NEW DELHI: Observing that litigants frequently attempt to blur the line between civil remedies and penal law, the Supreme Court of India, comprising a bench of Justice Satish Chandra Sharma and Justice N. Kotiswar Singh, has quashed criminal proceedings initiated against a General Power of Attorney holder for alleged cheating and dishonest execution of a sale deed. Setting aside an order of the High Court of Karnataka, the apex court held that where no criminality could be attributed to the landowners who executed the deed, criminal proceedings could not be sustained against their attorney who acted merely as an agent and confirming party.
Background of the Dispute
The dispute pertained to a parcel of land bearing survey no. 115, admeasuring 4 acres 19 guntas, situated in Channasandra Village, Karnataka. The property was originally owned by one Ganesh, who died intestate, leaving behind his wife and other legal heirs.
On October 5, 2012, these landowners executed an agreement for sale in favour of the petitioner, Sudha Rakesh, alongside a General Power of Attorney (GPA). Acting through this GPA, the landowners subsequently entered into another agreement for sale on November 19, 2012, with the complainant (respondent no. 2) and another individual for the sale of the same property. Under this agreement, the prospective buyers were obligated to pay the balance consideration and come forward for the execution of the sale deed within seven months.
However, the buyers failed to come forward within the stipulated seven months or during the subsequent statutory limitation period for seeking specific performance. Eventually, on February 11, 2016, the landowners and the petitioner executed a sale deed conveying the subject property to an ultimate purchaser, one Gaffar Baig.
Promptly after the execution of the sale deed, the prospective buyers instituted a civil suit seeking specific performance of the November 2012 agreement. Shortly thereafter, on May 13, 2016, they also lodged a criminal complaint resulting in FIR No. 121/2016 at Kadugodi Police Station against the landowners and the petitioner under Sections 420 (cheating), 423 (dishonest statement of consideration in deed of transfer), and 120-B (criminal conspiracy) read with Section 34 of the Indian Penal Code, 1860. The jurisdictional Magistrate took cognizance of the offences on September 28, 2017.
Conflicting High Court Orders
The landowners approached the High Court of Karnataka seeking quashing of the proceedings. On November 22, 2017, in Criminal Petition No. 9095/2016, a bench of the High Court quashed the FIR as against the landowners, observing that the matter was purely civil in nature.
Subsequently, the petitioner also filed a quashing petition before the High Court. However, vide an impugned order dated September 19, 2022, a coordinate bench of the High Court dismissed Criminal Petition No. 9470/2017 on merits, distinguishing the petitioner’s role on the grounds that the petitioner had received the funds, signed the agreement as attorney, acted as a confirming party, and that the land was later sold at a lesser value.
Submissions of the Parties
Before the Supreme Court, the petitioner argued that parity ought to have been extended since the case against the principal landowners had already been quashed. It was submitted that the dispute was entirely civil, the petitioner was merely a GPA holder and confirming party, and no criminal culpability could be sustained.
Opposing the plea, respondent no. 2 submitted that the High Court was justified in distinguishing the petitioner’s role as a principal actor who directly received the consideration. The respondent also alleged that the 2016 sale deed was executed by concealing the prior agreement of 2012. The State filed objections adopting similar lines of argument.
Analysis of the Court
Reiterating the threshold distinction between contractual breaches and criminal acts, the Supreme Court observed:
“The tendency of litigants to colourize civil disputes into criminal offences is an open secret in the present times. The courts have tried to put their foot down to prevent the litigants from obliterating the fine distinction between the two. We have done so to prevent the abuse of criminal process. The instant case presents a similar opportunity.”
Examining the record, the bench noted that the buyers had failed to act upon the November 19, 2012 agreement within the stipulated seven months and only initiated proceedings after the 2016 sale deed was registered. Recalling the High Court’s earlier quashing order in favour of the landowners, the bench cited the coordinate bench’s previous observation:
“…Therefore, when the complainant has already approached the civil court and in view of the long delay in moving for getting the sale deed executed, in my opinion, it is purely a civil transaction between the parties which has been given a criminal colour by the complainant (respondent herein) for such type for proceedings, when the factual aspects clearly disclose there is not even a tinge of criminal attitude on the part of the petitioners.”
Addressing the coordinate bench’s subsequent refusal to extend parity to the petitioner, the Supreme Court held that the High Court had fallen into a grave error. The court observed:
“The FIR alleges the commission of offence by the landowners as well as the petitioner. The allegation is based on the execution of sale deed, and the sale deed was executed by the landowners themselves. The petitioner was only a confirming party. If no criminality could be attributed to the landowners by virtue of the execution of sale deed, it cannot be sustained against the petitioner as well. For, there is nothing to attribute any aggravated role to the petitioner.”
The bench clarified that physical receipt of funds by the GPA holder on behalf of the collective owners did not place the attorney on a different pedestal, nor was there any allegation of exceeding authority. The court further rejected the High Court’s reliance on the lesser sale price as speculative, noting that such a fact, even if incriminating, applied equally to the landowners. The High Court was also held to have traversed beyond the scope of the case by framing a hypothetical question regarding whether the consideration was transmitted to the landowners, when the landowners themselves made no such allegation.
Turning to the statutory ingredients of the charged offences, the Supreme Court ruled:
“Notably, the offence of cheating requires a deceptive act which leads to inducement for delivery of property/money. Even on bare perusal of the allegations, it becomes clear that the property (that is the amount transferred by respondent no. 2 at the time of agreement for sale dated 19.11.2012) was not transferred on the basis of any deception. At that time, the property could have legitimately been transferred in favour of respondent no. 2 and there was no deception. The subsequent sale took place in 2016, almost 4 years after the alleged delivery of money by respondent no. 2. Thus, the foundational ingredient of cheating is missing.”
The court also found Section 423 of the IPC to be mis-invoked, noting the absence of any false statement regarding consideration in the instruments, adding that any false averment in the final sale deed could only confer grievance to the ultimate buyer, not respondent no. 2. Calling it “a classic case of casting the shadow of criminality on a pure civil dispute,” the bench emphasized that judicial consistency and propriety required extending the same relief to the petitioner.
Decision
Allowing the petition, the Supreme Court set aside the High Court’s impugned judgment dated September 19, 2022, and quashed FIR/Crime No. 121/2016 registered at Kadugodi Police Station, along with all consequential proceedings arising out of it.
Case Details
Case Title: Sudha Rakesh v. The State of Karnataka & Anr.
Case No.: Special Leave Petition (Crl.) No. 12638 of 2022
Bench: Justice Satish Chandra Sharma and Justice N. Kotiswar Singh
Date: October 05, 2026
