Bengaluru, June 24, 2022 – The LX Additional City Civil & Sessions Judge, Bengaluru, Sri Narashimsa M.V. (CCH 61), granted anticipatory bail to the petitioners, including the firm BSR Enterprises and its partners/associates, in a high-profile cheating case involving the alleged fraudulent sale of a mortgaged apartment. The order, pronounced on June 24, 2022, pertained to Crl.Misc. No. 6038/2022, arising from Yelahanka Police Station Crime No. 141/2022, registered for the offence under Section 420 of the Indian Penal Code (IPC).
The petitioners who sought protection from arrest under Section 438 of the Criminal Procedure Code (Cr.P.C.) were:
- BSR Enterprises (Developer Firm)
- G. Praveen Kumar Reddy (Individual)
- B. Raghavendra Reddy (Individual)
- BSR Builders & Engineers Contractors (Associate Firm)
The Allegations of Fraudulent Mortgage
The case was filed based on a First Information Report (FIR) lodged by the complainant, who had purchased Flat No. 106 in the BSR Koorla Residency Apartment in Sy. No. 56/2 on December 14, 2017, using their entire retirement fund.
The core of the allegation is that the petitioners—who are the developers and builders—had executed the sale deed for the flat to the complainant, but had previously (on February 3, 2017) pledged the entire apartment property with a financial institution, Federal Bank Financial Services Limited, to obtain a significant loan.
The complainant became aware of the alleged cheating only on July 24, 2020, when officials from Federal Bank Financial Services Limited pasted a notice on the apartment building, indicating that they had taken “symbolic possession” of the property, including the complainant’s Flat No. 106, under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
The complaint essentially accused the builders of concealing the mortgage and debt obligation at the time of executing the sale deed, thereby defrauding the flat buyer.
Petitioner’s Grounds and Prosecution’s Objection
The petitioners’ counsel, Sri. H. Suresh, argued for anticipatory bail, stressing that the alleged offence was triable by a Magistrate and was not punishable with death or imprisonment for life. They asserted that the petitioners were law-abiding citizens with deep roots in society and permanent residents with businesses in Bengaluru and would not abscond or interfere with the proceedings.
The prosecution, represented by the Learned Public Prosecutor, filed strong objections, reiterating the serious nature of the cheating allegations. They contended that if released on bail, the accused were likely to abscond, threaten witnesses, and destroy the evidence collected against them, and hence, bail should be rejected as the investigation was yet to be completed.
Court’s Analysis on Evidence and Documents
The court, after hearing arguments, focused its analysis on whether the grant of pre-arrest bail was warranted given the facts and the status of the evidence.
The court examined the documents produced by the petitioners, including a copy of a Writ Petition filed before the Hon’ble High Court of Karnataka against Federal Bank Financial Services Limited, ledger accounts, and correspondence between the petitioners and the financial institution. Crucially, the records also showed that an order under Section 14 of the SARFAESI Act for taking physical possession had been passed by a Magistrate, which was challenged by the first informant and others in a Criminal Revision Petition.
The court noted a key mitigating factor: the evidence in the case largely consists of registered documents, specifically the mortgage deed and the sale deed. The court observed, “The allegation of cheating is about concealment of the mortgage of the entire property by petitioners in favour of Federal Bank. Registered documents cannot be meddled or tampered with.”
Furthermore, the court took note of the financial details presented, observing that the loan amount borrowed by the builders was stated to be Rs. 5 Crores, with approximately Rs. 4,58,44,953/- claimed to be due. Comparing this debt to the value of the 26 unsold flats proposed for possession by the bank, the court inferred that the outstanding amount was a “fraction” of the project’s overall value. Considering the petitioners are builders involved in a major project, the court determined that the apprehension expressed by the prosecution could be adequately addressed by imposing strict conditions.
Order and Bail Conditions
Having answered the point for consideration in the affirmative, the court allowed the anticipatory bail application.
The court directed that the petitioners shall be released on bail in the event of their arrest, subject to the following conditions:
- Each petitioner shall execute a personal bond for Rs. 50,000/- with a surety for the like sum.
- The petitioners shall appear before the Investigating Officer (I.O.) on or before June 30, 2022, and cooperate with the investigation in all respects.
- The petitioners shall not tamper with the prosecution witnesses and shall appear before the Court on all dates of hearing.
The order provides temporary relief to the builders, allowing them to participate in the investigation without the threat of immediate arrest, while acknowledging the civil and criminal implications of the alleged concealment of the property mortgage.