Penal Code, 1860:
s.406 – Criminal Breach of Trust – Development agreement between appellant No. 1 and respondent No. 2 (Developer) – Security amount of Rs. One crore was deposited by developer with appellant No. 1 – As per the agreement the amount was liable to be refunded when the developer would handover possession of the areas of the owner’s share to the owner – Agreement could not be fulfilled in view of new building regulations – Appellant No. 1 conveyed to the developer that he did not wish to develop the property – FIR lodged by developer against appellant No. 1 alleging criminal breach of trust for having not refunded security amount and for having transferred the subject property in the name of his wife i.e. appellant No. 2 – Petition by appellants u/s.482 Cr.P.C. for quashing the FIR – High Court dismissed the petition as pre-mature and directed the investigation to proceed – Appeal to Supreme Court – During pendency of appeal, on completion of investigation chargesheet filed – Plea of appellants also for quashing the charge-sheet – Held: The essence of offence of Criminal Breach of Trust lies in the use of the property entrusted to a person, by that person, in violation of any direction of law or any legal contract which he has made during the discharge of such trust – Payment of Rs. one crore by the developer was a security amount which was required to be refunded when developer would hand-over the possession of the area of the owner’s share to the owner – It is not entrustment of property which was dishonestly converted by appellant No. 1 to his own use or was disposed of in violation of any direction of law or contract – Developer had also not made any attempt for recovery of the money – The dispute has the contours of a dispute of civil nature and does not constitute a criminal offence – Transfer of property by appellant No. 1 in the name of his wife also did not amount to commission of offence of Criminal Beach of Trust – Therefore, the prosecution is mala fide, untenable and solely intended to harass the appellants – FIR and charge-sheet are liable to be quashed – High Court erred in dismissing the petition under s. 482 Cr.P.C.
Code of Criminal Procedure, 1973:
s.482 – Petition under – For quashing of FIR – Maintainability of, when in the meantime charge-sheet is filed – Held: The inherent power u/s. 482 is conferred to prevent abuse of process of a court – The provision does not restrict the exercise of its inherent power to prevent abuse of process of the court only to the stage of FIR.
Allowing the appeal, the Court
HELD: 1. It cannot be said that once the charge sheet is filed, petition for quashing of FIR is untenable. There is nothing in the words of Section 482 Cr.P.C. which restricts the exercise of the power of the Court to prevent the abuse of process of court or miscarriage of justice only to the stage of the FIR. It is settled principle of law that the High court can exercise jurisdiction under Section 482 of Cr.P.C even when the discharge application is pending with the trial court. It would be a travesty to hold that proceedings initiated against a person can be interfered with, at the stage of FIR but not if it has advanced, and the allegations have materialized into a charge sheet. On the contrary, it could be said that the abuse of process caused by FIR stands aggravated if the FIR has taken the form of a charge sheet after investigation. The power is undoubtedly conferred to prevent abuse of process of power of any court. [Paras 15 and 17] [1035-G-H; 1036-A-B, F-G]
Joseph Salvaraj A. v. State of Gujarat (2011) 7 SCC
59 : [2011] 8 SCR 815; G. Sagar Suri and Anr. v. State of U.P and Others (2000) 2 SCC 636 : [2000] 1 SCR 417; Umesh Kumar v. State of Andhra Pradesh and Anr. (2013) 10 SCC 591: [2013] 14 SCR 213 – relied on.
2. The charge that appellant No.1 has fraudulently transferred the property which is the subject matter of the agreement dated 03.06.1993 to his wife and has thereby committed criminal breach of trust, is wholly untenable and rather extraordinary since the alleged fraudulent transfer of property by appellant No.1 to his wife, assuming it to be illegal, by no stretch of imagination can constitute the offence of a criminal breach of trust, since the property was not entrusted by respondent No.2 to the appellants. The property belonged to appellant No.1 and there was therefore no question of appellants having been entrusted with their own property, and that too by the complainant, who had merely entered into a development agreement in respect of the property. [Para 18][1037-B-C]
3. The essence of the offence of criminal Breach of Trust lies in the use of the property entrusted to a person by that person, in violation of any direction of law or any legal contract which he has made during the discharge of such trust. In the present case, the amount of Rs. One crore was paid by the complainantrespondent to the appellants as an interest free deposit on the signing of the agreement. It was liable to be refunded to the complainant simultaneously on handing over of possession of the area of the owner’s share to the owner in the group housing complex vide Clause 30 (b) of the agreement dated 03.06.1993. [Para 21][1038-G]
4. The amount has been retained by appellant No.1 as a security because not only is there any handing over of constructed portion, the complainant has also got into part possession of the property and has not handed it back. Also, the complainant has failed to get the property vacated from the tenant’s possession. Thus, it is not possible to hold that the amount of Rs. One crore which was paid along with the development agreement as a deposit, can be said to have been entrustment of property which has been dishonestly converted to his own use or disposed of in violation of any direction of law or contract by the appellant. The appellants have not used the amount nor misappropriated it contrary to any direction of law or contract which prescribes how the amount has to be dealt with. [Paras 22 and 23][1039-A-D]
5. Respondent No.2 has also not demanded the return of the amount at any point of time. In fact, it is the specific contention of the Respondent No.2 that he has not demanded the amount because the agreement is still in subsistence. Therefore, it cannot be said that the appellants have misappropriated the amount or dishonestly used the amount contrary to any law or contract. The dispute has the contours of a dispute of civil nature and does not constitute a criminal offence. [Para 23][1039-F]
6. Any effort to settle civil disputes and claims, which do not involve any criminal offence, by applying pressure through criminal prosecution should be deprecated and discouraged. [Para 25][1040-A]
Indian Oil Corporation v. NEPC India Ltd. and others (2006) 6 SCC 736 : [ 2006] 3 Suppl. SCR 704 – relied on.
7. The High Court erred in dismissing the petition of the appellants filed under Section 482 of Cr.P.C. This was a fit case for the High Court to exercise its inherent power under Section
482 of Cr.P.C. to quash the FIR. [Paras 27][1041-F-G]
State of Haryana and Ors. v. Bhajan Lal and Ors. (1992) Supp (1) SCC 335 : [1990] 3 Suppl. SCR 259 – relied on.
8. The prosecution is mala fide, untenable and solely intended to harass the appellants. The FIR and the charge-sheet filed against the appellants are liable to be quashed. [Paras 29 and 30][1042-D-E]
State of Karnataka v. L. Muniswamy and others (1977)
2 SCC 699 : [1977] 3 SCR 113 – relied on.
New Delhi Municipal Council v. Tanvi Trading and Credit Private Limited (2008) 8 SCC 765 : [2008] 12 SCR 867 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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