In re: T.S. Ramakrishnan and Another

Ratanavel Pandian, J.—Petitioners 1 to 4 have preferred this revision petition challenging the legality of the judgment made in C. A, No. 214 of 1974 on the file of the principal Sessions Judge, Madurai confirming the convictions under S. 120-B, I. P. C. as against petitioners 1 to 4 and under S. 420, I. P. C. (four counts against the first petitioner, two counts against the third petitioner and one count each against petitioners 2 and 4) and the sentence of rigious imprisonment for two years on each of the five counts posed on the first petitioner (to run (sic) currently), but reducing the sentences of rigorous imprisonment for two years imposed on petitioners 2 and 3 to one of rigorous imprisonment for one year under each of the counts (to run concurrently) and directing the fourth Petitioner to be released on probation of good conduct under S. 4(1) of the Probation of Offenders Act, by setting aside the sentence of rigorous imprisonment of two years under each of the two counts imposed on her.

The facts of the case which led to this revision petition, briefly stated, are as follows: During the period between November, 1972 and April, 1973 at Madurai these four petitioners along with some other unknown persons, agreed to do or caused to be done an illegal act, to wit, to cheat one Sabarathinam (P. W. 3) by dishonestly and fraudulently representing to him that the first petitioner was the proprietor of Rajeswari Handloom Textiles and Rajeswari Dress Lands, Madurai, manufacturing handloom cloth and dealing in ready-made garments and that the petitioners 2 to 4 were rich, reliable and financially sound customers of the first petitioner and thereby induced the said Sabarathinam (P.W. 3) to discount bogus cheques issued by petitioners 2 to 4 in the name of the fictitious firm of the first Petitioner and received payments for encashment by P. W. 3, which was done in pursuance of the said agreement. At the same time and place and in the course of the transaction, petitioners 1 to 3 opened a saving bank account in South Indian Bank situate at Avanimoola Street, Madurai, in the name of the third petitioner and received the cheque book containing leaves bearing Nos. 76661 to 76670 and that petitioners 1 and 3 cheated P. W. 3, by dishonestly and fraudulently inducing him to deliver cash of Rs. 400/- that during the course of the same transaction, petitioners 1 and 2 dishonestly and fraudulently induced the said Sabarathinam P. W. 3, to deliver cash of Rs. 625/- to them, that in the course of the same transaction petitioners 1 and 3 cheated P. W. 3 by dishonestly and fraudulently inducing him to deliver cash of Rs. 1958. 75 to them and that lastly during the course of the same transaction petitioners 1 and 4 cheated P. W. 3 by dishonestly and fraudulently inducing him to deliver cash of Rs. 1,818.60 to them by issuing cheques on all the four occasions in favour of the fictitious firm of the first petitioner and which cheques, when presented for payment before the respective banks by P.W. 6, Kalyanasundaram Chettiar, were all dishonoured.

The prosecution, to substantiate its case, has examined seven witnesses and marked Exs. P-1 to P-15. The petitioners, when examined under S. 342 of the Cr. P.C. denied their complicity with the crime and examined one witness as D.W. 1 and marked Exs. D. 1 to D. 4. Of the witnesses examined on the side of the prosecution, P.W. 1, the then agent of the South Indian Bank, Madurai 1, has deposed that the third petitioner was having Savings Bank Account, No. 796 in his bank, that the said account was opened on 20th November 1972 after having deposited a sum of Rs. 50/-, that on 22nd November 1972 a sum of Rs. 45/- was withdrawn in the name of the first petitioner, that there was only a balance of Rs. 5/- to the credit of the third Petitioner in the said account and that afterwards, there was neither credit nor withdrawal in the said account. Ex. P. 1 is the Savings Bank account opening form in the name of the third petitioner. Ex. P-2 is the cheque leaf d. 21st November 1972 drawn in favour of the first petitioner, who withdrew a sum of Rs. 45/- on 22nd November 1972 as indicated above. Ex. P-3, d. 20th December 1972 and Ex. P-5 d. 23rd December 1972 for Rs. 400/- and Rs. 1958.75 respectively are the two cheque leaves issued by the third petitioner drawn on P.W. 1''s bank in favour of Rajeswari Handloom Textiles of which the first petitioner is the proprietor. These two cheques were dishonoured on presentation for encashment as there were no funds in the account of the third petitioner. Exs. P-4 and P-6 are the respective objection slips. On 10th December 1972 petitioners 1 and 2 came to the house of P.W. 3 and the first petitioner gave the cheque for Rs. 625/- in favour of Rajeswari Dress Lands, of which he is the proprietor, issued by the second petitioner, as evidenced by Ex. P''7 and that P.W. 3 paid the cash to the first petitioner after deducting a commission of 12 per cent. On 28th December 1972, petitioners 1 and 4 handed over a cheque, Ex. P-8 to P.W. 3 for Rs. 1,818.60 drawn in favour of Rajeswari Handloom Textiles of which the first petitioner is the proprietor, issued by fourth petitioner. P.W. 3 paid that amount after deducting a commission of 12 per cent. Similarly on 20th December 1972 and 23rd December 1972, Exs. P 3 and P5 were also handed over to P.W. 3 who paid the cash less a commission of 12 per cent.

It is the common case that all the four cheques, viz, Exs. P-3, d. 20th December 1972, Ex. P5 d. 23rd December 1972. Ex. P7 d. 10th December 1972 and Ex. P8, d. 28th December 1972 were endorsed by the first petitioner in his capacity as the proprietor of the firms, the payees under the cheques, in favour of P.W. 3 with instruction that they should be presented at the bank of encashment on 12th March 1973 only. P. W. 3 endorsed these cheques in favour of his father, Kalyanasundaram Chettiar (P. W. 6) on 13th March 1973 and asked him to encash the same. When these cheques were presented for payment at the respective banks, all of them were dishonoured on the ground that there was no amount in the accounts of the drawers concerned. It may be noted that on all the above cheques, the first petitioner had signed as the proprietor of the respective firms in whose favour they were issued, in the presence of P.W. 3.

P.W. 4, the then Manager of the Canara Bank, Town Hall Road, Madurai, had deposed that the fourth petitioner opend a Savings Bank Account in his bank, bearing No, 4892 on 9th February 1972 with an initial deposit of Rs. 2,000/- and that the balance was reduced to Rs. 10/- by 29th November 1972. On the date when Ex. P 8 was issued by the fourth petitioner in favour of Rajeswari Handloom Textiles, of which the first petitioner is the proprietor, the balance was only Rs. 2-50. P.W. 5, the Sub Manager, Syndicate Bank, Madurai Branch, had deposed that on 14th December 1967 the second petitioner opened a sayings Bank Account bearing No. 1089 with an initial deposit of Rs. 25/-that thereafter on 15th December 1967 the second petitioner deposited a sum of Rs. 25 more and that on 18th December 1967 he withdrew a sum of Rs. 45/-, leaving a balance of Rs. 5/- and that subsequently no amount was deposited and Ex. P7 was referred to the drawer for want of funds on being presented by P.W. 6.

It is said that all the petitioners are closely-related. The fourth petitioner is the wife of the first petitioner and the second petitioner is the brother-in-law of the first petitioner. The third petitioner is said to be a close associate of the rest. There is no dispute that the first petitioner was the proprietor of Rajeswari Handloom Textiles and Rajeswari Dress Lands, Madurai, in whose favour the cheques were drawn and that the four cheques, Exs. P3, P5, P7 and P 8 were all dishonoured when presented at the bank for encashment on 13th March 1973. The legal question that would arise for consideration in the present case is whether the accused at the time when they gave the cheques, were having the knowledge that the representations made by them was false and that they made that representation with an intention to deceive, in other words, whether the accused induced the complainant to part with his money and whether they intended to act fraudulently or dishonestly.

The ingredients of the offence under S. 420 of the Indian Penal Code are that the person deceived delivered to someone a valuable security or property, that the person so deceived was induced to do so, that such person acted on such inducement in consequence of his having been deceived by the accused and that the accused acted fraudulently or dishonestly when so inducing that person.

It is not necessary that the false pretence should be made, in express words, if it can be gathered from all the circumstances attending to the obtainment of the property. Fraudulent intent is absolutely essential to warrant a conviction for an offence under S. 420 of the Indian Penal Code. The essential ingredient of the offence in cases of this nature are that at the time the accused made out the representation, the same was false to his knowledge and he made that with the intention to deceive, i.e. that the intention of the drawer as well as the endorser at the time when the cheque was issued or endorsed is a material test and if it appears from the circumstances that the drawer or endorser did not expect that the cheque would be cashed in the normal course, it would be prima facie proof of intention to cheat. This intention has to be gathered from the facts on record and if from them it is established that the failure to meet the cheque was not accidental, but was a consequence expected by the accused, the presumption would be that the accused intended to cheat. If there is nothing to show that the accused induced the complainant to part with his money and he intended to act fraudulently or dishonestly, then, it cannot be said that the accused has committed an offence. The fact that something afterwards supervened which caused the accused to break his contract, does not convert the honest intention to a dishonest one so as to support the conviction for cheating. If there are materials available to show that at the time when the cheque was dishonoured, it appeared that the accused bona fide expected a remittance which he intended to deposit in the bank to pay off cheque, but ultimately failed, then it will not amount to a false pretence. This, of course, does not establish a general exception in favour of the drawers or endorsers of cheques or bills, for, the question in each case depends upon the intention. In judging the nature of this act, the only thing relevant is the intention of the accused at the time of the inducement, because the person cannot be said to cheat if his act was (sic) originally honest. There must be an intention to deceive and to defraud at the time of taking the money. If the drawer and the endorser had no intention to deceive at the time when he parted with the cheques, but the cheques were dishonoured on the date of presentation into the banks due to some supervening causes, then it cannot be said that the drawer or endorser has committed the offence of cheating. This position is fortified by a plethora of decisions. I feel that I need not expatiate all those decisions except a few.

In Mahadeo Prasad v. State of West Bengal 1954 Crl.L.J. 1806 the Supreme Court has pointed out that-

Where the charge against the accused is under S. 420 in that he induced the complainant to part with his goods, on the understanding that the accused would pay for the same on delivery but did not pay, if the accused had at the time he promised to pay cash against delivery an intention to do so, the fact that he did not pay would not convert the transaction into one of cheating. But, if on the other hand, "he had no intention what so ever to pay but merely said that he would do so in order to induce the complainant to part with the goods, then a case of cheacing would be established.

In Chidambaram Chettiar v. Shanmugam Pillai 1937 M.W.N. 999 at 1000 : 46 L.W. 629 the following observation has been made-

Since prevention is always better than cure, the obligation to prevent specious and spiteful criminal prosecutions for actions which, though strictly dishonourable yet do not amount to crimes is one that must never be shirked. In the world of business things are often done which art betrayals of confidence and deceptions which arouse moral indignation but are nevertheless civil wrongs which can be righted by civil courts and are not crimes which can be punished by a criminal court. Not every immoral act is criminal and it is an abuse of the process of a Court to attempt to create new crimes in order to compel men to conform to a high standard of probity in business dealings or to force them to execute their promises.

It has been held in Cheriyan v. Kuruvilla 1968 M.L.J. Crl. 273 thus:

the drawing up of a cheque does not imply any representation that the drawer has money in the bank to the (sic) extent of the amount shown in the cheque, for, he may either have authority to overdraw or have an honest intention of paying in the necessary money "before the cheque can be presented. Giving of a cheque in lieu of money already due with the knowledge that the drawer has no funds in the bank does not amount to an offence, but is only a civil wrong But, if a person gives a cheque which is dishonoured and from the circumstances it could be presumed that he must have been aware that the cheque would be dishonoured, he would be guilty under S. 420.

Krishnaswamy Reddy, J. has pointed out in Shanmugha Sundara Nadar v. Sadasiram 1969 L.W. Crl. 37:

It is the duty of prosecution to prove that at the time when the representation was made, it was not only false, but the person who made such false representation knew that it was false and thereby induced the party so deceived, to deliver a property. Whether the subsequent conduct could be taken into consideration for the purpose of finding out the intention of the person at the time when he made the representation depends upon the facts of such case. Where it is possible that when a man makes a promise by making a representation, expecting that he could fulfil the same, but he was unable to do so, due to the subsequent circumstances, it cannot be said that the person who made the promise made it falsely.

In Venkatachalapathi Chettiar, In re 1971 L.W. Crl. 252 it was observed:

for a conviction for an offence under S. 420 of the Indian Penal Code, it is essential to establish the criminal intention of the accused at the time the offence is said to have been committed. Mere breach of contract cannot give rise to a criminal prosecution. The distinction between a case of mere breach of contract and one of cheating depend upon the intention of the accused at the time of the alleged inducement which may be judged by his subsequent act, but of which the subsequent act is not the sole criterion. Where there it no clear and conclusive evidence of the criminal intention of the aerated at the time the offence is said to have been committed and where the party said to be aggrieved hat an alternative remedy in the Civil Court, the matter should not be allowed to be fought In the Criminal Courts.

In State of Kerala Vs. A. Pareed Pillai and Another, the Supreme Court ruled that-

To hold a person guilty of the offence of cheating, it has to be shown that his intention was dishonest at the time of making the promise. Such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfil the promise.

I had occasion to deal with the ingredients for the offence of cheating in Ratanlal Sharma v. Mangaram Ghanshyamdas 1977 Crl. L.J. 8 (Short Notes) wherein I have pointed that the evidence must establish the existence of a fraudulent or dishonest intention at the time of the commission of the act in respect of which the cheating is alleged and therefore, the question whether there was intention to receive must be answered at the date when the contract was made and that mere breach of contract cannot give rise to a criminal prosecution. In the light of the above decisions and the principles of law, I shall now examine whether the accused in the present case had the intention to deceive P.W.3 at the time when accused-1 endorsed the concerned cheque in favour of P.W.3 in the presence of the other accused, or, whether fraudulent intention can be gathered or inferred from the attendant circumstances of this case.

It is the evidence of P.W.3 that on each of the four occasions the first accused came with each of the other accused and handed-over the cheques, Exs. P3, P5, P7 and P8 and got the amounts of the cheques less 12 per cent commission. The circumstances which stand as against the accused are: (1) that accused 1, 2 and 4 are close relations and accused-3 was an associate of theirs; (2) that when the cheques were handed over to P.W. 3 on each occasion the drawer of the cheque concerned was also present along with accused-1, the endorser; (3) that the drawers of the cheques, viz., accused 2. 3 and 4 were not having any amount to their credit in the Bank except the bare minimum and (4) that while accused-2 had already opened his account in the Syndicate Bank as early as in 1967, accused 3 and 4 had opened their account only in 1972, just a few months prior to the dates of their issuing the cheques in favour of the firm of which accused was the sole proprietor. It is contended on the side of the prosecution that the cumulative effect of all these circumstances would tend to show that all these accused conspired together and cheated P.W.3 by fraudulently pretending that they would deposit the requisite amount before 12th March, 1973 which act they had no intention to perform. The mere existence of the above four circumstances in the present case cannot at all prove any fraudulent intention on the part of the accused since on the date of handing over the cheques to P.W.3 they had amply indicated their financial position to P.W.3 by express and clear terms, viz., that the drawer concerned had no funds in the Bank and therefore, the cheque should be presented only after 12th March, 1973. If the cheques in this case had actually been handed over by accused-1 to P.W.3 with no such representation or instruction and had received the amount in advance, then the dishonour of the cheques by the Bank would have been a circumstance to prove that the accused had the fraudulent intention of cheating P.W.3. Since in this case P.W.3 himself has admitted that he was asked to present the cheques for encashment only on 12th March, 1973 and that accused-1 had told him that he should present the cheques when he would deposit the amount in March, 1973 it can be spelt out that P.W.3 parted with the money with full knowledge that the drawers had no money in their accounts at that time accused-1 who had promised to deposit the amount in March, 1973 might have failed to do so due to some supervening causes beyond his control. Unless there is clear and tangible evidence to show that accused-1, at the time when he made the said promise, had no intention to deposit the money into the Bank, then it would have amounted to an offence of cheating. It is the admitted case of P.W.3 that he knew accused-1 since August, 1972 and he was friendly with him and this reveals the confidence reposed by P.W. 3 on accused-1. As has been observed in Chidambaram Chettiar v. Shanmugam Pillai 1937 M.W.N. 999 : 46 L.W. 629 , in the modern commerical world, things are often done and carried out only on confidence but if such confidence is betrayed without there being my proof of fraudulent intention, the remedy always lies in a civil action. Moreover, in this case, it seems from the evidence that the accused had agreed to execute a promissory note in favour of P.W. 3''s wife, Valliammal Achi for a sum of Rs. 4,800/- which it is to be noted, is the total amount of these dishonoured four cheques. This document, Ex. D2, is signed by the accused. However, P.W.3 admits that he has written the body of this document and that he himself wrote on the reverse side of Ex. D 2, marked as Ex. D 3, about the details of the cheques including the amounts. This document, according to P.W.3, was drafted by him at the request of accused for getting additional security in favour of his wife for the amount covered under the four cheques and the same was written in January, 1973. From these circumstances it appears to me that P.W.3 wanted to safeguard himself by getting a promissory note from accused in the name of his wife. Even though he has failed in that course, as mentioned above, it was open to him to seek his remedy by way of a civil action against the accused. But, P.W.3 instead of taking such civil action, has chosen to prefer a criminal complaint against the accused for cheating in which he can succeed only if there is clinching proof of criminal intention on the part of the accused at the relevant time.

As already observed, I am not satisfied from the evidence available in this case, that any criminal intention on the part of the accused at the time when the offence is said to have been committed by them, has been proved in this case.

Hence, the accused are entitled to an acquittal. The conviction and sentences passed against them are, therefore, set aside and this revision petition is allowed.