A mere inability to repay a loan does not amount to cheating unless there was deception from the inception of the transaction.

JUDGMENT :

Anil Kumar Choudhary, J.

Heard the parties.

2. This Criminal Miscellaneous Petition has been filed invoking the jurisdiction of this Court under Section 482 of the Code of Criminal Procedure with a prayer to quash and set aside the entire criminal proceeding including the order dated 04.08.2022 passed by learned Judicial Magistrate, Dhanbad in connection with C.P. Case No.3916 of 2019 whereby and where under the learned Judicial Magistrate, Dhanbad has found prima facie case to proceed against the petitioners and taken cognizance of the offences punishable under Sections 420/406 of the Indian Penal Code against the petitioners.

3. The allegation against the petitioners is that the petitioner no.1 took a friendly loan of Rs.13,15,000/- with a promise to repay the same once the loan which he had applied from the State Bank of India is sanctioned in his favour. The complainant after getting the information that the loan has been sanctioned in favour of the petitioner no.1 and the complainant approached for repayment of the loan which the petitioner no.1 has taken from the complainant. The petitioner no.1 issued 10 cheques, out of which 5 cheques were signed by him as proprietor of Roop Rang Furniture and another 5 cheques belonged to a different bank account which was issued by the petitioner no.2 in the name of another proprietorship firm of which the petitioner no.2 was a proprietor. All the 10 cheques were dishonoured because of the insufficiency of fund in the accounts, but the petitioner no.1 assured the complainant that he will pay back the loan taken and not to institute the case, hence, the complainant did not institute any case, but ultimately as the petitioner did not pay the loan amount, this case has been filed.

4. Learned counsel for the petitioners relying upon the judgment of the Hon’ble Supreme Court of India in the case ofUma Shankar Gopalika vs. State of Bihar & Another reported in(2005) 10 SCC 336 paragraph-6 of which reads as under:-

6. “Xxxx xxxx xxxx It is well settled that every breach of contract would not give rise to an offence of cheating and only in those cases breach of contract would amount to cheating where there was any deception played at the very inception. If the intention to cheat has developed later on, the same cannot amount to cheating. In the present case it has nowhere been stated that at the very inception there was any intention on behalf of the accused persons to cheat which is a condition precedent for an offence under Section 420 IPC.” (Emphasis supplied)

and submits that in order to constitute an offence of cheating, the accused persons must have played deception since the very inception and if the intention to cheat develops later on, the same will not amount to cheating and in this case since there is no allegation against the petitioners of playing deception since the beginning of the transaction between the parties, hence, the offence of cheating is not made out against the petitioners, even if the entire allegations made against the petitioners are considered to be true in their entirety.

5. Learned counsel for the petitioners next relies upon the judgment of the Hon’ble Supreme Court of India in the case ofSatish Chandra Ratan Lal Shah vs. State of Gujarat & Anr. reported in(2019) 9 SCC 148 paragraph nos.11 and 13 of which reads as under:-

13. Now coming to the charge under Section 415 punishable under Section 420 IPC. In the context of contracts, the distinction between mere breach of contract and cheating would depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad Verma v. State of Bihar [Hri