Madan Lal Ram Chandra Daga Vs. State of
Maharashtra  INSC 28 (5 February 1968)
05/02/1968 HIDAYATULLAH, M.
CITATION: 1968 AIR 1267 1968 SCR (3) 34
Practice and Procedure--Criminal
appeal--Offence of cheating--Offer by accused to return money if sentence was
reduced--High Court willing to consider--Propriety.
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 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]
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 beingtried 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 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
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
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 theHigh 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
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 itdifficult 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
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 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 payin-slips
some more evidence was needed before it could be held that he was instrumental
in creating 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 inpossession 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 sentence. 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.
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.