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M. Suresh And Others v. State Of Andhra Pradesh And Another
Factual and Procedural Background
Respondent 2 lodged Criminal Complaint No. 1736 of 2006 on 26-6-2006 before the III Additional Chief Metropolitan Magistrate, Hyderabad, accusing the present appellants (A-1 and A-2) of cheating under Section 420 IPC. The complainant alleged that:
- A-2 introduced A-1 as owner of 39 acres 19 guntas of land in Karnataka. On this representation, the complainant agreed in December 2004 to purchase the land and paid Rs 10 lakh as advance.
- An MoU dated 22-1-2005 was executed; in all, the complainant paid Rs 85 lakh to A-1 by demand drafts, expecting title documents by 15-4-2005 so that bank finance could be arranged.
- When documents were not forthcoming, the complainant sought refund. A-1 issued two cheques (Rs 7 lakh and Rs 85 lakh) that were dishonoured. Subsequent negotiations led the complainant to arrange an additional Rs 1 crore draft on 5-9-2005, but the deal still did not close.
- A-1 later executed sale deeds in favour of A-2 with respect to part of the land, prompting the belief that the accused never intended to honour the agreement.
The appellants moved the High Court of Andhra Pradesh under Section 482 CrPC seeking quashing, contending that:
- The dispute was purely civil.
- They had already repaid Rs 95 lakh to the complainant between 25-9-2006 and 7-10-2006, covering principal and interest.
By order dated 30-3-2012 (M. Suresh v. State of A.P., 2012 SCC OnLine AP 1127) the High Court refused to quash, observing that repayment occurred only after the complaint was filed and therefore did not wipe out the offence. The appellants appealed to the Supreme Court, which stayed further proceedings on 6-8-2012 and has now delivered the present order.
Legal Issues Presented
- Whether the criminal proceedings alleging cheating under Section 420 IPC constitute an abuse of the process of law and should be quashed because the underlying dispute is essentially civil in nature.
Arguments of the Parties
Appellants’ Arguments
- The transaction concerned a private sale of land that ultimately did not materialise due to market conditions; absence of mens rea barred a cheating charge.
- The complainant has already been repaid Rs 95 lakh—more than the Rs 85 lakh advanced—pursuant to a cancellation deed dated 9-10-2006.
- Continuation of criminal proceedings would convert a civil dispute over payments and dishonoured cheques into a criminal matter, which the law disallows.
Respondent 2 (Complainant’s) Arguments
- Two cheques issued earlier for Rs 7 lakh and Rs 85 lakh were dishonoured, evidencing dishonest intent.
- The subsequent Rs 95 lakh repayment occurred only after filing of the complaint and does not absolve the accused of criminal liability; an additional Rs 30 lakh (two dishonoured cheques of Rs 15 lakh each) remains unpaid.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Hridaya Ranjan Prasad Verma v. State of Bihar (2000) 4 SCC 168 | Distinction between breach of contract (civil) and cheating (criminal) depends on existence of fraudulent or dishonest intent at inception. | Invoked to affirm that criminal process should not be used when dishonest intention is absent. |
| Anil Mahajan v. Bhor Industries Ltd. (2005) 10 SCC 228 | Quashing appropriate where allegations reveal only a civil wrong. | Relied upon to justify exercise of inherent powers to prevent abuse of process. |
| Indian Oil Corpn. v. NEPC India Ltd. (2006) 6 SCC 736 | Courts must guard against criminal proceedings being used for recovery of civil dues. | Cited for the general caution applicable in present facts. |
| Inder Mohan Goswami v. State of Uttaranchal (2007) 12 SCC 1 | Guidelines for exercising inherent powers to quash criminal proceedings. | Supports quashing where continuing the case would amount to misuse of criminal justice system. |
| Chandran Ratnaswami v. K.C. Palanisamy (2013) 6 SCC 740 | Reiterates that criminal law cannot be invoked for arm-twisting in civil disputes. | Used to reinforce the conclusion that filing of the complaint is an abuse of process. |
Court's Reasoning and Analysis
- The Court examined the complaint, the repayment receipts and the complainant’s own counter-affidavit, noting that Rs 95 lakh was admittedly received against the original Rs 85 lakh advance.
- The subsequent dishonour of cheques for an additional Rs 30 lakh, even if true, would at most give rise to civil claims; it did not establish dishonest intention at the inception of the transaction.
- The transaction for sale of land never culminated in a transfer; non-finalisation of a commercial deal, without more, is not cheating.
- Applying the principles from the cited precedents, the Court held that criminal prosecution must not be used to settle civil monetary disputes.
- Therefore, continuation of the criminal case would be an abuse of the process of law.
Holding and Implications
The appeals are allowed and the criminal complaint and all proceedings arising therefrom are quashed.
Implications: The decision terminates criminal proceedings against the appellants while expressly preserving the complainant’s right to pursue appropriate civil remedies. The order does not lay down new law but re-affirms existing jurisprudence that criminal process cannot be misused to resolve civil disputes.
Order
1. These appeals have been preferred against the order dated 30-3-2012 passed by the High Court of Andhra Pradesh in M. Suresh v. State of A.P. 2012 SCC OnLine AP 1127, whereby the High Court has declined to quash the proceedings initiated against the appellants by Respondent 2 by filing a criminal complaint bearing CC No. 1736 of 2006 dated 26-6-2006 before the IIIrd Additional Chief Metropolitan Magistrate at Hyderabad. The appellants are named as Accused 1 and 2 respectively.
2. The case set out in the complaint is that Accused 2 (A-2) introduced Accused 1 (A-1) as owner of the land admeasuring 39 acres 19 guntas in the State of Karnataka. A-2 assured the complainant that A-1 was a genuine person and the complainant agreed to purchase the land in December 2004 and paid Rs 10 lakhs as advance. On 22-1-2005 an MoU was also entered into between the complainants and A-1. A-3 and A-4 were the witnesses. In all, a sum of Rs 85 lakhs was paid by the complainant by way of demand drafts to A-1. The accused were to hand over the documents of the property before 15-4-2015 to enable the complainant to arrange the loan from the banks. Since this was not done, the complainant asked the accused to either return his money or to comply with the commitments. A-1 paid two cheques dated 5-5-2005 for Rs 7 lakhs and Rs 85 lakhs respectively but the cheques were dishonoured. Thereafter, negotiations took place between the parties and the complainant arranged bank draft of Rs 1 crore on 5-9-2005 to complete the deal on the condition that copies of documents will be made available to him. But when the complainant received no response, he believed that the appellants had cheated him by making him to pay Rs 85 lakhs and further making him to arrange a sum of Rs 1 crore. A-1 executed sale deeds in favour of A-2 pertaining to part of the said land which showed that A-1 was not going to complete the deal.
3. The appellant sought quashing of the criminal proceedings on the plea that it was a civil dispute and the appellant-accused had paid to the complainant an amount of Rs 95 lakhs as follows:
Sl. No. DD No. Date Amount 1. 005950 25-9-2006 10,00,000 2. 005951 25-9-2006 10,00,000 3. 005952 25-9-2006 10,00,000 4. 005954 25-9-2006 5,00,000 5. 005956 7-10-2006 22,00,000 6. 007556 7-10-2006 20,00,000 7. 007557 7-10-2006 8,00,000 8. 007560 7-10-2006 10,00,000 Total amount Rs 95,00,000
4. The above payment was against receipt of Rs 85 lakhs by the appellants. According to the appellants the payment covered the principal as well as interest.
5. It was further submitted by the appellants that the deal between the parties could not materialise because of market conditions but no inference could be drawn that the appellants had the intention to cheat. Respondent 2 complainant had already received the entire amount paid by A-1 with interest and the MoU has been cancelled. The complainant also did not file any suit.
6. The High Court declined to quash the complaint. It held that the complainant had paid to the accused a sum of Rs 85 lakhs. The accused issued two cheques of Rs 7 lakhs and Rs 85 lakhs for returning the said amount but the cheques were dishonoured. Thereafter, the accused has paid a sum of Rs 95 lakhs as against the amount of Rs 85 lakhs paid by the complainant. Since the payment was made after filing of the complaint, a case of cheating was made out. The operative part of the order is as follows: (M. Suresh case 2012 SCC OnLine AP 1127, SCC OnLine AP para 14)
“14. The contention of the petitioner's counsel cannot be accepted since the said cheques issued for Rs 85,00,000 and Rs 7,00,000 were dishonoured as the payment was stopped by the drawer and the payment of Rs 95,00,000 on different dates as mentioned in the petition is subsequent to filing of the complaint. Simply making of the payment of the amount subsequent to filing of the complaint does not absolve the criminal liability of the petitioner. Thus, the complaint filed by Respondent 2 prima facie establishes an offence under Section 420 IPC against the petitioners and the petitioners are not entitled for quashing of the proceedings as prayed for.”
7. When the appeals came up for hearing on 6-8-2012, this Court has passed the following order 2012 SCC OnLine SC 1138:
“Issue notice. There shall be stay of further proceedings in the meantime.”
8. A counter-affidavit has also been filed by the complainant.
9. We have perused the record and heard the learned counsel for the State and the learned counsel for the complainant. It is patent that the dispute between the parties is purely of civil nature. Transaction of sale of the land was not finalised between the parties. As against the payment of Rs 85 lakhs by the complainant, A-1 has returned a sum of Rs 95 lakhs which has not been disputed by the complainant. In the counter-affidavit, it has been further stated that the complainant has executed a deed of cancellation of the agreement dated 9-10-2006 under which the accused was to pay a sum of Rs 1.25 crores upon which the complainant was to withdraw the complaint. But, the two cheques of Rs 15 lakhs each have been dishonoured and thus, a case for cheating has been made out.
10. We find from the documents on record, particularly the counter-affidavit of the respondent himself and the cancellation deed dated 9-10-2006 filed along with the counter-affidavit that the dispute between the parties is purely of civil nature. Even the stand of the complainant is that the matter has already been resolved and the complainant has already received the amount of Rs 95 lakhs against the payment of Rs 85 lakhs. However, according to him, the appellants were liable to pay further sum of Rs 30 lakhs as the cheques for the said amount have been dishonoured. Mere fact that the cheques have been dishonoured and the appellants may be liable to pay further amount to the complainant will not by itself make out a case of cheating. It is a dispute for which the respondent complainant can take his remedies under the law. We are conscious that merely because a case involves a civil dispute does not by itself bar remedy under criminal law if a case is made out. At the same time, process of criminal law cannot be pressed into service merely for settling a civil dispute when no offence is committed. Law on the point is well settled in a series of judgments of this Court including Hridaya Ranjan Prasad Verma v. State of Bihar (2000) 4 SCC 168, Anil Mahajan v. Bhor Industries Ltd. (2005) 10 SCC 228, Indian Oil Corpn. v. NEPC India Ltd. (2006) 6 SCC 736, Inder Mohan Goswami v. State of Uttaranchal (2007) 12 SCC 1 and Chandran Ratnaswami v. K.C. Palanisamy (2013) 6 SCC 740.
11. We are satisfied that in the present case the criminal complaint filed by Respondent 2 is abuse of process of law and cannot be sustained.
12. Accordingly, while allowing these appeals we quash the impugned complaint and proceedings against the appellants in the said criminal case. This will, however, be without prejudice to any other remedies of Respondent 2 under the law.
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