Bail to an accused not arrested during investigation

Allegations of Cheating

Learned counsel for the complainant vehemently contended that the appellant had duped him of a considerable amount of money and that looking to the seriousness of the allegations against him, this was not a case in which the appellant ought to be granted bail by this Court. Learned counsel supported the view taken by the trial judge as well as by the Allahabad High Court. He argued that given the conduct of the appellant in not only cheating the complainant and depriving him of a considerable sum of money but thereafter issuing a cheque for which payment was stopped made it an appropriate case for dismissal.

Conduct of Investigation:

During the entire period of investigations which appear to have been spread over seven months, the appellant was not arrested by the investigating officer. Even when the appellant apprehended that he might be arrested after the charge sheet was filed against him, he was not arrested for a considerable period of time. When he approached the Allahabad High Court for quashing the FIR lodged against him, he was granted two months time to appear before the trial judge. All these facts are an indication that there was no apprehension that the appellant would abscond or would hamper the trial in any manner. That being the case, the trial judge, as well as the High Court ought to have judiciously exercised discretion and granted bail to the appellant. It is nobody’s case that the appellant is a shady character and there is nothing on record to indicate that the appellant had earlier been involved in any unacceptable activity, let alone any alleged illegal activity.

[Source: Dataram Singh vs The State o f Uttar Pradesh decided by SC on 6 February, 2018]

India: Law of Cheating needs amendment.

Law against cheating in India

Burden of proof in trial of cheating:

Indian Penal Code, 1860, Section 415 & 420.

It is well known that Legislature enacts laws, to arrest unsocial or undesirable activities, which cause harm to the society at large, and prescribes deterrent punishments to prevent such activities taking place. Judicial notice can be taken of the fact that there is a sea change in the human values and that human values etc. of 21st century are different from those prevailing in the 19th century. History tells us the people in this country, generally, were honest and law abiding during 1860 i.e. 19th century when IPC came into force on 6.10.1860, when with one rupee a person could purchase more than one bag of rice and some gold also. Now a bag of rice costs more than Rs.1,000/-Salaries of many government servants and officers at that time were in two figures. Now even a class four employee earns four figure salary. Obviously keeping in view the said fact recent enactment like Narcotic Drugs and Psychotropic Substances Act,1985 and Information Technology Act,2000 prescribe fine in lakhs of rupees for the offences committed under those enactments. But the fine prescribed in IPC way back in 1860, which at that time could be a deterrent, remained unchanged even till now i.e. more than 140 years after IPC was enacted.

Burden of proof in cheating cases should be shifted to the accused and the amount of fine must be suitably increased:

In the present day situation the meager fine prescribed in several Sections of I.P.C. can, by no stretch of imagination, be said to be a deterrent to prevent such offences. Since Greed to become rich over night, by any means, has become the order of the day, and taking notice of the fact that several individuals and bogus institutions, by promising rich returns, are luring innocent people into investing their hard earned money with them and are vanishing overnight, Legislature, in an attempt to prevent such operations, made some laws, obviously because such acts may not fall under ‘cheating’ as defined in Section 415 I.P.C. ‘Cheating’ as understood by a common man is different from ‘cheating’ as defined by Section 415 IPC, because for ‘cheating’ to be an offence under IPC, intention to cheat even at the time of entering into the transaction has to be established. In the present day situation when honesty became a very rare commodity, and since nobody would make apparent his intention to cheat even at the time of inception, and since persons resort to cheating only after creating confidence about his being honest in the mind of the man he intends to cheat, in my considered opinion it may be in the fitness of things, and to suit the present day need, to cast the burden to establish that he had no intention to cheat on the accused, by making suitable amendment to Section 415 IPC. It is for the concerned authorities to take a decision.

per JUSTICE C.Y.SOMAYAJULU in Vishal Paper Tech India Ltd. v. State of Andhra Pradesh , (AP)

Double jeopardy and dishonour of cheque with cheating

Prosecution for cheating and dishonour of cheque:

Principle of Double Jeopardy:

Double jeopardy or Autrefois Acquit is the name of doctrine which prohibits second trial of an acquitted accused. But it does not prohibit a second trial, on same facts, but for an offence, different from previous prosecution.

The statutes involved: General Clauses Act: Section 26; IPC: Section 420; Negotiable Instruments Act: Section 138; Criminal Procedure Code: Section 300.

Prosecution for dishonour of cheque:

However there appears to be conflict of opinion in two different benches of Supreme Court of India. This position was less complicated until the Supreme Court of India, quashed the criminal proceedings under Sections 406/420 IPC which were launched during the pendency of proceedings u/s 138 of Negotiable Instruments Act for dishonour of cheque, holding that it would amount to abuse of process of law. It was observed.

“…..A finance company also advances short term loans. In that case it is essentially a commercial transaction. After first two cheques were dishonoured two cheques were again issued, which again were dishonoured resulting in filing of complaint under Section 138 of the Negotiable Instruments Act. None of the respondents has been able to explain as to why offences under Sections 406/420, I.P.C. were not added in the complaint filed under Section 138 of the Negotiable Instruments Act and why resort was had to filing of a separate First Information Report. Certain motive has been attributed to the Investigating Officer but we think we need not go into that. There is also no answer as to why investigation against three other directors was still stated to be pending when same role is assigned to all the accused. In the FIR it is Sukhvender Singh, who first approached the complainant, but later it is Mukender Singh. There is no answer as to why there are two different names. As to who are the directors of Ganga Automobiles Ltd. could have been easily found by the complainant after going through the records of Register of Companies and also about its status. As noted above, in the subsequent statement by the complainant he does not assign any role to the first appellant. The allegation that in the first instance three persons contacted the complainant company, who told the complainant of other Directors with whom the complainant conversed on telephone appears to be rather improbable.
14. We agree with the submission of the appellants that the whole attempt of the complainant is evidently to rope in all the members of the family particularly who are the parents of the Managing Director of Ganga Automobiles Ltd. In the instant criminal case without regard to their role or participation in the alleged offences with a sole purpose of getting the loan due to the Finance Company by browbeating and tyrannizing the appellants of criminal prosecution. A criminal complaint under Section 138 of the Negotiable Instruments Act is already pending against the appellants and other accused. They would suffer the consequences if offence under Section 138 is proved against them. In any case there is no occasion for the complainant to prosecute the appellants under Sections 406/420, I.P.C. and in his doing so it is clearly an abuse of the process of law….”

[Source: G. Sagar Suri v. State of U.P. ( (2000) 2 SCC 636)]

Thus the above case involved addition of charge of cheating in a prosecution pending for dishonour of cheque. However in Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao, it was held that once the conviction under Section 138 of N.I. Act has been recorded, the question of trying a same person under Section 420 IPC or any other provision of IPC or any other statute is not permissible being hit by Article 20(2) of the Constitution and Section 300(1) Cr.P.C. It was held:

“Thus, it can be seen that Section 300(1) of Cr.P.C. is wider than Article 20(2) of the Constitution. While, Article 20(2) of the Constitution only states that ‘no one can be prosecuted and punished for the same offence more than once’, Section 300(1) of Cr.P.C. states that no one can be tried and convicted for the same offence or even for a different offence but on the same facts. In the present case, although the offences are different but the facts are the same. Hence, Section 300(1) of Cr.P.C. applies. Consequently, the prosecution under Section 420, IPC was barred by Section 300(1) of Cr.P.C”

[Source: Kolla Veera Raghav Rao v. Gorantla Venkateswara Rao, (2011) 2 SCC 703]

Now the same question arose once again in Sangeetaben Mahendrabhai Patel‘ case unfortunately without adverting to the difference of scope of Section 300 of Cr. P.C., now it has been held that after prosecution under 138 of NI Act, a subsequent prosecution under section 420 of IPC would be maintainable.

“……..in order to attract the provisions of Article 20(2) of the Constitution i.e. doctrine of autrefois acquit or Section 300 Cr.P.C. or Section 71 IPC or Section 26 of General Clauses Act, ingredients of the offences in the earlier case as well as in the latter case must be the same and not different. The test to ascertain whether the two offences are the same is not identity of the allegations but the identity of the ingredients of the offence. Motive for committing offence cannot be termed as ingredients of offences to determine the issue. The plea of autrefois acquit is not proved unless it is shown that the judgment of acquittal in the previous charge necessarily involves an acquittal of the latter charge…….
…………….the appellant had been tried earlier for the offences punishable under the provisions of Section 138 N.I. Act and the case is sub judice before the High Court. In the instant case, he is involved under Sections 406/420 read with Section 114 IPC. In the prosecution under Section 138 N.I. Act, the mens rea i.e. fraudulent or dishonest intention at the time of issuance of cheque is not required to be proved. However, in the case under IPC involved herein, the issue of mens rea may be relevant. The offence punishable under Section 420 IPC is a serious one as the sentence of 7 years can be imposed. In the case under N.I. Act, there is a legal presumption that the cheque had been issued for discharging the antecedent liability and that presumption can be rebutted only by the person who draws the cheque. Such a requirement is not there in the offences under IPC. In the case under N.I. Act, if a fine is imposed, it is to be adjusted to meet the legally enforceable liability. There cannot be such a requirement in the offences under IPC. The case under N.I. Act can only be initiated by filing a complaint. However, in a case under the IPC such a condition is not necessary.
28. There may be some overlapping of facts in both the cases but ingredients of offences are entirely different. Thus, the subsequent case is not barred by any of the aforesaid statutory provisions.”

[Source: Sangeetaben Mahendrabhai Patel v. State of Gujarat, 2012 (7) SCC 621, ]

Now we are left in a piquant situation. Two judgments relying upon two different lines of reasoning. One relying upon the similarity of the facts of case and other relying upon the difference in ingredients of offence.

In the meanwhile Gujarat High Court in the case of Nandlal vs State and Uttrakhand High Court in Rihan v.s State has followed the Kolla Veera case above.

Criminal Breach of trust and cheating

Ingredients to constitute criminal breach of trust or cheating:

Civil wrong v. Criminal wrong:

Bare perusal of the FIR lodged by the complainant, would indicate that he had got in touch with the appellant so as to extend the benefit of Appellant’s Channel “GOD TV”; to his other brethren residing at Ahmedabad. For the said purposes, he had met the owner of Siti Cable, Bapi Nagar in Ahmedabad and negotiated a settlement for a sum of Rs. 10 lacs on behalf of the Appellant’s Company as the fee to be paid to Siti cable by Appellant for telecast of channel “God TV” in Ahmedabad. Further grievance of the Complainant was that despite the telecast of “GOD TV”, the Appellant, as promised, failed to pay a sum of Rs. 10 lacs to the owners of Siti cables. This is what has been mentioned in nutshell in the complainant’s FIR. We have grave doubt, in our mind whether on such averments and allegations, even a prima facie case of the aforesaid offences could be made out against the present appellant.

The matter appears to be purely civil in nature. There appears to be no cheating or a dishonest inducement for the delivery of property or breach of trust by the Appellant. The present FIR is an abuse of process of law. The purely civil dispute, is sought to be given a colour of a criminal offence to wreak vengeance against the Appellant. It does not meet the strict standard of proof required to sustain a criminal accusation.

Existence of ‘dishonest intention’:

Intention should be dishonest ‘before start of transaction’:

Criminal breach of trust is defined under Section 405 IPC and Section 406 thereof deals with punishment to be awarded to the accused, if found guilty for commission of the said offence i.e. with imprisonment for a term which may extend to three years, or with fine, or with both.

Section 420 of the IPC deals with cheating and dishonestly inducing delivery of property. Cheating has been defined under Section 415 of the IPC to constitute an offence. Under the aforesaid section, it is inbuilt that there has to be a dishonest intention from the very beginning, which is sine qua non to hold the accused guilty for commission of the said offence. Categorical and microscopic examination of the FIR certainly does not reflect any such dishonest intention ab initio on the part of the appellant.

Civil dispute:

In such type of cases, it is necessary to draw a distinction between civil wrong and criminal wrong as has been succinctly held by this Court in Devendra Vs. State of U.P., 2009 (7) SCC 495, relevant part thereof is reproduced hereinbelow:

A distinction must be made between a civil wrong and a criminal wrong. When dispute between the parties constitute only a civil wrong and not a criminal wrong, the courts would not permit a person to be harassed although no case for taking cognizance of the offence has been made out.

Accordingly proceedings were quashed.

[Source: Joseph Salvaraj A. v. State of Gujarat, (2011) 7 SCC 59 (Supreme Court of India)]