Cheating

Yes, the case of cheating can be filed under section 406 and 418 of IPC.

Rajan Salvi ji,

Yes. A criminal case can be filed.

A dishonest concealment of facts is a deception within the meaning of  under Section 420 of the Indian Penal Penal Code, 1860.

Thanx, I found a judgment.

Equivalent citations: AIR 1952 All 428

Bench: P Bhargava

    Rama Shankar Shukla vs Rikhab Kumar Jain on 13/2/1951

ORDER

   P.L. Bhargava, J.

   1. This is an application in revision by Shri Rama Shankar Saukla, a lawyer

practising before the Income-tax and Sales.tax Officers in Kanpur.

   2. Shri Rikhabh Kumar filed a complaint against the applicant, on 18-6 1949,

charging him with an offence, punishable under Section 420, Penal Code. It was

alleged in the complaint that Shri Shukla had induced the complainant to pay him

Rs. 1,100 on the assurance that he had some influence with the Income-tax

Officer, Kanpur, and that he would exert that influence to secure some relief in

the assessment of income-tax on the complainant; but the applicant did nothing

of the kind and it was subsequently discoverd that Shri Shukla had no such

influence over the Income-tax Officer.

   3. The Magistrate, who took cognizance of the offence, recorded all the

evidence produced in support of the prosecution and also examined Shri Shukla.

Then he proceeded to hear arguments on behalf of the complainant and Shri Shukla

and dismissed the complaint and discharged the accused. The learned Magistrate

observed in his judgment that, after a careful consideration of the evidence on

the record, he bad come to the decision that no prima facie case was made out

against the accused, who must consequently be discharged. He, however, further

observed:

     "The entire evidence and facts of the case boil down to practically this that the complainant and the accused made the illegal and void agreement between themselves that the latter shall exercise his influence over the Income-tax Officer Kanpur in obtaining some relief to the former in matters of assesement of income-tax. The accused, however, did not exercise the alleged influence he had over the Income-tax Officer and, as it turned out later, he had no influence over the said Income-tax Officer. The complainant filed this complaint under Section 420, Penal Code, with regard to the money he paid to the accused for the illegal act referred to above."

   After thus summarising his conclusions on the evidence the Magistrate stated

the legal position thus:

     "There can be certainly no controversy about the legal aspect of this

complaint and it must fail. If two cheats conspire to cheat a third party and

later one of the two falls out, he cannot be said to have cheated the other

cheat. The complainant wag essentially doing an improper act in engaging the accused to exercise undue influence on the Income tax Official and thus affect his decision. The contract could not be enforced in a civil Court for being void and opposed to public policy."

   4. The complainant then filed a revision in the Court of the District

Magistrate of Kanpur; and the revision came up for hearing before the Additional

District Magistrate of the same place who did not agree with the view point of

the trial Court that, even if the applicant had paid Rs. 1 ,100 to the accused,

it was an illegal and void agreement and so no offence was committed. He was of

the opinion that there was sufficient prima facie evidence against the opposite

party for a charge being framed against him. Accordingly, he remanded the case

to the trial Court with a direction that further inquiry should be made in the

case and necessary action should be taken according to law.

   5. Against this order of the Additional District Magistrate this revision has

been filed. Learned counsel for the applicant has, in the first place, contended

that inasmuch as the complaint filed by Shri Rikhabh Kumar is based upon an

illegal contract, in respect of which a civil remedy is barred, it is not open

to the complainant to prosecute his co-conspirator. This argument assumes the

correctness of the finding of fact recorded by the learned Magistrate that

between the complainant and the accused there was an illegal and void agreement

of the nature alleged in the complaint. If the applicant had induced the

complainant to part with a sum of Rs. 1,100 on the assurance that ha would exert

his influence over the Income-tax Officer so as to persuade him to assess the

complainant in a particular manner, the Magistrate had only to see what offence,

if any, had been committed by the applicant and for what offence he should be

charged. Learned counsel for the complainant has pointed out that the applicant

could have been charged for all or any of the offences punishable under Sections

420, 163 or 409, Penal Code. If the facts proved by the evidence constituted the

offence with which the applicant was charged or any other offence, it was

immaterial whether the offence involved an illegal or void contract, which could

not be enforced in a civil Court.

   6. It is not possible to lay down as a general proposition of law that in each and every case where cheating is based upon a void and illegal agreement there can be no criminal prosecution for cheating. The offence of cheating has been thus defined in Section 415, Penal Code:

     "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'."

   The essential ingredients of the offence of cheating, therefore, are (1)

deception of any person and (2) (a) fraudulently or dishonestly inducing that

person to deliver any "property to any thereon; or to consent that any person

shall retain any property; or (b) intentionally inducing that person 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. If the essential ingredients of

the offence of cheating are made out the prosecution and conviction of the

accused is possible, irrespective of the fact whether cheating is based upon a

void or illegal contract.

   7. Learned counsel for the applicant has in support of his argument relied

upon a decision of the Bombay High Court reported in Emperor v. Jani Hira, 15.I.

C. 793 (Bom). In that case A agreed to let her daughter on hire to B for

concubinage for a period of one year in consideration of B paying her Rs. 70. B

paid A Rs. 85 in advance. Subsequently A refused to deliver her daughter to B or

to return the sum of Rs. 85 advanced by him. On these facts, A was convicted of

cheating. There it was held that the conviction could not be sustained, as a

party should not be allowed to prosecute on a charge of cheating when he would

not be entitled to obtain from a civil Court any relief for breach of the

contract. It appears from the report that there was no evidence to show that

there was any fraudulent or dishonest intention on the part of the accused when

she took the advance of Rs. 35 from the complainant. On the other hand, it

appeared that at that time she intended to let the complainant have her daughter

and only changed her mind later. Consequently, the conviction for the offence of

cheating was bad in law. A contrary view was, however, taken by a Division Bench

of the Oudh Chief Court in Emperor v. Raghunath, A. I. R. (28) 1941 Oudh 3 where

it was held that a criminal prosecution for cheating can be based on a contract

which cannot be enforced in a civil Court. This view is in consonance with the

view taken by me above. I, therefore, see no force in the first contention put

forward on behalf of the applicant.

   8. In the next place, it has been contended on behalf of the applicant that

the Additional District Magistrate could not have set aside the order of

discharge unless it was found to be manifestly perverse. The judgment of the

trial Court, read as a whole, leaves no room for doubt that the Magistrate

accepted the prosecution case as set out in the complaint; but having regard to

the fact that the cheating was based upon a void and illegal contract, which

could not be enforced in a civil Court, he held that the prosecution could not

proceed. For the reasons stated above, that view Cannot be sustained. In view of

the facts disclosed in the evidence, the learned Additional District Magistrate

was justified in holding that there was sufficient prima facie evidence for a

charge being framed against the applicant. That being so, there can be little

doubt that the order of discharge was manifestly perverse, which was rightly set

aside by the learned Additional District Magistrate.

   9. In the third place, learned Counsel for the applicant has argued that the

most important piece of evidence against the applicant was the statement of the

complainant, who was in a position of an accomplice; consequently his statement

could not be admitted in evidence or relied upon. In such cases the complainant

is undoubtedly an important witness and even as an accomplice he is a competent

witness. No doubt, there is a presumption that an accomplice is unworthy of

credit, unless his evidence is corroborated in material particulars; but it is

incorrect to say that his evidence is inadmissible. In this case, we find that

in order to corroborate the complainant's evidence a number of witnesses were

examined and his evidence is corroborated in material particulars. Babu Lal

Munim (P. w. 2) was examined to prove an entry in the account-books of the

complainant, which showed a payment of Rs. 1,100 to the applicant. There were

two other witnesses, Bal Mukund and Bharat Singh (p. Ws. 3 and 4), who stated

that in their presence the applicant had admitted having obtained the money from

the complainant, and had also promised to return the same. The Income-tax

Officer was examined as P. W. 6, who stated that the complainant had made a

complaint to him against the applicant. There was one more witness, the Bank

manager, who proved that on the particular day on which the amount of Rs. 1,100

was paid by the complainant to the applicant a sum of Rs. 1,000 was withdrawn by

the complainant. The evidence of the complainant was, therefore, admissible and

rightly relied upon.

   10. Lastly, it has been argued on behalf of the applicant that the Magistrate

having recorded the entire evidence and based his decision thereupon, there was

no necessity of any further inquiry and consequently the order of the Additional

District Magistrate directing a further inquiry was improper. It is true that

the entire evidence in support of the complaint had been recorded by the

Magistrate; but, on that evidence, he having come to the conclusion that the

complainant and the accused had entered into an illegal and void agreement,

could not discharge the applicant--he had to frame a charge and to proceed with

the trial. The learned Additional District Magistrate, being of the opinion that

there was prima facie evidence for a charge being framed against the applicant,

was perfectly justified in making an order that the trial Court should, after

further inquiry, take necessary action according to law; or, in other words,

proceed with the trial according to law.

   11. Having regard to all the circumstances appearing on the record, I am of

opinion that the order made by the learned Additional District Magistrate was

perfectly correct; and there is no reason whatsoever to interfere with the same.

The revision, is accordingly, rejected. The stay order is vacated. Let the

record of the case be returned to the Court concerned without any delay.

 Similar view was taken by the Madras High Court in a caes Public
Prosecutor v. Bhimeswara Rao:

    The Public Prosecutor vs K. Bhimeswara Rao on 23/7/1947

JUDGMENT

   Rajamannar, J.

   1. This is an appeal against the acquittal of the accused in C.C. No. 55 of
1946 by the Sub-Divisional Magistrate, Ellore. He was charged with an offence
under Section 420 of the Indian Penal Code for having dishonestly induced
Kesaripalli Anjaneyulu, P.W. 1, and Umma Janardhana Rao, P.W. 2, to deliver to
him Rs. 1,000.

   2. The accused was an auditor employed by P. Ws. 1 and 2 who were merchants
jointly conducting tobacco business at Ellore to audit the accounts of their
firm, to prepare their income-tax return and to look after their income-tax
affairs. He had been so employed by them for over fifteen years. They sent their
income-tax return for the assessment year 1944-45 some time in August, 1944. The
case for the prosecution is that after the accounts were prepared for income-tax
purposes the accused represented to them that their income was such that they
would become liable to Excess Profits Tax and he undertook to see that they
escaped such assessment if Rs. 1,000 was given to him to be paid as a bribe to
the Income-tax Officer. P.W.s 1 and 2 accordingly paid him Rs. 1,000 some time
in January, 1945. Eventually there was an assessment order Exhibit D-1, dated
12th January, 1945 and by that order they were not assessed to any Excess
Profits Tax. Months later, P.W. 2 met P.W. 3, the income-tax Officer, Ellore,
who was the Income-tax Officer on the relevant dates, and after a conversation
which related to private matters, P.W. 2 asked P.W. 3 if he was in receipt of
Rs. 1,000 sent through his auditor in the previous year. P.W. 3 denied having
received any money from the auditor. P.Ws. 1 and 2 then realised that they had
been duped. P.W. 3 consulted his superior officers and on their advice he lay a
trap to catch the accused.

   3. On 22nd September, 1945, he kept his Inspector, personal clerk and others
in a room adjacent to the hall in which he was seated and asked them to over-
hear what passed in the hall. P.Ws. 1 and 2 and the accused came into the hall
with the accounts. Then, as previously arranged, after a pretence of examining
the accounts, P.W. 2 said that P.W. 3 may .finish the examination and that he
would give him a bribe of Rs. 1000 as in the previous year. P.W. 3 asked him
what it was about and P.W. 2 told him that the accused had taken from them Rs.
1,000 in the previous year stating that it would be given to the Income-tax
Officer as a bribe. P.W. 3 then asked the accused about it. The accused replied
that it was a matter between them and that it was nothing. P.W. 3 then informed
the accused that the whole truth of the matter was known and that the accused*
should immediately return the amount to them. The accused agreed. P.W. 2 brought
an account book wherein an entry was made showing a cash payment of Rs. 1,000.
This entry was signed by the accused. This entry really amounted to a repayment
of Rs. 1,000 alleged to have been taken by the accused. The Income-tax Officer,
P.W. 3 then recorded statements from the accused, the Inspector, his personal
clerk and others and sent a report to the Assistant Commissioner. On 4th April,
1946, P.W. 3 was directed by the Commissioner of Income-tax to lodge a complaint
against the accused before the Police ; and a complaint was filed accordingly.

   4. The defence as set out in the statement made by the accused before the
Magistrate was that though it was true that a sum of Rs. 1,000 was paid it was
not paid to be utilised for bribing the income-tax Officer but it was paid as a
reward for the services rendered by the accused in pursuance of an agreement by
which P.W. 2 proposed to pay him this reward if excess profit liability was
avoided.

   5. The Magistrate considered that the only point for determination was
whether the accused received the amount as a reward or as a bribe for P.W. 3. He
held that the prosecution had failed to prove beyond reasonable doubt that the
accused received the amount representing to P.W.s 1 and 2 that he would give it
as a bribe to the Income-tax Officer. He came to this conclusion mainly because
he considered that P.Ws. 1 and 2 on whose testimony to a large extent the case
for the prosecution depended were not reliable and could not be believed. He
accepted as true the entry in the account book of the accused against the date
29th January, 1945 (Exhibit P. 16 (b). This date was long after the date of the
assessment order. It is common ground now that the payment of Rs. 1,000 was made
by P. Ws. 1 and 2 and received by the accused in January, 1945. P.Ws. 1 and 2
did not give the definite date on which the amount was paid ; but it is
reasonably clear from their evidence that according to them the money was paid
to the accused before' the order of assessment. On the other hand according to
the accused the money was paid on 29th January, 1945 and the is sought to be
supported by the entry in the account of the accused already referred to. If
this entry were genuine there can be no doubt that the case for the prosecution
must fail. It is impossible to accept the story of P.Ws. 1 and 2 that the money
was paid to be offered as a bribe to the Income-tax Officer when long before the
date of payment an assessment order had been made in their favour. I have looked
into the original account and the entry in question appears to me clearly an
interpolation. There are blank spaces on the page in question which would permit
the making of an entry at any time and curiously enough immediately following
the credit of Rs. 1,000 there is a debit of an identical sum in connection with
some other transaction. I think it extremely unsafe to act on this entry.

   6. There is another ground also on which the plea of the accused must be
rejected. In the account book of P.Ws. 1 and 2 there is no entry of the payment
of Rs. 1,000 to the accused either in the beginning of January, or on 29th
January, 1945. If this payment, was as the accused would have it, only for
services rendered then surely it must have found a place in the accounts of the
firm of P.Ws. 1 and 2 and admittedly it does not find a place. It was pointed
out by the learned advocate for the accused that according to P.W. is statement
before the Income-tax Officer (Exhibit P-2) the amount was paid out of his
deceased's wife's cash lying in the safe. I doubt if this statement is
admissible in evidence. But even if the money had been paid from cash belonging
to P.W. 1 's wife, there weould have been appropriate entries in the accounts of
the firm because the payment was certainly made on behalf of the firm. I have no
hesitation in rejecting the plea of the accused that the amount was paid to him
as a reward for his services after the date of the assessment.

   7. The Magistrate considered that P.Ws. 1 and 2 have no respect for truth and
their evidence cannot be believed. He came to this conclusion mainly because of
several discrepancies in the evidence. These witnesses were deposing nearly an
year after the alleged offence had been committed ; and there are bound to be
errors in their memory. I do not think much should be made out of the divergence
of testimony as to whether the accused told them in person or the accused made
the representation through their clerk. Though I agree that these two witnesses
are not certainly of high integrity because they admittedly abetted the offence
of the alleged bribing of the Income-tax Officer, still I do not think that fact
warrants a complete rejection of their evidence. In my opinion, their evidence,
taken along with the evidence of P.W. 3 does lead to the inference that the sum
of Rs. 1,000 was paid by them to the accused to be utilised for bribing the
Income-tax Officer.

   8. Mr. V.T. Rangaswami Ayyangar, learned Advocate for the accused, raised an
interesting point relying on the decision of the Bombay High Court in Emperor v.
Jani Hira (1912) 15 I.C. 793, that the money paid by P.Ws. 1 and 2 to the
accused for an illegal object could not have been recovered even in a civil suit
and in respect of such money a criminal prosecution for cheating will also not
be sustainable. I am not certain that the amount could not have been recovered
in a Civil suit. But even assuming it was not I do not consider that ipso facto
no criminal prosecution can lie if otherwise an offence under the Indian Penal
Code is made out. The learned Advocate conceded that there was nothing in
general exceptions from which he can derive any support. It must then be on
grounds of public policy. But I do not think it right to import considerations
of public policy in adjudicating on the criminal liability of an accused person.

   9. I therefore differ from the Magistrate and hold that it has been
established by the prosecution that a sum of Rs. 1000 was paid by P.Ws. 1 and 2
to the accused to be given as a bribe to the Income-tax Officer. Nevertheless in
my opinion the accused cannot be held to be guilty of the offence of cheating,
because there is one essential ingredient which has not been made out in this
case. According to P.Ws. 1 and 2 the accused represented that he wanted the sum
to be offered as a bribe to the Income-tax Officer. They also admit that they
agreed to pay the amount for that purpose. But it has not been conclusively
established that at the time when the payment was made the accused did not
intend to so utilise the amount. It may be that the amount was not really paid
to P.W. 3. But it has not been shown that the accused, when he induced P.Ws. 1
and 2 to give him the money, never had any intention of attempting to bribe the
Income-tax Officer. The accused might be foolish in assuming that he could have
bribed a public officer. But there is nothing to show that at the time when
P.Ws. 1 and 2 delivered the property i.e., the money, to the accused, there was
an actual deceit in the sense that it was not the intention of the accused ever
to try to utilise the amount in that way. For aught we know, it may be the
accused at the time thought that he might be able to achieve his object by
resorting to illegal means. P.Ws. 1 and 2 whole-heartedly agreed to such a
proposal. Whether the accused was bound to return the money to P.Ws. 1 and 2
when he did not as a fact pay it over to the Income-tax Officer and whether, on
his failure to do so, P.Ws. 1 and 2 had a cause of action against the accused
for the return of the money, it is unnecessary for me to decide. It is enough to
say that it has not been proved that at the time the accused made the alleged
representation he made it falsely and with the intention to deceive P.Ws. 1 and
2. In the absence of this ingredient, which I consider essential, it cannot be
said that the prosecution has established that the accused is guilty of
cheating. On this ground I would support the order of acquittal passed by the
Magistrate.

   10. It is only necessary for me to point out that the remarks made by the
Magistrate against P.W. 3 were unwarranted and need not have been made.

   11. In the result the appeal is dismissed.

 
  

Thanx Shree. Good to interact with you.