Telangana High Court
Mohd. Hasan Ali vs The State Of Telangana on 14 July, 2025
THE HONOURABLE SMT. JUSTICE K. SUJANA
CRIMINAL PETITION No.3540 of 2025
ORDER:
This Criminal Petition is filed seeking to quash the
proceedings against the petitioner/accused in C.C.No.10796
of 2022 on the file of the learned XII Additional Chief
Metropolitan Magistrate, Nampally, Hyderabad, registered
for the offences punishable under Sections 406 and 420
read with 34 of the Indian Penal Code, 1860.
2. The brief facts of the case are that on 15.09.2022
respondent No.2/de facto complainant lodged a complaint
against the petitioner and other accused stating that he,
along with his brothers, runs a readymade garments shop
under the name "Step Up" at Ramgopalpet, Secunderabad.
He has known Mr.Mohd.Hasan Ali and Mr.Mohd.Asad Ali,
who are brothers and proprietors of "Abid Jewellers" at
Gulzar House, Hyderabad, for about 30 years. In June
2021, the complainant informed Asad Ali of his interest in
purchasing a property in the Baba Nagar area.
Subsequently, Hasan Ali and Asad Ali offered to sell their
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property bearing H.No.18-1-350/22/157, admeasuring 200
sq. yards, situated at Phoolbagh, Kanchanbagh, Hyderabad,
stating they required funds to expand their business.
Following mutual discussions and site inspection, both
parties agreed to a total sale consideration of
Rs.2,75,00,000/-, of which Rs.2 crores was paid by the
complainant and his brothers. An Agreement of Sale dated
13.10.2021 was executed, signed by Asad Ali and also by
Hasan Ali and his wife, with a separate receipt
acknowledging receipt of Rs.2 crores, with the balance to be
paid at the time of registration.
3. Despite several requests by the complainant and his
brothers to execute a registered Sale Deed, the sellers
avoided compliance and eventually refused to sell the
property, stating they no longer required funds and even
issued threats. Though they later agreed to return the Rs.2
crores and issued cheques in the names of the complainant
and his brothers, the cheques were dishonoured upon
presentation. It was subsequently discovered that the
sellers had mortgaged the said property to M/s. Ambit
Finvest Pvt. Ltd. by executing a simple mortgage without
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possession, thereby causing wrongful loss of Rs.2 crores to
the complainant.
4. Basing on the said complaint, the Police registered a
case in Crime No.189 of 2022 before the EOW Team I, CCS
DD Police Station, Hyderabad for the offences punishable
under Sections 406 and 420 read with 34 of the Indian
Penal Code, 1860 and after completion of investigation, they
filed charge sheet vide C.C.No.10796 of 2022 before the
learned XII Additional Chief Metropolitan Magistrate,
Nampally, Hyderabad. Aggrieved thereby, the
petitioner/accused No.1 filed the present criminal petition to
quash the proceedings against him.
5. Heard Sri C. Sharan Reddy, learned counsel
appearing on behalf of the petitioner as well as Sri M.
Vivekananda Reddy, learned Assistant Public Prosecutor
appearing on behalf of respondent No.1 - State and Sri P.
Vamsheedhar Reddy, learned counsel appearing on behalf of
respondent No.2.
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6. Learned counsel for the petitioner submitted that the
petitioner is innocent of the offences alleged against him and
that the contents of the complaint do not disclose the
ingredients necessary to constitute the offence of cheating or
criminal breach of trust. He further submitted that there
was no dishonest or fraudulent intention on the part of the
petitioner at the inception of the transaction, which is a
prerequisite to attract the provisions of Sections 406 and
420 IPC and that the mere dishonour of the cheques issued
subsequently, in the absence of any specific allegation that
the petitioner intended to cheat the complainants (LWs.1
and 2) from the very beginning, would not amount to a
criminal offence.
7. Learned counsel for the petitioner contended that the
dispute arising from the alleged failure to register the
property in favour of the complainants gives rise to a purely
civil cause of action and does not warrant criminal
prosecution and that the complainant admittedly share a
longstanding acquaintance of 30 years with the petitioner,
which militates against any inference of fraudulent
intention. He asserted that the allegations are essentially
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civil in nature and have been improperly given a criminal
colour, and therefore, he prayed the Court to quash the
proceedings against the petitioner by allowing this criminal
petition.
8. In support of his submissions, learned counsel for the
petitioner relied upon the Judgment of the Hon'ble Supreme
Court in Rikhab Birani and Another v. State of Uttar
Pradesh and Another 1, wherein the relevant paragraphs are
extracted hereunder:
"This Court, in Delhi Race Club (1940) Limited
and Others v. State of Uttar Pradesh and
Another,10 highlighted the fine distinction
between the offences of criminal breach of trust
and cheating, observing that the two are
antithetical in nature and cannot coexist
simultaneously. Police officers and courts must
carefully apply their minds to determine whether
the allegations genuinely constitute the specific
offence alleged.
In Kunti and Another v. State of Uttar Pradesh
and Another,11 this Court referred to Sarabjit
Kaur v. State of Punjab and Another12 wherein it
was observed that a breach of contract does not
2025 INSC 512
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give rise to criminal prosecution for cheating
unless fraudulent or dishonest intention is shown
right at the beginning of the transaction. Merely
on the allegation of failure to keep a promise will
not be enough to initiate criminal proceedings.
Thus, the dishonest intention on the part of the
party who is alleged to have committed the
offence of cheating should be established at the
time of entering into the transaction with the
complainant, otherwise the offence of cheating is
not established or made out.
It is the duty and obligation of the court to
exercise a great deal of caution in issuing process,
particularly when the matter is essentially of civil
nature. The prevalent impression that civil
remedies, being time-consuming, do not
adequately protect the interests of creditors or
lenders should be discouraged and rejected as
criminal procedure cannot be used to apply
pressure.14 Failure to do so results in the
breakdown of the rule of law and amounts to
misuse and abuse of the legal process."
9. Learned counsel for respondent No.2, on the other
hand, submitted that in addition to the issue concerning the
tenure of the cheques, the contention advanced by the
learned counsel for the petitioners was that the petitioners
had entered into an agreement to sell the property to
respondent No.2 with a dishonest intention, and thereafter
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mortgaged the same property to third parties. This conduct,
it was argued, clearly demonstrates that the petitioners had
no intention to fulfil their obligations under the agreement.
The transaction involved a substantial sale consideration of
Rs.2,75,00,000/-, and the subsequent mortgage of the said
property is indicative of fraudulent intent. Such allegations
warrant a detailed trial, and therefore, at this stage, the
prayer for quashing the criminal proceedings against the
petitioners is untenable. Hence, he prayed that the criminal
petition be dismissed.
10. In support of his submissions, he relied upon the
judgment of this Court in Sidda Sabhitha v. Gorantla
Raju 2, wherein in paragraph No.17, it is held as follows:
"17. Learned counsel for the petitioners has
submitted that the dispute between the
petitioners and respondent No.2 is purely civil in
nature. Since an agreement of sale has already
been executed by petitioner No.1 in favour of
respondent No.2 and since there is no element of
criminal case, they should have gone to civil
Court to decide the rights of the parties. In any
case, on going through the complaint, there are
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certain allegations against the petitioners that
they have induced the de-facto complainant from
the beginning when proposal is being made and
giving assurances that this land can be highly
potential land and if the land is converted into
housing plots, they can earn money. Having said
all these things, subsequently, petitioner No.1
disappeared. Therefore, these are the aspects to
be required to be proved into. In a case under
Section 482 Cr.P.C., it is very difficult to conclude
to try the facts which are proposed by the de-facto
complainant and opposed by the petitioners.
Unless a full fledged trial is conducted it is very
difficult to give a finding that there is no prima
facie case against the petitioners. Therefore, the
case against petitioner No.1/A1 cannot be
quashed basing on the material available before
the Court."
11. In the light of the submissions made by both the
learned counsel and a perusal of the material available on
record, the primary allegation against the petitioner is that
he and other accused entered into an Agreement of Sale
with the de facto complainant on 13.10.2021 for a total sale
consideration of Rs.2,75,00,000/-, out of which Rs.2 crores
was paid initially. Subsequently, it is alleged that the
petitioner mortgaged the same property to a third party,
thereby giving rise to suspicion of dishonest intention.
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However, the complaint itself reveals that after negotiations,
the petitioner agreed to return Rs.2 crores and issued
cheques in the names of LWs.1 and 2, which were
dishonoured due to insufficient funds.
12. Moreover, the de facto complainant did not issue any
legal notice calling upon the accused to execute the
registered sale deed or to perform their part of the contract,
nor was any suit for specific performance filed. Instead, the
parties entered into a compromise, and the petitioner
undertook to repay the consideration amount. Though the
dishonoured cheques may give rise to an offence under
Section 138 of the Negotiable Instruments Act, admittedly,
no complaint under that provision has been filed. The facts
indicate a failed civil transaction rather than a criminal act,
and the agreement of the petitioner to repay the amount
negates the inference of initial fraudulent intent. As laid
down by the Hon'ble Supreme Court in Rikhab Birani and
Kunti v. State of U.P., (cited supra) mere breach of
contract or failure to keep a promise does not ipso facto
amount to cheating unless there is clear evidence of
dishonest intention at the inception of the transaction. In
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the absence of such material, continuation of criminal
proceedings under Sections 406 and 420 IPC would amount
to abuse of process of law. Therefore, the proceedings
against the petitioner are liable to be quashed.
13. Accordingly, this criminal petition is allowed and the
proceedings against the petitioner in C.C.No.10796 of 2022
on the file of the learned XII Additional Chief Metropolitan
Magistrate, Nampally, Hyderabad, are hereby quashed.
Miscellaneous petitions, pending, if any, shall stand
closed.
______________
K. SUJANA, J
Date: 14.07.2025
SAI
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THE HON'BLE SMT. JUSTICE K. SUJANA
CRIMINAL PETITION NO.3540 of 2025
Date: 14.07.2025
SAI
