Builder demanding interest for delayed payment not cheating: Bombay HC

Builder demanding interest for delayed payment not cheating: Bombay HC

The HC was hearing a petition filed by three partners of a builder firm seeking the quashing of the FIR against them at Kamothe police station in 2018 for cheating and forgery under the Indian Penal Code.

Urvi MahajaniUpdated: Saturday, April 22, 2023, 08:19 AM IST
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Bombay High Court | Wikimedia Commons

Mumbai: A builder demanding interest for delayed payment cannot amount to cheating under the Indian Penal Code. If a payment schedule is agreed upon, under the agreement for sale, and if the payment is not made (rightly or wrongly), its demand and legality is a matter of pure civil dispute, said the Bombay high court while quashing an FIR against three developers.

A division bench of Justices S B Shukre and Milind Sathaye recently quashed the FIR registered against the partners of M/s Megapolis Landmark LLP (Greenwood Estate), observing: “A builder demanding interest cannot amount to cheating for the simple reason that if payment schedule is agreed under the agreement for sale and if the payment is not made (rightly or wrongly), its demand and its legality is a matter of pure civil dispute.”

The HC was hearing a petition filed by three partners of the firm seeking the quashing of the FIR against them at Kamothe police station in 2018 for cheating and forgery under the Indian Penal Code.

FIR was filed against the builders for demanding interest on delayed payment

According to the FIR by a buyer, Gaurav Bhosale, a sale agreement was executed between him and the builder in October 2012. The dispute started after the execution of agreement for sale and the builder raised the demand for stage-wise payment. The FIR also alleges that the builder demanded interest.

It is to be noted that Bhosale was given possession of the flat after litigation before the consumer Court.

The builder’s advocate argued that the alleged dispute, if taken at face value, was purely civil in nature and they could not be prosecuted for the same.

What did HC say on the matter?

Agreeing with argument, the HC said: “Taking all these allegations at their face value, we fail to understand how the rights arising out of agreement for the sale of flat admittedly executed by Respondent No. 2 (Bhosale), can constitute cheating and criminal breach of trust.”

Bhosale never claimed that he was “deceived or fraudulently induced” to execute the agreement for sale.

The judges added that the “intention to deceive or fraudulent or dishonest inducement is totally lacking when Bhosale has admittedly executed the document for sale of flat, voluntarily”.

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