A person can be convicted of cheating under section 420 of the Indian Penal Code if they dishonestly induce a person to deliver any property by making false representations.

Headnote:
CRIMINAL LAW - CHEATING - SECTION 420 OF THE INDIAN PENAL CODE - DISHONESTLY INDUCING A PERSON TO DELIVER ANY PROPERTY - BANK ADVANCING MONEY ON THE BASIS OF FALSE REPRESENTATIONS MADE BY THE ACCUSED - ACCUSED CONVICTED OF CHEATING - SENTENCE ENHANCED ON REVISION.
Fact of the Case:

The accused, partners of various firms, obtained bill discounting facility from a bank. They submitted false invoices, hundis, and transport receipts to the bank to obtain advances for goods that were not of the value, quality, and quantity represented. The bank discovered the fraud and filed criminal complaints against the accused under section 420 of the Indian Penal Code for cheating.
Finding of the Court:

The court found that the accused had made false representations to the bank to obtain advances. The accused admitted that the goods consigned were not of the same quality, quantity, and value as mentioned in the invoices. The court held that the accused had dishonestly induced the bank to deliver money to them and were guilty of cheating.
Issues: 1. Whether the accused had made false representations to the bank to obtain advances? 2. Whether the accused were guilty of cheating under section 420 of the Indian Penal Code?
Ratio Decidendi: The court held that the accused had made false representations to the bank to obtain advances. The accused admitted that the goods consigned were not of the same quality, quantity, and value as mentioned in the invoices. The court held that the accused had dishonestly induced the bank to deliver money to them and were guilty of cheating.
Final Decision: The court dismissed the appeals filed by the accused and allowed the revision applications filed by the complainant bank. The court enhanced the sentences imposed on the accused by the trial court.

JUDGMENT - KOLSE B.G., J.: - These five appeals are filed by the original accused against the order dated March 25, 1982 of conviction and sentence passed by the learned Additional Chief Metropolitan Magistrate, Mazagaon in five different cases. The complainant has also preferred a Criminal Revision Application for enhancement of sentence in this Court in each case. The said appeals were initially filed in the Bombay City Civil and Sessions Court Bombay and they were transferred to this Court in view of the order passed in each of the Revision Applications by this Court. All these Appeals and the Revision Applications involve a common point for the consideration of this Court and, therefore, they are being disposed of by this common judgment.

2. Crescent Tool Corporation, a registered firm having its registered office at 4, Raghunath Madhavji Street, Mandvi, Bombay, is a parent concern having its sister concerns in the named and styled as Asia Electric Co. at 13-F, Chakla Street, Mandvi, Bombay-3, M/s. Metal and Material Corporation, 1st Dhirubhai Parikh Marg, New Era Engineering Co., at 30 Old Hanuman Lane, 2nd floor, Kalbadevi, Bombay and M/s. Rajendra Trading Co. at 112 Veer Vithaldas Chandan Street, Vadgali, Bombay-4. All these firms were dealing in mills stores, hardware, machine tools, etc. They had separate current accounts with Indian Overseas Bank, Mandvi Branch with the bill discounting facilities. This facility was given on the application of all the partners of each of the firms coupled with letters of hypothecation given by them. Under the said facility the account-holder is paid in advance the value of the goods under sale and the bank realises the amount later. The nature of the transaction itself calls for faithful report from the account-holder as regards the quality, quantity and the value of the goods to be sold. The facility was available to the parent concern and all other associated concerns between 1975 and 1977.

3. In Criminal Appeal No. 317 of 1984, the accused Jaswant P. Mathuria had drawn Hundi No. 28 for Rs. 18,554.50 as per Invoice No. 382 against a consignment. However, subsequently the hundi was not honoured and was returned to the drawee bank. On taking inventory of the consignment it was found that though the bank had advanced the sum of Rs. 18,554.50 p., the consignment was worth only Rs. 2300/-. Similarly, Hundi No. 29 for Rs. 16,298/- as per Invoice No. 383 was drawn on 29th September, 1977 and on inventory, it was found that the goods in the consignments were worth Rs. 3000/- only. The accused had also drawn Hundi No. 30 as per invoice No. 384 of Rs. 14,891/- on 4-10-1977, and after inventory the goods worth only Rs. 2600/- were found in the consignment. Thus in all a total amount of Rs. 49,743.50 was advanced by the bank whereas good worth Rs. 7958/- only were sent as per the consignments. All the three hundies and the invoices were signed by the accused. The accused was therefore, convicted for the offence under section 420 I.P.C. and was directed to be released on his entering into a bond of Rs. 5000/- for good behaviour for a period of two years.

4. In Cri. Appeal No. 538 of 1984 Rajendra D. Shah had drawn the following hundis:-

Hundi No. 14 Invoice No. 119 dated 29-8-1977 for Rs. 8,782/-;

Hundi No. 17 Invoice No. 122 dated 8-9-1977 for Rs. 14,768/- and

Hundi No. 16 Invoice No. 121 dated 8-9-1977 for Rs. 10,920/-.

All these hundis were returned unhonoured. The consignments were called back by the drawee bank and on inventory the goods worth Rs. 6500/ were only found in the consignment as against the advance of Rs. 34470/- The accused was convicted under section 420 I.P.C. and sentenced to suffer S.I. till rising of the Court and to pay a fine of Rs. 3,000/- i.d. to suffer further R.I. for three months.

5. In Cri. Appeal No. 318 of 1984, the accused J.P. Mathuria and R.D. Kothari had drawn following hundis:-

Hundi No. 78 for Rs. 14028/- dated October 5, 1977;

Hundi No. 79 for Rs. 14847/-

Click Here to Read the rest of this document