Holding

The Supreme Court held that the FIR and charge‑sheet under s.406 IPC were liable to be quashed as the alleged conduct did not constitute criminal breach of trust and the matter is a civil dispute, and that s.482 CrPC may be exercised even after a charge‑sheet is filed to prevent abuse of process.

Summary

Anand Kumar Mohatta and his wife entered into a 1993 development agreement with Ansal Properties, under which the developer deposited Rs.1 crore as a security to be refunded upon handing over possession. The agreement became impossible to perform due to new building regulations, and the Mohattas retained the security without refund, prompting the developer to file a criminal complaint alleging criminal breach of trust under IPC s.406. The High Court dismissed the Mohattas' petition under CrPC s.482 to quash the FIR, deeming it premature, and the police later filed a charge‑sheet. On appeal, the Supreme Court held that the alleged conduct did not amount to criminal breach of trust, as no property was entrusted to the appellants, and the dispute was essentially civil; consequently, the FIR and charge‑sheet were mala fide and intended to harass. The Court also clarified that the inherent power under s.482 CrPC can be exercised even after a charge‑sheet is filed to prevent abuse of process. Accordingly, the FIR and charge‑sheet were quashed and the appeal allowed.

Issues considered

The applicability of IPC s.406 (criminal breach of trust) to the retention of a security deposit in a failed development agreement
Whether a petition under CrPC s.482 to quash an FIR can be entertained after a charge‑sheet has been filed
Whether the alleged conduct constitutes a criminal offence or a civil dispute
Whether the prosecution is mala fide and intended to harass the appellants

Legislation cited

Code of Criminal Procedure, 1973s. 156(3), s. 482
Indian Penal Code, 1860s. 405, s. 406

Subjects

criminal breach of trustSection 482 CrPCquashing FIRcivil disputeabuse of processsecurity depositdevelopment agreementinherent powers of High Court

Judgment

1028 [2018] 13
SUPREME COURT S.C.R. 1028
REPORTS [2018] 13 S.C.R.

A ANAND KUMAR MOHATTA AND ANR.
v.
STATE (GOVT. OF NCT OF DELHI) DEPARTMENT OF HOME
AND ANR.
B (Criminal Appeal No. 1395 of 2018)
NOVEMBER 15, 2018
[S. A. BOBDE AND L. NAGESWARA RAO, JJ.]
Penal Code, 1860:
C 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
D
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
E 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 charge-
sheet filed – Plea of appellants also for quashing the charge-sheet
– Held: The essence of offence of Criminal Breach of Trust lies in
F
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
G 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
H
1028
ANAND KUMAR MOHATTA v. STATE (GOVT. OF NCT OF 1029
DELHI) DEPARTMENT OF HOME

property by appellant No. 1 in the name of his wife also did not A
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.
B
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 C
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 D
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 E
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 F
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 G
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 H
1030 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 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
B
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]
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 complainant-
D respondent 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]
E
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.
F 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
G 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
H
ANAND KUMAR MOHATTA v. STATE (GOVT. OF NCT OF 1031
DELHI) DEPARTMENT OF HOME

of the Respondent No.2 that he has not demanded the amount A
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]
B
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 C
(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 D
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 E
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. F
New Delhi Municipal Council v. Tanvi Trading and
Credit Private Limited (2008) 8 SCC 765 : [2008] 12
SCR 867 – referred to.
Case Law Reference
G
[2008] 12 SCR 867 referred to Para 4
[2011] 8 SCR 815 relied on Para 15
[2000] 1 SCR 417 relied on Para 17
[2013] 14 SCR 213 relied on Para 17
H
1032 SUPREME COURT REPORTS [2018] 13 S.C.R.

A [2006] 3 Suppl. SCR 704 relied on Para 25
[1990] 3 Suppl. SCR 259 relied on Para 26
[1977] 3 SCR 113 relied on Para 28
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.
B 1395 of 2018
From the Judgment and Order dated 02.02.2016 of the High Court
of Delhi at New Delhi in Criminal Misc. Case No. 4763 of 2014.
Mahesh Jethmalani, Basant R., Sr. Advs., Sandeep Kapur,
Debmalya Banerjee, Ravi Sharma, Vivek Suri, Mayank Datta, Manish
C Sharma, A. S. Aman, Kartik Bhatnagar, Aviral Kapoor, Ms. I. Khalid,
Mrs. Manik Karanjawala, Rohin Oza, Himanshu, Sandeepan Pathak,
Tushar Thakur, Ayush Jain for M/S. Karanjawala & Co., Advs. for the
Appellants.
Sanjiv Sen, Ajit Kr. Sinha, Sr. Advs., Chetan Dutt, Sanjay Jain,
D Sayan Ray, Soumo Palit, Abhay Kumar, T. A. Khan for B. V. Balaram
Das, Advs. for the Respondents.
The Judgment of the Court was delivered by
S. A. BOBDE, J. 1. Leave granted.
E 2. This Criminal Appeal is filed by Appellants challenging the final
judgment and order dated 02.02.2016 of the High Court of Delhi. The
High Court vide the above dated final judgment and order dismissed the
petition filed by the Appellants under Section 482 of Criminal Procedure
Code and refused to quash FIR No.0139/2014 dated 20.08.2014. During
the pendency of the appeal in this Court, Respondent No.1 filed charge
F sheet dated 03.08.2018 in the Court of Metropolitan Magistrate, Patiala
House Court, Delhi against the Appellants herein. Thus, by way of
amendment to the main prayer in the appeal, Appellants have also prayed
for quashing of charge sheet dated 03.08.2018. Appellants seek quashing
of the FIR dated 20.08.2014 and the charge sheet dated 03.08.2018.
G Facts
3. This appeal is by an accused against whom a FIR was lodged
on 20.08.2014, in respect of disputes arising out of the agreement dated
03.06.1993 entered into between the Appellant No.1 i.e. Mr. Anand
Kumar Mohatta and the complainant i.e. Ansal Properties &
H
ANAND KUMAR MOHATTA v. STATE (GOVT. OF NCT OF 1033
DELHI) DEPARTMENT OF HOME [S. A. BOBDE, J.]

Infrastructure Ltd. The FIR was lodged about 21 years after the A
agreement. Initially, the FIR was also lodged against the wife of the
Appellant No.1 i.e. Mrs. Shobha Anand Mohatta, but no offence has
been made out against her after investigation.
4. The agreement entered into by the two parties is with regard to
the development of the property owned by the Appellants. This property B
is situated at 20, Feroz Shah Road, New Delhi, which falls under Lutyens
Zone. The property was initially owned by the Appellant No.1 and later
on ownership of the property was transferred to Appellant No.2 i.e.
wife of Appellant No. 1. Desirous of developing the property, the
Appellant No.1 entered into a development agreement dated 03.06.1993
with Respondent No.2 M/s Ansal Properties & Infrastructure Ltd. The C
parties agreed to develop the said property by constructing a high-rise
building comprising of flats. Respondent No.2 paid a sum of Rs. One
crore as contemplated by clause 38 of the agreement. The agreement
could not be fulfilled as the new building regulations which were
introduced prohibited the construction of high-rise building in the Lutyens D
Bungalow Zone, where the property is situated. (See New Delhi
Municipal Council v. Tanvi Trading and Credit Private Limited)1.
5. Thereafter, on 14.03.2011, the Appellant No.1 wrote a letter
stating that he does not wish to develop the property. The Appellants did
not take any further action neither did they return the amount advanced E
by the Respondent No.2.
6. Apparently, since the Appellant had declined all alternate offers
made by the complainant but ostensibly on the ground that this security
amount of Rs. One crore had not been refunded, Respondent No.2 on
19.11.2011 filed a Criminal Complaint before the SHO, Police Station F
Barakhamba Road, New Delhi complaining of offences under Section
406 and 420 followed by a complaint dated 10.09.2012 with the Additional
Commissioner of Police. On refusal of police authorities to register FIR
against the Appellants, the Respondent-complainant invoked powers of
the Court under Section 156 (3) of the Cr. P.C on 03.11.2012. Thereafter,
on 11.11.2013 Respondent No. 2 withdrew the complaint filed under G
Section 156 (3). The FIR with which we are concerned was lodged on
20.08.2014 against the Appellants for offence under Section 406 of IPC
on a fresh complaint filed by the Respondent No.2.
1
2008 (8) SCC 765
H
1034 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 7. Following which, the Appellants approached the High Court
under Section 482 of the Cr. P.C seeking to quash FIR dated 20.08.2014.
According to the Appellants, the FIR was completely untenable in the
facts and circumstances of the case. Mainly, the amount of Rs. One
crore was rightfully retained by them and there was no question of such
retention constituting a criminal breach of trust. Moreover, assuming
B
that the Respondent No. 2 had a grievance only about the retention of
money, the redressal ought to have been sought before a Civil Court.
Therefore, the lodging of the FIR was mala fide in nature and done with
the intention to pressurize the Appellants to agree to certain new terms
and conditions of the agreement to which the Appellants did not want to
C proceed with.
8. It is the case of the complainant-Respondent No.2 that the
Appellant No.1 is guilty of the offence under Section 406 since he had
clandestinely and surreptitiously transferred the subject property in the
name of his wife i.e. Appellant No.2. This was done to defeat the
D agreement dated 03.06.1993. It is also said that the Appellants are guilty
of abusing the process of Court by undervaluing the property in a collusive
suit before the Bombay High Court and thus wrongly transferred the
property.
9. The High Court, however, disposed of the Appellants’ petition
E filed under Section 482 on the ground that the petition has been filed pre-
maturely as the case is still at the stage of investigation. The High Court
directed the investigation to proceed and further directed the Appellants
to join the investigation. Appellants thereafter preferred the present appeal
by way of Special Leave Petition in this Court. In the present appeal,
this Court on the prima facie view of the matter protected the Appellants
F from arrest and directed that the investigation be continued. Accordingly,
the Respondent No. 1 carried out investigation and has filed a report
under Section 173 of the Cr. P.C in the Court of Metropolitan Magistrate,
Patiala House Court, Delhi. Since, the police have now submitted a
charge sheet, Appellants have additionally filed amendment application
G seeking to incorporate prayer for quashing of charge sheet in addition to
prayer for quashing of the FIR.
Contentions
10. Shri Mahesh Jethmalani, Senior Counsel appearing for the
Appellants submitted that the transactions in the present case which are
H
ANAND KUMAR MOHATTA v. STATE (GOVT. OF NCT OF 1035
DELHI) DEPARTMENT OF HOME [S. A. BOBDE, J.]

set to constitute the offence under Section 406 cannot under any A
circumstances be said to constitute an offence under that section.
Assuming that the Respondent No.2 have a grievance about the alleged
wrongful retention of the amount of Rs. One crore, the dispute could at
best be a civil dispute.
11. The learned counsel further submitted that the amount of Rs. B
One crore advanced to the Appellants was liable to be refunded under
Clause 30 (b) which is as follows: -
“Developer handing over possession of the areas of the
Owner’s share to the Owner in the said Group Housing
Complex”. C
Since this contingency did not arise the amount has not been
refunded. In addition, the counsel submitted that the Appellants retained
the amount because the developer i.e. Respondent No.2 is in part
possession of some of the subject property and has also not complied
with the obligation of having a tenant vacated from the property. D
12. Shri Sanjiv Sen, learned Senior Counsel for the Respondent
No.2 submitted that the petition for quashing of FIR was untenable since
the proceedings have gone past the stage of FIR and have resulted in a
charge sheet.
13. Shri Sanjiv Sen, vehemently submitted that the charge under E
Section 406 against the Appellant No.1 arises from the fact that the
Appellant No.1 has fraudulently transferred the property which is the
subject matter of the development agreement dated 03.06.1993 to his
wife i.e Appellant No.2.
14. Shri Ajit Kumar Sinha, Learned Senior Counsel, appearing for F
the Respondent No.1 i.e. State government of NCT, places reliance on
the charge sheet to submit that the Appellants have committed an offence
punishable under Section 406 by not returning the amount of Rs. One
Crore advanced by the Respondent No.2.
Conclusion G
15. First, we would like to deal with the submission of the learned
Senior Counsel for the Respondent No.2 that once the charge sheet is
filed, petition for quashing of FIR is untenable. We do not see any merit

H
1036 SUPREME COURT REPORTS [2018] 13 S.C.R.

A in this submission, keeping in mind the position of this Court in Joseph
Salvaraj A. v. State of Gujarat2. In the case of Joseph Salvaraj A.
(supra), this Court while deciding the question whether the High Court
could entertain the 482 petition for quashing of FIR, when the charge
sheet was filed by the police during the pendency of the 482 petition,
observed: -
B
“16. Thus, from the general conspectus of the various sections
under which the appellant is being charged and is to be
prosecuted would show that the same are not made out even
prima facie from the complainant’s FIR. Even if the charge-
sheet had been filed, the learned Single Judge could have
C still examined whether the offences alleged to have been
committed by the appellant were prima facie made out from
the complainant’s FIR, charge-sheet, documents, etc. or not.”
16. Even otherwise it must be remembered that the provision
invoked by the accused before the High Court is Section 482 Cr. P.C
D and that this Court is hearing an appeal from an order under Section 482
of Cr.P.C. Section 482 of Cr.P.C reads as follows: -
“482. Saving of inherent power of the High Court.- Nothing
in this Code shall be deemed to limit or affect the inherent
powers of the High Court to make such orders as may be
E necessary to give effect to any order under this Code, or to
prevent abuse of the process of any Court or otherwise to
secure the ends of justice.”
17. There is nothing in the words of this Section which restricts
the exercise of the power of the Court to prevent the abuse of process
F 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 court3. Indeed, 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
G
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

2
(2011) 7 SCC 59
3
G. Sagar Suri and Anr. V. State of U.P and Others, (2000) 2 SCC 636 (Para 7). Umesh
H Kumar V. State of Andhra Pradesh and Anr. (2013) 10 SCC 591 (Para 20)
ANAND KUMAR MOHATTA v. STATE (GOVT. OF NCT OF 1037
DELHI) DEPARTMENT OF HOME [S. A. BOBDE, J.]

sheet after investigation. The power is undoubtedly conferred to prevent A
abuse of process of power of any court.
18. The second submission of learned counsel for the Respondent
No.2 is that the 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. This charge is B
wholly untenable and rather extraordinary since the alleged fraudulent
transfer of property by the 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 the Respondent
No.2 to the Appellants. The property belonged to Appellant No.1 and
there was therefore no question of Appellants having been entrusted C
with their own property, and that too by the complainant, who had merely
entered into a development agreement in respect of the property.
19. Lastly, we find that the FIR and the charge sheet essentially
charged the petitioner for an offence under Section 406 of the Cr.P.C.
for retaining the amount of Rs. One crore which was advanced to him D
by the Respondents at the time of entering into the development
agreement.
Whether an offence under Section 406 made out
20. It is necessary to refer to Sections 405 and 406 of the IPC in E
order to ascertain, whether in the facts and circumstances of the present
case, an offence under Section 406 is made out against the Appellants.
Section 405 and 406 of the IPC reads as follows: -
“405. Criminal breach of trust.—Whoever, being in any
manner entrusted with property, or with any dominion over F
property, dishonestly misappropriates or converts to his own
use that property, or dishonestly uses or disposes of that
property in violation of any direction of law prescribing the
mode in which such trust is to be discharged, or of any legal
contract, express or implied, which he has made touching the
G
discharge of such trust, or wilfully suffers any other person
so to do, commits “criminal breach of trust”.
[Explanation [1].—A person, being an employer [of an
estab-lishment whether exempted under section 17 of the
H
1038 SUPREME COURT REPORTS [2018] 13 S.C.R.

A Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952 (19 of 1952), or not] who deducts the employee’s
contribution from the wages payable to the employee for credit
to a Provident Fund or Family Pension Fund established by
any law for the time being in force, shall be deemed to have
been entrusted with the amount of the contribution so deducted
B
by him and if he makes default in the payment of such
contribution to the said Fund in violation of the said law,
shall be deemed to have dishonestly used the amount of the
said contribution in violation of a direction of law as
aforesaid.]
C [Explanation 2.—A person, being an employer, who deducts
the employees’ contribution from the wages payable to the
employee for credit to the Employees’ State Insurance Fund
held and admin-istered by the Employees’ State Insurance
Corporation established under the Employees’ State Insurance
D Act, 1948 (34 of 1948), shall be deemed to have been
entrusted with the amount of the contribution so deducted by
him and if he makes default in the payment of such
contribution to the said Fund in violation of the said Act,
shall be deemed to have dishonestly used the amount of the
said contribution in violation of a direction of law as
E aforesaid.]
406.Punishment for criminal breach of trust.—Whoever
commits criminal breach of trust shall be punished with
imprisonment of either description for a term which may
extend to three years, or with fine, or with both.”
F
21. The essence of the offence 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
complainant-Respondent to the Appellants as an interest free deposit on
G 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.

H
ANAND KUMAR MOHATTA v. STATE (GOVT. OF NCT OF 1039
DELHI) DEPARTMENT OF HOME [S. A. BOBDE, J.]

22. Two things are significant in the transaction between the A
parties. Firstly, that the occasion for returning the amount i.e. the
developer handing over the possession of the area of the owner’s share
to the owner in the group housing complex, has not occurred. According
to the Appellants, the contract stands frustrated because no group housing
can be legally built on 20 Feroz Shah Road, New Delhi since it falls in
B
the Lutyens Bungalow Zone. Appellant No.1 has therefore, terminated
the contract. Further, the amount has been retained by him 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. C
23. We, thus find that 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 D
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.
Going by the agreement dated 03.06.1993, the amount has to be
returned upon the handing over of the constructed area of the owner
which admittedly has not been done. Most significantly the Respondent
No.2 has not demanded the return of the amount at any point of time. In E
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.
We do not see how it can be contended by any stretch of
imagination that the Appellants have misappropriated the amount or
dishonestly used the amount contrary to any law or contract. In any F
case, we find that the dispute has the contours of a dispute of civil nature
and does not constitute a criminal offence.
24. Having given our anxious consideration, we are of the view
that assuming that there is a security deposit of Rs. One Crore and that
he has misappropriated the dispute between the two parties can only be G
a civil dispute.
25. In Indian Oil Corporation v. NEPC India Ltd. and others4,
this Court observed as follows: -
4
2006 (6) SCC 736
H
1040 SUPREME COURT REPORTS [2018] 13 S.C.R.

A “13. ….. 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…..”
The Court noticed a growing trend in business circles to convert
B purely civil dispute into criminal cases.
We find it strange that the complainant has not made any attempt
for the recovery of the money of Rs. One Crore except by filing this
criminal complaint. This action appears to be mala fide and unsustainable.
26. In State of Haryana and Ors. v. Bhajan Laland Ors.5, this
C Court has set out the categories of cases in which the inherent power
under Section 482 of Cr.P.C. can be exercised. Para 102 of the judgment
reads as follows: -
“102. In the backdrop of the interpretation of the various
relevant provisions of the Code under Chapter XIV and of
D the principles of law enunciated by this Court in a series of
decisions relating to the exercise of the extraordinary power
under Article 226 or the inherent powers under Section 482
of the Code which we have extracted and reproduced above,
we give the following categories of cases by way of illustration
E wherein such power could be exercised either to prevent
abuse of the process of any court or otherwise to secure the
ends of justice, though it may not be possible to lay down any
precise, clearly defined and sufficiently channelised and
inflexible guidelines or rigid formulae and to give an
exhaustive list of myriad kinds of cases wherein such power
F should be exercised.
(1) Where the allegations made in the first information report
or the complaint, even if they are taken at their face value
and accepted in their entirety do not prima facie constitute
any offence or make out a case against the accused.
G
(2) Where the allegations in the first information report and
other materials, if any, accompanying the FIR do not disclose
a cognizable offence, justifying an investigation by police
officers under Section 156(1) of the Code except under an
5
(1992) Supp (1) SCC 335
H
ANAND KUMAR MOHATTA v. STATE (GOVT. OF NCT OF 1041
DELHI) DEPARTMENT OF HOME [S. A. BOBDE, J.]

order of a Magistrate within the purview of Section 155(2) of A
the Code.
(3) Where the uncontroverted allegations made in the FIR or
complaint and the evidence collected in support of the same
do not disclose the commission of any offence and make out
a case against the accused. B
(4) Where, the allegations in the FIR do not constitute a
cognizable offence but constitute only a non-cognizable
offence, no investigation is permitted by a police officer without
an order of a Magistrate as contemplated under Section
155(2) of the Code. C
(5) Where the allegations made in the FIR or complaint are so
absurd and inherently improbable on the basis of which no
prudent person can ever reach a just conclusion that there is
sufficient ground for proceeding against the accused.
(6) Where there is an express legal bar engrafted in any of D
the provisions of the Code or the concerned Act (under which
a criminal proceeding is instituted) to the institution and
continuance of the proceedings and/or where there is a
specific provision in the Code or the concerned Act, providing
efficacious redress for the grievance of the aggrieved party. E
(7) Where a criminal proceeding is manifestly attended with
mala fide and/or where the proceeding is maliciously instituted
with an ulterior motive for wreaking vengeance on the accused
and with a view to spite him due to private and personal
grudge.” F
27. We are of the opinion that the present case falls under the 1st,
3 and 5th category set out in the para 102 of the judgment in the case of
rd

Bhajan Lal (supra). In such a situation, 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
G
Section 482 of Cr.P.C. to quash the FIR.
28. It is necessary here to remember the words of this Court in
State of Karnataka v. L. Muniswamy and others 6 which read as
follows: -
6
1977 (2) SCC 699 H
1042 SUPREME COURT REPORTS [2018] 13 S.C.R.

A “7. …..In the exercise of this wholesome power, the High Court
is entitled to quash a proceeding if it comes to the conclusion
that allowing the proceeding to continue would be an abuse
of the process of the Court or that the ends of justice require
that the proceeding ought to be quashed. The saving of the
High Court’s inherent powers, both in civil and criminal
B
matters, is designed to achieve a salutary public purpose which
is that a court proceeding ought not to be permitted to
degenerate into a weapon of harassment or persecution. In a
criminal case, the veiled object behind a lame prosecution,
the very nature of the material on which the structure of the
C prosecution rests and the like would justify the High Court in
quashing the proceeding in the interest of justice…..”
29. We find that the prosecution is mala fide, untenable and solely
intended to harass the Appellants. We are forfeited in view of the
Respondent not having made any attempt to recover the deposit of Rs.
D One Crore through a civil action.
30. We have, therefore, no hesitation in quashing the FIR and the
charge sheet filed against the Appellants. Hence, the FIR No.0139/
2014 dated 20.08.2014 and charge sheet dated 03.08.2018 are hereby
quashed.
E 31. For the aforesaid reasons, we hereby set aside the impugned
judgment and order dated 02.02.2016 of High Court of Delhi. Accordingly,
appeal is allowed along with the application filed by the Appellants seeking
amendment of main prayer.

F Kalpana K. Tripathy Appeal allowed.

G

H