Criminal Liability For False Advertising In Real Estate
🔹 1. Overview
(a) What is False Advertising in Real Estate?
False advertising in real estate occurs when a developer, builder, or agent makes misleading statements to buyers about properties, such as:
Overstating the size, amenities, or location of a property
Falsely claiming approvals from authorities
Promising unrealistic possession dates
Offering “exclusive” deals or discounts that don’t exist
This misrepresentation can lead to criminal liability if done knowingly and with intent to cheat or defraud buyers.
(b) Applicable Legal Provisions in India
Indian Penal Code (IPC)
Section 420 IPC: Cheating and dishonestly inducing delivery of property
Section 406 IPC: Criminal breach of trust (if advances collected are misappropriated)
Section 467–468 IPC: Forgery-related offences (if documents are faked)
Section 120B IPC: Criminal conspiracy
Consumer Protection Act (2019)
Section 2(1)(r): Misleading advertisements are actionable as unfair trade practices
Complaints can be filed with the Consumer Commission
Real Estate (Regulation and Development) Act, 2016 (RERA)
Sections 59, 60: Penalties for misrepresentation of project details
Criminal penalties under Section 59 include imprisonment up to 3 years or fines
🔹 2. Detailed Case Law Analysis
Case 1: DLF Ltd. v. Haryana Real Estate Regulatory Authority & Ors. (2018)
Facts:
DLF advertised a luxury housing project promising amenities like clubhouses, swimming pools, and gated security. Buyers complained that amenities were never delivered, and delays in possession were substantial.
Held:
The National Consumer Disputes Redressal Commission (NCDRC) held that:
Misrepresentation in advertisements constituted cheating under Section 420 IPC.
Developers must strictly adhere to promotional claims.
Compensation was awarded to buyers along with interest.
Key Takeaway:
Even large developers cannot escape liability by claiming “promotional exaggeration” if misrepresentation is proven.
Case 2: State of Maharashtra v. Purushottam P. Shinde (2004 Cri LJ 1271 Bom)
Facts:
A real estate agent advertised plots with false land titles and forged approvals. Buyers paid advances based on these advertisements.
Held:
Bombay High Court convicted the accused under Sections 420 and 468 IPC.
False advertising that induces buyers to part with money constitutes criminal fraud, not just civil wrong.
Principle:
Falsely claiming ownership or approvals is actionable under cheating and forgery laws.
Case 3: M. K. Builders v. State of Kerala (2011 Cri LJ 2002 Ker)
Facts:
A construction company advertised apartments as “RERA approved” and with guaranteed possession in two years, but neither claim was true.
Held:
Kerala High Court observed that deliberate false claims about legal approvals and possession dates can attract Sections 420 and 406 IPC.
Developers cannot evade criminal liability simply because a contract exists; intention to deceive is key.
Case 4: Lanco Infratech v. State of Telangana (2015)
Facts:
The company advertised plots with promised government-backed utilities and infrastructure. Buyers later found that facilities were non-existent.
Held:
Court ruled that misrepresentation amounts to cheating and unfair trade practice.
Company directors can be personally liable under IPC Sections 420, 406, and RERA penalties.
Principle:
Corporate officers may face criminal liability even if they delegate operations, provided the deception is systemic.
Case 5: Shakti Builders v. Union of India (2017 NCDRC)
Facts:
False advertisements claimed “exclusive ownership of villas” and “zero maintenance charges for 5 years.” Buyers sued after discovering hidden charges.
Held:
NCDRC ordered refunds, compensation, and criminal investigation under Section 420 IPC.
False promises in marketing materials are treated as intentional deceit, not mere exaggeration.
🔹 3. Legal Principles
Mens Rea (Intention to Deceive):
Criminal liability requires intentional misrepresentation to induce buyers to act.
Material Misrepresentation:
Statements about area, approvals, amenities, or legal status that affect buyers’ decisions are actionable.
Corporate Responsibility:
Directors and promoters may be held personally liable if aware of misleading advertisements.
Civil vs Criminal:
Civil remedies include refund, compensation, and consumer protection claims.
Criminal remedies (IPC/RERA) apply when fraudulent intent is present.
🔹 4. Conclusion
False advertising in real estate is not just a civil matter—it can constitute criminal fraud.
Sections 420 (cheating), 406 (criminal breach of trust), and 468 (forgery) IPC are commonly applied.
RERA has strengthened regulatory oversight and criminal penalties.
Courts consistently uphold that buyers’ trust cannot be exploited, and misrepresentation in advertisements can lead to imprisonment and fines.
RELATED Blog
comments