Claim By A Civil Suit And Criminal Proceedings By The Real Owner Are Barred In Benami Property

Case title:

C. Subbiah @ Kadambur Jayaraj & Ors. Vs. The Superintendent of Police & Ors.

Date of Order:

May 15, 2024

Bench:

Hon’ble Justice Mehta, Justice B.R. Gavai, Justice Sandeep Mehta

Parties:

Appellant: C. Subbiah @ Kadambur Jayaraj

Respondent: The Superintendent of Police & Ors

SUBJECT

The Hon’ble Supreme Court (hereinafter referred to as ‘The Court’) has set aside the order passed by the Madras High Court, Madurai Bench and stated that the initiation of criminal proceedings and FIR is a frivolous process and sheer violation of process of law. 

IMPORTANT PROVISIONS

Indian Penal Code, 1860

• Section 420: Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.
• Section 120B: Punishment of criminal conspiracy.--(1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death, 2[imprisonment for life] or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in this Code for the punishment of such a conspiracy, be punished in the same manner as if he had abetted such offence.

(2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished with imprisonment of either description for a term not exceeding six months, or with fine or with both.]

• Section 294(b): (b) sings, recites or utters any obscene song, ballad or words, in or near any public place, shall be punished with imprisonment of either description for a term which may extend to three months, or with fine, or with both.
• Section 506(ii): Whoever commits the offence of criminal intimidation shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both;

If threat be to cause death or grievous hurt, etc.and if the threat be to cause death or grievous hurt, or to cause the destruction of any property by fire, or to cause an offence punishable with death or 1[imprisonment for life], or with imprisonment for a term which may extend to seven years, or to impute unchastity to a woman, shall be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both.

• Section 114: Whenever any person, who is absent would be liable to be punished as an abettor, is present when the act or offence for which he would be punishable in consequence of the abetment is committed, he shall be deemed to have committed such act or offence.

Criminal Procedure Code, 1973

• Section 156(3): (1) Any officer in charge of a police station may, without the order of a Magistrate, investigate any cognizable case which a Court having jurisdiction over the local area within the limits of such station would have power to inquire into or try under the provisions of Chapter XIII.

(2) No proceeding of a police officer in any such case shall at any stage be called in question on the ground that the case was one which such officer was not empowered under this section to investigate.

(3) Any Magistrate empowered under section 190 may order such an investigation as above-mentioned.

Prevention of Corruption Act, 1988

• Section 13(1)(b): 1[(1) A public servant is said to commit the offence of criminal misconduct,--

(a) if he dishonestly or fraudulently misappropriates or otherwise converts for his own use any property entrusted to him or any property under his control as a public servant or allows any other person so to do; or

(b) if he intentionally enriches himself illicitly during the period of his office.

Explanation 1.--A person shall be presumed to have intentionally enriched himself illicitly if he or any person on his behalf, is in possession of or has, at any time during the period of his office, been in possession of pecuniary resources or property disproportionate to his known sources of income which the public servant cannot satisfactorily account for.

Explanation 2.--The expression ''known sources of income'' means income received from any lawful sources.

• Section 13(2): Any public servant who commits criminal misconduct shall be punishable with imprisonment for a term which shall be not less than 2[four years] but which may extend to 3[ten years] and shall also be liable to fine.

Benami Transactions (Prohibition) Act, 1988

• Section 2(a): (9) benami transaction means--

(A) a transaction or an arrangement--

(a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and

(b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration,

except when the property is held by--

(i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefit or benefit of other members in the family and the consideration for such property has been provided or paid out of the known sources of the Hindu undivided family;

(ii) a person standing in a fiduciary capacity for the benefit of another person towards whom he stands in such capacity and includes a trustee, executor, partner, director of a company, a depository or a participant as an agent of a depository under the Depositories Act, 1996 (22 of 1996) and any other person as may be notified by the Central Government for this purpose;

(iii) any person being an individual in the name of his spouse or in the name of any child of such individual and the consideration for such property has been provided or paid out of the known sources of the individual;

(iv) any person in the name of his brother or sister or lineal ascendant or descendant, where the names of brother or sister or lineal ascendant or descendant and the individual appear as joint owners in any document, and the consideration for such property has been provided or paid out of the known sources of the individual

• Section 2(c): a transaction or an arrangement in respect of a property where the owner of the property is not aware of, or, denies knowledge of, such ownership
• Section 4: Prohibition of the right to recover property held benami. 

(1) No suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property.

(2) No defence based on any right in respect of any property held benami, whether against the person in whose name the property is held or against any other person, shall be allowed in any suit, claim or action by or on behalf of a person claiming to be the real owner of such property.

BRIEF FACTS

1. The complainant, lodged a complaint in the Court of learned Judicial Magistrate No. II that he was having a qualification of M.Sc., MD Graduate. He was appointed as a government teacher on 8th October, 2007. Before that, he was in real estate business for 16 years.
2. While in the business, he came into contact with Subbiah and his wife. And through them with the subsequent respondents. 
3. The accused persons motivated him to join their real estate business taking undue advantage of the complainant’s trust on the accused. The accused allured and induced the complainant to enter into land deals with the intention to defraud the complainant right at the inception of the transactions. The complainant was told that the documents need not be registered in his own name and instead the registration may be carried out in the name of his sister-in-law. An alternative option was given that if the documents were registered in the names of the accused, the plots could be sold immediately to earn higher profits.
4. As a result, the complaint was lured into thinking that some portions of the land would be sold to other buyers which often was true. The complainant, a teacher, would experience inconvenience if the land pieces were registered in his name, which the seller has to appear physically to encounter. This was because upon completing the necessary investment, the plaintiff was unable to have the purchased properties registered under his name. The complaint was confident that the plots would soon be sold at high prices with him getting a share of the profit. 
5. It was further alleged that before the complainant had come in touch with the accused, he and his brother-in-law had entered into an agreement for sale with A. Sairam, for a chunk of land at Allampatti village measuring eight acres but the agreement could not materialise for the reason that there was pending suit filed in the District Court Tuticorin in respect of the said land. Meanwhile, the complainant was employed as a teacher in the institution of concern. In the case which was waiting in the District Court, Tuticorin was dismissed in the favour of A. Sairam. After having given the fraudulent allurements to the complainant, the accused got registered a sale deed in their name as Document No. 1839 of 2008 dated 27 th February, 2008 on the file of Sub 5 Registrar Office, Kovilpatti in respect of some plots of land situated in the Allampatti village of total area 7. 618 acres. The complainant claimed that he invested a sum of Rs. Towards this transaction, the company incurred a cost of Rs. 1,01,47,800/- whereas, the accused invested proportionately much lesser amounts in the said land deal. The respondents and the complainant purchased the above said parcel of land from A. Sairam for a money consideration of Rs. 3,08,33,600/-. However, the complainant has pointed out that the accused who remained involved in the agency never provided him the plots as per his investment and thus cheated and betrayed him. The complainant further avers that the respondents intended to cheat him. The accused misled the complainant to think that it is normal for business especially the real estate business to be conducted through word of mouth. But at a later juncture the accused had begun the criminal breach of trust and the intention was to cheat the complainant.
6. Being aggrieved of these continued criminal activities of the accused, the complainant submitted a complaint dated 29th June, 2010 at the Kovilpatti West Police Station but no action was taken thereupon. Having failed to get any action on his complaint, the complainant approached the Madras High Court and as per the directions, he submitted a fresh complaint to District Superintendent of Police but the FIR was not registered.
7. Ultimately, the complainant was compelled to file a complaint in the Court of the Jurisdictional Magistrate with a prayer to forward the same to the police under Section 156(3) of Code of Criminal Procedure, 1973.
8. The accused, being the appellants herein, approached the Madras High Court, Madurai Bench for assailing the FIR and the charge sheet by filing a CRL.O.P.(MD) No. 3846 of 2013. The learned Single Judge of Madras High Court proceeded to dismiss the said petition preferred by the appellants vide order dated 23rd April, 2018 which is subject matter of challenge in this appeal by special leave.

ISSUES RAISED

The issue raised in this special leave petition is that whether the judgement of dismissal of the petition for assailing the FIR and chargesheet by the learned judge of Madras High Court correct or not.

ARGUMENTS ADVANCED BY THE APPELLANT

1. Appellant’s counsel argued that even if the allegations made in the FIR and the charge sheet are taken to be true on the face of it then it does not make up the necessary ingredients of the offences alleged. He pointed out that, given the admitted facts outlined in the complaint, any existing dispute between the parties is of a civil nature at best and therefore, the continuation of proceedings under the charge sheet filed against the accused appellants is a gross abuse of the legal process. 
2. It gets very apparent from this charge sheet that a part of the sale proceeds which were generated from the land deals were paid to the complainant but the full amount as per his entitlement was not paid. As such the situation of alleged part performance of contractual obligations the tool of criminal law has been abused by the complainant. He further added that the complainant being a teacher serving in the Government establishment was not permitted to engage in property dealings and therefore at his own risk he availed services of the accused appellants herein for investment which did not yield the desired success in terms of profit sharing as far as the land deals were concerned and hence the complainant laid a trap and using the process of criminal law to bring a purely motivated prosecution against the accused appellants. 
3. The argument of the learned senior counsel was that on the material available on the record of the case, there was no evidence of any intention of the accused appellants to perpetrate a fraud against the complainant right from the start of the transactions being the subject matter of the case. 
4. The criminal proceedings sought to be taken against the appellants as a consequence to the charge sheet are fit to be quashed as the same amount to a sheer abuse of process of Court apart from the fact that the charge sheet does not disclose the necessary ingredients of any cognizable offence.

ARGUMENTS ADVANCED BY THE RESPONDENT

1. Counsel for the respondent as well as the learned Standing Counsel representing the State vehemently and fervently contested the points raised by the learned counsel for the appellants. This was argued to be so as the accused appellants, managed to deceive the complainant into parting with his money for mainly land related business deals. The accused on his part gave assurance time and again that he would provide the complainant his own share of the profits or the plots of the lands whichever would be purchased in the name of the accused because the complainant being a government teacher could not directly deal in such transactions. 
2. This, the complainant was lured and duped by the accused appellants on beliefs of the promises given by accused to invest large sums of money on acquiring land. However, the accused appellants lacked integrity as businessmen and cheated the complainant by not offering him the number of plots which would apply to him in proportion to the amount he invested. The complainant was also prejudiced out of his rightful share of the profits that were generated after some of the plot had been sold. They urged the court that because the complainant has also sought civil remedy for same grievances, that cannot be a ground to deny him the right to invoke the jurisdiction of the Criminal Court to prosecute the accused appellants for their fraudulent deeds since the allegations contained in the complaint are both civil wrong and criminal offences and therefore the two tracks may run concurrently. On these grounds, the complainant’s lawyer and the standing counsel for the state entreated the Court to dismiss the appeal.

JUDGEMENT ANALYSIS

1. The complainant having been a public servant; he had invested in property for benami without reporting such transactions to his employer. The complainant-firm has been filing its income tax returns since the financial year 2000-01. He entered into business of real estate from the year 2004 and have 15 acquired lots of wealth during this business activity. The complainant, according to the records of the school was appointed as a teacher only in the year 2007 when he was nearly 45 years of age. He passed away in the year 2022 without having any pension right or any other related facilities. Therefore, any money invested by the complainant in the consideration for the disputed land deals entered into with the accused was real investment made out of the lawful income and/ or savings as declared by him. Neither any enquiry was initiated against the complainant for offences under the PC Act. 
2. The other accusations made by the accused, for instance, that he allured him into buying the lands are unfounded. The complainant must have had complete understanding and knowledge of the procedures in place. 
3. These include; Section 4(1) of the Benami Act that states that no suit, claim or action exists in terms of enforcing any right in connection with any benami property against the person in whose name the property is held or any other person on behalf of any person claiming to be the real owner of such a property. It means such person cannot set up any defence based on any right regarding the property held benami before the person who has the property in his/her name as well as other people. By virtue of section 4(2), no suit, claim or any other action shall be brought by and on behalf of any person who asserts that he is the rightful owner of the said property. 
4. As provided under section 4(1) and section 4(2) of the Benami Act, the complainant cannot maintain an action for the recovery of a civil wrong against the accused. 
5. There is no such allegation therein which will make the Court to find that the accused appellants intend to defraud the complainant right from the inception of the transaction. The accused appellants have undoubtedly transferred some of the plots and part profits of land deals to the complainant but the controversy is over the determination of the extent of profits and adequate compensation for the share sought by the complainant in respect of the amount invested by him. 
6. It is therefore clear that the ingredients of the offences punishable under Section 406 and Section 420 IPC are not made out against the accused appellants from the admitted allegations contained in the complaint and the charge sheet. It can however not be doubted that what is essentially a civil dispute has been painted in hues of criminal prosecution where the petitioner alleged fraud and criminal breach of trust using criminal law as a tool. 
7. These orders were hereby quashed and set aside. The appeal was allowed.