2014 (2) TMI 1414 - HC - Indian Laws

Dishonor of Cheque - insufficient of funds - dishonest or fraudulent intention on the part of the petitioner at the time of taking the loan or not - civil dispute or criminal offence - offence under Section 420 IPC - HELD THAT - The principles that have emerged are that in order to sustain a plea of offence under section 420 IPC, the complaint has to show that the accused had dishonest or fraudulent intention at the time the complainant had parted with the property or that the accused by making a representation at or before the time the complainant had parted with property, deceived the complainant and thereby induced the complainant to deliver property and that the accused knew such representation to be false - When allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of culpable intention at the time of making initial promise, no offence under section 420 IPC can be said to be made out. It appears from the complaint petition that the petitioner and the complainant had shared a friendly relationship for a long time. The petitioner was in need of Rs. 8 lakhs and he requested the complainant to give him a loan for the said amount. Because of the friendship and bona fide need, the complainant advanced the loan to the petitioner on the understanding that loan will be repaid on or before 12.3.2010 and in token of the assurance and promise, the petitioner also issued one cheque for Rs. 8 lakhs. The complainant had deposited the cheque after 12.3.2010 and the same came to be dishonoured for insufficiency of fund - It appears that the petitioner did not harbour any apprehension that the complainant will not pay the amount and that also perhaps explains why he had not initiated proceeding under Negotiable Instruments Act, 1881 and why he had agreed for re-payment of the loan amount on instalment of Rs. 50,000/- per month. As such, no averment or allegation in the complaint was made that there was any fraudulent or dishonest intention on the part of the petitioner at the time of taking of the loan. From the averments made in the complaint petition and the initial deposition of the complainant, where the complainant only says that accused did not repay the loan as per promise made despite his many requests and as the accused finally refused to re-pay the loan, he had filed the complaint, it appears to me that the dispute between the parties is purely of civil nature arising out of breach of contract. Subsequent refusal to pay the balance amount does not satisfy the ingredients of cheating inasmuch as dishonest intention at the time of initial transaction is lacking. An offence of cheating would be constituted when the accused had fraudulent or dishonest intention at the time of making promise or representation. Petition allowed.

Summary

Issues Involved:
1. Quashing of Complaint Case No. 268C/11.
2. Validity of the order dated 29.2.2012 taking cognizance of the offence under Section 420 IPC.
3. Determination of whether the dispute is of civil or criminal nature.
4. Examination of the presence of dishonest or fraudulent intention at the time of taking the loan.

Detailed Analysis:

1. Quashing of Complaint Case No. 268C/11:
The petitioner filed an application under Section 482 of the Code of Criminal Procedure, 1973, and/or Article 227 of the Constitution of India, seeking to quash Complaint Case No. 268C/11 pending in the Court of Sub-Divisional Judicial Magistrate (S), Bongaigaon. The petitioner argued that the complaint did not disclose any dishonest or fraudulent intention at the time of taking the loan, and hence, the dispute was purely civil. The court noted that the complaint and the initial deposition did not contain any allegations of fraudulent or dishonest intention at the inception of the transaction, leading to the conclusion that the dispute was civil in nature.

2. Validity of the Order Dated 29.2.2012:
The order dated 29.2.2012, passed by the learned SDJM(S), Bongaigaon, took cognizance of the offence under Section 420 IPC and issued summons to the petitioner. The petitioner contended that the mere dishonor of the cheque due to insufficient funds did not satisfy the ingredients of Section 420 IPC. The court examined the complaint and the initial deposition, finding no mention of a fraudulent or dishonest intention at the time of the loan transaction. Consequently, the court held that the order taking cognizance of the offence under Section 420 IPC was not sustainable.

3. Determination of Whether the Dispute is of Civil or Criminal Nature:
The petitioner argued that the dispute was purely civil, arising from a breach of contract, and could not be converted into a criminal offence. The court reviewed the complaint and noted that the complainant had advanced the loan due to a long-standing friendly relationship and that the petitioner had issued a cheque as a token of assurance. Even after the cheque was dishonored, the complainant agreed to accept repayment in monthly installments. The court concluded that the dispute was civil in nature, as there was no indication of fraudulent or dishonest intention at the inception of the transaction.

4. Examination of the Presence of Dishonest or Fraudulent Intention at the Time of Taking the Loan:
The court emphasized that an offence of cheating under Section 420 IPC requires a fraudulent or dishonest intention at the time of making the promise or representation. The complaint and the initial deposition did not allege any such intention at the time the loan was advanced. The court cited several precedents, including Hari Prasad Chamaria v. Bishun Kumar Surekha & Ors., Joseph Salvaraja v. State of Gujarat & Ors., and Manoranjan Halder v. M/s. Machfab Engineering Industries, to support the principle that the absence of dishonest intention at the initial stage negates the offence of cheating. The court concluded that the subsequent refusal to repay the loan did not relate back to the time of the initial transaction, and thus, no offence under Section 420 IPC was made out.

Conclusion:
The court allowed the petition, setting aside and quashing the impugned order dated 29.2.2012 and Complaint Case No. 268C/11 pending in the court of SDJM(S), Bongaigaon. The court held that the dispute was civil in nature, arising from a breach of contract, and did not constitute an offence under Section 420 IPC due to the lack of dishonest or fraudulent intention at the time of the loan transaction.