K R Rajashekar Reddy vs. State Of Karnataka

Facts

The petitioners, K.R. Rajashekar Reddy and Smt. Bhagya Rajashekar Reddy, are accused in Crime No. 72 of 2021, registered for offences under Sections 417, 420, 467, 468, 471 read with Section 34 of the IPC. The case stems from two agreements of sale executed on July 1, 2015, and August 27, 2015, for two acres of property. The petitioners paid ₹35,00,000/- for the first acre and ₹35,00,000/- for the second acre, receiving the original title deeds. When the complainant failed to execute the sale deeds, the petitioners sent legal notices and subsequently filed two suits for specific performance (O.S. Nos. 230 and 231 of 2021). The civil court granted a temporary injunction against the complainant on February 3, 2021. Following this, the complainant registered the FIR.

Held

The Court held that the dispute between the parties is essentially civil in nature, arising from agreements of sale that are currently pending before the civil court in O.S. Nos. 230 and 231 of 2021. The Court found that the allegations of cheating and forgery, as presented in the FIR, did not prima facie constitute a criminal offence when viewed against the backdrop of the civil dispute and the ongoing suits for specific performance. Relying on Apex Court judgments, particularly in Vesa Holdings (P) Ltd. v. State of Kerala and Naresh Kumar, the Court emphasized that every breach of contract does not give rise to an offence of cheating, and it must be shown that the accused had a fraudulent or dishonest intention at the time of making the promise. The Court concluded that the criminal proceedings were manifestly attended with mala fide and were instituted with an ulterior motive, fitting within the categories outlined in State of Haryana v. Bhajan Lal for quashing proceedings. Therefore, the Court allowed the criminal petition and quashed the FIR and the consequent criminal proceedings.

Key Issues

1. Whether the FIR and the criminal proceedings initiated against the petitioners, arising from a dispute rooted in agreements of sale and suits for specific performance, constitute an abuse of the process of law, warranting quashing under Section 482 of the Cr.P.C.? Petitioner's contention: The learned senior counsel for the petitioners argued that the dispute is purely civil in nature and has been given a criminal colour. She contended that the registration of the FIR, especially after the petitioners approached the civil court and obtained an injunction, is an abuse of the process of law, and permitting further proceedings would be unjust. Respondent's contention: The learned senior counsel for the complainant argued that the petitioners were engaged in a chit fund business, and the complainant had invested significant amounts. He contended that the petitioners forged agreements of sale and used blank cheques to create false evidence of sale transactions, thereby committing cheating and forgery. He asserted that these allegations pertain to criminal offences and should be decided through a trial.