Shyam Sunder and Another vs Lala Bhawan Kishore and Another

V.P. Mathur, J.—This petition u/s 482 Code of Criminal Procedure is moved with the prayer that the criminal complaint No. 1174 of 1981 pending in the Court of Munsif Magistrate Sambhal, district Moradabad, may be quashed and further proceedings in that case may be stayed.

The complaint was filed for an action for the offences under Sections 415, 417 and 420 IPC and the case of the complainant was that on 24-10-80 the Petitioners went to their firm and purchased 61 bags of Khandsari sugar. The price was settled at Rs. 40395.14. A sum of Rs. 2,500/- was paid on the spot. Cheques for Rs. 30,000/-were also handed over and there is no dispute that they were duly encashed afterwards. Three further cheques were also issued for the amounts of Rs. 5000/-. Rs. 6000/- and Rs. 5000/- respectively. The payment of the first cheque was due on 7-9-81, of the second cheque on 7-10-81 and the third cheque on 7-11-81. They were presented to the bank concerned on 14-9-81, 22-10-81 and 13-11-81 i.e. after due dates and were dishonoured. Then a notice was given to the applicants informing them about the dishonour of the cheques and no satisfactory reply was received. The contention of the complainant was that the Petitioners were guilty of cheating and hence were liable to be prosecuted.

This case was taken up in the earlier part of the day on 2-12-88 and no body appeared. It was again taken up after the revision of the list and Sri. G.P. Dixit, learned Counsel for the applicants appeared and argued the case. There was no body on behalf of opposite party No. 1. Learned Counsel for the State was also heard. A long date for delivery of the judgment was given as the learned Counsel for the applicants wanted to cite some law.

The main point for consideration was whether in cases in which post dated cheques are issued, there can be any presumption that tbe intention from the very inception was to cheat, in case the cheques are returned dishonoured. In this context the learned Counsel for the Petitioners argued that unless it is established on record by satisfactory evidence that at the time when the cheques were issued it was the intention of the applicants not to honour those cheques and not to make payment but to cheat the opposite party, no presumption of guilt under Sections 415, 417 and 420 IPC can be made.

In tbe case of M.M.S.T. Chidambaram Chettiar v. Shanmugham Pillai AIR 1938 129 with reference to Section 415 of the Indian Penal Code, the following observation was made:

In the offence of cheating there are two elements-deception and dishonest inducement to do or omit to do something. Mere deception is not a criminal offence. Mere dishonesty is not a criminal offence. To establish an offence of cheating, the complainant would have to show not only that he was induced to do or to omit to do a certain act, but that this induced commission or omission on his part caused or was likely to cause him some harm or damage in body, mind, reputation or property, which are presumed to be four cardinal assets of humanity.

A post-dated cheque in payment of goods already received is a mere promise to pay on a future date and a broken promise is not a criminal offence, though it may amount in certain business relations to discreditable behaviour.

The above case followed the law laid down in the case of H.K. Shaw Vs. Suresh Chandra Mitter, .

Chidambaram''s case (supra) was followed by the Lahore High Court in the matter of R.S. Rata v. Ganesh Dass 1940 CriLJ 394 and the following observations are of importance:

Hence giving a post dated cheque by a person who has no funds to his credit in the Bank does not amount to an offence of cheating, when there is no evidence to show that the person to whom the Cheque was given parted with any property or that he did or omitted to do anything which he would not have done or omitted to do if he had known that the cheque would be dishonoured. The dispute in such a case is of a civil nature.

One more case of Kunwar Sen v. King Emperor, The Indian Law Reports (Volume-VIII), page 286 may also be looked into in this context. Charges of cheating were against one Kunwar Sen and they were based on two cheques issued by him. One of them was in part payment of the price of a counter ordered by him for his proposed Bank, and the other was issued in favour of a Publishing House for Printing; charges of some forms etc. to be used at his proposed Bank. Both the cheques were dishonoured. A copy of Kunwar Sen''s account with the Bank concerned showed that his credit balance at the time when be issued the cheques and for some months previous to it, was Re. 1 only. It was held that ''''It seems, therefore, clear that his failure to meet payment of the cheques was not accidental. He must therefore be presumed to have been aware that the cheques would be dishonoured and therefore his conviction on these two specific counts u/s 420 was quite correctly returned".

A perusal of this law as well as a host of other cases decided by different High Courts will clearly lay down the law which may be summed up as follows:

(i) If from the very inception of the contract the intention is of dishonesty and deception and in consequence thereof a person is induced to part with any property or to do or omit to do anything that he would not do or omit to do, but for that deception the offence of cheating is prima facie made out.

(ii) In case in which as a result of passing of some property or doing of an act or omission to do it, a post dated cheque is issued with the full knowledge of both the parties that for the present the cheque was not encashable, there is no dishonesty or inducement at the very inception of the contract. And if subsequently for some reason or the other, on the due date the cheques are dishonoured, the case may not be covered u/s 420 of the Indian Penal Code. It will only be a case of a civil liability. The reason being that it was not the intention of the person issuing the cheque to make an immediate payment and the post dated cheque was only in the nature of a promise to pay which promise, if it is broken, could give rise only to a civil liability.

The learned Counsel for the State has however, argued that in this case from the facts and circumstances, it appears that the intention of the revisionist right up from the very inception was to cheat. He intended to pay a part of the sum and withhold payment of the rest and hence since this was his intention from the very beginning, it will be a case of cheating. Although no law was cited in support of this argument, I could lay my hand upon a case of Delhi High Corut viz. Bhola Nath Arora and Another Vs. The State, . In this case the accused had delivered certain cheques for paying balance amount of goods supplied by the Dealer, the cheques were dishonoured. No attempt was made by the accused to pay the amount for the encashment of the cheques. It was held that the accused shall be presumed to have committed the offence u/s 420 of the Indian Penal Code. In this case the accused had already made payment of certain amounts by means of a demand draft and for the balance amount, cheques were delivered by him to the Dealer and these cheques were dishonoured on different dates and the Bank account showed that at no stage, any attempt was made by tbe accused to pay insufficient amount for encashment of the cheques. The High Court was of the view that such matters would be sufficient to afford a ground for presuming that the accused had committed an offence u/s 420 of the Indian Penal Code. The Court however also noted that what is material, is the intention of the drawer at the time when the cheque was issued and this intention has to be gathered from the facts on the record. If from the circumstances, it is established that the failure to meet a cheque, was not accidental but was the consequence expected by the accused, the presumption would be that the accused intended to cheat.

The Delhi High Court placed reliance upon the case of KeshavJi MadhoJi v. Emperor AIR 1930 Bom 179, and on the case of Ajodhya Prasad v. Chiranjilal 1957 AWR 4 and some other cases.

In Keshavji Madhoji v. Emperor (supra), the facts were that the accused had induced the complainant to advance a loan to them and gave a post dated cheque with the representation that it could be encashed on a particular date. The legal position was summed up by the High Court in the following words:

What the prosecution has to do, I take it, in a case of this kind is to establish facts which point prima facie to tbe conclusion that the failure to meet the cheque was not accidental but was a consequence expected and therefore intended by the accused. It will then be for the accused to establish any facts there may be in his favour which are specially within his knowledge and as to which the prosecution could not be expected to have any information.

In the Allahabad case of Ajodhya Prasad v. Chiranjilal (supra) it was observed that "the fact that the Hundi was not actually paid when it was presented for payment would not by itself make the accused guilty of cheating. They can be guilty of cheating only if on the circumstances proved by the prosecution the Court could draw a clear inference and the only inference that the intention of the accused at the time when they passed the Hundi to the Firm, was to cheat the Firm and not otherwise. The following observation is of importance:

When a person draws a Hundi or a cheque he does thereby make a representation to the person in whose favour the Hundi or cheque is drawn:

(i) that he has authority to draw that document and draw the document for that amount;

(ii) that the cheque or the hundi is a good or valid order of payment of that amount; and

(iii) that it would be paid when presented for payment.

The prosecution in a case of this nature can only establish facts which point prima facie to the conclusion that the failure to meet the negotiable instrument was not accidental but was a consequence expected and therefore intended by the accused.

The facts and circumstances of the present case are however, somewhat different. The purchase in this case was of sugar of a total value of Rs. 48396.00. As part payment a sum of Rs. 2500/- was paid as cash. A cheque of Rs. 15,000/-was issued which was duly encashed at the Bareilly Corporation Bank.

Another amount of Rs. 15,000/- was sought to be paid by a post dated cheque issued on 15-1-1981 and undoubtedly this was also duly encashed on the due date. In this manner a sum of Rs. 32,500/- had already been paid and only a sum of Rs. 16,000/- remained due. Three post-dated cheques were issued for the payment of this amount. The very fact that one post dated cheque had already been encashed and three further post dated cheques were accepted by way of promise to pay, goes to show that at the initial stages there was no intention to cheat. It appears that the three cheques were dishonoured after the due dates. This is simply accidental and cannot be said to be intentional or expected or at all known when the cheques were issued and the transaction was entered into. I am, therefore, of the view that the facts and circumstances do not attract the application of the law laid down in Allahabad case Ajodhya Prasad v. Chiranjilal (supra) or in Bhola Nath Arora v. The State (supra).

In my opinion it is not a case of cheating. It is a case of civil liability and therefore the criminal complaint No. 1174 of 1981 pending in the Court of Munsif Magistrate, Sambhal, District Moradabad in the matter of Lala Bhawan Kishore v. ShyamSunder and Anr. shall stand quashed. This petition u/s 482 Code of Criminal Procedure is accordingly allowed.