Dismissed

Zulfikar Ali Bhutto v. State of Hp and Ors.

Himachal Pradesh HC10 Sept 2024CRMMO/1221/2022

Case brief

AI extract

What is this about?

An accused challenged the framing of cheating charges for selling property hypothecated/mortgaged to Bank of India in violation of his undertaking not to encumber it. The High Court held defence documents cannot be considered at charge stage and applied Indian Oil Corp to hold allegations disclosed prima facie Section 420 offence. Petition dismissed; orders upheld.

What the court decided

AI extract

Zulfikar Ali Bhutto Vs State of Hp and Ors. — Quashing and FIR | Himachal Pradesh HC (2024)

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Neutral Citation No. ( 2024:HHC:8172 )

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IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA

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Cr. MMO No 1221 of 2022. Reserved on: 07.08.2024 Date of Decision: 10.09.2024.

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...Petitioner Zulfikar Ali Bhutto Versus State of H.P & others ...Respondents

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CCoram

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Hon’ble Mr Justice Rakesh Kainthla , Judge. Whether approved for reporting?¹ Yes For the Petitioner : Mr. Mukesh Sharma, Advocate. : For the Respondent Mr. Prashant Sen, Deputy Advocate General for respondents No.1 and 2. Mr. Ranvir Chauhan, Advocate, for respondent No.3.

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Rakesh Kainthla, Judge

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The petitioner has filed the present petition against the order dated 12.11.2021 passed by learned Additional Sessions Judge, Ghumarwin (Revisional Court) vide which the order dated 22.03.2017 passed by learned Judicial Magistrate First Class, Court No.2, Ghumarwin (learned Trial Court) was upheld. (Parties shall

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1 Whether reporters of Local Papers may be allowed to see the judgment? Yes.

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hereinafter be referred to in the same manner as they were arrayed before the learned Trial Court for convenience).

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Briefly stated, the facts giving rise to the present petition are that the Bank of India through its Senior Manager filed a written application before the police asserting that the petitioner/accused availed cash credit limit of ₹6,00,000/- being the proprietor of M/s Raja General Store. He executed an agreement of hypothecation and an equitable mortgage of his share as collateral security. He agreed not to sell, mortgage, lease, charge or otherwise part with the possession of the hypothecated and mortgaged property till the repayment of the loan, The accused transferred the property in violation of the agreement executed by him. The police registered the FIR and conducted the investigation. The police found that the accused had taken a loan from the Bank of India on 31.07.2014, and sold the shop and the house to Shehnaz Hussain. The accused had obtained ₹58,00,000/- from Prem Chand and Jitender and did not execute any sale deed in their favour. The accused had taken a loan of ₹3 lacs on 06.10.2001 and ₹ 3 lacs on 16.08.2002 against his property bearing Khasra No. 390/362 and the shops and the houses located on it. He had entered into an agreement with Prem Chand and Jitender Kumar to sell the

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property for ₹ 60 lacs. He had received ₹28 lacs for the shop and the house. The accused was to receive the remaining amount of ₹ 32 lacs after vacating the shop and the house but the accused failed to do so; hence, the amount of ₹32 lacs was not paid to him. FIR No.217 of 2009 was registered against the accused for the commission of an offence punishable under Section 420 IPC. The accused got the sale deed registered in favour of Shehnaz Hussain on 28.10.2009 for ₹ 13 lacs. The police seized the documents and recorded the statements of witnesses. The disputed documents and the specimen signatures of the accused were sent to the State Forensic Science Laboratory, Jungas and as per the report, the person who wrote the specimen and admitted handwriting also wrote the disputed documents. The ingredients of Section 420 IPC were duly satisfied. Hence, the challan was filed before the Court.

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The learned Trial Court summoned the accused and framed the charges against him for the commission of offences punishable under Sections 420 and 421 of IPC.

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The accused preferred a revision against the order framing the charges. Learned Additional Sessions Judge (Revisional Court) held that the accused had induced the bank to part with the

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Neutral Citation No. ( 2024:HHC:8172 )

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money by making it to believe that he had a shop and the godown as security for repayment. He transferred the collateral security in violation of the agreement. Learned Trial Court had rightly framed the charges against the accused and no interference was required.

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Being aggrieved from the order passed by the learned Revisional Court, the accused has filed the present petition asserting that the learned Trial Courts erred in framing charges against the accused. As per the prosecution, the accused had taken a loan from the bank and defaulted in depositing the loan amount with the bank. He sold the property hypothecated/mortgaged to some other person by executing a sale deed No. 562 of 2010 dated 03.06.2010 before the Sub Registrar, Ghumarwin. No mortgage deed was obtained by the prosecution. The accused had created an equitable amount of his share measuring 0-1 bigha and the shop constructed on it as collateral security. The mortgage by deposit of title deed does not apply to the State of H.P. Hence, the plea that an equitable mortgage was created is not acceptable. The registration of the Mortgage deed is necessary as per Section 17 of the Registration Act and in the absence of the same, no case for the commission of an offence punishable under Section 420 of IPC is made out. The accused has filed a civil suit against his Power of

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Attorney which is pending adjudication. Therefore, it was prayed that the present petition be allowed and the order passed by learned Courts below be set aside.

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The petition is opposed by filing a reply by the State asserting that the learned Trial Court had rightly framed the charges and the learned Revisional Court had rightly dismissed the revision petition. The FIR disclosed the commission of the cognizable offence and the police conducted the investigation. The police filed a charge sheet against the accused before the learned Trial Court. The documents regarding equitable mortgage were executed by the bank which were attached with the case file. The petitioner had made a declaration that he would not create any lien, charge, mortgage or encumbrance over the assets and would not borrow the money against the assets. He had entered into an agreement to sell the mortgaged property with Jakir Hussain and Mohammad Shehnaz in violation of the declaration made by him. It amounted to a breach of the contract executed by the petitioner/accused. Therefore, it was prayed that the present petition be dismissed.

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I have heard Mr Mukesh Sharma, learned Counsel for the petitioner/accused, Mr Prashant Sen, learned Deputy Advocate General for the respondents N0.1 & 2/State and Mr Ranveer Chauhan, learned Counsel for respondent No.3/complainant.

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Mr. Mukesh Sharma, learned counsel for the petitioner submitted that the learned Trial Court erred in framing the charges against the accused and the learned Revisional Court erred in dismissing the revision petition. The petitioner/accused has filed a civil suit against his power of attorney and the agreement was not executed with the consent of the petitioner/accused. The equitable mortgage could not have been executed in the State of H.P. Therefore, he prayed that the present petition be allowed and the order passed by the learned Trial Court and learned Revisional Court be set aside.

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Mr. Prashant Sen, learned Deputy Advocate General for the respondent/State submitted that the jurisdiction of this Court under Section 482 Cr.P.C. is quite limited. It cannot act as an Appellate or Revisional Court and has to see any defect in the procedure adopted by learned Courts below. The Court cannot look into the documents placed on record by the petitioner/accused

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which do not form part of the record of the learned Trial Court. Therefore, reliance cannot be placed upon the plaint and other documents annexed to the present petition. It was specifically mentioned in the charge sheet that the petitioner/accused had entered into an agreement with the Bank and agreed not to sell, mortgage or encumber the collateral security. He sold the hypothecated/mortgaged property and did not return the amount to the bank. The learned Trial Court had rightly framed the charges and the learned Revisional Court had rightly dismissed the revision. Therefore, he prayed that the present petition be dismissed.

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Mr Ranvir Chauhan, learned counsel for respondent No.3/complainant adopted the submissions of Mr. Prashant Sen, learned Deputy Advocate General.

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I have given considerable thought to the submissions made at the bar and have gone through the record carefully.

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The petitioner/accused has filed a revision against the order framing the charges by the learned Trial Court. This revision was dismissed by the learned Revisional Court; hence, the petitioner/accused approached this Court by filing a petition under Section 482 of Cr.P.C. It was laid down by the Hon’ble Supreme

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Court in Krishnan Vs. Krishnaveni (1997) 4 SCC 241 that the High Court has inherent power under Section 482 of Cr.P.C. to do complete justice and prevent the abuse of the process of law. It was observed:

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“10. Ordinarily, when revision has been barred by Section 397(3) of the Code, a person — accused/complainant — cannot be allowed to take recourse to the revision to the High Court under Section 397(1) or inherent powers of the High Court under Section 482 of the Code since it may amount to circumvention of the provisions of Section 397(3) or Section 397(2) of the Code. It is seen that the High Court has suo motu power under Section 401 and continuous supervisory jurisdiction under Section 483 of the Code. So, when the High Court on examination of the record finds that there is a grave miscarriage of justice or abuse of the process of the courts or the required statutory procedure has not been complied with or there is failure of justice or order passed or sentence imposed by the Magistrate requires correction, it is but the duty of the High Court to have it corrected at the inception lest grave miscarriage of justice would ensue. It is, therefore, to meet the ends of justice or to prevent abuse of the process that the High Court is preserved with inherent power and would be justified, under such circumstances, to exercise the inherent power and in an appropriate case even revisional power under Section 397(1) read with Section 401 of the Code. As stated earlier, it may be exercised sparingly to avoid needless multiplicity of procedure, unnecessary delay in trial and protraction of proceedings. The object of a criminal trial is to render public justice, to punish the criminal and to see that the trial is concluded expeditiously before the memory of the witness fades out. The recent trend is to delay the trial and threaten the witness or to win over the witness by promise or inducement. These malpractices need to be curbed and public justice can be ensured only when trial is conducted expeditiously.

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11. In Madhu Limaye v. State of Maharashtra [(1977) 4 SCC 551: 1978 SCC (Cri) 10] a three-judge Bench was to consider the scope of the power of the High Court under Section 482 and Section 397(2) of the Code. This Court held that the bar on the power of revision was put to facilitate expedient disposal of the cases but in Section 482 it is provided that nothing in the Code, which would include Section 397(2) also, shall be deemed to limit or affect the inherent powers of the High Court. On a harmonious construction of the said two provisions on this behalf, it was held that though the High Court has no power of revision in an interlocutory order, still the inherent power will come into play when there is no provision for redressal of the grievance of the aggrieved party. In that case, when allegations of defamatory statements were published in the newspapers against the Law Minister, the State Government decided to prosecute the appellant for an offence under Section 500 IPC. After obtaining the sanction, on a complaint made by the public prosecutor, cognizance of the commission of the offence by the appellant was taken to trial in the Sessions Court. Thereafter, the appellant filed an application to dismiss the complaint on the ground that the court had no jurisdiction to entertain the complaint. The Sessions Judge rejected all the contentions and framed the charges under Section 406. The Order of the Sessions Judge was challenged in revision in the High Court. On a preliminary objection raised on maintainability, this Court held that the power of the High Court to entertain the revision was not taken away under Section 397 or inherent power under Section 482 of the Code. 12. In V.C. Shukla v. State through CBI [1980 Supp SCC 92: 1980 SCC (Cri) 695: (1980) 2 SCR 380] (SCR at p. 393) a four-judge Bench per majority had held that sub-section (3) of Section 397, however, does not limit at all the inherent powers of the High Court contained in Section 482. It merely curbs the revisional power given to the High Court or the Sessions Court under Section 397(1) of the Code. In Rajan Kumar Machananda case [1990 Supp SCC 132: 1990 SCC (Cri) 537] the case related to the release of a truck from attachment,

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obviously on the filing of an interlocutory application. It was contended that there was a prohibition on the revision by operation of Section 397(2) of the Code. In that context, it was held that it was not revisable under Section 482 in the exercise of inherent powers by operation of sub-section (3) of Section 397. On the facts in that case, it was held that by provisions contained in Section 397(3), the revision is not maintainable. In the Dharampal case [(1993) 1 SCC 435: 1993 SCC (Cri) 333] which related to the exercise of power to issue an order of attachment under Section 146 of the Code, it was held that the inherent power under Section 482 was prohibited. On the facts, in that case, it could be said that the learned Judges would be justified in holding that it was not revisable since it was a prohibitory interim order of attachment covered under Section 397(2) of the Code but the observations of the learned Judges that the High Court had no power under Section 482 of the Code were not correct in view of the ratio of this Court in Madhu Limaye case [(1977) 4 SCC 551: 1978 SCC (Cri) 10 ] as upheld in V.C. Shukla case [1980 Supp SCC 92: 1980 SCC (Cri) 695 : (1980) 2 SCR 380] and also in view of our observations stated earlier. The ratio in the Deepti case [(1995) 5 SCC 751: 1995 SCC (Cri) 1020] is also not apposite to the facts in the present case. To the contrary, in that case, an application for discharge of the accused was filed in the Court of the Magistrate for an offence under Section 498-A IPC. The learned Magistrate and the Sessions Judge dismissed the petition. In the revision at the instance of the accused, on a wrong concession made by the counsel appearing for the State that the record did not contain allegations constituting the offence under Section 498-A, the High Court without applying its mind had discharged the accused. On appeal, this Court after going through the record noted that the concession made by the counsel was wrong. The record did contain the allegations to prove the charge under Section 498-A IPC. The High Court, since it failed to apply its mind, had committed an error of law in discharging the accused leading to the miscarriage of justice. In that context, this Court held that the order of the Sessions Judge operated as a bar to entertain the application under Section

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482 of the Code. In view of the fact that the order of the High Court had led to the miscarriage of justice, this Court had set aside the order of the High Court and confirmed that of the Magistrate.

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13. The ratio of Simrikhia case [(1990) 2 SCC 437: 1990 SCC (Cri) 327] has no application to the facts in this case. Therein, on a private complaint filed under Sections 452 and 323 IPC the Judicial Magistrate, First Class had taken cognizance of the offence. He transferred the case for inquiry under Section 202 of the Code to the Second-Class Magistrate who after examining the witnesses issued a process to the accused. The High Court exercising the power under Section 482 dismissed the revision. But subsequently, on an application filed under Section 482 of the Code, the High Court corrected it. The question was whether the High Court was right in reviewing its order. In that factual backdrop, this Court held that the High Court could not exercise inherent power for the second time. The ratio therein, as stated above, has no application to the facts in this case.

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14. In view of the above discussion, we hold that though the revision before the High Court under sub-section (1) of Section 397 is prohibited by sub-section (3) thereof, inherent power of the High Court is still available under Section 482 of the Code and as it is paramount power of continuous superintendence of the High Court under Section 483, the High Court is justified in interfering with the order leading to miscarriage of justice and in setting aside the order of the courts below. It remitted the case to the Magistrate for a decision on merits after consideration of the evidence. We make it clear that we have not gone into the merits of the case. Since the High Court has left the matter to be considered by the Magistrate, it would be inappropriate at this stage to go into that question. We have only considered the issue of power and jurisdiction of the High Court in the context of the revisional power under Section 397(1) read with Section 397(3) and the inherent powers. We do not find any justification warranting interference in the appeal.”

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13. This position was reiterated in Rajinder

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Prasad v. Bashir, (2001) 8 SCC 522 , wherein it was held:

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“…though the power of the High Court under Section 482 of the Code is very wide, yet the same must be exercised sparingly and cautiously, particularly in a case where the petitioner is shown to have already invoked the revisional jurisdiction under Section 397 of the Code. Only in cases where the High Court finds that there has been failure of justice or misuse of judicial mechanism or procedure, sentence or order was not correct, the High Court may, in its discretion, prevent the abuse of the process or miscarriage of justice by exercise of jurisdiction under Section 482 of the Code. It was further held, “Ordinarily, when revision has been barred by Section 397(3) of the Code, a person - accused/complainant - cannot be allowed to take recourse to the revision to the High Court under Section 397(1) or inherent powers of the High Court under Section 482 of the Code since it may amount to circumvention of provisions of Section 397(3) or Section 397(2) of the Code.”

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A similar view was taken in Kailash Verma v. Punjab State

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Civil Supplies Corporation, (2005) 2 SCC 571 , and it was held:—

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“5. It may also be noticed that this Court in Rajathi v. C. Ganesan [(1999) 6 SCC 326: 1999 SCC (Cri) 1118 ] said that the power under Section 482 of the Criminal Procedure Code has to be exercised sparingly and such power shall not be utilised as a substitute for second revision. Ordinarily, when a revision has been barred under Section 397(3) of the Code, the complainant or the accused cannot be allowed to take recourse to revision before the High Court under Section 397(1) of the Criminal Procedure Code as it is prohibited under Section 397(3) thereof. However, the High Court can entertain a petition under Section 482 of the Criminal Procedure Code when there is a serious

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miscarriage of justice and abuse of the process of the court or when mandatory provisions of the law are not complied with and when the High Court feels that the inherent jurisdiction is to be exercised to correct the mistake committed by the revisional court.”

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This position was reiterated in Shakuntala Devi v. Chamru Mahto , (2009) 3 SCC 310: (2009) 2 SCC (Cri) 8: 2009 SCC OnLine SC 292 , wherein it was observed: -

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“24. It is well settled that the object of the introduction of sub-section (3) in Section 397 was to prevent a second revision to avoid frivolous litigation, but, at the same time, the doors to the High Court to a litigant who had lost before the Sessions Judge were not completely closed and in special cases, the bar under Section 397(3) could be lifted. In other words, the power of the High Court to entertain a petition under Section 482, was not subject to the prohibition under sub-section (3) of Section 397 of the Code and was capable of being invoked in appropriate cases. Mr Sanyal's contention that there was a complete bar under Section 397(3) of the Code debarring the High Court from entertaining an application under Section 482 thereof does not, therefore, commend itself to us.

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25. On the factual aspect, the Magistrate came to a finding that the appellants were entitled to possession of the disputed plot. It is true that while making such declaration under Section 145(4) of the Code, the Magistrate could have also directed that the appellants be put in possession of the same.

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26. The question which is now required to be considered is whether the High Court was right in quashing the order passed by the Magistrate, which was confirmed by the Sessions Judge, on the ground that the application made by the appellants under Section 145(6) of the Code was barred firstly by limitation under Article 137 of the Limitation Act and also by virtue of Section 6 of the Specific Relief Act, 1963.

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16. Delhi High Court also took a similar view in Surender Kumar Jain v. State, ILR (2012) 3 Del 99 and held: —

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“5. The issue regarding the filing of a petition before the High Court after having availed the first revision petition before the Court of Sessions has come up before the Supreme Court and this Court repeatedly. While laying that section 397(3) Cr. P.C. laid the statutory bar of the second revision petition, the courts have held that the High Court did enjoy inherent power under section 82 (sic) Cr. P.C. as well to entertain petitions even in those cases. But, that power was to be exercised sparingly and with great caution, particularly, when the person approaching the High Court has already availed remedy of first revision in the Sessions Court. This was not that in every case the person aggrieved of the order of the first revision court would have the right to be heard by the High Court to assail the same order which was the subject matter of the revision before Sessions Court. It was all to depend not only on the facts and circumstances of each case but as on whether the impugned order brought about a situation which is an abuse of the process of the court, there was a serious miscarriage of justice or the mandatory provisions of law were not complied with. The power could also be exercised by this Court if there was an apparent mistake committed by the revisional court. Reference in this regard can be made to the judgments of the Supreme Court i n Madhu Limave v. State of Maharashtra (1977) 4 SCC 551, State of Orissa v. Ram Chander Aggarwal, (1979) 2 SCC 305: AIR 1979 SC 87, Rai Kapoor v. State (Delhi Administration) 1980 Cri LJ 202, Krishnan v. Krishnaveni and Kailash Verma v. Punjab State Civil Supplies Corporation (2005) 2 SCC 571 .”

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17. Therefore, the Court cannot exercise the power of

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revision by taking recourse to Section 482 of Cr.P.C. However, the Court has power under Section 482 of Cr.P.C. to correct any serious

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miscarriage of justice and abuse of the process of the Court or violation of the mandatory provision of law. Hence, the Court has to determine whether any miscarriage of justice has taken place or there is a violation of the mandatory provision of law.

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The petitioner has relied upon the copies of the civil suits filed by him against Mohammad Shehnaz and others to submit that the Power of Attorney had been challenged by filing a civil suit. The power of attorney had exceeded his authority by executing the Sale Deed. There is a force in the submission of Mr. Prashant Sen, learned Deputy Advocate General for the respondent/State that it is not permissible to look into the documents not forming part of the record of the learned Trial Court while considering the question of discharge of the accused. It was laid down by the Hon’ble Supreme Court in State of Gujarat v. Dilipsinh Kishorsinh Rao, 2023 SCC OnLine SC 1294 that the learned Revisional Court cannot look into the material produced by the accused and has to confine itself to the material collected by the prosecution. It was observed:

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“7. It is trite law that the application of judicial mind is necessary to determine whether a case has been made out by the prosecution for proceeding with trial and it would not be necessary to dwell on the pros and cons of the matter by

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examining the defence of the accused when an application for discharge is filed. At that stage, the trial judge has to merely examine the evidence placed by the prosecution in order to determine whether or not the grounds are sufficient to proceed against the accused on the basis of charge sheet material. The nature of the evidence recorded or collected by the investigating agency or the documents produced in which prima facie it reveals that there are suspicious circumstances against the accused, so as to frame a charge would suffice and such material would be taken into account for the purposes of framing the charge. If there is no sufficient ground for proceeding against the accused necessarily, the accused would be discharged, but if the court is of the opinion, after such consideration of the material there are grounds for presuming that the accused has committed the offence which is triable, then necessarily charge has to be framed.

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8. At the time of framing of the charge and taking cognizance the accused has no right to produce any material and call upon the court to examine the same. No provision in the Code grants any right to the accused to file any material or document at the stage of framing of charge. The trial court has to apply its judicial mind to the facts of the case as may be necessary to determine whether a case has been made out by the prosecution for trial on the basis of charge-sheet material only.

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9. If the accused is able to demonstrate from the chargesheet material at the stage of framing the charge which might drastically affect the very sustainability of the case, it is unfair to suggest that such material should not be considered or ignored by the court at that stage. The main intention of granting a chance to the accused of making submissions as envisaged under Section 227 of the Cr. P.C. is to assist the court to determine whether it is required to proceed to conduct the trial. Nothing in the Code limits the ambit of such hearing, to oral hearing and oral arguments only and therefore, the trial court can consider the material produced by the accused before the I.O.

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10. It is a settled principle of law that at the stage of considering an application for discharge the court must proceed on an assumption that the material which has been brought on record by the prosecution is true and evaluate said material in order to determine whether the facts emerging from the material taken on its face value, disclose the existence of the ingredients necessary of the offence alleged. This Court in State of Tamil Nadu v. N. Suresh Rajan, (2014) 11 SCC 709 adverting to the earlier propositions of law laid down on this subject has held:

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“29. We have bestowed our consideration to the rival submissions and the submissions made by Mr. Ranjit Kumar commend us. True it is that at the time of consideration of the applications for discharge, the court cannot act as a mouthpiece of the prosecution or act as a post office and may sift evidence in order to find out whether or not the allegations made are groundless so as to pass an order of discharge. It is trite that at the stage of consideration of an application for discharge, the court has to proceed with an assumption that the materials brought on record by the prosecution are true and evaluate the said materials and documents with a view to find out whether the facts emerging therefrom taken at their face value disclose the existence of all the ingredients constituting the alleged offence. At this stage, the probative value of the materials has to be gone into and the court is not expected to go deep into the matter and hold that the materials would not warrant a conviction. In our opinion, what needs to be considered is whether there is a ground for presuming that the offence has been committed and not whether a ground for convicting the accused has been made out. To put it differently, if the court thinks that the accused might have committed the offence on the basis of the materials on record on its probative value, it can frame the charge; though for conviction, the court has to come to the conclusion that the accused has committed the offence. The law does not permit a mini-trial at this stage.”

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11. The defence of the accused is not to be looked into at the stage when the accused seeks to be discharged. The expression “the record of the case” used in Section 227 Cr. P.C. is to be understood as the documents and articles, if any, produced by the prosecution. The Code does not give any right to the accused to produce any document at the stage of framing of the charge. The submission of the accused is to be confined to the material produced by the investigating agency.

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This position was reiterated in Ram Prakash Chadha v. State of U.P., 2024 SCC OnLine SC 1709 wherein it was observed:

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We have already considered the meaning of the expression “the record of the case and the documents submitted therewith” relying on the decision in Debendra Nath Padhi's case (supra) only to re-assure as to what are the materials falling under the said expression and thus, available for consideration of an application filed for discharge under Section 227, Cr. P.C. In light of the same, there cannot be any doubt with respect to the position that at the stage of consideration of such an application for discharge, a defence case or material, if produced at all by the accused, cannot be looked at all. Once “the record of the case and the documents submitted therewith” are before the Court they alone can be looked into for considering the application for discharge and thereafter if it considers that there is no sufficient ground for proceeding against the accused concerned then he shall be discharged after recording reasons therefor.”

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Thus, the documents filed with the petition cannot be

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looked into as per the binding precedent of the Hon’ble Supreme Court.

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A specific allegation was made against the petitioner that he had furnished a declaration before the bank that he would not mortgage, sell or encumber the collateral security furnished by him for taking the loan. A similar situation arose before the Hon’ble Supreme Court in Indian Oil Corp. v. NEPC India Ltd., (2006) 6 SCC 736 in which the property hypothecated by the NEFC India Limited was sold and the criminal complaint was filed by Indian Oil Corporation under various provisions of law. Hon’ble Supreme Court held that the provisions of Section 406 will not be attracted. However, the provision of Section 420 of Cr.P.C may be attracted when there was an allegation against the accused that he had made a representation to the complainant that he would not sell the property and allowed the complainant to proceed with the transaction. It was observed:

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32. The essential ingredients of the offence of “cheating” are ( i ) deception of a person either by making a false or misleading representation or by other action or omission, ( ii ) fraudulent or dishonest inducement of that person to either deliver any property or to consent to the retention thereof by any person or to intentionally induce that person to do or omit to do anything which he would not do or omit if he were not so deceived and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property.

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33. The High Court has held that a mere breach of contractual terms would not amount to cheating unless the fraudulent or

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dishonest intention is shown right at the beginning of the transaction and in the absence of an allegation that the accused had a fraudulent or dishonest intention while making a promise, there is no “cheating”. The High Court has relied on several decisions of this Court wherein this Court has held that dishonest intent at the time of making the promise/inducement is necessary, in addition to the subsequent failure to fulfil the promise. Illustrations ( f ) and ( g ) to Section 415 make this position clear:

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“( f ) A intentionally deceives Z into a belief that A means to repay any money that Z may lend to him and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats.

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( g ) A intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery, A cheats; but if A , at the time of obtaining the money, intends to deliver the indigo plant, and afterwards breaks his contract and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract.”

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34. In Rajesh Bajaj [(1999) 3 SCC 259: 1999 SCC (Cri) 401 ] this Court held: (SCC pp. 262-63, paras 9 & 11)

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“ 9 . It is not necessary that a complainant should verbatim reproduce in the body of his complaint all the ingredients of the offence he is alleging. Nor is it necessary that the complainant should state in so many words that the intention of the accused was dishonest or fraudulent. …

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11 . The crux of the postulate is the intention of the person who induces the victim of his representation and not the nature of the transaction which would become decisive in discerning whether there was a commission of offence or not. The complainant has stated in the body of the complaint that he was induced to believe that the respondent would

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honour payment on receipt of invoices and that the complainant realised later that the intentions of the respondent were not clear. He also mentioned that the respondent after receiving the goods had sold them to others and still, he did not pay the money. Such averments would prima facie make out a case for investigation by the authorities.”

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35. In Hridaya Ranjan Prasad Verma [(2000) 4 SCC 168: 2000 SCC (Cri) 786] this Court held: (SCC pp. 176-77, paras 14-15)

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“ 14 . On a reading of the section, it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do. In the first place, he may be induced fraudulently or dishonestly to deliver any property to any person. The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived. In the first class of cases, the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.

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15 . In determining the question, it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is, the time when the offence is said to have been committed. Therefore, it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.”

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36. In this case, the complaints clearly allege that the accused with a fraudulent intention to cheat and defraud IOC, had induced IOC to resume the supply of aircraft fuel on a cash-and-carry basis, by entering into a further agreement dated 20-9-1997 and undertaking to clear the outstanding amount of Rs 18 crores approximately within the time stipulated in the hypothecation agreements. The sum and substance of the said allegation read with other averments extracted above is that NEPC India, having committed default in paying the sum of Rs 18 crores, entered into a fresh agreement dated 20-9-1997 agreeing to clear the outstanding amount as per a fresh schedule, with the dishonest and fraudulent intention of pre-empting and avoiding any action by IOC in terms of the hypothecation deeds to take possession of the aircraft. Though the supplies after 20-9-1997 were on a cash-and-carry basis, the fraudulent intention is alleged to emanate from the promise under the said agreement to make payment, thereby preventing immediate seizure (taking possession) of the aircraft by IOC. This allegation in addition to the allegation relating to the removal of engines, has been lost sight of by the High Court. All that is to be seen is whether the necessary allegations exist in the complaint to bring the case within Section 415. We are clearly of the view that the allegations in the complaint constitute such an offence. We are not concerned with the proof of such allegations or the ultimate outcome of the trial at this stage.”

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In the present case also the bank had specifically asserted in the complaint made to the police that the accused had created an equitable mortgage of his share of the land, a building consisting of shop-cum-residential house in favour of the bank and undertook not to sell, mortgage, lease or otherwise part with the possession or encumber the hypothecated/mortgaged property

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in any way till the repayment of the loan amount in full to the bank. He had also assured to keep the property insured by taking a comprehensive policy in the name of the bank and himself. He violated this undertaking and sold the property to a third person without paying the loan. These allegations specifically show that the bank was led to advance the loan on the representation that the accused would not create any charge on the property so mortgaged/hypothecated by him in favour of the bank. The accused failed to honour the promise made by him and acted in breach of the same by selling the property to a third person. Therefore, as per the judgment of the Hon’ble Supreme Court in Indian Oil Corporation (supra), a prima-facie case for the commission of an offence punishable under Section 420 of IPC would be made out against the accused.

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Thus, the learned Trial Court had rightly framed the charges against the accused for the commission of an offence punishable under Section 420 of IPC and the learned Revisional Court had rightly dismissed the revision preferred by the accused. No interference is required with these orders in the exercise of the inherent jurisdiction of this Court under Section 482 of Cr.P.C.

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