REPORTABLE

IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NO.   1135         OF 2009 (Arising out of SLP (Crl.) No.431 of 2008)

Dalip Kaur & Ors. … Appellants

Versus

Jagnar Singh & Anr.              … Respondents

J U D G M E N T

S.B. Sinha, J.

1. Leave granted.

2. Whether breach of contract of an agreement for sale would constitute an offence  

under Section 406 or Section 420 of the Indian Penal Code is the question involved herein.

3. It arises in the following factual background:

Appellant is the owner of some agricultural lands.  He entered into an agreement  

for  sale  with  the  respondent  No.2  agreeing  to  sell  13  acres  of  land  at  the  rate  of  

Rs.4,70,000/- per acre.  Allegedly, respondent No.2 is said to be a property dealer.  He paid  

a sum of  Rs.7,00,000/- towards advance to the appellant.   A sum of Rs.14,20,000/-  was  

furthermore paid  to  the  appellant   within  a  period  of  seven  months  from the  date  of  

execution of the said sale agreement.  

4. Inter alia,  on the premise that the second respondent was unable  to pay the  

balance amount of consideration, the appellant executed a deed of sale in favour of Balbir  

Singh and Mohinder Singh.  Whereas the case of the appellant is that it was at the instance

of the respondent No.2, the said deed of sale was executed, the latter contends that the  

appellant  did  so without  calling  upon him to pay the balance  amount and as  such he  

committed  an  offence  under  Section  406  and  Section  420  of  the  Indian  Penal  Code.  

Pursuant to or in furtherance of the agreement dated 12.05.2006, the appellant paid a sum  

of  Rs.7,20,000 to the respondent  No.2 at  the time of  cancellation  of  agreement of  sale.  

Appellant  furthermore  stated  that  another  agreement  was  entered  into  on  or  about  

10.6.2006 pursuant whereto the parties have agreed to cancel the agreement of sale itself  

and it was furthermore agreed that in the event the appellant fails to refund the amount,  

the respondent will take recourse to law.

5. Appellants in this Special Leave Petition, in no uncertain terms, stated that they  

were ready and willing to pay the amount on due date.   

6. Indisputably, the respondent No.2 lodged a first information report on or about  

7.9.2006, inter alia, alleging :

“… we got a call from Surjit Singh, who said us to come tomorrow i.e.  12.05.2006 to execute the sale deed and if they could not execute the sale  deed they will return our money.  We again reached Tapa Mandi on  12.05.2006.  The above said accused were called at the home of Shri  Harbans Singh & they said that they don’t want to sell their land, so  you take your money back.  After this we  & accused persons came at  Tapa  Mandi  where  cancellation  deed  was  executed  & accused  have  returned us  Rs.7,80,000/-  & remaining  amount of  Rs.14,20,000/-  was  promised  to  return  till  10.06.2006  &  it  was  also  written,  if  accused  persons could not return Rs.14,20,000/- till 10.06.2006, the agreement to  sell will remain intact and amount of Rs.7,80,000/- given by the accused  will be forfeited in favour of the complainant.  The accused persons did  not return the money of Rs.14,20,000/- till 10.06.2006, so we reached at  their  home  at  village  Khokhar  on  10.06.2006.   The  accused  has  promised us to give that amount on 20.06.2006.  But accused still did  not  return the  amount,  when we  reached on 20.06.2006 to  take  our  money, we came to know that accused have sold the land which was  subject matter of the agreement, to Balbir Singh, Mohinder Singh sons  of  Mohar Singh  son  of  Rulia  Singh  etc.  R/o  village  Tanola,  District  Sangrur and got the sale deed executed in their favour on 10.05.2006.  After that, we got a copy of registry with the help of an Advocate & we  came to know that the land subject matter of agreement with us was  sold.  After that, one application was given to sub-registrar, Rampura  Phul on 23.06.2006 to mark my presence and again on 26.06,2006 one  application  was  given  to  mark  my  presence  being  holiday  on

24/25.06.2006 & marked my presence.  We have taken the amount with  us to get the sale deed executed.  Accused neither returned our amount  of Rs.22,00,000/- nor executed the sale deed in our favour.  Accused has  committed  fraud  with  us  and  grabbed  our  Rs.22.0  lacs  &  rather  threatening to kill us if we have taken any action against them.”

7. Appellants filed an application before the High Court of Punjab and Haryana at  

Chandigarh  on  25.8.2007  for  quashing  the  said  first  information  report  No.302  dated  

7.9.2006.  By reason of the impugned order dated 31.8.2007, the said application has been  

rejected by a learned Single Judge of the said Court, stating :

“The petitioners  despite  the  agreement to  sell  having  been cancelled  have  not  returned  the  earnest  money,  which  is  indicative  of  their  dishonest intention leading to registration of the FIR.  Nothing has been  shown to this  Court which could persuade it  to exercise its  inherent  jurisdiction under Section 482 of the Code of Criminal Procedure.

Dismissed.”

8. Mr. Sachin Jain, learned counsel appearing on behalf of the appellant, would urge  

that the allegations made in the first information report, even if given face value and taken  

to be correct in its entirety, does not constitute an offence under Section 406 and 420 of the  

Indian Penal Code.

9. Mr. Vivek Sharma, learned counsel appearing on behalf of the respondent, on the  

other hand, supported the impugned judgment contending that the appellants not only sold  

the  land  to  other  persons  but  also  deliberately  refused  to  return  a  huge  amount  of  

Rs.22,00,000/-,  despite having made promise therefor.  

10. Sections 405 and 415 of the Indian Penal Code defining ‘criminal breach of trust’  

and ‘cheating’ respectively read as under:

"405  -  Criminal  breach  of  trust.-Whoever,  being  in  any  manner  entrusted  with  property,  or  with  any  dominion  over  property,  dishonestly misappropriates or converts to his own use that property,  or  dishonestly  uses  or  disposes  of  that  property  in  violation  of  any  direction  of  law  prescribing  the  mode  in  which  such  trust  is  to  be  discharged, or of any legal contract, express or implied, which he has  made touching the discharge of such trust, or wilfully suffers any other

person so to do, commits "criminal breach of trust".

“415. Cheating—Whoever, by deceiving any person, fraudulently  or  dishonestly induces the person so deceived to deliver any property to  any person, or to consent that any person shall retain any property, or  intentionally  induces  the  person  so  deceived  to  do  or  omit  to  do  anything which he would not do or omit if he were not so deceived, and  which act or omission causes or is likely to cause damage or harm to  that person in body, mind, reputation or property, is said to ‘cheat’.”

An offence of cheating would be constituted when the accused has fraudulent or  

dishonest  intention at the time of making promise or representation.   A pure and simple  

breach of contract does not constitute an offence of cheating.

11. The ingredients of Section 420 of the Indian Penal Code are :

“(i) Deception of any persons;

(ii) Fraudulently or dishonestly inducing any person to deliver any  property; or

(iii) To consent that any person shall retain any property and finally  intentionally inducing that person to do or omit to do anything  which he would not do or omit.”

12. The High Court, therefore, should have posed a question as to whether any act of  

inducement on the part of  the appellant  has been raised by the second respondent and  

whether the appellant had an intention to cheat him from the very inception.  If the dispute  

between the parties was essentially a civil dispute resulting from a breach of contract on the  

part  of  the  appellants  by  non-refunding  the  amount  of  advance  the  same  would  not  

constitute an offence of cheating.  Similar is the legal position in respect of an offence of  

criminal  breach of  trust  having  regard to  its  definition  contained  in  Section  405 of  the  

Indian Penal Code.  {See Ajay Mitra v. State of M.P. [(2003) 3 SCC 11]}.

13. There cannot furthermore be any doubt that the High Court would exercise its  

inherent jurisdiction only when one or the other propositions of law, as laid down in  R.

Kalyani v. Janak C. Mehta & Ors. [(2009 (1) SCC 516] is attracted, which are as under:

“(1) The High Court ordinarily would not exercise its inherent  jurisdiction to quash a criminal proceeding and, in particular, a First  Information  Report  unless  the  allegations  contained  therein,  even  if  given face value and taken to be correct in their entirety, disclosed no  cognizable offence.

(2)  For  the  said  purpose,  the  Court,  save  and  except  in  very  exceptional circumstances, would not look to any document relied upon  by the defence.

(3)  Such  a  power  should  be  exercised  very  sparingly.  If  the  allegations made in the FIR disclose commission of an offence, the court  shall not go beyond the same and pass an order in favour of the accused  to hold absence of any mens rea or actus reus.

(4) If the allegation discloses a civil dispute, the same by itself  may not be a ground to hold that the criminal proceedings should not  be allowed to continue.”

Yet again, in Hira Lal & Ors. v. State of U.P. & Ors. [2009 (5) SCALE 418], this  

Court held :

“10. The parameters of interference with a criminal proceeding by  the High Court in exercise of its jurisdiction under Section 482 of the  Code are well known.  One of the grounds on which such interference is  permissible is that the allegations contained in the complaint petition  even  if  given  face  value  and  taken  to  be  correct  in  their  entirety,  commission of an offence is not disclosed.  The High Court may also  interfere where the action on the part of the complainant is mala fide.”

{See also Harmanpreet Singh Ahluwalia & Ors. v.  State of Punjab & Ors. [2009  

(7) SCALE 85]}

14. As the High Court has not applied its mind with regard to the aforementioned  

aspects  of  the  matter,  the  impugned  judgment  cannot  be  sustained.   It  is  set  aside  

accordingly.  The appeal is allowed.

15. The matter is remitted to the High Court for consideration of the matter afresh.

…………………….J.      [S.B. Sinha]

……………..…J.            [Asok Kumar Ganguly]

New Delhi; July 7, 2009