Vires of Section 420 IPC challenged before Allahabad High Court

A writ petition has been filed before the Allahabad High Court challenging the constitutionality of Section 420 of the Indian Penal Code (IPC), which deals with cheating and dishonestly inducing the delivery of property.

The plea stated that the provision is violative of Article 14 and 21 of the Constitution of India.

The petitioners contended that there is no material difference between the offence of cheating under Section 417 of IPC and the offence of cheating involving the delivery of property under Section 420 IPC. It is contended that there is “lack of clarity” and “stark distinction” in the two punitive provisions for procedural safeguards for investigating as well as in punishment prescribed for cheating under the two provisions as Section 420 IPC provides for “higher punishment” and being against personal liberty, without any intelligible differentia.

The writ petition was filed by Indiabulls Housing Finance Ltd. (IHFL) in response to FIRs lodged against the company and its officers by the Enforcement Directorate and the Yamuna Expressway Industrial Development Authority (YEIDA). IHFL sanctioned 16 loan facilities of Rs. 2801.00 crores to Shipra Group/Borrowers for the purposes of construction and development of housing projects.

M/s Kadam Developers Pvt. Ltd. was granted permission to mortgage its land allotted by Yamuna Expressway Industrial Development Authority (YEIDA) under its sub-lease with IHFL. 100% equity shares (demated) of M/s Kadam Developers were pledged to secure the loan. Shipra Group committed default of approximately Rs.1763.00 Crores.

On failure of response from Shipra Group, IHFL sold the pledged equity shares to one M/s Finalstep Developers Pvt. Ltd. with M3M India Pvt. Ltd. as confirming party for R.900.00 Crores.

M/s. Kadam Developers conveyed the factum of the sale to YEIDA within 45 days. However, YEIDA lodges FIRs against IHFL and its officers for selling the shares of M/s. Kadam Developers as it caused it a loss of Rs. 200 crores.

Petitioners challenged the ECIR and FIRs lodged by the ED and YEIDA against IHFL and its officers. The counsel for the petitioner argued that the dispute is of a civil nature and that the criminal proceedings are tainted with mala fides.

The division bench of Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava noted that at this stage, the petitioner pressed for interim relief.

The court granted interim protection to IHFL and its directors against any coercive measures. “The parties are granted six weeks' time to exchange pleadings”, it ordered.

The matter is listed for further consideration on August 28.

Case Title: Niraj Tyagi and Anr. v. State of UP & 3 others