Tulsi Ram vs State of U.P.

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

Court: supreme-court

Case Number: Not extracted

Decision Date: 27 September, 1962

Coram: J.R. Mudholkar, K. Subba Rao, N. Rajgopala Ayyangar

In this case, the Court observed that the appeals arose from certificates issued by the High Court of Allahabad and were based on the same trial. The appellants, except for Chandrika Singh, had been convicted by the Second Additional District and Sessions Judge of Kanpur of offences under section 471 of the Indian Penal Code read with sections 467 and 468, and they received separate sentences for those offences. Tulsi Ram, Beni Gopal and Babu Lal each faced convictions for offences under section 417 read with section 420, while Moti Lal was convicted of an offence under section 417, and Lachhimi Narain was convicted of an offence under section 420; each of these convictions also attracted distinct sentences. In addition, all six appellants were found guilty of an offence under section 120B and were sentenced separately for that charge. On appeal, the High Court set aside the convictions and sentences imposed on Tulsi Ram, Beni Gopal, Babu Lal and Moti Lal under section 471 read with sections 467 and 468, and it also acquitted Moti Lal of the offence under section 417. However, the High Court upheld the conviction of each appellant under section 120B, and it affirmed the convictions of Tulsi Ram, Beni Gopal and Babu Lal under section 417 read with section 420. Regarding Lachhimi Narain, the High Court sustained both the conviction and the sentences imposed by the Additional Sessions Judge in every respect and dismissed his appeal completely. The Court then turned to the factual background, noting that the appellants other than Chandrika Singh belonged to a Marwari trading family originating from Rae Bareli, and that Chandrika Singh was employed by that family. The genealogical relationships among Lachhimi Narain and the first four appellants in criminal appeal number 62 of 1958 were illustrated by a family tree that showed Sri Niwas as the patriarch, with his sons and grandsons including Beni, Tulsi, Gobardhandas, Pahlad, Gopal, Ram das, Rai, Babu Lal, Moti Lal, and others, some of whom were minors or had died during the pendency of the case. It was established as common ground that Lachhimi Narain acted as the karta of the family and that the entire family business operated under his direction and supervision, a fact that was material to the defence raised by the first four appellants. The Court further noted that the family conducted business under the names and styles of five distinct firms: Beni Gopal Mohan Lal with its head office at Rae Bareli; Tulsi Ram Sohan Lal with its head office at Lalgunj in Rae Bareli district; Bhairon Prasad Srinivas with its head office at Rae Bareli; Gobardhan Das Moti Lal with its head office at Madhoganj in Partapgarh district; and Sagarmal Surajmal with its head office at Unchahar in Rae Bareli district. Although different family members appeared as partners in each firm, the Court emphasized that the business of every firm was conducted under Lachhimi Narain’s orders and directions, even though he was formally shown as a partner only in the firm Bhairon Prasad Srinivas, together with his father Sri Niwas and his brother Pahlad. Finally, the Court recorded that in May 1949 the firm Bhairon Prasad Srinivas was appointed the sole importer of cloth for distribution among wholesalers in Rae Bareli district, replacing a previous syndicate of four firms that had failed to take delivery of the cloth.

In the case, the family’s commercial activities were organised under five distinct firms: the firm Beni Gopal Mohan Lal, with its head office situated in Rae Bareli; the firm Tulsi Ram Sohan Lal, also headquartered in Rae Bareli; the firm Bhairon Prasad Srinivas, whose head office was in Rae Bareli; the firm Gobardhan Das Moti Lal, located at Madhoganj in the district of Partapgarh; and the firm Sagarmal Surajmal, based at Unchahar in Rae Bareli. Although different members of the extended family appeared as partners in each of these enterprises, it was not contested that the actual control and day‑to‑day conduct of every one of those firms rested with Lachhimi Narain, who directed their business operations. In reality, Lachhimi Narain was formally shown as a partner only in the firm Bhairon Prasad Srinivas, where he was listed together with his father Sri Niwas and his brother Pahlad; in all the other firms he was not named as a partner, yet his orders guided their activities.

It was further established that in May 1949 the firm Bhairon Prasad Srinivas received an appointment as the sole importer of cloth for distribution to wholesalers throughout the Rae Bareli district. Before this appointment, a syndicate composed of four separate Rae Bareli firms had held the exclusive import licence for cloth in the district, but that syndicate failed to take delivery of several large consignments, resulting in a stock of cloth bales valued at approximately Rs 2,25,000 left at the railway station and a daily increase in demurrage charges. The Deputy Commissioner, noticing the accumulation of undelivered cloth, intervened and secured the agreement of Bhairon Prasad Srinivas to act as the sole importer, to accept delivery of the pending cloth, and to distribute it to local wholesalers. In addition, the Deputy Commissioner required that the firm subsequently receive cloth consignments worth more than Rs 23 lakhs. Apart from cloth, the same firm together with another allied firm also functioned as importers and distributors of foodgrains and salt within the district.

Both lower courts concluded that, in order to obtain short‑term credit, the appellants devised a sophisticated scheme that enabled them to secure credit amounting to roughly Rs 80 lakhs between May 1949 and December 1949. While appellant Lachhimi Narain openly admitted that such a scheme had been employed, the remaining appellants denied any knowledge of the device. The scheme operated as follows: a partner or an employee of any of the five firms would book small consignments—typically two or three bags—containing rapeseed, poppy seed or mustard seed from various railway stations in Rae Bareli and Partapgarh, arranging for transportation to stations in West Bengal, including Calcutta. The individual concerned would then prepare forwarding notes and obtain railway receipts for the consignments. The railway authorities issued these receipts in triplicate, providing one copy to the consignor, sending another to the destination station, and retaining the third on the records of the forwarding station. The consignor’s copy of the railway receipt was subsequently taken back to Rae Bareli, where it was altered by changing the declared number of bags, the total weight, and the freight charges. These alterations were carried out by munims acting under the direct instructions of Lachhimi Narain.

In this case, the forged railway receipts were subsequently endorsed by the consignor in favour of one of the firms named Beni Gopal Mohan Lal, Tulsi Ram Sohan Lal, Sagarmal Soorajmal or Bhairo Prasad Srinivas. Each of these firms then drew large sums of money that corresponded to the enormous quantities of goods described in the falsified receipts. Using the security of those receipts, the firms drew demand drafts or hundi instruments that were made payable to various banks and to two firms of Kanpur, the payees, on a drawee identified as Murarka Brothers, Calcutta. The firm styled Murarka Brothers had been set up by the family in Calcutta approximately one year before the transactions under consideration were undertaken. After the establishment of Murarka Brothers, Lachhimi Narain opened an account in the name of that firm in the Calcutta branch of Allahabad Bank and authorised Babu Lal and Chandrika Singh—originally an employee of the firm Bhairo Prasad Srinivas who had been transferred to Calcutta—to operate the account. The banks that discounted the hundi and draft instruments were the Kanpur branches of the Bank of Bikaner, the Bank of Bihar, the Bank of Baroda and the Central Bank of India, while the firms that received the proceeds were Matadin Bhagwandas and Nand Kishore Sitaram, both situated in Kanpur. These payees realised the amounts by presenting the hundi and the accompanying railway receipts to Murarka Brothers at Calcutta; the banks obtained payment through their own Calcutta branches, and the two Kanpur firms obtained their payments through certain other banks. To enable Murarka Brothers at Calcutta to honour the hundi on presentation, Lachhimi Narain and Tulsi Ram, the acquitted accused Srinivas, and a munim of theirs named Hanuman Prasad—who was also an accused but died during the investigation—transferred money from the firms’ accounts in the Rae Bareli, Lucknow and Kanpur branches of Allahabad Bank to the Murarka Brothers account in Calcutta by means of telegraphic transfers. The delivery of the consignments dispatched by the partners or employees of the various family firms could not have been effected by using the forged railway receipts, because such a method would have immediately exposed the fraud. Consequently, delivery was effected through commission agents on indemnity bonds that alleged the railway receipts had been lost. The bonds were executed either by a partner or by an employee, were verified by the station masters and goods clerks at the booking stations, and were then endorsed in favour of the consignees. Evidence established, and not contested before this Court, that these consignees, at the specific request of Lachhimi Narain, took delivery of the small consignments, disposed of the goods and credited the sale proceeds to the account of Bhairo Prasad Srinivas or to Murarka Brothers at Calcutta. The majority of the forged railway receipts were not produced, apparently because they had been destroyed after the hundi were honoured and the receipts were received from the banks or the firms that were payees under those hundi.

It was observed that the hundis had been honoured and that the receipts which the banks or the firms had received from the payees under those hundis were the documents presented for payment. According to the prosecution, the banks and the firms had charged a discount of one or two annas per cent on the amounts they paid, whereas if the family firms had obtained the same sums by way of a loan they would have been required to pay interest at a rate of six to nine per cent. Towards the end of December 1949 the Kanpur branch of the Bank of Bikaner and the Kanpur branch of the Bank of Bihar each received a number of hundis that had been returned unhonoured together with the corresponding forged railway receipts. The Bank of Bikaner received five hundis amounting to Rs 3,52,000; of these, hundis worth Rs 1,82,000 had been negotiated directly by the bank with the firm of Bhairo Prasad Srinivas, while hundis valued at Rs 1,70,000 had been negotiated through Nand Kishore Sitaram. The Bank of Bihar, Kanpur, received six hundis valued at Rs 1,92,000, which had been negotiated through Matadin Bhagwandas. The bank adjusted its accounts by debiting Matadin Bhagwandas with the amount of those hundis. The unpaid payees subsequently made inquiries of the consignees and of the railways and discovered that the railway receipts which had been offered to them as security were forged. Those forged railway receipts were exhibited in the trial as the basis for the charge of forgery.

After the fraudulent activities of the family firms and the forgery of the receipts became known, Daya Ram, a partner in the firm of Matadin Bhagwandas, filed a complaint before the City Magistrate of Kanpur on 4 January 1950. On 18 January 1950 B. N. Kaul, the manager of the Bank of Bihar, lodged a report at the police station in Colonelganj, Kanpur. On 5 January 1950 the appellants, with the exception of Chandrika Singh, executed a mortgage deed in favour of the Bank of Bikaner for a sum of Rs 3,62,000. This amount included Rs 3,52,000 that was due on unpaid hundis together with interest and other charges. The prosecution alleged that Bhairo Prasad Srinivas had paid the firm of Matadin Bhagwandas Rs 1,00,000 and that Lachhimi Narain had executed a promissory note for the remaining balance of Rs 92,000 in their favour. The defence, however, contended that the criminal case filed by Matadin Bhagwandas had been compounded by the payment of the settled amount between the parties, and that consequently the appellants had been acquitted of the charge contained in the complaint of Matadin Bhagwandas. The appellant Lachhimi Narain accepted full responsibility. He admitted that he had obtained credit of Rs 80 lakhs on the security of railway receipts in which the quantities of goods consigned had been exaggerated, and that the inflation of those quantities had been carried out by his munims, Raj Bahadur and Hanuman Prasad, both of whom were now deceased. According to his statement, apart from the involvement of these two munims, the entire scheme had been concealed from everyone else. He further maintained that he had committed no offence because he had intended to, and indeed had, repaid the entire amount that had been raised.

In the trial, the other appellants acknowledged that each of them had participated in some way in the transactions that were the subject of the case, but they denied that they were members of any conspiracy and asserted that whatever actions they performed were done solely under the direction of Lachhimi Narain. The first argument raised on behalf of the appellants was presented by counsel Mr. A. N. Mulla, who contended that the case lacked the mandatory sanction required by section 196A of the Code of Criminal Procedure, and therefore the entire proceeding should be declared void from the outset. He pointed out that a document identified as Exhibit P 1560, a letter from Mr. Dave, Under‑Secretary of the Home Department of Uttar Pradesh, addressed to the District Magistrate of Kanpur, indicated that the Governor had been “pleased to grant sanction” for the initiation of proceedings against the persons named in that order. However, Mr. Mulla argued that this correspondence could not be treated as a valid sanction or its equivalent because, in his view, a proper sanction must be a written order bearing the signature of the sanctioning authority, and no individual may act as a substitute for that authority; furthermore, any oral consent, even if it existed, cannot be considered legally valid. He further maintained that the document on record did not, on its face, demonstrate that the Governor had examined the factual matrix of the case before granting sanction. Mr. Mulla’s narrative suggested that, had the true circumstances—such as the fact that the firm of Bhairo Prasad Srinivas was never appointed as sole importer of cloth for Rae Bareli district, that the firm was compelled by the Deputy Commissioner to undertake the work in a critical situation, that large credits were indeed obtained through fraudulent representations and forgeries but without any intention by Lachhimi Narain to cause loss, that all parties had been fully paid, and that the prosecution originated from the railway authorities rather than any aggrieved individual—been presented to the Governor, then no sanction would have been issued because the prosecution would have served no useful purpose. The Court did not permit Mr. Mulla to pursue this point further, observing that the issue was not a pure question of law but required an examination of factual evidence. The objection did not allege the total absence of a sanction; rather, it challenged the adequacy of proof that a sanction had been properly issued by the competent authority after due consideration of all relevant facts in accordance with Article 166 of the Constitution. The Court noted that, had this objection been raised before the trial court, the prosecution would have been in a position to adduce evidence showing that the Governor had indeed received all material facts, had considered them, and had expressed the sanction in the form prescribed for a gubernatorial order.

The Court observed that the Governor had examined the relevant material, considered it, and then granted sanction in the manner prescribed for an act of the Governor. Counsel for the appellant, Mr Mulla, argued that section 196A of the Code of Criminal Procedure functions as a limitation on the criminal court’s power to investigate a charge of conspiracy, and that the court lacks jurisdiction to examine that charge unless the limitation is removed. He maintained that the prosecution must demonstrate that the limitation was removed because the appropriate authority had given its sanction in accordance with the law, and that the defence was not required to raise an objection on the ground of an absent or improper sanction. The Court noted that the argument would have carried more weight if Exhibit P‑1560 had not been placed on the record. Although the document was neither the original order issued by the Governor nor a certified copy, it stated that the Governor had consented to sanction the prosecution of the appellants for certain offences as required by section 196A of the Code of Criminal Procedure. The document originated as an official communication from the Home Department addressed to the District Magistrate of Kanpur. From this, the Court inferred a presumption that the sanction referred to in the document had indeed been granted. Moreover, because the communication was an official one, the Court presumed that the official act mentioned therein had been performed regularly. In the Court’s view, the document prima facie satisfied the requirements of section 196A of the Code of Criminal Procedure; consequently, the appellants could not now claim a lack of evidence of a valid sanction. The Court therefore rejected the contention raised by counsel for the appellant.

The second point raised by counsel for the appellant concerned the allegation that the charge as framed combined several offences and therefore resulted in a miscarriage of justice. The Court observed that this issue had not been raised before the lower courts and found no merit in the submission. The objection pertained to the first charge, which read: “That between the months of May 1949 and December 1949 both months inclusive, in the district of Rae Bareli, Pratabgarh and Kanpur, Sri Niwas, Lachhimi Narain, Tulsi Ram, Beni Gopal, Babulal, Moti Lal, Brij Lal Coenka, Chajju Lal and Chandrika Singh agreed to do amongst themselves and the deceased Hanuman Prasad and Purshottom Dass or caused to be done illegal acts viz. the act of cheating the (1) Bank of Bikaner, Kanpur, (2) Bank of Baroda, Kanpur (3) Bank of Bihar, Kanpur, (4) Central Bank of India, Kanpur, (5) M/s. Matadin Bhagwan Dass, Kanpur and (6) M/s. Nand Kishore Sitaram of Kanpur by dishonestly inducing them to part with huge sums of money on the basis of hundis drawn on Murarka Bros., Calcutta covered with securities knowing such R/Rs. to be forged and cheated the aforesaid Banks and Bankers by using forged documents as genuine knowing them to be forged in pursuance of a common agreement amongst them all and thereby committed an offence punishable under section 120B read with sections 467 / 468 / 471 and 420 of the Indian Penal Code and within the cognizance of the court of Sessions.” The Court concluded that there was no amalgamation of separate charges; the charge was a single charge of conspiracy, with references to other sections of the Penal Code merely indicating the objects of the conspiracy, namely cheating and forgery. Consequently, the Court found no justification for the claim that the charge had been improperly jumbled.

In this case, the charge specified that Matadin Bhagwan Dass of Kanpur and M/s Nand Kishore Sitaram of Kanpur were alleged to have, together with the other accused, dishonestly induced the banks and merchants to part with large sums of money by presenting hundis drawn on Murarka Bros., Calcutta that were covered with securities, while being fully aware that those receipts and securities were forged. The charge further alleged that the accused used the forged documents as if they were genuine, acting on a common agreement to defraud the banks and bankers, and that such conduct constituted an offence punishable under section 120B in conjunction with sections 467, 468, 471 and 420 of the Indian Penal Code, which fell within the jurisdiction of the Sessions Court. The Court observed that the objection raised by counsel regarding “jumbling up” of offences was unfounded, because the charge embodied a single conspiracy charge. Reference to the various sections merely clarified that the purpose of the conspiracy was to forge railway receipts, which were valuable securities, to commit forgery and to employ the forged documents as genuine. The Court noted that the appellants had not expressed confusion or bewilderment at the charge at any stage, indicating that they understood its content. Consequently, the Court overruled the objection.

The Court then turned to the question of whether Lachhimi Narain, having undeniably committed the forgeries, was also guilty of cheating under section 420 of the Indian Penal Code, as held by the Additional Sessions Judge and the High Court, or whether the appropriate provision was section 417, as argued before the Court. Counsel correctly pointed out that a conviction under section 420 requires proof not only of cheating but also of dishonest inducement that caused the victim to deliver property or something of value. The Court explained that an act is dishonest when it is performed with the intention of causing wrongful gain to one person or wrongful loss to another. Wrongful loss means loss of property to which the victim is lawfully entitled, obtained by unlawful means; wrongful gain means acquisition by a person of property to which he is not legally entitled, also by unlawful means. Counsel contended that the banks and the two firms that discounted the hundis suffered no wrongful loss because they received only modest amounts for discounting the hundi‑drawn funds. The Court, however, rejected this contention, holding that the firms did suffer a wrongful loss, as they received far less than they would have obtained had the true facts been disclosed, thereby satisfying the element of dishonest inducement required for section 420.

It was observed that, had the banks and firms been aware of the true facts, they would not have discounted the hundis, although they might have extended loans and charged interest ranging from six to nine percent on the amounts advanced. The Court held that the fraudulent misrepresentation made to the banks and the firms caused them to lose the amount they otherwise could have obtained, thereby constituting a wrongful loss. Numerous documents were placed on record, and those documents made clear that the entities which discounted the disputed hundis were entitled, in addition to the discount charges, to levy interest of six percent or more if payment was not made within twenty‑four hours of presentation. Reference was made to exhibits 1440 to 1454, which are the debit vouchers of the Bank of Bikaner, and to exhibits 1330 to 1345, which are the debit vouchers of the Bank of Bihar. Those exhibits demonstrated that the first bank charged, debited and realised interest at six percent, while the second bank charged interest at nine percent, for the entire period during which the hundis remained unpaid after presentation. Although these documents are illustrative, they indicate that the banks were not deprived of interest income.

Counsel for the respondents pointed out that the managers and officers of the banks and the firms had been examined and had not alleged any loss of interest in these transactions. Counsel for the State, Mr Mathur, argued that, in practice, a hundi could not be presented for payment in less than ten days. He relied on exhibits P‑1106 and P‑1055, which are records of bills purchased by the Central Bank of India, Kanpur, and drew attention to the penultimate column headed “date enquire on,” contending that this column recorded the date of presentation. As an illustration, he cited the first entry showing a discount date of 10 June and a date of 20 June in the penultimate column, inferring that the hundi was presented on 20 June. Accordingly, for the ten‑day period and the subsequent twenty‑four hours, the bank would have received only discount charges and no interest. The hundi was realised on 25 June, so, according to his calculation, the bank would have earned interest for only four days.

The Court noted, however, that the heading of the penultimate column had not been correctly reproduced in the paper book. Upon examination of the original, the heading was found to be “Date enquired.” Considering this correction together with the entry in the final column, which is headed “non‑payment advice sent,” the Court concluded that the information in the penultimate column does not represent the date of presentation. Moreover, the documents contain no column indicating the date of presentation. Consequently, those exhibits did not assist the State’s argument. The Court further observed that it was the bank’s responsibility to ensure timely presentation of hundis, and any delay on the part of the bank would entail its own consequences. The Court also remarked that if the bank were unable to earn interest, or earned only minimal interest, for a period of ten days, this situation would have applied to all transactions, not solely those supported by forged railway receipts but also those backed by genuine receipts. Thus, the Court found no merit in Mr Mathur’s contention.

The Court observed that the entry appearing in the penultimate column of the examined documents was not the date of presentation of the hundi but rather some other date, and that neither document contained a column indicating the actual presentation date; consequently, the documents supplied by the State could not assist the State's case. The Court further noted that it was the Bank’s responsibility to ensure that hundis were presented without delay, and that any delay caused by the Bank itself should have been borne by the Bank. Moreover, the Court pointed out that if the Bank had been unable to earn interest or had earned only a minimal amount of interest on these transactions for a period of ten days, such a circumstance would have applied to all the transactions, not solely to those supported by forged railway receipts but also to those supported by genuine railway receipts, thereby rendering Mr Mathur’s contention without substance. The Court then turned to Mr Mathur’s argument that the banks were exposed to the risk of loss because the railway receipts underlying the bills were forged, and that the resulting wrongful loss should be deemed caused by the actions of the firms; while acknowledging that the argument possessed considerable force, the Court refrained from giving a final opinion, stating its view that the appellant firms had undeniably obtained an unlawful gain. Subsequently, the Court considered the submissions of counsel for the respondent, who contended that the firms’ ability to obtain temporary credit on the basis of their hundis did not constitute wrongful gain, because the firms possessed good market credit and offered suitable equivalents in the form of hundis. That counsel also emphasized that out of approximately 180 hundis drawn by the firms, only a very few were dishonoured, and that such dishonour occurred solely in December 1949. It was further argued that it had not been demonstrated that Murarka Brothers, on whose name the hundis were drawn, lacked the capacity to meet the hundis throughout the nine‑month period during which the transactions were effected. Of the hundis amounting to Rs 80 lakhs, Rs 74 lakhs were honoured, and the remaining hundis would likely have been honoured but for a market slump and for the fact that cotton bales worth Rs 12 lakhs belonging to the appellants were pledged in the Central Bank of India’s godowns as security for Rs 9 lakhs; had those bales been sold in the ordinary course, the December crisis that led to the dishonour of certain hundis payable to the Bank of Bikaner and Matadin Bhagwandas would not have arisen. In light of these facts, the learned counsel sought to draw the inference that the credit obtained by the firms was based not on forged railway receipts but on the security provided by the hundis themselves.

The Court observed that the security for the transactions consisted of the hundis themselves, which were drawn by parties that enjoyed credit in the market and were drawn on a party whose possession of adequate funds to honor the hundis throughout the relevant period had not been demonstrated. The Court expressed that it was not persuaded by the argument presented by the learned counsel. The Manager of the Kanpur branch of the Bank of Bihar, identified as B. N. Kaul (PW 32), testified that he purchased the hundis because the accompanying railway receipts indicated that the consignments were large and that their value corresponded to the amount for which the bills had been drawn. He further stated that he would not have purchased such hundis if the consignments had involved very small quantities, thereby implying that a mismatch between the consignment value and the amount to be advanced would have deterred him from discounting the hundis. In addition to Kaul’s testimony, other evidence was introduced to demonstrate that the actual basis for discounting the bills was not solely the creditworthiness of the appellant or the security provided by the bills themselves. This evidence corresponded with the ordinary banking practice of discounting hundis only when they were supported by railway receipts of consignments dispatched by the drawer to external parties. While acknowledging that bills or hundis are themselves securities and that a bank may, in principle, discount hundis taking into account the drawer’s credit, the Court held that when the hundis are backed by railway receipts it would be unreasonable to assert that the railway receipts were not intended by the parties to serve as additional security for the discounting of the bills. Where a consignor draws a hundi for the price of the consignment in favour of a bank or firm and pledges the railway receipt obtained for that consignment as support, the consignor effectively pledges the consignment to the bank discounting the hundi; consequently, the railway receipt in such a transaction must be viewed as a security for that transaction. If that security proves to be worthless or essentially worthless because the actual value of the consignment is only a fraction of what was represented, the discounting of the hundi by the drawer must be considered unlawful. The Court therefore concluded that the firms involved obtained credit by unlawful means and that the gains they derived were consequently unlawful. Counsel for the appellant, Mr. Mulla, argued that an act cannot be classified as dishonest merely by showing that one person deceived another and obtained a wrongful gain; it must also be shown that the deception caused a wrongful loss to the other party. To support this contention, he relied upon the decision in Sanjiv Ratanappa Ronad v. Emperor [(1932) I.L.R. LVI Bom. 488], a case in which

In this case the Court recorded that the first accused, who held the rank of police Sub‑Inspector, had prepared a false document by altering an entry that he himself had made in his official diary, the purpose of the alteration being to create a piece of evidence. The prosecution argued before the Court that, for an act to constitute the offence of forgery under sections 463 and 464 of the Indian Penal Code, the document must be made either dishonestly or fraudulently, and that those terms must be interpreted according to the definitions supplied in the Penal Code. The argument further asserted that it was insufficient merely to demonstrate that the deception was intended to secure an advantage for the deceiver. Addressing this contention, Justice Baker, one of the judges of the Bench, observed at page 493 that the meaning of “dishonestly” in section 24 of the Penal Code is confined to situations involving wrongful gain or wrongful loss. He noted that, although there were divergent authorities on the precise meaning of “fraudulently,” the prevailing view of this Court required the presence of some advantage on one side together with a corresponding loss on the other side. The Court then recited the definition of forgery contained in section 463, which states that anyone who makes a false document or any part of a document with the intention of causing damage or injury to the public or to any person, or to support a claim or title, or to cause any person to part with property, or to enter into an express or implied contract, or with the intention of committing fraud or of enabling fraud, commits the offence of forgery. Accordingly, the intention to cause damage or injury to the public or to any individual constituted an essential element that had to be proved before a fabricated document could be characterised as a false document or as forgery. While the Court found the observation of Justice Baker understandable in the context of section 463, it emphasized that the matter before it primarily concerned the offence under section 420 of the Penal Code, which requires dishonest inducement as an essential ingredient. Justice Baker correctly pointed out that dishonesty, by its very nature, entails either a wrongful gain or a wrongful loss, and therefore could not be applied to a situation where no monetary question arose. Nevertheless, the Court held that an offence under section 420 necessarily involves a pecuniary element. The first part of section 464 provides that a person who dishonestly or fraudulently makes, signs, or otherwise executes a document with a particular intention is said to have made a false document, thereby covering both dishonest and fraudulent acts. In cases where no monetary question is present, the element of dishonesty need not be established; it suffices to demonstrate that the act was fraudulent, and, as the learned Judge observed, when the act is fraudulent the prosecution must establish an intention to cause injury to the person defrauded. However, where the allegation is that a person has dishonestly induced another to part with property, a different analysis is required.

The Court explained that the question to be considered was whether the accused had caused a wrongful loss to the person who parted with property or had made a wrongful gain to himself, and that either of these two aspects satisfied the definition of dishonesty; the law did not require proof of both. Accordingly, the decision cited by learned counsel was held to be distinguishable. Learned counsel then referred to the dissenting judgment of Subrahmania Ayyar, J., in Kotamraju Venkatarayudu v. Emperor [(1905) I.L.R. 28 Mad. 90], which stated that for offences under sections 465 and 461 it must be shown that the deception involved some loss or risk of loss to the individual or to the public, and that it was insufficient to demonstrate that the deception was intended merely to secure advantage to the deceived. The Court found that this decision, together with other authorities mentioned by counsel, was likewise distinguishable for the same reason that distinguished Sanjiv Ratanappa Ronad’s case [(1932) I.L.R. LVI Bom. 488] from the present matter. Consequently, the Court held that the offence of cheating had been established. The High Court had previously found that dishonesty was established against Lachhimi Narain because he had drawn and negotiated various hundis. Learned counsel argued that the prosecution had not proved that the other appellants had drawn or discounted any hundi; however, the Court observed that this contention was not sustainable. The learned Additional Sessions Judge had found that the appellant Tulsi Ram had sold to the Central Bank of India certain hundis supported by forged railway receipts. The judge had also found that the appellant Beni Gopal had admittedly booked a consignment of two bags of rapeseed from Rae Bareli to Raniganj, drawn a hundi of Rs 40,000 on the basis of a tampered railway receipt, and subsequently obtained the stamped indemnity bond for that consignment, which was sent to the firm Chiranji Lal Ram Niwas for delivery. In a second transaction, Beni Gopal’s firm booked two bags of poppy seeds, drew a hundi for Rs 38,000 on Murarka Brothers, and sold that hundi to the Central Bank of India; this hundi was also supported by a tampered railway receipt. On the basis of these findings, the learned Additional Sessions Judge convicted both Tulsi Ram and Beni Gopal of offences under sections 417 and 420 of the Indian Penal Code. The judge further held that the appellants Babu Lal and Moti Lal were likewise guilty of offences under sections 417 and 420. The High Court had set aside the conviction and sentence of Moti Lal. The Court opined that the prosecution had failed to establish that Babu Lal had either drawn or negotiated hundis supported by forged railway receipts; the material on which the learned Additional Sessions Judge and the High Court relied did not address those matters. Consequently, whatever other role Babu Lal might have played did not bring home to him the charge under section 420, and his conviction and sentence for cheating were set aside. The High Court had affirmed the conviction of Tulsi Ram and Beni Gopal for offences under sections 417 and 420, and the Court noted that there was evidence showing that both individuals had participated either in drawing or negotiating hundis supported by forged railway receipts. The evidence relied upon by the learned Additional Sessions Judge had not been challenged before the Court, and therefore the Court confirmed the convictions of the appellants Tulsi Ram and Beni Gopal for the offence of cheating.

In reviewing the material on which the learned Additional Sessions Judge, and apparently also the High Court, based their findings, the Court observed that it does not address the matters concerning Babu Lal at all. Although Babu Lal may have participated in certain aspects of the transactions, his conduct does not satisfy the elements of the offence punishable under section 420 of the Indian Penal Code. Consequently, the Court held that his conviction and sentence for cheating were unsupported by the evidence and therefore set aside the conviction and the accompanying sentence.

The Court then turned to the convictions of Tulsi Ram and Beni Gopal, which the High Court had affirmed for offences under sections 417 and 420 of the Indian Penal Code. The record showed that both individuals were involved either in drawing or negotiating hundi instruments that were backed by forged railway receipts. The evidence cited by the learned Additional Sessions Judge was not contested before this Court, and on that basis the Court confirmed the convictions of Tulsi Ram and Beni Gopal for the offence of cheating. However, the Court clarified that once the acts were determined to fall within section 420, it was inappropriate for the High Court to phrase the conviction as being under “section 417/420,” because the offence cannot be both simultaneously; it must be characterised under the correct provision. The only remaining issue was the allegation of conspiracy. Counsel for the appellants fairly admitted that, irrespective of the findings against the other accused, Lachhimi Narain could not escape conviction under section 120B because two other individuals had been associated with him; those persons would have been co‑accused had they not died before trial. Regarding the remaining appellants, counsel argued that there was no evidence of a conspiracy. While counsel accepted the correctness of the findings of the Additional Sessions Judge and the High Court on certain acts committed by the appellants, counsel contended that those acts did not demonstrate participation in a conspiracy, asserting that the other appellants acted under the direction of Lachhimi Narain and were unaware of his systematic deception. The Court rejected this argument. It observed that Tulsi Ram and Beni Gopal were guilty of cheating, and when this fact was combined with the additional evidence noted in the High Court’s concluding judgment and the surrounding circumstances, it was sufficient to conclude that they possessed knowledge of the conspiracy. As for Babu Lal, the Court listed the acts proven against him: (1) signing four forwarding notes; (2) presenting a cheque at the Bank of Bikaner, Kanpur; (3) cashing a cheque; (4) paying off certain hundi instruments accompanied by forged railway receipts; and (5) signing thirty‑two indemnity bonds.

The record established that Babu Lal had performed five distinct acts. First, he signed four forwarding notes that related to consignments whose security depended on hundis that had been discounted by certain banks. Second, he presented a cheque to the Bank of Bikaner in Kanpur, and third, he cashed another cheque, thereby operating on the bank account into which the proceeds of certain hundis, supported by forged railway receipts, had been credited. Fourth, he participated in the payment of hundis that were accompanied by forged railway receipts. Fifth, he signed or endorsed thirty‑two indemnity bonds, on the basis of which the delivery of a large number of consignments—consignments whose railway receipts had been forged—was ultimately taken. The combination of these acts, taken together with the payments of hundis backed by forged railway receipts, was considered sufficient to demonstrate Babu Lal’s connection with the conspiracy. In addition, his signing or endorsing of the thirty‑two indemnity bonds showed that he facilitated the delivery of the forged‑receipt consignments, reinforcing the conclusion that he was a participant in the unlawful scheme.

Similarly, the evidence against Moti Lal comprised several acts. He signed twenty‑three forwarding notes that concerned consignments whose railway receipts had been tampered with, yet those receipts served as security for hundis drawn by the firm. He also signed or endorsed fifty‑two indemnity bonds, on the strength of which delivery was taken of consignments whose railway receipts had been tampered with and were nevertheless offered as security to banks or firms that discounted hundis for the value of those consignments. These circumstances were deemed adequate to support the finding of the Additional Sessions Judge, a finding that the High Court had affirmed. The court also considered that the four appellants were closely related to Lachhimi Narain, that their family business was joint, and that they therefore shared a common interest. Given these familial and business ties, it was concluded that it was inconceivable that they could have been unaware of Lachhimi Narain’s actions, and their convictions under section 120B of the Indian Penal Code were upheld.

The situation concerning Chandrika Singh was assessed on a different basis. The record showed that he had originally been an employee of the firm Bhairo Prasad Srinivas and had been transferred to Calcutta a year before the transactions in question began, when the firm of Murarka Brothers was established. In Calcutta, he was placed in charge of paying hundis presented to Murarka Brothers. The High Court had found him to be a party to the conspiracy based on several facts: he signed a letter of authority dated 22 July 1948, through which Lachhimi Narain authorized him to operate the Murarka Brothers account in the Calcutta branch of the Allahabad Bank; he paid Rs 25,000 to the Hindustan Commercial Bank and received the hundis and railway receipts concerned; he made payments to the Bank of Bihar at Calcutta on behalf of Murarka Brothers and obtained the relevant hundis and railway receipts, as shown by the vouchers; and he made similar payments to the Calcutta branches of the Central Bank of India, the Punjab National Bank and the Allahabad Bank, with the respective receipts and vouchers supporting those transactions.

The Court noted that the record showed Chandrika Singh had, as admitted by him, made payments to the Calcutta branches of the Central Bank of India, the Punjab National Bank and the Allahabad Bank. Regarding the Punjab National Bank, the receipt marked as exhibit P‑1375 proved the payment, and for the Allahabad Bank, the vouchers numbered P‑1440 to P‑1446 and P‑1448 to P‑1457 were also admitted by him. The Court then examined the first ground relied upon by the High Court, namely that Chandrika Singh had appended his specimen signature to a letter of authority signed by Lachhimi Narain, which authorized him to operate the Murarka Brothers’ account in the Calcutta branch of the Allahabad Bank. The Court observed that this signature was affixed long before any alleged conspiracy and therefore could not be given any relevance to the question of his participation in the conspiracy. The remaining grounds, according to the Court, merely demonstrated that Chandrika Singh had performed the payments that were his official duty. While it was possible that forged railway receipts might have been submitted along with those hundi payments, the Court held that from this single circumstance it could not be legitimately inferred that he had any active role in the conspiracy. At most, the Court said, his suspicion might have been aroused, but nothing more could be concluded. Consequently, the Court found that none of the reasons advanced by the High Court supported the conclusion that Chandrika Singh was a party to the conspiracy. The Court’s attention was then drawn to an additional reason given by the learned Additional Sessions Judge. That judge had recorded that Chandrika Singh was asked to explain what he did with the forged railway receipts and why he had not taken delivery of them at Calcutta when they were endorsed in favour of Murarka Brothers. Chandrika Singh had replied that he gave the Calcutta railway receipts to commission agents in Calcutta and sent other railway receipts to Raj Bahadur Singh, a munim of Bhairo Prasad Srinivas. The Additional Sessions Judge had observed that, according to the evidence, the deliveries in all such cases were taken by merchants in Calcutta and other West Bengal stations on indemnity bonds, that no witness had been put to on this point, and therefore concluded that Chandrika Singh’s explanation was altogether false. The judge further inferred that Chandrika Singh must have destroyed the railway receipts because he knew they were forged, reasoning that if he had presented them at a railway station for delivery, the station master would have compared the number of bags in the corresponding invoices and the fraud would have been exposed. From this, the judge said, there was a common conspiratorial mindset aimed at preserving the secrecy of the crime. The Court found that this line of reasoning was faulty. It held that the judge’s conclusion rested entirely on the assumption that the railway receipts endorsed in favour of Murarka Brothers were forged or tampered with, an assumption that was not established by the evidence.

Evidence demonstrated that, in fact, the firms belonging to the appellants habitually dispatched authentic consignments of food grains and similar items to destinations in West Bengal. The Court noted that the possibility that railway receipts corresponding to those genuine consignments might have been endorsed in favour of the Murarka Brothers had not been eliminated. The explanation offered by Chandrika Singh, that he handed the railway receipts to the Calcutta commission agents, could reasonably pertain to the receipts associated with the genuine consignments. Consequently, the risk foreseen by the learned Additional Sessions Judge, concerning Chandrika Singh delivering such receipts to commission agents in order to obtain delivery, did not actually arise. Moreover, bearing in mind the overall scheme employed by the appellants’ firms, it would not be reasonable to presume that consignments whose railway receipts had been tampered with were nonetheless endorsed in favour of the Murarka Brothers. Overall, the Court found Chandrika Singh’s explanation to be plausible and concluded that he was the least deserving of the benefit of doubt among the accused. In view of these considerations, the Court set aside the conviction under section 120‑B of the Indian Penal Code and also vacated the sentences that had been imposed upon him.

The Court considered that the offences had been committed thirteen years earlier and that the appeal had remained pending in the High Court for about four years. It also noted that the High Court required nearly three years to prepare the paper book, and therefore, despite the gravity of Lachhimi Narain’s crimes, the sentence should be reduced. Lachhimi Narain was fifty‑two years old when the alleged transactions began, and he is now sixty‑five years of age. If the Court were to affirm the original seven‑year imprisonment, he would remain incarcerated until the age of seventy‑two, at which point his health is likely to be deteriorating. The Court observed that no actual loss had been suffered by any party as a result of the fraud, whereas Lachhimi Narain and members of his family have endured considerable monetary hardship and damage to their reputation over the years. Accordingly, the Court imposed a term of three years’ imprisonment on him. It also raised the fine imposed by the learned Additional Sessions Judge from five thousand rupees to ten thousand rupees. If the fine is not paid, the default penalty shall be one year of rigorous imprisonment. The Court accordingly modified the sentences that had previously been imposed on him. The Court clarified that the modified punishment applies to all the offences for which Lachhimi Narain has been convicted and does not constitute separate sentences for each individual charge. Concerning the remaining four appellants, the Court held that incarcerating them at this stage would serve no useful purpose, especially since each had previously served only a few weeks in custody before being released on bail.

The court observed that ordering the remaining appellants to resume imprisonment at this stage would not be appropriate, and therefore it would be just and fair to alter their punishments. Consequently, the substantive imprisonment originally imposed on each of the four individuals was reduced to correspond exactly with the period of detention they had already undergone. In lieu of any further custodial term, each appellant was required to pay a monetary penalty of three thousand rupees. If the fine could not be paid, the court directed that the appellant undergo rigorous imprisonment for a period of six months. The decision to modify the sentences was based on three specific circumstances that the court had taken into consideration. The first circumstance had already been mentioned in the preceding discussion, namely that continued incarceration would not serve any useful purpose at this point in time. The second circumstance concerned the extreme youth of the appellants at the time when the alleged transactions were allegedly carried out. The third circumstance related to the fact that, although the appellants were aware that the conduct was improper and they hoped to obtain benefit from it, they acted under the dominating influence of Lachhimi Narain. Lachhimi Narain was the head of the family and therefore exercised a dominating role over the younger participants. Having weighed these factors, the court accordingly modified the sentences of each appellant in accordance with the considerations outlined above. Finally, the court concluded that the appeals were partially allowed and ordered that the modified punishments be implemented forthwith.