Andhra Pradesh High Court Quashes Forgery and Cheating Case Against Property Buyer, Holds Purchaser Cannot Be Held Liable for Vendor's Fraud

The High Court of Andhra Pradesh quashed criminal proceedings against a property buyer accused of forging a sale deed, finding no material to link him to the alleged conspiracy with the seller.

The High Court of Andhra Pradesh at Amaravati has quashed a charge sheet filed against a property buyer accused of conspiring with the seller to create a forged sale deed and cheat a decree-holder out of his auctioned property. Justice K. Sreenivasa Reddy, sitting singly, allowed the petition under Section 482 of the Code of Criminal Procedure, 1973, and closed Calendar Case No. 55 of 2020 pending before the Judicial Magistrate of First Class for Railways, Guntur. The court held that even accepting all charge sheet allegations at face value, no offence under Sections 420, 468, or 470 of the Indian Penal Code, 1860 was made out against the petitioner, who had purchased the property under a registered sale deed before the executing court delivered physical possession to the complainant.

The Dispute Before the High Court

The case has its origins in a debt recovery suit filed in 1997. Respondent No. 2, the de facto complainant, had lent Rs. 65,000 to Respondent No. 3 (Accused No. 1), who executed a promissory note. When repayment was not made, the complainant filed Original Suit No. 347 of 1997 before the Principal Senior Civil Judge, Guntur, for recovery of Rs. 79,625 along with interest. The suit was decreed on 18 February 1999.

In execution of the decree, the complainant filed E.P. No. 293 of 2000 and got attached a house property of 156 square yards at Door No. 4-19-111/1, 5th Lane, Vikas Nagar, Guntur. The executing court conducted auction on 27 October 2004, and the complainant became the highest bidder. A sale certificate was issued and the Sub-Registrar, Guntur was directed to register the sale.

During the pendency of the original suit, the wife and sons of Accused No. 1 filed a collusive partition suit, O.S. No. 307 of 1998, before the same court, claiming the attached property as ancestral property. That suit was preliminarily decreed and a final decree was passed by order in I.A. No. 1178 of 2002, dated 3 March 2003, allotting the property to the minor sons of Accused No. 1.

Accused No. 1 also challenged the original decree by filing Appeal Suit No. 30 of 2014 before the IV Additional District Judge, Guntur. That appeal was dismissed on 23 September 2015. Thereafter, when the complainant applied for delivery of possession, the executing court issued a delivery warrant on 5 August 2016, and the court amin delivered possession on 10 August 2016 in the presence of four listed witnesses.

In the meantime, Accused No. 1 had sold the same property to the petitioner, Tellamekala Rama Rao (Accused No. 2), by a registered sale deed, Document No. 6079/2015, dated 30 September 2015 — months before the delivery warrant was issued. The petitioner subsequently availed a loan of Rs. 65 lakhs from Kotak Mahindra Bank Limited, Nallapadu Branch, Guntur, by mortgaging the property, and the loan transaction was also registered vide Document No. 7219/2015 dated 25 November 2015. On learning that the property had been auctioned by the court and possession delivered to the complainant, the petitioner filed O.S. No. 479 of 2016 before the V Additional District Judge, Guntur, against the complainant, Accused No. 1, and the Sub-Registrar, seeking a declaration of his title and recovery of possession.

A complaint was lodged on 22 December 2016, and Crime No. 392 of 2016 was registered against both Accused No. 1 and Accused No. 2 at Arundalpet Police Station, Guntur Urban, for offences punishable under Sections 468, 470, and 420 read with 34 of the IPC. After investigation, a charge sheet was filed, and the case was numbered as C.C. No. 55 of 2020 before the Judicial Magistrate of First Class for Railways, Guntur.

The Legal Issues

The petitioner/Accused No. 2 filed Criminal Petition No. 980 of 2023 under Section 482 CrPC seeking to quash the charge sheet. The central question was whether the charge sheet, even when its allegations were accepted entirely, disclosed any criminal offence against the petitioner as a purchaser of the disputed property.

The petitioner's counsel argued that the petitioner purchased the property under a registered sale deed, that the encumbrance certificate showed no encumbrances at the time of purchase, that the bank had independently verified documents and granted the loan, and that the complainant had remained silent until 2016 despite the auction being conducted in 2004. It was also argued that the registered sale deed in favour of the complainant — an entry dated 3 November 2016 — was executed after the petitioner's purchase and could not override it.

The complainant's counsel countered that the sale deed in favour of the petitioner was created fraudulently, after the appeal against the decree was dismissed in September 2015, specifically to defeat the complainant's claim. It was argued that the dishonest intention of the petitioner was evident, that there were specific overt acts connecting him to the offences, and that disputed questions of fact could not be resolved in a Section 482 CrPC petition.

The State, through the Special Assistant Public Prosecutor, supported the complainant's position and prayed for dismissal of the petition. Accused No. 1's counsel maintained that the sale to the petitioner dated 30 September 2015 was valid.

How the Court Reasoned

Justice K. Sreenivasa Reddy began by restating the settled position on the scope of Section 482 CrPC. Citing the Supreme Court's decision in State of Haryana v. Ch. Bhajanlal and Ors. (AIR 1992 SC 604), the court reaffirmed that inherent powers must be exercised sparingly, in the rarest of rare cases, and that the court does not assess the reliability or genuineness of allegations at this stage. Quashing is justified, among other grounds, where allegations in the charge sheet, even if taken at face value, do not prima facie constitute any offence against the accused.

On the offences under Sections 420, 468, and 470 IPC, the court examined the essential ingredients of each. For cheating under Section 420 IPC, the court noted that there must be a dishonest intention from the very beginning, that the accused must have deceived the complainant, and that the complainant must have been fraudulently or dishonestly induced to deliver property or part with money. For forgery under Section 468 IPC, the accused must have made, signed, or altered a document dishonestly or fraudulently with a deliberate intention to deceive. Section 470 IPC defines a forged document as a false document made by forgery.

The court examined the statements of the four witnesses recorded under Section 161 CrPC who were present at the time of delivery of possession. Their statements, on a perusal, did not disclose any act connecting the petitioner to the offences under Sections 420, 468, or 470 IPC.

On the critical factual point, the court noted that the registered sale deed in favour of the petitioner was dated 30 September 2015, while the executing court delivered possession to the complainant only on 10 August 2016. The court held that it was Accused No. 1 who had knowledge that the property had been auctioned and was under litigation, yet sold it to the petitioner. Crucially, the court declined to transfer that knowledge to the petitioner:

“Merely, because respondent No. 3/A1 is having knowledge, it cannot be inferred that the petitioner/A2 is also well aware of the said fact.”

The court drew support from two Supreme Court decisions. In Mohammed Ibrahim and Others v. State of Bihar and Another ((2009) 8 SCC 751), the Supreme Court had held that a third party who is not the purchaser under a sale deed may not be able to complain of cheating, and that the execution of a sale deed purporting to convey property that does not belong to the vendor does not by itself constitute making a false document amounting to forgery. The court applied the principle that the purchaser in such a situation is not necessarily a cheat simply because the vendor lacked title.

In Sheila Sebastian v. R. Jawaharaj and Another ((2018) 7 SCC 581), the Supreme Court had held that a charge of forgery cannot be imposed on a person who is not the maker of the document. Under Section 464 IPC read with Explanation 2, it is imperative that the false document is made by the accused person; merely being a party to the transaction in which the document features is not sufficient.

The court found that the petitioner had purchased the property on the basis of a registered sale deed, that the encumbrance certificate filed by him showed the property standing in the name of Accused No. 1 at the time of purchase, that there was no prima facie material to show that the petitioner deceived the complainant, and that all the material allegations pointed towards Accused No. 1. The petitioner's conduct after discovering the court auction — filing O.S. No. 479 of 2016 seeking a declaration of title — was also noted as consistent with the conduct of a bonafide purchaser who discovered an adverse claim.

The court concluded that continuing the proceedings against the petitioner/Accused No. 2 would be an abuse of the process of law.

Outcome

Justice K. Sreenivasa Reddy allowed Criminal Petition No. 980 of 2023 and quashed the proceedings in Calendar Case No. 55 of 2020 pending before the Judicial Magistrate of First Class for Railways, Guntur, against the petitioner/Accused No. 2. The order was pronounced on 17 June 2026, after having been reserved on 6 April 2026. All miscellaneous petitions pending in the criminal petition were directed to stand closed as a consequence.