Criminal Breach Of Trust Would Arise Only Where Accused Is Entrusted With Property, Not Where Property Belongs To Them: Supreme Court Quashes FIR Over Property Dispute

The Appeal before the Supreme Court was filed against the final Judgment passed by the Karnataka High Court, dismissing the petition seeking quashing of the FIR registered against the accused persons under Sections 405, 406, 415, 417, 418, 420, 504, 506, 384 and 120B read with 34 of the Indian Penal Code, 1860.

The Division Bench of Justice Sudhanshu Dhulia and Justice Ahsanuddin Amanullah stated, “From a bare reading of Section 405 of the IPC, criminal breach of trust would arise only in a situation where the accused in any manner has been entrusted with property, or with any dominion over property and dishonestly misappropriates or converts the same to his own use, or dishonestly uses or disposes of that property. Here, it is not a case where the accused were entrusted with the subject property. The subject property belongs to them and they had rights over it as owners with title. Thus, the very foundation for invoking Section 406 of the IPC falls to the ground.”

Factual Background

The complainant had alleged that the first accused -K. V. Jayalakshmamma along with K. V. Srinivasa Murthy and K. V. Prabhakar (these three have passed away – the accused appellants are their family members) were joint owners of the subject property. One D. Muniswamy executed a Sale Deed in respect of the said land to one Lakshminarasimhaiah, who purchased the same in trust for K. V. Shrinivas Murthy and K. V. Prabhakar. Later, Murthy and Prabhakar filed a suit for a declaration and a permanent injunction against the said Lakshminarasimhaiah. The said suit came to be decreed and the occupancy rights were conferred in favor of Jayalakshmamma and Shrinivas Murthy. It was the complainant’s case that, based on the false assurances by the accused, Ravishankara Shetty spent a lot of time, and money fighting the litigations, and on his insistence, and after much reluctance, the accused agreed to enter into an Agreement to Sell (ATS).

The appellants entered into an ATS with the complainant, who was himself the nominee of one Ravishankara Shetty. The appellant also executed a GPA in favour of the complainant. Writ Petitions were filed by Jayalakshmamma, through the GPA-holder, seeking to declare the land acquisition as lapsed in respect of the subject property, contending that the BDA failed to implement the concerned scheme. These writ petitions were allowed in the favour of the appellants. The appellants were said to have taken Rs 2,02,00,000 from one M/s Legacy Global Realty for transferring the subject property. Thereafter, the accused revoked the GPA executed in favour of the complainant and executed another GPA and registered Gift Deed by which the subject property was conveyed in favour of the fourth appellant.

This prompted the complainant to institute a civil suit to declare the subsequent GPA and Release Deed as not binding, and also seeking specific performance of the ATS, taking the stand that he proposed to pay the remaining Rs.1,48,00,000, which the appellants refused and were also not ready to transfer the subject property. The complainant, having filed the civil suit, soon thereafter filed the FIR. Chargesheet was submitted, and cognizance was taken. Challenge to the same having failed before the High Court, the Impugned Judgment came to be challenged before the Apex Court.

Reasoning

The Bench did not find that by deceiving the complainant, the appellants had fraudulently or dishonestly induced him to deliver the property to them or any other person. It was also noticed that the possession was with the appellants and Clause 6 of the ATS concerning possession, postulated that possession of the subject property would be handed over in ready condition upon execution of the Sale Deed by the vendors. This version of events, put forth by the complainant, falsified the claim of Ravishankara Shetty to have taken over possession of the subject property for the simple reason that he was a witness cited in the FIR filed at the instance of the complainant.

“Thus, when from the own pleadings of the complainant, it emerges that possession of the subject property was never given to the complainant and rather, stipulation was made for such possession being handed over after execution of Sale Deed, Section 420 of the IPC would not be attracted, regard being had to the definition in Section 415 of the IPC”, it said while also adding, “Thus, we do not find any criminal aspect in the allegations ex-facie.

The Bench also observed, “Coming to the second question i.e., whether civil and criminal proceedings both can be maintained on the very same set of allegations qua the same person(s), the answer stricto sensu, is that there is no bar to simultaneous civil and criminal proceedings. If the element of criminality is there, a civil case can co-exist with a criminal case on the same facts. The fact that a civil remedy has already been availed of by a complainant, ipso facto, is not sufficient ground to quash an FIR.” Reference was also made to the judgments in P Swaroopa Rani v M Hari Narayana, (2008) and Syed Aksari Hadi Ali Augustine Imam v State (Delhi Admn.), (2009).

One of the contentions urged by the appellants was that the procedure laid down in Priyanka Srivastava (supra) had not been followed by the complainant before filing the PCR. As per the guidelines prescribed in Priyanka Srivastava (supra), any person aggrieved by the non-registration of an FIR by the police is required to approach the concerned Superintendent of Police and on his failure to take action, can move before the Magistrate concerned under Section 200 of the CrPC by filing a private complaint.

In this case, the complainant approached the police, who refused to register an FIR. Thereafter, the complainant approached the ACMM by filing the PCR and while such private complaint was pending on the file of the ACMM, the complainant approached the Deputy Commissioner of Police, Bangalore City. On nothing being done even then, faced with such inaction, the complainant finally filed the requisite affidavit before the ACMM. Subsequently, the ACMM referred the PCR to the police, culminating in the underlying FIR.

The Bench was of the view that the requirement under Priyanka Srivastava (supra) is to safeguard the rights of the citizenry and to put a stop to unjust criminal action and filing of vexatious applications to settle personal scores. Thus, such requirement could not be said to be a mere formality. Holding that the directions issued in Priyanka Srivastava (supra) are mandatory, the Bench stated, “If the Magistrate proceeds without the requisite affidavit, such order/any consequential orders/proceedings can be quashed on the sole ground of non-compliance with Priyanka Srivastava (supra)”.

As per the Bench, the interference with the Impugned Judgment was necessitated as the ingredients of offences apropos which cognisance was taken by the ACMM were not made out. Thus, the Bench quashed the FIR along with all consequential orders, including the Chargesheet and the cognizance order. The Bench concluded the matter by ordering that till such time, the Court takes a view on the matter in BDA’s SLP, no third-party rights will be created or given effect to in the subject property by the appellants.

Cause Title: S. N. Vijayalakshmi v. State Of Karnataka (Neutral Citation: 2025 INSC 917)

Appearance

Appellant: Senior Advocates Abhishek Manu Singhvi, Shoeb Alam, Advocates Anil C. Nishani, P. Prasanna Kumar, Meenesh Dubey, Krishna M. Singh, Amit Bhandari, Vishwesh R. Murnal, Gaurav Chavan, M/S. Krishna & Nishani Law Chambers

Respondent: AOR Mahesh Thakur, Advocates Geetanjali Bedi, Ranvijay Singh Chandel, Vedika Singh, AOR D. L. Chidananda

Click here to read/download Judgment