Case Note & Summary
The petitioner, Babu Dadasaheb Gavhane, filed a Criminal Writ Petition under Article 227 of the Constitution of India and Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of Regular Criminal Case No.420 of 2020 pending before the Judicial Magistrate First Class, Aurangabad, for offences under Sections 406 and 420 of the Indian Penal Code, 1860, and to set aside the order dated 28-07-2021 issuing process against him. The respondent No.1, Shailesh Gopal Dahad, had filed a private complaint alleging that the petitioner, as owner of a property, entered into a development agreement with the complainant on 20-05-2017, received a security deposit of Rs.60 lakh, and subsequently sold flats to third parties without repaying the deposit, thereby cheating and committing criminal breach of trust. The petitioner contended that the dispute was purely civil in nature, arising from a breach of contract, and that the complainant suppressed material facts, including clauses in the agreement that permitted the sale of flats. The Court, after hearing the petitioner's counsel and the APP for the State, examined the agreement and found that the transaction was a commercial dealing with mutual obligations. The Court held that the allegations did not disclose any dishonest intention at the time of the agreement or any entrustment of property, and that the dispute was essentially civil. Relying on the principle that criminal proceedings should not be allowed to continue when the dispute is civil, the Court quashed the criminal proceedings and set aside the process order. The Court observed that allowing the proceedings to continue would be an abuse of the process of law.
Headnote
A) Criminal Law - Quashing of Criminal Proceedings - Sections 406, 420 Indian Penal Code, 1860 - Civil Dispute - The petitioner sought quashing of criminal proceedings alleging breach of contract in a property development agreement. The Court held that the dispute was purely civil in nature and no criminal offence was made out. The complaint did not disclose any dishonest intention at the inception or any entrustment of property. The proceedings were quashed to prevent abuse of process of law. (Paras 5-8) B) Criminal Law - Cheating - Section 420 Indian Penal Code, 1860 - Ingredients - The Court held that for an offence under Section 420 IPC, there must be a fraudulent or dishonest inducement at the time of the transaction. In the present case, the agreement was entered into voluntarily and the allegations only pertained to non-performance of contractual obligations, which does not amount to cheating. (Para 7) C) Criminal Law - Criminal Breach of Trust - Section 406 Indian Penal Code, 1860 - Entrustment - The Court held that the offence under Section 406 IPC requires entrustment of property or dominion over property. In the present case, there was no entrustment of property to the petitioner; the transaction was a commercial agreement for development. Hence, no case under Section 406 IPC was made out. (Para 7)
Issue of Consideration
Whether the criminal proceedings for offences under Sections 406 and 420 of the Indian Penal Code, 1860, arising out of a property development agreement, should be quashed when the dispute is essentially civil in nature.
Final Decision
The Court allowed the writ petition. The criminal proceedings in Regular Criminal Case No.420 of 2020 pending before the Judicial Magistrate First Class, Aurangabad, were quashed. The order dated 28-07-2021 issuing process against the petitioner was set aside. Rule made absolute.
Law Points
- Breach of contract does not constitute criminal offence
- Civil dispute cannot be converted into criminal proceedings
- Ingredients of criminal breach of trust and cheating must be present
- Quashing of criminal proceedings when dispute is purely civil
