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The Delhi High Court has set aside criminal proceedings initiated against two flat buyers under Sections 182 and 211 of the Indian Penal Code (IPC), holding that the mandatory procedure under Section 195 of the Code of Criminal Procedure (CrPC) had not been followed. At the same time, the Court upheld the cancellation report in the underlying cheating case.
Background
The matter arose from the purchase of two flats in Naraina, Delhi. Deepak Malhotra and Ruchi Malhotra had purchased the properties through registered sale deeds in June 2009. They alleged that the sellers had represented that the properties were free from any mortgage or other encumbrance.
The buyers later alleged that the property had already been mortgaged with Union Bank of India as security for a ₹25 lakh credit facility. They claimed that they became aware of the mortgage in February 2013 after the bank took possession and subsequently auctioned the property. An FIR under Sections 420/34 IPC was registered after the buyers approached the Magistrate.
However, the investigation brought material suggesting that petitioner Deepak Malhotra was aware of the loan transaction. The Court noted that he had introduced one of the sellers to the bank and that a handwritten communication sent by him to the bank in 2010 referred to proceedings concerning the outstanding amount. This was inconsistent with the claim that the mortgage became known only in 2013.
Justice Madhu Jain held that the existence of an earlier mortgage, by itself, was not enough to establish cheating. The relevant question was whether the mortgage had actually been concealed from the purchasers and whether they were induced to buy the flats without knowing about it. The Court found that the investigation material did not support that allegation sufficiently and therefore found no defect in accepting the cancellation report.
The Court, however, found a legal defect in the subsequent cognizance taken against the buyers under Sections 182 and 211 IPC. Referring to the mandatory requirements of Section 195 Cr.P.C., the Court observed:
“In the absence of compliance with the mandatory requirement of Section 195 Cr.P.C., the cognizance so taken cannot be sustained.”
For Section 211 IPC, the Court held that the allegation was connected with judicial proceedings because the buyers had approached the Magistrate and the FIR was registered pursuant to the Court's order. Therefore, cognizance could not have been taken merely on the basis of the police Kalandra without the complaint contemplated under Section 195 Cr.P.C.
The High Court upheld the Trial Court's acceptance of the cancellation report and dismissal of the protest petition. However, it set aside the order to the extent that it took cognizance of offences under Sections 182 and 211 IPC against the petitioners. All proceedings arising from that Kalandra were also set aside.
The Court clarified that this limited relief did not disturb the cancellation report in the original FIR.
Case Details
Case Title: Deepak Malhotra and Anr. v. State Through SHO P.S. Inderpuri & Ors.
Case Number: CRL.M.C. 2327/2025 & CRL.M.A. 10441/2025
Judge: Justice Madhu Jain
Decision Date: 06 October 2026
