In a recent ruling, the Supreme Court clarified that mere non-performance of an Agreement to Sell does not amount to the criminal offenses of cheating or criminal breach of trust. The Court quashed a criminal case against three individuals accused of failing to execute a sale despite an agreement, emphasizing that a civil dispute should not be escalated into a criminal matter to exert pressure.
Key Observations
The Supreme Court bench of Justice Vikram Nath and Justice Prasanna Bhalakrishna Varale highlighted that the complainant, who had already filed a civil suit for specific performance of the contract, was misusing the criminal justice system. The Court stated:
“Mere non-performance of an Agreement to Sell by itself does not amount to cheating and breach of trust. Respondent no.2 has adequate remedy of filing a Civil Suit for relief of specific performance of a contract which he has already availed and the suit is still pending. The FIR only appears to be an arm-twisting mechanism to pressurize the appellants to execute the Sale Deed or to extract money. Every civil wrong cannot be converted into a criminal wrong.”
Case Background
The case revolves around an Agreement to Sell dated June 29, 2020, involving the sale of a property in Rajgarh, Rajasthan, for Rs 5.11 crores. The complainant made an advance payment of Rs 11 lakh, with Rs 5 lakh in cash and Rs 6 lakh via cheque. According to the agreement, Rs 1 crore was to be paid by September 30, 2020, with the remaining Rs 4 crore due over the following fifteen months.
However, the sale was not executed as agreed. On May 24, 2022, the complainant filed an FIR, alleging that despite paying Rs 1 crore, the appellants refused to execute the property registry. The complaint accused the appellants of cheating, claiming they acted with dishonest intentions in collusion with the appellant’s brother.
The complainant subsequently filed a civil suit in June 2023, seeking specific performance of the contract, which remains pending.
Supreme Court’s Analysis
The Supreme Court underscored that the complaint lacked the necessary elements to constitute offenses under Sections 420 (cheating) and 406 (criminal breach of trust) of the Indian Penal Code (IPC). The Court clarified that the allegations did not demonstrate any fraudulent inducement or deceitful intention on the part of the appellants.
“Mere non-registration of the sale or its refusal cannot amount to cheating. The delivery of the advance payment towards consideration was made in furtherance of an Agreement to Sell, and it is not the case of the respondent that he was in any way deceived or duped to make such payments to the appellants,” the Court stated.
Additionally, for an offense under Section 406, the Court noted that the payment made as part of the consideration cannot be deemed as property entrusted to the appellants. The refusal to register the sale did not constitute misappropriation of the advance payment.
Conclusion
The Supreme Court concluded that the FIR was an attempt by the complainant to use the criminal justice system to coerce the appellants into performing the agreement or extracting money. Since the complainant had already availed the civil remedy of filing a suit for specific performance, the Court held that the criminal proceedings should not continue.
The Supreme Court allowed the appeal, set aside the Rajasthan High Court’s order, and quashed the FIR. It was clarified that the observations made would not impact the pending civil suit, which would be decided on its merits based on the evidence presented during the trial.
Case Reference
- Case Title: Radheyshyam & Ors. v. State of Rajasthan & Anr.
- Case No.: Special Leave to Petition (Crl.) No. 13675 of 2023
