defraud him and to commit breach of trust.
7. It was further alleged that before the complainant had come in touch with the accused, he and his brother-in-law Chandrasekar, S/o Krishnasamy Naicker had entered into an agreement for sale with A. Sairam in respect of a chunk of land at Allampatti village, admeasuring 8 acres, but the sale could not be finalized because a suit was pending in the District Court, Tuticorin in respect of the said land. In the meantime, the complainant was appointed as a teacher. The suit pending before the District Court, Tuticorin was disposed in favour of A. Sairam.
8. Having given the fraudulent allurements to the complainant, the accused got registered a sale deed in their name as Document No. 1839 of 2008 dated 27th February, 2008 on the file of Sub Registrar Office, Kovilpatti in respect of some plots of land situated in the Allampatti village of total area 7.618 acres. The complainant invested a sum of Rs. 1,01,47,800/- towards this transaction whereas, the accused invested proportionately much lesser amounts in the said land deal. A-1, A-3, A-4, and A-6 along with the complainant, purchased the said parcel of land from A. Sairam for a total consideration of Rs. 3,08,33,600/-. However, as per the complainant, the accused never gave him the plots equivalent to the investment made by him and thereby, committed fraud and breach of trust.
9. The complainant further alleged that A-2 and A-5 had conspired with A-1, A-3, A-4, and A-6 to cheat him. The accused made the complainant believe that the business of real estate is generally carried on by word of mouth and trust. However, at a later point of time, the accused started indulging in criminal breach of trust with the ulterior motive of cheating the complainant.
10. A-1, A-3, A-4 and A-6 invested the amount provided by the complainant towards his share in the land deal and completed the sale of the suit property on 27th February, 2008 with A. Sairam. However, despite the assurances, the accused conspired and refused to give the due share of plots to the complainant thereby committing breach of trust. Therefore, a Panchayat meeting was convened on 19th July, 2010 and a settlement deed was also executed wherein, it was agreed that 52 plots admeasuring 256.51 cents would be handed over by A-1 and A-2 to the complainant towards the investment made by him.
11. Under the same settlement, A-4 and A-6 were given 45 plots to the extent of 233.50 cents for the investment made by them after deducting land to the extent of 16.50 cents towards the passages. On the very date of execution of the settlement deed, all the accused entered into an agreement with Dharamraj(hereinafter being referred to as ‘A-7’), brother-in-law of A-4 and executed a General Power of Attorney(GPA) in his favour after receiving a sum of Rs. 30,00,000/- towards plots Nos. 68, 69, 70 and 71 which were a part and parcel of the settlement deed.
12. The complainant alleged that the accused failed to pay a sum of Rs. 19,00,000/- which would be the share amount due to the complainant out of the sale price of Rs. 30,00,000/-. Thus, the accused persons despite being signatories to the settlement deed did not act as promised under the settlement and thereby, committed breach of trust.
13. The accused had also promised to execute the sale deeds of some plots in favour of the persons to be nominated by the complainant. The complainant provided names of three persons for these plots. Three sale deeds were got prepared on stamp papers worth Rs. 90,000/-. The accused gave their photographs and ID-proofs and signed the sale deeds, but they failed to appear at the Sub-Registrar Office, Kovilpatti at the scheduled time for registration of the sale deeds. When the complainant enquired from A-1 and A-3 as to why they were indulging in such fraudulent acts, they abused the complainant and threatened to get rid of him. A-1 threatened the complainant that if the matter is reported to the police, he would shoot and kill the complainant and his family members by using a revolver. While saying so, A-1 brandished a revolver and handed it over to A-3.
14. It was further alleged that A-1 further induced the complainant to pay a sum of Rs. 41,00,000/- on 14th November, 2011, whereafter, the sale deed for one of the properties forming a part of the settlement memorandum was executed. However, for some of the properties, the accused were not abiding by the terms of the memorandum and had fraudulently transferred the same to other investors. Some land brokers were also present at the time when this incident occurred.
15. Being aggrieved of these continued criminal activities of the accused, the complainant submitted a complaint dated 29th June, 2010 at the Kovilpatti West Police Station but no action was taken thereupon. Having failed to get any action on his complaint, the complainant approached the Madras High Court, Madurai Bench by filing CRL.O.P.(MD) No. 1396 of 2011 and as per the directions of the High Court, he submitted a fresh complaint to the District Superintendent of Police, Tuticorin, but still the FIR was not registered. Ultimately, the complainant was compelled to file a complaint in the Court of the Jurisdictional Magistrate with a prayer to forward the same to the police under Section 156(3) of Code of Criminal Procedure, 1973.
16. It may be mentioned that for the very same set of allegations, the complainant had also filed a civil suit by impleading A-1 to A6 as defendants which is pending on the file of District Judge, Tuticorin in O.S. No. 06 of 2012.
17. A-1, A-2, A-3, A-4, A-5, A-6, A-7, and A-8 being the appellants herein, approached the Madras High Court, Madurai Bench for assailing the FIR and the charge sheet by filing a CRL.O.P.(MD) No. 3846 of 2013. The learned Single Judge of Madras High Court proceeded to dismiss the said petition preferred by the appellants vide order dated 23rd April, 2018 which is subject matter of challenge in this appeal by special leave.

Consideration of submissions and material on record

25. Heard the learned counsel for the parties at length and perused the impugned order as well as the complaint and the charge sheet filed against the accused appellants.

Hon’ble Supreme Court got clarification about the benami land transactions and did not direct any inquiry against the complainant since he was a public servant

26. The arguments were heard, and the judgment was reserved on 16th February, 2024. Thereafter, we thought it fit to seek a clarification from the learned counsel for the parties because on going through the material available on record, we were prima facie of the opinion that the case presents sufficient material to direct inquiry under the provisions of Section 13(1)(b) and Section 13(2) of the Prevention of Corruption Act, 1988(hereinafter being referred to as ‘PC Act’) because, manifestly, the complainant being a public servant had indulged in large scale benami land transactions without disclosing the same to his employer. Accordingly, learned counsel for the complainant was put to notice and he has submitted a short clarificatory note mentioning therein that the complainant is an Income Tax assessee from the year 2000. It is also submitted in the note that the complainant started the business of real estate from the year 2004 onwards and had acquired significant wealth during the course of this business. The complainant was appointed as a teacher in the Government School only in the year 2007 when he was nearly 45 years of age. He has superannuated in the year 2022 without any pensionary benefits. Thus, it was submitted that whatever money the complainant invested in the disputed land deals entered into with the accused, were genuine investments made by using his valid and declared sources of income and savings. A chart was also set out along with this explanation regarding the sources from where the complainant received various amounts which he claims to have invested in the disputed land deals.
27. Being satisfied with the explanation so offered, we do not find any justifiable cause so as to direct an enquiry against the complainant for the offences under the PC Act.

Since complainant already involved in real estate business he knows the pros and cons of the business

29. At the outset, we may note that the complainant has come out with a clear case that he was already involved in real estate business before being selected as a Government teacher in the year 2007. Hence, it can safely be assumed that he was well versed with the nitty gritties of such business and the innocence and ignorance feigned by him in the complaint qua pros and cons of fallouts of property dealings cannot ex facie be countenanced.

Complainant purchased the lands in the names of other persons names but funded partially

30. The complainant has alleged in the FIR, that the accused fraudulently allured him into buying the lands by using honey quoted words and that they also took advantage of the fact that the complainant was a teacher serving in a Government institution and hence he was persuaded to get the lands registered in the name of the accused. However, these allegations are one sided and do not present the true picture. The complainant after having been appointed in Government service would be conscious that indulging in land deals may land him in departmental proceedings. It was precisely for that reason, the complainant must have agreed that the lands to be purchased may not be registered in his name. On the face of the record, the property deals allegedly made in the names of other persons by using the funds partially provided by the complainant were benami transactions.
31. We may, at this stage, refer to the relevant provisions of the Benami Transactions (Prohibition), Act 1988 (hereinafter being referred to as the ‘Benami Act’)(applicable at the time of the alleged transactions), and particularly Section 2(a), Section 2(c) and Section 4 thereof: –

“sections 2 and 4 of Binami Transactions (Prohibition), Act 1988)”

What is benami transaction?

32. As per Section 2(a), any transaction in which property is transferred to one person for a consideration paid or provided by another person would be a “benami transaction”.

Section 2(c): property

33. As per Section 2(c), “property” means property of any kind, whether movable or immovable, tangible or intangible, and includes any right or interest in such property.

Section 3 of Benami Act declared unconstitutional

34. Sections 3 of the Benami Act have been declared unconstitutional by this Court in the case of Union of India v. Ganpati Dealcom (P) Ltd ((2023) 3 SCC 315). A review petition is, however, pending against the said judgment.

Section 4: Speaks about defence and further prohibits the institution of suit

35. Section 4(1) of the Benami Act makes it clear that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person, shall lie or on behalf of a person claiming to be real owner of such property. Such person cannot raise a defence based on any right in respect of any property held benami either against the person in whose name the property is held or against any other person. Section 4(2) prohibits the institution of any suit, claim or any other action by and on behalf of a person claiming to be the real owner of such property. (emphasis supplied).

Complainant is prohibited from suing the accused for a  civil wrong

36. It is, thus, clear that the complainant in spite of having made investments in the land deals which were evidently benami transactions, could not have instituted any civil proceedings for recovery against the person(s) in whose name, the properties were held which would be the accused appellants herein. Since by virtue of the provisions contained in Sections 4(1) and 4(2) of the Benami Act, the complainant is prohibited from suing the accused for a civil wrong, in relation to these benami transactions, as a corollary, allowing criminal prosecution of the accused in relation to the self-same cause of action would be impermissible in law.

It is an admitted case that the accused made over a part of the land and the profits to the complainant

37. Going by the allegations as set out in the FIR and the charge sheet, it is apparent that it is the admitted case of the complainant that the accused appellants made over a part of the purchased lands/plots to the complainant and also paid a part of the profits to him. However, when the exact share of the investment on prorata basis was not being given to the complainant, he was compelled to convene a Panchayat meeting wherein a Memorandum of Settlement was arrived at. Even despite the settlement, the actual share of the lands and profits enuring to the complainant was not paid to him. The relevant extract from the complaint is reproduced hereinbelow: –

“………………..”

No allegation in the complaint as if the intention of the accused was to defraud the complainant right from the inception

38. It is thus clear that from the complaint, there is no such allegation therein which can persuade the Court to hold that the intention of the accused appellants was to defraud the complainant right from the inception of the transactions. The accused appellants have unquestionably, passed on some plots as well as part profits from the land deals to the complainant but the dispute is regarding the quantification of profits and full satisfaction of the share claimed by the complainant proportional to the investments made by him.
39. These allegations can at best give a cause to the complainant to sue the accused appellants in a civil Court. However, as discussed above, such remedy is barred by Section 4 of the Benami Act.

Breach of contract would not arise unless the intention is fraudulent from the beginning

40. The complainant has clearly alleged that the accused caused him monetary loss because the appropriate share of profits was not passed on to him after some plots from the entire chunk had been sold. This Court in the case of Sarabjit Kaur v. State of Punjab and Anr – 2023 SCC OnLine SC 201 [https://section1.in/s-c-on-cheating-breach-of-contract/] observed that: –

“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 the promise will not be enough to initiate criminal proceedings”.

42. Thus, we are of the firm view that the necessary ingredients of the offences punishable under Section 406 and Section 420 IPC are not made out against the accused appellants from the admitted allegations set out in the complaint and the charge sheet. It cannot be doubted that a dispute which is purely civil in nature has been given a colour of criminal prosecution alleging fraud and criminal breach of trust by misusing the tool of criminal law.
43. The Investigating Officer has also applied offences under Section 294(b) and Section 506(ii) read with Section 114 IPC in the charge sheet. On going through the entire charge sheet, we do not find any such material therein which can justify invocation of the offence under Section 294(b) IPC which reads as below: –

“section 294(b) IPC”

44. The complainant alleged that the accused abused him by using profane language. Section 294(b) IPC would clearly not apply to such an act. Apart from a bald allegation made by the complainant that A-1 abused him and intimidated him on 28th July, 2010, there is no material which can show that the accused indulged in criminal intimidation of the complainant so as to justify invocation of the offence punishable under Section 506(ii) IPC.

Complainant tried to misuse the tool of criminal law by filing the patently frivolous FIR

45. We have to be conscious of the fact that the complainant has tried to misuse the tool of criminal law by filing the patently frivolous FIR dated 6th March, 2011, wherein the allegation is levelled regarding the so-called incident of criminal intimidation dated 28th July, 2010. The said allegation otherwise is also belied for the reason that in the FIR, the complainant states that he filed a complaint dated 29th July, 2010 in Kovilpatti West Police Station, but the RTI reply from the said police station clearly states that no such complaint was ever received.
46. Thus, we are persuaded to accept the contention of learned counsel for the accused appellants to hold that the criminal prosecution instituted against the accused appellants in pursuance of the totally frivolous FIR tantamounts to sheer abuse of the process of law.

Case quashed

49. As a result, all proceedings sought to be taken against the appellants in pursuance of the charge sheet dated 10th August, 2011 are also quashed.
50. The appeal is allowed accordingly.

Party

SUBBIAH @ KADAMBUR JAYARAJ AND OTHERS .…APPELLANT(S) VERSUS THE SUPERINTENDENT OF POLICE AND OTHERS ….RESPONDENT(S) – CRIMINAL APPEAL NO(S). OF 2024 (Arising out of SLP (Criminal) No(s). 8990 of 2019)

https://webapi.sci.gov.in/supremecourt/2019/32570/32570_2019_3_1501_53250_Judgement_15-May-2024.pdf