Supreme Court Quashes Cheating Charges Against Land Seller in A.M. Mohan vs. State (2024)

LEGAL ISSUE: Whether a person can be charged with cheating under Section 420 of the Indian Penal Code, 1860, when there is no direct inducement or dishonest intention on their part to deceive the complainant. CASE TYPE: Criminal Law. Case Name: A.M. Mohan vs. The State represented by SHO and Another. Judgment Date: 20 March 2024

Date of the Judgment: 20 March 2024

Citation: 2024 INSC 233

Judges: B.R. Gavai, J., Rajesh Bindal, J., and Sandeep Mehta, J.

The Supreme Court of India addressed a case where a person was accused of cheating, even though there was no evidence of direct inducement or dishonest intention to deceive the complainant. The court examined whether the charges under Section 420 of the Indian Penal Code, 1860 (IPC) were valid against the accused, A.M. Mohan, who had sold land to another accused, who in turn, allegedly cheated the complainant. The bench was composed of Justices B.R. Gavai, Rajesh Bindal, and Sandeep Mehta, with Justice B.R. Gavai authoring the judgment.

Case Background

The case revolves around a complaint filed by Karthick Krishnamurthy, who alleged that he was cheated by multiple individuals, including A.M. Mohan. The complainant had initially extended financial help to Suresh Prathaban, who introduced him to Lakshmanan. Lakshmanan, who was running a hotel and also doing real estate business, needed funds for his projects. The complainant agreed to provide financial assistance of Rs. 1,60,00,000 with the condition that it would be repaid within 20 months with 100% profit.

Over time, the complainant transferred funds to Lakshmanan, totaling Rs. 1,60,01,000. To secure this amount, Lakshmanan executed a simple mortgage deed for 100 plots in Thiruvannamalai District. Later, the complainant paid additional sums, including Rs. 20,00,000 directly to A.M. Mohan for a land purchase, and Rs. 1,80,00,000 to A.M. Mohan through Lakshmanan for another land purchase. To secure the additional sum of Rs. 2,00,00,000 with returns of Rs. 10,00,00,000, Lakshmanan executed a General Power of Attorney (GPA) in favor of the complainant for a 9.80-acre land in Chittoor Village, and a sale deed for a 2.52-acre land in Vellarai Village.

Further, Lakshmanan also executed a mortgage deed for another land in Sunguvarchatram Village. The complainant also joined a gold chit business run by Lakshmanan, paying Rs. 1,20,000 per month from March 2016 to August 2017, totaling Rs. 21,60,000. It was alleged that Lakshmanan disposed of 58 plots without returning the mortgaged amount, cancelled the GPA, and sold the 9.80-acre land to third parties without informing the complainant. The complainant alleged that he was cheated of Rs. 16,01,00,000 due to the fraudulent actions of the accused.

Timeline

Course of Proceedings

The complainant filed a complaint before the Judicial Magistrate, which led to the registration of FIR No. 21 of 2020 against Lakshmanan, Suresh Prathaban, and A.M. Mohan for offenses under Section 420 read with 34 of the Indian Penal Code, 1860. A.M. Mohan, the appellant, then filed a petition under Section 482 of the Code of Criminal Procedure, 1973 (Cr.P.C.) before the High Court of Judicature at Madras to quash the FIR. The High Court rejected the petition, observing that there were specific allegations against the appellant that warranted investigation. The High Court directed the investigating agency to complete the investigation and file a final report within twelve weeks. Aggrieved by this order, A.M. Mohan appealed to the Supreme Court.

Legal Framework

The Supreme Court examined the provisions of Section 420 of the Indian Penal Code, 1860, which deals with cheating and dishonestly inducing delivery of property. The section states:

“420. Cheating and dishonestly inducing delivery of property.—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.”

The Court also referred to Section 415 of the IPC, which defines “cheating”:

“415. Cheating.—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”.”

The Court emphasized that for an offense under Section 420 of the IPC to be established, it must be shown that there was deception, dishonest inducement to deliver property, and a dishonest intention at the time of the inducement.

Arguments

Appellant’s Arguments:

• The appellant argued that even if the allegations in the FIR were taken at face value, no case was made out against him under Section 420 of the IPC.
• The appellant contended that neither the FIR nor the charge-sheet contained any evidence of inducement, fraud, or dishonesty on his part that caused the complainant to transfer Rs. 20,00,000 to his bank account.
• The appellant pointed out that the complainant had suppressed the fact that the appellant had transferred the land to accused No. 1 through a sale deed on 3rd February 2017, the day after receiving the Rs. 20,00,000.
• The appellant also highlighted that on the same day, accused No. 1 had executed a GPA in favor of the complainant, specifically mentioning that the complainant received the GPA for the land purchased from the appellant.
• The appellant asserted that he had no role after 3rd February 2017, and the subsequent allegations regarding the cancellation of the GPA and the sale of the land by accused No. 1 to other parties were not related to him.

Respondent’s Arguments:

• The respondent argued that since the charge-sheet had already been filed, the appeal was rendered infructuous and the appellant should file a discharge application.
• The respondent submitted that the FIR clearly showed that the appellant, along with other accused persons, had cheated the complainant.
• The respondent contended that no interference was warranted in the appeal.

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether the allegations in the FIR and charge-sheet disclose the necessary ingredients to attract the offense under Section 420 of the Indian Penal Code, 1860, against the appellant.

Treatment of the Issue by the Court

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

Authorities

The Supreme Court relied on several cases to determine the principles for quashing complaints and criminal proceedings under Section 482 of the Cr.P.C. These cases include:

• Indian Oil Corporation v. NEPC India Limited and Others [2006] 6 SCC 736 – Supreme Court of India: This case summarized the principles for quashing complaints under Section 482 of Cr.P.C.
• Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre [(1988) 1 SCC 692] – Supreme Court of India: Outlined the principles for quashing complaints.
• State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335] – Supreme Court of India: Further elaborated on the principles for quashing complaints.
• Rupan Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC 194] – Supreme Court of India: Discussed the circumstances under which criminal proceedings can be quashed.
• Central Bureau of Investigation v. Duncans Agro Industries Ltd. [(1996) 5 SCC 591] – Supreme Court of India: Addressed the quashing of complaints in commercial transactions.
• State of Bihar v. Rajendra Agrawalla [(1996) 8 SCC 164] – Supreme Court of India: Dealt with the abuse of process in criminal proceedings.
• Rajesh Bajaj v. State NCT of Delhi [(1999) 3 SCC 259] – Supreme Court of India: Discussed the quashing of complaints where no offense is made out.
• Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [(2000) 3 SCC 269] – Supreme Court of India: Emphasized the distinction between civil and criminal wrongs.
• Hridaya Ranjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168] – Supreme Court of India: Discussed the ingredients of the offense of cheating.
• M. Krishnan v. Vijay Singh [(2001) 8 SCC 645] – Supreme Court of India: Addressed the quashing of complaints in commercial disputes.
• Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque [(2005) 1 SCC 122] – Supreme Court of India: Discussed the abuse of process in criminal proceedings.
• G. Sagar Suri v. State of U.P. [(2000) 2 SCC 636] – Supreme Court of India: Highlighted the tendency to convert civil disputes into criminal cases.
• Prof. R.K. Vijayasarathy and Another v. Sudha Seetharam and Another [(2019) 16 SCC 739] – Supreme Court of India: This case outlined the essential ingredients of the offenses under Sections 415 and 420 of the IPC.
• Archana Rana v. State of Uttar Pradesh and Another [(2021) 3 SCC 751] – Supreme Court of India: Discussed the requirements for establishing cheating.
• Deepak Gaba and Others v. State of Uttar Pradesh and Another [(2023) 3 SCC 423] – Supreme Court of India: Further clarified the elements of cheating.
• Mariam Fasihuddin and Another v. State by Adugodi Police Station and Another [2024 SCC OnLine SC 58] – Supreme Court of India: Reiterated the need for dishonest inducement for a cheating offense.
• Anand Kumar Mohatta and Another v. State (NCT of Delhi), Department of Home and Another [(2019) 11 SCC 706] – Supreme Court of India: Clarified that a charge-sheet does not bar the quashing of an FIR.
• Joseph Salvaraj A. v. State of Gujarat [(2011) 7 SCC 59] – Supreme Court of India: Held that a High Court can examine if offences are made out even after the charge-sheet is filed.
• Haji Iqbal alias Bala through S.P.O.A. v. State of U.P. and Others [2023 SCC OnLine SC 946] – Supreme Court of India: Reiterated that the High Court can quash proceedings even after the charge sheet is filed.

Judgment

The Supreme Court allowed the appeal, quashing the High Court’s order and the FIR and charge-sheet against A.M. Mohan. The Court held that the necessary ingredients for an offense under Section 420 of the IPC were not met in the case of the appellant. The Court noted that there was no evidence of dishonest inducement by the appellant to the complainant. The Court emphasized that the appellant had sold the land to accused No. 1, and the subsequent actions by other accused persons could not be attributed to him. The Court observed that the dishonest inducement is the sine qua non to attract the provisions of Sections 415 and 420 of IPC and the same was lacking in the case of the appellant.

How each authority was viewed by the Court?

• The Court relied on Indian Oil Corporation v. NEPC India Limited and Others [2006] 6 SCC 736* to reiterate the principles for exercising jurisdiction under Section 482 of Cr.P.C. to quash complaints and criminal proceedings.
• The Court followed the principles laid down in Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre [(1988) 1 SCC 692]*, State of Haryana v. Bhajan Lal [1992 Supp (1) SCC 335]*, Rupan Deol Bajaj v. Kanwar Pal Singh Gill [(1995) 6 SCC 194]*, Central Bureau of Investigation v. Duncans Agro Industries Ltd. [(1996) 5 SCC 591]*, State of Bihar v. Rajendra Agrawalla [(1996) 8 SCC 164]*, Rajesh Bajaj v. State NCT of Delhi [(1999) 3 SCC 259]*, Medchl Chemicals & Pharma (P) Ltd. v. Biological E. Ltd. [(2000) 3 SCC 269]*, Hridaya Ranjan Prasad Verma v. State of Bihar [(2000) 4 SCC 168]*, M. Krishnan v. Vijay Singh [(2001) 8 SCC 645]* and Zandu Pharmaceutical Works Ltd. v. Mohd. Sharaful Haque [(2005) 1 SCC 122]* regarding the exercise of powers under Section 482 of the Cr.P.C.
• The Court cited G. Sagar Suri v. State of U.P. [(2000) 2 SCC 636]* to caution against the growing tendency to convert civil disputes into criminal cases.
• The Court referred to Prof. R.K. Vijayasarathy and Another v. Sudha Seetharam and Another [(2019) 16 SCC 739]* to understand the ingredients of the offense under Sections 415 and 420 of the IPC.
• The Court relied on Archana Rana v. State of Uttar Pradesh and Another [(2021) 3 SCC 751]*, Deepak Gaba and Others v. State of Uttar Pradesh and Another [(2023) 3 SCC 423]* and Mariam Fasihuddin and Another v. State by Adugodi Police Station and Another [2024 SCC OnLine SC 58]* to reiterate the need for dishonest inducement for a cheating offense.
• The Court relied on Anand Kumar Mohatta and Another v. State (NCT of Delhi), Department of Home and Another [(2019) 11 SCC 706]*, Joseph Salvaraj A. v. State of Gujarat [(2011) 7 SCC 59]* and Haji Iqbal alias Bala through S.P.O.A. v. State of U.P. and Others [2023 SCC OnLine SC 946]* to clarify that a charge-sheet does not bar the quashing of an FIR if the necessary ingredients of the offense are not met.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the lack of evidence demonstrating any dishonest inducement or intention on the part of A.M. Mohan to deceive the complainant. The court emphasized that the core element of cheating, as defined under Section 415 and 420 of the IPC, is the presence of a dishonest inducement. In this case, the court found that the appellant had merely sold land to accused No. 1, and there was no direct interaction or inducement between the appellant and the complainant. The court also highlighted that the complainant had not provided any evidence to show that A.M. Mohan had any intention to defraud him. The court was also concerned about the growing tendency to convert civil disputes into criminal cases and emphasized that criminal proceedings should not be used to settle civil disputes. The court was also influenced by the fact that the appellant had transferred the land to accused No. 1 and the subsequent actions by other accused persons could not be attributed to the appellant.

Logical Reasoning:

The Court considered that while the complainant had been defrauded, there was no evidence to suggest that A.M. Mohan was part of the conspiracy or had any dishonest intention to cheat the complainant. The Court emphasized that the dishonest inducement is the sine qua non to attract the provisions of Sections 415 and 420 of IPC. The court also considered that the appellant had transferred the land to accused No. 1 and the subsequent actions by other accused persons could not be attributed to the appellant.

The Court also noted the growing tendency in business circles to convert purely civil disputes into criminal cases. The Court observed that this is obviously on account of a prevalent impression that civil law remedies are time consuming and do not adequately protect the interests of lenders/creditors. The Court also recorded that there is an impression that if a person could somehow be entangled in a criminal prosecution, there is a likelihood of imminent settlement. The Court, relying on the law laid down by it in the case of G. Sagar Suri and Another v. State of U.P. and Others held that any effort to settle civil disputes and claims, which do not involve any criminal offense, by applying pressure through criminal prosecution should be deprecated and discouraged.

The Court also observed that though no one with a legitimate cause or grievance should be prevented from seeking remedies available in criminal law, a complainant who initiates or persists with acriminal prosecution with oblique motives or malafide intentions, should not be permitted to misuse the process of law. The Court also held that the High Court should have exercised its jurisdiction under Section 482 of the Cr.P.C. to quash the criminal proceedings against the appellant.

Conclusion

The Supreme Court’s judgment in A.M. Mohan vs. State (2024) underscores the essential elements of the offense of cheating under Section 420 of the Indian Penal Code, 1860. It clarifies that mere involvement in a transaction that eventually leads to fraud does not automatically implicate a person in the offense of cheating. The Court emphasized that there must be clear evidence of dishonest inducement and intention to deceive on the part of the accused. This ruling is significant in protecting individuals from being unjustly implicated in criminal proceedings arising out of commercial disputes, where their involvement is limited and lacks any dishonest intent. The judgment also acts as a reminder to the lower courts to exercise caution in converting civil disputes into criminal cases and to ensure that the necessary ingredients of a criminal offense are present before initiating criminal proceedings.

Implications

• Protection against Unjust Criminalization: This judgment provides a safeguard against the misuse of criminal law to settle commercial disputes where there is no clear evidence of dishonest intent.
• Emphasis on Dishonest Inducement: The ruling reiterates that the core element of cheating is the presence of a dishonest inducement, which must be proven beyond reasonable doubt.
• Judicial Scrutiny: It highlights the judiciary’s role in carefully scrutinizing complaints and criminal proceedings to prevent the misuse of the legal process.
• Discouragement of Converting Civil Disputes: The judgment discourages the growing tendency to convert civil disputes into criminal cases, emphasizing that criminal law should not be used as a tool for settling civil matters.
• Guidance for Lower Courts: This ruling serves as a guide for lower courts to ensure that the necessary ingredients of a criminal offense are present before initiating criminal proceedings.

This case serves as an important precedent for future cases involving allegations of cheating in commercial transactions, emphasizing the need for a clear demonstration of dishonest inducement and intention to deceive for an offense under Section 420 of the IPC to be established.

Key Takeaways

• Dishonest Inducement is Crucial: For an offense under Section 420 of the IPC, there must be evidence of dishonest inducement by the accused to the complainant.
• Mere Involvement is Insufficient: Simple involvement in a transaction that eventually leads to fraud does not automatically implicate a person in the offense of cheating.
• Civil Disputes Should Not Be Criminalized: Criminal proceedings should not be used to settle civil disputes unless there is clear evidence of a criminal offense.
• Judicial Scrutiny is Necessary: Courts must carefully scrutinize complaints and criminal proceedings to prevent the misuse of the legal process.
• Charge-Sheet Does Not Bar Quashing: The filing of a charge-sheet does not prevent the High Court from quashing an FIR if the necessary ingredients of the offense are not met.