When prosecution for cheating is liable to be quashed?


S.B. Criminal Misc(Pet.) No. 3723 / 2016

Jugal Kishore
The State of Rajasthan


1. The petitioner has preferred this criminal misc. petition under Section 482 Cr.P.C. for quashing of FIR No.488/2016 dated 09.11.2016 registered at Police Station Udaimandir, Jodhpur for the offence under Section 420 406 of IPC.

2. The brief facts of the case are that the respondent No.2 submitted a complaint regarding the plot No.88 situated at Shobhawaton Ki Dhani, Khasra No.775/19, 775/19/1 775/19/2 Amrit Nagar, First Scheme, Jodhpur. Allegedly the petitioner made a proposal to the complainant to sell the plot in question. On assurance that the same has not been sold to anyone and if the mortgage was redeemed by the present respondent to the tune of Rs. 20,00,000/- then the petitioner assured registration of the title in favour of the complainant. The agreement was executed on 08.09.2013 according to which the deal was made for consideration Rs. 27,60,000/- and against which Rs.7,60,000/-, in cash which was to be paid as advance on the same day, a token amount of Rs.1,30,000/- was paid to the petitioner on 09.09.2013 on an endorsed receipt.

3. The complainant’s main allegation was that the petitioner was aware that the plot was in dispute and had already been proposed to be sold by the petitioner earlier to one Chhoga Ram vide agreement dated 25.07.2012. The sole allegation of the complainant in the FIR was that since the plot was already promised to be sold to one Chhoga Ram vide agreement dated 25.07.2012, therefore, the petitioner had committed an offence under Section 420 406 of IPC against the present complainant and the FIR was lodged bearing No.488/2016.

4. Learned counsel for the petitioner has shown from the FIR that since the main allegation was only that Chhoga Ram was transferred the title of the plots in question, therefore, at the inception itself as per the respondent, the petitioner dishonestly induced the complainant to purchase the plot in question, thereby the complainant was deceived by the present petitioner in relation to the plot in question.

5. Learned counsel for the petitioner has pointed that the agreement with Chhoga Ram was abandoned on 25.04.2013 which was also recorded before the Additional Sessions Judge No.1, Jodhpur in Criminal Case No.286/2016 vide order dated 23.11.2016. The learned court below had recorded the fact that the investigating officer had recorded the statement of Chhoga Ram under Section 161 Cr.P.C., who had made a categorical statement that he had entered into a compromise with the present petitioner as his money was returned and the agreement between them came to an end on 25.04.2013.

6. Learned counsel for the respondent and learned Public Prosecutor vehemently opposed the arguments of learned counsel for the petitioner by stating that Chhoga Rram has been managed by the present petitioner and in fact the petitioner did not carry the valid title in respect of the plot in question, at the inception.

7. Learned counsel for the respondent has also pointed out that the petitioner took such steps which disable the respondent from executing the agreement as the loan account itself was closed and the respondent could not have deposited the amount of Rs.20,00,000/- in the bank in accordance with the agreement.

8. Learned counsel for the respondent states that the petitioner did not have title of the property in question and was therefore, at the inception, deceiving the petitioner intentionally and inducing the respondent to make a sale of the said property.

9. Learned counsel for the petitioner has relied upon the judgment of International Advanced Research Centre for Powder Metallurgy and New Material (ARCI) and Others Vs. Nimra Cerglass Technics Private Limited and another. reported in (2016) 1 Supreme Court Cases 348. The relevant portion of the judgment reads as under:

“15. The essential ingredients to attract Section 420
Indian Penal Code are: (i) cheating; (ii) dishonest
inducement to deliver property or to make, alter or
destroy any valuable security or anything which is
sealed or signed or is capable of being converted into
a valuable security and (iii) mens rea of the accused at
the time of making the inducement. The making of a
false representation is one of the essential ingredients
to constitute the offence of cheating Under Section
420 Indian Penal Code. In order to bring a case for the
offence of cheating, it is not merely sufficient to prove
that a false representation had been made, but, it is
further necessary to prove that the representation was
false to the knowledge of the accused and was made
in order to deceive the complainant.

16. Distinction between mere breach of contract and
the cheating would depend upon the intention of the
accused at the time of alleged inducement. If it is
established that the intention of the accused was
dishonest at the very time when he made a promise
and entered into a transaction with the complainant to
part with his property or money, then the liability is
criminal and the accused is guilty of the offence of
cheating. On the other hand, if all that is established
that a representation made by the accused has
subsequently not been kept, criminal liability cannot
be foisted on the accused and the only right which the
complainant acquires is the remedy for breach of
contract in a civil court. Mere breach of contract
cannot give rise to criminal prosecution for cheating
unless fraudulent or dishonest intention is shown at
the beginning of the transaction. In S.W. Palanitkar
and Ors. v. State of Bihar, this Court held as under:

“21. …In order to constitute an offence of
cheating, the intention to deceive should
be in existence at the time when the
inducement was made. It is necessary to
show that a person had fraudulent or
dishonest intention at the time of making
the promise, to say that he committed an
act of cheating. A mere failure to keep up
promise subsequently cannot be presumed
as an act leading to cheating.”

The above view in Palanitkar’s case was referred to and followed in Rashmi Jain v. State of Uttar Pradesh and Anr. (2014) 13 SCC 553.

10. Learned counsel for the petitioner has relied upon the judgment of Devendra Others Vs. State of Uttar Pradesh Another. reported in (2009) 7 Supreme Court Cases 495. The relevant portion of the judgment reads as under:

“14. It was, however, submitted that by reason of
execution of a deed of sale claiming title over the
property to which the appellants were not entitled to,
the complainant – respondent had been cheated. It is
difficult to accept the said contention. Appellants had
not made any representation to the respondent No. 2.
No contract and/ or transaction had been entered into
by and between the complainant and the appellants.

15. “Cheating” has been defined in Section 415 of the
Indian Penal Code to mean:

“Cheating– Whoever, by deceiving any
person, fraudulently or dishonestly induces
the person so deceived to deliver any
property to any person, or to consent that
any person shall retain any property, or
intentionally induces the person so
deceived to do or omit to do anything which
he would not do or omit if he were not so
deceived, and which act or omission causes
or is likely to cause damage or harm to that
person in body, mind, reputation or
property, is said to `cheat’.”

16. In V.Y. Jose v. State of Gujarat and Anr. (2009)3SCC78, this Court opined:

“14. An offence of cheating cannot be said
to have been made out unless the following
ingredients are satisfied:
(i) deception of a person either by making a
false or misleading representation or by
other action or omission;
(ii) fraudulently or dishonestly inducing any
person to deliver any property; or
(iii) To consent that any person shall retain
any property and finally intentionally
inducing that person to do or omit to do
anything which he would not do or omit.
For the purpose of constituting an offence of cheating,
the complainant is required to show that the accused
had fraudulent or dishonest intention at the time of
making promise or representation. Even in a case
where allegations are made in regard to failure on the
part of the accused to keep his promise, in absence of
a culpable intention at the time of making initial
promise being absent, no offence under Section 420 of
the Indian Penal Code can be said to have been made

It is, therefore, evident that a misrepresentation from the very beginning is a sine qua non for constitution of an offence of cheating, although in some cases, an intention to cheat may develop at a later stage of formation of the contract.”

11. Learned counsel for the petitioner has relied upon the judgment of Binod Kumar and Others Vs. State of Bihar and Another reported in (2014) 10 Supreme Court Cases 663. The relevant portion of the judgment reads as under:

“11. Referring to the growing tendency in business
circles to convert purely civil disputes into criminal
cases, in paragraphs (13) and (14) of the Indian Oil
Corporation’s case (supra), it was held as under:

13. While on this issue, it is necessary to
take notice of a growing tendency in
business circles to convert purely civil
disputes into criminal cases. This is
obviously on account of a prevalent
impression that civil law remedies are time
consuming and do not adequately protect
the interests of lenders/creditors. Such a
tendency is seen in several family disputes
also, leading to irretrievable breakdown of
marriages/families. There is also an
impression that if a person could somehow
be entangled in a criminal prosecution,
there is a likelihood of imminent
settlement. Any effort to settle civil
disputes and claims, which do not involve
any criminal offence, by applying pressure
through criminal prosecution should be
deprecated and discouraged. In G. Sagar
Suri v. State of U.P. (2000) 2 SCC 636 this
Court observed:

‘8… It is to be seen if a matter,
which is essentially of a civil
nature, has been given a cloak of
criminal offence. Criminal
proceedings are not a short cut of
other remedies available in law.
Before issuing process a criminal
court has to exercise a great deal
of caution. For the accused it is a
serious matter. This Court has laid
certain principles on the basis of
which the High Court is to
exercise its jurisdiction Under
Section 482 of the Code.
Jurisdiction under this section has
to be exercised to prevent abuse
of the process of any court or
otherwise to secure the ends of

14. While no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with a prosecution, being fully aware that the criminal proceedings are unwarranted and his remedy lies only in civil law, should himself be made accountable, at the end of such misconceived criminal proceedings, in accordance with law. One positive step that can be taken by the courts, to curb unnecessary prosecutions and harassment of innocent parties, is to exercise their power Under Section 250 Code of Criminal Procedure more frequently, where they discern malice or frivolousness or ulterior motives on the part of the complainant. Be that as it may.

15. Section 405 Indian Penal Code deals with criminal breach of trust. A careful reading of the Section 405 Indian Penal Code shows that a criminal breach of trust involves the following ingredients:

(a) a person should have been entrusted with property, or entrusted with dominion over property;

(b) that person should dishonestly misappropriate or convert to his own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so;

(c) that such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.

16. Section 406 Indian Penal Code prescribes punishment for criminal breach of trust as defined in Section 405 Indian Penal Code. For the offence punishable Under Section 406 Indian Penal Code, prosecution must prove:

(i) that the accused was entrusted with property or with dominion over it and.

(ii) that he (a) misappropriated it, or (b) converted it to his own use, or (c) used it, or (d) disposed of it.

The gist of the offence is misappropriation done in a dishonest manner. There are two distinct parts of the said offence. The first involves the fact of entrustment, wherein an obligation arises in relation to the property over which dominion or control is acquired. The second part deals with misappropriation which should be contrary to the terms of the obligation which is created.

18. In the present case, looking at the allegations in the complaint on the face of it, we find no allegations are made attracting the ingredients of Section 405 Indian Penal Code. Likewise, there are no allegations as to cheating or the dishonest intention of the Appellants in retaining the money in order to have wrongful gain to themselves or causing wrongful loss to the complainant. Excepting the bald allegations that the Appellants did not make payment to the second Respondent and that the Appellants utilized the amounts either by themselves or for some other work, there is no iota of allegation as to the dishonest intention in misappropriating the property. To make out a case of criminal breach of trust, it is not sufficient to show that money has been retained by the Appellants. It must also be shown that the Appellants dishonestly disposed of the same in some way or dishonestly retained the same. The mere fact that the Appellants did not pay the money to the complainant does not amount to criminal breach of trust.

19. Even if all the allegations in the complaint taken at the face value are true, in our view, the basic essential ingredients of dishonest misappropriation and cheating are missing. Criminal proceedings are not a short cut for other remedies. Since no case of criminal breach of trust or dishonest intention of inducement is made out and the essential ingredients of Sections 405/420 Indian Penal Code are missing, the prosecution of the Appellants Under Sections 406/120B Indian Penal Code, is liable to be quashed.”

12. After hearing learned counsel for the parties and perusing the record of the case as well as precedent laws cited at Bar, this Court is of the opinion that the sum and substance of the FIR was that at the time of agreement with the respondent No.2, the property in question was already promised to be transferred to one Chhoga Ram vide agreement dated 25.07.2012. It is an admitted position which is also reflected in the case diary that Chhoga Ram has during investigation deposed before the investigating authority and stated that though he had entered into an agreement on 25.07.2012 but after a compromise, he has abandoned the agreement and vide compromise between the parties on 25.04.2013, he has agreed to the proposition of the petitioner that the agreement in question shall no more have any impact upon the title of the petitioner. Thus, very basis of the FIR is not found to be correct in the investigation and the investigating authority has categorically pointed out that Chhoga Ram was not having any claim over the property in question after 25.04.2013 whereas the agreement between the petitioner and respondent No.2 had happened only on 08.09.2013 and at the very inception, the petitioner was neither deceiving the respondent No.2 nor inducing him by any of his act which would amount to an offence as defined under Section 415 IPC.

13. Since, the offence under Section 415 IPC itself was not made out, there is no question of offence under Section 420 IPC being made out, as the basic ingredients of the alleged offence is cheating and dishonest inducement, at the inception, for delivery of property. Thus, even in the constrained jurisdiction under Section 482 Cr.P.C. after seeing the precedent laws and observing the facts, on the face of it, this Court finds that no offence is made out.

14. In light of the aforesaid observations, the present petition is allowed and the FIR and further proceedings in pursuance of FIR No.488/2016 registered at Police Station Udaimandir, Jodhpur is hereby quashed and set aside.


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