2021 (9) TMI 943 - HC - Indian Laws

Dishonor of Cheque - accusation of cheating - acquittal of the accused - fraudulent or dishonest intention at the time of making promise or representation - conviction under 420 of IPC - HELD THAT - This Court finds that although the allegation was made in the complaint petition that the petitioner had not only induced the complainant to take E.S.S. from the company but had also, on false assurance of handsome return as well as employment of son and son-in-law of the complainant, took huge amount from the complainant, but failed to return the money - The learned trial court considered the conduct of the petitioner after the transactions, particularly with regards to non-payment of any amount pursuant to agreement entered during the pendency of the case and convicted the petitioner for offence under section 420 IPC. The learned appellate court, after considering the materials on record, from perusal of the evidences adduced by the witnesses examined by the complainant it transpires that the money was given by the complainant to the petitioner as friendly loan. The learned appellate court also considered the conduct of the petitioner and held that it was never his intention to repay the amount to the complainant and considered that in part payment of the loan amount the petitioner issued cheque in favour of the complainant, but the same also stood dishonoured twice and the cheque issued to Suresh Agarwal was also dishonoured - Considering the conduct of the petitioner including the agreement which was entered into after the institution of the case, the learned appellate court was convinced that it was never the intention of the petitioner to repay the loan amount to the complainant and with these findings, the learned appellate court upheld the conviction of the petitioner for offence under Section 420 IPC. It is a well-established principle of law that every breach of contract or every dispute under an agreement or every dispute in connection with transaction of money and failure to repay does not amount to the offence of cheating. It would amount to cheating only in those cases where there was any deception played at the very inception. To establish the offence of cheating, the accused should be shown to have had fraudulent or dishonest intention at the time of making promise or representation - the learned appellate court, while upholding the conviction under section 420 IPC, recorded the conduct of the petitioner relating to events after the completion of entire transaction i.e. bouncing of cheques issued by the petitioner and non-adherence to the agreement to pay the amount which was entered into between the parties during the pendency of the case to give a finding that the petitioner never intended to return the amount. Such consideration of the conduct of the petitioner subsequent to completion of transaction could not have been relied upon by the learned appellate court to sustain the conviction of the petitioner under Section 420 of Indian Penal Code as the basic ingredient of the offence is dishonest intention of the petitioner since inception, which is totally absent in the instant case. This Court also finds that the dispute between the petitioner and the complainant was essentially in the realm of civil dispute and there being no evidence on record that the petitioner had the intention to cheat the complainant right from the inception of the transaction of extending friendly loan, the conviction of the petitioner under Section 420 of Indian Penal Code cannot be sustained in the eyes of law - the conviction and sentence of the petitioner for alleged offence under Section 420 of Indian Penal Code is hereby set-aside. The criminal revision petition is allowed.

Issues Involved:
1. Whether the basic ingredients of the offence under Section 420 IPC were satisfied.
2. Whether the transaction between the complainant and the petitioner was of a civil nature or constituted a criminal offence.
3. Whether the petitioner had a dishonest intention at the inception of the transaction.
4. The relevance of the subsequent conduct of the petitioner in determining the offence under Section 420 IPC.

Issue-wise Detailed Analysis:

1. Whether the basic ingredients of the offence under Section 420 IPC were satisfied:

The petitioner argued that the basic ingredients of the offence under Section 420 IPC were not satisfied, as the transaction was a friendly loan, which negated the criminal intent necessary for a conviction under this section. The court reiterated that for an offence of cheating to be made out, the complainant must show that the accused had fraudulent or dishonest intention at the time of making the promise or representation. The court found that the evidence did not support the presence of such intention at the inception of the transaction.

2. Whether the transaction between the complainant and the petitioner was of a civil nature or constituted a criminal offence:

The court examined the nature of the transaction and found that it was essentially a civil dispute. The transaction was characterized as a friendly loan, and the failure to repay did not inherently constitute a criminal offence. The court noted that every breach of contract does not amount to cheating unless there was deception at the very inception of the transaction.

3. Whether the petitioner had a dishonest intention at the inception of the transaction:

The court scrutinized the evidence and found no indication that the petitioner had a dishonest intention at the inception of the transaction. The complainant and the witnesses described the transaction as a friendly loan, and there was no evidence that the petitioner intended to cheat the complainant from the beginning. The appellate court's reliance on the subsequent conduct of the petitioner to infer dishonest intention was found to be misplaced.

4. The relevance of the subsequent conduct of the petitioner in determining the offence under Section 420 IPC:

The court highlighted that the subsequent conduct of the petitioner, such as the bouncing of cheques and failure to adhere to an agreement to repay, could not establish the initial dishonest intention required for a Section 420 IPC offence. The court referred to several Supreme Court judgments emphasizing that the intention to cheat must be present at the inception of the transaction, and subsequent failure to fulfill a promise does not constitute cheating.

Conclusion:

The court concluded that the conviction of the petitioner under Section 420 IPC could not be sustained due to the absence of evidence showing dishonest intention at the inception of the transaction. The judgment of the appellate court upholding the conviction was set aside, and the petitioner was acquitted. The court emphasized that the dispute was of a civil nature and did not meet the criteria for a criminal offence under Section 420 IPC. The petitioner was discharged from his liabilities under the bail bond, and the criminal revision petition was allowed.

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