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What must be the nature of suppression in order to attract Section 420 of the Indian Penal Code? Whether all suppression of material facts would amount to cheating?
In this blog post we discuss one of the oft-quoted decision of the Supreme Court in the case of Hridaya Ranjan Pd. Verma And Ors vs State Of Bihar And Anr on 31 March 2000 by a division bench consisting of K.T. Thomas, D.P. Mohapatra. This landmark decision has laid down the role of ‘intention’ in a criminal complaint for an offence of cheating.
The question in simple words is “when a party has failed to disclose an important fact related to the transaction, would it amount to cheating?” Usually, this question would be answered as yes. But an important element is the intention of the party to suppress the material fact. The suppression of the material fact must be with the intent to deceive the complainant. Unless, it is stated in the complaint that the accused had suppressed this fact with an intention to deceive the victim, the ingredients of Section 420 is not made out is the take home message from this decision.
Section 415 in The Indian Penal Code
415. Cheating.—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”.
Section 420 in The Indian Penal CodeIndian Penal Code, 1860
420. Cheating and dishonestly inducing delivery of property.—Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.
The facts relate to a sale of a property which had been inherited directly by 3 sons out of 6 sons. Appellants are the 3 sons who have inherited a property which was owned by their deceased father. They have agreed to sell the land to the Respondent No. 2 for a consideration of Rs. 16,00,000. Respondent No. 2 paid a sum of Rs. 11,00,000 by way of demand draft. On registration of the sale deed, Respondent 2 gave cheques for the remaining sum which bounced. Notice was sent reminding to the Respondent for the payment of the remaining sum. Since the payment was not made, FIR was filed for 406, 420 and 120 B IPC based on the complaint made. After investigation, chargesheet was filed against Respondent 2.
Shortly thereafter, Respondent No. 2 filed another complaint against the appellants alleging offences punishable under Section 418, Section 420, Section 423, Section 469, Section 504 and Section 120B IPC. It is the case of the appellants that this is a counterblast case. This is the complaint before the Supreme Court for quashing under Section 482 Code of Criminal Procedure.
Allegations in the complaint
It was averred in the complaint by the Respondent 2 that it was represented that one of the brothers who was to sign as a witness in the agreement would show up when required, whereas his presence has not been secured. Also, a title suit related to the same property had been suppressed by the sellers, the appellants herein.
Appreciation by the Supreme Court
The Supreme Court on going through the complaint found that the major allegation in the complaint pertains to Section 420 IPC and the remaining offences are not attracted as such. Then the Hon’ble Supreme Court went to say:
- what a person deceived can be induced to do.
- That the person deceiving must have the intention to deceive right at the beginning of the transaction when the promise was made
- That the complaint on hand did not state that the non-disclosing of the material fact is with an intention to deceive
The relevant portion of the decision is extracted hereunder:
On a reading of the section it is manifest that in the definition there are set forth two separate classes of acts which the person deceived may be induced to do.
(a) In the first place he may be induced fraudulently or dishonestly to deliver any property to any person.
(b) The second class of acts set forth in the section is the doing or omitting to do anything which the person deceived would not do or omit to do if he were not so deceived.
In the first class of cases the inducing must be fraudulent or dishonest. In the second class of acts, the inducing must be intentional but not fraudulent or dishonest.
In determining the question it has to be kept in mind that the distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time to inducement which may be judged by his subsequent conduct but for this subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed. Therefore it is the intention which is the gist of the offence. To hold a person guilty of cheating it is necessary to show that he had fraudulent or dishonest intention at the time of making the promise. From his mere failure to keep up promise subsequently such a culpable intention right at the beginning, that is, when he made the promise cannot be presumed.
Judged on the touchstone of the principles noted above, the present case, in our considered view warrants interference inasmuch as the ingredients of the offence of cheating punishable under section 420 IPC and its allied offences under sections 418 and 423 has not been made out. So far as the offences under sections 469, 504 and 120B are concerned even the basic allegations making out a case thereunder are not contained in the complaint. That being the position the case comes within the first category of cases enumerated in State of Haryana & Ors. v. Bhajan Lal and Ors. (Supra) and as such warrants interference by the Court. Reading the averments in the complaint in entirety and accepting the allegations to be true, the ingredients of intentional deception on the part of the accused right at the beginning of the negotiations for the transaction has neither been expressly stated nor indirectly suggested in complaint. All that the respondent No. 2 has alleged against the appellants is that they did not disclose to him that one of their brothers had filed a partition suit which was pending. The requirement that the information was not disclosed by the appellants intentionally in order to make the respondent No. 2 part with property is not alleged expressly or even impliedly in the complaint. Therefore the core postulate of dishonest intention in order to deceive the complainant-respondent no.2 is not made out even accepting all the averments in the complaint on their face value. In such a situation continuing the criminal proceeding against the accused will be, in our considered view, an abuse of process of the court. The High Court was not right in declining to quash the complaint and the proceeding initiated on the basis of the same.
This decision highlights that in cases of cheating caused by suppression of fact, the criminal complaint for Section 420 IPC must show that the non-disclosure of a material by the accused is with an intent to cheat.
All or any suppression of material facts would not attract Section 420 IPC, unless it is duly alleged in the complaint that such suppression of the material fact is with an intent to deceive. Further, it must also be alleged in the complaint that the complainant had in fact been deceived by the representation, believing it to be true. In the absence of such allegations, the complaint does not make out an offence and is liable to be quashed u/s 482 Cr.P.C.
The Supreme Court went on to quash the complaint with the above observations.
State of Haryana and Others v. Bhajan Lal and Others,  Supp. 1 SCC 335
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