Important point
To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making promise.

Headnote:Indian Penal Code, 1860—Section 420—Cognizance of offence in a private complaint filed by respondent—Appellant-accused was alleged to have executed an agreement to sell the house for total consideration of Rs. 2,50,000/- and received Rs. 1,25,000 as advance—He failed to discharge obligation of contract—Complaint alleging offence of cheating—Agreement was dated 25-12-1988 and complaint was filed on 17-5-1999 after lapse of 11½ years—Earlier in 1996 appellant accused in reply to complainant’s notice had denied execution of any such agreement or receipt of amount as advance—Complaint did not disclose ingredients of Section 415 IPC—Fit case to set aside order of Magistrate of issuance of process of offence and as confirmed by High Court.
Held : A perusal of the complaint would show that the entire dispute raised by the complainant is based on the alleged agreement to sell dated 25.12.1988 nearly 11 years prior to the filing of the private complaint on 17.05.1999. The existence of any such agreement or any advance taken has been specifically denied by the appellant by way of his reply dated 06.07.1996 in response to the legal notice dated 11.07.1996 sent by the complainant through his lawyer. For nearly 3 years from the date of reply, the complainant kept quiet before filing his complaint on 17.05.1999 before the Magistrate. It is stated that even as per the police report, no offence is made out against accused Nos. 2-4. Despite this, the Magistrate issued process against accused Nos. 2-4 as well which clearly shows the non-application of mind by the Magistrate. A perusal of the complaint would only reveal that the allegations as contained in the complaint are of civil nature and do not prima facie disclose commission of alleged criminal offence under Section 420 IPC. The Magistrate, in our opinion, has not considered the report filed by the police under Section 156(3) Cr.PC judicially. Irrespective of the opinion of the police, the Magistrate may or may not take cognizance under Section 190(1) of Cr.PC. In the instant case, as could be seen from the records, that the police has given a clean chit to accused Nos. 2-4. In our opinion, the Magistrate ought not to have taken cognizance of the alleged offence against the accused No.1, the appellant herein and that the complaint has been made to harass the accused No.1 to come to terms by resorting to criminal process. As already noticed, the complaint was filed on 17.05.1999 after a lapse of 11 1/2 years and, therefore, the very private complaint filed by the respondent No.1 is not at all maintainable at this distance of time. It is the specific case of accused No.1 that he has not executed any agreement to sell or received any advance payment. In our view, the complaint does not disclose the ingredients of Section 415 of Cr.PC and, therefore, we have no hesitation to set aside the order passed by the Magistrate taking cognizance of the offence alleged. It is also not clearly proved that to hold a person guilty of cheating, it is necessary to show that he had a fraudulent or dishonest intention at the time of making the promise. The order of the Magistrate and of the High Court requiring the accused No.1 appellant herein to face trial would not be in the interest of justice. On the other hand, in our considered opinion, this is a fit case for setting aside the order of the Magistrate as confirmed by the High Court of issuance of process and the proceedings itself. (Paras 10 and 11)

Judgement Key Points

Key Points: - The judgment discusses the necessity of fraudulent or dishonest intention at the time of making the promise to establish cheating under Section 420 IPC. (!) - It holds that the private complaint filed after a long delay (11.5 years) with allegations largely civil in nature does not prima facie disclose an offence under 420 IPC, and cognizance ought not to have been taken. (!) (!) - It emphasizes judicial assessment by the Magistrate of the police report under Section 156(3) Cr.PC and that mere private complaint cannot sustain initiation of criminal proceedings where evidence is lacking. (!) - The High Court’s order was found to be mechanically passed and not properly applied to the facts, warranting setting aside and dismissal due to inordinate latches. (!) (!) - The Supreme Court ultimately set aside the impugned orders and allowed the appeal, vacating the cognizance and proceedings against the accused. (!) (!)

What is the criteria to hold a person guilty of cheating in the context of an agreement to sell and alleged advance payment?

What are the limitations on cognizance of offences under Section 420 IPC in private complaints filed after a long interval and when the complaint discloses civil allegations rather than criminal elements?

What is the appropriate court's role in evaluating cognizance and whether an order issuing process should be set aside in cases of inordinate delay and lack of prima facie evidence?

Judgment

Dr. AR. Lakshmanan, J.—Leave granted.

2. The present appeal was filed against the final judgment and order dated 17.02.2004 passed by the High Court of Karnataka at Bangalore in Criminal Revision Petition No. 932/2000 dismissing the said petition filed by the appellant-herein (accused No.1).

3. The short facts leading to the filing of the above appeal are narrated herein below:

Respondent No.1 is the complainant. According to the complaint, the appellant herein had executed an agreement to sell dated 25.12.1988 in respect of the house premises bearing No. 120, K.H.B. Colony, Agrahara Dasarahalli, Bangalore in favour of the wife of the complainant—Renukamma and as per the said agreement a sum of Rs. 1,25,000/- was paid as advance out of the total consideration of Rs. 2,50,000/- and the remaining amount was to be paid at the time of registration of sale deed. It is stated in the complaint that the second accused being the father of the first accused, the appellant herein was a member of the Karnataka Housing Board, who negotiated the transaction among the parties and in spite of several requests and demands made by the complainant it did not yield any fruits and that the first accused had sold the said property in favour of the wife of the fourth accused. It was further stated that the complainant approached all the accused persons several times for possession of the said premises and was ready to pay the balance sale consideration, but all the accused persons failed to discharge the obligations of the contract. Certain other averments have also been made in the complaint in regard to the receipt of Rs. 5 lacs from one Uma Belagavi and Nadigar for vacating the said premises on filing civil cases with which are not presently concerned in this appeal. A legal notice dated 11.07.1996 was also issued by the complainant calling upon the appellant herein to execute the sale deed in respect of the premises in question. The appellant herein on 18.07.1996 replied to the said legal notice. He denied the very existence of the alleged agreement to sell. He also denied that he had ever received Rs.1,25,000/- as consideration amount.

4. According to the complainant, all the accused persons committed offences attracting penal provisions of IPC under Sections 196, 209, 386, 403, 406 and 420. The complainant requested the Chief Metropolitan Magistrate, Bangalore to take cognizance of the offence against the accused persons and punish them in accordance with law in the interest of justice and equity. This complaint was numbered as PCR No. 453/1999 dated 17.05.1999.

5. The appellant denied the execution of such an agreement or received any advance from the complainant or his wife.

6. The IV Addl. Chief Metropolitan Magistrate directed the office to register the case as PCR and refer the same to the sub-inspector Kamakshi Palya P.S. for investigation and submit a report as per Section 156(3) of Cr.PC by 27.08.1999. This order was passed by the Magistrate on 17.05.1999 (Annexure-P2). On 04.08.2000 the IV Addl. Chief Metropolitan Magistrate passed the following order:

“Order

Perused the record. Cognizance of the offence alleged against the accused is taken u/s 190(i)(b) of Cr.P.C. Office to register the case in CC register and issue SS to accused by 30-9-2000.

Sd/-4-8-2000"

7. Aggrieved by the order dated 04.08.2000 passed by the IV Addl. CMM, the appellant accused preferred a criminal revision under Section 401 Cr.PC praying the High Court to set aside the said order. The said revision was dismissed by the High Court by the impugned order dated 17.02.2004.

8. We have perused the entire pleadings and the order passed by the High Court in revision and heard the counsel appearing for the appellant. Though notice was served on the first respondent, no one has entered appearance on his behalf. Mr. Sanjay R. Hegde, learned counsel for the respondent filed vakalatnama on behalf of the State but has not filed any counter affidavit on behalf of respondent No.2

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2005 Supreme(SC) 271

Important pointTo hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making promise.

What is the criteria to hold a person guilty of cheating in the context of an agreement to sell and alleged advance payment?

What are the limitations on cognizance of offences under Section 420 IPC in private complaints filed after a long interval and when the complaint discloses civil allegations rather than criminal elements?

What is the appropriate court's role in evaluating cognizance and whether an order issuing process should be set aside in cases of inordinate delay and lack of prima facie evidence?

Important point
To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making promise.