Mandla Balaram vs State of Telangana - 2026 Supreme(Telangana) 491

Headnote:(A) Code of Criminal Procedure, 1973 - Section 482 - Indian Penal Code, 1860 - Sections 415, 418, and 420 - Quashment of criminal proceedings - Dispute arising from agreement of sale - Distinction between breach of contract and cheating - To constitute the offence of cheating, there must be "fraudulent or dishonest intention at the inception of the transaction" - A "subsequent failure to fulfil a promise, by itself, does not establish the dishonest intention necessary to constitute cheating at the time when the promise was made" (Paras 11, 12).

(B) Indian Penal Code, 1860 - Section 418 - Requires cheating coupled with knowledge that such cheating is likely to cause wrongful loss to a person whose interest in the transaction was required to be protected by the accused "either by law or under a legal contract" - Mere reciprocal contractual obligations arising out of a sale agreement do not independently attract this provision in the absence of the foundational ingredients of cheating (Para 14).

(C) Criminal Procedure Code, 1973 - Section 482 - Inherent jurisdiction of the High Court to prevent abuse of the process of law - While a contractual dispute may give rise to both civil and criminal proceedings, permitting prosecution to continue when allegations disclose only a contractual dispute without evidence of initial dishonest intent would amount to "giving a criminal colour to what is, in substance, a contractual dispute" (Paras 9, 19).

Facts of the case:
The petitioners entered into an agreement of sale for agricultural land and received an advance amount. The complainant alleged that the petitioners failed to perform agreed obligations, including survey, demarcation, and obtaining a Non-FTL certificate, and subsequently alienated the property to a third party. A private complaint led to the registration of a calendar case for offences under Sections 420, 415, and 418 of the IPC. Simultaneously, a civil suit for recovery of money was instituted by the complainant.

Findings of Court:
The court found that the controversy primarily arises from a contractual dispute. There was no specific allegation or material demonstrating that the petitioners possessed fraudulent or dishonest intention at the inception of the transaction. The subsequent alienation of the property does not conclusively establish initial dishonesty.

Issues: Whether the failure to perform contractual obligations under a sale agreement and the subsequent sale of the property to a third party constitute the criminal offences of cheating, or whether the matter is a purely civil dispute.

Ratio Decidendi: The essential ingredient of cheating is the existence of dishonest intention at the inception of the transaction. A mere subsequent breach of contract or non-performance of obligations does not constitute cheating unless it is proven that the accused intended to deceive the complainant at the time the promise was made. Continuing criminal proceedings in such a scenario constitutes an abuse of the process of the court.

Result: Criminal Petition is allowed and the proceedings against petitioner Nos. 1 and 2/Accused Nos. 1 and 2 in C.C. No. 424 of 2023, pending on the file of the learned Additional Judicial Magistrate of First Class, Jadcherla, Mahabubnagar District, are hereby quashed.

Legal Category Hierarchy

1. Petition under Section 482 CrPC seeking quashment of proceedings for offences under Sections 420, 415, 418 IPC arising from an agreement of sale. (Para 1 , 2 )

ORDER :

N.TUKARAMJI, J.

This Criminal Petition is filed under Section 482 of the Code of Criminal Procedure, 1973, (CrPC) seeking quashment of proceedings against the petitioners in C.C. No. 424 of 2023, pending on the file of the learned Additional Judicial Magistrate of First Class, Jadcherla, Mahabubnagar District.

2. The petitioners are arrayed as Accused Nos. 1 and 2 and facing accusations for the offences punishable under Sections 420, 415, 418 of the Indian Penal Code, 1860 (IPC) in the aforesaid Calendar Case.

3. Heard Mr. Karanam Ramesh, learned counsel for the petitioners; Mr. Surepalli Prashanth, learned Assistant Public Prosecutor, appearing for respondent No.1-State and Mr. K. Krishna Kalyan, learned counsel, representing Mr. K. Venu Madhav, learned counsel for respondent Nos. 2 and 3.

4.1. The prosecution case, in brief, is that the petitioners/Accused Nos. 1 and 2 are the owners of agricultural land admeasuring Ac.2-12 guntas, situated at Mudireddypally Hamlet, Rajapur Village and Mandal, Mahabubnagar District. Petitioner No.1/Accused No.1 allegedly represented himself as being authorised to deal with the property belonging to petitioner No.2/Accused No.2 and offered to sell the same to respondent No.2/complainant. Pursuant thereto, an agreement of sale dated 24.06.2019 was executed for a total sale consideration of Rs.2,71,40,000/-, and an amount of Rs.10,00,000/- was paid by the complainant towards advance sale consideration. It is alleged that the petitioners/Accused had agreed to conduct a survey and demarcate the boundaries of the subject property and to obtain a Non-FTL Certificate within a period of two months. However, according to the complainant, despite repeated requests, the petitioners failed to perform the said obligations. The complainant asserts that he was ready and willing to pay the balance sale consideration and complete the transaction. A legal notice was accordingly issued calling upon the petitioners to comply with the terms of the agreement. However, the petitioners allegedly failed to do so. Petitioner No.2/Accused No.2, in her reply, denied having executed the agreement of sale.

4.2. It is further alleged that the petitioners, with a dishonest intention to cheat the complainant and cause wrongful loss to him, subsequently alienated the subject property in favour of a third party without informing the complainant. Aggrieved thereby, the complainant lodged a police report on 22.08.2022. As the police allegedly failed to take any action thereon, the complainant approached the learned Magistrate by way of a private complaint. Pursuant to the order passed by the learned Magistrate, a crime came to be registered. After completion of the investigation, the police filed a charge sheet. The learned Magistrate thereafter took cognizance of the alleged offences and registered the Calendar Case. Aggrieved by the continuation of the criminal proceedings, the petitioners have filed the present criminal petition seeking quashment of the proceedings.

5.1. Learned counsel appearing for the petitioners submits that the dispute arises entirely out of the agreement of sale dated 24.06.2019 and is essentially civil and contractual in nature. It is contended that, contrary to the allegations of the complainant, the survey and demarcation of the subject property had been completed, but the complainant failed to pay the balance sale consideration within the stipulated period. According to the petitioners, the alleged non-performance of contractual obligations, by itself, cannot be given a criminal colour in the absence of the necessary ingredients of a criminal offence. It is further submitted that the criminal proceedings have been initiated only as a means of exerting pressure upon the petitioners in connection with a contractual dispute. Learned counsel points out that respondent No.2/complainant and respondent No.3 have already instituted O.S. No.204 of 2023 before the Principal Junior Civil Judge, Jadcherla, s