Samir Sahay v. State of U.P.

, (2018) 14 SCC 233

2J: Justices A K Sikri, Ashok Bhushan; Justice Bhushan delivered the judgement
Relevant Facts:The Company, namely, M/s Aneja Consultancy was founded in the year
1984 by one I.J. Aneja as Chairman. The father of the appellant, Major P.C. Sahay (Retd.)
joined the Company as Branch Manager at District Fatehpur. Several persons including the
appellant as well as Respondent 2 deposited different amounts in the Company. Respondent 2
and his wife deposited total amount of Rs 86,000 in the Company in June/July 1987. The
owner/proprietor of the Company on 20-6-1996 made a public declaration that the owner
would bear the full liability and responsibility of all deposits made by various investors
across the country and employees and staff of the Company have no personal liabilities to
repay to the investors.
The Company faced a financial trouble, cash/liquidity crunch and was unable to make
repayment of the money of the investors. Respondent 2 lodged first information report on 30-
5-1998 against the appellant and his father Major (Retd.) P.C. Sahay under Section 420 IPC.
Case Crime No. 386 of 1998 was registered against the appellant under Section 420 IPC.
Issues:
1. S. 415, 420 IPC; INGREDIENTS REITERATED
Issue wise judgement with reasoning:
The court observed:
According to Section 415 IPC, the inducement must be fraudulent and dishonest which
depends upon the intention of the accused at the time of inducement.
InDalip Kaur v. Jagnar Singh, (2009) 14 SCC 696, this Court noticed the ingredients
of Section 420 IPC.
“9. The ingredients of Section 420 of the Penal Code are:
‘(i) Deception of any persons;
(ii) Fraudulently or dishonestly inducing any person to deliver any property; or
(iii) To consent that any person shall retain any property and finally intentionally
inducing that person to do or omit to do anything which he would not do or omit.’
Applying the ratio laid down by this Court as noted above, it is clear that ingredients of
Section 420 IPC are not made out in the present case, either from the first information report
or from any other material. From the first information report as extracted above only
allegation made against the appellant was that he accompanied his father Major P.C. Sahay
(Retd.) when he assured that the money of the applicants will not be lost and it shall be the
responsibility of his father (late P.C. Sahay). The following allegations made in the first
information report need to be specially noticed:
“Along with him his son Samir Sahay, Advocate who was already acquainted with the
applicant also accompanied his father. Major P.C. Sahay gave the abovesaid
assurance, and the applicant and his wife Smt Uma Devi deposited rupees one lakh
with Major P.C. Sahay in this regard and he gave the receipt of the same to the
applicant of which the applicant is enclosing the photocopy. Like this Major P.C.
Sahay(retired) has got deposited total amount of Rs 86,000 from me and my wife. But
after some days it came to be known that the said Company has run away along with
the lakhs of rupees of the depositors after closing its office.”
In the first information report even allegation of making assurance was not made against the
appellant but was made against Major P.C. Sahay (Retd.), father of the appellant. There was
no allegation that the appellant fraudulently or dishonestly induced the complainant to deposit
money. This Court in Arun Bhandari v. State of U.P. [Arun Bhandari v. State of U.P., (2013)
2 SCC 801, has held that it is necessary to show that a person had fraudulent or dishonest
intention at the time of making the promise. A mere failure to keep up promise subsequently
cannot be presumed as an act leading to cheating.
The ingredients in order to constitute a criminal breach of trust are: (i) entrusting a person
with property or with any dominion over property, (ii) that person entrusted (a) dishonestly
misappropriating or converting that property to his own use; or (b) dishonestly using or
disposing of that property or wilfully suffering any other person so to do in violation (i) of
any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any
legal contract made, touching the discharge of such trust.
The ingredients of an offence of cheating are: (i) there should be fraudulent or dishonest
inducement of a person by deceiving him, (ii)(a) the person so deceived should be induced to
deliver any property to any person, or to consent that any person shall retain any property;
or (b) the person so deceived should be intentionally induced to do or omit to do anything
which he would not do or omit if he were not so deceived; and (iii) in cases covered by, (ii)(b)
the act of omission should be one which causes or is likely to cause damage or harm to the
person induced in body, mind, reputation or property.’”
That in the present case ingredients of Section 420 IPC were not made out so as to frame any
charge under Section 420 IPC against the appellant.
Concurring/Dissenting Opinions (if any):No
 Archana Yadav v State of UP, 2021 SCC OnLine SC 156
2J: Justices D. Y. Chandrachud, M.R. Shah; Justice Shah delivered the judgement
Relevant Facts: S. 420, 415 IPC
Issues:
1. Ingredients reiterated.
Issue wise judgement with reasoning: Cheating, defined under section 415 is an essential
ingredient for an act to constitute an offence under Section 420 IPC. A fraudulent or
dishonest inducement is an essential ingredient of the offence under Section 415 IPC. A
person who dishonestly induced any person to deliver any property is liable for the offence of
cheating.
Concurring/Dissenting Opinions (if any): No
 Sushil Sethi v. State of Arunachal Pradesh, (2020) 3 SCC 240
2J: Justices Ashok Bhushan, M. R. Shah; Justice Shah delivered the judgement
Relevant Facts:Not relevant
Issues:
1. S. 420 elements
Issue wise judgement with reasoning:
Every breach of contract would not give rise to an offence of cheating and only in those cases
breach of contract would amount to cheating where there was any deception played at the
very inception. For the purpose of constituting an offence of cheating, the complainant is
required to show that the accused had fraudulent or dishonest intention at the time of making
promise or representation. It is further observed and held that even in a case where allegations
are made in regard to failure on the part of the accused to keep his promise, in the absence of
a culpable intention at the time of making initial promise being absent, no offence under
Section 420 IPC can be said to have been made out. It is further observed and held that the
real test is whether the allegations in the complaint disclose the criminal offence of cheating
or not.
Concurring/Dissenting Opinions (if any):No
 SatishchandraRatanlal Shah v. State of Gujarat, (2019) 9 SCC 148
2J: Justices N V Ramana, M M Shantanagoudar; Justice Ramana delivered the judgement
Relevant Facts:Respondent 2 knew the appellant and the attendant circumstances before
lending the loan. Further it is an admitted fact that in order to recover the aforesaid amount,
Respondent 2 had instituted a summary civil suit which is still pending adjudication.Cheating
and criminal breach of trust v. breach of promise.
Issues:
1. S. 406, 420 IPC
Issue wise judgement with reasoning:
The law clearly recognises a difference between simple payment/investment of money and
entrustment of money or property. A mere breach of a promise, agreement or contract does
not, ipso facto, constitute the offence of the criminal breach of trust contained in Section 405
IPC without there being a clear case of entrustment.
Now coming to the charge under Section 415 punishable under Section 420 IPC. In the
context of contracts, the distinction between mere breach of contract and cheating would
depend upon the fraudulent inducement and mens rea. (See Hridaya Ranjan Prasad
Verma v. State of Bihar [Hridaya Ranjan Prasad Verma v. State of Bihar, (2000) 4 SCC 168.
The mere inability of the appellant to return the loan amount cannot give rise to a criminal
prosecution for cheating unless fraudulent or dishonest intention is shown right at the
beginning of the transaction, as it is this mens rea which is the crux of the offence. Even if all
the facts in the complaint and material are taken on their face value, no such dishonest
representation or inducement could be found or inferred.
The legislature intended to criminalise only those breaches which are accompanied by
fraudulent, dishonest or deceptive inducements, which resulted in involuntary and inefficient
transfers, under Section 415 IPC.
Hence no case under Ss. 415 and 420 was made.
Concurring/Dissenting Opinions (if any):No
 R.K. Vijayasarathy v. Sudha Seetharam, (2019) 16 SCC 739
2J: Justices D Y Chandrachud, Hemant Gupta; Justice Chandrachud delivered the judgement
Relevant Facts:RajivVijayasarathy Ratnam (the son of the appellants) and Savitha
Seetharam (the daughter of the first respondent) were married on 24-5-2002. They moved to
the United States of America and a child was born to them in 2009. Savitha was involved in a
car accident on 5-2-2010 and proceedings were initiated against her abroad. It is alleged by
the appellants that fearing the attachment of their son's property in the proceedings, an
amount of Rs 20 lakhs was transferred by Rajiv to the bank account of the first respondent on
17-2-2010. Following a breakdown in marital relations, Savitha and Rajiv have been living
separately since October 2010. Multiple rounds of litigation ensued in various courts.
Savitha filed a private complaint [ PCR No. 3418 of 2012; FIR No. 18 of 2012 registered on
23-2-2012.] against her husband Rajiv and the appellants alleging the commission of various
offences, including criminal intimidation and a demand for dowry. The High Court of
Karnataka quashed the proceeding against Appellant 2. On 14-2-2013, Rajiv filed a civil suit
for recovery of money [ OS No. 1305 of 2013.] against the first respondent for the return of
the money allegedly transferred by him into her bank account. The suit is pending. Two
divorce petitions instituted by Savita have been dismissed by the Family Court.
Issues:
1. whether the averments in the complaint disclose the ingredients necessary to
constitute an offence under the Penal Code? The first respondent has alleged in the
complaint that the appellants have committed offences under Sections 405, 406, 415
and 420 read with Section 34 of the Penal Code.
Issue wise judgement with reasoning:
A careful reading of Section 405 shows that the ingredients of a criminal breach of trust are
as follows:
- A person should have been entrusted with property, or entrusted with
dominion over property;
- That person should dishonestly misappropriate or convert to their own use that
property, or dishonestly use or dispose of that property or wilfully suffer any
other person to do so; and
- That such misappropriation, conversion, use or disposal should be in violation
of any direction of law prescribing the mode in which such trust is to be
discharged, or of any legal contract which the person has made, touching the
discharge of such trust.
- Entrustment is an essential ingredient of the offence. A person who
dishonestly misappropriates property entrusted to them contrary to the terms
of an obligation imposed is liable for a criminal breach of trust and is punished
under Section 406 of the Penal Code.
- [406. Punishment for criminal breach of trust.—Whoever commits criminal
breach of trust shall be punished with imprisonment of either description for a
term which may extend to three years, or with fine, or with both.]
The condition necessary for an act to constitute an offence under Section 405 of the Penal
Code is that the accused was entrusted with some property or has dominion over property.
The first respondent has stated that the disputed sum was transferred by the son of the
appellants of his own volition to her. The complaint clearly states that the amount was
transferred for the benefit of the son of the appellants and that the first respondent was to hold
the amount “in trust” for him. The complaint alleges that the money was transferred to the
appellants “as per the dicta” of the son of the appellants. There is on the face of the
complaint, no entrustment of the appellants with any property.
The condition necessary for an act to constitute an offence under Section 415 of the Penal
Code is that there was dishonest inducement by the accused. The first respondent admitted
that the disputed sum was transferred by the son of the appellants to her bank account on 17-
2-2010. She alleges that she transferred the money belonging to the son of the appellants at
his behest. No act on part of the appellants has been alleged that discloses an intention to
induce the delivery of any property to the appellants by the first respondent. There is thus
nothing on the face of the complaint to indicate that the appellants dishonestly induced the
first respondent to deliver any property to them. Cheating is an essential ingredient to an
offence under Section 420 of the Penal Code. The ingredient necessary to constitute the
offence of cheating is not made out from the face of the complaint and consequently, no
offence under Section 420 is made out.
Facts analysis: The suit for recovery of money was instituted by the son of the appellants
against the first respondent in 2013. The complaint alleging offences under the Penal Code
was filed by the first respondent belatedly in 2016. It is clear from the face of the complaint,
that no amount was entrusted by the first respondent to either of the appellants and there was
no dishonest inducement of the first respondent by the appellants to deliver any property. As
stated by the first respondent in the complaint, the money belonged to the son of the
appellants. It was transferred by the appellants' son to her on his own volition. The money
was alleged to have been returned to the appellants on the instructions of their son. A plain
reading of the complaint thus shows that the ingredients necessary for constituting offences
under Sections 405, 415 and 420 of the Penal Code are not made out.
In the present case, the son of the appellants has instituted a civil suit for the recovery of
money against the first respondent. The suit is pending. The first respondent has filed the
complaint against the appellants six years after the date of the alleged transaction and nearly
three years from the filing of the suit. The averments in the complaint, read on its face, do not
disclose the ingredients necessary to constitute offences under the Penal Code. An attempt
has been made by the first respondent to cloak a civil dispute with a criminal nature despite
the absence of the ingredients necessary to constitute a criminal offence. The complaint filed
by the first respondent against the appellants constitutes an abuse of process of court and is
liable to be quashed.For the above reasons, the appeal is allowed. The judgment [R.K.
Vijayasarthy v. Sudha Seetharam, 2016 SCC OnLine Kar 8478] of the High Court is set aside
and the criminal proceedings arising from PCR 2116 of 2016 instituted by the first
respondent against the appellants are quashed. We however clarify, that no opinion has been
expressed on the merits of the pending civil suit filed by the son of the appellants for the
recovery of money. The pending suit shall be disposed of in accordance with the law.
Concurring/Dissenting Opinions (if any):No