Homebuyer Stops Paying EMIs on ₹39.92 Lakh Loan After Builder Sells His Flat to Another Buyer; Karnataka HC Quashes Bank’s Criminal Case

Karnataka High Court Quashes Bank's Criminal Case Against Homebuyer

The Karnataka High Court has granted relief to a homebuyer who stopped paying his home loan EMIs after discovering that the builder had sold his booked apartment to another buyer.

In a judgment dated September 25, 2026, the High Court quashed criminal proceedings against Pritesh Bari, who had taken a ₹39.92 lakh loan from State Bank of India (SBI) to purchase a flat in Bengaluru.

The court found that Bari had neither received legal title to the apartment nor participated in its subsequent sale to a third party. It held that the allegations against him did not establish the necessary criminal elements to justify prosecution.

The ruling highlights the distinction between a financial or contractual dispute and criminal liability.

How the ₹39.92 Lakh Home Loan Dispute Began

Bari, a resident of Mumbai, had booked Flat B-306 in the Grandeur Park residential project in Bengaluru.

During the 2019–20 financial year, he obtained a home loan of ₹39.92 lakh from SBI to finance the purchase. On February 8, 2020, he entered into a tripartite agreement involving himself, the bank and the builder.

Under this arrangement, the bank financed the purchase, while the builder was responsible for constructing and handing over the apartment and completing the necessary property-related formalities.

Bari continued paying his home loan EMIs. However, he was unable to obtain the registered sale deed that would establish his ownership of the apartment.

Builder Allegedly Sold the Same Flat to Another Buyer

The dispute escalated when the builder sold the same apartment to a third party through a registered sale deed dated March 27, 2023.

According to the case records, the sale took place without the consent of either Bari or SBI.

Bari had not received the apartment's legal title, and the project had not been completed as contemplated under the original transaction.

After learning that the flat had been sold to another buyer, Bari stopped paying the home loan EMIs.

The loan remained outstanding, leading to a dispute between the bank, the borrower and the builder.

Why Did SBI Initiate Criminal Proceedings?

SBI alleged that the outstanding loan had not been repaid by Bari or the builder.

The bank accused Bari and the developers of offences including cheating, criminal breach of trust and misappropriation of the loan amount.

The criminal case was initiated after a magistrate ordered an investigation into a private complaint filed by the bank. An FIR was registered at Shankarapura Police Station in Bengaluru in 2024.

The bank argued that Bari had provided documents and entered into an agreement to obtain the loan, assuring the bank that a registered sale deed would be executed in his favour.

It also argued that the loan remained unpaid despite reminders.

Bari, however, maintained that he was himself a victim of the builder's actions because he had taken the loan and paid EMIs for a property he never legally received.

What Did the Tripartite Agreement Say?

A crucial aspect of the case was the tripartite agreement signed by the borrower, SBI and the builder.

According to the court proceedings, the agreement specifically addressed situations in which the project was cancelled, abandoned or not completed.

The agreement placed an obligation on the builder to repay the bank the amounts received from the borrower in specified circumstances, including failure to complete the project.

The High Court considered these provisions important because the bank itself was a party to the agreement and was aware of the obligations assigned to the builder.

The court found that the bank's complaint did not adequately account for these contractual provisions when seeking criminal action against the homebuyer.

Why Did the Karnataka High Court Quash the Criminal Case?

The High Court examined whether the allegations in the complaint, even if accepted at face value, established a criminal offence by Bari.

It found that the borrower had taken the loan to purchase the apartment but had never received a registered sale deed. The property was subsequently sold to another buyer by the builder.

The court also found no material indicating that Bari had participated in the subsequent sale, benefited from it or acted together with the builder to deceive the bank.

The judgment distinguished the existence of an unpaid loan from the legal requirements for criminal prosecution.

In other words, the fact that a loan remained outstanding did not automatically prove that the borrower had committed cheating, misappropriation or another criminal offence.

The court therefore quashed the criminal proceedings and the consequential FIR against Bari.

Court Criticises the Bank's Approach

The High Court expressed concern about the bank's decision to initiate criminal proceedings against the borrower without adequately considering the circumstances of the failed property transaction.

It observed that a public-sector bank should exercise due care before invoking the criminal process against a customer.

The court also emphasised that criminal proceedings should not be used as a substitute for the legal remedies available to recover a financial liability.

Where the underlying dispute is contractual, criminal prosecution requires evidence of the essential elements of the alleged offence. An outstanding loan alone is not sufficient.

The ruling did not determine whether the builder had committed a separate offence, and the court expressly refrained from deciding the builder's liability in these proceedings.

Does the Judgment Mean the Homebuyer No Longer Has to Repay the Loan?

No. The judgment does not automatically cancel the home loan or extinguish the outstanding debt.

The High Court was considering the legality of the criminal proceedings against Bari, not deciding every question concerning the loan agreement or recovery of the money.

Quashing the criminal case means that the criminal proceedings covered by the order cannot continue against Bari on the basis challenged in this petition.

However, the financial and contractual consequences of the failed property transaction remain separate issues.

The precise liability of the parties, including any recovery claims under the loan agreement and the tripartite agreement, would depend on the applicable contractual provisions and any further legal proceedings.

Homebuyers should therefore not interpret this judgment as general permission to stop paying EMIs whenever a builder delays construction or breaches an agreement.

What Happens to the Money Already Paid by the Homebuyer?

The court's decision did not resolve the fate of Bari's original booking or the money he had already paid towards the property.

The buyer had taken a home loan and made payments but was left without the apartment's legal title after the builder sold it to another party.

The judgment focused on whether criminal proceedings against Bari were legally sustainable. It did not provide a comprehensive determination of his property-related financial claims.

Any recovery of the money paid, compensation or other relief would depend on the applicable agreements, evidence and separate legal remedies available to the parties.

What This Judgment Means for Other Homebuyers

The case offers an important legal lesson for homebuyers who take loans to purchase under-construction properties.

A dispute involving a builder, lender and buyer can raise separate questions about construction obligations, ownership, repayment, contractual remedies and criminal liability.

The judgment highlights several practical considerations:

• Read the tripartite agreement carefully: Check what happens if the builder abandons the project, cancels the booking or fails to hand over the apartment.

• Keep payment records: Preserve loan statements, EMI receipts, booking documents and evidence of payments made to the builder.

• Maintain written communication: Record communications with the builder and lender when construction is delayed or ownership documents are not provided.

• Act promptly when a dispute arises: Seek legal advice before stopping repayments, because an unpaid loan may still have contractual and financial consequences.

• Understand the difference between civil and criminal proceedings: A contractual default does not automatically amount to a criminal offence, but the facts and evidence of each case matter.

Key Takeaways

• The Karnataka High Court quashed criminal proceedings against homebuyer Pritesh Bari.

• Bari had taken a ₹39.92 lakh home loan from SBI to purchase a Bengaluru apartment.

• The builder subsequently sold the same flat to another buyer in March 2023.

• Bari had not received a registered sale deed establishing his ownership.

• He stopped paying EMIs after learning about the subsequent sale.

• SBI initiated criminal proceedings alleging offences including cheating and criminal breach of trust.

• The court found no material showing that Bari participated in or benefited from the subsequent sale.

• The tripartite agreement placed specific repayment obligations on the builder in certain circumstances.

• The court held that an outstanding loan, by itself, does not establish a criminal offence.

• The ruling does not automatically cancel the home loan or settle all financial claims arising from the failed property transaction.

Bottom Line

The Karnataka High Court has ruled in favour of a homebuyer who stopped paying EMIs on a ₹39.92 lakh home loan after discovering that the builder had sold his booked apartment to someone else.

The court found that the buyer had never received legal title to the property and that there was no material showing he had participated in the subsequent sale or acted dishonestly towards the bank.

By quashing the criminal proceedings, the court reaffirmed that an unpaid loan and a failed property transaction do not automatically establish criminal liability.

However, the judgment does not itself erase the outstanding loan or resolve every financial claim. Homebuyers facing similar disputes should review their agreements, preserve evidence and obtain legal advice before deciding how to respond to a loan or builder-related problem.

Disclaimer: This article is for general information and is not legal advice. The implications of a court judgment depend on its precise terms and the facts of each case. Readers facing a similar dispute should consult a qualified legal professional.