2025:HHC:7189 IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Cr. Revision No. 146 of 2017 Reserved on: 10.03.2025 Date of Decision: 22.03.2025 State Bank of India ...Petitioner Versus M/s Aman Enterprises and others ...Respondents Coram Hon’ble Mr Justice Rakesh Kainthla, Judge. Whether approved for reporting?1 Yes For the Petitioner : Mr. Arvind Sharma, Advocate. For the Respondents : Mr Karan Singh Kanwar, Advocate for Respondent No.1. None for respondent No.2. Rakesh Kainthla, Judge The present revision petition is directed against the order dated 17.04.2017 passed by learned Judicial Magistrate, First Class, Nahan District Sirmour, H.P. vide which the petitioner (accused before learned Trial Court) was ordered to be summoned for the commission of an offence punishable under Section 420 of the Indian Penal Code (for short IPC). (The parties shall hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience). 1 Whether reporters of Local Papers may be allowed to see the judgment? Yes. 2 2025:HHC:7189 2. Briefly stated, the facts giving rise to the present petition are that the complainant filed a complaint before the learned Trial Court for the commission of an offence punishable under Section 420 of IPC. It was asserted that the accused published a Sale Notice in the newspaper on 19.08.2016 that the property situated at Village Moginand, Tehsil Nahan, in the name of M/S Sanbro Compressor Ltd. was to be auctioned on 24.09.2015 under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short SARFAESI Act). The officials of the bank disclosed that the property was free from all encumbrances except the bank loan. The complainant deposited a sum of ₹53,90,000/- on 24.09.2015, and a sale certificate was issued in his favour on 06.10.2015. The complainant submitted necessary documents before the authorities and found that permission under Section 118 of the H.P. Tenancy & Land Reforms Act was required, and the dues of the Excise Department were pending against M/S Sunbro Compressors Limited. The accused played a fraud by concealing the facts in their knowledge, and the complainant was led to deposit ₹53,90,000/- in the auction. Hence, the complaint was filed for taking action against the accused. 3 2025:HHC:7189 3. The learned Trial Court recorded the preliminary evidence of the complainant and found sufficient reasons to summon the accused. 4. Being aggrieved from the order passed by the learned Trial Court, the accused has filed the present petition for quashing the complaint and summoning order. It was asserted that a complaint was filed for taking action against the accused under Section 156(3) of Cr.P.C. Learned Trial Court erred in taking cognisance of the same and issuing summons to the accused. The entry in the name of the Excise Department was stray. The property never remained with the Excise & Taxation Department as a security. It was a secured asset with the petitioner/accused. Section 35 of the SARFAESI Act overrides the provisions of other laws, and the question of the lien of the Excise & Taxation department does not arise. No action could be taken against the officers of the bank as per Section 32 of the SARFAESI Act. The sale was made to recover the public money. Learned Trial Court passed a non-speaking order while summoning the accused. Therefore, it was prayed that the present petition be allowed and the proceedings pending before the learned Trial Court be quashed. 4 2025:HHC:7189 5. I have heard Mr. Arvind Sharma, learned counsel for the petitioner and Mr. Karan Singh Kanwar, Advocate, for respondent No.1 6. Mr Arvind Sharma, learned counsel for the petitioner, submitted that no case was made out against the accused for the commission of an offence punishable under Section 420 of IPC. The complainant annexed an advertisement regarding the e-auction containing the conditions. Those conditions were not communicated to the complainant. Since it was an e-auction, therefore, the plea that officials of the bank disclosed the property to be free from all encumbrances is not correct. The right of a secured creditor prevails over the right of any unsecured creditor, and there was no misrepresentation. Hence, he prayed that the present petition be allowed and that the proceedings pending against the petitioner be set aside. He relied upon the judgment of the Hon’ble Supreme Court in Ramesh Kumar Bung & Ors vs State of Telangana & Anr SLP (Crl. No.13762 and judgment of this Court in State of H.P. & Ors. Vs. State Bank of India & Another in LPA No. 156 of 2021, along with connected matters in support of his submission. 5 2025:HHC:7189 7. Mr Karan Singh Kanwar, learned counsel for respondent No.1, submitted that the complainant categorically stated on oath that bank officials had told him that the property was free from all encumbrances. This was a misstatement, and the complainant was led to purchase the property because of the misstatement. The accused was aware of the entry in favour of the Excise & Taxation Department and was bound to disclose the same to the complainant at the time of the e-auction, failure to do so amounts to fraud. Hence, he prayed that the present petition be dismissed. 8 I have given considerable thought to the submissions made at the bar and have gone through the records carefully. 9. It was laid down by the Hon’ble Supreme Court in Malkeet Singh Gill v. State of Chhattisgarh, (2022) 8 SCC 204: (2022) 3 SCC (Cri) 348: 2022 SCC OnLine SC 786 that the revisional court is not an appellate court and it can only rectify the patent defect, errors of jurisdiction or the law. It was observed on page 207: - “10. Before adverting to the merits of the contentions, at the outset, it is apt to mention that there are concurrent findings of conviction arrived at by two courts after a detailed appreciation of the material and evidence 6 2025:HHC:7189 brought on record. The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction like to the appellate court and the scope of interference in revision is extremely narrow. Section 397 of the Criminal Procedure Code (in short “CrPC”) vests jurisdiction to satisfy itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior court. The object of the provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error which is to be determined on the merits of individual cases. It is also well settled that while considering the same, the Revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings. 10. This position was reiterated in State of Gujarat v. Dilipsinh Kishorsinh Rao, 2023 SCC OnLine SC 1294 wherein it was observed: “13. The power and jurisdiction of the Higher Court under Section 397 Cr. P.C. which vests the court with the power to call for and examine records of an inferior court is for the purposes of satisfying itself as to the legality and regularities of any proceeding or order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law or the perversity which has crept into such proceedings. It would be apposite to refer to the judgment of this court in Amit Kapoor v. Ramesh Chandra, (2012) 9 SCC 460 where the scope of Section 397 has been considered and succinctly explained as under: “12. Section 397 of the Code vests the court with the power to call for and examine the records of an inferior court for the purposes of satisfying itself as to the legality and regularity of any proceedings or 7 2025:HHC:7189 order made in a case. The object of this provision is to set right a patent defect or an error of jurisdiction or law. There has to be a well-founded error and it may not be appropriate for the court to scrutinise the orders, which upon the face of it bear a token of careful consideration and appear to be in accordance with the law. If one looks into the various judgments of this Court, it emerges that the revisional jurisdiction can be invoked where the decisions under challenge are grossly erroneous, there is no compliance with the provisions of law, the finding recorded is based on no evidence, material evidence is ignored or judicial discretion is exercised arbitrarily or perversely. These are not exhaustive classes but are merely indicative. Each case would have to be determined on its own merits. 13. Another well-accepted norm is that the revisional jurisdiction of the higher court is a very limited one and cannot be exercised in a routine manner. One of the inbuilt restrictions is that it should not be against an interim or interlocutory order. The Court has to keep in mind that the exercise of revisional jurisdiction itself should not lead to injustice ex-facie. Where the Court is dealing with the question as to whether the charge has been framed properly and in accordance with law in a given case, it may be reluctant to interfere in the exercise of its revisional jurisdiction unless the case substantially falls within the categories aforestated. Even framing of charge is a much- advanced stage in the proceedings under the CrPC.” 11. The present revision has to be decided as per the parameters laid down by the Hon’ble Supreme Court. 8 2025:HHC:7189 12. The complainant has relied upon auction notice (Ext.CW-1/B) in which it was mentioned that the sale of moveable and immovable property mortgaged to a bank under the provisions of SARFAESI will be done through an e-auction provided at the Web Portal. The last date of submission of the EMD & Documents (online) was mentioned as 22.09.2015 at 4:00 p.m and the hard copy to be submitted on 21.09.2015 at 4:00 p.m. It was further mentioned that the sale notice published in the newspapers named Indian Express and Amar Ujala, dated 19.08.2015, was to be referred for the terms and conditions of the auction. Significantly, the sale notice dated 19.08.2015 was not produced on record. Since the e-auction of the property was to be held on the web Portal, the plea that the bank officials had disclosed the property to be free from all encumbrances at the time of auction is not acceptable. 13. It was submitted that the bank was bound to disclose the details of the encumbrances, and failure to do so amounts to cheating. This submission is not acceptable. It was laid down in Bishan Das v. King-Emperor, 1905 SCC OnLine All 43, that the failure to disclose the encumbrances by the vendor does not amount to cheating. It was observed:- 9 2025:HHC:7189 “… It appears that the applicant, Bishan Das, sold to the complainant, Babu Lal, a certain landed property which Babu Lal discovered had been previously mortgaged along with other property by his vendor, Bishan Das. The sale deed does not state that the property sold is unencumbered, and it has not been found that Bishan Das actually deceived the complainant by representing to him or leading him to believe that the property was free from encumbrance. In my opinion, the conviction cannot be supported. It is true that the explanation appended to Section 415 lays down that a dishonest concealment of facts is a deception within the meaning of the section. If we turn to the definition of the word “dishonesty” to be found in section 24 of the Code, we find that a dishonest act is an act done with the intention of causing wrongful gain to one person or wrongful loss to another. Section 23 defines ‘wrongful gain’ as gain, by unlawful means, of property to which the person gaining is not legally entitled. Similarly, a ‘wrongful loss’ is defined as the loss, by an unlawful means, of property to which the person losing is legally entitled. The unlawfulness of the means used is a necessary element in criminal dishonesty. Now, in the present instance, I cannot find anything unlawful in the means used by the applicant. There was no obligation, cast on him by law, to disclose to his vendee the existence of the mortgage inasmuch as the mortgage ‘had been effected by a registered instrument, and the vendee could, with ordinary care, have ascertained its existence. 2. He might also have ascertained its existence by questioning his vendor. Had he done so and had the vendor falsely represented the property to be unencumbered, the case would have been very different as there would have been an actual misrepresentation by the vendor sufficient to constitute the offence of cheating. It might be thought at first sight that the illustration appended to section 415 is opposed to the view set forth above, but the case contemplated in that illustration is clearly distinguishable. The illustration referred to deals 10 2025:HHC:7189 with the case of a person selling or mortgaging an estate which he has previously sold and conveyed away. In that case, a person who knows that he has no right left to a property deals with it as if he had, his conduct amounts to a representation that he had a subsisting right in the estate, although he well knows that he has not. In the case before me, the seller still owned an interest, viz, the equity of redemption in the property, which he conveyed to the complainant. For all that he knew to the contrary, the vendee might have been aware, at the time of his purchase, that the property he bought was under a mortgage. I have no hesitation in holding that the dishonest concealment of facts referred to in the Explanation to section 415 is a dishonest concealment of facts, which it is the duty of the person concealing them to disclose to the person with whom he is dealing. The Magistrate, in his judgment, argues that it is not necessary that wrongful gain or wrongful loss should have been caused, inasmuch as the conduct of the defendant, if not dishonest, was, at least, fraudulent. If the applicant refrained from disclosing the existence of the encumbrance, his conduct might be immoral, but it would not, in my opinion, be fraudulent any more than would the conduct of the seller of a horse, who, knowing that the horse had a splint did not disclose the existence of the splint to a purchaser. Of course, I refer to a case in which the vendor has not actively deceived the purchaser by representing the horse to be sound. Illustration (a) of section 17 of the Contract Act is as follows:— A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about the horse's soundness. This is not a fraud of A. The same is the law in England. In the case of Horsfall v. Thomas [31 L.J., Exch, 322, S.C. 1 H, and C., 90.], BRAMWELL, J. says, “The fraud must be committed by the affirmance of something, not true within the knowledge of the affirmer, or by the suppression of something, which is true and which it was his duty to make.” When there is a concealment of fact, I am of the opinion that there is neither fraud nor dishonesty, within 11 2025:HHC:7189 the meaning of the criminal law, unless there is a duty imposed by law, as between the accused and the person with whom he is dealing to make that fact known. For the above reason, I quash the conviction of the applicant, Bishan Das, under section 417 of the Penal Code, 1860. The fine, if paid, must be refunded. 14. This position was reiterated in Karachi Municipality v. Bhojraj, 1915 SCC OnLine Sind JC 6 wherein it was observed- 2. The cheating must refer to some false representation which induced the Municipality to agree to buy the land. 3. As to such representation there is only the evidence of one witness, the land clerk, and as he is not supported by the correspondence, I think the Magistrate was right not to act upon his evidence. Mr. Rupchand refers to illustration (1) to S. 415, but that refers to a case where the seller has no title and his conduct in selling amounts to deception. That is not the case here. The law on this point is, I think, correctly stated in the case of Emperor v. Bishen Das [(1905) 27 All 561.]. 15. Madhya Pradesh High Court also took a similar view in Nandram v. Ganesh Narain, 1934 SCC OnLine MP 64, wherein it was observed:- “6. In Pannalal v. Pandit Narayan Rao [142 Ind. Cas. 376 : 15 NLJ 141 : Ind. Rul. (1933) Nag. 112.], Grille, then A.J.C., had considered the point and interpreted the old law in the way it is now amended. It is, therefore, clear that by suppressing the fact of the charge from the non- applicant, the applicant cannot be said to have committed any deception leading to cheating as defined in S. 415, Penal Code, 1860.” 12 2025:HHC:7189 16. A similar view was taken in Pandit Shivnath Sahibram Kaul v. Jethanand Moorijmal Bhagnari, 1936 SCC OnLine Sind JC 89, wherein it was observed:- 2. The learned Magistrate relied upon the judgment of the Nagpur Court cited in Ramkrishna Nan dram v. Ganesh Narain [AIR 1934 Nag. 149: 150 Ind. Cas. 20: 35 Cr. L.J. 1063 : (1934) Cr. Cas. 658 : 30 NLR 303 : 6 RN 279.] . He has not, however, referred to a case of this Court in Karachi Municipality v. Bhojraj [9 SLR 97: 30 Ind. Cas. 994 : AIR 1915 Sind 21 : 16 Cr. LJ 706.], and the case in Emperor v. Bishandas [27 A 561: 2 Cr. LJ 218 : 2 ALJ 268 : AWN 1905, 98.] . Those two cases, I think, make it clear that there is a difference between mere concealment or non-disclosure and a false representation, and that while there is no legal duty placed upon the vendor of immovable property to disclose any charge or encumbrance, yet, if a false representation is made and acted upon, and as a result, money passes, then, though the false representation relates ta immovable property, the offence of cheating may have been committed. 3. Reference to s. 415, Penal Code, 1860, will show that there is nothing to exclude from, the scope of its provisions cheating, which has relation to immovable property. The representation which must be fraudulent or dishonest and which must have induced the person deceived to deliver property may as well be perpetrated in relation to immovable property as to movable property. It is true that so far as that part of the section which relates to dishonest concealment of facts is concerned, it must be read subject to the qualification that there is no duty on a seller to disclose defects in title in immovable property which the buyer with ordinary care could discover; or in other words: “The fraud must be committed by the affirmance of something not true within the knowledge of the affirmer or 13 2025:HHC:7189 by the suppression of something which is true, and which was his duty to make known,” and “where there is concealment of fact, I am of the opinion that there is neither fraud nor dishonesty within the meaning of the Criminal Law unless there is a duty imposed by law as between the accused and the person with whom he has dealing to make the fact known.” 17. Therefore, the preponderant view is that a vendor is not supposed to disclose the encumbrance on the property unless specifically asked for. Since, in the present case, an e- auction was conducted, there was no question of making an inquiry or giving a reply. Thus, the failure to mention the encumbrances will not constitute cheating. 18. The learned Trial Court was persuaded to hold that the bank was aware of the fact that the property was encumbered with the Excise and Taxation Department, as the bank had given the reply to the letter returned by the department. However, the learned Trial Court did not consider the fact whether the bank was duty-bound to disclose the encumbrance to the purchaser. Hence, the order passed by the learned Trial Court cannot be sustained. 19. It has been held that the bank was not bound to disclose the facts regarding encumbrance; therefore, the 14 2025:HHC:7189 question whether the right of the bank will prevail over the rights of the Excise & Taxation Department and whether the sale was made in good faith do not arise and need not be gone into. 20. Consequently, the present petition is allowed and the complaint pending before the learned Trial Court qua the petitioner is ordered to be quashed. 21 The present petition is disposed of in aforesaid terms, so also pending application(s), if any. 22. A copy of this judgment along with the record of the learned Trial Court be sent back forthwith. (Rakesh Kainthla) 22nd March, 2025 Judge (ravinder)