Supreme Court quashes FIR in property dispute case: Sarabjit Kaur vs. State of Punjab (2023)

Introduction

Date of the Judgment: 1 March 2023
Citation: (2023) INSC 179
Judges: Hon’ble Mr. Justice Abhay S. Oka and Hon’ble Mr. Justice Rajesh Bindal
Can a civil dispute over a property agreement be escalated to a criminal case? The Supreme Court of India recently addressed this question, clarifying the boundaries between civil and criminal liabilities in property sale agreements. The court emphasized that a mere breach of contract does not automatically amount to cheating unless a dishonest intention is evident from the beginning of the transaction. This judgment, delivered by a two-judge bench comprising Justice Abhay S. Oka and Justice Rajesh Bindal, quashed a First Information Report (FIR), highlighting the need to distinguish between civil and criminal matters.

Case Background

The case revolves around a property sale agreement where the appellant, Sarabjit Kaur, agreed to sell a plot to Sarabjit Kaur (wife of respondent No. 2, Darshan Singh). The appellant had an agreement to purchase the property from Malkit Kaur. The agreement to sell between the appellant and respondent No. 2’s wife was executed on 18.11.2013, with the date for the sale deed set for 25.06.2014. The agreement explicitly stated that the appellant was not the owner of the property at the time. An amount of ₹5,00,000 was paid as earnest money. The date for the sale deed was later extended to 24.12.2014 upon payment of an additional ₹75,000. When the sale deed was not executed, Darshan Singh filed multiple complaints. Initially, these complaints were against property dealers, but later, the appellant was also included. The police, after investigation, initially closed the matter, deeming it civil. However, a subsequent complaint led to the registration of an FIR against the appellant and others under Sections 420, 120-B, and 506 of the Indian Penal Code, 1860.

Timeline

Legal Framework

The case primarily involves Sections 420, 120-B, and 506 of the Indian Penal Code, 1860. Section 420 of the Indian Penal Code, 1860 deals with cheating and dishonestly inducing delivery of property. Section 120-B of the Indian Penal Code, 1860 pertains to criminal conspiracy, and Section 506 of the Indian Penal Code, 1860 addresses the offense of criminal intimidation.

Arguments

Appellant’s Arguments:

• The appellant argued that the dispute was purely civil and that the respondent No. 2 had filed multiple complaints with the same allegations.
• The appellant contended that the first complaint was against property dealers, and the appellant’s name was included only in subsequent complaints.
• The appellant highlighted that the respondent No. 2 did not initiate civil proceedings for specific performance of the agreement to sell or for the return of the earnest money.
• The appellant submitted that the FIR was filed nearly three years after the last date fixed for the execution of the sale deed.

State’s Arguments:

• The State argued that the chargesheet had been filed and that the appellant could raise all pleas before the trial court.
• The State contended that it was not a case for quashing the FIR.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section, but the core issue was:

1. Whether a breach of contract in a property sale agreement automatically gives rise to a criminal prosecution for cheating under Section 420 of the Indian Penal Code, 1860.

Treatment of the Issue by the Court

Authorities

The court did not explicitly cite any specific cases or books in the provided judgment.

Judgment

How each authority was viewed by the Court?

• The court considered the allegations under Section 420 of the Indian Penal Code, 1860 and stated that the ingredients of cheating were not met as there was no dishonest intention shown right at the beginning of the transaction.
• The court considered the allegations under Section 120-B of the Indian Penal Code, 1860 and stated that there were no grounds to establish criminal conspiracy.
• The court considered the allegations under Section 506 of the Indian Penal Code, 1860 and stated that there was no evidence of criminal intimidation.

What weighed in the mind of the Court?

The Court’s decision was primarily influenced by the fact that the dispute was essentially a civil matter, with no evidence of dishonest intention at the beginning of the transaction. The Court noted that the respondent No. 2 had filed multiple complaints with improved versions, indicating an attempt to convert a civil dispute into a criminal one. The lack of civil proceedings and the delay in filing the FIR also weighed heavily in the Court’s decision.

Logical Reasoning:

The court emphasized that “A breach of contract does not give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction.” The court also noted that “Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings.” Furthermore, the court observed that “The criminal Courts are not meant to be used for settling scores or pressurise parties to settle civil disputes.”

Key Takeaways

• A breach of contract does not automatically constitute cheating under Section 420 of the Indian Penal Code, 1860.
• Criminal proceedings should not be used to settle civil disputes.
• Dishonest intention must be present from the beginning of the transaction to constitute cheating.
• The court emphasized the importance of civil remedies in cases of breach of contract.
• Filing criminal complaints to pressure parties in civil disputes is an abuse of the process of the court.

Directions

The Supreme Court quashed the FIR No. 430 dated 16.10.2017 and all subsequent proceedings.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that a breach of contract does not automatically amount to cheating unless there is evidence of dishonest intention from the beginning of the transaction. This judgment reinforces the distinction between civil and criminal liabilities and prevents the misuse of criminal proceedings to settle civil disputes. There is no change in the previous position of law but the Court has reiterated the established principles.

Conclusion

The Supreme Court’s decision in Sarabjit Kaur vs. The State of Punjab & Anr. clarifies that a breach of contract does not automatically constitute cheating. The court quashed the FIR, emphasizing that criminal proceedings should not be used to settle civil disputes. This judgment underscores the importance of proving dishonest intention from the outset in cases of alleged cheating and reinforces the need to pursue civil remedies for breaches of contract.