Criminal Prosecution Cannot Be Invoked to Resolve Property Disputes Camouflaged as Cheating Missing Dishonest Inducement

Opposite Party No. 2 (Rakeshwar Dayal Saxena) filed a complaint under Section 156(3) Cr.P.C. against his son (Rajat Saxena), son-in-law (Anil Saxena), and a HDFC Bank Manager (Anshul Srivastava).

The house in question was owned and mortgaged by Rajat and his deceased mother; the complainant, though not an owner, claimed to have paid loan installments since 2014.

Under a Debts Recovery Tribunal (DRT) proceeding, the complainant deposited Rs. 45.95 lakhs to liquidate the debt, expecting the Bank to transfer the property to him via "private treaty".

However, the Bank returned the original title deeds to the legal owner/mortgagor (Rajat Saxena) instead of the complainant.

The Trial Court summoned the applicants to face trial for cheating under Section 420 IPC.

The applicants challenged this order, asserting the dispute was purely civil.

1. Whether the facts of the case prima facie satisfy the essential ingredients of cheating under Section 420 IPC or if the dispute is essentially of a civil nature.

2. Whether the Bank Manager’s act of accepting loan dues and returning title deeds to the mortgagor constitutes a criminal offense.

The court applied Section 415 and 420 of the IPC, which require the existence of fraudulent or dishonest intention at the time of making the initial promise.

It relied on Mitesh Kumar J. Sha v. State of Karnataka, emphasizing that civil disputes should not be given a "cloak of criminal offense" to apply pressure for settlement.

Further, it applied the principles from Dinesh Gupta v. State of Uttar Pradesh and Rikhab Birani v. State of U.P., which hold that a mere breach of contract or failure to keep a promise does not constitute cheating unless dishonest intention is established at the inception of the transaction.

The Court observed that the complainant was not a co-owner of the property and his voluntary payment of dues did not vest him with ownership rights or the right to demand a "private treaty" transfer, which is legally inapplicable to individuals in this context.

The Bank Manager made no demand for money; rather, the complainant approached the Bank and the Manager acted in the Bank’s interest by accepting the dues.

There was no evidence of an initial fraudulent inducement by the son or the Bank Manager, especially since the Bank’s promise to return title deeds was contingent on DRT orders, which later clarified that ownership was a civil court matter.

The Court found that the complainant had concealed a pending civil partition suit, suggesting a mala fide design to grab the property by divesting his children of their shares.

Consequently, the criminal process was being misused to resolve a bitter family property dispute.

The High Court allowed the applications, quashed the summoning order dated 08.04.2022, and dismissed the complaint filed by Opposite Party No. 2.