DISHONOR OF AGREEMENT IS NOT CHEATING

CASE NAME: Manish v state of Maharashtra

CASE NUMBER: SLP (Criminal) No. 10931 OF 2022

DATE: 02 April, 2025

QUOROM: J. PAMIDIGHANTAM SRI NARASIMH, J. JOYMALYA BAGCHI.

 

FACTS OF THE CASE

The accused/applicant has approached the honourable supreme court through an appeal from a Special Leave Petition No. 10931 of 2022 filed under article 136 of the Indian constitution. The relevant facts which led to the current appeal can be summarized in a two-fold manner consisting of subject matter of dispute and the legal history of the case.

• Subject matter of dispute: The dispute revolves around an informal arrangement between the appellant and the respondent no. 2 which involved supply of coal with 15-day credit period to pay for the supplied coal. The arrangement was entered into based on the representation of the appellant who claimed to be a trustworthy, creditworthy and reputed business person. However, the appellant failed to pay on multiple occasions, resulting in the debt of Rs.76, 82,833/- which remained unpaid until the parties decided to engage in private negotiation. The result of the negotiation is the notarized agreement that was entered between the applicant and respondent no.2 on 23rd July, 2020 which demanded payment of the debt though 5 installments within the period of 1st August, 2020 to 31st January, 2021. The agreement also specifically stated that the respondent no. 2 supply of coal was made solely based on the representation made by the appellant and also allowed the respondent no.2 to pursue civil and criminal action upon the dishonor of the agreement. The agreement was dishonored by the appellant as he merely paid one installment for Rs.5,00,000/- and the rest were not paid. This forced the respondent no. 2 to initiate civil and criminal proceedings against the appellant.

• Legal history: A writ petition was filed before the Hon’ble Bombay High court seeking quashing of the F.I.R which charged the applicant for the offence of cheating under section 420 of Indian Penal Code, 1860. The hon’ble high court relied heavily on the representation made by the applicant to the respondent no.2 to conclude that the applicant made the representation with the intention to deceive the respondent no.2 and thereby, a prima facie case of cheating is established. For the aforementioned reason, the Hon’ble High Court found the applicant to no have sufficient cause to quash the F.I.R and the same was dismissed. The applicant preferred a special leave petition under article 136 and the same is being and dealt and disposed of in the current case.

ISSUES

• Whether the Hon’ble High curt of Bombay erred in its judgment?

• Whether dishonor of notarized agreement and the representation is sufficient to constitute offence under section 420 IPC,1860?

LEGAL PROVISIONS

Section 415 and 420 of Indian penal code, 1860.

 

APELLANT CONTENTIONS

1. There is neither sufficient material on record to show that the appellant deliberately wanted to deceive the respondent no.2 from the beginning of the arrangement nor is there evidence to show that the appellant never intended to pay back the debt he owes the respondent no.2.
2. The appellant never had the intention to deceive the respondent no.2 when the notarized agreement was entered and the appellant was suffering substantial losses due to which he could not make timely payments and the same cannot be given a cloak of criminality as the ingredients of section 415 of IPC,1860 is satisfied.
3. The case State Of Haryana V Bhajan Lal, the verbatim of the judgement being,

 

(3) Where the uncontroverted allegations made in the FIR or complaint and the evidence collected in support of the same do not disclose the commission of any offence and make out a case against the accused.  

 

      The case clearly allows the quashing of an F.I.R where there is lack of evidence that can conclusively prove the happening of the offence.

 

RESPONDENT CONTENTITIONS

• The appellant deliberately deceived the respondent no.2 by stating that he is a creditworthy, reputed and trustworthy person when in reality he never intended to pay for the supply. He has deliberately deceived the respondent no.2 into a false sense of security. 

• The illustration provided in section 415 IPC clearly shows that the merely deceiving a person utilizing false representations is sufficient to constitute the offence.

• The case of Khoda Baksha V Bakeya Mundari clearly laid out that false representations or suppression of material facts made to get money or supply of goods is sufficient to constitute the offence as laid down in section 415 IPC. In the current case, he suppressed the facts about his financial position.

 

ANALYSIS

The Hon’ble Supreme Court analysed the facts of the case and laid down two fold reasons to quash the F.I.R

1. 1. Firstly, the appellant never has the intention to deceive the respondent no.2 while entering into the notarized agreement and the same can be seen through the Bonafide effort to pay back the debt.

• Secondly, there is no sufficient evidence to portray that the appellant has deceived or had the intention to deceive the responodent no. 2 and the case of the Khoda Baksha V Bakeya Mundari cannot be relied upon as there is no evidence to show that the appellant suppressed facts about his financial straits.

Therefore, the Hon’ble Supreme Court allowed the quashing of the F.I.R as it failed to establish a prima facie case under section 415 IPC, 1860

 

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WRITTEN BY LALITHA SASANKA G