Friday, 25 October 2019

Whether prosecution for cheating can be quashed if civil suit and prosecution for dishonour of cheque is pending?

Mere filing of the suits for recovery of
the money and complaint filed under Section 138 of the N.I.
Act by itself is no ground to quash the proceedings in the
complaints filed by the appellant herein. When cheating and
criminal conspiracy are alleged against the accused, for
advancing a huge sum of Rs.9 crores, it is a matter which is
to be tried, but at the same time the High Court has entered
into the disputed area, at the stage of considering the
petitions filed under Section 482, Cr.P.C. It is fairly
well settled that power under Section 482 Cr.P.C. is to be
exercised sparingly when the case is not made out for the

offences alleged on the reading of the complaint itself or
in cases where such complaint is filed by way of abuse of
the process. Whether any Schedules were appended to the
agreement or not, a finding is required to be recorded after
full fledged trial. Further, as the contract is for the
purpose of procuring the land, as such the same is of civil
nature, as held by the High Court, is also no ground for
quashing. Though the contract is of civil nature, if there
is an element of cheating and fraud it is always open for a
party in a contract, to prosecute the other side for the
offences alleged. Equally, mere filing of a suit or
complaint filed under Section 138 of the N.I. Act, 1881 by
itself is no ground to quash the proceedings. While
considering the petition under Section 482 of Cr.P.C., we
are of the view that the High Court also committed an error
that there is a novation of the contract in view of the
subsequent agreement entered into on 08.11.2012. Whether
there is novation of contract or not and the effect of such
entering into the contract is a matter which is required to
be considered only after trial but not at the stage of
considering the application under Section 482, Cr.P.C.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURISDICTION
CRIMINAL APPEAL NOS.1573-1575 OF 2019

Dr. Lakshman  Vs The State of Karnataka 

R. Subhash Reddy, J.
Dated:October 17, 2019.

1. Leave granted.
2. These criminal appeals are filed by the complainant,
aggrieved by the judgment and order dated 28th April, 2017
passed by the High Court of Karnataka at Bengaluru in Crl.P
Nos.2383 of 2017, 7976 of 2013 and 7161 of 2016. By the
aforesaid order, the High Court has allowed the petitions
filed by the respondents-accused under Section 482 of
Cr.P.C. and quashed the complaint bearing P.C.R. No.12317 of
2013 filed before the IV ACMM, Bangalore, and complaint
bearing P.C.R. No.14420 of 2015, filed before the VIII ACMM,

Bengaluru, as well as the order dated 27th November, 2015
(wrongly mentioned as 27th July, 2015) passed by the VIII
ACMM, Bengaluru, in P.C.R.No.14420 of 2015, directing the
Sanjaya Nagara Police Station to investigate the matter.
3. The appellant herein has filed complaint on 29th April,
2013 before the Chief Metropolitan Magistrate, Bangalore,
which is registered as P.C.R. No.12317 of 2013 against the
accused A1 to A5, namely (1) M/s. Pramila Santhosh Land
Developers and Builders Pvt. Ltd., (2) D.T. Santhosh (3)
D.C. Thamanna (4) Smt. K.G. Pramila and (5) M/s. Sri Sai
Developers for the alleged offences under Sections 403, 406,
420, 506(B) of the Indian Penal Code. There is also a
susequent complaint by the same complainant on 27th November,
2015 which is registered as P.C.R. No.14420 of 2015, which
is subseqently numbered as CC No.54 of 2016 (after filing of
the chargesheet dated 22nd December, 2015) against the
accused therein namely (1) M/s. Pramila Santhosh Land
Developers and Builders Pvt Ltd. (2) D.T. Santhosh and (3)
Smt. K.G. Pramila for the alleged offences under Sections
417, 418, 420, 422, 120(B) read with Section 34 of IPC and
for offences under the Prevention of Money Laundering Act.

4. The first complaint dated 29th April, 2013 was filed
alleging that the respondents-accused made a representation
that they are owners and are absolutely seized and possessed
of land at Ballur village, Attibele Hobli, Anekal Taluk and
promised to procure an extent of 70 acres of land and
entered into an agreement with the appellant-complainant on
26th September, 2012 and received an amount of Rs.9 crores
(Rupees Nine crores) by way of cheques and demand drafts. It
is alleged that the extent and survey nos. of land mentioned
in the Schedule appended to the Memorandum of Understanding
(MOU) were to be procured in favour of the complainant. It
was further pleaded that there were two cheques issued by
the accused as security for the amount of advance paid by
the appellant-complainant. It was the case of the
complainant that subsequent to agreement dated 26th
September, 2012, the respondents-accused having failed to
perform the contract in terms of agreement, have entered
into another MOU on 8th November, 2012, representing that
they are in possession of 70 acres of agricultural land and
30 acres of converted land and they promised to transfer
such land in favour of the appellant. To the MOU dated 8th

November, 2012 M/s. Sri Sai Developers was added as a party.
As per the complaint, there is also a Schedule indicating
the survey nos. and extent of lands to the second MOU. In
the complaint filed on 29th April, 2013 it was alleged that
though the respondents have already sold the land covered by
Survey Nos.115 and 117 to M/s. Sri Sai Developers on 7th
June, 2012, with a dishonest intention respondents have
played fraud and cheated the appellant by receiving huge sum
of Rs.9 Crores (Rupees Nine crores), by including the lands
covered by Survey Nos.115 and 117 also. Further alleging
that when the demand was made to comply with the terms of
the contract, the respondents have threatened the
complainant, as such the respondents are liable to be
punished for offences under Sections 403, 406, 420, 506(B)
of IPC.
5. Further alleging that after filing of the first
criminal complaint, the respondents have threatened and
pressurised the appellant and the second complaint was
filed. In the second complaint, it was alleged that one of
the accused, by name, D.C. Thamanna also gave an undertaking
in writing stating that from 16th May, 2013 onwards they

would start registering the sale deeds but they failed to do
so. It was further alleged that instead of abiding by such
undertaking, the appellant was forced to enter into an
addendum dated 30th May 2013. In the second complaint, it is
alleged that all the accused have told the appellant that
lands bearing Survey Nos.115 and 117 are not available for
sale, as such they will compensate in other lands and made a
request to become confirming party to sale deed dated
6.7.2013 executed in favour of the trust. It is stated in
the complaint that though the purchaser of the lands covered
by Survey nos.115 and 117 was not known to the appellant, he
was made to sign the sale deed as a confirming party which
is also a conspiracy of all the accused to avoid performance
of the contract entered into by the accused with the
appellant and to retain the amount of Rs.9 crores (Rupees
Nine crores) with them illegally. In the second complaint,
it was further the case of the appellant that when the
cheques, which were given by the accused as security, were
presented, it was learnt that the account of which cheques
were issued was closed even prior to entering into the
agreement dated 26.9.2012. Alleging that there is a fraud,

cheating and conspiracy, it is pleaded that the respondents
are liable to be prosecuted for the offences under Sections
417, 418, 420, 422 and 120(B) read with Section 34, IPC and
the provisions of Prevention of Money Laundering Act.
6. At this stage, it is to be noticed that in the second
complaint, after investigation, chargesheet is also filed
and C.C. is numbered.
7. The High Court has allowed the petitions filed under
Section 482, Cr.P.C. by the respondents-accused mainly on
the ground that in view of the agreement entered into on
08.11.2012, there is a novation of the contract between the
parties. Further the High Court has disbelieved the
Schedule to the MOU dated 08.11.2012 on the ground that the
additional pages were not paginated. Further on the grounds
that the appellant has already filed a civil suit for
recovery of advance paid by him for a sum of Rs.9 crores
(Rupees Nine crores) and the appellant has filed complaint
for offence under Section 138 of the Negotiable Instruments
Act, 1881, the appellant has joined in the sale deed for
lands covered by Survey Nos.115 and 117 of Ballur Village,
has allowed the petitions and quashed the proceedings.

8. Having heard Sri Arun Joshi, learned counsel for the
appellant and Sri R. Basant, learned senior counsel assisted
by Mr. Anand Sanjay M. Nuli, Advocate, appearing for the
respondents, we have perused the impugned order passed by
the High Court and other materials placed on record.
9. It is not seriously disputed by the parties with
regard to the entering of the agreements for procuring the
land in favour of the appellant in Ballur Village, Anekal
Taluk, Bangalore Urban District and respondents have
received the amount of Rs.9 crores by way of demand drafts
and cheques. It is the specific case of the appellant that
there are schedules mentioned to the agreements as per which
respondents have agreed to procure the land covered by
Survey Nos.115 and 117 of Ballur Village apart from other
lands. In a petition under Section 482, Cr.P.C. it is
fairly well settled that it is not permissible for the High
Court to record any findings, wherever there are factual
disputes. Merely on the ground that there is no pagination
in the Schedule, the High Court has disbelieved such
Schedule to the Agreements. It is the specific case of the
appellant that the lands covered by Survey Nos.115 and 117

of Ballur Village were sold even prior to the first
agreement, as such respondents have committed an act of
cheating. It is also the specific case of the appellant
that two cheques were issued by respondents-accused by way
of security for the amount of Rs.9 crores which is advance
but the account of such cheques was closed even prior to
entering into the Agreement itself. The second complaint
filed by the appellant is self-explanatory and he is
forcefully made to sign the sale deed which were executed
subsequently for the lands covered by Survey Nos.115 and 117
of Ballur Village. Mere filing of the suits for recovery of
the money and complaint filed under Section 138 of the N.I.
Act by itself is no ground to quash the proceedings in the
complaints filed by the appellant herein. When cheating and
criminal conspiracy are alleged against the accused, for
advancing a huge sum of Rs.9 crores, it is a matter which is
to be tried, but at the same time the High Court has entered
into the disputed area, at the stage of considering the
petitions filed under Section 482, Cr.P.C. It is fairly
well settled that power under Section 482 Cr.P.C. is to be
exercised sparingly when the case is not made out for the

offences alleged on the reading of the complaint itself or
in cases where such complaint is filed by way of abuse of
the process. Whether any Schedules were appended to the
agreement or not, a finding is required to be recorded after
full fledged trial. Further, as the contract is for the
purpose of procuring the land, as such the same is of civil
nature, as held by the High Court, is also no ground for
quashing. Though the contract is of civil nature, if there
is an element of cheating and fraud it is always open for a
party in a contract, to prosecute the other side for the
offences alleged. Equally, mere filing of a suit or
complaint filed under Section 138 of the N.I. Act, 1881 by
itself is no ground to quash the proceedings. While
considering the petition under Section 482 of Cr.P.C., we
are of the view that the High Court also committed an error
that there is a novation of the contract in view of the
subsequent agreement entered into on 08.11.2012. Whether
there is novation of contract or not and the effect of such
entering into the contract is a matter which is required to
be considered only after trial but not at the stage of
considering the application under Section 482, Cr.P.C.

10. Learned senior counsel Sri R. Basant appearing for the
accused, in support of his case, relied on the judgment of
this Court in the case of S.W. Palanitkar and Ors. vs. State
of Bihar and Anr.1 and submitted that every breach of
contract may not result in a penal offence, but in the very
same judgment, this Court has held that breach of trust with
mens rea gives rise to a criminal prosecution as well. In a
given case, whether there is any mens rea on the part of the
accused or not is a matter which is required to be
considered having regard to the facts and circumstances of
the case and contents of the complaint etc. In the case on
hand, it is clearly alleged that even before entering into
the agreement dated 26.09.2012, lands were already sold to
third party, which were agreed to be procured in favour of
the appellant. Not only that, it is the specific allegation
of the complainant that the cheques were issued towards
security from the account which was also closed much earlier
to the date of Agreement itself. Learned counsel also
relied on judgment in the case of Anil Mahajan vs. Bhor
Industries Ltd. and Anr.2 but in the very same judgment it
1 (2002) 1 SCC 241
2 (2005) 10 SCC 228

is also held that where there exists a fraudulent and
dishonest intention at the time of the commission of the
offence, law permits the victim to proceed against the
wrongdoer for having committed an offence of criminal breach
of trust or cheating. In another case relied on by the
learned counsel, viz., Inder Mohan Goswami and Anr. vs.
State of Uttaranchal and Ors.3 this Court has reiterated the
scope of power of the High Court under Section 482 Cr.P.C.
Having regard to the facts of the case, we are of the view
that the said judgments relied on by the learned counsel
would not support the case of the respondents. It is also
to be noticed that in the complaint filed in P.C.R.No.14420
of 2015, investigation has been completed and chargesheet
was also filed on 22nd December 2015.
11. For the aforesaid reasons, we are of the view that the
High Court has committed an error in allowing the petitions
filed under Section 482, Cr.P.C. by the respondents-accused.
Accordingly, these criminal appeals are allowed and impugned
common order dated 28.4.2017 passed by the High Court of
Karnataka at Bengaluru is set aside. It is made clear that
the findings recorded in this judgment are confined only for
3 2007 (12) Scale 15

these appeals and the same cannot be construed as an
expression of opinion on merits of the matter and it is
open for the trial court to proceed in accordance with law
and decide the complaints on their own merits.
.................... J.
[R.Banumathi]
.................... J.
[R. Subhash Reddy]
New Delhi;
October 17, 2019

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