# **IN THE HIGH COURT OF KERALA AT ERNAKULAM**
## **PRESENT**
**THE HONOURABLE MR. JUSTICE P.SOMARAJAN**
**WEDNESDAY, THE 15[TH] DAY OF NOVEMBER 2023 / 24TH KARTHIKA, 1945 CRL.REV.PET NO. 435 OF 2010**
**AGAINST THE JUDGMENT DATED 21/11/2009 IN CRA 383/2008 OF ADDITIONAL DISTRICT COURT (ADHOC I), KOZHIKODE CC 80/2005 OF CHIEF JUDICIAL MAGISTRATE ,KOZHIKODE**
## **REVISION PETITIONER/ACCUSED:**
K. SURESH KUMAR, AGED 38, S/O DAMODARAN ILLIKKAL KUZHIKKANDATHIL HOUSE, NELLIKODE AMSOM, KOVUR DESOM, P.O.CHEVAYUR, KOZHIKODE.
BY ADVS. SRI.A.RANJITH NARAYANAN SRI.S.K.SAJU
## **RESPONDENTS:**
1 P.VENUGOPALAN,S/O BALAKRISHNAN PALAGADATH HOUSE, 19/1530B, CHALAPPURAM, KOZHIKODE. 2 STATE OF KERALA REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA. BY ADVS. SRI.K.M.JAMALUDHEEN SRI.K.K.KRISHNA KUMAR SMT.LATHA PRABHAKARAN
## **OTHER PRESENT:**
SR PP SRI C N PRABHAKARAN
THIS CRIMINAL REVISION PETITION HAVING COME UP FOR HEARING ON 15.11.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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## **CR**
## **JUDGMENT**
It is against the conviction rendered for the offence punishable under Section 418 and 420 IPC, the sole accused came up in revision.
2. Both the courts below found the accused guilty of the offences punishable under Section 418 and 420 IPC and convicted thereunder and sentenced to undergo six months rigorous imprisonment for the offence under Section 418 IPC and two year rigorous imprisonment for the offence under Section 420 IPC. It is pertaining to an agreement for sale entered into by the parties, the complainant and the accused under a consensus ad idem specifying the terms and conditions to do certain things in future, that is to say, execution of a sale deed pertaining to an immovable property.
3. A mere breach of an obligation arising out of a contract for sale of immovable property though involves entrustment of money by way of part consideration or by way
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of security/earnest money would not by itself attract the offence punishable under Section 418 or 420 IPC. The expression “deliver any property” incorporated under Section 420 IPC does not include the amount received by way of security to contract or earnest money or advance deposit under a contract for sale unless the same is the result of “inducement” with dishonest intention. The phraseology of Section 417 and also 420 IPC mandates delivery of property under deception, which may include either alteration or conversion of valuable security or anything, which is signed or sealed capable of being converted into a valuable security. Delivery of property or valuable security for any specific purpose under a contract between the parties, though involves dishonest intention, will not attract either of the offences under Section 418 or 420 IPC, unless there is element of “inducement” to do or not to do any act. The contract entered into should be the result of “inducement” and it may be direct or indirect. The reason behind it is that in order to attract the criminal liability under Section 418 and 420 IPC, the vital
ingredient “inducement” to the person to whom the deception
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was played has to be established. The word “inducement” and “dishonest intention” are having different connotations in its application. The word “inducement” stands for something which will have the force of prompting or forcing or persuading any particular person to do or not to do any act and when materialized, it may result in “deception”. But mere existence of dishonest intention to deceive a particular person cannot be substituted in the place of the required vital ingredient “inducement”. In order to bring up a case of inducement, there should be some act or forbearance from the part of the person to persuade the other to do or not to do certain act. The contract or delivery of any money either by way of advance or earnest money must be the result of such “inducement” played on the person and mere existence of dishonest intention unless coupled with necessary ingredient i.e. inducement may not be sufficient to attract the offence under Section 418 or 420 IPC.
4. The ingredient which would constitute 'cheating'
as defined under Section 415 IPC is an inseparable part of offence punishable under Section 420 IPC. Hence, when there
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is delivery of any property either movable or immovable or money in trust for the performance of contractual obligation arising out of a contract for sale, unless there is “inducement” to deliver such property or to enter into a contract, it would not attract the criminal liability under the said provision even if it is found that the contract was entered into and the other person had entertained a dishonest intention at that time. There should be something to show that the other person was compelled or persuaded to enter into such contract and deliver any money or property. If the existence of dishonest intention is of such a nature sufficient to persuade the other directly or indirectly to enter into a contract or to deliver property, it would fall under the mischief of “inducement”. When the contract contains a specific clause that the seller should clear out all existing liabilities over the property which is the subject of the contract within the period of contract or within a specified time, it would constitute a contractual
obligation on that party to perform it within the time agreed into. Necessarily, the existence of liability over the property at the time when the contract was entered will
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stand subject to the abovesaid contractual obligation to be performed on a future date, hence, non-disclosure of any such liability at the time when the contract was entered into cannot be brought under the purview of “cheating” as defined under Section 415 IPC, even if it involves payment of money or delivery of possession of property. A mere obligation though involves monetary transfer by way of advance or earnest money cannot be brought under the purview of “delivery of property under deception”, unless involves “inducement” for the purpose of attracting either of the offences viz., Section 418 and 420 IPC. The primary
requirement to make out an offence of “cheating”, the inseparable part of both the offences under Sections 418 and 420 IPC is the existence of dishonest or fraudulent “inducement”. The existence of fraudulent or dishonest intention may not be sufficient, unless it carries the necessary vital ingredient persuading the other or compelling the other directly or indirectly to enter into the agreement or to deliver such property. Hence, a mere non-disclosure of a liability over the property unless coupled with the necessary intention of deception and
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inducement cannot be brought under the purview of criminal liability under Section 418 and 420 IPC. But the legal position would be different when there is assertion in the contract with respect to non-existence of any liability or a declaration to that effect, which would by its nature constitute the required “inducement” with the dishonest intention. In short, mere non-disclosure of any liability over the property at the time when the contract was entered
into for the sale of property with the specific understanding that all liabilities will be cleared before the execution of the sale deed would not attract the criminal liability either under Section 418 or 420 IPC, unless there is an assertion/declaration to the contrary in the contract. Subsequent failure to comply with the condition agreed into would fall within the mischief of breach of an obligation arising out of contract, for which no criminal liability can be fastened either under Section 418 or 420 IPC.
5. The Apex Court very recently in **Sarabjit Kaur v. State of Punjab and Another [(2023) 5 SCC 360]** has observed
that “a breach of contract does not give rise to criminal
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prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction. Merely on the allegation of failure to keep up promise will not be enough to initiate criminal proceedings”.
6. Earlier, in **ARCI v. Nimra Cerglass Technics Pvt. Ltd [(2016) 1 SCC 348]** while deliberating upon the difference between mere breach of contract and the offence of cheating, observed that the distinction depends upon the intention of the accused at the time of the alleged incident. If dishonest intention on part of the accused can be established at the time of entering into the transaction with the complainant, then criminal liability would be attached.
7. When there is defective title to the property
making it incapable of conveying a valid title to the purchaser, the non-disclosure of such defective title would take away the very purpose for which the contract for sale was entered into by payment of amount or part consideration and thereon, the criminal liability for the offence under Section 418 and 420 IPC will stand attracted.
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8. In the instant case, there was a subsisting mortgage with the bank at the time when the contract was entered into. But it was not disclosed in the contract for sale at the time when the contract for sale was entered into, but the contract contains a clause, by which the owner of the property had agreed to clear out all liabilities over the property before the sale deed is executed in accordance with the contract. The amount given by way of advance/earnest money is only for the purpose of securing performance of contract. Necessarily, the subsequent failure on the part of owner of property to clear out the liability would fall within the mischief of breach of an obligation arising out of contract and not sufficient to extend the criminal liability under Section 418 or 420 IPC. But when a sale deed was executed and property was transferred without disclosing any existing liability, it may be a case of “cheating” as defined under Section 415 IPC as the parties would stand bound by Section 55 of the Transfer of Property Act. The seller is statutorily bound to disclose to the buyer any material defect in the property which the buyer could not with
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ordinary care discover by virtue of sub-section 1(a) of Section 55 of the Act. Hence, the conviction and sentence under Section 418 and 420 IPC cannot be sustained and the accused is acquitted and is set at liberty. The bail bond,
if any executed will stand cancelled.
The Criminal Revision Petition will stand allowed
accordingly.
Sd/-
**P.SOMARAJAN JUDGE**
sv
