Point of Law: Distinction between mere breach of contract and cheating and held that breach of contract could not give rise to criminal prosecution for cheating, but fraudulent or dishonest intention is the basis of the offence of cheating.

ORDER :

This Criminal Miscellaneous Case has been filed under Section 482 of the Code of Criminal Procedure and the petitioners are accused Nos.1 and 2 in Crime No.274/2015 of Kadakkal Police Station, Kollam, now pending as C.C.No.471/2016 on the files of Judicial First Class Magistrate Court, Kadakkal.

2. The respondents herein are State of Kerala as well as the original complainant.

3. Heard the learned counsel for the petitioners as well as the learned Public Prosecutor, in detail.

4. Perused the relevant documents made available.

5. Background facts:

The original complainant is a widow and the 1st accused is her brother. The 2nd accused is the relative of the 1st accused. The specific allegation is that, accused Nos.1 and 2 availed loan to the tune of Rs.1,50,000/-(Rupees One Lakh Fifty Thousand only) from Kadakkal Service Co-operative Bank No.3456 and offered the property of the complainant towards security of the loan by creating mortgage. The sum and substance of the allegation in the complaint lodged by the complainant is that, the accused herein failed to repay the amount and accordingly, the bank proceeded against the property to recover the debt. It is on this premise, the complainant would allege that the accused herein cheated her without repaying the loan amount. When a private complaint was lodged before the Judicial First Class Magistrate Court, Kadakkal, narrating the said allegations, the same was forwarded to the police and the same culminated in filing of Annexure D – Charge Sheet.

6. The petitioners, who are accused Nos.1 and 2, would allege that, no offence under Section 420 r/w Section 34 of the Indian Penal Code (for short 'the IPC' hereinafter) would attract in the facts of the given case. The specific case put up by the accused is that, the 1st petitioner availed a loan of Rs.1,50,000/-(Rupees One Lakh Fifty Thousand only) from Kadakkal Service Co-operative Bank, after mortgaging the property of the de facto complainant, to secure money for treatment of carcinoma. Therefore, the petitioners had no deceitful intention at the time of inception to cheat or defraud the complainant in any manner and therefore, the final report produced as Annexure D, is liable to be quashed.

7. Whereas, it is submitted by the learned Public Prosecutor that, when there is intention of cheating at the very inception, the matter has to go for trial to elicit the ingredients of Section 420 of IPC.

8. The crucial question arises for consideration is; whether in the facts of the given case, an offence under Section 420 r/w Section 34 of IPC would attract?

9. Insofar as the ingredients to attract offence under Section 420 of IPC is concerned, the law is well settled. In the decision reported in Raghavender N. v. State of Andhra Pradesh, CBI [2021 KHC 6834 : 2021 KHC OnLine 6834 : 2021 (6) KLT OnLine 1071: AIR 2022 SC 826], the Apex Court considered the ingredients necessary to attract offence under Section 420 of IPC and held that, in order to attract the provisions of S.420 IPC, the prosecution has to not only prove that the accused has cheated someone but also that by doing so, he has dishonestly induced the person who is cheated to deliver property. There are, thus, three components of this offence, i.e., (i) deception of any person, (ii) fraudulently or dishonestly inducing that person to deliver any property to any person, and (iii) mens rea of the accused at the time of making the inducement. It goes without saying that for the offence of cheating, fraudulent and dishonest intention must exist from the inception when the promise or representation was made. It has been settled further that, the phrase 'dishonestly' emphasizes a deliberate intention to cause wrongful gain or wrongful loss, and when this is coupled with cheating and delivery of property, the offence becomes punishable under S.420 IPC. Contrarily, the mere breach of contract cannot give rise to criminal prosecution under S.420 unless fraudulent or dishonest intention is