Subsequent Property Sale Does Not Establish Cheating Without Initial Deception: Supreme Court Quashes FIR Against GPA Holder, Faults High Court for Denying Parity with Landowners

Case Name: Sudha Rakesh v. The State of Karnataka & Another.

Date of Judgment: 5 October 2026.

Citation: 2026 INSC 1086.

Bench: Justice Satish Chandra Sharma and Justice Nongmeikapam Kotiswar Singh.

Held: The Supreme Court held that a subsequent sale of property cannot establish cheating when the earlier payment under an agreement to sell was not induced by deception. On the allegations before it, the foundational ingredient of cheating under Section 420 IPC was absent. Section 423 IPC was also inapplicable because no false statement concerning consideration was identified in either the agreement or the sale deed. The Court further held that, in the circumstances of this case, the High Court could not sustain criminal proceedings against the General Power of Attorney holder after quashing the same FIR against the landowners, when no distinct or aggravated role justified different treatment.

Summary: The dispute concerned land measuring 4 acres and 19 guntas in Channasandra Village, Karnataka. After the original owner died intestate, his legal heirs entered into an agreement to sell the property to Sudha Rakesh and executed a General Power of Attorney in the petitioner’s favour on 5 October 2012. Subsequently, acting on behalf of the landowners, the petitioner executed another agreement dated 19 November 2012 to sell the property to the complainant and another prospective purchaser.

The prospective purchasers were required to pay the balance consideration and obtain the sale deed within seven months. They did not act within that period or before the property was subsequently sold to Gaffar Baig on 11 February 2016. Following that sale, they instituted a suit for specific performance and lodged a criminal complaint on 13 May 2016. FIR was registered under Sections 420, 423 and 120-B read with Section 34 IPC, and the Magistrate took cognizance on 28 September 2017.

The Karnataka High Court quashed the FIR against the landowners on 22 November 2017, finding that a civil transaction had been given a criminal colour. However, a coordinate Bench declined equivalent relief to the petitioner on 19 September 2022. It distinguished the petitioner’s role on the grounds that the petitioner had received the money, signed the agreement as GPA holder and acted as a confirming party to the subsequent sale deed. It also relied on the lower price of the subsequent sale and raised the question whether the petitioner had transmitted the consideration to the landowners.

The Supreme Court found these distinctions unsustainable. The landowners themselves had executed the subsequent sale deed, while the petitioner was only a confirming party. The consideration had been received collectively, and its physical receipt by the petitioner on behalf of the parties did not establish a separate culpable role. There was also no allegation that the petitioner had exceeded the authority conferred by the GPA or executed the earlier agreement without the landowners’ knowledge.

The Court rejected the lower sale price as a speculative basis for attributing criminality. Even if that circumstance were incriminating, it would apply equally to the landowners who executed the sale. It also faulted the High Court for treating the transmission of consideration as a triable issue when the landowners had made no allegation of misappropriation against the petitioner. That reasoning travelled beyond the allegations actually raised.

Addressing the ingredients of the offences, the Court found no deception inducing the purchasers’ payment in 2012: the property could legitimately have been transferred to them at that stage. The subsequent sale in 2016 did not supply the missing ingredient of cheating. Nor was there any identified false statement concerning consideration to support Section 423 IPC. Describing the prosecution as a civil dispute cast in criminal terms, the Court held that judicial consistency and propriety required equivalent relief for the petitioner in these circumstances. It expressly left the merits of the specific-performance suit, including readiness and willingness, for determination by the civil court.

Decision: The Supreme Court allowed the petition and set aside the Karnataka High Court’s order in Criminal Petition. It quashed the proceedings arising from FIR/Crime at Kadugodi Police Station, together with all consequential proceedings.