Supreme Court of India
DALIP KAUR & ORS.versusJAGNAR SINGH & ANR.
- Citation
- 2009 INSC 874
- Decided
- 7 July 2009
- Disposal
- Appeal(s) allowed
- Bench
- S B SINHA
Holding
A breach of contract alone does not amount to cheating under Section 420 IPC; the prosecution must show fraudulent intent and inducement, and the High Court failed to consider this, warranting remand.
Summary
The appellants entered into a sale agreement for agricultural land, received an advance and further payment, but later executed a deed of sale in favour of third parties and returned only part of the advance. The second respondent filed an FIR alleging cheating and criminal breach of trust, and the appellants sought to quash the FIR under Section 482 of the CrPC. The High Court dismissed the petition, holding that the appellants' refusal to refund the balance indicated dishonest intent. The Supreme Court held that a mere breach of contract does not satisfy the elements of cheating under Section 420 IPC unless there is fraudulent intent and inducement, and that the High Court had not examined these aspects. Consequently, the Supreme Court set aside the High Court's order, allowed the appeal, and remitted the matter to the High Court for fresh consideration.
Issues considered
- Whether a breach of contract in a sale agreement can constitute an offence under Section 406 or Section 420 of the Indian Penal Code.
- Whether the FIR disclosed a cognizable offence warranting quashment under Section 482 of the Code of Criminal Procedure.
Legislation cited
- Code of Criminal Procedure, 1973s. 482
- Indian Penal Code, 1860s. 405, s. 406, s. 415, s. 420
Subjects
cheatingSection 420 IPCbreach of contractcriminal breach of trustSection 482 CrPCquash FIRinherent jurisdictioncivil dispute
Judgment
[2009] 10 S.C.R. 264
....
-
A DALIP KAUR & ORS.
v.
JAGNAR SINGH & ANR.
(Civil Appeal No. 1135 of 2009)
JULY 7, 2009
B
(S.B. SINHA AND ASOK KUMAR GANGULY, JJ.]
'
Penal Code, 1860: s. 420 - Necessary ingredients -
Explained - On facts, FIR alleging cheating on account of
c breach of contract - Petition u/s.482 CrPC for quashing FIR
- Dismissed by High Cowt - On appeal, held: Breach of
contract would not constitute offence of cheating - Dispute
between the parties essentially civil in nature - High Court did
not apply its mind with regard to this aspect - Matter remitted
D to High Court for consideration afresh - Code of Criminal ..
Procedure, 1973 - s.482.
The appellant entered into an agreement for sale of
land with the respondent no.2. Respondent no.2 paid an
advance amount and also a further sum within 7 months
E from execution of sale agreement. The appellant
executed a deed of sale in favour of another person.
Appellant returned the advance amount to respondent
no.2 at the time of cancellation of agreement of sale and
promised to refund the balance amount received.
F Respondent no.2 lodged an FIR alleging fraud on the part
of appellant. Appellant filed petition for quashing the FIR
which was rejected.
In appeal to this Court, appellant contended that the
G allegations made in the FIR, even if taken to be correct
in its entirety, would not constitute an offence under A >
'
Section 406 and 420 IPC.
Allowing the appeal and remitting the matter to High
Court, the Court •
H 264
DALIP KAUR & ORS. v. JAGNAR SINGH & ANR. 265
> HELD: An offence of cheating would be constituted A
- when the accused has fraudulent or dishonest intention
at the time of making promise or representation. A pure
and simple: breach of contract does not constitute an
offence of cheating. The ingredients of Section 420 IPC .
are (i) deception of any persons; (ii) fraudulently or B
dishonestly inducing any person to deliver any property;
or (iii) to consent that any person shall retain any property
) and finally intentionally inducing that person to do or omit
to do anything which he would not do or omit. The High
Court should have posed a question as to whether there c
was any act of inducement on the part of the appellant
and whether the appellant had an intention to cheat
;.;/ respondent 2 from the very inception. If the dispute
between the parties was essentially a civil dispute
resulting from a breach of contract on the part of the D
appellants by non-refunding the amount of advance the
same would not constitu,e an offence of cheating. Similar
is the legal position in respect of an offence of criminal
breach of trust having regard to its· definition contained
in Section 405 IPC. As the High Court did not apply its
E
mind with regard to these aspects of the matter, the
impugned judgment cannot be sustained. [Paras 10, 12
and 14) [269-H; 270-A-E; 271-F)
t Ajay Mitra v. State of M.P. (2003) 3 SCC 11; R. Kalyani
v. Janak C. Mehta & Ors. 2009 (1) SCC 516; Hira Lal & Ors. F
v. State of U.P. & Ors. 2009 (5) SCALE 418; Harmanpreet
Singh Ahluwalia & Ors. v. State of Punjab & Ors: 2009 (7)
SCALE 85, relied on.
Case Law Reference:
G
(2003) 3 sec 11 relied on Para 12
~
2009 (1) sec 516 relied on Para 13
.
•
2009 (5) SCALE 418 relied on Para 13
H
266 SUPREME COURT REPORTS [2009] 10 S.C.R.
A 2009 {7) SCALE 85 relied on Para 13
"'
CRIMINAL AP PELLATE JURISDICTION : Criminal Appeal
No. 1135 of 2009.
...
From the Judgment & Order dated 31.08.2007 of the High
B Court of Punjab & Haryana at Chandigarh in Misc. No. 44056-
M of 2007.
Sachin Jain and Dr. Kailash Chand for the Appellants.
c Firm)Vivek Sharma and Chander Shekhar (for Temple Law
for the Respondents.
The Judgment of the Court was delivered by
S.B. SINHA, J. 1. Leave granted.
D
2. Whether breach of contract of an agreement for sale
would constitute an offence undc,· Section 406 or Section 420
of the Indian Penal Code is the question involved herein.
3. It arises in the following factual background:
E
Appellant is the owner of some agricultural lands. He
entered into an agreement for sale with the respondent No.2
agreeing to sell 13 acres of land at the rate of Rs.4, 70,000/-
per acre. Allegedly, respondent No.2 is said to be a property
F dealer. He paid a sum of Rs.7,00,000/- towards advance to the
appellant. A sum of Rs.14,20,000/-was furthermore paid to the
appellant within a period of seven months from the date of
execution of the said sale agreement.
4. Inter alia, on the premise that the second respondent
G was unable to pay the balance amount of consideration, the
appellant executed a deed of sale in favour of Balbir Singh and : .i
Mohinder Singh. Whereas the case of the appellant is that it
was at the instance of the respondent No.2, the said deed of
sale was executed, the latter contends that the appellant did
•
H so without calling upon him to pay the balance amount and as
DALIP KAUR & ORS. v. JAGNAR SINGH & ANR. 267
[S.B. SINHA, J.]
;
-
such he committed an offence under Section 406 and Section A
420 of the Indian Penal Code. Pursuant to or in furtherance of
the agreement dated 12.05.2006, the appellant paid a sum of
Rs.7,20,000 to the respondent No.2 at the time of cancellation
of agreement of sale. Appellant furthermore stated that another
agreement was entered into on or about 10.6.2006 pursuant B
whereto the parties have agreed to cancel the agreement of
sale itself and it was furthermore agreed that in the event the
J
appellant fails to refund the amount, the respondent will take
recourse to law.
5. Appellants in this Special Leave Petition, in no uncertain c
terms, stated that they were ready and willing to pay the amount
on due date.
6. Indisputably, the respondent No.2 lodged a first
4;
information report on or about 7.9.2006, inter alia, alleging : D
"... we got a call from Surjit Singh, who said us to come
tomorrow i.e. 12.05.2006 to execute the sale deed and if
they could not execute the sale deed they will return our
money. We again reached-Tapa Mandi on 12.05.2006. The
above said accused were called at the home of Shri E
Harbans Singh & they said that they don't want to sell their
· land, so you take your money back. After this we &
accused persons came at Tapa Mandi where cancellation
deed was executed & accused have returned us
Rs. 7,80,000/- & remaining amount of Rs.14,20,000/- was F
promised to return till 10.06.2006 & it was also written, if
accused persons could not return Rs.14,20,000/- till
10.06.2006, the agreement to sell will remain intact and
amount of Rs.7,80,000/- given by the accused will be
forfeited in favour of the complainant. The accused G
~
"- persons did not return the money of Rs.14,20,000/- till
10.06.2006, so we reached at their home at village
Khokhar on 10.06.2006. The accused has promised us to
give that amount onI
20.06.2006. But accused still did not.
return the amount, when we reached on 20.06.2006 to take H
268 SUPREME COURT REPORTS (2009] 10 S.C.R.
our money, we came to know that accused have sold the ...
A
land which was subject matter of the agreement, to Balbir
Singh, Mohinder Singh sons of Mohar Singh son of Rulia
Singh etc. R/o village Tanola, District Sangrur and got the
-
sale deed executed in their favour on 10.05.2006. After
B that, we got a copy of registry with the help of an Advocate .
& we came to know that the land subject matter of
agreement with us was sold. After that, one application
was given to sub-registrar, Rampura Phul on 23.06.2006 '
to mark my presence and again on 26.06,2006 one
application was given to mark my presence being holiday
c on 24/25.06.2006 & marked my presence. We have taken
the amount with us to get the sale deed executed. Accused
neither returned our amount of Rs.22,00,000/- nor
executed the sale deed in our favour. Accused has
committed fraud with us and grabbed our Rs.22.0 lacs &
D •
rather threatening to kill us if we have taken any action
against them."
7. Appellants filed an application before the High Court of
Punjab and Haryana at Chandigarh on 25.8.2007 for quashing
E the said first information report No.302 dated 7.9.2006. By
reason of the impugned order dated 31.8.2007, the said
application has been rejected by a learned Single Judge of the
said Court, stating :
"The petitioners despite the agreement to sell having been
F
cancelled have not returned the earnest money, which is
indicative of their dishonest intention leading to registration
of the FIR. Nothing has been shown to this Court which
could persuade it to exercise its inherent jurisdiction under
Section 482 of the Code of Criminal Procedure.
G
Dismissed."
8. Mr. Sachin Jain, learned counsel appearing on behalf
,
-
of the appellant, would urge that the allegations made in the first
information report, even if given face value and taken to be
H
DALIP"KAUR & ORS. v. JAGNAR SINGH & ANR. 269
[S.B. SINHA, J.]
'
·~· correct in its entirety, does not constitute an offence under A
Section 406 and 420 of the Indian Peral Code.
9. Mr. Vivek Sharma, learned counsel appearing on behalf
of the respondent, on the other hand, supported the impugned
judgment contending that the appellants not only sold the land B
to other persons but also deliberately refused to return a huge
amount of Rs.22,00,000/-, despite having made promise
therefor.
" ' '··· 10. Sections 405 and 415 of the Indian Penal Code
c
--
. defining 'criminal breach of trust' and 'cheating' respectively
read as under:
"405 - Criminal breach of trust.-Whoever, being in any
,
__ manner entrusted with property, or with any dominion over
·, . property, dishonestly misappropriates or converts to his D
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 discharge of such trust, or wilfully suffers any
E
other person so to do, commits "criminal breach of trust".
"415. Cheating-Whoever, by deceiving any person,
' fraudulently or dishonestly induces the person so deceived
to deliver any property to any person, or to consent that
any person shall retain any property, or intentionally F
induces the person so deceived to do or omit to do
anything which he would not do or omit if he were not so
deceived, and which act or omission causes or is likely to
cause damage or harm to that person in body, mind,
~
reputation or property, is said to 'cheat'." G
-~~ An offence of cheating would be constituted when the
accused has fraudulent or dishonest intention at the time of
making promise or representation. A pure and simple breach
.. of contract does not constitute an offence of cheating. H
270 SUPREME COURT REPORTS (2009] 10 S.C.R.
A 11. The ingredients of Section 420 of the Indian Penal ...
Code are:
"(i) Deception of any persons;
(ii) Fraudulently or dishoriestly inducing any person to
B deliver any property; er
(iii) To consent that any person shall retain any property ~
and finally intentionally inducing that person to do ·'
or omit to do anything which he would not do or
c omit."
12. The High Court, therefore, should have posed a
question as to whether any act of inducement on the part of the
-•
appellant has been raised by the second respondent and
D
whether the appellant had an intention to cheat him from the
very inception. If the dispute between the parties was essentially f
.-'
a civil dispute resulting from a breach of contract on the part of
the appellants by non-refunding the amount of advance the
same would not constitute an offence of cheating. Similar is the
legal position in respect of an offence of criminal breach of trust
E having regard to its definition contained in Section 405 of the
Indian Penal Code. {See Ajay Mitra v. State of M.P. ((2003) 3
sec 11n.
·-
13. There cannot furthermore be any doubt that the High
F Court would exercise its inherent jurisdiction only when one or
the other propositions of law, as laid down in R. Kalyani v.
Janak C. Mehta & Ors. [(2009 (1) SCC 516] is attracted, which
are as under:
G
"(1) The High Court ordinarily would not exercise its inherent ...
jurisdiction to quash a criminal proceeding and, in
particular, a First Information Report unless the allegations ,,.)ol -
contained therein, even if given face value and taken to be
correct in their entirety, disclosed no cognizable offence.
H (2) For the said purpose, the Court, save and except in
DALIP KAUR & ORS. v. JAGNAR SINGH & ANR. 271
[S.8. SINHA, J.]
very exceptional circumstances, would not look to any A
document relied upon by the defence.
(3) Such a power should be exercised very sparingly. If the
allegations made in the FIR disclose commission of an
offence, the court shall not go beyond the same and pass
8
an order in favour of the accused to hold absence of any
mens rea or actus reus.
(4) If the allegation discloses a civil dispute, the same by
itself may not be a ground to hold that the criminal
proceedings should not be allowed to continue." c
Yet again, in Hira Lal & Ors. v. State of UP. & Ors. [2009
(5) SCALE 418], this Court held :
"10. The parameters of interference with a criminal
·,i proceeding by the High Court in exercise of its jurisdiction D
under Section 482 of the Code are well known. One of the
grounds on which such interference is permissible is that
the allegations contained in the complaint petition even if
given face value and taken to be correct in their entirety,
commission of an offence is not disclosed. The High Court E
may also interfere where the action on the part of the
complainant is mala fide."
)
{See also Harmanpreet Singh Ahluwalia & Ors. v. State
of Punjab & Ors. [2009 (7) SCALE 85]}
14. As the High Court has not applied its mind with regard
to the aforementioned aspects of the matter, "the impugned
judgment cannot be sustained. It is set aside accordingly. The
appeal is allowed.
G
«1, 15. The matter is remitted to the High Court for
consideration of the matter afresh.
D.G. Appeal allowed.
H
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