JUDGMENT

1. These four appeals have been preferred by the State against the acquittal of the respective accused in C.C 18 to 21 of 1973, on the file of the Sub Divisional Magistrate, Villupuram. Since the facts in each of the cases are more or less the same and since common questions of law are involved, all the four appeals are disposed of by a common judgment. The facts in C.As 332 and 335 of 1974, are some what alike, while the facts in C.As 333 and 334 of 1974 are similar in character.

2. The Land Development Bank in Gingee introduced a scheme for disbursement of loans to agriculturists for the purpose of digging new wells or for the purchase of new oil engines. A ryot wishing to avail the loan facility had to make an application to the Bank and had also to produce a certificate from the village karnam about the extent of the land owned by him and its approximate value. Whenever a loan was sanctioned, the applicant has also to execute a mortgage deed and give property security to the Bank for the loan advanced to him. In the ease of loans for digging up of wells the maximum amount fixed was Rs. 3,000, while in the case of loans for purchasing new oil engines the maximum amount fixed was Rs. 4,000. In the former case one-half of the loan amount will first be paid to the ryot. With that amount he had to start the digging of the well. The progress of the work will be checked and verified by an employee of the bank and on his certificate that the first instalment of the loan had been fully utilised, the balance of the loan amount would be given to the loanee. In respect of the loans for purchase of new oil engines, the loanee will have to produce a bill from the dealer, who supplied him the oil engines as proof of his having purchased an oil engine. The Bank would then issue a cheque in favour of the dealer, who had supplied the oil engine to the ryot.

3. In accordance with this scheme the respondent in C.A No. 332 of 1974, as well as respondents 1 and 2 in C.A 335 applied for loans from the Bank for digging new wells. All the formalities were gone through and they were given the first instalment of Rs. 1,500. Later they produced utilisation certificates from the concerned staff member of the Bank and thereafter the second instalment was also given. The third respondent in C.A 335 of 1974 is one such staff member, who had given utilisation certificate in favour of respondents 1 and 2 in the said appeal. Later a member of the Special Audit Squad for the Co-operative Societies made a check of the loan transactions entered into by the Bank and it was then found that the respondent in C.A 332 of 1974 and respondents 1 and 2 in C.A 335 of 1974, had not dug any new well in their respective lands. In the process of investigation it was also found that the third respondent in C.A 335 of 1974 had given a false utilisation certificate. It was in these circumstances the concerned respondents in the two appeals were prosecuted for committing an offence of cheating. The 3rd respondent in C.A 335 of 1974, was charged for abetting the commission of the offence of cheating by respondents 1 and 2.

4. In so far as the respondents in the two other appeals are concerned, the Special Audit Squad found that the first respondent in C.A 333 of 1974, had not purchased an oil engine at all. The second respondent therein was found to have issued a false bill in favour of the first respondent to make it appear that he had purchased a new oil engine from him. Similarly the first respondent in C.A 334 of 1974, had not purchased a new oil engine, but had purchased only an old oil engine, which was not in working order at the time of inspection by the Special Audit Squad. The second respondent in the appeal was charged for abetting the offence of cheating committed by the first respondent, in that he had issued a false bill to make it appear that he had supplied a new oil engine to the first respondent.

5. The trial Magistrate came to the conclusion that the loanee in each of the cases had made fraudulent representations to the Bank and obtained the loan amount. The Magistrate's finding is that the person who asked for the loan amounts for the purpose of digging new wells or buying new oil engines had no intention, when they applied for the loans, of digging new wells or buying new oil engines, as the case may be. Nevertheless, he held that the accused in each of the cases cannot be convicted under Section 420 or under S. 420 read with Section 109, I.P.C as the case may be on account of the fact that the Bank had not sustained loss in any of the transactions. The Magistrate has taken the view that since each advancement by the Bank had been done on the security of immoveable property, there was no possibility of the Bank losing any portion of its advance despite the drawal of money by the loanees on false pretexts and, as such, the respective accused in each case cannot be convicted for the offence of cheating or abetment of the offence of cheating.

6. On behalf of the State, it is contended that the view taken by the trial Magistrate is wrong and it is not in accordance with law. To appreciate the contentions of the learned Public Prosecutor it is necessary to refer to the definition of the offence of cheating in the Penal Code. Shorn of minute details, Section 415, I.P.C reads as follows—

“S. 415: Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person … … … or intentionally induces the person so deceived to do or omit to do anything … … … … … 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’.”

7. The word ‘dishonestly’ had been defined in S. 24, I.P.C as follows—

“S. 24: Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing ‘dishonestly’.”

8. Section 25, I.P.C describes the word ‘fraudulently’ in the following manner—

“25. A person is said to do a thing fraudulently if he does that thing with intent to defraud”.

9. Bearing these definitions in mind, we have to find out what are the ingredients of the offence of cheating. Firstly, there has to be practice of deception by the offender. Then on account of the deception there must be fraudulent or dishonest inducement so as to make the person deceived to deliver any property or to do something or omit to do something etc. Lastly, by reason of delivery of the property or the doing of a thing or the omission to do a thing, there must be the causing of or the likelihood of the causing of damage or harm to the person deceived in body, mind, reputation or property. Thus, as a result of the dishonest inducement of a person, there can be either wrongful loss to the person deceived or wrongful gain to another including the person practising the deception. Whenever any one of these results follow on account of the deception practised by a person, then the offence of cheating would be complete. The learned Magistrate is not, therefore, correct in having taken the view that since no damage or harm had been caused to the person deceived, to wit the Bank, the offence of cheating has not been committed.

10. The Supreme Court has pointed out in Tulsi Ram v. State of U.P, AIR 1963 SC 666 at p. 674 : (1963-1 Cri LJ 623), that when an allegation is made that a person has dishonestly induced another to part with property, what has to be considered is whether by his act the offender has caused a wrongful loss to the person who parted with the property or has made a wrongful gain to himself. It then pointed out that both the elements of wrongful loss and wrongful gain need not necessarily be present in each case in the following words—

“These are the two facets of the definition of dishonesty and it is enough to establish the existence of one of them. The law does not require that both should be established.”

11. Viewed in that perspective, there can be no difficulty in holding that the borrowers in each case had committed the offence of cheating. Even though each advancement of loan was made on the security of property and on account of it there had been no loss to the Bank, yet it follows that each of the borrowers had made, a wrongful gain to himself by making dishonest representation, to the Bank in getting the loan amount. Had the borrowers told the bank even in the beginning that they were not going to dig any well or that they were going to buy only old oil engines, the Bank would not have advanced moneys to them. There can, therefore, be no doubt that the borrowers had gained wrongfully by obtaining the loan amounts from the Bank on fake pretext. The offence committed by than clearly satisfies the requirements of Section 415, I.P.C and, therefore, the State is justified in its contention that the acquittal of the borrowers in each case by the trial Magistrate is wrong and erroneous.

12. On behalf of the respondents in each case several arguments have been advanced. Some of the arguments are common and 1 shall, therefore, deal with them in the first instance. The first argument is that the loans were not advanced on the basis of the representations made by the borrowers, but were advanced on the basis of the mortgage deeds executed by each one of them. The argument, which, in my opinion, is clearly erroneous, therefore, is that there has been no inducement much less dishonest inducement on the part of the borrower to the Bank to part with the money. As I have already stated, the Bank advanced the money only on the statements of the respective parties that they were requiring the loan either for the purpose of digging a new well car for the purpose of buying a new oil engine. The Bank's insistence upon the borrowers executing mortgage deeds was only for securing the repayment of the loan and hence the mortgage deeds did not form the basis on which the loans were sanctioned and moneys paid.

13. The second argument is that in view of the loan being a secured one the Bank can proceed against the property security and recover the loan amount and, as such, there is no possibility at all of the Bank suffering any loss much less wrongful loss. It is unnecessary to deal with this argument at length. I have already held that the dishonest inducement is the causation and its effect can be of a two-fold character, viz., wrongful loss or wrongful gain. There may be cases where both the effects may ensue. There will also be cases where only one of the two effects may ensue. But, for holding an act as amounting to an offence of cheating, it is not necessary that both the effects viz., wrongful gain as well as wrongful loss should be present. It is enough if one of them has been occasioed by the dishonest inducement of the deceiver.

14. The learned counsel appearing for the respondents in C.As 332 and 335 of 1974, advanced a theory that the borrowers had actually commenced the well digging operation, but had to give up their attempts later, because the sites chosen for digging the wells were rocky. It was, therefore urged that the prosecution is not entitled to say that the borrowers had made false representations to the Bank and obtained loan amounts. This argument fails to take note of the fact that the borrowers in each of the two cases had admitted before P.W 1, a member of the Special Audit Squad that they had not dug any new well at all and have reiterated their admissions in written statements which have been marked as exhibits in the case. In view of the admissions of the borrowers before P.W 1, both orally and in writing, there can be no doubt whatever that the concerned respondents in the appeals had not dug new wells and had obtained loan amounts from the Bank by making dishonest representations.

15. On behalf of the second respondent in C.A 333 of 1974, the learned counsel appearing for him urged that his client cannot be charged for having abetted the commission of the offence of cheating. This plea is raised on the basis that the Bank had already sanctioned a loan in favour of the first respondent and therefore, the second respondent had no hand in the attainment of the loan from the Bank by the first respondent. But this argument proceeds on the fallacy that the loan amount was disbursed to the first respondent contemporaneously with the sanction of the loan. The evidence discloses that the loan amount, though sanctioned, was actually disbursed to the first respondent only after he produced a bill from the second respondent to make it appear that he had actually purchased an oil engine from the later. It was on the strength of the bill the loan amount was disbursed. But for the production of the bill the loan amount would not have been disbursed even though the loan had been sanctioned earlier. In such circumstances, there can be no doubt that the second respondent, by issuing a bogus bill, had aided and abetted the first respondent in cheating the Bank and getting a loan of Rs. 3,000. Moreover, the second respondent has admitted before P.W 1 that he never supplied any oil engine to the first respondent and he had issued the bill merely on the receipt of commission charges from the first respondent.

16. With regard to C.A 334 of 1974, Mr. Thirumalai, learned counsel appearing for the first respondent, vehemently contends that his client had purchased an oil engine, though not a new one and, therefore, it cannot be said that his client had committed any offence. This contention is not at all a tenable one, for the loan was asked for and was sanctioned on the basis that the first respondent was to buy and instal a new oil engine in his land. Had the first respondent stated even at the beginning that he wanted the loan amount only to buy a second hand oil engine, the Bank authorities would never have given the amount to him. Moreover, the first respondent obtained a bill from the second respondent and produced the same before the Bank authorities and made them believe that he had purchased a new oil engine. There cannot, therefore, be any doubt that the first respondent in C.A 334 of 1974, had derived wrongful gain from the transaction and had thus committed the offence of cheating and similarly the second respondent had abetted him in the commission of the offence.

17. Mr. Thirumalai invited my attention to a decision, Hari Sao v. State of Bihar, (1969) 3 SCC 107 : AIR 1970 SC 843 : (1970 Cri LJ 849) and contended that as long as the Bank did not suffer any loss or incur any additional liability on account of the representations made by his client, even if they were false ones, the offence of cheating had not taken place. In support of his argument he points out that P.W 3, an officer of the Bank, had admitted that the Bank had not sustained any loss on account of the advancement of loans to the respondents in the various appeals. The Supreme Court case referred to above was one where certain persons were prosecuted for having induced the railway authorities to make out a railway receipt in respect of some bags said to contain chillies; whereas the bags contained only chaff. The Supreme Court held that the Station Master cannot be said to have been cheated by the consignors, for the railways had not incurred any additional liability by the false representations made by the accused persons. I am afraid the decision in that case can have no application to the facts of the instant case. Whether the bags transported by the railways were chilly bags or bags containing chaff, the railways would have transported the bags if they had been paid the transport charges. The transport itself proceeded on the footing that the railways would not be held responsible for the weight of the goods or loss due to loading and unloading. It was on account of these peculiar features, the Supreme Court gave a finding in the case in favour of the accused persons therein. In the instant case, as already stated, the Bank would not have advanced loans to any of the persons if they had represented in the beginning that they were not requiring the loans for digging new wells or for buying new oil engines.

18. Lastly I have only to deal with the case of the third respondent in C.A 335 of 1974. He was a Co-operative Sub Registrar, who was in the employment of the Co-operative Bank which advanced the loans. It was part of his duty to verify the utilisation of the loan amounts obtained by the ryots and then recommend to the Bank for the disbursement of the second instalment of the loan. The charge against him was that he had issued a false utilisation certificate in favour of respondents 1 and 2 in the appeal and on the basis of that certificate the Bank had disbursed the second instalment of Rupees 1,500 to these two persons. Though the certificate issued by the 3rd respondent was undoubtedly an incorrect one, the question, however, remains whether he issued the certificate with any mens rea or out of negligence. The evidence discloses that the second respondent in the case was the Secretary of the very same Bank wherein the 3rd respondent was employed as Supervisor. It is, therefore, quite likely that the third respondent was misled by the assurance given by the second respondent about the first instalment of the loans having been utilised for digging a new well and issued the utilisation certificate in that frame of mini The trial Magistrate himself has found that the 3rd respondent could have issued the utilisation certificate either due to negligence or due to fraudulent conduct. In such circumstances, it is not possible to accept the prosecution case that the 3rd respondent issued the certificate intentionally with a view to enable respondents 1 and 2 to complete their scheme of fraud and obtain from the Bank the remaining portion of the loan amount. The (benefit of doubt must, therefore, enure in favour of the 3rd respondent in this case.

19. In the result, I find that all the criminal appeals by the State have to be allowed except in so far as it relates to the 3rd respondent in C.A 335 of 1974. In so far as he is concerned his acquittal of the charge under S. 420 read with Section 109, I.P.C will stand confirmed, though for a different reason. The respondent in C.A 332 of 1974, as well as respondents 1 and 2 in each of the other three appeals will stand convicted for the respective offences for which they were charged viz., either under S. 420 or S. 420 read with S. 109, I.P.C, as the case may be. Now coming to the question of sentence, I find that these are not cases, where any deterrent or severe sentence is called for. I think the ends of justice would be met by dealing with each of the convicted persons under S. 3 of the Probation of Offenders Act. I am taking this view in view of the fact that the borrowers (except the respondent in C.A 332 of 1974, whose repayment of the loan is not evidenced by any receipt), who now stand convicted, have subsequently repaid the entire loan amounts inclusive of interest to the Bank. Consequently the Bank has not suffered any loss by reason of the accused persons having cheated the Bank and obtaining the loan amounts. The investigation of the case was begun as early as in the year 1970 and the trial before the Sub Divisional Magistrate at Villupuram came to a conclusion only in the year 1973. Thereafter the appeals have been pending for the last two years. The accused persons, apart from the mental agony, have also been put to lot of expenses in defending themselves before the two courts. In such circumstances, I admonish each one of the convicted persons under S. 3 of the Probation of Offenders Act for their respective convictions.

20. Order accordingly.