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2021 (11) TMI 293 - HC - Indian LawsDishonor of Cheque - insufficiency of funds - offence of criminal breach of trust - delay of more than one year in lodging the FIR or not - fulfilment of ingredients of Sections 406 and 420 of the IPC, to enable the Learned Trial Court to accordingly convict the Respondent No.1 - reversal of order of Conviction, correct or not - HELD THAT - Admittedly, entrustment has been established in the matter at hand, yet it is trite to state that mere entrustment cannot constitute the offence under Section 405 of the IPC. To establish an offence under this Section, the fact of entrustment of the property as well as any or more of the ingredients detailed above have to be established by the Prosecution, the gist being a dishonest intention on the part of the Accused. The burden of proving such dishonest intention is on the Prosecution, which can justifiably be inferred from the attending circumstances, the conduct of the Accused and steps taken by him - It was the duty of the Prosecution to have investigated as to whether there was a Chairman of the Indian Chamber of Commerce and not taken the Statement of P.W.14 as gospel truth, based on Exhibit 23, the response of P.W.14. Further, no Witness was ever produced from the Syndicate Finance Pvt. Ltd. to prove that the Respondent No.1 had ever deposited or not deposited any amount by way of Promoter s Capital Contribution and no investigation appears to have been conducted on this aspect. The onus would shift on the Respondent No.1 only if the Prosecution had conducted investigation as to whether the money taken by the Respondent No.1 had been deposited and on concluding that no amount was deposited by the Respondent No.1 in any of the Financial Institutions mentioned above, the onus would fall on the Respondent No.1 to prove how he had misappropriated the amount. The Prosecution cannot shirk its burden of proving its case beyond a reasonable doubt nor foist such responsibility on the Accused. Hence, the ingredients of Section 405 of the IPC, have clearly not been established. The entire matter of the Appellant appears to pivot around the dishonouring of the Cheque Exhibit 15, for a sum of ₹ 10,00,000/- only, issued by the Respondent No.1 to the Appellant on 30.12.2014, on the ground of insufficiency of funds in the Account of the Respondent No.1 pursuant to which, he lodged the FIR Exhibit 16. It is worth noting that Exhibit 1 was executed between the parties and mere breach of the terms of Exhibit 1 ipso facto does not constitute the offence either of Criminal breach of trust as provided under Section 405 of the IPC or of cheating under Section 420 of the IPC nor is mens rea deducible. It is clear that the Prosecution has failed to establish the ingredients of Sections 405 and 420 of the IPC and inevitably, in the absence of any such evidence, the Learned Trial Court could not have convicted the Respondent No.1 - no error arises in the findings of the Learned First Appellate Court, which has correctly reversed the order of Conviction of the Learned Trial Court. Appeal dismissed.
Issues Involved:
1. Whether the ingredients of Sections 406 and 420 of the IPC were fulfilled to enable the Learned Trial Court to convict the Respondent No.1. 2. Whether the Learned First Appellate Court was in error in reversing the order of Conviction. Detailed Analysis: Issue 1: Fulfillment of Ingredients of Sections 406 and 420 of the IPC 1. Background and Entrustment: - The Appellant lodged an FIR against Respondent No.1 for allegedly taking ?42,70,000 in two tranches in March and August 2013, promising to secure a loan for the Appellant's son's hotel project. The money was taken as "Promoter’s Capital Contribution." - Respondent No.1 issued three post-dated cheques, which were dishonoured due to insufficient funds. 2. Trial Court's Findings: - The Trial Court convicted Respondent No.1 under Sections 406 and 420 of the IPC, citing that the issuance of money receipts and cheques corroborated the breach of trust and dishonest intent to cheat the Appellant. 3. Appellate Court's Findings: - The Appellate Court reversed the conviction, stating no material evidence proved dishonest misappropriation or conversion of the entrusted money for personal use. It also noted that the alleged broking house where the money was suspected to be invested had closed in 2011, and there was a significant delay in lodging the FIR. 4. High Court's Analysis: - Section 406 IPC (Criminal Breach of Trust): - Entrustment was established through money receipts and agreements. - However, dishonest misappropriation was not proved as no evidence showed that Respondent No.1 diverted the money for his use. The prosecution failed to investigate whether Respondent No.1 deposited any money with Syndicate Finance Pvt. Ltd. or the Indian Chamber of Commerce. - Section 420 IPC (Cheating and Dishonestly Inducing Delivery of Property): - No evidence of dishonest inducement at the time of the transaction. The Appellant willingly handed over the money, knowing the Respondent No.1 and the circumstances. - The prosecution could not establish mens rea or fraudulent intent by Respondent No.1 at the inception of the transaction. Issue 2: Error in Reversing the Order of Conviction 1. Prosecution's Burden of Proof: - The prosecution did not discharge its burden of proving beyond a reasonable doubt that Respondent No.1 had dishonest intentions or misappropriated the money. The onus to prove how the money was used would shift to Respondent No.1 only if the prosecution had shown that no money was deposited with the financial institutions. 2. Civil Nature of the Dispute: - The Appellate Court correctly identified the matter as inherently civil, lacking the basic ingredients of Sections 406 and 420 of the IPC. The Appellant's remedy lay in civil proceedings for recovery of money rather than criminal prosecution. 3. High Court's Conclusion: - The High Court found no error in the Appellate Court's judgment. The prosecution failed to establish the essential ingredients of criminal breach of trust and cheating. The conviction by the Trial Court was not supported by sufficient evidence. Conclusion: The High Court dismissed the appeal, upholding the Appellate Court's decision to reverse the Trial Court's conviction of Respondent No.1 under Sections 406 and 420 of the IPC. The prosecution did not prove dishonest misappropriation or fraudulent intent, and the dispute was deemed civil in nature.
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