PRITI SARAF vs. STATE OF NCT OF DELHI

REPORTABLE IN THE SUPREME COURT OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL NO(S).296 OF 2021 (Arising out of SLP(Crl.) No(s). 6364 of 2019) PRITI SARAF & ANR. ….APPELLANT(S) VERSUS STATE OF NCT OF DELHI & ANR. ….RESPONDENT(S) J U D G M E N T Rastogi, J. 1. Leave granted. 2. The appellants who are the de-facto complainants in FIR No. th 132/2017 dated 28 April, 2017 are questioning the order of the th High Court dated 15 March, 2019 passed in Criminal Miscellaneous Case Nos. 1718/2017 and 7009/2017 whereby the learned Single Judge in exercise of its jurisdiction under Section 482 of the Code of Signature Not Verified Criminal Procedure(hereinafter being referred to as “CrPC”) taking Digitally signed by Nidhi Ahuja Date: 2021.03.10 13:47:22 IST Reason: cognizance for the offence under Sections 420, 406 and 34 IPC 1 quashed the orders and set aside the criminal proceedings against nd 2 respondent on the foundation that the allegations made in the complaint/FIR does not constitute offences under aforestated sections. Brief facts of the case 3. The factual matrix of the matter as reflected from the complaint as alleged are that the subject property in question, i.e., 37, Friends nd Colony(East), New Delhi is in the ownership of 2 respondent. The said property was mortgaged with State Bank of Patiala and the total legal liability payable to the Bank was Rs. 18 crores. That in order nd to clear the said dues, 2 respondent hatched a conspiracy with broker Ashok Kumar so as to cheat and defraud the appellants/complainants and to further misappropriate the amounts nd paid by the complainants as part of the deal, the 2 respondent breached the trust of the appellants/complainants deliberately and nd falsely stating to the appellants/complainants that the 2 respondent would be liable to pay a sum of Rs. 25.50 crores to the nd complainant if the deal is not carried forward by the 2 respondent. Keeping in view the overall scenario, agreement to sell was executed 2 th nd st on 24 December, 2011 between the 2 respondent and the 1 nd appellant. The 2 respondent agreed to sell 1205.43 sq yds. of the property in question for a total sale consideration of Rs. st 63,28,50,750/-. At the time of execution, 1 appellant paid a sum of th Rs. 12.50 crores vide cheque dated 24 December, 2011 drawn on HDFC Bank, New Friends Colony, Delhi. As per clause 3 of the said nd agreement to sell, 2 respondent had to perform and complete three requirements which were compulsory in nature. The said nd requirements were to be completed by the 2 respondent latest by th 24 March, 2012 before any further amount is to be received by her st from the 1 appellant/complainant. 4. It was further alleged in the complaint that the three requirements in terms of clause 3 of the agreement to sell were not nd fulfilled by the 2 respondent and even after there being a delay in st obtaining sanction plans, still the 1 appellant on demand made a rd payment of Rs. 5.40 crores by a cheque dated 23 May, 2012 and to nd show her bonafides, the 2 respondent handed over post-dated cheques worth Rs. 25.50 crores towards security for performance of th agreement dated 24 December 2011. After the amount was received 3 st nd from the 1 appellant/complainant, 2 respondent immediately cleared her outstanding legal liability of State Bank of Patiala and obtained NOC from the bank, however, the fact of obtaining NOC was nd never divulged by the 2 respondent to the complainants nd deliberately. This fact for the first time was disclosed by the 2 respondent at the stage when post-dated cheques of Rs.25.50 crores handed over as security to the complainant were rendered invalid. nd 5. The intention of the 2 respondent from the very inception to cheat and deceive the complainants/appellants is made out from the nd fact that the 2 respondent had to complete the compulsory th requirement on or before 24 March, 2012 but the first two th nd requirements were completed on 11 May, 2012 and 2 June, 2012 respectively and the third requirement was still not complete. At this st nd stage, just to cheat the 1 appellant/complainant, 2 respondent illegally terminated the agreement to sell vide communication dated th st 30 January, 2013. The 1 appellant had tried her level best to get nd the matter settled but, the modus operandi of the 2 respondent was to cheat from the very inception when the agreement to sell was executed, nothing materialised. 4 6. In this regard, a private complaint was filed under Section 200 rd read with Section 190 CrPC on 23 September, 2015 before the learned Magistrate for taking cognizance of the offence committed by nd the 2 respondent before Saket Court, Delhi wherein it was directed to the concerned Police Station to register the FIR under Section th 156(3) CrPC vide Order dated 15 November, 2016 that came to be nd challenged by the 2 respondent by filing of a criminal revision but that came to be dismissed by the ASJ & Special Judge(NDPS), South th East, Saket Courts, New Delhi vide Order dated 26 April, 2017 and thereafter FIR under Section 156(3) CrPC came to be registered nd against the 2 respondent and the broker Mr. Ashok Kumar under th Sections 420, 406 and 34 IPC on 28 April, 2017. 7. The Investigation Officer conducted investigation and filed th charge-sheet dated 5 October, 2018 under Sections 420, 406 and 34 IPC. It reveals from the charge-sheet that the property in question, i.e. 1205.43 sq. yds was alleged to be sub-divided whereas the subject property, i.e. Plot No. 37 is admeasuring 3930 sq. yds. and sub- division of the plot is not permitted to be sanctioned as per Clause 4.4.3(IV) of the Master Plan Delhi, 2021. It also reveals from the 5 charge-sheet that prior to the present transaction which was th executed pursuant to agreement to sell dated 24 December, 2011, nd 2 respondent under the same modus operandi earlier in reference to self-same subject property forfeited in the year 2007 a sum of Rs.18 crores from M/s. Shinestar Buildcon Private Ltd. It further nd reveals that 2 respondent never got the site plan sanctioned for appellants nor the bifurcated & demarcated area knowingly because nd of her malafide intentions. The role of husband of 2 respondent as a suspect is under pending investigation under Section 173(8) CrPC and if adverse material comes on record, the supplementary charge- nd sheet may be filed against S.C. Goyal(husband of 2 respondent) at a later stage. nd th 8. The 2 respondent challenged the orders dated 15 November, th 2016 and 26 April, 2017 passed in revision petition filed at her instance before the High Court under Section 482 CrPC. 9. It reveals from the record that after this fact was brought to the notice of the learned Judge of the High Court that the charge-sheet has been filed, the learned Judge directed the Public Prosecutor by th Order dated 9 October, 2018 to place the charge-sheet on record. 6 Even after the charge-sheet came to be filed by the Public Prosecutor in compliance of the Order of the Court, the learned Judge of the High Court while noticing the facts has only taken note of the th agreement to sell dated 24 December, 2011, notice of termination th dated 30 January, 2013 and without examining the bare facts on record, what being transpired in the complaint and so also during the investigation reflected from the charge-sheet filed before the trial Court and which was part of the record still proceeded on the premise and observed that the case is of a simple breach of contract, which gives rise to purely civil dispute and cannot be converted into a criminal offence, more so, when the arbitral proceedings have been initiated, in the given circumstances, held that if such civil disputes as alleged are being permitted to be prosecuted in the criminal proceedings, this according to the learned Judge, would be a sheer abuse of the process of the Court. In consequence thereof, quashed all the criminal proceedings and the orders under challenge therein th th dated 15 November, 2016 and 24 April, 2017 and further observed that the observations made shall not be construed to be expression on merits, in the arbitration proceedings by impugned judgment th dated 15 March, 2019. 7 10. We have heard Mr. Mukul Rohatgi, learned senior counsel for nd the appellants, Mr. P. Chidambaram, learned senior counsel for 2 respondent and Ms. Aishwarya Bhati, learned Additional Solicitor General for the State. 11. Mr. Mukul Rohatgi, learned senior counsel for the appellants submitted that the charge-sheet filed by the Investigating Officer on th 5 October, 2018 discloses that the offence under Sections 406, 420 nd and 34 IPC has been committed by the 2 respondent and pursuant th to the order of the learned Judge of the High Court dated 9 October, 2018, copy of the charge-sheet was placed on record still no reference of the charge-sheet has been made by the learned Judge in the impugned judgment while quashing the criminal proceedings. 12. Learned counsel further submits that the exercise of inherent power of the High Court under Section 482 CrPC is an exceptional one. Great care should be taken by the High Court before embarking to scrutinise the complaint/FIR/charge-sheet in deciding whether the rarest of the rare case is made out to scuttle the prosecution in its inception. It was expected from the High Court to prima facie consider the complaint, charge-sheet and the statement of witness 8 recorded in support thereof which was recorded by the Investigating Officer in arriving at a conclusion whether court could take cognizance of the offence, on that evidence and proceed further with the trial. If it reaches a conclusion that no cognizable offence is made out, no further act could be done except to quash the FIR/charge- sheet. But only in exceptional cases, i.e., in rarest of rare cases of mala fide initiation of the proceedings to wreak private vengeance process is availed of in laying a complaint or FIR itself does not disclose any cognizable offence. 13. Learned counsel submits that the High Court has committed a manifest error in ignoring the material facts on record which make the orders sensitively susceptible and further submits that the learned Additional Sessions Judge had considered the entire gamut of facts and appositely opined that the order taking cognizance could not be flawed but the High Court has completely erred in its conclusion and has not even looked into the bare facts available on record and has proceeded on a premise that in case where there is an agreement to sell and its subsequent termination for its alleged breach, such disputes are civil disputes and more so where the 9 arbitral proceedings are pending, criminal proceedings will be an abuse of the process of the Court, in the given circumstances, what has been made to be a basis by the learned Judge is unsustainable in law and hence the order deserves to be set aside. 14. In support of his submissions, learned counsel has placed reliance on the judgments of this Court in R.P. Kapur Vs. State of 1 2 Punjab ; State of Haryana and Ors. Vs. Bhajan Lal and Others ; 3 Trisuns Chemical Industry Vs. Rajesh Agarwal and Ors. ; M. 4 Krishnan Vs. Vijay Singh & Anr. ; Joseph Salvaraj A. Vs. State 5 of Gujarat and Ors. ; Arun Bhandari Vs. State of Uttar Pradesh 6 and Ors. ; Anand Kumar Mohatta and Anr. Vs. State (NCT of 7 Delhi), Department of Home and Anr. . 15. Per contra, Mr. P. Chidambaram, learned senior counsel for 2nd th respondent submits that agreement to sell dated 24 December, 2011 discloses all the facts about the ownership of the property, 1 1960 (3) SCR 388 2 1992 Suppl (1) SCC 335 3 1999 (8) SCC 686 4 2001 (8) SCC 645 5 2011 (7) SCC 59 6 2013 (2) SCC 801 7 2019 (11) SCC 706 10 property being mortgaged with the State Bank of Patiala and after the payment, property to be redeemed after obtaining the original papers and no objection certificate from the Bank, thereafter further procedure to be carried out by the parties as per the terms and th conditions of the agreement to sell dated 24 December, 2011. When the appellant failed to carry out its obligation in compliance of the terms and conditions of the agreement to sell,the agreement to sell th was terminated by letter dated 30 January, 2013 and that nd empowers the 2 respondent to forfeit the earnest money which was deposited in terms of the agreement and it was purely a civil dispute and as their being a clause of arbitration, arbitral proceedings were st initiated at the instance of the 1 appellant and although during pendency of the proceedings in the Court, learned Arbitrator has th passed an award dated 8 May, 2020 which has been challenged by nd the 2 respondent under Section 34 of the Arbitration and Conciliation Act, 1996 which is pending before the High Court of Delhi. 16. Learned counsel further submits that parties have entered into an agreement to sell that does not amount to an offence under 11 Section 420 IPC. Neither the complaint which was initially instituted th at the instance of the appellants nor the charge-sheet dated 5 October, 2018 which was later filed although remain unnoticed by the High Court in the impugned judgment nowhere reveals even a nd prima facie case of a criminal offence being committed by the 2 respondent under Sections 420, 406 and 34 IPC and if the parties have entered into an agreement to sell which is purely a commercial transaction, and if there is a breach of the terms of agreement to sell, the party to the agreement in consequence was justified to forfeit the earnest money, it is simply a civil dispute. As there was a demand to refund the forfeited amount failing which FIR was registered to set the criminal law into motion obviously to settle the scores giving the colour of criminal proceedings which is impermissible and this what has been observed by the High Court in the impugned judgment supported by the factual matrix on record. 17. Learned counsel further submits that the present case is of civil nd dispute as earnest money was forfeited by the 2 respondent when st the 1 appellant was not ready to fulfil and perform the terms and th conditions of agreement to sell dated 24 December, 2011 and after 12 the arbitral proceedings were initiated, criminal proceedings were initiated just to harass the respondent with criminal charge under Sections 420, 406 and 34 IPC and further submits that no offence under Section 406 is made out as the earnest money was paid in terms of the contract and there was no restriction in the agreement as to how this money was to be utilised therefore, there is no misappropriation. 18. Learned counsel further submits that the appellant has not come with clean hands and she has suppressed the fact that she did th nd not receive the letter dated 28 February, 2012 sent by 2 respondent. To the contrary, there is sufficient documentary st evidence, as well as his/her admission to this effect by the 1 appellant, which would show that she had received the said letter. th Since she did not respond to the letter dated 28 December, 2012, it was observed that she was not ready to perform her obligations in nd terms of the contract and consequently, the 2 respondent was well th within her rights to terminate the contract by letter dated 30 January, 2013. 13 19. Learned counsel has further tried to justify that all the three conditions of clause 3 of agreement hammered by the appellants were fulfilled, and there is documentary evidence placed on record in support thereof in the counter affidavit. nd 20. Learned counsel for the 2 respondent has also placed reliance on various judgments of this Court which lays down the basic principles under which inherent powers under Section 482 CrPC to be exercised by the High Court and has set aside the criminal proceedings observing that when there are civil disputes, the initiation of criminal proceedings would be abuse of the process of the Court and placed reliance on the judgments in Rajabhai Abdul 8 Rehman Munshi Vs. Vasudev Dhanjibhai Mody ; G. Narayanaswamy Reddy (Dead) by LRs. & Anr. Vs. Govt. of 9 Karnataka and Anr. ; G. Sagar Suri & Anr. Vs. State of U.P. and 10 11 Ors. ; Murari Lal Gupta Vs. Gopi Singh ; Indian Oil 12 Corporation Vs. NEPC India Ltd. and Ors. ; Harmanpreet Singh 8 1964 (3) SCR 480 9 1991 (3) SCC 261 10 2000 (2) SCC 636 11 2005 (13) SCC 699 12 2006 (6) SCC 736 14 13 Ahluwalia and Ors. Vs. State of Punjab and Ors. ; Joseph 14 Salvaraj A. Vs. State of Gujarat and Ors. ; Chandran 15 Ratnaswami Vs. K.C. Palanisamy and Ors. ; VESA Holdings 16 Private Limited and Anr. Vs. State of Kerala & Ors. K. Subba ; Rao and Ors. Vs. State of Telangana Rep. by its Secretary, 17 Department of Home & Ors. . 21. Learned counsel has further submitted in his written submissions that the High Court indeed has not referred to the charge-sheet of which a reference has been made, this Court if considers it appropriate, in the facts and circumstances, may remit the matter back to the High Court for fresh consideration. It would nd be unjust if the 2 respondent was compelled to face criminal prosecution on the ground that the High Court had not looked into the material available on record. 22. After the conclusion of the submissions, an IA has been filed at nd the instance of the 2 respondent for initiating proceedings under 13 2009 (7) SCC 712 14 2011 (7) SCC 59 15 2013 (6) SCC 740 16 2015 (8) SCC 293 17 2018 (14) SCC 452 15 Section 340 read with Section 195 CrPC, in which it has been alleged that the appellants have not only concealed the documents but has made false statement and it has been prayed that proceedings under Section 340 CrPC may be initiated against the appellants. 23. It being a settled principle of law that to exercise powers under Section 482 CrPC, the complaint in its entirety shall have to be examined on the basis of the allegation made in the complaint/FIR/charge-sheet and the High Court at that stage was not under an obligation to go into the matter or examine its correctness. Whatever appears on the face of the complaint/FIR/charge-sheet shall be taken into consideration without any critical examination of the same. The offence ought to appear ex facie on the complaint/FIR/charge-sheet and other documentary evidence, if any, on record. 24. The question which is raised for consideration is that in what circumstances and categories of cases, a criminal proceeding may be quashed either in exercise of the extraordinary powers of the High Court under Article 226 of the Constitution, or in the exercise of the inherent powers of the High Court under Section 482 CrPC. This has 16 often been hotly debated before this Court and various High Courts. Though in a series of decisions, this question has been answered on several occasions by this Court, yet the same still comes up for consideration and is seriously debated. 25. In this backdrop, the scope and ambit of the inherent jurisdiction of the High Court under Section 482 CrPC has been examined in the judgment of this Court in State of Haryana and Others Vs. Bhajan Lal and Others(supra). The relevant para is mentioned hereunder:-

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26. This Court has clarified the broad contours and parameters in laying down the guidelines which have to be kept in mind by the High Courts while exercising inherent powers under Section 482 CrPC. The aforesaid principles laid down by this Court are illustrative and not exhaustive. Nevertheless, it throws light on the circumstances 18 and the situation which is to be kept in mind when the High Court exercises its inherent powers under Section 482 CrPC. 27. It has been further elucidated recently by this Court in Arnab 18 Manoranjan Goswami Vs. State of Maharashtra and Others where jurisdiction of the High Court under Article 226 of the Constitution of India and Section 482 CrPC has been analysed at great length. 28. It is thus settled that the exercise of inherent power of the High Court is an extraordinary power which has to be exercised with great care and circumspection before embarking to scrutinise the complaint/FIR/charge-sheet in deciding whether the case is the rarest of rare case, to scuttle the prosecution at its inception. 29. In the matter under consideration, if we try to analyse the guidelines of which a reference has been made, can it be said that the allegations in the complaint/FIR/charge-sheet do not make out nd a case against the 2 respondent or do they disclose the ingredients nd of an offence alleged against the 2 respondent or the allegations are patently absurd and inherently improbable so that no prudent 18 2020 SCC Online SC 964 19 person can ever reach to such a conclusion that there is sufficient nd ground for proceeding against the 2 respondent. 30. In the instant case, the complaint/FIR/charge-sheet as noticed above, does, however, lend credence to the questions posed. It is settled that one is not supposed to dilate on this score, or intend to present that the allegations in the complaint will have to be accepted on the face of it and the truth or falsity of which would not be gone into by the Court at this stage, as noticed above, whether the allegations in the complaint were true is to be decided on the basis of the evidence led at the stage of trial and the observations on this score in the case of Nagpur Steel & Alloys Pvt. Ltd. Vs. P. 19 Radhakrishna and Others ought to be noticed. In para 3, this Court observed:- “ 3 . We have perused the complaint carefully. In our opinion it cannot be said that the complaint did not disclose the commission of an offence. Merely because the offence was committed during the course of a commercial transaction, would not be sufficient to hold that the complaint did not warrant a trial. Whether or not the allegations in the complaint were true was to be decided on the basis of evidence to be led at the trial in the complaint case. It certainly was not a case in which the criminal trial should have been cut short. The quashing of the complaint has resulted in grave miscarriage of justice. We, therefore, without expressing any opinion on the merits of the case, 19 1997 SCC(Cri) 1073 20

31. Be it noted that in the matter of exercise of inherent power by the High Court, the only requirement is to see whether continuance of the proceedings would be a total abuse of the process of the Court. The Criminal Procedure Code contains a detailed procedure for investigation, framing of charge and trial, and in the event when the High Court is desirous of putting a halt to the known procedure of law, it must use proper circumspection with great care and caution to interfere in the complaint/FIR/charge-sheet in exercise of its inherent jurisdiction. 32. In the instant case, on a careful reading of the complaint/FIR/charge-sheet, in our view, it cannot be said that the complaint does not disclose the commission of an offence. The ingredients of the offences under Sections 406 and 420 IPC cannot be said to be absent on the basis of the allegations in the complaint/FIR/charge-sheet. We would like to add that whether the allegations in the complaint are otherwise correct or not, has to be decided on the basis of the evidence to be led during the course of 21 trial. Simply because there is a remedy provided for breach of contract or arbitral proceedings initiated at the instance of the appellants, that does not by itself clothe the court to come to a conclusion that civil remedy is the only remedy, and the initiation of criminal proceedings, in any manner, will be an abuse of the process of the court for exercising inherent powers of the High Court under Section 482 CrPC for quashing such proceedings. 33. We have perused the pleadings of the parties, the complaint/FIR/charge-sheet and orders of the Courts below and have taken into consideration the material on record. After hearing learned counsel for the parties, we are satisfied that the issue involved in the matter under consideration is not a case in which the criminal trial should have been short-circuited. The High Court was not justified in quashing the criminal proceedings in exercise of its inherent jurisdiction. The High Court has primarily adverted on two circumstances, (i) that it was a case of termination of agreement to sell on account of an alleged breach of the contract and (ii) the fact that the arbitral proceedings have been initiated at the instance of the appellants. Both the alleged circumstances noticed by the High 22 Court, in our view, are unsustainable in law. The facts narrated in the present complaint/FIR/charge-sheet indeed reveal the commercial transaction but that is hardly a reason for holding that the offence of cheating would elude from such transaction. In fact, many a times, offence of cheating is committed in the course of commercial transactions and the illustrations have been set out under Sections 415, 418 and 420 IPC. Similar observations have been made by this Court in Trisuns Chemical Industry Vs. Rajesh Agarwal and Ors.(supra) :-

34. So far as initiation of arbitral proceedings is concerned, there is no correlation with the criminal proceedings. That apart, the High nd Court has not even looked into the charge-sheet filed against 2 23 respondent which was on record to reach at the conclusion that any criminal offence as stated is prima facie being made out and veracity of it indeed be examined in the course of criminal trial. 35. The submission made by Mr. P. Chidambaram, learned senior nd counsel for 2 respondent showing bonafides and taking us through the documentary evidence annexed to the counter affidavit on record to show that it was a simple case of termination because of breach of terms of the contract giving rise to a purely civil dispute or initiation of the arbitral proceedings would not attract the provisions under Sections 406, 420, 34 IPC may not hold good at this stage for the nd reason what is being suggested by the learned counsel for the 2 respondent can be his defence during the course of trial but was not open to be examined by the High Court to take a judicial notice and for quashing of the criminal proceedings in exercise of its inherent powers under Section 482 CrPC. 36. So far as the further submission made by learned counsel for nd the 2 respondent that if the High Court has failed to consider the charge-sheet and other material available on record, the matter be remitted back to the High Court for re-consideration afresh in 24 accordance with law. There may be some substance in what being nd urged by learned counsel for the 2 respondent but for the reason that matter has been argued threadbare before us, and learned counsel for the parties have taken us through the record of criminal proceedings. After going through the record, we are satisfied that there was sufficient material available as manifests from the record nd of criminal proceedings to connect the 2 respondent in the commission of crime. Consequently, we do not consider it appropriate to remit the matter back at this stage, as it would be an exercise in futility; on the contrary, it will just delay the proceedings, and hold the criminal trial at bay, which deserves to be expedited. 37. At the time of conclusion of the proceedings, IA has been filed nd at the instance of 2 respondent initiating criminal proceedings st against the 1 appellant under Section 340 read with Section 195 CrPC. We find that such applications are being filed for ulterior reasons which we seriously deprecate. The said IA is accordingly dismissed. 38. Consequently, the appeal succeeds and is accordingly allowed. th The judgment of the High Court impugned dated 15 March, 2019 is 25 hereby set aside. We, however, make it clear that what has been observed by us is only for the purpose of disposal of the present appeal. The trial Court may proceed with the trial expeditiously without being influenced by the observations made in this judgment or taken as an expression of our opinion. 39. All pending IAs stand disposed of. ……………………………J. (INDU MALHOTRA) .…………………………..J. (AJAY RASTOGI) NEW DELHI March 10, 2021 26