# MADAN LAL AAM CHANDRA DAGA ETC v. SfATE OF MAHARASHTRA

- **Citation:** [1968] 3 S.C.R. 34
- **Court:** Supreme Court of India
- **Decided:** 1968-02-05
- **Case number:** Criminal Appeals Nos. 99 to 104 of 1964
- **Bench:** M. Hidayatullah, Bachawat, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/madan-lal-aam-chandra-daga-etc-v-sfate-of-maharashtra-4387
- **Pages:** 7

## Headnote

B
Practice and Procedure-Criminal appeti/-Offtnc• o' cheatlng--0/ftr
by accused to return 1noney if sentence 'M'OS rtduct!d-Higlt Court willing
to consider-Propriety.
The three appellants were a partner, munim and clerk of the R. R.
firm and were closely related to one another. In the course of their deolings with. the J. R. firm, who were Bankers and CoinmisMon Ajents, the
appellants were alleged to have, inlla!ed the invoices of goods drawn up
exaggerated lmndies, and borrowed money from the J. R. finii on the
security of such invoices and hundks. The J. R. firm came to know 1he
fact! when the hundios were not honoured; but before the hundies were
tendered to the R. R. firm, its partners were declared inlolvenL 'lbe
~ppellants were charged with the offence of cheatinJI the J. R. firm. In
the High Court, the partner offered to pay his sbaro of the losses of tbe
J. R. firm if the sente11ee passed on him by the trial court was reduced.
1be High Court adjourned the appeal to enable him to deposit the money
but did not. reduce the sentence though it recovered the fine imposed from
the money. deposited.
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In appeal to this Court it was contended that : (I) there was no evidence against the clerk; (2) the High Court should have ,reduced the smtence; and (3) the partner and munim would pay to the J. R. firm tbe
amounts wrongly realised by them and this Court may reduce the aenteru:e.
E
HELD : (I) As regards the clerk there was nothing to show that he
took prut in the negotiations with the J. R. firm, or that any r-ntation
was made by him to that firm, or thaJ he made the inflated invoices and
hundies.
The only evidence against htm was (a) that he wrote some invoices which were not inflated, (b) that he took ~
to the J. R. firm,
and (c) that he drew ·up some pay-in-slips on behalf of the J. R. firm.
In the absence of a charge of conspiracy, the evidenal was not relevant and
F
the clerk could not be held guilty of the offence of cheating. [38 A-Fl
(2) It is very wtong for courts to enter into a barpin with the accused
by which money is recovered for the complainant through their agency.
Offences should be tried and punished according to the guilt of the accused,
and if any leniency is to be shown in the 'sentence it should be on the faots
of the case.
The High Court should not have agn:ed to consider lhe
question of sentence and the offer of the accused in· this Court could ltot
also be accep ed. [39 E--GJ
( 3) The sentences were however reduced, because, but for the supuvening ilsolvency, the ac:Cused ·might have paid back the money as they
had done in the past. [39 HJ
CRIMINAL
APPELLATE
JURISDICTION :
Criminal Appeals
Nos. 99 to 104 of 1964.
Appeals by special leave from the judgment and order dated
March l 0, 1964 of the Bombay High Court in Criminal Appeals
G
H
•
A
B
MADAN LAL v. MAHARASHTRA (Hidayatul/a/1, /.)
35
Nos. 1323 to 1325 of 1962 and 1073 to 1075 of 1962 respectively.
Nurudclin Ahmed, G. L. Sanghi and 0. C. Marhur, for the
appellants (in all the appeals).
M. S. K. Sastri and S. P. Nayar, for the respondent (in all
the appeals).
Purshottam Trikamdas and I. N. Shroff, for the complainants
(in all the appeals).

## Text

MADAN LAL AAM CHANDRA DAGA ETC.
v.
SfATE OF MAHARASHTRA
February 5, 1968
A
(M. HIDAYATULLAH, R. S, BACHAWAT AND K. S. HEGDE, JJ.j
B
Practice and Procedure-Criminal appeti/-Offtnc• o' cheatlng--0/ftr
by accused to return 1noney if sentence 'M'OS rtduct!d-Higlt Court willing
to consider-Propriety.
The three appellants were a partner, munim and clerk of the R. R.
firm and were closely related to one another. In the course of their deolings with. the J. R. firm, who were Bankers and CoinmisMon Ajents, the
appellants were alleged to have, inlla!ed the invoices of goods drawn up
exaggerated lmndies, and borrowed money from the J. R. finii on the
security of such invoices and hundks. The J. R. firm came to know 1he
fact! when the hundios were not honoured; but before the hundies were
tendered to the R. R. firm, its partners were declared inlolvenL 'lbe
~ppellants were charged with the offence of cheatinJI the J. R. firm. In
the High Court, the partner offered to pay his sbaro of the losses of tbe
J. R. firm if the sente11ee passed on him by the trial court was reduced.
1be High Court adjourned the appeal to enable him to deposit the money
but did not. reduce the sentence though it recovered the fine imposed from
the money. deposited.
c
D
In appeal to this Court it was contended that : (I) there was no evidence against the clerk; (2) the High Court should have ,reduced the smtence; and (3) the partner and munim would pay to the J. R. firm tbe
amounts wrongly realised by them and this Court may reduce the aenteru:e.
E
HELD : (I) As regards the clerk there was nothing to show that he
took prut in the negotiations with the J. R. firm, or that any r-ntation
was made by him to that firm, or thaJ he made the inflated invoices and
hundies.
The only evidence against htm was (a) that he wrote some invoices which were not inflated, (b) that he took ~
to the J. R. firm,
and (c) that he drew ·up some pay-in-slips on behalf of the J. R. firm.
In the absence of a charge of conspiracy, the evidenal was not relevant and
F
the clerk could not be held guilty of the offence of cheating. [38 A-Fl
(2) It is very wtong for courts to enter into a barpin with the accused
by which money is recovered for the complainant through their agency.
Offences should be tried and punished according to the guilt of the accused,
and if any leniency is to be shown in the 'sentence it should be on the faots
of the case.
The High Court should not have agn:ed to consider lhe
question of sentence and the offer of the accused in· this Court could ltot
also be accep ed. [39 E--GJ
( 3) The sentences were however reduced, because, but for the supuvening ilsolvency, the ac:Cused ·might have paid back the money as they
had done in the past. [39 HJ
CRIMINAL
APPELLATE
JURISDICTION :
Criminal Appeals
Nos. 99 to 104 of 1964.
Appeals by special leave from the judgment and order dated
March l 0, 1964 of the Bombay High Court in Criminal Appeals
G
H
•
A
B
MADAN LAL v. MAHARASHTRA (Hidayatul/a/1, /.)
35
Nos. 1323 to 1325 of 1962 and 1073 to 1075 of 1962 respectively.
Nurudclin Ahmed, G. L. Sanghi and 0. C. Marhur, for the
appellants (in all the appeals).
M. S. K. Sastri and S. P. Nayar, for the respondent (in all
the appeals).
Purshottam Trikamdas and I. N. Shroff, for the complainants
(in all the appeals).
The Judgment of the Court was delivered by
Hidayatullah, J. . This judgment shall govern the disposal of
C
Criminal Appeals Nos. 99-104 of 1964.
These appeals arise
from a number of criminal prosecutions started against four
·persons for cheating. In the original court there were as many
as nine cases filed against them which were tried simultaneously,
three of the same kind being tried together, as required by the
Code of Criminal Procedure. As a result of the trial the lirst
D
and the fourth accused were acquitted. Accused Nos. 2 and 3
were convicted.
They were sentenced in the aggregate to
rigorous imprisonment for two years and were imposed
fines
lotalling Rs. 15,000 each.
The convicted accused appealed to
the High Court.
The State Government also appealed against
the acquittal of accused No. 4. The High Court maintained the
E ·conviction and sentences qf accused Nos. 2 and· 3 and further set
aside the acquittal of accused No. 4 who on conviction was sentenced to rigorous imprisonment for two years but no fine was
imposed on him.
The convicted accused have now filed these
appeals by special leave.
F
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The case started on tlie complaint of one Bansilal who was
a partner in a firm Jawarmal Ramkaran of Kalbadevi, Bombay.
It had five or six partners. This firm deals as
Bankers and
Commission Agepts.
The accused are connected with another
.firm the name of which is Ramnarayan _Rajmal Rathi. The ~t
accused ( Laxminarayan Ramchandra) and the second accused
(Murlidhar Daga) were partners of this firm and were doing
business at Jhaveri Bazar, Bombay. The third accused Motilal,
who is the brother of accused No. 2 was working as a Muilim
in the firm.
Accused No. 4, Madan Lal, is a nephew of accused Nos. 2 and 3 and was working as a clerk.
The third firm
which is involved in the narration of facts was called Satyanarayan Shymsunder Firm at Tejpur, Assam.
Accused No. 4 is
a partner of that firm. In the High Court the first firm is shortly described as J. R. Firm. the second as R. R. Firm and 'the
,third as S. S. Firm.
We shall adhere to these abbreviations in
this judgment.
36
SUPREME COURT REPORTS
[1968] 3 s.c.R.
It is an _admitted fact that the R. R. Firm had dealings with
the J. R. Frrm for several years and had borrowed in the past
large sums of money from the J. R. Firm. In September, 1959
accused No. 3 approached Bansilal representing that the R.R'.
Firm had tci supply cloth to certain ·constituents in Assam and
that the R.R. Firm needed money for this pu1pose.
Accused
No. 3 offered to the J .R. Firm a commission of 2 as. on every
Rs. 100 and 6t per cent interest. It appears that Bansilal wanted that some security should be furnished and accused No. 3
promised that the railway receipts, invoices and .the
hundies
drawn upon the S.S. Firm would be handed over as security.
For a time things went on quite regularly and honestly.
As
many as 110 hundies and railway receipts were .tendered and
the liability was also met.
This involved a sum of no less than
Rs. 1,20,000. .Later, however, the R.R. Firm began to inflate
its invoices and to draw hundies for exaggerated amounts. When
these hundies and the invoices reached the S.S. Firm they were
returned. Thy hundies and the railway receipts were then returned and .the Bank got back the goods from the railway. authorities.
The parcels were opened and surveyed.
T t was found that the
goods represented by the invoices were not in the parcels and
that cloth very much less in value was actually despatched. In
other words, it was apparent that the RR. Firm was inflating
the invoices and drawing up exaggera~ed hundies although cloth
which was being sent was very much less in value. In other
words, the drawing of the money on the security of the invoice&
and hundies from the J.R. Firm was an act of cheati"ng
pure
and simple because if the J.R. Firm knew that the invoices and
hundies were worthless or at any rate not of sufficient worth they
would not have advanced such large sums of money to the R.R.
Finn. It ffi\lY be mentioned here that in this way 40 invoices and
hundi~s were found to be inflated and they invofved a sum of
Rs. 1, 10,000 or thereabouts.
The matter might not have come to a head but for an event
which made the R.R. Firm incompetent even to pay the hundies
if tendered .to them. A . petition in insolvency was filed against
them and they were declared insolvent on December 30, 1959.
The first hundi and invoice which was rejected by the S.S. Firm
was as far back as October 8, 1959. Although the R.R. Finn
wrote to .the J.R. Firm that the hundies may be tendered to them
for payment no action appears to have been taken. Jn this way"
the offence of cheating which really arose when the inflated if,.
voices and hundier were tend.~red representing not the full value
in tenns of bales was made out.
Accustd Nos. 2 and 3, 'vho
were partner and Muni.m, respectively were held to be responsible for this cheating.
Accused. No. 1 was acquitted because he
was only a financing partner and had no knowledge about .these
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MADAN LAL v. MAHARASHTRA (Hidayatul/ah, /.)
37
happenings.
His acquittal was allowed to remain because th~
State did not appeal against his acquittal. Accused No. 4, who
was only a clerk, was also acquitted by the court of trial on the
ground that he had made no representation to the J. R. Firm and
thus was not guilty of any offence. It may ·be stated here that no
charge of conspiracy was made. If it had· been, other considerations might have applied.
Since accused No. 4
was
directly
charged with cheating some representation on his behalf had
to be made out. It is on this point that the court o[ trial aiid the
High Court have differed, .the court of trial having held that there
was no such representation and the High Court, taking the view,
on evidence, which we shall consider presently, that accused No.
4 must be held to be equally guilty.
In this appeal it is practically admitted that the offence was
committed although Mr. Nuruddin
Ahmed
described
it
as
rechnical because (a) Bansilal knew what was being done, (b)
this ruse was adopted so that the other partners of the J. R .. firm
may not object, and ( c) but for the intervention of inso!Vency
the hundies if they had been presented for payment to the RR
Firm would have been .met. He draws our attention to the fact
tha'. as many as 110 invoices and hundies were regular and also
met by the R.R. Firm. He pleads for a mitigation of the sentence
on this ground.
As regards accused
No. 4, Mr.
Nuruddin
Ahmed submits .that his case has been wrongly viewed by the,
High Court which has read too much into his actions and has.
thus erroneously held that he was responsible for cheating the
I.R. Firm.
Mr. Nuruddin Ahmed also draws our attention to
what the High Court did during the hearing of the appeal. Jt
appears that it was, represented to the High Court that accused
No .. 2 was willing to bring the money in payment of his share
of the losses caused to the J.R. Firm. The High Court adopted
an unusual procedure by adjourning the appeal and affording
accused No. 2 an opportunity of tendering his share of the amount.
Accμsed No. 2 brought a sum of Rs. 35,000 and deposited it
in Court. It appears from the High Court judgment that it had
assured his counsel that the question of reduction · of sentence·
would be heard after the amount
was deposited.
When
the
amouRt was deposited the matter was heard again.
The High.
Court found it difficult to reduce the sentence. It returned the
balance of the amount after retaining the gross amount of fine .
:mp<ised upcin accused No. 2 in the case. Mr. Nuruddin .Ahmed
contends · thai the High Court should have reduced the sentence .
and taken over the money which had been deposited fo.r payment
to ttie complaiiiant. He contends also that the· High Court was.
in error in deducting the amount of fine when no qu~rion of
reduction of sentence was to be considered. We shall say something 'ab<iut the procedure adopted in the High-Court preserttly.
38
SUPREME COURT REPORTS
(1968] 3 s.c.R.
We may .begin first by considering the case of the fourth
ac:cused. Evidence shows .that he was a mere cl.erk in the R.R.
firm.
No doubt he is a nephew of accused Nos. 2 and 3 but
there is nothing to show that he took any part in the negotiations
or in .the making out of the inflated invoices and hundies. We
have already said that no charge of· conspiracy was made and
his action as a mere clerk is capable of a different inteJ1lretation
untess we can attribute to him an intention to cheat the J .R.
Firm as did the other accused, On this part there is no evidence
whatever. The only evidence is that being a clerk he wrote sl>me
of the invoices and took to the J .R. Firm. There is also evidence
that at the instance of the J.R. Firm he drew up some pay-inslips which were later submitted, not by him, but by the J.R:
Firm to the Bank with the hundies. In our judgment this evidence falls short of the requirements of the law. No representation was made by the fourth accused to induce the J.R. Firm
to part with the funds. If a charge of conspiracy had been made
this evidence might have been relevant under s. 10 of the Evidence Act but as no charge of conspiracy was made the charge
of cheating by the fourth accused had. to be made out on good
and proper evidence. There is nothing to show that the fourth
·accused knew that the hundies were not going to be met or that
the invoices were in fact inflated.
In the absence of any such
proof it is diflicult to hold (as did thei High Court) that accused
No. 4 was also guilty of the offence of cheating. None of the
invoices which were written by the fourth accused was found
to be inflated.
The bad invoices were apparently written by
someone else and he was only instrumental in taking them to
the J :R. Firm as the servant of the R.R. Firm. Even if he wrote
some of the bad invoices or the pay-in-slips some more evidence
was needed before it could be held that he was instrumental in
cheating the J.R. Firm. On these grounds he was entitled to an
acquittal and the High Court erred in setting it aside in the
apr.al of the State Government.
We accordingly
allow
his
appeal and order his acquittal. He need' not surrender his bail
which was granted by this Court. The bail bond is cancelled.
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This brings. us to the question of the sentence of the remainG
ing accused, viz,., accused Nos. 2 and 3.
From what we have
said above it is quite clear that these accused seem now to
admit that they were guilty of cheating the J. R. Firm. Their
case is that Bansilal knew that the invoices and the hundies were
inflated, but that is no excuse because Bansilal was
not the
only person involved. There was the J. R. Firm who as Bankers
H
and Commission Agents would never have lent such large sums
of money if they knew that the invoices and hundies did not. represent the proper villue of the goods. It is also to be noticed that
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MADAN LAL v. MAHARASHTRA (Hidaj'atul/ah, J.)
39
Bansilal denies alJ this and the suggestion of the second and the
third accused that he knew everything is merely an assertion. It
appears to us that having found a financier who was willing to
lend money on the security of invoices and hundies, the second
and the third accused engineered a plan under which a larger
sum could be borrowed than what could be if the true facts were
known.
In other words, they devised a method under which
inflated invoices and false hundies would enable them to get
at larger loarts than the actual value of the goods represented.
There was thus cheating and their conviction must be held to
be proper. We do not think that the offence can be described
as merely technical. It was quite clearly a bold attempt .to ge.t
more money through false documents which were to form secu·
rity for the loans. It is true that in some way they might even
have paid this money if the hundies had been tendered to them
but there is nothing to show that they were in a position to meet
the liability because the insolvency which
supervened
clearly
indicates that they were not in possession of funds. It is their
insolvency or lack of funds which must have induced them to
adopt this method.
Having, therefore, held that the offence against them is prov·
ed we are now to consider the question of sentence in the case.
We pointed out that the High Court adopted an unusual .course
in the case. In fact a similar course was suggested to us at the
hearing by submitting that we should
increase
the fine
and
reduce the sentence to the period und.'!rgone.
In other words,
the accused were adopting the same method which they did in
the High Court, namely, that they will pay the amount
which
they have wrongly realised from the J.R. Firm and this ·may be
taken in mitigation of the punishment imposed on them. In our
opinion, it is very wrong for a court to enter into a bargain of
this character Offences should be tried and punished according
to the guilt of the accused. If the. Court thinks that leniency can
be shown on the facts of the case it may impose a lighter sen·
tence.
But the court should never be a party to a bargain by
which money is recovered for the complainant through
their
agency.
We do not approve of the action adopted by the High
Court and for the same reason we would refrain from accepting
the suggestion of Mr. Niμ11ddin Ahmed that we should inerease
the fine with a· view to reducing the sentence of imprisonment.
We, however, think that in this case, but for the supervening
insolvency the accused might have paid back the money to the
J .R. Finn. The fact that they were on this occasion and also in
the High Court willing to pay shows that if the matter had not
been concluded against them by .the insolvency they might even
have attempted to satisfy the J.R. Firm. They were influenced
40
SUPREME COURT REPORTS
(1968) 3 S.C.R.
by the ease with which they could borrow money and therefore
tempted to depart from the strict path of honesty to meander into
an offence of cheating. Taldng this into consideration we think
that although we cannot condone such offences there is room for
reduction of the sentence of imprisonment imposed upon these
two appellants. We reduce their sentence to one year's rigorous
imprisonment.
The sentence of fine imposed on
them shall
stand. With this modification the appeal of the second and the
third accused will stand dismissed. Their bill is cancelled and
they shall ,~urrender forthwith.
V.P.S.
Sentence reduced and Appeal dismisseil..
a