“Mere non-performance of an Agreement to Sell by itself does not amount to cheating and breach of trust:” Supreme Court
Recently, the Supreme Court (SC) of India observed that mere non-performance of an agreement to sell by itself does not amount to cheating and breach of trust. The SC bench constituting Justice Prasanna B Varale and Justice Vikram Nath quashed a criminal case against 3 persons who failed to execute a sale despite an agreement to sell a property. It also said that the dispute was of a civil nature and that the judicial process cannot be used as a tool to enforce the specific performance of a contract. The bench said, “The act of the appellant at best constitutes a civil wrong and does not call for any criminal action against them. A civil wrong cannot be given a criminal color merely to coerce the appellants into registering the sale. The judicial process cannot be used as a tool to enforce specific performance of an agreement.”
Moreover, the bench opined, “Mere non-performance of an Agreement to Sell by itself does not amount to cheating and breach of trust. Respondent no.2 has adequate remedy of filing a Civil Suit for relief of specific performance of a contract which he has already availed and the suit is still pending. The FIR only appears to be an arm-twisting mechanism to pressurize the appellants to execute the Sale Deed or to extract money. Every civil wrong cannot be converted into a criminal wrong. As we find in the present case, respondent no.2 is trying to abuse the criminal machinery for ulterior motives.”
In this case, Respondent No. 2 and the appellants entered into an Agreement to Sell (June 29, 2020) for the sale of a property in Rajgarh for a total sale consideration of Rs. 5,11,00,000/- (Rupees five crore eleven lakhs only) and an advance payment of Rs.11 lakhs i.e. Rs.5 lakhs in cash and Rs.6 lakhs by way of a cheque was made at the time of Agreement to Sell. Further, Respondent No. 2 agreed to make the payment of Rs. 1 crore by September 30, 2020, and the balance amount of Rs. 4 crore in the next 15 months beginning September 30, 2020, as per his convenience. The entire payment was to be made within 18 months from the date of execution of the Agreement to Sell. The same was not executed; therefore, Respondent No. 2 (complainant) filed an FIR on May 24, 2022.
A perusal of the complaint simply states that the Agreement to Sell had been executed between the parties on June 29, 2020. The complainant alleged that despite making a total payment of Rs. 1 crore, the appellants refused to execute the registry. Therefore, “It is further stated that their refusal is evident of the fact that the appellants have cheated respondent no.2 with dishonest intentions and have duped him of Rs.1 crore in collusion with his brother in furtherance of their criminal conspiracy.” The Complainant has been regularly contacting the appellants and requesting them to execute the registry of the property but the appellants were openly refusing to do the same saying “Do whatever you want, we will not execute the registry in your name.”
Further, the complainant instituted a civil suit for relief of specific performance of the contract against the appellant which is still pending. The appellants approached the Rajasthan High Court (HC) seeking to quash the FIR, which was declined by the HC. Therefore, the appellants moved to the Supreme Court. After hearing the matter, the SC opined, “Mere non-registration of the sale or its refusal cannot amount to cheating. The delivery of the advance payment towards consideration was made in furtherance of an Agreement to Sell and it is not the case of the respondent that he was in anyway deceived or duped to make such payments to the appellants.”
Concerning the offence under Section 406 of the Indian Penal Code (IPC) in the present case, the bench said “...the appellants were not entrusted with any property by respondent no.2 – complainant. The only delivery made was of part payment towards an Agreement to Sell between the parties. The amount paid towards consideration cannot be said to have been entrusted with the appellants by respondent no. 2.” It added, “Merely because the appellants are refusing to register the sale, it does not amount to misappropriation of the advance payment. Since there was no entrustment of property, the offence of misappropriation of such property and thereby criminal breach of trust cannot be said to be made out.” Lastly, the top court quashed the FIR and set aside the impugned judgment and order of the HC.
