Supreme Court Quashes Cheating Charges Against Educational Society: Vipin Sahni vs. CBI (2024)

Introduction

Date of the Judgment: April 8, 2024

Citation: 2024 INSC 284

Judges: Aniruddha Bose, J., Sanjay Kumar, J.

Can an educational society be held liable for cheating if it fails to disclose a mortgage in some applications, when the mortgage was disclosed in an earlier application, and the approving authority does not claim to be deceived? The Supreme Court of India recently addressed this question, overturning a High Court decision and quashing charges against an educational society. The core issue revolved around whether the society had intentionally deceived the All India Council for Technical Education (AICTE) to obtain approvals for its educational institutions. The judgment was delivered by a two-judge bench comprising Justice Aniruddha Bose and Justice Sanjay Kumar, with Justice Sanjay Kumar authoring the opinion.

Case Background

The appellants, Vipin Sahni and his wife, established the Sunshine Educational and Development Society in 2004, with the aim of promoting technical education. In 2006, the Society leased 4.90 acres of land in Greater NOIDA to set up educational institutions. The Society applied to the AICTE for approval to establish the ‘Business School of Delhi’ in 2007, disclosing a loan of ₹5.75 Crore and that the land was mortgaged. Subsequently, the Society applied for approvals for two more institutions: ‘Business School for Women’ and ‘International Business School of Delhi’ in 2007. However, these later applications did not disclose the mortgage on the land. An anonymous complaint led to a CBI investigation, alleging that the Society had obtained approvals through deceitful means. The CBI filed a charge sheet against the appellants under Sections 420 (cheating) and 120B (criminal conspiracy) of the Indian Penal Code (IPC).

Timeline:

Course of Proceedings

Initially, the appellants approached the High Court at Allahabad under Section 482 of the Code of Criminal Procedure (Cr.P.C), seeking to quash the criminal proceedings. The High Court accepted their plea and quashed the proceedings. However, the Supreme Court, in Criminal Appeal No. 239 of 2015, set aside the High Court’s order, clarifying that the Trial Court could examine the merits of the case during the framing of charges. Subsequently, the appellants filed a discharge application before the Special Judicial Magistrate, CBI Court, Ghaziabad, which was initially rejected. On revision, the Additional Sessions Judge remanded the matter. The Magistrate then discharged the appellants under Section 239 Cr.P.C. The CBI challenged this discharge order before the High Court under Section 482 Cr.P.C., which set aside the discharge order, leading to the current appeal before the Supreme Court.

Legal Framework

The case primarily involves Sections 415, 420, 120A, and 120B of the Indian Penal Code (IPC).

✓ Section 415 IPC defines ‘Cheating’ as:

‘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”. Explanation.- A dishonest concealment of facts is a deception within the meaning of this section.’

✓ Section 420 IPC defines ‘Cheating and dishonestly inducing delivery of property’ as:

‘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.’

✓ Section 120A IPC defines ‘Criminal Conspiracy’ as:

‘When two or more persons agree to do, or cause to be done, (1) an illegal act, or (2) an act which is not illegal by illegal means, such an agreement is designated a criminal conspiracy: Provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof.’

✓ Section 120B IPC defines ‘Punishment of criminal conspiracy’ as:

‘(1) Whoever is a party to a criminal conspiracy to commit an offence punishable with death, [imprisonment for life] or rigorous imprisonment for a term of two years or upwards, shall, where no express provision is made in this Code for the punishment of such a conspiracy, be punished in the same manner as if he had abetted such offence. (2) Whoever is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence punishable as aforesaid shall be punished with imprisonment of either description for a term not exceeding six months, or with fine or with both.]’

The core of the case revolves around whether the appellants’ actions met the criteria for ‘cheating’ under Section 415 IPC and whether they conspired to commit this offense under Section 120B IPC. The court also considered the procedural aspects of the case, including the maintainability of the CBI’s petition under Section 482 Cr.P.C.

Arguments

Arguments on behalf of the Appellants:

• The appellants argued that the first application for the ‘Business School of Delhi’ explicitly disclosed the mortgage on the land.
• They contended that the AICTE was aware of the encumbrance when it granted approval for the first institution.
• The appellants submitted that the subsequent non-disclosure in the later applications was not deliberate and did not amount to cheating.
• They asserted that the AICTE never claimed to be deceived or dishonestly induced.
• The appellants also raised a preliminary objection regarding the maintainability of the CBI’s petition under Section 482 Cr.P.C, arguing that the CBI should have filed a revision under Section 397 Cr.P.C.

Arguments on behalf of the CBI:

• The CBI argued that the appellants deliberately withheld information about the mortgage in the second and third applications.
• They contended that this suppression of information was a dishonest act to induce the AICTE to grant approvals.
• The CBI maintained that the appellants’ actions constituted cheating under Section 420 IPC and criminal conspiracy under Section 120B IPC.
• The CBI submitted that the High Court was correct in setting aside the discharge order passed by the Magistrate.
• The CBI also argued that the High Court could treat a petition filed under Section 482 Cr.P.C as a revision under Section 397 Cr.P.C.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

✓ Whether the appellants had committed the offence of cheating under Section 420 of the Indian Penal Code, 1860?

✓ Whether the appellants had committed the offence of criminal conspiracy under Section 120B of the Indian Penal Code, 1860?

✓ Whether the High Court was correct in setting aside the discharge order passed by the Magistrate under Section 239 of the Code of Criminal Procedure, 1973?

✓ Whether the petition filed by the CBI under Section 482 of the Code of Criminal Procedure, 1973 was maintainable?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each authority was viewed by the Court?

✓ Ram Jas v. State of U.P. [1970] 2 SCC 740*: The Court relied on this case to define the essential ingredients of cheating, emphasizing the need for fraudulent or dishonest inducement.

✓ V.P.Shrivastava vs. Indian Explosives Limited and others [2010] 10 SCC 361*: The Court cited this case to highlight that a fraudulent or dishonest intention at the time of making the representation is necessary for the offense of cheating.

✓ Mohit alias Sonu and another vs. State of U.P. and another [2013] 7 SCC 789*: The Court referred to this case to reiterate that the inherent power of the High Court under Section 482 Cr.P.C cannot be invoked when a specific remedy like revision under Section 397 Cr.P.C is available.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• The fact that the mortgage on the land was disclosed in the first application submitted by the appellants.
• The absence of any complaint from the AICTE that it was deceived or dishonestly induced.
• The lack of evidence of a deliberate conspiracy or dishonest intent on the part of the appellants.
• The procedural impropriety of the CBI filing a petition under Section 482 Cr.P.C instead of a revision under Section 397 Cr.P.C.

Fact:Law Ratio:

Logical Reasoning

Judgment

The Supreme Court held that the essential ingredients to constitute an offence of cheating were missing. The Court observed that the first application dated 22.01.2007 filed by the appellant No. 1 on behalf of the Society disclosed that a bank loan was still outstanding and that the subject land of nearly 5 acres had been mortgaged to secure the loan. Further, the AICTE never complained that it was under any misinformation in that regard. The Court also found that there was no evidence of the appellants consciously agreeing or conspiring to deliberately furnish false information to the AICTE. The Court also held that the CBI could not have ignored the statutory remedy available to it under Section 397 Cr.P.C and thereafter resort to filing of an application under Section 482 Cr.P.C.

The Supreme Court quoted from the judgment:

“In Ram Jas v. State of U.P.1, the ingredients required to constitute an offence of cheating were succinctly summed up thus: –
(i) there should be fraudulent or dishonest inducement of a person by deceiving him;
(ii) (a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or
(b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and
(iii) in cases covered by ( ii) (b), the act or omission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property.”

“In V.P.Shrivastava vs. Indian Explosives Limited and others2, this Court observed that in order to constitute an offence of cheating, it must be shown that the accused had a fraudulent or dishonest intention at the time of making the representation or promise and such a culpable intention should be there at the time of entering into the agreement. On facts, it was found that the party alleged to have been cheated was fully conscious of the situation at the time it decided to enter into the contract and there was no dishonest inducement.”

“In the light of the above edict, it was not open to the CBI to blithely ignore the statutory remedy available to it under Section 397 Cr.P.C and thereafter resort to filing of an application under Section 482 Cr.P.C.”

The Supreme Court, therefore, set aside the impugned order dated 20.01.2023 passed by the Allahabad High Court and restored the order of discharge passed by the Special Judicial Magistrate, CBI Court, Ghaziabad.

Key Takeaways

• Disclosure of all relevant information, particularly encumbrances on property, is crucial in applications for approvals.
• The absence of a complaint from the party allegedly deceived is a significant factor in determining whether cheating has occurred.
• The inherent powers of the High Court under Section 482 Cr.P.C cannot be invoked when a specific remedy, such as revision under Section 397 Cr.P.C, is available.
• Mere carelessness in filling out applications does not automatically equate to deliberate deception.
• The prosecution must prove dishonest intent to secure a conviction for cheating.

Directions

The Supreme Court did not give anyspecific directions in this case. The Court’s judgment primarily focused on setting aside the High Court’s order and restoring the discharge order passed by the Magistrate.

Conclusion

The Supreme Court’s judgment in Vipin Sahni vs. CBI underscores the importance of proving dishonest intent in cases of alleged cheating. The Court’s decision to quash the charges against the educational society highlights that mere non-disclosure in subsequent applications, when the information was disclosed in an earlier application, does not automatically constitute cheating. The judgment also reiterates the limitations on invoking the inherent powers of the High Court when specific remedies are available. The case serves as a reminder that the prosecution must establish fraudulent or dishonest inducement to secure a conviction for cheating. The Supreme Court’s ruling provides clarity on the application of Sections 415, 420, and 120B of the IPC, and emphasizes the need for meticulous adherence to procedural norms in criminal proceedings.