Mahadeo Prasad vs State Of West Bengal

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 13 January, 1954

Coram: Bhagwati

In this case the Court noted that the matter arose from a special leave appeal against a judgment of the Calcutta High Court which had affirmed the conviction of the appellant under Section 420 of the Indian Penal Code and the sentence of one year’s rigorous imprisonment imposed by the Additional Presidency Magistrate of Calcutta. The appellant had consented to purchase from the complainant, Dulichand Kheria, twenty‑five ingots of tin on 5 May 1951. At the time the complainant possessed only fourteen ingots in his stock and therefore obtained the remaining eleven ingots from the firm of M Golam Ali Abdul Hossain. It was agreed that the twenty‑five ingots would be delivered at the guddi of the appellant and that the price, fixed at the rate of Rs 778 per cwt, would total Rs 17,324 12⁄6, to be paid by the appellant against delivery. The complainant’s Jamadar proceeded to the appellant’s guddi, where the appellant took possession of the ingots but retained the Jamadar waiting and did not make the payment. The Jamadar waited for an extended period; the appellant then left the guddi and failed to return. Consequently the Jamadar returned to the complainant and reported that although the ingots had been taken by the appellant, no payment had been made. Realising that he had been deceived, the complainant filed a complaint on 11 May 1951 before the Court of the Additional Chief Presidency Magistrate, Calcutta, charging the appellant with an offence under Section 420. The appellant’s defence asserted that he had no intention to swindle the complainant, contending that the transaction was on credit and that the allegation of a promise to pay in cash was fabricated by the complainant to give a criminal complexion to the case. It was further alleged that the appellant, of his own accord, visited the complainant seven or eight days after the transaction in order to settle the amount in view of fluctuations in the market price of tin, and that he was arrested at the complainant’s premises while negotiating such a settlement.

The evidence revealed that the appellant held an overdraft account with the Bank of Bankura Ltd., which was overdrawn by Rs 46,696 12⁄9 as of 4 May 1951, the overdraft limit being Rs 50,000. On 5 May 1951 the appellant hypothecated seventy ingots of tin with the bank as additional security against the overdraft. No satisfactory evidence was adduced to demonstrate that the twenty‑five ingots taken by the appellant from the Jamadar were among the seventy ingots hypothecated on that date. Nevertheless the record showed that at the time of taking delivery the appellant possessed no assets beyond the margin of his overdraft account, which was limited to Rs 3,303 3⁄3, an amount insufficient to meet the price of the twenty‑five ingots. The question that the Additional Presidency Magistrate was required to decide was whether, given the surrounding circumstances, it could safely conclude that the appellant had no intention whatsoever to pay and had merely promised cash payment against delivery in order to induce the complainant to part with the goods that he would otherwise have withheld. The Additional Presidency Magistrate held that the charge against the appellant was proved, convicted him under Section 420, and sentenced him to one year of rigorous imprisonment. The appellant subsequently appealed this decision to the High Court of Calcutta.

In this case the Court noted that the jamadar’s share of the complainant was included in the seventy ingots that were hypothecated to the Bank of Bankura Ltd. on the same date. Evidence on record showed that when the appellant took delivery of those ingots on 5 May 1951 he possessed no assets beyond the overdraft margin of Rs 3,303‑3‑3, an amount that was clearly insufficient to meet the price of the twenty‑five ingots in question. The issue before the Additional Presidency Magistrate was whether, having regard to the surrounding circumstances, it could be safely concluded that the appellant had no intention whatsoever to pay and had merely promised to pay cash on delivery in order to induce the complainant to part with the goods, which the complainant would otherwise not have relinquished. The Additional Presidency Magistrate, Calcutta, held that the charge against the appellant was proved, convicted him and imposed the sentence that had been recorded. The appellant subsequently appealed this conviction and sentence to the High Court. The High Court dismissed the appeal and affirmed both the conviction and the sentence that had been passed by the Additional Presidency Magistrate, Calcutta.

The High Court observed correctly that if, at the time the appellant promised to pay cash on delivery, he actually intended to fulfil that promise, the later failure to pay would not convert the transaction into cheating. On the other hand, if the appellant lacked any intention to pay and only made the promise to induce the complainant to surrender the goods, a case of cheating would be established. Both parties agreed that the market for tin was falling rapidly, dropping from Rs 840 per hundredweight in April 1951 to Rs 540 per hundredweight in August 1951. Even between 3 May 1951, when negotiations began, and 5 May 1951, when the contract was concluded, the market price fell from Rs 778 to Rs 760 per hundredweight. It was therefore urged on behalf of the appellant that the complainant would have been anxious to sell the goods to the appellant in a falling market and that there was no occasion for the appellant to induce the complainant to part with the goods on a false promise of cash on delivery. It was further urged that the record did not show that the appellant’s only resource was the overdraft account with the Bank of Bankura Ltd., that he might have mis‑calculated his capacity to pay the price on delivery, and that consequently there was no justification for concluding that he initially had no intention to pay for the ingots when they would be delivered to him. It was also urged that the bill (Exhibit No 1) which was given by the complainant to

The appellant argued that the bill he issued contained a clause providing for interest at twelve per cent per annum on any price not paid in cash against delivery, and that this clause demonstrated that the transaction was merely a civil matter and could not give rise to criminal liability. He further contended that he had been eager to reach a settlement with the complainant, that he had even visited the complainant’s shop where he was arrested while negotiating such a settlement, and that this conduct showed an absence of any fraudulent intent when he received the ingots. The court rejected all of these submissions. The complainant had never dealt with the appellant before the disputed transaction and therefore could not have been inclined to sell the tin on credit or even in a falling market unless the payment was made in cash on delivery. Even if the complainant was anxious to dispose of his goods, he would not have entrusted delivery to a complete stranger without insisting on cash payment, and the rapid decline in market price did not alter this requirement. The appellant was fully aware of his own financial obligations; he knew exactly what money he would receive from other parties and what payments he was required to make up to 4 May 1951. On the evening of that date he possessed no credit beyond the sum of three thousand three hundred and three rupees and three annas, and the record contained no evidence that he expected any additional receipts by 5 May to enable him to pay the price on delivery. The interest clause on the bill did not defeat the original agreement that the price of the ingots must be paid in cash upon delivery; it merely imposed a civil liability to pay twelve per cent interest if cash payment was not made. While the interest obligation created a civil debt, it did not eliminate the possibility of criminal liability if the surrounding circumstances gave rise to a fraud offence. The appellant’s alleged desire to settle could readily be explained by the fact that he had already taken delivery of the ingots without having paid the cash price.

The Court observed that the Appellant’s claim of intending to pay cash upon delivery was merely a pretense designed to obtain the tin from the complainant. The evidence presented included the overdraft balance of the Appellant’s account with the Bank of Bankura Limited, the testimony of the complainant, and the statements of the Jamadar. It also showed that on the fifth day of May 1951 the Appellant hypothecated seventy ingots of tin to the same bank as security for his overdraft. The totality of these facts, together with the manner in which the Appellant conducted himself, led the Court to conclude that when he received the twenty‑five ingots, he possessed no genuine intention to pay the agreed price. The Appellant’s only apparent strategy to avoid criminal liability was to negotiate a settlement with the complainant after having already obtained the goods. Because the evidence demonstrated that the settlement was intended merely to conceal the fraud, the Court held that the Appellant was rightly convicted of the offence defined in Section 420 of the Indian Penal Code. Both the trial court and the appellate court were found to have correctly applied the law in finding the Appellant guilty and in imposing a term of one year of rigorous imprisonment. Consequently, the appeal was dismissed as lacking any merit.