S.B Sinha, J.— Leave granted. Whether breach of contract of an agreement for sale would constitute an offence under Section 406 or Section 420 of the Penal Code, 1860 is the question involved herein.
2. It arises in the following factual background: the appellant is the owner of some agricultural lands. He entered into an agreement for sale with Respondent 2 agreeing to sell 13 acres of land at the rate of Rs 4,70,000 per acre. Allegedly, Respondent 2 is said to be a property dealer. He paid a sum of Rs 7,00,000 towards advance to the appellant. A sum of Rs 14,20,000 was furthermore paid to the appellant within a period of seven months from the date of execution of the said sale agreement. Inter alia, on the premise that the second respondent was unable to pay the balance amount of consideration, the appellant executed a deed of sale in favour of Balbir Singh and Mohinder Singh.
3. Whereas the case of the appellant is that it was at the instance of Respondent 2 the said deed of sale was executed, the latter contends that the appellant did so without calling upon him to pay the balance amount and as such he committed an offence under Section 406 and Section 420 of the Penal Code.
4. Pursuant to or in furtherance of the agreement dated 12-5-2006, the appellant paid a sum of Rs 7,20,000 to Respondent 2 at the time of cancellation of agreement of sale. The appellant furthermore stated that another agreement was entered into on or about 10-6-2006 pursuant whereto the parties have agreed to cancel the agreement of sale itself and it was furthermore agreed that in the event the appellant fails to refund the amount, the respondent will take recourse to law. The appellants in this special leave petition, in no uncertain terms, stated that they were ready and willing to pay the amount on due date.
5. Indisputably, Respondent 2 lodged a first information report on or about 7-9-2006, inter alia, alleging:
“… we got a call from Surjit Singh, who said us to come tomorrow i.e 12-5-2006 to execute the sale deed and if they could not execute the sale deed they will return our money.
We again reached Tapa Mandi on 12-5-2006. The abovesaid accused were called at the home of Shri Harbans Singh and they said that they don't want to sell their land, so you take your money back. After this we and the accused persons came at Tapa Mandi where the cancellation deed was executed and the accused have returned us Rs 7,80,000 and remaining amount of Rs 14,20,000 was promised to return till 10-6-2006 and it was also written, if the accused persons could not return Rs 14,20,000 till 10-6-2006, the agreement to sell will remain intact and amount of Rs 7,80,000 given by the accused will be forfeited in favour of the complainant.
The accused persons did not return the money of Rs 14,20,000 till 10-6-2006, so we reached at their home at Village Khokhar on 10-6-2006. The accused has promised us to give that amount on 20-6-2006. But the accused still did not return the amount when we reached on 20-6-2006 to take our money, we came to know that the accused have sold the land which was the subject-matter of the agreement, to Balbir Singh and Mohinder Singh, sons of Mohar Singh, son of Rulia Singh etc. resident of Village Tanola, District Sangrur and got the sale deed executed in their favour on 10-5-2006. After that, we got a copy of the registry with the help of an advocate and we came to know that the land, the subject-matter of agreement with us was sold. After that, one application was given to the Sub-Registrar, Rampura Phul on 23-6-2006 to mark my presence and again on 26-6-2006 one application was given to mark my presence being holiday on 24-6-2006/25-6-2006 and marked my presence.
We have taken the amount with us to get the sale deed executed. The accused neither returned our amount of Rs 22,00,000 nor executed the sale deed in our favour. The accused has committed fraud with us and grabbed our Rs 22 lakhs and rather threatening to kill us if we have taken any action against them.”
6. The appellants filed an application before the High Court of Punjab and Haryana at Chandigarh on 25-8-2007 for quashing the said First Information Report No. 302 dated 7-9-2006. By reason of the impugned order dated 31-8-2007, the said application has been rejected by a learned Single Judge of the said Court, stating:
“The petitioners despite the agreement to sell having been cancelled have not returned the earnest money, which is indicative of their dishonest intention leading to registration of the FIR. Nothing has been shown to this Court which could persuade it to exercise its inherent jurisdiction under Section 482 of the Code of Criminal Procedure.
Dismissed.”
7. Mr Sachin Jain, learned counsel appearing on behalf of the appellant, would urge that the allegations made in the first information report, even if given face value and taken to be correct in their entirety, do not constitute an offence under Sections 406 and 420 of the Penal Code. Mr Vivek Sharma, learned counsel appearing on behalf of the respondent, on the other hand, supported the impugned judgment contending that the appellants not only sold the land to other persons but also deliberately refused to return a huge amount of Rs 22,00,000, despite having made promise therefor.
8. Sections 405 and 415 of the Penal Code defining “criminal breach of trust” and “cheating” respectively read as under:
“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’.
415. Cheating.—Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to ‘cheat’.”
An offence of cheating would be constituted when the accused has fraudulent or dishonest intention at the time of making promise or representation. A pure and simple breach of contract does not constitute an offence of cheating.
9. The ingredients of Section 420 of the Penal Code are:
“(i) Deception of any persons;
(ii) Fraudulently or dishonestly inducing any person to deliver any property; or
(iii) To consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.”
10. The High Court, therefore, should have posed a question as to whether any act of inducement on the part of the appellant has been raised by the second respondent and whether the appellant had an intention to cheat him from the very inception. If the dispute between the parties was essentially a civil dispute resulting from a breach of contract on the part of the appellants by non-refunding the amount of advance the same would not constitute an offence of cheating. Similar is the legal position in respect of an offence of criminal breach of trust having regard to its definition contained in Section 405 of the Penal Code. (See Ajay Mitra v. State of M.P (2003) 3 SCC 11)
11. There cannot furthermore be any doubt that the High Court would exercise its inherent jurisdiction only when one or the other propositions of law, as laid down in R. Kalyani v. Janak C. Mehta (2009) 1 SCC 516 is attracted, which are as under:
“(1) The High Court ordinarily would not exercise its inherent jurisdiction to quash a criminal proceeding and, in particular, a first information report unless the allegations contained therein, even if given face value and taken to be correct in their entirety, disclosed no cognizable offence.
(2) For the said purpose the Court, save and except in very exceptional circumstances, would not look to any document relied upon by the defence.
(3) Such a power should be exercised very sparingly. If the allegations made in the FIR disclose commission of an offence, the court shall not go beyond the same and pass an order in favour of the accused to hold absence of any mens rea or actus reus.
(4) If the allegation discloses a civil dispute, the same by itself may not be a ground to hold that the criminal proceedings should not be allowed to continue.”
12. Yet again, in Hira Lal v. State of U.P (2009) 11 SCC 89, (2009) 5 Scale 418 this Court held:
“12. The parameters of interference with a criminal proceeding by the High Court in exercise of its jurisdiction under Section 482 of the Code are well known. One of the grounds on which such interference is permissible is that the allegations contained in the complaint petition even if given face value and taken to be correct in their entirety, commission of an offence is not disclosed. The High Court may also interfere where the action on the part of the complainant is mala fide.”
(See also Harmanpreet Singh Ahluwalia v. State of Punjab (2009) 7 SCC 712, (2009) 7 Scale 85.)
13. As the High Court has not applied its mind with regard to the aforementioned aspects of the matter, the impugned judgment cannot be sustained. It is set aside accordingly. The appeal is allowed. The matter is remitted to the High Court for consideration of the matter afresh.