Laxmi Narain Kalra vs The State Of Uttar Pradesh

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 25 November, 1955

Coram: Venkatarama Ayyar

In this appeal, the petitioner sought special leave to challenge a decision of the Allahabad High Court that had affirmed his conviction by two lower courts for an offence alleged under Section 420 of the Indian Penal Code. The matter arose when the District Development Officer of Etawah issued a notice on 4 November 1949 inviting tenders for the supply of bricks for a Flood Relief Housing Scheme. The petitioner submitted a tender that was accepted, and the rules required him to provide a security deposit of Rs 4,000. Accordingly, on 17 November 1949 he delivered a cheque dated 16 November 1949 for that amount, drawn on the Punjab National Bank, Kanpur, although his bank account held only Rs 5 at that time. Clause 11 of Exhibit P-2, which governs the acceptance of tenders, specified that the deposit must be made in cash or in postal securities; consequently, a cheque could not be accepted under the rule. On 21 November 1949 the Development Officer returned the cheque and asked the petitioner to supply cash as required. The petitioner was absent, and his brother, Sobhraj, visited the officer on 22 November 1949 and stated that the petitioner had gone out, that the cash would be deposited on his return, and that, if the officer wished, the cheque could be presented for encashment. Acting on this representation, the cheque was sent for encashment and was dishonoured.

The charge against the petitioner alleged that by furnishing the cheque on 17 November 1949 and again presenting it on 22 November 1949, while he knew that only Rs 5 was available in his account, he had cheated the authorities, thereby committing an offence punishable under Section 420 of the Indian Penal Code. The Additional District Magistrate of Kanpur, who tried the case, concluded that the offence was established, convicted the petitioner, and sentenced him to one year of rigorous imprisonment together with a fine of Rs 1,000. The petitioner appealed to the Sessions Judge at Kanpur, who affirmed both the conviction and the sentence. Subsequently, a revision petition was filed before the High Court, where Justice Sankar Saran observed that, on the facts, “the appellant was not a cheat as cheating is generally understood in common parlance” and that “he was a victim of circumstances,” yet he held that, in a technical sense, the offence had been proven and therefore confirmed the conviction. The High Court reduced the term of imprisonment to the period already served but upheld the fine. The present special leave petition challenges that order.

The High Court accordingly affirmed the conviction but reduced the term of imprisonment to the period already served, while leaving the monetary penalty unchanged. The appellant then pursued a special leave petition against that order. After reviewing the material placed before it, the Court expressed the view that the conviction under Section 420 of the Indian Penal Code could not be sustained. The factual background relevant to this conclusion was that on 17 November the appellant presented a cheque although his bank account held only a credit of five rupees. According to the applicable railway rules, the receipts for coal could be issued to a claimant only after a cash deposit had been made, and Clause 11 expressly prohibited the acceptance of a cheque as security by the railway department. Consequently, the railway receipts could not ordinarily be delivered on the basis of such a cheque, and there was no basis to infer any dishonest intention on the part of the appellant in handing over the instrument. The respondent did not seriously dispute this point. It appears that the appellant lacked the required amount for the deposit and was in the process of arranging the funds. He therefore sought additional time and submitted the cheque for that purpose. As a businessman, he would have been aware that the railway officers were not authorised to accept the cheque as security and would have expected the cheque to be returned. This expectation was confirmed on 21 November 1949 when the Department wrote to him stating that the cheque could not be accepted and that he should make a cash deposit. Up to this stage, there is no factual support for any allegation of cheating, and the cheque that formed the basis of the charge was returned unaccepted, eliminating any question of dishonest conduct.

The next issue for consideration concerned the events of 22 November 1949. On that date the appellant was not present at the railway station because he had gone away to secure the amount required for the deposit. It is alleged that substantial sums, amounting to more than four thousand rupees, were due to him from the Railways, making it probable that his absence was intended to raise the necessary funds. When the letter dated 21 November was received, the appellant’s brother, Sobhraj, who was also involved in the business, took the initiative to visit the second prosecution witness on 22 November and to make the representation that had already been described. Assuming, for the sake of argument, that Sobhraj acted with dishonest intent in making those representations, the Court was required to determine whether the appellant could be held liable for the brother’s statements and whether dishonest intent could be imputed to him. There was absolutely no evidence that the appellant had dispatched his brother on this errand with any authority to make the representations in question. Moreover, on 22 November the appellant himself was not at the station and consequently could not have directed the conduct of his brother. Thus, in the absence of any proof of authorisation or participation by the appellant, the Court found no basis to attribute responsibility for the alleged dishonest representations to him.

In this case the Court observed that, because the appellant was not present, his brother Sobhraj acted according to his own judgment of what was appropriate under the circumstances, and consequently there was no basis for attributing responsibility for the statements made by Sobhraj to the appellant. The respondent’s counsel highlighted certain portions of the testimony of witnesses identified as P.W. 2 and P.W. 3, suggesting that these passages indicated Sobhraj was acting with the appellant’s authority. P.W. 2, in his examination-in-chief, reported that on 15 November 1949 the appellant had informed him that Sobhraj was his brother and that Sobhraj would "come and go in his place as he was engaged in contracts outside at several places." From this description the respondent argued that a general authority had been granted by the appellant to his brother to act on his behalf, and that such authority encompassed the specific representations actually made by Sobhraj. The Court found this line of reasoning difficult to accept. During cross-examination, P.W. 2 admitted that no written document existed to confirm that Sobhraj was authorised to operate on behalf of the appellant, and the Court held that the vague verbal statement was wholly inadequate to establish Sobhraj as an authorised representative for the purpose of making those representations. P.W. 3 testified that initially, on 15 and 16 November, both the appellant and Sobhraj appeared together before him, and they sometimes appeared together at later dates, a fact that merely reflected their familial and business connection and did not confer authority. Moreover, when cross-examined, P.W. 3 disclosed that on 22 November 1949 Sobhraj informed him that the appellant would arrive the following day, indicating that Sobhraj did not possess independent authority to make representations and that the decision remained with the appellant. Consequently, the Court concluded that, based on the evidence, Sobhraj could not be said to have been authorised to act on the appellant’s behalf in the matters under consideration.

The Court noted that no other evidence linked the appellant to the events of 22 November 1949, and therefore there was no material upon which to base a charge against him under Section 420 of the Penal Code. As a result, the conviction under that provision was required to be set aside. Accordingly, the appeal was allowed, the conviction and sentence imposed by the lower courts were vacated, and the fine that had been paid was ordered to be refunded to the appellant.