Allowed

Shiv Prasad Choubey v. State of Jharkhand and Anr.

Jharkhand HC16 Sept 2021Cr.Rev./1070/2012

Case brief

AI extract

What is this about?

In a criminal revision, the High Court of Jharkhand acquitted the petitioner convicted under Section 420 IPC for cheating. The Court held that mere breach of a friendly loan agreement, failure to repay, or subsequent dishonour of cheques does not constitute cheating unless there was a fraudulent or dishonest intention at the very inception of the transaction, which was absent here.

What did the court decide?

Conviction, sentence, and judgment under Section 420 IPC were set aside; petitioner acquitted and discharged from bail liabilities.

Shiv Prasad Choubey Vs State of Jharkhand and Anr. — Cheating and Forgery | Jharkhand HC (2021)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI

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Cr. Revision No. 1070 of 2012

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Shiv Prasad Choubey son of Late Rajbali Choubey, resident of C/1/V, 9^th Phase, Adarsh Nagar, Sonari, P.O. Sonari, P.S. Sonari, Town, Jamshedpur, District East Singhbhum, Jharkhand

… … … Petitioner

Versus

1.State of Jharkhand

2.Dudhnath Tiwary son of Late Shiv Baran Tiwary, resident of Nand Nagar, Bhuiyandih Gwala Basti, P.O. Agrico, P.S. Sidgora, Town Jamshedpur, District East Singhbhum, Jharkhand

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… … Opp. Parties

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CORAM: HON'BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY

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--For the Petitioner : Mr. Anil Kumar, Senior Advocate Ms. Nalini Jha, Advocate For the State : Mr. Suraj Verma, Advocate For the O.P. No.2 : Mr. Sanjay Kumar, Advocate

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Through Video Conferencing

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C.A.V. On 09/09/2021 Pronounced on 16.09.2021

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1. Heard Mr. Anil Kumar, learned Senior counsel appearing on behalf of the petitioner along with Ms. Nalini Jha, Advocate.

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2. Heard Mr. Suraj Verma, learned counsel appearing on behalf of the opposite party-State.

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3. Heard Mr. Sanjay Kumar, learned counsel appearing on behalf of the opposite party No. 2.

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4. This criminal revision application has been filed for setting aside the judgment dated 4^th August, 2012, passed by the court of learned Additional Sessions Judge-I, Jamshedpur in Cr. Appeal No. 128 of 2010 whereby the learned Appellate Court has dismissed the appeal filed by the petitioner.

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The petitioner was convicted and sentenced for the offence under Section 420 Indian Penal Code to undergo rigorous imprisonment for three years and to pay a fine of Rs. 5,000/- and in default of payment of fine, he was directed to undergo further imprisonment of two months. The order of conviction was passed by the learned

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Judicial Magistrate, 1^st Class, at Jamshedpur, in Complaint C/1 Case No. 1128 of 2001.

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Submission on behalf of the petitioner.

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5. Learned Senior counsel for the petitioner submits that on the basis of the materials on record and the findings recorded by the learned court below, the basic ingredients of offence under Section 420 of Indian Penal Code are not satisfied. He also submits that it has been specifically recorded that upon perusal of the evidences adduced by the witnesses examined by the complainant, it transpired that the money was given by the complainant to the accused as friendly loan. He submits that once the finding of friendly loan has been arrived at by the learned appellate court, under such circumstances, the criminal intent which is required to convict the petitioner under Section 420 Indian Penal Code is totally absent. He submits that at best this is a case arising out of civil dispute. The learned counsel has also submitted that so far as the other offences are concerned, the petitioner has been acquitted for those offences.

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Arguments on behalf of Opposite party No. 2 and the State.

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6. Learned counsel for the opposite party no. 2 has opposed the prayer and has submitted that the learned courts below have passed well-reasoned judgements considering the entire materials on record. He has specifically submitted that the intention to cheat the complainant also reflected from the fact that at the stage of bail the petitioner had entered into an agreement with the opposite party no. 2 for refund of the entire amount but no payment was made. He has submitted that the present case is not at all of civil nature and the petitioner has been rightly held guilty of offence under Section 420 of Indian Penal Code. He also submits that if a person has taken loan putting another person into belief that he will repay the loan and he does not intend to repay, a clear case of cheating is made out. He has also submitted that on account of concurrent findings recorded by the learned courts below, no interference is called for in revisional jurisdiction by this court.

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The learned counsel for the State has supported the arguments advanced by the opposite party no. 2.

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Findings of this Court 7. As per the complaint case, both the complainant and the petitioner were employees of Telco Company Ltd. and families of both had good relationship. In the month of June, 2000, on persuasion of the petitioner, the complainant took E.S.S. from the company and thereafter the petitioner induced the complainant to invest the E.S.S. amount in the institutions established by him and also assured the complainant regarding handsome return. Thereafter the complainant under the influence of sweet proposals of the accused gave him a total amount of Rs. 2,65,000/- on different dates firstly on 20.11.2000 he paid an amount of Rs. 50,000/- to the petitioner at his residence in presence of witness namely Ram Kailash Mishra which was withdrawn by the complainant from the Bank in presence of witness. The amount was paid on different dates partly in cash and partly by cheques. The last payment was made when at the request of the petitioner, the complainant went to Patna and on 21.02.2001 handed over an amount of Rs. 1,00,000/- to the petitioner. In the month of March, 2001, the petitioner came to Jamshedpur and on demand of the complainant he assured to return his amount at the end of March, 2001 but failed to do so. The complainant met the petitioner and demanded his money and then the petitioner issued a cheque for an amount of Rs. 50,000/- as part payment by the cheque dated 07.04.2001 which was dishonoured on 17.05.2001 showing fund insufficient . The complainant informed the petitioner and at the request of the petitioner the cheque was again deposited but thereafter it was again bounced on 5.09.2001 for the same reasons. In the month of April, 2001, the complainant had to pay an amount of Rs. 49,000/- to one Suresh Agarwal and in this regard the petitioner issued a cheque for an amount of Rs. 49,000/dated 25.04.2001 in the name of Suresh Agarwal, but the said cheque was also dishonoured on 19.09.2001. It has also been also alleged that

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the petitioner had taken an amount of Rs. 5,000/- from the complainant to manage the loan of Rs. 1,00,000/- from Prime Minister’s Fund in the name of the son of the complainant, but the petitioner managed the loan in the name of his son and thus cheated the complainant again. The complainant demanded the money from the petitioner through a letter dated 28.07.2001 and on receipt of the said letter, on 15.08.2001 the petitioner came to the residence of the complainant and abused him with filthy language and threatened to kill him. The complainant also sent a legal notice dated 20.09.2001 and after receiving the same, the petitioner replied and admitted in part the loan amount as well as the cheque but denied to pay the same. The complaint was filed on 20.10.2001 before the court of learned Chief Judicial Magistrate, Jamshedpur and was registered as complaint case being C/1-case No. 1128 of 2001.

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8. After enquiry, prima facie case was said to have been made out against the petitioner under Sections 420/506 of Indian Penal Code and under Section 138 of the Negotiable Instruments Act. Subsequently on 19.02.2009, the charge was also framed under the said sections. 9. The complainant produced altogether four witnesses and they were fully cross examined. On 15.12.2009 the statement of the petitioner was recorded under Section 313 Cr.P.C. and the petitioner denied all the allegation levelled against him. The petitioner did not lead any defence evidence.

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10. The complainant was examined as C.W. 4 and had deposed that the petitioner had worked with him in Telco for a period of 16 years and there was good relationship between their families. He took E.S.S. on persuasion of the petitioner and the petitioner also took E.S.S. Thereafter, the petitioner demanded money from him to run coaching institutes and assured him regarding the employment of his son and son-in-law. According to the complainant, on 20.11.2000, he withdrew an amount of Rs. 50,000/- from Bank of Baroda in presence of Ram Kailash Mishra and he went to the house

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of the petitioner and delivered the same to him. Apart from the aforesaid statement of the complainant, the complainant has supported the various amount which was paid to the petitioner either through cash or through cheque as stated in the complaint petition. The complainant has also supported the allegation regarding bouncing of the various cheques and exhibited the corresponding cheques and the corresponding documents. The cheque issued in the name of Suresh Agarwal was marked as Exhibit-3. The complainant has also stated about the bouncing of the cheque issued in the name of Suresh Agarwal. It has also been alleged by the complainant that the petitioner also took an amount of Rs. 5,000/- in the name of managing loan from the Prime Minister’s Employment Scheme, but his son did not get any loan. Thus, the complainant has alleged that the petitioner took an amount of Rs. 2,65,000/- from him but did not return the same in spite of correspondences made for the purpose and issuance of legal notice. 11. The learned trial court also recorded that on 21.04.2003 an agreement was prepared between both the parties and the accused had put his signature. The said agreement was identified by the complainant which was marked as exhibit-6 with objection from the side of the petitioner. 12. Ram Kailash Mishra was examined as C.W. 1 who deposed that both the complainant and accused, worked together in the Telco company, and both of them, took E.S.S. in the year 2000. On 20.11.2000, he (witness) went to the residence of complainant, where, he found the son of the petitioner named Santosh Choubey, and all three of them (this witness, complainant and Santosh Choubey) went to the Bank of Baroda, Bhuiyadih, where after withdrawing an amount of Rs. 50,000/- all three of them, went to the House of petitioner, where the complainant delivered the said amount of Rs. 50,000/- to the petitioner. Again on 23.12.2001 on the demand of petitioner, the complainant withdrew an amount of Rs. 50,000/from bank of Baroda, Bhuiyadih, and at the shop of Manoranjan

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Pandey, the complainant gave the said amount of Rs. 50,000/- to the petitioner. Thereafter the complainant informed him (witness) that the petitioner had not returned him the amount. According to this witness, the petitioner took an amount of total Rs. 2,65,000/- but in spite of getting a legal notice, failed to return the money. He claimed to identify the petitioner. Further, according to this witness, both the complainant and petitioner were good friends. In his cross examination he admitted that the transaction was made between both the sides, as friendly loan.

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13. Suresh Agarwal was examined as C.W. 3. His evidence is in connection with the issuance of cheque by the petitioner in his favour on account of complainant having purchased marble worth Rs. 49,000/- and the cheque had ultimately bounced.

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14. C.W. 2 has stated that both the complainant and accused were Telco Employees, and there was sweet family relationship between both the families. In the year 2000, the complainant took E.S.S. from the Telco Company. On 20.11.2000, the accused person came to Bhuiyadih and demanded an amount of Rs. 50,000/- from the complainant. Along-with the accused, his son named Santosh Kumar Choubey, too, was with him. According to the witness, the complainant issued a cheque of Rs. 50,000/- to the accused. According to the witness, the accused person neither returned the money nor gave jobs to the son or son-in-law, of the complainant, as assured. According to the witness, in the month of April, 2003, accused person came to the house of complainant, and compromised the matter, and assured him to return the money in 10 installments, but even-then, he did not return back the money. According to the witness, the compromise was prepared in written. According to this witness also, all the transactions were made as friendly loan. 15. The learned trial court after considering the materials on record found that the allegations for offence under Section 506 of Indian Penal Code and under Section 138 of the Negotiable

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Instruments Act were not made out and acquitted the petitioner for such offence.

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16. Learned trial court considered the offence under Section 420 of Indian Penal Code and recorded its finding at para 19 of the judgment that the petitioner with a dishonest intention induced the complainant, not only to take E.S.S. from the company, but also, on false assurance of handsome return, as well as, of employment of son and son-in-law of the complainant, and took a huge amount from the complainant and convicted the petitioner for offence under section 420 of IPC. The trial court also recorded that it is admitted that both the sides were in very good family relation since long, but even then, the petitioner failed to return back the money of the complainant. The trial court also considered that during trial, the petitioner entered into an agreement (Ext.-6) with complainant, but even-then, he failed to repay the amount of a retired person and in the view of the learned trial court, this fact alone was sufficient to show the dishonest intention of petitioner and further the cheques issued by the petitioner were not honoured by the bank, which also showed dishonest intention of the petitioner.

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17. 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. It was also alleged before the learned courts below that when an agreement to refund the amount by the petitioner to the complainant was entered into between the parties during the pendency of the case before the learned trial court, the petitioner did not honour the agreement and did not pay any amount to the complainant.

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18. From perusal of the evidence of the complainant as recorded in para-10 of the trial court’s judgment, it appears that the allegation was that on persuasion of the petitioner the complainant took E.S.S.

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and thereafter the petitioner demanded money from him to run a coaching institute and assured him regarding employment of his son and son-in-law. This Court finds that there is no allegation levelled by the complainant in his deposition that the petitioner had a dishonest intention at the inception of the transaction and with such dishonest intention he had induced the complainant not only to take E.S.S. from the company but also on false assurance of handsome return as well as employment of his son and son-in-law, petitioner took huge amount from the complainant. Rather the witnesses of the case have clearly deposed that the complainant had given friendly loan to the petitioner but he did not return the same in spite of demand and even the cheques issued by the petitioner had bounced. It has also come on record that during the pendency of the case an agreement was entered into between the parties, but the petitioner did not pay any amount in spite of agreement to pay. 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 . 19. The learned appellate court, after considering the materials on record, clearly recorded in para 13 that 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. Learned Appellate court also considered the circumstance that after the institution of the case, the petitioner executed an agreement with the complainant with promise to repay the entire amount of loan in instalment, but not even a single instalment was given by him to the

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complainant. Considering the aforesaid 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.

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20. In the case of “V.Y. Jose and Another Vs. State of Gujarat and Another” reported in (2009) 3 SCC 78, the Hon’ble Supreme Court has considered the basic ingredients of offence under Section 420 IPC and held that:

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“14. An offence of cheating cannot be said to have been made out unless the following ingredients are satisfied:

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(i) deception of a person either by making a false or misleading representation or by other action or omission;

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(ii) fraudulently or dishonestly inducing any person to deliver any property; or to consent that any person shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit.

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For the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. Even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 of the Penal Code can be said to have been made out”

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21. In the case of “ Uma Shankar Gopalika Vs. State of Bihar and Another” reported in (2005) 10 SCC 336, the Supreme Court considered the legal position as to when the breach of contract would give rise to offence of cheating and held as under:

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“6…………………… It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case it has nowhere been stated that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC”

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22. In “Vesa Holdings Private Limited and Another Vs. State of Kerala and Others” reported in (2015) 8 SCC 293 , the Hon’ble Supreme Court considered the legal position if the intention to cheat developed after the transaction and has held as under:

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“12........,the settled proposition of law is that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In other words, for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time or of making promise

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representation…..”

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23. In “ Hira Lal Hari Lal Bhagwati Vs. CBI, New Delhi” reported in (2003) 5 SCC 257 , the Hon’ble Supreme Court reiterated the legal position as under:

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“40. It is settled law, by a catena of decisions, that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. From his making failure to keep promise subsequently, such a culpable intention right at the beginning that is at the time when the promise was made cannot be presumed….”

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24. In the case of “Satishchandra Ratanlal Shah Vs. State of Gujarat and Another” reported in (2019) 9 SCC 148 , the Hon’ble Supreme Court considered the legislative intent to criminalize the nature of breaches of contract as under:

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13. Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168: 2000 SCC (Cri) 786].) ……………………………”

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“14……………………. The legislature intended to criminalise only those breaches which are accompanied by fraudulent, dishonest or deceptive inducements, which resulted in involuntary and inefficient transfers, under Section 415 IPC.”

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25. 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

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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.

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26. It has also been held in the aforesaid judgement that if the intention to cheat has developed later on, the same cannot amount to cheating. It is also settled by the aforesaid judicial pronouncements that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In other words, for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. 27. This Court finds that in the present case, it was the specific case of the complainant in his deposition that the petitioner had worked with him in Telco and there was good relationship between the parties and he had taken E.S.S. on persuasion of the petitioner and the petitioner took E.S.S. Thereafter, the petitioner demanded money from him to run coaching institute and assured him regarding employment of his son and son-in-law. Thereafter, on a number of occasions, the complainant had extended money either in cash or through cheques totaling Rs. 2,65,000/- and the petitioner neither returned the money nor gave employment to his son and son-in-law. It has nowhere been stated by the complainant in his evidence that at the very inception there was any intention on behalf of the accused person to cheat which is a condition precedent for an offence under Section 420 IPC. The witnesses have clearly stated that the transaction was in the nature of friendly loan which was not paid in spite of demand. The appellate court has also recorded a clear finding that the transaction was in the nature of friendly loan. The learned appellate court, while upholding the conviction under

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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.

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28. 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 of the petitioner under Section 420 of Indian Penal Code by the learned trial court which has been upheld by the learned appellate court calls for interference in revisional jurisdiction of this Court to meet the ends of justice and rectify the illegality and perversity committed by the learned courts below in convicting the petitioner under Section 420 of Indian Penal Code. Accordingly, the conviction and sentence of the petitioner for alleged offence under Section 420 of Indian Penal Code is hereby setaside.

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29. Consequently, the judgment dated 4^th August, 2012, passed by the court of learned Additional Sessions Judge-I, Jamshedpur in Cr. Appeal No. 128 of 2010 upholding the judgment of conviction and order of sentence dated 30.04.2010 under Section 420 Indian Penal Code passed by learned Judicial Magistrate, 1st Class, at Jamshedpur, in Complaint C/1 Case No. 1128 of 2001 is hereby set-

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aside and the petitioner is acquitted. This criminal revision petition is allowed.

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30. The petitioner is discharged from his liabilities under the bail bond.

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31. Pending interlocutory application, if any, is closed.

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32. The office is directed to send the records of the court below to the concerned court.

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33. Let this order be communicated to the court concerned through “FAX /e-mail”.

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