Dishonest intention in the offence of cheating under Section 420 IPC can develop during the course of business, even if it was not present at the inception.

IMMANENI PANDURANGA RAO, J.

( 1 ) A1 is the petitioner. He was working as a clerk up South Central railway. A2 is his younger sister. Alleging that both the accused have started chit furd scheme consisting cf two chits and having induced several of the wives of railway employees and others to subscribe to those chits, the accused stopped payment of chit fund amount with dishonest intention of cheating the subscribers including pw 1. PW 1, preferred a private complaint. The second accused died during the pendency of the case. The learned Judicial First Class Magistrate, kavali has convicted Al under Sectioa 420 I PC and sentenced him to undergo r I-for three months in addition,to payment of fine of Rs. 500/- in default to suffer R I for one month. Aggrieved by the said conviction and sentence the first accused preferred criminal appeal No. 44/ 89 to the learned Sessions Judge, Nellore who has confirmed the conviction as well as sentence.

( 2 ) AGGRIEVED by the said conviction and sentence, a1 preferred this revision case. The learned counsel for the petitioner submitted that even taking the entire prosecution evidence to be correct no offence of cheating is made out against the accused, because the accused are said to have started two chits of Rs. 8000/- and Rs. 4200/- :that it is elecited, from the evidence of P Ws. 1 to 4 that the auction was being conducted every month the amount was being paid to the lowest bidder and the balance was being distributed to the subscribers: that P W 1 deposed that she has subscribed Rs, 6500/- towards first chit and Rs. 2100/- towards second chit; that from the above facts it is clear that there was not dishonest intention on the part of the accused at the inception: that the lower appellate Judge presumed dishonest intention because the accused have not registered the chits under the Chit Funds Act that the failure oa the part cf the accused to register the chit fund may constitute an offence under the Chit Funds Act but not under Section 420 IPC and therefore the conviction and sentence inflicted against Al are liable to be set aside.

( 3 ) IN support of his contention, the learned counsel for the petitioner relied upon the decision of the Supreme court in the State of Madhya Pradesh, vs. Mir Basit AH Khan (1) AIR 1971 S C 1620 in which it is held that in the absence of misrepresentation or suppression of any material facts with a view to defraud or cheat the public, the promoters of a money circulation scheme are not guilty of cheating even if the scheme is speculative and unworkable. Their lordships held though the High court held en facts of that case that the money circulation scheme promoted by the respondents therein was speculative te the highest degree and unworkable, it was not dishonest or fraudulent in the sense that it either represented to the public something which was not true or concealed from them something which should have been disclosed. In that case the High Court thought that it was an appeal to the gambling instinct of humanity but their Lordships of the Supreme court opined that this cannot per s e amount to cheating. The learned counsel for the petitioners also relied upon the decision in The State of Kerala. Vs. A. Pareed Pillai (2) AIR 1973 SC 326 which lays down that to hold a person guilty of the offence of cheating, it has to be shows that his intention was dishonest at the time of making the promise and that such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfil the promise. In that case their Lordships of the Supreme court found that during the period from 2nd February, 1963 to 24th April, 1963 more than 5000 oil tins were despatched to various stations from Always railway station on behalf of the firm of the accused -respondents and those oil tins were appropriated by the railway authorities towards the railway receipts of earlier dates. From the fact that more than 5000 oil tins were despatched on behalf of the

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