IMPORTANT POINT
The essence of the offence of cheating under Section 415 IPC is the fraudulent intention at the time of the transaction, and a mere breach of contract does not constitute cheating unless such intention is established.

ORDER :

1. In this petition under section 482 Cr.P.C, petitioner challenges the crime registered against him as F.I.R. No. 119/2021 of the Chandera Police Station, Kasaragod, Kerala.

2. A complaint was filed by the second respondent on 05.02.2021, alleging that he had been authorised by M/s.Invest Bank, Sharjah, United Arab Emirates, to initiate criminal proceedings against the petitioner. The F.I.R was registered pursuant to a complaint alleging that the accused had on 04-10-2017 and 23-01-2018 obtained a total loan of 68.159 million UAE dirhams equivalent to Rs.135 Crores for the business purposes of his establishment by the name 'M/s.Hexsa Oil and Gas Services LLC' and failed to repay 42.898 million UAE dirhams and thereby committed cheating.

3. The complainant alleged that the loan was disbursed since the accused had promised to repay it in 84 months and also that the amount shall be utilised only for the purpose of the business of his company and the accused had personally undertaken to repay the payment. Induced by the promise of the accused, the bank disbursed the loan amount. However, the accused defaulted in repayment and when the bank officials visited the establishment of the accused, they found that he had diverted the loan amount for his personal purposes without utilising the same for his business. When confronted with it, the accused handed over 84 cheques of Rs.3,25,000/-UAE dirhams each, but the first cheque itself, when presented for encashment, returned dishonoured. Thereafter the accused became unreachable as he switched off his phone and soon absconded from Dubai. On verification, the bank realised that the accused had set up business establishments under different names in India, utilising the money taken from the bank. In the meantime, in a civil suit filed by the bank before the court in UAE, it was held that the outstanding amount due to the bank was 48.898 million UAE dirhams, equivalent to more than Rs. 83 Crores. The accused has thereby cheated the bank and committed the offence alleged.

4. Sri.S.Sreekumar, learned Senior Counsel instructed by Sri.M.V.Amaresan, learned counsel for the petitioner contended that even if the entire allegations in the complaint and in the FIR remain uncontroverted, the same would still not make out any offence of cheating as it is a pure loan transaction that is revealed from the complaint. Relying upon the decision in Lalit Chadurvedy v. State of Uttar Pradesh, 2024 Live Law (SC) 150 it was submitted that a contractual dispute or a breach of contract per se cannot lead to the initiation of a criminal proceeding, since the existence of a fraudulent or dishonest intention at the initial stage of the promise or representation is necessary to attract the offence of cheating. It was argued that since neither in the complaint nor in the FIR has the complainant made any such allegation, the offence alleged is not attracted. The learned Senior Counsel further submitted that even going by the complainant's allegation, the bank had initiated a civil suit for recovery of money and a decree has also been passed, indicating that the offence alleged cannot be attracted at all.

5. At this juncture it is apposite to mention that though the second respondent had filed the complaint on the basis of a power of attorney executed by the Bank, subsequently, a new power of attorney was executed in favour of another person who has thereafter impleaded in this proceeding as additional third respondent. Additional materials were submitted to the police by the third respondent pointing out that initially an agreement was entered into on 19.06.2016 between the parties and that the accused had nurtured a fraudulent intention to defraud the bank from the very beginning. It was also mentioned that the mental state of the accused at the time of granting loan was understood from the events that followed thereafter and that the intention of the accused was to defraud the bank which was evident from his subs