Gujarat HC Refuses To Quash Cheating FIR Against Partners Of Real Estate Firm For Not Completing Project Or Returning Homebuyers' Money

The Gujarat High Court refused to quash an FIR against developers/partners of a real estate development firm accused by home buyers of neither finishing the project called Suranva Residency nor handing over possession of the flats in question or returning the booking amount. 

In doing so the court underscored that the partners of the firm were obliged to either finish the project, or return the money to the homebuyers and even if there was an dispute inter-se partners the buyers cannot become victims of the same. The court was hearing the plea moved by the applicants who had floated the project as well as their relatives seeking quashing of the FIR registered under IPC Section 420 cheating and Section 406 Punishment for criminal breach of trust.

Perusing the provisions of law, Supreme Court decisions and facts of the case Justice Divyesh A Joshi observed in his order observed:

"The dispute appears to be between the builder and buyers and there is a clear, unambiguous and categorical allegations of cheating and siphoning of funds of the innocent buyers against the accused and there exists valid and legal grounds to infer that the applicants herein are guilty for offence under sections 406 and 420. Thus, after taking into consideration the facts and circumstances of the case, I find that in the case on hand, the essential ingredients of dishonest misappropriation and cheating are spelt out, and hence the  prosecution lodged against the applicants under Section 406 and 420 cannot be quashed at this stage by exercising inherent jurisdiction under 482 of the Cr.P.C...In my opinion, the FIR under consideration do attract ingredients of a cognizable offence. There is clear cut allegation of cheating and criminal breach of trust against the applicants. Even they have not completed the project yet".

The court observed that petitioner no. 1 was the the partner of the partnership firm–'Proton Engi Plus' and they received a huge sum from the complainant and other witnesses under the guise of booking amount and instalment of the flats.

It noted that there was no dispute that the petitioner1 and all the other accused failed to either return back the money or to handover the possession to the respective buyers.

It however said that whether or not their default would be misappropriation punishable under Sections 406 and 409 IPC, is a question of fact, which will be adjudicated during trial.

The court rejected the petitioners contention that the present dispute arises from a breach of contract whether oral or written, and therefore, the petitioners' default would not attract the criminal consequences terming it "logically unsound".

The court further said, "It clearly reveals from the record as well as the statements of the witnesses recorded during the course of investigation that the applicant herein along with accused Paresh Kantilal Suthar and accused-Ronak Satishbhai Gajjar floated a residential scheme of 32 flats, wherein the complainant had also booked one flat. There were bookings from the other buyers also. However, subsequently disputes cropped up between the three partners with regard to the accounts of the firm, and therefore, the applicant No.1 herein transferred his 33% share in favour of applicant No.3 and accused No.5-Dhaval Suryakant Patel and declared him to be  not a partner of the said firm. However, merely declaring that he has relieved from the partnership firm would not exclude the applicant No.1 from his liabilities. It is apparent from the materials collected by the investigating officer that the applicant No.1 was very much available in the meetings held with the buyers even after he said to have left the firm. His presence is very much there in the meetings with the buyers along with the other partners, and at that time, they all gave assurance to either complete the scheme and handover the possession to the respective parties or to return back their money".

The court further noted that it appeared that instead of executing sale deeds and handing over possession to the homebuyers who booked the individual flats by paying their heard earned money, the accused Nos.1 to 3 executed sale deeds of the flats in question "in favour of their friends and relatives without there being any sale consideration".

It said that petitioner no. 1 does not seem to be "so innocent as trying to be projected by his learned counsel" and him being relieved from the firm would not exclude him from his liabilities. The court underscored that he is "also equally liable and guilty of the misappropriation than that of the other accused persons".

"The applicant No.1 and other partners are under an obligation to either complete the project and hand it over to the concerned party or to return back their money, and non-fulfillment of contract or promise, whether oral or written, would definitely amount to cheating. Thus, there appears to be a clear cut mens rea on the part of the applicant No.1 to deceive the complainant. Whatever may be the dispute inter-se between the partners, the buyers should not be the victims of the same," it added. 

The court further said that statements of the complainant as well as other witnesses recorded during the probe when read conjointly seemed to reveal that they had earlier  initiated proceedings before the Consumer Forum against all the accused persons, which the petitioner used to attend the along with other co-accused persons. At that point of time, all the accused persons including the applicant had given assurance to the complainant as well as the other witnesses that they will either handover the possession or return back their money. 

It thus dismissed the plea. 

Case title: SANDIP HASMUKHBHAI CHUDASAMA & ORS. Versus STATE OF GUJARAT & ANR.

Click Here To Read/Download Order