REPORTABLE IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL  APPEAL No.1395   OF 2018 [Arising out of SLP (Crl.) No. 3730 of 2016]

Anand Kumar Mohatta and Anr. ....Appellant(s) Versus

State (Govt. of NCT of Delhi)  Department of Home and Anr.                    …Respondent(s)

J U D G M E N T  S.A. BOBDE, J.

Leave granted.

2. This Criminal Appeal is filed by Appellants challenging the final

judgment and order dated 02.02.2016 of the High Court of Delhi. The

High Court vide the above dated final judgment and order dismissed

the  petition  filed  by  the  Appellants  under  Section  482 of  Criminal

Procedure  Code  and  refused  to  quash  FIR  No.0139/2014  dated

20.08.2014.   During  the  pendency  of  the  appeal  in  this  Court,

Respondent No.1 filed charge sheet dated 03.08.2018 in the Court of

Metropolitan  Magistrate,  Patiala  House  Court,  Delhi  against  the

Appellants herein. Thus, by way of amendment to the main prayer in

the appeal, Appellants have also prayed for quashing of charge sheet

dated  03.08.2018.  Appellants  seek  quashing  of  the  FIR  dated

20.08.2014 and the charge sheet dated 03.08.2018.

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Facts

3. This appeal is by an accused against whom a FIR was lodged on

20.08.2014, in respect of disputes arising out of the agreement dated

03.06.1993 entered into between the Appellant No.1 i.e.  Mr. Anand

Kumar  Mohatta  and  the  complainant  i.e.  Ansal  Properties  &

Infrastructure  Ltd.   The  FIR  was  lodged  about  21  years  after  the

agreement.  Initially, the FIR was also lodged against the wife of the

Appellant No.1 i.e. Mrs. Shobha Anand Mohatta, but no offence has

been made out against her after investigation.

4. The agreement entered into by the two parties is with regard to

the  development  of  the  property  owned  by  the  Appellants.   This

property is situated at 20, Feroz Shah Road, New Delhi, which falls

under  Lutyens  Zone.  The  property  was  initially  owned  by  the

Appellant No.1 and later on ownership of the property was transferred

to Appellant No.2 i.e. wife of Appellant No.1.    Desirous of developing

the  property,  the  Appellant  No.1  entered  into  a  development

agreement  dated  03.06.1993  with  Respondent  No.2  M/s  Ansal

Properties & Infrastructure Ltd.   The parties agreed to develop the

said property by constructing a high-rise building comprising of flats.

Respondent No.2 paid a sum of Rs. One crore as contemplated by

clause 38 of the agreement.  The agreement could not be fulfilled as

the new building  regulations  which  were  introduced  prohibited  the

construction  of  high-rise  building  in  the  Lutyens  Bungalow  Zone,

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where the property is situated.  (See New Delhi Municipal Council  v.

Tanvi Trading and Credit Private Limited)1.

5. Thereafter,  on  14.03.2011,  the  Appellant  No.1  wrote  a  letter

stating that he does not wish to develop the property.  The Appellants

did not take any further action neither did they return the amount

advanced by the Respondent No.2.  

6.  Apparently, since the Appellant had declined all alternate offers

made  by  the  complainant  but  ostensibly  on  the  ground  that  this

security amount of Rs. One crore had not been refunded, Respondent

No.2 on 19.11.2011 filed a Criminal Complaint before the SHO, Police

Station Barakhamba Road, New Delhi complaining of offences under

Section 406 and 420 followed by a complaint dated 10.09.2012 with

the Additional Commissioner of Police.  On refusal of police authorities

to register  FIR against  the Appellants,  the Respondent-complainant

invoked powers of the Court under Section 156 (3) of the Cr. P.C on

03.11.2012.  Thereafter, on 11.11.2013 Respondent No. 2 withdrew

the complaint filed under Section 156 (3).   The FIR with which we are

concerned  was  lodged  on  20.08.2014  against  the  Appellants  for

offence under Section 406 of IPC on a fresh complaint filed by the

Respondent No.2.   

7. Following which, the Appellants approached the High Court under

Section 482 of the Cr.  P.C seeking to quash FIR dated 20.08.2014.

According to the Appellants, the FIR was completely untenable in the

1 2008 (8) SCC 765

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facts and circumstances of the case.  Mainly, the amount of Rs. One

crore was rightfully retained by them and there was no question of

such  retention  constituting  a  criminal  breach  of  trust.   Moreover,

assuming that the Respondent No. 2 had a grievance only about the

retention of money, the redressal ought to have been sought before a

Civil Court.   Therefore, the lodging of the FIR was mala fide in nature

and done with the intention to pressurize the Appellants to agree to

certain  new  terms  and  conditions  of  the  agreement  to  which  the

Appellants did not want to proceed with.   

8. It  is  the  case  of  the  complainant-Respondent  No.2  that  the

Appellant No.1 is guilty of the offence under Section 406 since he had

clandestinely and surreptitiously transferred the subject property in

the name of his wife i.e. Appellant No.2.  This was done to defeat the

agreement dated 03.06.1993.  It is also said that the Appellants are

guilty of abusing the process of Court by undervaluing the property in

a  collusive  suit  before  the  Bombay  High  Court  and  thus  wrongly

transferred the property.   

9. The  High  Court,  however,  disposed of  the  Appellants’  petition

filed under Section 482 on the ground that the petition has been filed

pre-maturely as the case is still  at the stage of investigation.  The

High Court directed the investigation to proceed and further directed

the  Appellants  to  join  the  investigation.   Appellants  thereafter

preferred the present appeal by way of Special Leave Petition in this

Court.  In the present appeal, this Court on the prima facie view of the

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matter  protected  the  Appellants  from arrest  and  directed  that  the

investigation be continued.  Accordingly, the Respondent No.1 carried

out investigation and has filed a report under Section 173 of the Cr.

P.C in the Court of Metropolitan Magistrate, Patiala House Court, Delhi.

Since, the police have now submitted a charge sheet, Appellants have

additionally  filed  amendment  application  seeking  to  incorporate

prayer for quashing of charge sheet in addition to prayer for quashing

of the FIR.  

Contentions

10. Shri  Mahesh  Jethmalani,  Senior  Counsel  appearing  for  the

Appellants submitted that the transactions in the present case which

are set to constitute the offence under Section 406 cannot under any

circumstances be said to constitute an offence under that  section.

Assuming  that  the  Respondent  No.2  have  a  grievance  about  the

alleged wrongful retention of the amount of Rs. One crore, the dispute

could at best be a civil dispute.   

11. The learned counsel  further submitted that the amount of  Rs.

One crore advanced to the Appellants was liable to be refunded under

Clause 30 (b) which is as follows: -

“Developer handing over possession of the areas of the Owner’s share to the Owner in the said Group Housing Complex”.   

Since this contingency did not arise the amount has not been

refunded.   In  addition,  the  counsel  submitted  that  the  Appellants

retained the amount because the developer i.e. Respondent No.2 is in

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part  possession of  some of  the  subject  property  and has  also  not

complied  with  the  obligation  of  having  a  tenant  vacated from the

property.   

12. Shri Sanjiv Sen, learned Senior Counsel for the Respondent No.2

submitted that the petition for quashing of FIR was untenable since

the proceedings have gone past the stage of FIR and have resulted in

a charge sheet.   

13. Shri  Sanjiv  Sen,  vehemently  submitted  that  the  charge  under

Section 406 against the Appellant No.1 arises from the fact that the

Appellant No.1 has fraudulently transferred the property which is the

subject matter of the development agreement dated 03.06.1993 to

his wife i.e Appellant No.2.

14. Shri Ajit Kumar Sinha, Learned Senior Counsel, appearing for the

Respondent No.1 i.e. State government of NCT, places reliance on the

charge  sheet  to  submit  that  the  Appellants  have  committed  an

offence punishable under Section 406 by not returning the amount of

Rs. One Crore advanced by the Respondent No.2.

Conclusion

15. First, we would like to deal with the submission of the learned

Senior Counsel for the Respondent No.2 that once the charge sheet is

filed,  petition for quashing of FIR is untenable. We do not see any

merit in this submission, keeping in mind the position of this Court in

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Joseph Salvaraj A. v. State of Gujarat2.  In the case of Joseph Salvaraj

A. (supra), this Court while deciding the question whether the High

Court could entertain the 482 petition for quashing of FIR, when the

charge sheet was filed by the police during the pendency of the 482

petition, observed: -

“16.  Thus,  from  the  general  conspectus  of  the various sections under which the appellant is being charged and is to be prosecuted would show that the same are not made out even prima facie from the  complainant’s  FIR.  Even  if  the  charge-sheet had been filed, the learned Single Judge could have still  examined  whether  the  offences  alleged  to have been committed by the appellant were prima facie made out from the complainant’s FIR, charge- sheet, documents, etc. or not.”

16. Even  otherwise  it  must  be  remembered  that  the  provision

invoked by the accused before the High Court is Section 482 Cr. P.C

and that this Court is hearing an appeal from an order under Section

482 of Cr.P.C.  Section 482 of Cr.P.C reads as follows: -

“482. Saving of inherent power of the High Court.- Nothing in this Code shall be deemed to limit or affect the inherent powers of the High Court to make such orders as may be necessary to give effect to any order under this Code, or to prevent  abuse of  the  process  of  any  Court  or otherwise to secure the ends of justice.”

17. There is nothing in the words of this Section which restricts the

exercise of the power of the Court to prevent the abuse of process of

court or miscarriage of justice only to the stage of the FIR. It is settled

principle of  law that the High court  can exercise jurisdiction under

Section 482 of Cr.P.C even when the discharge application is pending 2 (2011) 7 SCC 59

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with  the  trial  court3.  Indeed,  it  would  be  a  travesty  to  hold  that

proceedings initiated against a person can be interfered with at the

stage of  FIR  but  not  if  it  has  advanced,  and  the  allegations  have

materialized into a charge sheet.  On the contrary it could be said that

the abuse of process caused by FIR stands aggravated if the FIR has

taken the form of a charge sheet after investigation.  The power is

undoubtedly conferred to prevent abuse of process of power of any

court.

18. The second submission of  learned counsel  for the Respondent

No.2  is  that  the  Appellant  No.1  has  fraudulently  transferred  the

property  which  is  the  subject  matter  of  the  agreement  dated

03.06.1993 to his wife and has thereby committed criminal breach of

trust. This charge is wholly untenable and rather extraordinary since

the alleged fraudulent transfer of property by the Appellant No.1 to

his wife, assuming it to be illegal, by no stretch of imagination can

constitute the offence of a criminal breach of trust, since the property

was not entrusted by the Respondent No.2 to the Appellants.  The

property  belonged  to  Appellant  No.1  and  there  was  therefore  no

question of Appellants having been entrusted with their own property,

and  that  too  by  the  complainant,  who  had  merely  entered  into  a

development agreement in respect of the property.

19. Lastly,  we  find  that  the  FIR  and  the  charge  sheet  essentially

charged the petitioner for an offence under Section 406 of the Cr.P.C.

3 G. Sagar Suri and Anr. V. State of U.P and Others, (2000) 2 SCC 636 (Para 7). Umesh Kumar V. State of Andhra Pradesh and Anr. (2013) 10 SCC 591 (Para 20)

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for retaining the amount of Rs. One crore which was advanced to him

by the  Respondents  at  the  time of  entering into  the  development

agreement.   

Whether an offence under Section 406 made out

20. It  is  necessary to refer to Sections 405 and 406 of the IPC in

order  to  ascertain,  whether  in  the  facts  and  circumstances  of  the

present case, an offence under Section 406 is made out against the

Appellants.

Section 405 and 406 of the IPC reads as follows: -

“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”.  [Explanation [1].—A person, being an employer [of  an  establishment  whether  exempted under section  17  of  the  Employees’  Provident  Funds and  Miscellaneous  Provisions  Act,  1952  (19  of 1952),  or  not]  who  deducts  the  employee’s contribution  from  the  wages  payable  to  the employee  for  credit  to  a  Provident  Fund  or Family Pension Fund established by any law for the time being in force, shall be deemed to have been  entrusted  with  the  amount  of  the contribution so deducted by him and if he makes default  in the payment of  such contribution to the said Fund in violation of the said law, shall be deemed to have dishonestly used the amount of the said contribution in violation of a direction of law as aforesaid.]  

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[Explanation  2.—A person,  being an employer, who deducts  the employees’  contribution  from the wages payable to the employee for credit to the Employees’  State Insurance Fund held and administered by the Employees’ State Insurance Corporation  established  under  the  Employees’ State Insurance Act, 1948 (34 of 1948), shall be deemed  to  have  been  entrusted  with  the amount of the contribution so deducted by him and if he makes default in the payment of such contribution to the said Fund in violation of the said Act,  shall  be deemed to have dishonestly used  the  amount  of  the  said  contribution  in violation of a direction of law as aforesaid.] 406. Punishment  for  criminal  breach  of trust.—Whoever  commits  criminal  breach  of trust  shall  be  punished  with  imprisonment  of either description for a term which may extend to three years, or with fine, or with both.”

21. The  essence  of  the  offence  lies  in  the  use  of  the  property

entrusted to a person by that person, in violation of any direction of

law or any legal contract which he has made during the discharge of

such trust.  In the present case, the amount of Rs. One crore was paid

by the complainant-Respondent to the Appellants as an interest free

deposit on the signing of the agreement.  It was liable to be refunded

to the complainant simultaneously on handing over of possession of

the  area  of  the  owner’s  share  to  the  owner  in  the  group  housing

complex vide Clause 30 (b) of the agreement dated 03.06.1993.   

22. Two things are significant in the transaction between the parties.

Firstly, that the occasion for returning the amount i.e. the developer

handing over the possession of the area of the owner’s share to the

owner in the group housing complex, has not occurred.  According to

the  Appellants,  the  contract  stands  frustrated  because  no  group

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housing can be legally built on 20 Feroz Shah Road, New Delhi since it

falls  in  the  Lutyens  Bungalow Zone.  Appellant  No.1  has  therefore,

terminated the contract.  Further, the amount has been retained by

him as  a  security  because  not  only  is  there  any  handing  over  of

constructed portion, the complainant has also got into part possession

of the property and has not handed it back.  Also, the complainant has

failed to get the property vacated from the tenant’s possession.   

23. We, thus find that it is not possible to hold that the amount of Rs.

One crore which was paid along with the development agreement as a

deposit can be said to have been entrustment of property which has

been dishonestly converted to his own use or disposed of in violation

of any direction of law or contract by the Appellant.  The Appellants

have not  used the  amount  nor  misappropriated it  contrary  to  any

direction of law or contract which prescribes how the amount has to

be dealt with.   

Going by the agreement dated 03.06.1993, the amount has to

be returned upon the handing over of  the constructed area of  the

owner which admittedly has not been done.  Most significantly the

Respondent No.2 has not demanded the return of the amount at any

point of time.  In fact, it is the specific contention of the Respondent

No.2 that he has not demanded the amount because the agreement is

still in subsistence.   

We  do  not  see  how  it  can  be  contended  by  any  stretch  of

imagination that the Appellants have misappropriated the amount or

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dishonestly used the amount contrary to any law or contract.  In any

case, we find that the dispute has the contours of a dispute of civil

nature and does not constitute a criminal offence.  

24. Having given our anxious consideration, we are of the view that

assuming that there is a security deposit of Rs. One Crore and that he  

has misappropriated the dispute between the two parties can only be

a civil dispute.

25. In Indian Oil Corporation v. NEPC India Ltd. and others4, this Court

observed as follows: -

“13. ….. Any  effort  to  settle  civil  disputes  and claims,  which  do  not  involve  any  criminal offence,  by  applying pressure through criminal prosecution  should  be  deprecated  and discouraged…..”

The Court noticed a growing trend in business circles to convert

purely civil dispute into criminal cases.

We  find  it  strange  that  the  complainant  has  not  made  any

attempt for the recovery of the money of Rs. One Crore except by

filing this criminal complaint.  This action appears to be mala fide and

unsustainable.  

26. In  State of Haryana and Ors. v. Bhajan Lal and Ors.5, this Court

has set out the categories of cases in which the inherent power under

Section 482 of Cr.P.C.  can be exercised.  Para 102 of  the judgment

reads as follows: -

4 2006 (6) SCC 736 5 (1992) Supp (1) SCC 335

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“102. In the backdrop of the interpretation of the various  relevant  provisions  of  the  Code  under Chapter  XIV  and  of  the  principles  of  law enunciated by this Court in a series of decisions relating  to  the  exercise  of  the  extraordinary power under Article 226 or the inherent powers under Section 482 of the Code which we have extracted  and  reproduced  above,  we  give  the following  categories  of  cases  by  way  of illustration  wherein  such  power  could  be exercised either to prevent abuse of the process of any court or otherwise to secure the ends of justice,  though  it  may  not  be  possible  to  lay down  any  precise,  clearly  defined  and sufficiently channelised and inflexible guidelines or rigid formulae and to give an exhaustive list of  myriad  kinds  of  cases  wherein  such  power should be exercised.

(1)  Where  the  allegations  made  in  the  first information report or the complaint, even if they are  taken at  their  face  value  and accepted in their entirety do not prima facie constitute any offence or make out a case against the accused.

(2) Where the allegations in the first information report and other materials, if any, accompanying the  FIR  do  not  disclose  a  cognizable  offence, justifying  an  investigation  by  police  officers under Section 156(1) of the Code except under an order of a Magistrate within the purview of Section 155(2) of the Code.

(3) Where the uncontroverted allegations made in  the  FIR  or  complaint  and  the  evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.

(4)  Where,  the  allegations  in  the  FIR  do  not constitute  a  cognizable  offence  but  constitute only a non-cognizable offence, no investigation is permitted by a police officer without an order of a Magistrate as contemplated under Section 155(2) of the Code.

(5)  Where  the  allegations  made  in  the  FIR  or complaint  are  so  absurd  and  inherently

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improbable  on  the  basis  of  which  no  prudent person  can  ever  reach  a  just  conclusion  that there is sufficient ground for proceeding against the accused.

(6)  Where  there  is  an  express  legal  bar engrafted in any of the provisions of the Code or the  concerned  Act  (under  which  a  criminal proceeding  is  instituted)  to  the  institution  and continuance  of  the  proceedings  and/or  where there is a specific provision in the Code or the concerned Act, providing efficacious redress for the grievance of the aggrieved party.

(7)  Where  a  criminal  proceeding  is  manifestly attended  with  mala  fide  and/or  where  the proceeding  is  maliciously  instituted  with  an ulterior motive for wreaking vengeance on the accused  and  with  a  view to  spite  him due  to private and personal grudge.”

27. We are of the opinion that the present case falls under the 1st, 3rd

and 5th category set out in the para 102 of the judgment in the case of

Bhajan  Lal  (supra).  In  such  a  situation,  the  High  Court  erred  in

dismissing the petition of the Appellants filed under Section 482 of

Cr.P.C. This was a fit case for the High Court  to exercise its inherent

power under Section 482 of Cr.P.C. to quash the FIR.

28. It is necessary here to remember the words of this Court in State

of Karnataka v. L. Muniswamy and others6 which read as follows: -   

“7. …..In the exercise of this wholesome power, the High Court is entitled to quash a proceeding if  it  comes to the conclusion that allowing the proceeding to continue would be an abuse of the process of the Court or that the ends of justice require  that  the  proceeding  ought  to  be quashed. The saving of the High Court's inherent powers,  both  in  civil  and  criminal  matters,  is

6 1977 (2) SCC 699

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designed to  achieve a  salutary  public  purpose which is that a court proceeding ought not to be permitted  to  degenerate  into  a  weapon  of harassment or  persecution.  In  a criminal  case, the veiled object behind a lame prosecution, the very  nature  of  the  material  on  which  the structure  of  the prosecution rests  and the like would  justify  the  High  Court  in  quashing  the proceeding in the interest of justice…..”

28. We find that the prosecution is mala fide, untenable and solely

intended to harass the Appellants.  We are forfeited in view of the

Respondent not having made any attempt to recover the deposit of

Rs. One Crore through a civil action.

29. We have, therefore, no hesitation in quashing the FIR and the

charge  sheet  filed  against  the  Appellants.   Hence,  the  FIR

No.0139/2014 dated 20.08.2014 and charge sheet dated 03.08.2018

are hereby quashed.   

30. For  the aforesaid  reasons,  we hereby set  aside  the  impugned

judgment  and  order  dated  02.02.2016  of  High  Court  of  Delhi.

Accordingly, appeal is allowed along with the application filed by the

Appellants seeking amendment of main prayer.    

….………………………………..J.   [S.A. BOBDE]

….………………………………..J.         [L. NAGESWARA RAO]

NEW DELHI  NOVEMBER 15, 2018

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