1. Loan advanced against hypothecation of business stock based on representations of non-encumbrance — Complaint under Section 420 read with Section 34 and Section 120-B, IPC. (Para 1 , 2 )
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1996 Supreme(SC) 1284
1996(6) Supreme 411
SUPREME COURT OF INDIA
A.S. Anand and K.T. Thomas, JJ.
Abdul Fazal Siddiqui -Appellant
versus
Fatehchand Hirawat and Anr.
-Respondents
Criminal Appeal No. 42 of 1981
Decided on 20-8-1996
Counsel for the Parties :
For the Appellant : Rathin Das and Dipak Bhattacharya, Advocates.
For the Respondent No. 1 (NP) : In-person.
For the State (NP): Pranab Kumar Chatterjee, Advocate.
Important Points
IMPORTANT POINT
A mere representation, which is neither claimed or alleged to be dishonest or fraudulent would not attract the charge of cheating only because the complainant parts with his money on the basis thereof.
A mere representation, which is neither claimed or alleged to be dishonest or fraudulent would not attract the charge of cheating only because the complainant parts with his money on the basis thereof.
Subject
Criminal Law - Cheating
Act Referred
Headnote
Indian Penal Code, 1860-Section 420/34-Hypothecation of Cafe business on representation that it was free from all encumbrances-Representation found false as property was encumbered and in a suit Joint Receiver has been appointed -Complainant in his evidence had not made any mention of any representation having been made by appellant that property was free from encumbrances-Nothing on record to show that appellant had any knowledge about Cafe being an encumbered property or about appointment of Receiver by Court-Evidence did not connect appellant with crime-Conviction is unsustainable. (Paras 4 to 6)
Legal Category Hierarchy
Table of Contents
2. Appellant denied making false representations to induce the loan or having knowledge of the property's encumbrance, asserting he only identified the executant of the deed. (Para 2 )
3. Evidence failed to show the appellant made false representations knowingly, dishonestly, or fraudulently, as the primary representations were made by the business proprietor. (Para 4 , 6 )
4. A representation that is neither dishonest nor fraudulent does not constitute cheating under Section 415, IPC, regardless of whether the complainant parts with money. (Para 6 )
5. Appeal allowed — Conviction and sentence set aside — Appellant acquitted. (Para 6 )
6. What are the essential ingredients for an offence of cheating under Section 415, IPC?
Cheating involves deceiving a person to fraudulently or dishonestly induce them to deliver property, or to consent that any person shall retain property, or intentionally induce them to do or omit anything which causes damage or harm. Dishonest concealment of facts also constitutes deception. (Para 5 )
7. Does a mere representation to a party constitute cheating if the party parts with money based on that representation?
No. A mere representation does not attract a charge of cheating unless it is specifically claimed or alleged to be dishonest or fraudulent. (Para 6 )
8. Is knowledge of the falsity of a representation necessary to establish the offence of cheating?
Yes. To establish cheating, there must be evidence that the accused knowingly made a false representation dishonestly or fraudulently; without such knowledge and intent, the basic ingredients of the offence are missing. (Para 6 )
ORDER
Respondent No. 1 filed a complaint in the Court of Additional Chief Presidency Magistrate, Calcutta, against the appellant (A.I), Kochi Mia (A.2) and Fazlur Rahman (A.3) alleging offence under Section 120-B read with Section 420 IPC and in the alternative under Section 420 IPC read with Section 34 IPC.
2. According to the complainant, Kochi Mia (A.2) and the appellant met him and requested him to advance money against the stock-in-trade of business of the Calcutta Cafe of which Fazlur Rahman (A. 3) was represented to be the proprietor. The complainant wanted to meet Fazlur Rahman (A. 3) himself before agreeing to advance the loan. After a few days, Fazlur Rahman (A. 3), Kochi Mia (A. 2) and the appellant went to the place of business of the complainant to meet him. A friend of the complainant by name Mangtulal Bagaria was also present at that time with the complainant. The three accused represented to the complainant that Calcutta Cafe was free from all encumbrances and that the money could be advanced against hypothecation. Both the complainant and his friend Mangtulal Bagaria agreed to advance Rs 30,000/-- to Fazlur Rahman. On the next date, a deed of hypothecation was drafted and executed in the office of Mr. G. Bagari (PW 4) between the parties. In the deed of hypothecation, it was stated that the business in question was free from all encumbrances and charges etc. The deed of hypothecation was signed by Fazlur Rahman (A.3). On the basis of the specific representation made orally and in the deed, the complainant and Mangtulal Bagaria advanced a sum of Rs. 30,000/- to Fazlur Rahman (A.3). The amount was advanced against six hundies. Fazlur Rahman (A.3) also executed a general irrevocable power of attorney in favour of the complainant and Mangtulal Bagaria authorising them to take charge of the management of the Calcutta Cafe in case of default of payment as agreed to in the deed of hypothecation. Some payments were subsequently made towards repayment of the loan by Fazlur Rahman (A.3) to the complainant and Mangtulal Bagaria but after 28th November, 1966 admittedly no payments were made. On an enquiry made by the complainant, it transpired that the representation made by Fazlur Rahman (A.3), Kochi Mia (A.2) and the appellant was false because the property in question was an encumbered property and in a suit filed in the Calcutta High Court, Joint Receivers had been appointed regarding Calcutta Cafe. After recording the preliminary evidence all the three accused were sent up for trial. It transpires that no charge was framed against Kochi Mia (A.2) while Fazlur Rahman (A.3) died during the pendency of the trial. The defence of the appellant was that he was in no way connected with the alleged crime nor had he cheated the complainant and his friend Mangtulal Bagaria and that he had not made any false representation to the complainant to induce him to part with his money. He asserted that he was not present at the time when the alleged representation was made by A.3 to the complainant, at the time of the drawing up of the hypothecation deed and that he had only subsequently identified the executant at the request of the complainant and Kochi Mia (A.2).
3. In the trial Court the case, therefore, proceeded only against the appellant. The learned trial Magistrate vide his order dated 24th April, 1972 convicted the appellant for an offence under Section 420/34 IPC and sentenced him to undergo rigorous imprisonment for six months and to pay a fine of Rs.500/- and in default to undergo further rigorous imprisonment for two months. The appeal filed by the appellant in the High Court failed on 30th August, 1979. By special leave the appellant is before us.
4. We have examined the record and heard learned counsel for the parties. We find that the complainant who appeared as PW 7 in the trial Court in his examination in-chief stated that the amount was advanced "on believing in good faith on the representation of accused Nos. 2-3 tha
