The Punjab & Haryana High Court has clarified that the non-return of commission in a cancelled property transaction, even if allegedly dishonest, does not per se constitute a criminal offence under Sections 406, 420 or 506 of the IPC. The Court granted anticipatory bail to a property dealer accused of retaining Rs. 25 lakhs, emphasizing that such disputes are civil in nature and must be resolved through contractual remedies, not criminal prosecution.
Background & Facts
The Dispute
The dispute arose from a proposed sale of three acres of land in Mullana, District Ambala, valued at Rs. 6 crores. The complainant, Paramjit Singh, was the seller. The petitioner, Lakhwinder Singh, acted as a property dealer and mediator in the transaction. A sale agreement was entered into between Paramjit Singh and the purchaser, Harnek Singh, with the petitioner facilitating the deal. As per the terms, the petitioner received a commission of Rs. 25 lakhs from the complainant, Paramjit Singh.
Key Facts
- The sale agreement was executed on an undisclosed date prior to 20.06.2025
- Harnek Singh paid a token amount of Rs. 50 lakhs to Paramjit Singh
- The deal was mutually cancelled, and the Rs. 50 lakhs was fully refunded to Harnek Singh
- The petitioner retained Rs. 25 lakhs as commission, which the complainant now claims was to be returned upon cancellation
- A subsequent compromise was allegedly reached for the petitioner to return Rs. 19,50,000, which he allegedly failed to do
- FIR No. 169 dated 20.06.2025 was registered at Police Station Mullana under Sections 406 (criminal breach of trust), 420 (cheating), and 506 (criminal intimidation) of the IPC
- The petitioner has no prior criminal record and is willing to cooperate with the investigation
Procedural History
- 20.06.2025: FIR No. 169 registered against the petitioner
- 15.07.2025: Petitioner filed anticipatory bail petition (CRM-M-36589-2025)
- 15.07.2025: Court issued notice and stayed arrest pending hearing
- 30.07.2025: Parties directed to appear before Mediation and Conciliation Centre
- 08.09.2025: Case listed for report on mediation outcome
- 25.03.2026: Final hearing and order passed by Justice Sanjay V Ashisth
Relief Sought
The petitioner sought anticipatory bail to prevent arrest in connection with FIR No. 169/2025, and requested that the Court recognize the dispute as civil in nature, not criminal.
The Legal Issue
The central question was whether the alleged failure to return a commission after cancellation of a property deal, without evidence of fraudulent intent at the time of receipt, amounts to a criminal offence under Sections 406, 420 and 506 of the IPC, or whether it remains a civil dispute over contractual obligations.
Arguments Presented
For the Petitioner
Counsel submitted that the commission was paid voluntarily under a valid agreement, and its non-return after cancellation of the deal does not establish criminal intent. The FIR was filed as a coercive tactic to recover a disputed civil debt. The petitioner has no history of dishonesty, is ready to cooperate with investigation, and the matter is purely contractual. No mens rea was alleged in the FIR.
For the Respondent
The State and complainant contended that the petitioner, having received Rs. 25 lakhs as commission, was under a clear obligation to return it upon cancellation of the deal. His retention of the amount, despite a compromise to return Rs. 19.5 lakhs, amounted to dishonest misappropriation. The act satisfies the ingredients of criminal breach of trust and cheating under the IPC.
The Court's Analysis
The Court examined the nature of the transaction and the allegations in the FIR. It noted that the commission was paid pursuant to a commercial agreement, and its non-return followed the mutual cancellation of the sale. The Court observed that the complainant had not alleged that the petitioner obtained the commission through fraudulent means at the time of receipt. The dispute, therefore, arose only after the deal fell through.
"The dispute in question is of a monetary nature... the FIR appears to have been lodged as an arm-twisting tactic to recover the commission amount, the entitlement to which is yet to be established by the complainant."
The Court held that the retention of a disputed commission, without proof of initial dishonest intent, does not attract criminal liability under Sections 406 or 420 IPC. The remedy, if any, lies in a civil suit for recovery. The Court further noted that the petitioner had no criminal antecedents and was willing to cooperate with the investigation.
The Court also considered the proportionality of criminal proceedings in a commercial dispute and emphasized that anticipatory bail must be granted where the allegations, even if true, do not prima facie constitute a non-bailable offence.
The Verdict
The petition was allowed. The petitioner is granted anticipatory bail. He must join the investigation within two weeks of the order or as and when summoned by the investigating agency. In case of arrest, he shall be released on bail upon furnishing bonds satisfactory to the arresting officer. He must surrender his passport to the Investigating Agency or submit an affidavit stating he does not possess one. He shall not leave India during the trial without prior court permission. The complainant and prosecution may apply for cancellation of bail if the petitioner fails to cooperate with the investigation.
What This Means For Similar Cases
Civil Disputes Over Commissions Are Not Criminal
- Practitioners must challenge FIRs under Sections 406/420 IPC where commission disputes arise from cancelled commercial agreements
- Absence of fraudulent intent at the time of receipt of money negates criminal liability under Section 420
- Courts will not permit criminal law to be weaponized for recovery of disputed civil dues
Anticipatory Bail Is Appropriate When No Mens Rea Is Alleged
- Courts must distinguish between breach of contract and criminal dishonesty
- Willingness to cooperate with investigation and absence of prior record are strong factors in favour of bail
- Mediation should be encouraged before criminal proceedings are initiated in commercial disputes
Procedural Safeguards Must Be Applied in Financial Disputes
- Courts may direct surrender of passports or affidavits regarding travel documents as conditions of anticipatory bail
- Conditions under Section 482(2) BNSS (formerly Section 438(2) CrPC) are binding and enforceable
- Cancellation of bail remains available if the accused fails to comply with court directions
