In a Karnataka home loan case, the High Court quashed criminal proceedings against a buyer who stopped paying instalments after learning that the flat he had booked had been sold to someone else.

Key Takeaways

  • The buyer had borrowed Rs 39.92 lakh from State Bank of India for the Bengaluru flat.
  • The court found that an outstanding loan or a failed transaction alone did not constitute a criminal offence.
  • The ruling did not settle what would happen to the booking or the money paid towards the property.

Karnataka home loan dispute

The buyer, identified as Mr Bari, took the loan from State Bank of India (SBI) in the 2019–20 financial year to buy flat B-306 in the Grandeur Park project in Bengaluru. He signed a tripartite agreement with the bank and builder on February 8, 2020.

The builder sold the same flat to a third party on March 27, 2023, without consent from Bari or SBI. Bari stopped paying equated monthly instalments after learning of the sale, although the loan remained outstanding.

SBI filed a police complaint against Bari on September 25, 2024. Its lawyers alleged criminal breach of trust, misappropriation and cheating, and said he had become irregular in his payments despite reminders. Bari’s lawyer argued that the buyer was the victim of the builder’s actions.

Why the court quashed the case

On September 25, 2026, the Karnataka High Court quashed the criminal proceedings and the related police complaint against Bari. The court said he had never obtained title or signed a sale deed, and the evidence suggested he received no wrongful gain from the resale.

The court said an outstanding loan or failure of the underlying transaction could not, by itself, constitute a criminal offence. It also said criminal prosecution could not be used to recover a financial liability unless the essential elements of the alleged offences were established at first sight.

The court did not comment on the builder’s actions. Its ruling dealt with the criminal proceedings and did not resolve the status of Bari’s booking or the money paid towards the property.

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