TaxTMI 
TaxTMI 
2026 (6) TMI 716
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....ng in search of suitable flat in Mumbai for expansion of its business was approached by the petitioner no. 1, who introduced himself as the manging partner of M/s. Shreepati Investment, an erstwhile partnership firm and represented that his firm was a renowned real estate concern engaged in several large projects, including a mass housing project styled 'Shreepati Estate' at greater Mumbai. The petitioners, thorough false assurances of reputation, financial soundness and project credential induced the complainant company to invest in two flats i.e. flat no. 2001 admeasuring 4323.15 square feet and flat no. 2002 admeasuring 4694.38 square feet both on the 20th Floor of the said project. The petitioners promised timely completion, modern amenities and also assured approvals from authorities. Believing such representations, the complainant reposed faith and confidence in the petitioners herein. The Opposite party (in short OP) No. 2 was pressured into making advance payment even before approvals, citing high demand in the market. Based on the representations and assurances made by the petitioners herein, the OP No. 2 was induced to part away from their hard earned money aggregating to....
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....olvency and Bankruptcy Code 2016 (in short IBC) for initiation of Corporate Insolvency Resolution Process by the first informant and Abhiyan respectively. On February 5, 2019 the first informant filed another affidavit in connection with CP(IB)/4148 of 2018 wherein again there was no allegation of forgery or production of fake document by Shreepati. On being challenged by Shreepati the constitutional validity of the IBC, vide order dated March 11, 2019 in WP No. 277 of 2019 and WP (civil) No. 281 of 2019, the Supreme Court was pleased to stay all further proceedings pending before NCLT. Thereafter by an order dated August, 9 2019 the Supreme Court was pleased to dispose of the Writ Petition thereby upholding the constitutional validity of the amendment of section 5(8) of IBC. On October, 29, 2021 Shreepati went into CIRP in a proceeding initiated by Abhijan being CP(IB) 4149 of 2018. The said proceeding was challenged before the NCALT being Company Appeal no. (AT) (INC) 939 of 2021, when NCLAT was pleased to set aside the order dated October 29, 2021 passed by Hon'ble NCLT. Taking exception to an order dated March 7, 2021 passed by NCLAT, Abhiyan filed a civil appeal being C.A. 318....
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....he first part of the FIR deals with non-performance of contract by the petitioners thereby not handing over possession of flat to the first informant. The second part of the allegation made in the FIR revolves around conversion of the earnest money into a loan transaction at the behest of the first informant because it is the prosecution case that the earnest money was converted into a loan amount, which was payable with 12% cumulative interest per month, and was subsequently enhanced by 15%. Therefore, it is evident that on account of such conversion of earnest money the transaction becomes a pure and simple loan transaction. 7. He further argued that the fundamental objection of first informant was that the special leave petition preferred by the petitioners herein has foreclosed any further deliberation by the present petitioners. Such argument of the OP No. 2 is misplaced as rejection against an interim order has no bearing at the final disposal stage. Furthermore the Supreme Court while disposing the Special Leave Petition was pleased not to interfere at that stage of the case only. Therefore the attempt of first informant to extrapolate the order of the Supreme Court canno....
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....he supplementary affidavit filed by the petitioner, it is evident that the petitioner had made a representation before the Hon'ble Home Minister for obtaining sanction for construction of the flats in rehab wings. Again the petitioner moved before Bombay High Court who directed the State Authorities to consider the representations of the petitioner without going into the merits of the case. Therefore, the petitioner, were very much aware about the fact that they did not have the necessary sanction to construct the flat and yet the accused/petitioner retained the advance amount paid to them by the defacto complaint. Furthermore the petitioners unilaterally transferred the said advance to unsecured loan amount, which clearly demonstrates the intention to defraud the defacto complainant. The conduct of the petitioner, both preceding and subsequent to the transaction in question clearly reveals a pattern of deliberate mis-representation and concealment, indicative of a mala-fide intent to deceive from the very inception. The petitioners actions were neither inadvertence nor the product of any bona-fide mis understanding but rather formed part of a calculated design to induce reliance t....
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....property remains incomplete till date and the petitioner has not acted in bona-fide manner despite having no sanction from the competent authorities. Petitioner accepted money from the complainant which itself speaks to their dishonest conduct. The accused persons were fully conscious of the fact that the necessary sanctions might not be forthcoming, yet they deliberately induced the defacto complainant to part with a substantial sum of money towards consideration for two flats. Furthermore to assure them of the viability of the petitioner's project they furnished forged and fabricated documents, including the approved sanction plan and others, showcasing that the necessary permission had been obtained. Such conduct amounts to deliberate misrepresentation and dishonest inducement and forms the very subject matter of investigation. 16. He further argued that a bare perusal of letter of complaint it clearly indicates that the said amount of money was collected by inducing the representatives of the complainants through false representation and assurance to the effect that flats were selling like hot cake and that approvals and sanctions would follow, thereby persuading them to par....
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....de in the FIR, it is clear that initially FIR makers inquired whether M/s Shreepati Investment/accused had obtained necessary approval and sanctions from appropriate authorities to commence the proposed project, though it is also there case that the accused persons assured them that they were in process of obtaining such approval. In the FIR the complainant also alleged that even after knowing that they do not have necessary approval and sanctions, being induced by the petitioners flowery representation they made advance payment of Rs. 3, 30,00,000/-. It is also admitted position that thereafter the parties entered into an agreement for sale on March, 15, 2011. The petitioners defence is that the construction could not take place on account of objection from the jail authorities as would be evident from the correspondences relied on in the FIR. It is not in dispute that on account of such objection raised by the jail authorities in 2014, Shreepati filed a Writ Application under Article 226 of the Constitution of India before the High Court of Judicature at Bombay being writ petition (L) no. 6173 of 2014. Said Writ Court by an order dated July 24, 2014 directed the State of Maharash....
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....eedless to say that each of the said offences have specific ingredients. 23. In order to constitute a criminal breach of trust (Section 406 IPC) (1) There must be entrustment with persons for property or dominion over the property, and (2) The person entrusted: (a) Dishonestly misappropriated or converted property to his own use, or (b) Dishonestly used or disposes of the property or wilfully suffers any other persons so to do in violation of: (i) Any direction of law prescribing the method in which the trust is discharge; or (ii) Legal contract touching the discharge of trust (see; S.W. Palanitkar). Similarly, in respect of an offence under section 420 IPC, the essential ingredients are: (1) Deception of any person, either by making a false or misleading representation or by other action or by omission; (2) Fraudulently or dishonestly inducing any persons to deliver any property, or (3) The consent that any persons shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit. In order to constitute offence of cheating w....
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....yer. 26. From the materials available so far and the unimpeachable documents relied by the petitioner there is nothing to say that aforesaid representations were found to be false at the material time. Regarding the promotion of the project by painting a rosy picture that the property is being sold like a hot cake is not an inducement but can be taken as 'invitation to treat'. Infact the delay in constructing the project was apparently beyond the control of the petitioners. The complainant had also earlier invoked civil remedy. This court while granted interim stay directed the petitioner to deposit a sum of Rs. 3.30 crores to the Registrar General of this High Court and the petitioners in compliance of the said order have already deposited the same amount which is lying with this High Court. Therefore, neither money was misappropriated nor the petitioners have avoided to deposit the said amount before the court. The opposite party/complainant in their FIR has prayed for recovery of money which they have paid to the accused persons by way of advance. Infact the purpose for which the amount was paid by first informant i.e. for allotment of flat in the housing project is still sub....
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....ntract cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right from the beginning of the transaction i.e. the time when the offence is said to have been committed. Therefore, simply because a party to an agreement fails to perform its promise does not attract criminality. It is also well settled that even if guilty mind develop at a subsequent stage, it does not constitute an offence punishable under section 420 of the IPC. 29. In the instant case it is evident from the FIR that in 2009 a sum of Rs. 3.30 crores was paid to Shreepati by the first informant for purchase of flats. Subsequently on March, 2011 an agreement for sale was entered into. As the possession was not delivered to the first informant, on a mutual understanding dated March 15, 2015 the said amount, was converted into a loan amount payable with 12% cumulative interest per annum. Such interest component was subsequently enhanced to 15%. It is also evident that the construction could not take place on account of objection raised by jail authorities as appearing from the correspondences exchanged and relied in the FIR and for which upon mutual understanding on....
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....reement for purchase and paid advance consideration price in 2010 and though they had converted the same into a loan agreement in the year 2015 but at the same time they have also retained their allotment of the said flats in the project simultaneously. 32. It is also well settled in view of judgment passed in Delhi Race Club 1940 Ltd. (Supra), that if it is a case of the complainant that offence of criminal breach of trust as defined under section 405 IPC, punishable under section 406 IPC is committed by the accused, then in the same breath it cannot be said that the accused has also committed the offence of cheating as defined and explained in section 415 IPC punishable under section 420 IPC. From the assertion made in the FIR, it is quite clear that the complainant's grievance is regarding failure of the appellants to pay the outstanding amount inspite of complainants repeated demands. Therefore essentially the present dispute between he parties at best relates to a breach of contract. A mere breach of contract by one of the parties would not attract prosecution for criminal offence in every case, unless it is shown that the accused had fraudulent or dishonest intention at th....
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.... an afterthought. It is also important to mention that the money was paid in the year 2009 which is much prior to the alleged production of forged and false documents allegedly in 2013. Therefore, even by going the allegations in the FIR qua forgery no initial deception was made on the strength of the alleged forged /false documents and therefore it has hardly any impact in the impugned transaction. From the unimpeachable document annexed by the petitioner, it appears that the petitioners obtained NOC of Chief Fire Officer on 2nd February, 2013 and also obtained NOC of High Rise Buildings on 21.03.2013. Petitioners specific case is that since there was no response from the Hon'ble Home Department in respect of representation made for Jail NOC, the petitioner again applied for Jail NOC to the Hon'ble Home Department on 12th February, 2014. It is submitted in the writ petition no. 1734 of 2013 that the Hon'ble Court by its order dated 08.05.2014 directed the State Authorities to grant NOC in respect of buildings mentioned therein. After passing the aforesaid order of High Court the petitioner again made a representation to the Hon'ble Home Department on 22.05.2014, requesting them to....
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....o a pure and simple loan on March, 15, 2015, however the FIR was lodged only on January, 18, 2020. No explanation for such delay was found in the FIR. Approaching the court at a much belated stage for a rightful cause is generally considered as good ground for its rejection at the threshold. Learned counsel for the petitioners submits even if all the allegations in the complaint are taken as correct complaint has been filed in the year 2020 while the agreement for sale was executed in 2011. No suit for specific performance of contract was filed within a period of more than 9 years and in this circumstances the complaint is an abuse of court process to enforce civil rights which had become legally unenforceable. Therefore, if the facts of the case is appreciated there remains no shadow of doubt that the complaint filed by the complainant after an inordinate unexplained delay of about 11 years from the date of payment, is nothing but sheer misuse and abuse of the process of law to settle the personal scores with the petitioners and therefore, continuation of such malicious prosecution would only be further abuse and misuse of process of law, more particularly when neither the alle....