Aadrikaa Legal Services (ALS)- Law I Litigation I Arbitration
Date: 10.10.2026
Karnataka HC: Absence of Direct Contract with Homebuyer No Ground to Quash Cheating Proceedings at Preliminary Stage
This Short Article has been prepared & written by Advocate G Sridharamurthy. The views expressed are based on his interpretation of the law. He can be reached at his email id sriadv3@gmail.com .
The Karnataka High Court has declined to quash criminal proceedings against three landowners accused in connection with an uncompleted apartment project, holding that the allegations require examination at trial.
Background of the dispute
The case arose from a residential development near Mysuru Road, Kengeri, Bengaluru. The complainant alleged that his daughter and son-in-law were drawn to the project after seeing advertising material and a demonstration house for the proposed apartments.
According to the complaint, the landowners had entered into a Joint Development Agreement (JDA), a power of attorney, and related arrangements with development companies for construction of multi-storey residential apartments. A flat was subsequently booked in the complainantβs daughterβs name.
The purchasers allegedly paid an initial amount of Rs. 1,02,575 in June 2011. They later received a welcome letter, an allotment, and a demand for further payment. A further Rs. 6,04,640, along with service tax, was paid in January 2012. The total amount claimed to have been paid was Rs. 7,41,828.
The complaint stated that the sales representative obtained the purchaserβs signature on an agreement but did not secure the developer companyβs signature. When the family later tried to contact the site office, they found it closed. Construction had allegedly stopped after only the foundation work, despite funds having been collected from prospective purchasers.
Landownersβ case for quashing
The petitioners, who were accused Nos. 4, 5 and 6, sought quashing of the case under Section 482 of the Code of Criminal Procedure. They argued that they were only landowners and had not received any money from the complainant or the purchaser.
They said they had entered into the JDA and power of attorney with the developer in 2008, followed by an addendum in 2009. They further contended that the developer failed to meet its obligations, including clearing a HUDCO loan of Rs. 14.50 crore with interest and penalty. As a result, they issued termination notices in February 2012 and published the cancellation in local newspapers.
The petitioners also argued that there was no direct contractual relationship between them and the complainant, and that the payments had been made to the builder rather than to them. On that basis, they maintained that criminal liability could not be imposed on them.
Stateβs response
The State opposed the petition, emphasizing that the payments were made while the JDA, power of attorney, and addendum were still in force. It argued that the landowners had granted the developer authority connected with the project, and that the alleged cancellation took place only after the purchasers had made payments.
The State also relied on allegations that the project was advertised to the public, money was collected from buyers, and the flats were not delivered. It submitted that these circumstances warranted a criminal trial rather than termination of the case at the preliminary stage.
Courtβs findings
Justice H.P. Sandesh noted that the landowners did not dispute executing the JDA, power of attorney, and addendum with the developer. The Court also noted that the complainantβs payments were made before the purported termination notices of February 2012.
The Court held that the developerβs authority under the project documents and the timing of the payments were material. Even though the landowners claimed there was no direct transaction with the complainant, the Court found that the developer had allegedly collected money from prospective purchasers on the strength of the arrangements made with the landowners.
The Court said questions such as whether there was a conspiracy and whether there was an intention to cheat at the time money was collected are matters for the trial court to determine. It also observed that disputes between landowners and developers should not prejudice prospective purchasers who paid money in connection with the project.
Outcome and significance
The High Court dismissed Criminal Petition No. 4986 of 2019 and allowed the proceedings in C.C. No. 8921 of 2019 to continue before the IV Additional Chief Metropolitan Magistrate, Bengaluru.
The ruling underscores that a landownerβs claim of a later dispute or termination of an arrangement with a developer may not, by itself, justify quashing criminal proceedings where purchasers allegedly paid money before that termination and the project was not completed. The Court did not decide guilt; it held that the allegations and defences must be tested through trial.
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Source: Karnataka High Court
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