'No Deceitful Intention': Kerala High Court Quashes Cheating Case Against Cancer Patient Who Failed To Clear Loan Taken Against Sister's Property

The Kerala High Court last week quashed criminal proceedings initiated by a woman against her brother and a relative (the 1st and 2nd accused, respectively), who failed to repay a loan taken against her property for the 1st accused person's cancer treatment.

Justice A. Badharudeen observed that accused-petitioners failure to fulfil the terms of the contract to repay the amount and to discharge the liability would only amount to 'breach of contract' and not the offence of cheating.

The Court emphasized that mere breach of contract would not constitute an offence of cheating and that 'deceitful intention' to get wrongful gain to the accused and corresponding loss to the victim ought to be established at the very inception in order to constitute the offence of cheating. 

"It is true that, if accused Nos.1 and 2 failed in fulfilling the terms of the contract to repay the amount and to discharge the liability, then, the said act would attract only breach of contract and the same shall not come under the purview of cheating. That is to say, mere breach of contract by itself, would not constitute an offence of cheating and cheating as an offence shall be established by the ingredients hereinabove extracted and by establishing deceitful intention to get wrongful gain to the accused and corresponding loss to the victim at the very inception," Justice Badharudeen observed. 

The brother of the complainant-widow and his relative had availed a loan amounting to Rs.1,50,000/- and had offered the complainant's property towards security of the loan by creating mortgage. The complainant alleged that the accused failed to repay the amount, following which the bank proceeded against the property to recover the debt. The complainant thus alleged that the accused persons had cheated her without repaying the loan amount.

Advocate Liju M.P. contended on behalf of the accused petitioners that no offence of cheating under Section 420 IPC would be attracted in the present case. It was averred that the complainant's property was mortgaged in order to secure money for cancer treatment, thereby indicating that there was no dishonest intention on their part at the time of inception to cheat or defraud the complainant in any manner. 

The Public Prosecutor G.P. Manu on the other hand, argued that the petitioner's intention to cheat the complainant was evident from the very inception. 

The Court at the very outset perused the ingredients to constitute the offence of cheating, as had been laid down by the Apex Court in the case of Raghavender N. v. State of Andhra Pradesh, CBI (2021). These include: (i) deception of any person; (ii) fraudulently or dishonestly inducing that person to deliver any property to any person; and (iii) mens rea of the accused at the time of making the inducement. 

The Court further noted that it is settled position of law that "the phrase 'dishonestly' emphasizes a deliberate intention to cause wrongful gain or wrongful loss, and when this is coupled with cheating and delivery of property, the offence becomes punishable under S.420 IPC". 

The Court also took note of the Apex Court decision in Vijay Kumar Ghai & Ors. v. State of West Bengal & Ors. (2022), wherein it was categorically laid down that breach of contract could not give rise to criminal prosecution for cheating, and that the basis of cheating was that of fraudulent or dishonest intention. 

The Court was of the view that the loan amount had been availed by mortgaging the complainant's property in order to secure money for the cancer treatment of her brother. 

"It may be true that the understanding between the parties might be to clear the loan by accused Nos.1 and 2. When the property of the complainant was offered as security to avail loan to meet the cancer treatment of her own brother, the said purpose could not be held as an act, where deceitful intention is available at the threshold or inception," the Court observed. 

It thus held that it could not be stated that the accused persons had deceitful intention at the very inception to cheat the de facto complainant in any manner, even though they may have failed to fulfill the contract by repaying the amount, so as to discharge the property from liability.

It thereby quashed the criminal proceedings against the petitioners. 

Case Title: Vijayan & Anr. v. State of Kerala & Anr. 

Citation: 2023 LiveLaw (Ker) 334 

Click Here To Read/Download The Order