Withholding Of Salary Or Emoluments Does Not Fall Within The Ambit Of Offence Of Cheating: Bombay High Court

Background Facts

Rajiv Bansal (Petitioner) was the erstwhile Chairman and Managing Director of Air India Limited (AIL). The other Petitioners were the current and former Directors/Managers of AIL. K. V. Jagannatharao (Respondent) joined AIL as an Assistant Flight Pursuer in 1987. In 2013, AIL issued 2 notifications to withhold 25% of Performance Linked Incentive due to dire financial condition of AIL but AIL did not issue the statutory notice of change as required under Section 9A of the Industrial Dispute Act, 1947 (ID Act). Writ Petitions were filed against the said notification and the Bombay High Court declared the notifications as illegal. However, the Bombay High Court considering the peculiar facts of the case held that the workmen would be entitled to receive the same benefits as were being received by them on the date of judgment. The Division Bench of the Bombay High Court further clarified that if AIL desired to change the conditions of service of the workmen, then it shall give a notice of change by 31.07.2014. The aforesaid decision of the Bombay High Court was challenged before the Supreme Court by an SLP which is pending till date.

Pursuant to directions by the Supreme Court in the aforesaid SLP, AIL transferred the arrears of salary to the workmen but did not pay any interest on the said amount. A verification statement under Section 200 of Code of Criminal Procedure, 1973 (CrPC) was filed by the Respondent alleging that withholding of salary and allowances without following the due process of law amounted to offences punishable under Section 120B, 409, 415 and 420 of the Indian Penal Code, 1860 (IPC). By the challenged order, the Metropolitan Magistrate observed that a prima facie case existed against the Petitioners for offences punishable under Section 409 and 420 read with Section 34 of IPC. Thus, the writ petition was filed against the challenged order

It was contended by the Petitioners that no case for offences punishable under section 420 and 409 read with 34 of IPC was made out as the Magistrate committed grave error in law by issuing process in a mechanical manner. The Magistrate did not record the verification statement of the Complainant on oath and went on to issue the process on the basis of the typed verification statement tendered by the Complainant. Further, withholding a portion of salary and emoluments in the purported exercise of the employer's authority cannot be said to be cheating or criminal breach of trust. The workmen had civil remedies and they have resorted to those remedies as well.

On the other hand, it was contended by the Respondent that the ground on non-compliance of Section 200 of CrPC is not tenable as the Respondent tendered the verification which was endorsed by the Magistrate and the process was issued on the basis of that. Thus, it cannot be said that the verification statement was not recorded by the Magistrate. Further, there is no bar on initiation of criminal action where on the same set of facts a party can also resort to civil remedies. The act of withholding of salary of the workmen without any notice under Section 9A of the ID Act was clearly with criminal intent.

Findings of the Court

The court observed that on direction of the Supreme Court, AIL has already paid the arrears in salary and the only controversy revolved around the claim for interest. However, even if the court proceeded on the premise that AIL could not have deducted a portion of salary/emoluments without giving a notice of change under Section 9A of the ID Act, the fact that there is a penalty provided under section 31(2) of the ID Act for non-compliance of Section 9A does not imply that such non-compliance constitutes the offence of cheating.

The court held that for the offence of cheating, there needs to be deceit coupled with injury. Cheating involves deception, fraudulent and dishonest inducement and thereby making the person deliver any property or to consent that any person shall retain any property. The court further held that

“The withholding of a portion of the salary/emoluments by no stretch of imagination can fall within the dragnet of the offence of cheating as the employer cannot be said to have either deceived the employee or fraudulently, or dishonestly induced the employee to deliver the property or give consent to any person to retain the property or intentionally induced the employee to do or omit to do anything, which the employee would not do or omit, if he was not so deceived.”

The court further held that to constitute the offence of cheating, the intention of the accused should be dishonest from the inception of the transaction. However, the act of AIL to deduct the salary/emoluments was in exercise of its authority as an employer. Terming such deduction as illegal is different than terming such deduction to be cheating.

Further the offence of criminal breach of trust is also not made out even if the allegations in the complaint are taken at par as it cannot be said that there was any entrustment of any property by the employees to the employer. Further it cannot be said that the employer had acted in breach of any legal contract made by the employer which could amount to breach of trust.

The court further observed that even on procedural grounds, the Magistrate had made an error in not recording the verification statement of the complainant on oath. Reliance of placed on the judgment of Mohd. Nawaz Iqbal Shaikh vs. The State of Maharashtra and another wherein it was held by the Bombay High Court that Section 200 of CrPC, makes it obligatory on the part of the Magistrate to record the statement of the complainant or his witnesses on oath before taking cognizance of the matter.

With the aforesaid observations, the court allowed the writ petition.

Case No.- WRIT PETITION NO. 1014 OF 2023

Date of Order- 10^th May, 2024

Case Name- Rajiv Bansal & Ors vs State of Maharashtra and Ors

Counsel for Petitioners- Mr. Aniket Nikam, Mranal Mandhane and Shiva Gaur, i/b Nazish Alam, for the Petitioners

Counsel for Respondents- Mr. S. R. Aagarkar, APP for the State/Respondent No.1. Mr. K. V. Jagannathrao, Respondent No.1-in-person

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