Section 420 IPC: Supreme Court flags "disquieting trend" of cheating cases transforming into money recovery proceedings

The Supreme Court on Tuesday took exception to the trend of courts allowing cases involving allegations of cheating, which is punishable under Section 420 of the Indian Penal Code (IPC), to effectively become money recovery proceedings on the whims of the lawyer [Ramesh Kumar vs State of NCT of Delhi]..A bench of Justices S Ravindra Bhat and Dipankar Datta stressed that High Courts and trial courts should not be 'unduly swayed' by lawyers who call for making the amount in dispute the deposit needed for the grant of anticipatory bail in such cases.."A disquieting trend emerging over the years which has gained pace in recent times necessitates this opinion. It has been found by us in multiple cases in the past several months that upon First Information Reports being lodged inter alia under section 420 of the Indian Penal Code, 1860 (“the IPC”, hereafter), judicial proceedings initiated by persons, accused of cheating, to obtain orders under Section 438 of the Code of Criminal Procedure, 1973 (“the Cr. PC”, hereafter) are unwittingly being transformed into processes for recovery of the quantum of money allegedly cheated and the courts driven to impose conditions for deposit/payment as pre-requisite for grant of pre-arrest bail," the Court noted..The observations came while setting aside a Delhi High Court order that had set a condition for the accused to pay an amount of ₹ 22 lakh as a condition for anticipatory bail. The amount was to be paid by the owner of a plot of land who was implicated in a cheating case that arose from a land redevelopment agreement. The criminal proceedings arose after some homebuyers alleged that the builder and broker had not completed the construction of flats as promised despite taking big amounts as payment..During anticipatory bail proceedings before the High Court, the counsel for the accused had voluntarily agreed to pay the deposit amount in order to secure relief. However, when the matter reached the Supreme Court in appeal, the accused expressed his inability to arrange such funds within the stipulated time..The Supreme Court opined that setting such conditions for bail would defeat its purpose and intent. "Inclusion of a condition for payment of money by the applicant for bail tends to create an impression that bail could be secured by depositing money alleged to have been cheated … No Court should be averse to putting public money back in the system if the situation is conducive therefor. We are minded to think that this approach would be in the larger interest of the community. However, such an approach would not be warranted in cases of private disputes where private parties complain of their money being involved in the offence of cheating,” the top court explained. .The Court added that even if the appellant-accused had himself suggested that he would make such payment, such an undertaking should not have weighed in the mind of the High Court to decide on the question of grant of anticipatory bail.The bench also termed the appellant's initial undertaking to pay such money as a 'last ditch effort to avert losing his liberty'.."Under the circumstances, we hold that the High Court fell in grave error in proceeding on the basis of the undertaking of the appellant and imposing payment of Rs.22,00,000 as a condition precedent for grant of bail," the Court concluded..The top court further opined that the High Court ought not to have allowed what appeared to be a civil dispute to turn into criminal proceedings.."The High Court ought to have realized that having regard to the nature of dispute between the parties, which is predominantly civil in nature, the process of criminal law cannot be pressed into service for settling a civil dispute," the judgment stated..The Supreme Court proceeded to remand that matter back to the High Court for a fresh decision. The appellant was granted interim protection from arrest till then.Advocate Sarvesh Bisaria and ER Sumathy appeared for the appellant. Additional Solicitor General (ASG) KM Nataraj appeared for the respondents..[Read Judgment]