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IN THE HIGH COURT OF DELHI AT NEW DELHI
Dinesh Kumar Sharma, J.
Shiv Kumar & Anr. – Appellants
Versus
State of NCT of Delhi & Anr. – Respondents
Cr.M.C. 1537 of 2023, Cr.M.A. 5860 of 2023
Decided On : 03-07-2023
CRIMINAL PROCEDURE CODE - SECTION 482 - QUASHING OF FIR - FIR QUASHED - CRIMINAL BREACH OF TRUST - CHEATING - INTENTION TO CHEAT - CIVIL DISPUTE - ABUSE OF PROCESS OF LAW - INHERENT POWERS OF HIGH COURT - SECTION 482 CR.P.C. - MALA FIDE INTENTION - DELAY IN LODGING FIR - COMMERCIAL TRANSACTION - LOAN TRANSACTION - ALLOTMENT LETTER - RENEWAL LETTERS - POSTDATED CHEQUES - DIRECTORS' REPORT - INSOLVENCY PROCEEDINGS - NATIONAL COMPANY LAW TRIBUNAL (NCLT) - COMMITTEE OF CREDITORS (COC) - SECTION 138 OF NI ACT -
Fact of the Case:
Petitioner sought quashing of FIR alleging cheating and criminal breach of trust. Complainant alleged that petitioners induced him to invest in a luxurious Golf Resort villa project in Goa undertaken by their company. Complainant paid Rs. 9,90,00,000/- towards the sale consideration of the villa and was assured of possession by 31.07.2019. Complainant also advanced Rs. 7.45 crores as a short term loan @ 12.5% p.a. on the assurance of faster completion of the complainant's villa. Complainant alleged that the intent to cheat was evident as the petitioners duped him of his life savings under the false pretext of building World Class Villas despite knowing that the land on which the project was to be made was in litigation before NGT since 2014/2015. Petitioners contended that the FIR was registered with malice and ulterior motives, containing concocted and fabricated allegations while suppressing vital facts. Petitioners argued that the present dispute is purely contractual in nature, but it has been given a criminal colour to evade pending civil proceedings and browbeat the petitioners. Petitioners also contended that the FIR fails to establish any cognizable offense. Additionally, charging both "criminal breach of trust" under Section 406 IPC and "cheating" under Section 420 IPC for the same transaction is contradictory.
Finding of the Court:
The court found that the dispute between the parties was predominantly of a civil commercial nature and had been given the garb of a criminal case by filing of the present FIR. The court noted that there was an admission of claims of complainant and BKG as a financial creditor in the CIRP which reflected that this was a purely civil dispute. The court also noted that the petitioners had made disclosures of all loans taken by the Company, including the loans from Yes Bank Ltd., in its Balance Sheets and Audited accounts in the relevant years. The court held that the present dispute seems to be civil in nature and has been deliberately given a criminal colour. The court further held that the FIR was lodged after filing of the complaints under Section 138 of NI Act and proceedings were initiated before NCLT. The factum of litigations were in public domain as having been declared in Director's report. The court held that the FIR was lodged after much delay of around 7 years.
Issues: 1. Whether the FIR was registered with malice and ulterior motives, containing concocted and fabricated allegations while suppressing vital facts? 2. Whether the present dispute is purely contractual in nature, but it has been given a criminal colour to evade pending civil proceedings and browbeat the petitioners? 3. Whether the FIR fails to establish any cognizable offense? 4. Whether charging both "criminal breach of trust" under Section 406 IPC and "cheating" under Section 420 IPC for the same transaction is contradictory?
Ratio Decidendi: 1. The court held that the FIR was lodged after much delay of around 7 years. 2. The court held that the present dispute seems to be civil in nature and has been deliberately given a criminal colour. 3. The court held that the FIR was lodged after filing of the complaints under Section 138 of NI Act and proceedings were initiated before NCLT. The factum of litigations were in public domain as having been declared in Director's report.
Final Decision: The court quashed FIR No. 7/22 dated 18.01.2022 under sections 406/420 r/w 120B of IPC registered at PS EOW, Delhi and all the proceedings emanating there from.
JUDGMENT
Dinesh Kumar Sharma,J.
Overview
1. The present petition has been filed under Section 482 Cr.P.C. seeking quashing of FIR No. 7/2022 dated 18.01.2022 under sections 406/420 r/w 120B of IPC registered at PS EOW, Delhi.
2. The said FIR was lodged on the complaint of respondent No.2, Shivraj Krishna Gupta, against the petitioners, alleging therein, that the petitioners systematically conspired through wilful misrepresentations and duped the complainant to invest a substantial amount of Rs 16 crores approx. (along with assured returns/interest @ 12.5% p.a. till possession which was to be given by 31.07.2019), in a luxurious Golf Resort villa project in Goa undertaken by the petitioners through their company M/s Leading Hotels Limited. It was alleged that in February 2015, one Mr. Girish Sareen (CA and Financial Adviser & Funds arranger for the petitioners and their Group Companies) made false representations with respect to the said project and induced the complainant to entrust the petitioners with his money. The complainant alleged that he was assured by Mr. Girish that the project was in collaboration with a world renowned USA chain namely Four Seasons and that the petitioners also owned Asian Hotels (North) Ltd (the parent company of M/s Leading Hotels Limited) owning several luxurious hotel chains such as Hyatt Regency, New Delhi, and thus the project would be one of a kind and very safe to invest in. It was misrepresented to the complainant that for the project all the necessary licenses, clearances and permissions to build the residential villas have been granted. The complainant trusting the petitioners and Mr. Girish paid Rs. 9,90,00,000/- towards the sale consideration of the villa. Subsequently, allotment letter and Builder buyer Agreement were made. Thereafter, in 2017 Mr. Girish approached the complainant on the pretext of shortage of funds to complete the project and sought an amount of Rs. 7.45 crores as short term loan @ 12.5% p.a. on the assurance of faster completion of the complainant's villa. Believing this, the complainant further paid Rs. 7.45 crores through his company BKG Corp. Ltd. as an Inter Corporate Deposit (ICD) vide cheques issued from January 2017 to August 2018. Out of the Rs. 7.45 crores an amount of Rs. 2.05 crores was returned, thereby leaving an outstanding balance of Rs. 5.40 crores in addition to Rs. 9,90,00,000. Thereafter the complainant learnt that no construction or development was taking place due to ongoing litigation before NGT. Complainant was given further reassurances that the project is proceeding well and in order to gain further confidence he was issued Cheques as security of the money along with part period interest cheques all dated between January 2021 & March 2021. The said cheques were deposited after apprising the petitioners, and were dishonoured with remark `payment stopped/account closed'.
3. It was alleged that the intent to cheat was evident as the petitioners duped the complainant of his life savings under the false pretext of building World Class Villas despite knowing that the land on which the project was to be made was in litigation before NGT since 2014/2015, of which the undersigned was not aware. It was alleged that the business operandi of the petitioners was to control his parent Company Asian Hotels (North) Ltd through a web of Overseas Companies so that none of his personal assets in India can be attached for his criminal activities committed here. It was alleged that thus the petitioners committed offences of cheating, criminal breach of trust and misappropriated funds. Basis the said allegations, the impugned FIR was lodged.
4. The main grounds of the petitioner for seeking the quashing of the present FIR are as follows:
a) The FIR was registered with malice and ulterior motives, containing concocted and fabricated allegations while suppressing vital facts.
b) The present dispute is purely contractual in nature, but it has been given a criminal co
Power under Section 156(3) warrants application of judicial mind. A court of law is involved. It is not the police taking steps at the stage of Section 154 of the Code.
The main legal point established in the judgment is that a mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the begin....
Court held that breaches of contract, if primarily civil in nature, do not implicate criminal liability unless fraudulent intent is evident from the outset.
The court affirmed that a party only involved in a civil contract cannot face criminal liability unless it directly transacted or misappropriated funds, supporting the need for a clear distinction be....
The court maintained that an FIR must not be quashed at an initial stage unless no prima facie case is established, even if the allegations suggest civil nature.
Extraordinary power under article 226 of Constitution and also inherent powers under Section 482 of Code which it said could be exercised by High Court either to prevent abuse of the process of any c....
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