The landowners were freed in 2017 and their power-of-attorney holder was not. The Supreme Court calls that a grave error
Justices Satish Chandra Sharma and N. Kotiswar Singh quash an FIR nine years on, holding that an agent who signed for his principals cannot be prosecuted where the principals cannot.
The judgment opens with a sentence that states its own theme: the tendency of litigants to colourize civil disputes into criminal offences is an open secret in the present times. What follows is a land sale in Karnataka that produced a civil suit for specific performance and, a few days later, an FIR for cheating. The High Court quashed that FIR against the landowners in 2017. A different bench of the same Court refused the same relief to the man who had signed for them as their power-of-attorney holder. The Supreme Court has now quashed it against him too.
A sale that waited four years
The facts lie within a narrow compass, as the Court puts it. A man owned a little over four acres in Channasandra village. He died intestate and the land passed to his wife and other legal heirs. In October 2012 those landowners entered into an agreement for sale in favour of the petitioner and executed a general power of attorney in his favour on the same day.
In November 2012, the landowners acting through the petitioner as their attorney entered into a further agreement with the second respondent and another person — the prospective buyers — for sale of the same land. Under that agreement the prospective buyers were required to pay the balance consideration and come forward for execution of the sale deed within seven months.
They never turned up. The petitioner and the landowners waited beyond the seven months and on past the expiry of the limitation period for a suit for specific performance. The prospective buyers took no action at all. Eventually, in February 2016, the land was sold by sale deed to a different purchaser.
Immediately after that, the prospective buyers instituted a civil suit for specific performance of the 2012 agreement. Three months later they lodged a criminal complaint, registered as an FIR under Sections 420, 423 and 120-B read with Section 34 of the Indian Penal Code, naming the petitioner along with the landowners. The Magistrate took cognizance in September 2017.
Two benches, one FIR
The landowners moved the High Court of Karnataka to quash. In November 2017 it did so in their favour, holding that where the complainant had already approached the civil court, and in view of the long delay in moving to get the sale deed executed, this was purely a civil transaction given a criminal colour — with, in the High Court's words, not even a tinge of criminal attitude on the part of the petitioners before it.
The petitioner then filed his own quashing petition. It was listed before a different bench, and in September 2022 it was dismissed on merits. That coordinate bench distinguished his case from the landowners' on five grounds: the amounts were received by him; the 2012 agreement was signed by him as attorney; he was a confirming party to the sale deed; the land was sold at a lesser value to the ultimate buyer; and there was a triable issue as to whether the consideration he received was eventually passed on to the landowners.
His case before the Supreme Court was that he stood on the same footing as the landowners, that the coordinate bench should have followed the earlier order, that the dispute is purely civil, and that he was merely an attorney acting for the landowners, who themselves executed the sale deed while he was only a confirming party.
Why the five distinctions did not hold
The Court held that the High Court had fallen into error, and a grave one, and dealt with the distinctions in turn.
The FIR alleges the commission of an offence by the landowners as well as the petitioner, and the allegation rests on the execution of the sale deed — which the landowners executed themselves, the petitioner being only a confirming party. If no criminality could be attributed to the landowners by virtue of executing that deed, it cannot be sustained against him either, there being nothing to attribute any aggravated role to him.
On the money, the consideration was received collectively by the landowners and the petitioner; the fact that it was physically received by him on behalf of all of them does not place him on a different pedestal. On the 2012 agreement, it was indeed executed by him alone — but on behalf of the landowners, and there is no allegation that he executed it in violation of the authority conferred on him or by keeping his principals in the dark.
The point about the land being sold at a lesser price should not have weighed with the High Court at all. The Court called it a purely speculative line of reasoning that cannot be treated as an incriminating circumstance; and in any event, if it were incriminating it would incriminate the landowners equally, since the property was sold by all the accused and not by the petitioner alone. Having not weighed against them, it could not be of any consequence against him.
The fifth distinction drew the sharpest answer. The High Court had posed itself a hypothetical question — whether the sale consideration was transmitted by the petitioner to the landowners — and called it a triable issue, without regard to the fact that the question does not fall within the ambit of the allegations at all. The landowners have raised no allegation against him about misappropriating consideration meant for them. In distinguishing his case, the Court held, the High Court had travelled beyond the scope of the allegations.
The ingredients that were never there
Beyond parity, the Bench examined whether the offences were made out at all, and found they were not.
Cheating requires a deceptive act leading to an inducement for the delivery of property or money. On a bare perusal of the allegations, the money transferred by the second respondent at the time of the November 2012 agreement was not transferred on the basis of any deception: at that time the property could legitimately have been transferred to him, and there was no deception. The sale to someone else took place in 2016, almost four years after the money changed hands. The foundational ingredient of cheating is therefore missing — a point of sequence rather than degree, because a deception has to exist when the inducement occurs, not arrive years later.
Section 423, the Court held, was simply mis-invoked. It requires a false statement as to consideration in an instrument of transfer, and there is no such false statement in the 2012 agreement or in the sale deed. Even if there were a false averment in the sale deed, it would have created a right in favour of the ultimate buyer, not in favour of the complainant.
The Bench's characterisation is blunt: a classic case of casting the shadow of criminality on a pure civil dispute.
Order
The petition was allowed. The High Court's order of September 2022 was set aside, and the proceedings in the FIR, along with all consequential proceedings, stand quashed. The petition was disposed of with pending applications.
The Court was careful about what it left alone. It consciously refrained from expressing any observation on the merits of the suit for specific performance, or on the elements of readiness and willingness — questions for the civil court that is seized of them. The complainant's claim to the land, such as it is, is untouched; what has gone is the criminal case running alongside it.
Two things make this judgment useful beyond its facts. The first is the parity principle applied to agents. Where an attorney signs for his principals and the principals are cleared, the agent cannot be kept in the dock on the strength of having been the one holding the pen or receiving the cheque, unless something is alleged against him personally — acting outside his authority, or keeping his principals in the dark. Neither was alleged here.
There is also a quieter point about one FIR reaching two benches of the same High Court and coming out differently. The landowners' petition was decided in November 2017; the attorney's was decided in September 2022, on the identical FIR and the identical transaction, by a coordinate bench that distinguished rather than followed. Nothing in the judgment suggests the second bench was shown the first order and disregarded it, and the Supreme Court frames the problem as error rather than impropriety. But the practical consequence for the petitioner was five more years as an accused in a case his co-accused had been out of since 2017, and a total of nine years and five months between the FIR and its quashing — on a complaint the first High Court order had already described as a civil transaction with not even a tinge of criminality about it.
The second is the warning about triable issues. “There is a triable issue” is the standard reason for declining to quash, and it is usually unanswerable. The Court's point is that the issue has to arise from the allegations in the FIR. An issue the court itself constructs — here, whether the attorney passed the money on, a complaint nobody had made — cannot be the reason for sending a man to trial. That is a discipline on the quashing jurisdiction worth more than the result in this case.