Penal Code, 1860 – s.420 – Offence of cheating – Appellantmovie producer borrowed money from the complainant on assurance that it would be returned by a share in profits – Appellant issued two post-dated cheques towards return of the principal amount – Cheques dishonoured for insufficient funds in the account – Complaint for the offence of cheating and criminal breach of trust – Petition for quashing of report and consequential proceedings on the ground that it was a civil cause of action given a colour of criminal offence – High Court quashed the indictment of an offence punishable u/s.406 but declined to quash proceedings qua the offence of cheating punishable u/s.420 – Correctness:
Held: Where the transaction between the parties is such that fulfilment of the promise is not entirely in the control of the promisor, or there is an inherent risk in fulfilment of the promise, the High Court may, in exercise of its inherent powers under the Code, or u/Art.226 of the Constitution, as the case may be, upon consideration of the attending circumstances, take a decision whether the dishonest intention existed or not at the time of making the promise – And, if it comes to the conclusion that the alleged conduct of the parties does not reflect a dishonest intention of the accused from the very beginning, it may quash the criminal complaint/proceedings and relegate the aggrieved party to civil remedies – On facts, the initial payment of money by the complainant to the appellant was for a movie project on promise of a share in profits – Additional money was paid later for its completion under a promise of an enhanced share in the profits – No denial about the completion of the movie and its ultimate release, thus, the promise to make a movie not false, as also no dishonest intention of the appellant in making the promise which remained unfulfilled – Nature of transaction between the parties was a crucial factor in determining whether the investor party should be allowed to bring in a criminal action or pursue civil remedies – High Court overlooked the same – Post-dated cheques were not by way inducement to lend money or invest money in the proposed movie – Dishonour of those cheques, would not ipso facto amount to an offence of cheating – Thus, dishonour of a post-dated cheque by itself not sufficient to presume existence of a dishonest intention on part of its drawer – Thus, in absence of allegations that movie made profits, the complaint and the supporting materials failed to indicate that the appellant harboured a dishonest intention from inception – Allegations only disclosed a civil cause of action and the High Court erred in not quashing the criminal proceedings – Impugned judgment and order of the High Court set aside to the extent it declined quashing of the proceedings u/s.420 – Impugned criminal proceedings u/s.420 quashed. [Paras 15, 17, 18, 20, 21]
Penal Code, 1860 – s.420 – Cheating – Necessary ingredients to constitute an offence of cheating:
Held: In order to constitute an offence of cheating the intention to deceive should be in existence when the inducement was made – It is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise – Mere failure to keep the promise subsequently cannot be the sole basis to presume that dishonest intention existed from the very beginning. [Para 13]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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