1. Forgery of machinery purchase vouchers to inflate costs for claiming higher depreciation from the Government under a production contract — Charges under Sections 120-B, 420, 467, and 471, IPC. (Para 2 , 3 , 4 )
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1959 Supreme(SC) 165
SUPREME COURT OF INDIA
24th September, 1959
S.R. DAS, C.J.I., P.B. GAJENDRAGADKAR AND K. SUBBA RAO, JJ.
The State of Bombay, Appellant
Versus
Rusy Mistry and another, Respondents.
Criminal Appeal No. 105 of 1956.
Advocates appeared
Mr. H. N. Sanyal, Additional Solicitor General of India, Mr. N. S. Bindra, Senior Advocate (M/s. M. S. Pandit and R. H. Dhebar, Advocates, with them), for Appellant; Mr. A. S. R. Chari, Senior Advocate, (Mr. K. R. Choudhury, Advocate with him), for respondent No. 1; Mr. K. V. Suryanarayana Aiyar, Advocate-General for the State of Kerala (Mr. C. Sankaran Nair and Mr. Sardar Bahadur for Mr. M. S. K. Sastri, Advocates, with him), for Respondent No. 2.
Advocates:
A.S.R.CHARI, CHETTUR SANKARAN NAIR, H.N.SANYAL, K.R.CHAUDHARY, K.V.SURYANARAYANA IYER, M.S.K.Shastri, M.S.PANDIT, N.S.BINDRA, R.H.Dhebar, SARDAR BAHADUR SAHARYA
A.S.R.CHARI, CHETTUR SANKARAN NAIR, H.N.SANYAL, K.R.CHAUDHARY, K.V.SURYANARAYANA IYER, M.S.K.Shastri, M.S.PANDIT, N.S.BINDRA, R.H.Dhebar, SARDAR BAHADUR SAHARYA
FIRs are not substantive evidence and cannot be used to prejudice a jury with irrelevant past conduct. Retrospective contract clauses cannot create criminal liability for acts committed before execution, and charges of cheating must be strictly proven as framed based on the evidence.
Headnote:(A) Code of Criminal Procedure, 1973 - Sections 154, 161 and 162 - First Information Report (FIR) - Evidence - It is well-settled that a first information report is not substantive evidence, but can only be used to corroborate or contradict the evidence of the informant given in Court or to impeach his credit. A Judge cannot place such a report before the jury as substantive evidence. Reading irrelevant portions of a complaint regarding the past antecedents and alleged misdeeds of an accused to a jury constitutes a clear misdirection that prejudices the trial. (Paras 7, 8, 9 and 10)
(B) Constitution of India - Article 136 - Special Leave Petition - Scope - Article 136 confers a discretionary power on the Supreme Court to interfere in suitable cases, not a right of appeal. The Court generally does not interfere with findings of fact, especially in cases of acquittal, unless the finding shocks the conscience of the Court, involves a disregard for legal process, or results in substantial and grave injustice. (Para 11)
(C) Indian Penal Code, 1860 - Sections 420, 467 and 471 - Cheating and Forgery - Criminal liability cannot be imputed to an accused for an act done before a contract was executed, regardless of whether the contract later came into effect retrospectively. Where the specific method of cheating alleged in the charge—namely, the submission of inflated bills—is not supported by evidence, the charges of cheating and the associated forgery for that purpose cannot be sustained. (Paras 14 and 15)
Facts of the case:
A company entered into a contract with the government for the manufacture and repair of equipment, under which the company was entitled to actual costs plus profit, including depreciation. It was alleged that the accused forged a machinery purchase list to inflate the cost of equipment from approximately 3 lakhs to 4 lakhs to dishonestly claim higher depreciation. The trial court convicted the accused of forgery, using a forged document, and attempting to cheat the government. The High Court subsequently set aside the convictions and acquitted the accused.
Findings of Court:
The Supreme Court found that the trial judge had misdirected the jury by reading a prejudicial document concerning the accused's past conduct. On the merits, the Court found that the bills submitted to the government were based on overhead charges calculated as a multiple of labor charges, rather than on the capital account of depreciation. Consequently, no claim was made based on the inflated machinery costs.
Issues: Whether the trial court's introduction of the accused's past conduct to the jury constituted a misdirection; whether the accused attempted to cheat the government by submitting inflated bills; and whether the Supreme Court should exercise its discretion under Article 136 to overturn the acquittal.
Ratio Decidendi: An FIR or police statement cannot be used as substantive evidence to prejudice a jury. Criminal liability cannot be established based on the retrospective date of a contract for acts committed prior to its execution. Since the evidence showed that the bills submitted to the government did not rely on the inflated machinery costs, the essential ingredients of the charges of cheating and forgery were not established.
Result: Appeal dismissed.
Legal Category Hierarchy
- crime and sentencing
- practice and procedure
-
constitutional law
- special leave petition (Para 11)
Table of Contents
2. State challenged the High Court's finding on jury misdirection and contended that the accused were guilty of cheating based on the evidence of inflated accounts. (Para 6 )
3. The trial judge misdirected the jury by reading prejudicial antecedents as substantive evidence; further, no evidence proved that inflated bills were actually submitted to the Government. (Para 7 , 8 , 9 , 10 , 13 , 14 , 15 )
4. First Information Reports are not substantive evidence and cannot be used to prejudice a jury regarding the character or past deeds of the accused. (Para 7 , 8 , 9 )
5. Appeal dismissed and acquittal upheld. (Para 16 )
6. Can a First Information Report (FIR) be used as substantive evidence in a trial?
No, a first information report is not substantive evidence. It can only be used to corroborate or contradict the evidence of the informant given in court or to impeach the informant's credit. (Para 7 , 8 )
7. Does reading the prejudicial antecedents of an accused to a jury constitute a misdirection?
Yes, reading documents detailing an accused's alleged past fraudulent acts to a jury, even with a caution, is a misdirection that unconsciously prejudices the jury and can vitiate the entire charge. (Para 7 , 9 , 10 )
8. How is the scope of a cheating charge determined when specific means of deception are alleged?
The scope is limited to the specific acts alleged in the charge. If the charge specifies cheating by submitting inflated bills, the prosecution must prove those specific bills were submitted to induce payment. (Para 13 , 15 )
Judgment
SUBBA RAO, J. : This appeal by special leave filed by the State of Bombay is directed against the judgment of the High Court of Judicature at Bombay setting aside the convictions of the respondents and the sentences passed on them by the Sessions Court for Greater Bombay, and acquitting them of the offences with which they were charged.
2. A private limited company called the Industrial Commercial Trust Limited was formed on April 1, 1943. The principal shareholders in that company were the first accused and one Sir Chinubhai Madhavlal. During the course of that year i.e., 1943, a firm called the Asian Air Associates (hereinafter called "the Company") was established as a subsidiary concern of the Industrial Commercial Trust Limited. Accused No. 1 and Sir Chinubhai Madhavlal were partners of the Company, and accused No. 2 was its General Secretary. The factory and the head office of the Company were at different places. The main work of the Company was the manufacture and repair of Royal Air Force equipment. In or about October 1943 the Company entered into a contract with Messrs. Ramdas and Sons for the purchase of certain machinery and tools at an agreed price of Rs. 3,05,001 and obtained possession of the same. On January 8, 1944, Ramdas and Sons wrote a letter (Ex. C), with an enclosure (Ex. D.) giving a description of the machinery sold, to the Company acknowledging the receipt of the full price. In or about January 1944, Ex. D, the list of machinery, was detached from the letter and the price of the machinery was inserted therein as Rs. 4,05,001, with the result that the list of machinery (Ex. D) was converted into a voucher. On the basis of that voucher, necessary entries were posted in the accounts of the Company debiting the "Plant and Machinery Account" with Rs. 4,05,001, and crediting Ramdas and Sons with an equal amount. An amount of Rs. 3,05,001, was shown as having been paid to Ramdas and Sons, and the balance of Rs. 1,00,000 remained credited to their account. This balance was carried forward from year to year till March 30, 1946. About the end of 1944, accused No. 1 paid Sir Chinubhai Madhavlal a sum of about Rs. 17,00,000 and took over both the Industrial Commercial Trust Limited and the Company, and, thereafter, accused No. 1 and his wife became the partners of the Company. On March 30, 1946, the said balance of Rs. 1,00,000 standing to the credit of Ramdas and Sons was transferred to the personal account of accused No. 1 and a corresponding debit was made in the account of Ramdas and Sons.
3. On March 2, 1944, the Company entered into a contract with the Director of Munitions Production representing the Government of India for the manufacture, overhauling, repair and modification of Royal Air Force equipment. The said contract was to come into force retrospectively from November 11, 1943. Under one of the clauses of the contract, the Company would be entitled to the actual cost plus 7 1/2 per cent - later on enhanced to 10 per cent - profit on the actual cost of the work done by it. Depreciation was one of the items to be taken into consideration in determining the actual cost. The prosecution case is that the accused dishonestly inflated the cost of the machinery purchased from Ramdas and Sons by forging Ex. D, and attempted to cheat the Government by submitting bills on that basis. The prosecution also relied upon another item, namely, the commission of Rs. 3,338 alleged to have been received by the Company from the Electric Cable and Machinery Co. Ltd., but not included in the accounts with the same object of inflating the cost of the electrical goods purchased from them. It is not necessary to trace the facts in regard to this item as the learned Additional Solicitor General, appearing for the State, does not press the appeal of the prosecution in regard to this item, and, therefore, nothing further need be said about this.
4. The two accused were committed to the Sessions, and they were tried by th
