Citation Codes

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Case Number

Cr. Misc. Appli. No. 307 of 1982

Judges

V.P Mathur, J.

Acts

Section 415 of the Indian Penal Code,
Section 420 of the Indian Penal Code.
Sections 415, 417 and 420 I.P.C
Section 482 Cr. P.C

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Smart Summary

Judgment Summary — V.P. Mathur, J.

Factual and Procedural Background

This petition under Section 482 of the Code of Criminal Procedure was filed to quash Criminal Complaint No. 1174 of 1981 pending before the Munsif Magistrate, Sambhal, District Moradabad. The complaint alleged offences under Sections 415, 417 and 420 of the Indian Penal Code.

The factual allegations in the complaint, as stated in the opinion, are: on 24.10.1980 the petitioners purchased 61 bags of Khandsari sugar for Rs. 40,395.14. They paid Rs. 2,500 in cash and handed over cheques amounting to Rs. 30,000 which were subsequently encashed. Three additional post-dated cheques for Rs. 5,000; Rs. 6,000; and Rs. 5,000 were given to cover the remaining balance. The due dates for these three cheques were 7.9.81, 7.10.81 and 7.11.81 respectively; they were presented (after the due dates) on 14.9.81, 22.10.81 and 13.11.81 and were dishonoured. A notice was issued to the applicants about the dishonour and, according to the complainant, no satisfactory reply was received. The complainant alleged cheating by the petitioners.

At the hearing on 2.12.88, counsel for the applicants appeared and argued; there was no appearance for opposite party No. 1. The learned counsel for the State was heard and judgment was reserved for a later date.

Legal Issues Presented

Whether the issuance of post-dated cheques which are subsequently dishonoured gives rise to a presumption that the drawer intended, from the very inception, to cheat the payee and thereby attract offences under Sections 415, 417 and 420 IPC.
Whether, on the facts of this particular transaction (partial cash/payment already made and some cheques earlier encashed), the criminal complaint should be quashed under Section 482 Cr. P.C. as being a matter of civil liability rather than criminal cheating.

Arguments of the Parties

Applicants' Arguments

It was contended that a post-dated cheque is, in substance, a promise to pay on a future date and that the mere fact of a promise later being broken (i.e., the cheque dishonoured) is not, by itself, a criminal offence of cheating.
The applicants' counsel argued that unless it is established by satisfactory evidence that at the time when the cheques were issued the drawer intended not to honour them (i.e., an intention to cheat existed from inception), no presumption of guilt under Sections 415, 417 and 420 IPC can be drawn.

State's Arguments

The learned counsel for the State argued that, on the facts and circumstances of the case, the intention of the revisionists (applicants) from the very inception was to cheat: they intended to pay part of the sum and withhold the rest, and therefore the transaction attracted criminal liability for cheating.
The State relied on precedents (notably Bhola Nath Arora v. The State and other authorities) to contend that, in appropriate factual situations, a presumption of intention to cheat can be drawn from the record when cheques are dishonoured and there is no attempt to make good the payment.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
M.M.S.T. Chidambaran Chettiar v. Shanmugham Pillai	Defines cheating as requiring deception plus dishonest inducement to act or omit an act causing harm; holds that a post-dated cheque for goods already received is a mere promise to pay and a broken promise is not criminal in itself.	Adopted as authority that post-dated cheques are generally promises to pay and that mere failure to pay (without evidence of intent to cheat at inception) does not constitute cheating.
H.K. Shaw v. Suresh Chandra	Legal principles regarding cheating and negotiable instruments (as followed by Chidambaran Chettiar).	Noted that Chidambaran followed this law; used to support the position that dishonour of post-dated cheques is not necessarily criminal.
R.S. Rata v. Ganesh Dass	Giving a post-dated cheque without funds does not amount to cheating where there is no evidence that the payee parted with property or did anything he would not have done had he known of dishonour; dispute is civil.	Cited to reinforce that absence of evidence of inducement or reliance keeps the matter within civil law and not criminal cheating.
Kunwar Sen v. Emperor	Where the drawer's account showed a credit balance of only Rs. 1 at the time of issuing cheques, failure to meet payment was held not accidental and conviction under section 420 was upheld.	Referred to as an example where insufficient funds at the time of issuance supported presuming intent to dishonour and thus criminal liability; used as a contrast to the present facts.
Bhola Nath Arora v. The State	Holds that when cheques given for balance are dishonoured and no attempt is made to pay, the drawer may be presumed to have committed an offence under Section 420; material fact is intention at time of issuance, to be inferred from record.	Relied upon by the State; the Court considered it but found the present facts distinguishable and not sufficient to attract that authority.
Keshav Ji Madho Ji v. Emperor	Prosecution must establish facts pointing prima facie that failure to meet the cheque was not accidental but a consequence expected/ intended by the accused; then the burden shifts to the accused to explain.	Quoted to explain the evidential approach required to infer criminal intent from dishonour of negotiable instruments.
Ajodhya Prasad v. Chiranji Lal	Drawing a hundi/cheque constitutes representations (authority, validity, and that it would be paid); nondelivery of payment on presentation does not by itself establish cheating—only if circumstances permit drawing clear inference of intention to cheat at the time of issue.	Applied to underline that the critical question is the drawer's intention at the time of issuance and that dishonour alone is not decisive; the Court held these principles did not apply to make the present transaction criminal.

Court's Reasoning and Analysis

The court began by identifying the central legal question: whether post-dated cheques that are later dishonoured give rise to a presumption that the drawer intended to cheat from the very inception of the transaction.

The Court reviewed the authorities cited in favour of both positions. It summarized the established legal position drawn from multiple High Court decisions:

If, at the very inception of the contract, the intention was dishonest and deceptive causing the complaiant to part with property or act/omit to act, then the offence of cheating may be made out.
Where a post-dated cheque is issued as a promise to pay at a future date and both parties understand that the cheque is not presently encashable, there is no dishonest inducement at the inception and subsequent dishonour ordinarily gives rise to civil liability only (Section 420 IPC not attracted).

The Court then compared those principles to the facts of the case. Key factual findings relied upon by the Court were:

Cash payment of Rs. 2,500 was made at the time of purchase.
One cheque of Rs. 15,000 was encashed at Bareilly Corporation Bank.
A post-dated cheque dated 15.1.81 (for Rs. 15,000) was also encashed on its due date.
Thus, Rs. 32,500 had been paid (cash and encashed cheques), leaving only Rs. 16,000 due, which was covered by the three post-dated cheques that were subsequently dishonoured.

The Court reasoned that acceptance and encashment of earlier cheques and the partial payments demonstrated that there was no dishonest intention at the time the transaction commenced. The dishonour of the remaining three post-dated cheques occurred after the due dates (and were presented late) and, on the material before the Court, appeared accidental rather than the product of an intention formed at the outset to cheat.

The Court distinguished the present facts from the cases where criminal liability was sustained — for example, Kunwar Sen (where the drawer's bank account showed a balance of only Rs. 1 at the time of issuing cheques) and Bhola Nath Arora (where no attempt was made to make good payments) — stating that in those cases the surrounding circumstances supported an inference of an intention to dishonour at the time of issuance, which is not so here.

On the basis of this analysis, the Court concluded that the allegations did not attract the ingredients of cheating under the cited provisions of the Penal Code and that the dispute was essentially one of civil liability.

Holding and Implications

Holding: The Court's final operative decision was that the complaint did not disclose an offence of cheating and therefore the criminal complaint was quashed. The petition under Section 482 Cr. P.C. was allowed.

DISPOSAL: Criminal Complaint No. 1174 of 1981 pending before the Court of Munsif Magistrate, Sambhal, District Moradabad (Lala Bhawan Kishore v. Shyam Sunder) is quashed.

Implications: The direct consequence is that the criminal proceedings on that complaint are terminated. The Court treated the matter as one properly addressed by civil remedies (contractual or civil liability for non-payment) rather than criminal sanctions for cheating. The opinion distinguishes earlier cases where the drawer's intention could be inferred from the record (e.g., accounts showing no funds or no attempt to pay) and applies established principles that mere dishonour of a post-dated cheque, without evidence of dishonest intention at the time of issuance, is insufficient to sustain a criminal charge under Sections 415/417/420 IPC. The judgment does not purport to create a new legal principle beyond applying existing authorities to the facts before it.

This summary is prepared strictly from the content of the provided opinion and does not add or infer facts beyond those explicitly stated in the text.

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Shyam Sundar v. Lala Bhawan Kishore

V.P Mathur, J.:— This petition under Sec. 482 Cr. P.C is moved with the prayer that the criminal complaint No. 1174 of 1981 pending in the court of Munsif Magistrate Sambhal, district Moradabad, may be quashed and further proceedings in that case may be stayed.

2. The complaint was filed for an action for the offences under Sections 415, 417 and 420 I.P.C and the case of the complainant was that on 24.10.80 the petitioners went to their firm and purchased 61 bags of Khandsari sugar. The price was settled at Rs. 40,395,14. A sum of Rs. 2,500.00 was paid on the spot. Cheques for Rs. 30,000.00 were also handed over and there is no dispute that they were duly encashed after wards. Three further cheques were also issued for the amounts of Rs. 5,000.00: Rs. 6,000.00 and Rs. 5,000.00 respectively. The payment of the first cheque was due on 7.9.81, of the second cheque on 7.10.81 and the third cheque on 7.11.81 They were presented to the bank concerned on 14.9.81, 22.10.81, and 13.11.81 i.e after due dates and were dishonoured. Then a notice was given to the applicants informing them about the dishonour of the cheques and no satisfactory reply was received. The contention of the complainant was that the petitioners were guilty of cheating and hence were liable to be prosecuted.

3. This case was taken up in the earlier part of the day on 2.12.88 and nobody appeared. It was again taken up after the revision of the list and Sri G.P Dixit, learned counsel for the applicants appeared and argued the case. There was nobody on behalf of opposite party No. 1. Learned counsel for the State was also heard. A long date for delivery of the judgment was given as the learned counsel for the applicants wanted to cite some law.

4. The main point for consideration was whether in cases in which post dated cheques are issued, there can be any presumption that the intention from the very inception was to cheat, in case the cheques are returned dishonoured. In this context the learned counsel for the petitioners argued that unless it is established on record by satisfactory evidence that at the time when the cheques were issued it was the intention of the applicants not to honour those cheques and not to make payment but to cheat the opposite party, no presumption of guilt under sections 415, 417, and 420 I.P.C can be made.

5. In the case of M.M.S.T Chidambaran Chettiar v. Shanmugham Pillai(1) with reference to Section 415 of the Indian Penal Code, the following observation was made:

“in the offence of cheating there are two elements-deception and dishonest inducement to do or omit to do something. Mere deception is not a criminal offence. Mere dishonesty is not a criminal offence. To establish an offence of cheating, the complainant would have to show not only that he was induced to do or to omit to do a certain act, but that this induced commission or omission on his part caused or was likely to cause him some harm or damage in body, mind, reputation or property, which are presumed to be four cardinal assets of humanity”.

“A post-dated cheque in payment of goods already received is a mere promise to pay on a future date and a broken promise is not a criminal offence, though it may amount in certain business relations to discreditable behaviour”.

6. The above case followed the law laid down in the case of H.K Shaw v. Suresh Chandra(2).

7. Chidambaram's case owed by the Lahore High Court in the matter of R.S Rata v. Ganesh Dass,(3) and the following observations are of importance:

“Hence giving a post-dated cheque by a person who has no funds to his credit in the Bank does not amount to an offence of cheating, when there is no evidence to show that the person to whom the cheque was given parted with any property or that he did or omitted to do anything which he would not have done or omitted to do if he had known that the cheque would be dishonoured. The dispute in such a case is of a civil nature.

8. One more case of Kunwar Sen…Applicant; v. Emperor…Opposite Party.(4) may also be looked into in this context. Charges of cheating were against one Kunwar Sen and they were based on two cheques issued by him. One of them was in part payment of the price of a counter ordered by him for his proposed Bank, and the other was issued in favour of a Publishing House for Printing charges of some forms etc. to be used at his proposed Bank. Both the cheques were dishonoured. A copy of Kunwar Sen's account with the Bank concerned showed that his credit balance at the time when he issued the cheques and for some months previous to it, was Rs. 1 only. It was held that “It seems, therefore, clear that his failure to meet payment of the cheques was not accidental. He must therefore be presumed to have been aware that the cheques would be dishonoured and therefore his conviction on these two specific counts under section 420 was quite correctly returned”.

9. A perusal of this law as well as a host of other cases decided by different High Courts will clearly lay down the law which may be summed up as follows:

(i) If from the very inception of the contract the intention is of dishonesty and deception and in consequence thereof a person is induced to part with any property or to do or omit to do anything that he would not do or omit to do but for that deception the offence of cheating is prima facie made out.

(ii) In case in which as a result of passing of some property or doing of an act or omission to do it, a post dated cheque is issued with the full knowledge of both the parties that for the present the cheque was not encashable, there is no dishonesty or inducement at the very inception of the contract. And if subsequently for some reason or the other on the due date the cheques are dishonoured, the case may not be covered under Section 420 of the Indian Penal Code. It will only be a case of civil liability. The reason being that it was not the intention of the person issuing the cheque to make an immediate payment and the post dated cheque was only in the nature of a promise to pay which promise, if it is broken, could give rise only to a civil liability.

10. The learned counsel for the State has however, argued that in this case from the facts and circumstances, it appears that the intention of the revisionist right up from the very inception was to cheat. He intended to pay a part of the sum and withhold payment of the rest and hence since this was his intention from the very beginning, it will be a case of cheating. Although no law was cited in support of this argument, I could lay my hand upon a case of Delhi High Court viz. Bhola Nath Arora v. The State(5). In this case the accused had delivered certain cheques for paying balance amount of goods supplied by the Dealer, the cheques were dishonoured. No attempt was made by the accused to pay the amount for the encashment of the cheques. It was held that the accused shall be presumed to have committed the offence under Section 420 of the Indian Penal Code. In this case the accused had already made payment of certain amounts by means of a demand draft and for the balance amount, cheques were delivered by him to the Dealer and these cheques were dishonoured on different dates and the Bank account showed that at no stage, any attempt was made by the accused to pay in sufficient amount for encashment of the cheques. The High Court was of the view that such matters would be sufficient to afford a ground for presuming that the accused had committed an offence under Sec. 420 of the Indian Penal Code. The Court however also noted that what is material, is the intention of the drawer at the time when the cheques was issued and this intention has to be gathered from the facts on the record. If from the circumstances, it is established that the failure to meet a cheque, was not accidental but was the consequence expected by the accused, the presumption would be that the accused intended to cheat.

11. The Delhi High Court placed reliance upon the case of Keshav Ji Madho Ji v. Emperor(6) and on the case of Ajodhya Prasad…Applicant; v. Chiranji Lal…Opposite-Party.(7) and some other cases.

12. In Keshavji Madhoji v. Emperor (supra), the facts were that the accused had induced the complainant to advance a loan to them and gave a post dated cheque with the representation that it could be encashed on a particular date. The legal position was summed up by the High Court in the following words:

“What the prosecution has to do, I take it, in a case of this kind is to establish facts which point prima facie to the conclusion that the failure to meet the cheque was not accidental but was a consequence expected and therefore intended by the accused, It will then be for the accused to establish any facts there may be in his favour which are specially within his knowledge and as to which the prosecution could not be expected to have any information”.

13. In the Allahabad Case of Ajodhya Prasad…Applicant; v. Chiranji Lal…Opposite-Party. (supra) it was observed that “the fact that the Hundi was not actually paid when it was presented for payment would not be itself make the accused guilty of cheating. They can be guilty of cheating only if on the circumstances proved by the prosecution the Court could draw a clear inference and the only inference that the intention of the accused at the time when they passed the Hundi to the Firm, was to cheat the Firm and not otherwise. The following observation is of importance:

14. When a person draws a Hundi or a cheque he does thereby make a representation to the person in whose favour the Hundi or cheque is drawn:

(i) that he has authority to draw that document and draw the document for that amount;

(ii) that the cheque or the Hundi is a good or valid order of payment of that amount; and

(iii) that it would be paid when presented for payment. The prosecution in a case of this nature can only establish facts which point prima facie to the conclusion that the failure to meet the negotiable instrument was not accidental but was a consequence expected and therefore intended by the accused.

15. The facts and circumstances of the present case are however, somewhat different. The purchase in this case was of sugar of a total value of Rs. 40396,00. As part payment a sum of Rs. 2500.00 was paid as cash. A cheque of Rs. 15000.00 was issued which was duly encashed at the Bareilly Corporation Bank. Another amount of Rs. 15000.00 was saught to be paid by a post dated cheque issued on 15.1.81 and undoubtedly this was also duly encashed on the due date. In this manner a sum of Rs. 32500.00 had already been paid and only a sum of Rs. 16000.00 remained due. Three post dated cheques were issued for the payment of this amount. The very fact that one post dated cheque had already been encashed and three further post-dated cheques were accepted by way of a promise to pay, goes to show that at the initial stages there was no intention to cheat. It appears that the three cheques were dishonoured after the due dates. This is simply accidental and cannot be said to be intentional or expected or at all known when the cheques were issued and the transaction was entered into. I am, therefore, of the view that the facts and circumstances do not attract the application of the law laid down in Allahabad case Ajodhya Prasad…Applicant; v. Chiranji Lal…Opposite-Party. (supra) or in Bhola Nath Arora v. The State (supra).

16. In my opinion it is not a case of cheating. It is a case of civil liability and therefore the criminal complaint No. 1174 of 1981 pending in the Court of Munsif Magistrate, Sambhal, District Moradabad in the matter of Lala Bhawan Kishore v. Shyam Sunder shall stand quashed. This petition under Section 482 Cr. P.C is accordingly allowed.

Shyam Sundar v. Lala Bhawan Kishore

Judgment Summary — V.P. Mathur, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Applicants' Arguments

State's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Shyam Sundar v. Lala Bhawan Kishore

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