K. Shanmugasundara Nadar vs V. Sadasivam

N. Krishnaswamy Reddy, J.—The appellant, Shanmugasundara Nadar was convicted u/s 420, Indian Penal Code, and sentenced to

undergo R.I. for six months and to pay a fine of Rs. 500, by the Fourth Presidency Magistrate, Madras, in C.C. No. 4690 of 1966.

The facts of the prosecution case are these : The appellant is an industrialist. He has been doing business in collaboration with Czeckoslovakian

people. He had accounts in various banks like, National & Grindlays Bank Ltd., Madras, Canara Bank, Indian Overseas Bank etc. It appears that

he was also having certain business connections in foreign countries, and exporting handlooms and getting import incentive licences. In November,

1965, he was expecting National Defence Remittance Certificates and wanted one Sathar who was doing import business in the name of

Commercial Syndicate, examined as D.W.1 in this case, to find out whether he could sell those certificates on forward sale basis. Sathar contacted

one Swami of Swami & Co., who were importers. A fortnight later, Swami brought P.W. 1 Sadasivam of Bangalore as a prospective buyer.

Swami and D.W. 1 Sathat negotiated the deal on behalf of the appellant and both Sadasivam (P.W. 1) and the appellant entered into an agreement

(Exhibit P-l) on 25th November, 1965. By virtue of the agreement, it was agreed that the appellant should secure an import entitlement certificate

for an amount not less than Rs. 4,00,000 of Indian Currency, that P.W. 1 should purchase the said certificate at the rate of 175 per cent on Rs.

4,00,000 and that such certificate should be handed over to P.W. 1 on or before 15th January, 1966, time being the essence of the contract and

P.W. 1 should pay an earnest money of Rs. 1,25,000. If there was a breach of the agreement, P.W. 1 shall be entitled to the refund from the

appellant the earnest money of Rs. 1,25,000 and a further payment of Rs. 50,000 as and by way of damages. If P.W. 1 failed to pay the balance

amount of consideration, the appellant shall be entitled to cancel the transaction and refund the earnest money of Rs. 1,25,000 after retaining Rs.

50,000 as damages. According to the agreement, P.W. 1 has paid Rs. 1,25,000 to the appellant as earnest money. This is not disputed.

The appellant failed to comply with the terms of the agreement and did not deliver the certificates on or before 15th January, 1966, and thereby

committed breach of the agreement. On 22nd January, 1966, the appellant wrote a letter to P.W. 1 stating that due to certain circumstances

beyond his control, there was bound to be some delay in getting the certificates as agreed and, therefore, he requested P.W. 1 to give him

extension of time upto 28th February, 1966. On 25th January, 1966, P.W. 1 sent a telegram to the appellant informing him about the breach of the

agreement and asking him to remit forthwith Rs. 1,25,000, and also a sum of Rs. 50,000 stipulated as damages. On 27th January, 1966, P.W. 1

again wrote a letter to the appellant regretting his inability to extend time. On 11th December, 1966, in supersession of the agreement dated 25th

November, 1965, P.W. 1 and the appellant entered into a fresh agreement Exhibit P.-8 wherein it is stated that as the appellant could not fulfil his

commitments in time due to reasons beyond his control and as P.W. 1 refused to grant extension of time, the appellant agreed to refund the amount

received by him as advance and also a sum of Rs. 15,000 by way of damages .The agreement further states that the parties have agreed to cancel

the previous agreement dated 25th November, 1965. In pursuance of this agreement on 11th February, 1966, the appellant gave three post-dated

cheques to be drawn on the Canara Banking Corporation, namely (1) for Rs. 50,000 to be cashed on 26th February, 1966; (2) for Rs. 40,000 to

he cashed on 28th February, 1966; and (3) for Rs. 35,000 to be cashed on 4th March, 1966. Another cheque for Rs. 15,000 as compensation

was also given to P.W. 1 by the appellant, to be cashed on 10th March, 1966.

It appears that the appellant stopped payment on the post-dated cheques issued by him and, therefore, the cheques could not be cashed.

Thereafter, P.W. 1 sent a lawyer''s notice on 8th March, 1966 stating that he believed his words when he handed over the post-dated cheques

that the cheques could be cashed, that, therefore he agreed to cancel the previous agreement and that the act of the appellant would amount to

cheating. In that notice, the appellant was asked to pay the amount due to him within three days, as otherwise, he would be forced to resort to

criminal and civil proceedings. The appellant promptly replied to the lawyer''s notice on 11th March, 1966 stating that though the post-dated

cheques were given to P.W. I, the understanding was that P.W. 1 should present the cheques with the consent of the appellant. He also explained

in the reply notice that the Government of India extended the scheme of obtaining National Defence Certificates as a concession shown for persons

obtaining foreign exchange from foreign countries upto 31st May, 1966 and that the inward remittances which he had arranged with the foreign

countries earlier were delayed, the delay being entirely beyond his control. He further stated that on 24th February, 1966, he sent a letter to P.W.

1 by registered post explaining the difficulties and his letter was unfortunately returned to him on 8th March, 1966 as ""addressee was. on tour and

date of return not known."" He also stated that under the direction of P.W. 1, he handed over five Bank Certificates signed by him leaving the

authorization column blank, to the representatives of P.W. 1, Mr. Swami and Sathar (D.W. 1) with the understanding and instructions to dispose

the certificates on a minimum premium of 180 per cent and on receipt of the sale proceeds of the Bank certificates, he would agree to pay Rs.

50,000 only in March and the balance later. He added that he wrote a letter on 5th March, 1966 under certificate of posting to P.W. 1. In this

letter, the appellant asked P.W. 1 to accept Rs. 50,000 on receipt of the sale proceeds of the Bank Certificates and to wait to receive the balance

of Rs. 90,000 on or before 31st May, 1966 which was the date extended for National Defence Remittance Scheme. The complaint was filed by

P.W. 1 before the Presidency Magistrate on 18th March, 1966.

After examining four witnesses including P.W. 1 the complainant and after questioning the appellant, the learned Fourth Presidency Magistrate

framed the following charge:

That you, on or about the 11th day of February, 1966 at Madras, cheated one Sadasivam by dishonestly inducing him to deliver a sum of Rs.

1,40,000 to you and which was the property of the said Sadasivam and thereby committed an offence punishable u/s 420 of the Indian Penal

Code....

The learned Counsel for the appellant contended that the charge as framed by the Magistrate is unsustainable on the facts of this case and there

is absolutely no evidence to indicate that the appellant had made any false representation to P.W. 1 and P.W. 1 was induced by such false

representation to deliver any property. There appears to be force in both the contentions of the learned Counsel. It is clear from the facts that on

11th February, 1966 when a fresh agreement was entered into by both P.W. 1 and the appellant, the prior agreement dated 25th November,

1965 was specifically cancelled. According, to the prosecution, the cheating was in respect of the handing over to P.W. 1 of the post-dated

cheques, thereby making P.W. 1 believe that these cheques could be cashed on the dates mentioned in the cheques and, that on that account, he

had foregone a substantial portion of the compensation stipulated in the prior agreement, namely, a sum of Rs 35,000. It is not the case of the

prosecution that on the date when Exhibit P-8 was entered into and when the post-dated cheques were handed over that P.W. 1 parted with a

sum of Rs. 1,40,000 as mentioned in the charge extracted above. The gravamen of the charge u/s 420, Indian Penal Code, is the delivery of

property in consequence of the inducement made by false representation, by the party who obtained the property. On 11th February, 1966,

admittedly P.W. 1 did not deliver a sum of Rs. 1,40,000. It appears that at the time of arguments in this case, the Magistrate felt a difficulty that

this charge has been wrongly framed and attempted to amend the charge, but as it was objected to by the appellant that it would cause a great

prejudice to him, to amend the charge at that stage, the learned Magistrate gave it up and, however, convicted him under the same erroneous

charge u/s 420, Indian Penal Code. The learned Counsel for the respondent would submit that even now the conviction can be altered to one u/s

417, Indian Penal Code, and that, therefore, if the facts warrant for some alteration, there cannot be a bar for convicting the appellant u/s 417,

Indian Penal Code, though the charge under this section is not specifically framed. It is true that if a person is convicted of a particular charge, on

appeal, such conviction can be altered to another if facts warrant; but this can be done only if material prejudice is not caused to the appellant. In

this case, it is clearly seen that the appellant took a specific objection for altering the charge in the trial Court itself stating that it would cause

material prejudice to him and that it should not be done. The Magistrate could have overruled the objection of the appellant and amended the

charge and could have given opportunity to the appellant to meet the amended charge by recalling the witnesses examined already and to examine

his own witnesses. This was not done by the Magistrate; but curiously, as already pointed out, he convicted him on the erroneous charge. In these

circumstances, I do not think, it would be fair and just to alter the conviction, even if the facts justify.

Even on the facts of the case, I do not think any offence is made out. The entire correspondence, as narrated supra between the parties, would

indicate that there were certainly bona fides in respect of the stand taken by the appellant. It is true that the appellant gave post-dated cheques. It is

also true, as seen from the evidence of P.W. 2, that the appellant stopped payment of cheques before they could be encashed. But what happened

is this : A fresh agreement was entered into on 11th February, 1966 as the appellant could not fulfil the terms of the earlier contract. He gave post-

dated cheques on the date of the fresh agreement. He must have expected that he would get moneys by that time. It cannot, therefore, be said that

at the time when he handed over the post-dated cheques, he made a false representation, which induced P.W. 1 to give up his claim for damages

for Rs. 35,000 as stipulated in the earlier agreement. He has not stated in his evidence as to what was the representation made by the appellant,

what made him believe his representation and what he did in consequence of such representation. A representation need not be always by oral

statement, but it can be inferred from the conduct of parties. But, when the man to whom the representation was said to have been made was

examined, there is no question of inferring a representation from the conduct of the party. P.W. 1 must have positively stated as to what was the

representation the appellant made. He has failed to do so. This is undoubtedly a fatal lacuna. It is argued by the learned Counsel for the respondent

that there is an indication in the agreement Exhibit P-8 as to what the representation must have been. I do not see any indication there. It is only an

agreement between two parties. It is possible that the appellant made representation that he would give post-dated cheques and that P.W. 1 might

agree to reduce the amount of compensation and it is equally possible that P.W. 1 himself might have told the appellant to give post-dated cheques

to him and that in consideration of his receiving the cheques immediately he would forego a portion of the compensation stipulated in the earlier

agreement, as he might have been sure that at least he would get the cash within the time specified in the post-dated cheques. Therefore, it cannot

be said that from the terms of the agreement, it can be inferred that the appellant necessarily made a representation stating that he would give post-

dated cheques and requesting the respondent to forego a substantial portion of the compensation. It is the duty of the prosecution to prove that at

the time when the representation was made, it was not only false but that the person who made such false representation knew that it was false and

with that knowledge, he made such representation making the other party believe such representation and thereby induced the party deceived to

deliver a property. Of course, it is true that what happened subsequently should be taken into consideration for the purpose of finding out as to

what should have been the intention of the person at the time when he made the representation. It will depend upon the facts of each case. Even if

the subsequent conduct of a person creates suspicion, it would not be enough. It is possible that when a man makes a promise by making

representation, he would have expected that he could fulfil the promise; but the subsequent circumstances and events that might happen may justify

his inability to fulfil the promise. In these circumstances, it cannot be said that the person who made the promise made it falsely.

There are circumstances in this case which would indicate that the appellant was actuated by bona fides in his transaction. After he entered into

the first agreement (Exhibit P-l) that he would deliver the certificates on or before 15th January, 1966, he could not comply, as the Government of

India extended the scheme, by which a person could get foreign exchange freely with a concession, to get certificates of the value of 60 per cent of

the foreign exchange obtained by him. This caused a delay in getting the foreign exchange, as there was speculation in the market and, as seen from

the evidence, the price of the certificate has been going down. This was the reason that the respondent refused to extend time for the appellant

fulfilling his part of the promise as he would stand to lose in consequence of the price of certificates going down. Therefore, both the parties

entered into a fresh agreement, Exhibit P-8, by which the respondent agreed to receive the money paid by him with a compensation of Rs. 15,000

probably persuaded by the fact that the appellant gave post-dated cheques for the purpose of encashment of the money due by him under the

agreement. It appears from the records that before the cheques could be put in the banks, the appellant sent a letter to P.W. 1 by registered post

on 24th February, 1966 explaining the difficulties in putting sufficient funds in the bank. But of course, this letter was returned on 8th March, l966

as it could not be served as the respondent was on tour. This would indicate that even before the cheque could be presented, the appellant had

attempted to inform P.W. 1 about his difficulties and not to present the cheques. In the meanwhile, we see not only from the statement of the

appellant but also from the evidence of D.W. 1 that the appellant handed over five bank certificates signed by him to D.W. 1 with instructions to

dispose of the certificates on a minimum premium of 180 per cent. agreeing to pay a sum of Rs. 50,000 to the respondent from the sale proceeds.

The appellant would say that he wrote a letter on 5th March, 1966 under certificate of posting to P.W. 1 asking him to accept a sum of Rs.

50,000 on receipt of the sale proceeds of the bank certificates and to receive the balance on or before 31st May, 1966. But the complaint was

filed on 18th March. 1966. As a matter of fact, it is stated that the respondent received a sum of Rs. 50,000 from the appellant in the course of the

trial of this case. Thus, we see that the appellant was taking all necessary steps that he could take in informing the respondent then and there about

his difficulties and ultimately paying a sum of Rs. 50,000 available to him. It also appears that the respondent had filed a suit for recovery of the

amount due from the appellant and he had attached the properties of the appellant which is said to be worth about a few lakhs.

It is strenuously argued by the learned Counsel for the respondent that the conduct of the appellant in having stopped the payment before the

cheques could be presented, gives a sure indication that he had no mind to pay the amount due to the respondent and that he should have made a

false representation even at the time when post-dated cheques were handed over to the respondent. He also pointed out that admittedly a sum of

Rs. 77,000 was credited in the National and Grindlays Bank to the account of the appellant. Unfortunately, in this case, the pass books of the

appellant, either of the Canara Bank or the National and Grindlays Bank were not summoned to be produced. We do not know whether in the

Canara Bank, the appellant had sufficient money. He might have stopped the payment even before the cheques were presented if he had no

sufficient money, so that the cheques might not be dishonoured for want of funds. It may be that the appellant might have considered that if the

cheques were dishonoured, it might affect his reputation as a businessman. Though prima facie, this circumstance may appear to be a suspicious

one, yet, the possibility of the appellant having stopped payment due to insufficient funds in the Bank cannot be ruled out. Further we do not know

what other pressing commitments the appellant had besides the commitments made by him to the respondent. It may also be possible that there

might have been other pressing demands and that he wanted to fulfil those demands. Of course all these things are in the realm of speculation.

However, in the absence of positive proof from the prosecution that the representation made by the appellant was false and that the respondent

believed it to be true and that he was induced to forego a substantial portion of the compensation, on such representation, the conviction cannot be

sustained.

In the result, the appellant is acquitted and his bail bond is cancelled. The toe amount, if paid, will be refunded to him. The appeal is allowed.