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PETITIONER: MADAN LAL RAM CHANDRA DAGA ETC.

       Vs.

RESPONDENT: STATE OF MAHARASHTRA

DATE OF JUDGMENT: 05/02/1968

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. BACHAWAT, R.S. HEGDE, K.S.

CITATION:  1968 AIR 1267            1968 SCR  (3)  34

ACT:      Practice  and  Procedure--Criminal  appeal--Offence  of cheating--Offer  by accused to return money if sentence  was reduced--High Court willing to consider--Propriety.

HEADNOTE: The three appellants were a partner, munim and clerk of  the R. R. firm and were closely related to one another.  In  the course  of  their  dealings with the J. R.  firm,  who  were Bankers  and Commission Agents, the appellants were  alleged to   have,  inflated  the  invoices  of  goods,   drawn   up exaggerated hundies, and borrowed money from the J. R.  firm on  the  security of such invoices and hundies.  The  J.  R. firm  came  to  know the facts when  the  hundies  were  not honoured, but before the hundies were tendered to the R.  R. firm, its partners were declared insolvent.  The  appellants were  charged with the offence of cheating the J.  R.  firm. In  the High Court, the partner offered to pay his share  of the  losses of the J. R. firm if the sentence passed on  him by  the trial court was reduced.  The High  Court  adjourned the  appeal to enable him to deposit the money but  did  not reduce  the  sentence though it recovered the  fine  imposed from the money deposited. in  appeal to this Court it was contended that :  (1)  there was no evidence against the clerk; (2) the High Court should have  reduced  the sentence; and (3) the partner  and  munim would pay to the J. R. firm the amounts wrongly realised  by them and this Court may reduce the sentence. HELD  : (1) As regards the clerk there was nothing  to  show that  be took part in the negotiations with the J. R.  firm, or that any representation was made by him to that firm,  or that  he made the inflated invoices and hundies.   The  only evidence  against  him was (a) that he wrote  some  invoices which were not inflated, (b) that he took them to the J.  R. firm,  and (c) that he drew up some, pay-in-slips on  behalf of  the  J.  R.  firm.   In  the  absence  of  a  charge  of conspiracy,  the  evidence was not relevant  and  the  clerk could not he held guilty of the offence of cheating. [38A-F] (2)It is very wrong for courts to enter into a bargain  with the accused by which money is recovered for the  complainant through their agency.  Offences should be tried and punished

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according  to the guilt of the accused, and if any  leniency is to be shown in the sentence it should be on the facts  of the case.  The High Court should not have agreed to consider the  question  of sentence and the offer of the  accused  in this Court could not also be accepted. [39 E--G] (3) The sentences were however reduced, because, but for the supervening insolvency the accused might have paid back  the money as they had done in the past. [39 H]

JUDGMENT: CRIMINAL  APPELLATE JURISDICTION : Criminal Appeals Nos.  99 to 104 of 1964. Appeals  by special leave from the judgment and order  dated March 10, 1964 of the Bombay High Court in Criminal Appeals 35 Nos.  1323  to  1325  of  1962 and  1073  to  1075  of  1962 respectively.      Nuruddin  Ahmed, G. L. Sanghi and O. C. Mathur,for  the appellants (in all the appeals).      M.S.K.  Sastri and S. P. Nayar, for  the  respondent(in all ,the appeals). Purshottam Trikamdas and I. N. Shroff, for the  complainants (in all the appeals). The Judgment of the Court was delivered by Hidayatullah,  J. ’This judgment shall govern  the  disposal of  .Criminal Appeals Nos. 99-104, of 1964.   These  appeals arise  ’from  a  number  of  criminal  prosecutions  started against  four persons for cheating.  In the  original  court there  were as many as nine cases filed against  them  which were  tried  simultaneously, three of the same  kind  being- tried  together,  as  required  by  the  Code  of   Criminal Procedure.   As  a  result of the trial the  first  and  the fourth  accused were acquitted.  Accused Nos. 2 and  3  were convicted.  They were sentenced in the aggregate to rigorous imprisonment for two years and were imposed fines ,totalling Rs. 15,000 each.  The convicted accused appealed to the High Court.   The  State  Government also  appealed  against  the acquittal  of accused No. 4. The High Court  maintained  the conviction and sentences of accused Nos. 2 and 3 and further set  aside the acquittal of accused No. 4 who on  conviction was sentenced to rigorous imprisonment for two years but  no fine  was  imposed on him.  The convicted accused  have  now filed these appeals by special leave. The case started on the complaint of one Bansilal who was  a partner  in a firm Jawarmal Ramkaran of  Kalbadevi,  Bombay. It  had  five or six partners.  This firm deals  as  Bankers :and  Commission  Agents.  The accused  are  connected  with another  firm the name of which is Ramnarayan Rajmal  Rathi. The  first accused (Laxminarayan Ramchandra) and the  second accused (Murlidhar Daga) were partners of this firm and were doing business at Jhaveri Bazar, Bombay.  The third  accused Motilal, who is the, brother of accused No. 2 was working as a Munim in the firm Accused No. 4, Madan Lal, is a nephew of accused Nos. 2 and 3 and was working as a. clerk.  The third firm which is involved in the narration of facts was  called Satyanarayan Shyamsunder Finn at Tejpur, Assam.  Accused No. 4  is a partner of that firm.  In the High Court  the  first firm is shortly described as J. R. Finn, the second as R. R. Firm and the third as S. S. Firm.  We shall adhere to  these abbreviations in this judgment. 36 It is an admitted fact that the R, R. Firm had dealings with the  J.  R. Firm for several years and had borrowed  in  the

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past large sums of money from the J. R. Finn.  In September, 1959,  accused No. 3 approached Bansilal  representing  that the R.R. Finn had to supply cloth to certain constituents in Assam and that the R.R. Firm needed money for this  purpose. Accused No. 3 offered to the J.R. Firm a commission of 2 as. on  every Rs. 100 and 6-1/2 per cent. interest.  It  appears that Bansilal wanted--that some security should be furnished and  accused  No.  3 promised  that  the  railway  receipts, invoices and the hundies drawn upon the S.S. Firm. would  be handed  over as security.  For a time things went  on  quite regularly and honestly.  As many as 110 hundies and  railway receipts  were  ..tendered and the liability was  also  met. This  involved a sum of no less than Rs.  1,20,000.   Later, however, the R.R. Firm began to inflate its invoices and  to draw  hundies for exaggerated amounts.  When  these  hundies and  the invoices reached the S.S. Firm they were  returned. The hundies and the railway receipts were then returned  and the  Bank got back the goods ’from the railway  authorities. The parcels were opened and surveyed.  It was found that the goods  represented by the invoices were not in  the  parcels and  that  cloth  very  much  less  in  value  was  actually despatched.   In other words, it was apparent that  the  RR. Firm  was inflating the invoices and drawing up  exaggerated hundies  although cloth which was being sent was, very  much less in value.  In, other words, the drawing of the money on the security of the invoices and hundies from the J.R.  Firm was  an act of cheating pure and simple because if the  J.R. Firm knew that the invoices and hundies were worthless or at any  rate  not  of  sufficient worth  they  would  not  have advanced such large sums of money to the R.R. Finn. , It may be,,  mentioned  here  that in this  way,  40  invoices  and hundies were found to be inflated and they involved a sum of Rs. 1,10,000 or thereabouts. The  matter might not have come to a head but for  an  event which made the R.R. Firm incompetent even to pay the hundies if  tendered  to them.  A petition in insolvency  was  filed against  them and they were declared insolvent  on  December 30, 1959.  The first hundi and invoice which was rejected by the S.S. Firm was as far back as October 8, 1959.   Although the R.R. Firm wrote to the J.R. Firm that the hundies may be tendered to them for payment no action appears to have  been taken.   In  this way the offence of cheating  which  really arose  when the inflated invoices and hundies were  tendered representing  not the full value in terms of bales was  made out.   Accused  Nos. 2 and 3, who were  partner  and  Munim, respectively were held to be responsible for this  cheating. Accused No. 1 was acquitted because he was only a  financing partner and had no knowledge about these 37 happenings.  Ms acquittal was allowed to remain because  the State did not appeal against his acquittal.  Accused No.  4, who  was only a clerk, was also acquitted by the court  of’. trial.  on the ground that he had made no representation  to the  J. R. Firm and thus was not guilty of any offence.   It may  be stated here that no charge of conspiracy  was  made. If  it  had been, other considerations might  have  applied. Since accused No. 4 was directly charged with cheating  some representation on his behalf had’ to be made out.  It is  on this  point that the court of trial and the High Court  have differed;  the court of trial having held that there was  no such representation and the- High Court, taking the view, on evidence,  ’Which we shall consider presently, that  accused No. 4 must be. held to be equally guilty. In  this appeal it is practically admitted that the  offence was  committed although Mr. Nuruddin Ahmed described  it  as

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technical because (a) Bansilal knew what was being done, (b) this  ruse was adopted so that the other partners of the  J. R. Firm may not object, and (c) but for the intervention  of insolvency  the  hundies  if they  had  been  presented  for payment  to the R.R Finn would have been met.  He draws  our attention  to  the fact’ that as many as  110  invoices  and hundies were regular and also met by the R.R.Firm. He pleads for a mitigation of the sentence on this ground.  As regards accused No. 4, Mr. Nuruddin   Ahmed  submits that  his  case has been wrongly viewed by the High Court which has read too much, into his actions and has thus erroneously held that he was responsible for cheatingthe  J.R.  Firm. Mr.  Nuruddin Ahmed also draws our attention to  what the High, Court  did during, the hearing of the appeal.It  appears  that-it  was represented  to  the  High Court that.  accused  No.  2  was willing  to bring the money in payment of his share  of  the losses caused to the J.R. Firm.  The High Court adopted’  an unusual  procedure by adjourning _the, appeal and  affording accused  No. 2 an opportunity of tendering his share of  the amount.   Accused  No.  2 brought a sum of  Rs.  35,000  and deposited  it  in  Court.  It appears from  the  High  Court judgment  that it had assured his counsel that the  question of reduction of sentence would be heard after the amount Was deposited.   When  the amount was deposited the  matter  was heard  again.  The High Court found it- difficult to  reduce the  sentence.  It returned the balance of the amount  after retaining the gross amount of fine imposed upon accused  No. 2  in the case.  Mr. Nuruddin Ahmed contends that  the  High Court  should have reduced the sentence and taken  over  the money   which  had  been  deposited  for  payment   to   the complainant.   He contends also that the High  Court,was  in error  in deducting the amount of fine When no  question  of reduction  of  sentence was to be Considered: We  shall  say Something  about  the procedure adopted in’ the  High  Court presently. 38 We  may begin first by considering the case, of  the  fourth accused.   Evidence  shows that he was a mere clerk  in  the R.R. Firm.  No doubt he is a nephew of accused Nos. 2 and  3 but  there is nothing to show that he took any part  in  the negotiations  or in the making out of the inflated  invoices and  hundies.   We  have  already said  that  no  charge  of conspiracy  was  made  and his action as  a  mere  clerk  is capable   of  a  different  interpretation  unless  we   can attribute to him an intention to cheat the J.R. Firm as  did the  other  accused.   On this part  there  is  no  evidence whatever.  The only evidence is that being a clerk he  wrote some  of the invoices and took to the J.R. Firm.   There  is also evidence that at the ’instance of the J.R. Finn he drew up some pay-inslips which were later submitted, not by  him, but  by the J.R. Firm to the Bank with the hundies.  In  our judgment  this evidence falls short of the  requirements  of the  law.  No representation was made by the fourth  accused to induce the J.R. Firm to part with the funds.  If a charge of  conspiracy had been made this evidence might  have  been relevant under S. 10 of the Evidence Act but as no charge of conspiracy  was  made the charge of cheating by  the  fourth accused  had  to be made out on good  and  proper  evidence. There  is nothing to show that the fourth accused knew  that the  hundies were not going to be met or that  the  invoices were in fact inflated.  In the absence of any such proof  it is  difficult to hold (as did the High Court)  that  accused No.  4 was also guilty of the offence of cheating.  None  of the  invoices which were written by the fourth  accused  was found  to  be inflated.  The bad  invoices  were  apparently

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written  by  someone else and he was  only  instrumental  in taking  them  to the J.R. Finn as the servant  of  the  R.R. Firm.  Even if he wrote some of the bad invoices or the pay- in-slips  some more evidence was needed before it  could  be held that he was instrumental in cheating the J.R. Firm.  On these  grounds he was entitled to an acquittal and the  High Court  erred in setting it aside in the appeal of the  State Government.  We accordingly allow his .appeal and order  his acquittal.  He need not surrender his bail which was granted by this Court.  The bail bond is cancelled. This  brings  us  to the question of  the  sentence  of  the remaining accused, viz., accused Nos. 2 and 3. From what  We have  said above it is quite clear that these  accused  seem now  to  admit that they were guilty of cheating the  J.  R. Firm.   Their case is that Bansilal knew that  the  invoices and the hundies were inflated, but that is no excuse because Bansilal was not the only person involved.  There was the J. R.  Finn who as Bankers and Commission Agents,  would  never have  lent such large sums of. money if they knew  that  the invoices  and hundies did not represent the proper value  of the goods.  It is also to be noticed that 39 Bansilal  denies all this and the suggestion Of  the  second and  the third accused that he knew everything is merely  an assertion.   It appears to us that having found a  financier who  was willing to lend money on the security  of  invoices and  hundies, the second and the third accused engineered  a plan  under which a larger sum could be borrowed  than  what could be if the true facts were known.  In other words, they devised  a  method under which inflated invoices  and  false hundies  would enable them to get at larger loans  than  the actual  value  of  the goods represented.   There  was  thus cheating and their conviction must be held to be proper.  We do  not  think that the offence can be described  as  merely technical.  It was quite clearly a bold attempt to get  more money  through false documents which were to  form  security for the loans.  It is true that in some way they might  even have  paid  this money if the hundies had been  tendered  to them  but  there  is nothing to show that  they  were  in  a position to meet the liability because the insolvency  which supervened   clearly  indicates  that  they  were  not   in- possession  of  funds.  It is their insolvency  or  lack  of funds which must have induced them to adopt this method. Having,  therefore,  held that the offence against  them  is proved  we are now to consider the question of  sentence  in the  case.  we pointed out that the High  Court  adopted  an unusual  course in the case.  In fact a similar  course  was suggested to us at the hearing by submitting that we  should increase  the  fine and reduce the sentence  to  the  period undergone.   In other words, the accused were  adopting  the same  method which they did in the High Court, namely,  that they  will pay the amount which they have  wrongly  realised from  the J.R. Firm and this may be taken in  mitigation  of the punishment imposed on them.  In our opinion, it is  very wrong for a court to enter into a bargain of this  character Offences should be tried and punished according to the guilt of  the accused.  If the Court thinks that leniency  can  be shown on the facts of the case it may impose a lighter  sen- tence.   But the court should never be a party to a  bargain by  which  money is recovered for  the  complainant  through their  agency.  We do not approve of the action  adopted  by the High Court and for the same reason we would refrain from accepting  the  suggestion  of Mr. Nuruddin  Ahmed  that  we should  increase  the  fine  with a  view  to  reducing  the sentence of imprisonment.

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We.   however,  think  that  in  this  case,  but  for   the supervening insolvency the accused might have paid back  the money  to  the J.R. Firm.  The fact that they were  on  this occasion  and  also in the High Court willing to  pay  shows that  if the matter had not been concluded against  them  by the insolvency they might even have attempted to satisfy the J.R. Firm.  They were influenced 40 by the ease with which they could borrow money and therefore tempted to depart from the strict path of honesty to meander into an offence of cheating.  Taking this into consideration we think that although we cannot condone such offences there is  room  for  reduction of  the  sentence  of  imprisonment imposed upon these two appellants.  We reduce their sentence to  one year’s rigorous imprisonment.  The sentence of  fine imposed  on  them shall stand.  With this  modification  the appeal  of  the  second and the  third  accused  will  stand dismissed.  Their bill is cancelled and they shall surrender forthwith. V.P.S.      Sentence reduced and Appeal dismissed. 41