Supreme Court quashes criminal proceedings in property-sale dispute, finds no prima facie offence under Sections 406/420 IPC

A bench of Justice B.V. Nagarathna and Justice R. Mahadevan heard an appeal arising out of an order of the Jharkhand High Court that had declined to quash criminal proceedings initiated from a complaint and FIR alleging cheating and criminal breach of trust in relation to a property sale. The appellant challenged the High Court’s refusal to set aside FIR No.18 of 2021 and Complaint Case No.619 of 2021 and sought quashing of subsequent proceedings.

The Court allowed the appeal and held that the allegations did not disclose prima facie offences under Sections 406 or 420 IPC and that the prosecution was mala fide and instituted without requisite criminal intent. The Court emphasised established principles that cheating required proof of a fraudulent or dishonest intention “at the time of making the promise” and that mere failure to perform a contract could not be equated with cheating. The Court, in its reasoning, observed: “On a careful consideration of the aforementioned judgment in the light of the facts of this case, we find that none of the offences alleged against the appellant herein is made out. In fact, we find that the allegations of criminal intent and other allegations against the appellant herein have been made with a mala fide intent and therefore, the judgment of this Court in the case of Bhajan Lal and particularly sub-paragraphs 1, 3, 5 and 7 of paragraph 102, extracted above, squarely apply to the facts of this case. In our view, it is neither expedient nor in the interest of justice to permit the present prosecution to continue.” The Court therefore set aside the High Court’s order and quashed the complaint, FIR and all consequent proceedings.

Background The dispute stemmed from an agreement for sale dated 16.02.2013 under which the complainant paid Rs.20,00,000 towards a total consideration of Rs.43,00,000 for two contiguous plots. After nearly eight years and alleged non-transfer of title, the complainant lodged a complaint on 29.01.2021 alleging offences under Sections 406, 420 and 120B IPC; FIR No.18 of 2021 was registered on 08.02.2021. The accused obtained anticipatory bail from the Judicial Commissioner, Ranchi, in December 2021 and furnished a first instalment under a mediated settlement, but the bail was later cancelled by the Judicial Commissioner on account of alleged failure to comply with the instalment schedule. The accused then approached the High Court under Section 482 CrPC seeking quashing; the High Court refused to quash the criminal proceedings but permitted a fresh anticipatory bail application. The accused challenged that order before the Supreme Court.

The Supreme Court reviewed the complaint and FIR against the ingredients of Sections 405, 406 and 420 IPC and relevant precedents including Inder Mohan Goswami and Bhajan Lal. The Court noted the settled proposition in Inder Mohan Goswami that “To hold a person guilty of cheating it is necessary to show that he had a fraudulent or dishonest intention at the time of making the promise,” and observed that the complaint contained no factual averments showing dishonest intention at inception. The Court further held that allegations of civil breach or failure to perform contractual obligations did not automatically translate into criminal breach of trust or cheating; as the judgment recorded, “Criminal law ought not to become a platform for initiation of vindictive proceedings to settle personal scores and vendettas.” The Court found delay of nearly eight years in lodging the complaint unexplained, and concluded that the allegations were vague, did not disclose essential ingredients of the charged offences, and were attended with mala fide. Applying the tests in Bhajan Lal, the Court found that continuation of prosecution would cause undue harassment and was neither expedient nor in the interest of justice, and accordingly allowed the appeal and quashed the complaint, FIR and all consequential proceedings.

Case Details: Case No.: 2025 INSC 1151 (Criminal Appeal arising out of Special Leave Petition (Criminal) No.3606 of 2024) Case Title: Arshad Neyaz Khan v. State of Jharkhand & Another Appearances: For the Petitioner(s): Not indicated in the judgment For the Respondent(s): Not indicated in the judgment