Homebuyers in India have to face troubles. But, what upsets home buyers the most is the delay in possession and project completion. Every buyer has a fixed timeline when he plans to invest in real estate. For most of the buyers, property investment remains a onetime activity that takes up a lifetime's savings.

However, when these deadlines are not honoured by the developer, it is a major setback for the Homebuyer, and it is now when the homebuyers start searching for various means and methods to get their loss indemnified which has been caused due to the delay in delivery of possession. One such method which is frequently opted by the homebuyers is filing of a Criminal Complaint against the Developer.

The Homebuyer while investing in a certain project enters into an agreement which mentions the date of delivery of possession and when the same is not met, the Homebuyers claim that even after express agreement with the Developer, the Developer failed to handover the possession on time. Thereafter when the Homebuyer proceeds for filing the Criminal Complaint and majorly alleges that the Developer has cheated them and had caused Criminal breach of Contract.

However, the Homebuyers fail to understand that there is a difference between mere breach of contract and Criminal breach of Contract, and cheating. It has been categorically established by the Apex Court that mere Breach of Contract would not amount to Criminal offence until and unless it is specifically stated that the knowledge to cheat and intention was there since the beginning.

Moreover, Subsequent act post agreement also plays a major role. It has been the scenario in majority of the cases that the Developer had started the construction and had also taken the necessary approvals for the completion of its Project, which acts as an evidence in favour of the Developer that their intentions were very honest at the time of signing the agreement and making the promise to delivery of possession on time. Moreover, it shall also be noted that the Developer in majority of the cases never denies the delivery of possession; it is just that the delivery of possession is delayed.

Cheating should not be confused with breach of contract. Moreover, Breach of trust should not be confused with Criminal Breach of Trust.

There are plethoras of Judgments delivered by the Hon'ble Supreme Court of India, which has specifically emphasized on Knowledge and Criminal Intention which is necessary behind any act which shall be termed as a criminal act. More specific in the present scenario why the delay is delivery of possession would be just a Breach of Contract and would not amount to issue liable for any Criminal Prosecution.

In Hridaya Ranjan Prasad Verma & Ors. v. State of Bihar & Anr, [2000] 4 SCC 168, the Apex Court held that "In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed.

Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed." The view of the Apex Court in Hridaya Ranjan (Supra) was also accepted by the Hon'ble Supreme Court again in Anil Mahajan Vs. Bhor Industires, (2005) 10 SCC 228.

In G.V. Rao v. L.H.V. Prasad & Ors., [2000] 3 SCC 693,the Apex Court while interpreting the offence under Section 415 of the India Penal Code, 1860 categorically stated that "As mentioned above, Section 415 has two parts. While in the first part, the person must "dishonestly" or "fraudulently" induce the complainant to deliver any property; in the second part; the person should intentionally induce the complainant to do or omit to do a thing. That is to say, in the first part, inducement must be dishonest or fraudulent. In the second part, the inducement should be intentional.

As observed by this Court in Jaswantrai Manilal Akhaney v. State of Bombay, AIR (1956) SC 575 a guilty intention is an essential ingredient of the offence of cheating. In order, therefore, to secure conviction of a person for the offence of cheating, "mens rea" on the part of that person, must be established. It was also observed in Mahadeo Prasad v. State of W.B., AIR (1954) SC 724 that in order to constitute the offence of cheating, the intention to deceive should be in existence at the time when the inducement was offered"

Thereafter the Apex Court in S.W. Palanitkar And Ors vs State Of Bihar And Anr, (2002) 1 SCC 241, while explaining the difference between Breach of Trust and Criminal breach of trust held that:
Every breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of a mental act of fraudulent misappropriation.

An act of breach of trust involves a civil wrong in respect of which the person wronged may seek his redress for damages in a civil court but a breach of trust with mens rea gives rise to a criminal prosecution as well. ……In order to constitute an offence of cheating, the intention to deceive should be in existence at the time when the inducement was made.

It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise, to say that he committed an act of cheating. A mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating.” The view of the Apex Court in S.W Palanitkar (Supre) was referred to and followed again by the Hon'ble Apex Court in Rashmi Jain vs. State of Uttar Pradesh & Anr. (2014) 13 SCC 553.

The Apex Court in International Advance Research Centre for power Metallurgy Vs. NIRMA Cerglass Pvt. Ltd. , (2016) 1 SCC 348 while interpreting the offence under section 420 of Indian Penal Code, 1860 held that:
“The making of a false representation is one of the essential ingredients to constitute the offence of cheating under Section 420 IPC. In order to bring a case for the offence of cheating, it is not merely sufficient to prove that a false representation had been made, but, it is further necessary to prove that the representation was false to the knowledge of the accused and was made in order to deceive the complainant.

Distinction between mere breach of contract and the cheating would depend upon the intention of the accused at the time of alleged inducement. If it is established that the intention of the accused was dishonest at the very time when he made a promise and entered into a transaction with the complainant to part with his property or money, then the liability is criminal and the accused is guilty of the offence of cheating.

On the other hand, if all that is established that a representation made by the accused has subsequently not been kept, criminal liability cannot be foisted on the accused and the only right which the complainant acquires is the remedy for breach of contract in a civil court. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown at the beginning of the transaction”

Conclusion
If we see the fundamental elements of a Crime we come across that mens rea, evil intent or guilty mind is the primary and basic element of a Crime. It has been established that there can be no crime without mens rea. Each criminal act requires a mental element and that is considered as the basic principle of Criminal Liability. It is the basic requirement that the accused must have been aware of those elements in his acts in consequence of which he is charged. It is a well known maxim that actus non facit reum nisi mens sit rea which means that the guilty intention and guilty act together constitute a crime.

No person can be punished in a criminal proceeding unless guilty mind is shown. On the other hand, if we observe the stages of a Crime, we come across first stage i.e Intention. For any act to be termed as a Criminal act, it is necessary that the same is preceded with Criminal Intention.

However, in the present case of Delay in Delivery of possession, there is no criminal intention of the developer at the time of entering into an Agreement with the Homebuyers. In majority of the cases, the developer had already taken the necessary approvals for the construction and in many instances the constructions are started and it is only delayed. Moreover, the Developer never denies the delivery of possession; it is only delay in delivery of possession.

However, in cases where the Developer had neither taken any necessary approvals for construction, and nor applied for the same and neither has the developer started any construction, in such case the Homebuyers can easily show the Criminal Intention and mens-rea of the Developer since beginning and in such case the Homebuyers can file a Criminal Case against such developers for its Criminal Acts under various provisions of Indian Penal Code, 1860.

Written By: Abhay Gupta, Advocate - Kapoor & Co.
Email : [email protected], Tele: +91 9560147929