Criminal proceedings arising from a settled property dispute were quashed against GSFC auction purchasers.

The applicants invoked the High Court’s inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973, seeking quashing of C.R. No. I-4 of 2014 registered at Matar Police Station for offences under Sections 420, 406, 467, 468, 471, 504 read with Section 114 of the Indian Penal Code.

The FIR alleged that the applicants, in collusion with Vasudev Narandas Vaghvani, a former Manager of the Gujarat State Financial Corporation (GSFC), had created false documents and unlawfully dealt with land bearing Survey No. 1346/2 belonging to the original owners.

The applicants contended that the land had been leased to Shakti Rice Mills for 30 years under a lease deed dated 4 March 1983. After Shakti Rice Mills defaulted on its GSFC loan, GSFC auctioned the industrial concern’s construction and machinery. The applicants’ offer was accepted in 1989, and they claimed possession from that period onward; a sale deed was executed on 18 November 2008.

They maintained that the dispute was civil in nature, that the FIR was lodged after dismissal of their civil suit, and that the complainant lacked authority as his power of attorney had allegedly been revoked.

The original owners alleged that only the leasehold interest and industrial assets could have been dealt with, and that the applicants, knowing that Shakti Rice Mills was not the landowner, had colluded with GSFC officials to usurp the land through fabricated documents.

A coordinate Bench had already quashed the same FIR against the former GSFC Manager, holding that the auction operated on an “as is where is” basis and transferred only the rights and obligations held by Shakti Rice Mills.

The original owners subsequently compromised the civil dispute with the applicants and declared that the complainant was no longer their power-of-attorney holder.

Petitioner No. 1, Sureshbhai Patel, died on 13 February 2016; the proceedings against him were accordingly held to have abated.

Whether the FIR and consequential criminal proceedings disclosed a prima facie criminal case against the applicants under Sections 420, 406, 467, 468, 471, 504 and 114 of the IPC, or constituted an abuse of the process of law in what was essentially a civil property dispute.

Whether the applicants, as auction purchasers from GSFC, acquired only the rights and obligations held by Shakti Rice Mills and could therefore be prosecuted for allegedly creating false title documents in respect of the land.

Whether the complainant possessed authority to initiate and maintain the criminal proceedings as the power-of-attorney holder of the original landowners.

The Court applied Section 482 of the Code of Criminal Procedure, 1973, which preserves the High Court’s inherent power to prevent abuse of the process of court and to secure the ends of justice.

It considered the IPC offences alleged—Sections 420, 406, 467, 468, 471, 504 and 114—in the context of whether the FIR disclosed the necessary criminality or merely arose from a disputed civil transaction.

The Court also relied on the legal effect of proceedings under Section 29 of the State Financial Corporations Act, as reflected in the coordinate Bench’s reasoning: a sale by GSFC of an industrial concern on an “as is where is” basis transfers the rights and obligations possessed by that concern, but does not amount to a sale of the underlying land itself.

The Court further considered the consequences of the original owners’ compromise and their declaration that the complainant’s power of attorney had been revoked.

The Court found that the applicants were auction purchasers from GSFC and acquired the same rights and obligations that Shakti Rice Mills possessed in relation to the property.

The coordinate Bench had already concluded that the transaction did not constitute a sale of the land, but transferred possession and the industrial concern’s existing rights on an “as is where is” basis.

This reasoning substantially undermined the allegation that the applicants had fraudulently fabricated title to appropriate the land.

The Court also relied on the subsequent compromise between the original owners and the applicants, together with the original owners’ declaration that the complainant’s power of attorney had been revoked, which weakened the complainant’s standing and the continuation of the prosecution.

In these circumstances, continuation of the FIR and consequential proceedings was considered an abuse of process warranting exercise of the Court’s inherent jurisdiction under Section 482 CrPC.

The FIR being C.R. No. I-4 of 2014 registered with Matar Police Station, together with all consequential proceedings, was quashed and set aside qua the applicants; the rule was made absolute.

The proceedings against Petitioner No. 1 had separately abated because of his death on 13 February 2016.