sec.420-Failure on the part of the guarantor to perform his part of contract under guarantee agreement will not attract the provision of Section 420 IPC. PWs 1 and 2 failed to establish fraudulent or dishonest intention of the accused at the time of execution of surety bond. Mere breach of contracts cannot give arise to criminal prosecution for cheating unless fraudulent or dishonest intention shown right at the beginning of the transactions.


THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY

Criminal Revision Case No.146 of 2013


(Dated: 04-03-2013)

Between:

Smt.Ala Bhagya Laxmi W/o late Ala Chinna Reddy
…Petitioner

           A n d

Ala Vinod Kumar Reddy and another
…Respondents


































THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY

Criminal Revision Case No.146 of 2013

ORDER:

        This Criminal Revision Case is directed against the judgment dated 17-10-2012 passed in Criminal Appeal No.89 of 2011 on the file of the Additional District & Sessions Judge, Wanaparthy, Mahaboobnagar District, whereby and whereunder, the learned Additional Sessions Judge confirmed the acquittal of the accused, namely, Ala Vinod Kumar Reddy, Ala Aruna for the offences under Sections 420, 406, 448, 323, 504 and 506 IPC passed in C.C.No.300 of 2005 on the file of the Judicial First Class Magistrate, Wanaparthy.

2.     Prosecution case, in brief, is:-
        A-1-Ala Vinod Kumar Reddy and A-2-Ala Aruna are husband and wife. PW-2-A.Vijaya Kumar Reddy and A-1-Vinod Kumar Reddy are brothers and are sons of PW-1-A.Bhagya Lakshmi.  PW-1 and her husband purchased House bearing No.37/1 and 37/2 on 9.7.1998.  PW.1 let out the house to Wanaparthy Educational Society.  A-1 borrowed Rs.17 lakhs for the development of the college run by Wanaparthi Educational Society.  PW-1 has been made to offer her properties as security for the loan availed by the society on misrepresentation.  A-1 executed a surety bond on 3.10.2001 undertaking to clear the loan availed by the society for the purpose of the college. A-1 failed to pay the loan and thereupon, the S.B.I., Wanaparthy  called upon   the complainant/Pw-1 to repay the loan.  A-1 neither liquidated the liability nor paid the rent to PW-1 who is  owner of the premises  wherein college has been housed.  A-2 who is no other than the wife of A-1 has been falsely representing that she is the Correspondent of the college. Therefore, A-1 and A-2 defrauded PW-1 and misappropriated the funds and thereby, rendering themselves liable for the offences under Sections 420, 406 r/w 323 and 506 IPC.  On behalf of the prosecution, the prosecution examined eleven witnesses and marked (32) documents to substantiate the charges leveled against the accused.  On behalf of the accused, a portion in 161 Cr.P.C statement of PW.2 was marked as Ex.D-1.  The learned Judicial Magistrate of First Class, Wanaparthi, on appreciation of  the evidence brought on record and on hearing the counsel appearing for the prosecution and the accused, came to the conclusion that the prosecution failed to substantiate the charges leveled against the accused for the offences under Sections 420, 406, 448, 323, 504 and 506 IPC and thereby, recorded acquittal of the accused for the said offences, by judgment dated 27-7-2011.  For better appreciation, I may refer paragraphs (18) to (20) of the judgment of the trial Court and it is thus:-
“        18.  The Investigating Officer testified as follows: That he did not receive any complaint from P.W.1 in connection with this case prior to the receipt of the court referred complaint.  He had not examined any bank authorities in connection with the loan transaction and default in re-payment.   He further admitted that accused stood as a guarantor for the loan amount sanctioned to P.W.1, but the complainant’s case is accused had borrowed the loan and P.W.1 stood as a guarantor.  Further the investigating Officer admits it is true I have not filed any document   issued by the Bank that P.W.1 stood  as a guarantor to the accused for loan to a tune of Rs.17,00,000/- obtained from SBI Wanaparthy”.  Further he testifies “ I have not collected any loan document  from the bank,  so I can not tell whether   P.W. 2 and L.W.2  had signed  on the mortgaged deed or not  that “it is true that both the P.W.2 and L.W.2  have been at bitter  ends since  a quite a long time in connection with the assets of their family. I have not verified the original of the surety bond executed by P.W.1.  That “it is true P.W.1 stated before me that on 3-10-2001 A.1 obtained loan of Rs.17,00,000/- as loan from S.B.I Bank of Wanaparthy branch and also Mahabubnagar Branch for which the complainant stood as a guarantor  and that the complainant had signed on 3-10-2001 on surety document.   I have not verified the original of the surety bond executed by P.W.1.  P.W.1 never stated before me that the accused obtained her signature by deceiving her and without her knowledge showing her as a guarantor for the loan obtained by the accused.  It is true that  P.W.1 and L.W.2, A.1 Vinay Kumar Reddy signed on documents pertains to the loan transaction signed  as guarantors. I have not filed any document to show that the accused misappropriated the funds of Society. It is true that the original surety bonds dated 3-10-2001 has not been filed.  It is not filed so far in any cases though I did not see the said document.   I registered the case under Section 406 IPC. As the funds of Wanaparthy  Educational Society were misappropriated.  I did not  receive  any complaint from Wanaparthy  Educational Society.
19.     PW.10 is the President of the Society deposed that, he does not know about the financial dealings and also  the day to day administration so “ I cannot tell  who is liable to discharge the loan debt”.  And he filed Ex.P.30 is C.C of authorization given to A.1 to raise a loan of Rs.7,24,000/- as he was the treasurer-cum-correspondent.  All other members who were cited by the prosecution have not supported the prosecution case.
20.     From the above it emerges that, Pws.1,2 and L.W.2 and A.1 had obtained loan by mortgaging  the properties  of P.W.1. Two or three years thereafter A.1 being in the management of the society, could not discharge the loan debt, so the bank had filed money suit against all the family members of P.W.1 i.e., P.Ws.1, 2, L.W.3 and A.1. So allegation of P.W.1 and 2 is, that A.1 had wantonly with a dishonest intention refrained from discharging the debt.  But to prove the dishonest intention on the part of A.1 at the time of the loan transaction, there is no proof.  That the accused No.1 had executed Ex.P.2 but P.W.1 is said to have never stated before Investigating Officer. More so, by deceiving P.W.1 investigating officer himself deposed that he had not filed any document to show that accused had misappropriated the amounts.  That the investigating officer had not filed original of surety bond  alleged to have been executed by A.1.  The testimony of P.W.1 and 2 is inconsistent not only inter se but with the very case of prosecution, there are contradictions and omissions. In regard to the specific incident alleged to have happened on 17-10-2005.  Moreover admittedly the Investigating Officer had not collected the documents which as relied by the prosecution.  Thus the prosecution could not prove the charge against the accused”.

3.     The de facto complainant who has been examined as PW-1 assailed the judgment of acquittal dated 27-7-2011 passed in C.C.No.300 of 2005 by filing Criminal Appeal No.89 of 2011 on the file of Additional Sessions Judge, Wanaparthy.  The learned Additional Sessions Judge, on re-appreciation of the material brought on record, came to the conclusion that the judgment of acquittal is based on sound reasons and the same does not warrant interference and thereby, proceeded to dismiss the appeal, by judgment dated 17-10-2012.  Hence this revision by the de facto complainant.

4.     Heard Sri P.Vishnu Vardhan Reddy, learned counsel appearing for the petitioner and perused the judgment of the trial Court as well as the appellate Court.

5.     It is contended by the learned counsel appearing for the petitioner that the signature of the petitioner has been obtained on the loan document with regard to sanction of Rs.7.24 lakhs  by way of misrepresentation  and therefore,  they committed  an offence of cheating  punishable under Section 420 IPC.  He would further contend that the petitioner’s only livelihood is the rents derived from the premises, which have been let out to the society.   She has been deprived of the rents and therefore, the accused are liable for the offence of misappropriation punishable under Section 406 IPC.  In a way, it is the contention of the learned counsel that A.1 and A.2 who have been arrayed as respondents 1 and 2   in this revision misappropriated the funds of the society.   Learned counsel refers the loan document dated 16-6-1998 and 20-6-1998 in support of his contentions.  Learned counsel would strenuously contend that the trial Court as well as the lower appellate Court misread the evidence brought on record and thereby, committed serious error in recording acquittal of the accused for the offences with which they stood charged.

6.     Two principal accusations have been made against the accused. 
Firstly; the accused obtained the signatures of the complainant on the loan document by misrepresentation.  
Secondly; the accused misappropriated the funds of the society.   
It is a matter of record that the complainant herself availed the loan of Rs.9 lakhs to meet part of the cost of construction of the 1st and 2nd floors of the building proposed to be leased to  Wanaparthy College of Computers & Management, Wanaparthy.  Wanaparthy Educational Society also availed loan of Rs.7.24 lakhs for purchase of computer, furniture fixation and lab equipment.  The petitioner/de facto complainant offered her property as a security for both the loans viz., loan availed by her as well as the loan availed by the Society. 
 It is the case of the petitioner/de facto complainant that A-1-Vinod Kumar Reddy undertook to discharge the liability under surety bond.  Even assuming that there is any such undertaking; it is for the petitioner/de facto complainant to initiate proceedings for specific performance of the said undertaking.   
The petitioner/   de facto complainant  failed to place on record any material  that the accused misappropriated  the funds of the society.  
The lower appellate Court has examined the documents brought on record and observed as hereunder:-
“        PW.2 brother of accused No.1 and son of P.W.1 stated in his evidence that they leased out building for college for a period of five years in the year 1998 and accused No.1 is the correspondent of the college.  
The building consist 600 Sq.yards. was leased  out except shops and residential house.  
The monthly rent is fixed at Rs.1,800/-.  
P.W.2 and other family members are not the members in the society of college.  
P.W.2 had not filed any document to show that P.W.2 and his family members are having shares in the college. 
Accused No.1 filed a partition suit in    OS 6 of 2003.  
PW.1, accused No.1, P.W.2 and Vinay Kumar Reddy the another brother of P.W.2 signed mortgage deed while taking loan from bank.  
From the above evidence of P.W.2 one point is very clear that all the members of the family that is mother and son executed mortgage deed and obtained loan.  
When that being the case it cannot be said that the accused cheated P.W.1 and obtained loan.  
As seen from the evidence of PWs 1 and 2 it appears that there are property disputes between the parties.  
Ex.P.2 is the surety bond wherein the accused No.1 agreed and undertakes to pay the entire amount of Rs.17,00,000/-.  
If there is any breach of violation of the terms and condition of the Ex.P.2 by the accused No.1 the parties are at liberty to approach the competent civil court for execution of surety bond.  
Failure on the part of the guarantor to perform his part of contract under guarantee agreement will not attract the provision of Section 420 IPC.  PWs 1 and 2 failed to establish fraudulent or dishonest intention of the accused at the time of execution of surety bond.   Mere breach of contracts cannot give arise to criminal prosecution for cheating unless fraudulent or dishonest intention shown right at the beginning of the transactions.  
In the present case all the parties obtained loan by executing the loan documents. 
Subsequent to that accused No.1 executed Ex.P.2.  
When that being the case it cannot be said that there is dishonest intention on the part of the accused at the time of execution of Ex.P.2. 
Admittedly the partition suit between the parties is pending and the particulars of partition suit and the interim orders passed by the Hon’ble High Court in the said partition suit are not placed before the court to the reasons best known to the parties”.

7.     The trial Court as well as the lower appellate Court considered the evidence brought on record in a right perspective and found the charges leveled against the accused (respondents 1 and 2) are not made out.  I do not see any illegality or irregularity in the findings recorded by the trial Court as confirmed by the lower appellate Court.  Therefore, I am of the view that the judgment impugned in the revision does not warrant interference by this Court, in exercise of powers under Sections 397 and 401 of Cr.P.C.

8.     Accordingly, the Criminal Revision Case is dismissed.
_____________________

B.SESHASAYANA REDDY, J

Dt.04-03-2013

RAR

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