Auction Purchaser Cannot Be Prosecuted for Alleged Undervaluation Where Commercial Recovery Follows Prescribed Statutory Procedures

The petitioner was the successful bidder in an e-auction conducted by the Bank of Baroda for a mortgaged residential property, paying Rs. 67,49,000/- after which a sale certificate was issued.

The complainant (Opposite Party No. 2), the original borrower and loan defaulter, filed a complaint alleging a conspiracy between the petitioner, bank officials, and the valuer to undervalue the property by classifying it as residential instead of commercial.

Consequently, the Judicial Magistrate, 1st Class, Araria, took cognizance against the petitioner on 05.01.2023 under Sections 120B, 406, and 420 of the IPC.

The petitioner challenged this order, noting that the complainant had previously failed in writ proceedings and had already approached the Debt Recovery Tribunal (DRT).

1. Whether the criminal proceedings against the petitioner are sustainable when the allegations pertain to a banking auction process and the complainant has already sought civil/statutory remedies.

2. Whether the complaint, taken at face value, discloses the commission of any cognizable offence by the auction purchaser.

The Court applied Sections 406 (Criminal Breach of Trust), 420 (Cheating), and 120B (Criminal Conspiracy) of the Indian Penal Code.

It relied on the principle that criminal prosecution cannot substitute alternative civil remedies, as established in Shailesh Kumar Singh @ Shailesh R. Singh v. State of Uttar Pradesh Ors. (2025 INSC 869).

It further applied the doctrine from Urmila Devi Ors. v. Balram Anr. (2025 INSC 915), which cautions against using complaint cases as circuitous tools to abuse the process of law.

Finally, the Court invoked the firsthand category of the State of Haryana v. Bhajan Lal (1992 Supp (1) SCC 335) guidelines, allowing the exercise of Section 482 Cr.P.C. powers when allegations, even if accepted in entirety, do not prima facie constitute an offence.

The Court reasoned that the petitioner was a bona fide auction purchaser who paid the full amount following prescribed norms.

The primary grievance regarding "undervaluation" falls strictly within the domain of the valuer, and the petitioner had no role in that technical process.

The Court noted that the complainant is a chronic defaulter whose previous challenges to the auction failed in high court writ and LPA jurisdictions.

Since the complainant has already moved the Debt Recovery Tribunal, the criminal complaint is an attempt to bypass civil remedies through "circuitous tools".

Furthermore, a coordinate Bench had already quashed the proceedings against the Bank officials and the Valuer, placing the petitioner—the purchaser—on a much stronger legal footing.

The Court answered that since civil/statutory remedies were being pursued and no prima facie criminal intent was shown, the cognizance was unsustainable.

Accordingly, the Court allowed the application and quashed the order dated 05.01.2023 passed by the Judicial Magistrate, 1st Class, Araria, in Complaint Case No. 1747 of 2021.