SC Raises Concerns Over Misuse of Section 420 IPC in Cheating Cases

The Supreme Court recently expressed its concern regarding a worrisome trend observed in courts, where cases involving allegations of cheating punishable under Section 420 of the Indian Penal Code (IPC) transform into money recovery proceedings based on the requests of lawyers.

A bench of Justice S Ravindra Bhat and Justice Dipankar Datta emphasized that High Courts and trial courts should not be unduly influenced by lawyers advocating for the deposit of the disputed amount as a condition for granting anticipatory bail in such cases.

The Court highlighted this emerging trend, noting instances where judicial proceedings initiated by individuals accused of cheating turned into recovery processes for the alleged cheated amount. These proceedings were driven to impose conditions of deposit or payment as prerequisites for the grant of pre-arrest bail. The Court stated that this practice undermines the purpose and intent of bail.

The Supreme Court set aside a Delhi High Court order that had imposed a condition for the accused to pay ₹22 lakh as a requirement for anticipatory bail. The case involved a landowner implicated in a cheating case arising from a land redevelopment agreement. Homebuyers alleged that the builder and broker had failed to complete the promised construction of flats despite receiving substantial payments.

During the anticipatory bail proceedings before the High Court, the accused’s counsel voluntarily agreed to pay the deposit amount as a means to secure relief. However, upon appeal to the Supreme Court, the accused expressed his inability to arrange the funds within the given time frame.

The Supreme Court stated that incorporating such payment conditions for bail defeats the purpose of bail and creates the impression that bail can be obtained by depositing the allegedly cheated amount. The Court clarified that public money should be restored to the system if the situation permits, but this approach is not suitable for cases involving private disputes where individuals complain about their money being involved in cheating offenses.

The Court held that the High Court erred in relying on the appellant-accused’s undertaking to pay the amount and imposing it as a condition precedent for bail. The initial undertaking was considered a last-ditch effort to avoid losing liberty.

Moreover, the Supreme Court emphasized that the High Court should not allow a civil dispute to escalate into criminal proceedings. Recognizing the predominantly civil nature of the dispute, the Court highlighted that criminal law should not be employed to resolve civil disputes.

The Supreme Court remanded the matter back to the High Court for a fresh decision while granting the appellant interim protection from arrest during this period.