QAISER AHMED HAMIDI, J. -- Appellant Mian Jamshed Hussain was tried by the Presiding Officer, Special Court (Offences in Banks) Karachi, for the offence under section 403/406/420/109, P.P.C., who found him guilty for the offence under section 420, P.P.C. And vide judgment, dated 27th February, 1991, sentenced him to suffer R.I. For five years and to pay a fine of Rs.200,000,00 (Twenty millions) or in default to suffer R.I. For 18 months. Out of fine, if recovered Rs.71,00,0W plus mark-up were ordered to be paid to the Bank to be re-appropriated towards the loan in question. In case the fine was not paid within six months, the Mizan Steel Mills, Karachi, including the plot on which it is situated was ordered to be auctioned to reimburse the claim of the Bank. The appellant was also extended the benefit of section 382-B, Cr.P.C. While computing the sentence. By this appeal filed under section 10 of the Offences in Respect of Banks (Special Courts) Ordinance, 1984, the appellant has challenged his conviction and sentence.
2. Briefly the case of the prosecution is that the appellant alongwith absconding accused Mian Muhammad Omer, Mrs. Sultana Jamshed and Mrs. Shahzadi Khalid, as Managing Director/Directors of Mizan Re-rolling Mills, Karachi applied jointly for loan from Main Branch of National Bank of Pakistan on 9-9-1984 under the Small Loan Scheme and a sum of Rs.56 lacs was sanctioned. As a collateral the mills including the machinery, structure and the plot on which it was situated were mortgaged with the Bank. On 21-8-1984, the appellant and the absconding accused named herein applied for a further loan under cash finance facility for working capital requirement.
To avail of this loan a cash finance account bearing No.M-52 was opened on 27-10-1985 at the Main Branch of National Bank of Pakistan. An amount of Rs.15 lacs was credited by the Bank in the above account, which was withdrawn by the appellant. The grievance of the National Bank of Pakistan is that under the agreement between the Bank and the accused persons the latter had to repay the above loan in the form of monthly instalments of Rs.One lac, but they failed to pay even a single instalment in spite of reminders and notices. It is alleged that the appellant prevented the Bank officials from entering the premises of the mills and inspecting the working thereof, with the result that the mills did not work at full capacity and it was gradually slowed down and ultimately closed. It is further alleged that the appellant removed the parts of machinery worth Rs.34 lacs in contravention of the agreement executed by him and other absconding accused, who not only misappropriated the amount of Rs.71 lacs plus mark-up, obtained as loan, but they also committed breach of trust by removing the machinery from the premises. On 25-5-1987 the SeniorVice- President and Chief Manager, Main Branch of the National Bank of Pakistan sent a written report to Deputy Director, F.IA. (C.B.C.) Karachi, which was incorporated in F.I.R. Book. Wali Muhammad Sehto, Inspector and Muhammad Hashim Qureshi, Inspector F.IA. Conducted the investigation and after usual investigation sent up the appellant to stand trial. Mian Muhammad Omer, Mrs. Sultana Jamshed and Mrs. Shahzadi Khalid were absconding and consequently they were sent up in absentia.
3. Charge under section 403/406/420/109, P.P.C. Was framed against the appellant and he was asked whether he pleads guilty or claims a trial, to which he pleaded not guilty. At the trial the prosecution examined Akbar Ali Barolia, Vice-President (P.W.1), Najam-ul-Hasan, Godown Inspector (P.W.2), Ijaz Ahmad, Officer (P.W.3), Muhammad Abdul Malik, Officer (P.W.4), Abdul Rashid Khan, AN.P. (P.W.5), Abdul Rauf, Resident Engineer (P.W.6), Muhammad Ghous, Chowkidar (P.W.7), Zubair Ahmad, Officer (P.W.8), Syed Talib Hussain, Godown Inspector (P.W.9), Muhammad Hashim Oureshi, Inspector F.1-A. (P.W.10), Wali Muhammad Sehto, Inspector, F.I.A. (P.W.11), and Adnan Haider, Surveyor (P.W.12).
4. In his statement recorded under section 342, Cr.P.C. The appellant has denied each and every allegation put to him except the loan of Rs.15 lacs for working capital purposes which he admits to have availed of. The appellant has admitted his signatures on almost all the documents, but denied the contents thereof by stating that he was made to sign on blank papers. The defence of the appellant in his own words is as follows:-- "I had paid from my own sources an amount of Rs.32 lacs to the Mill---Wallas for the purchase of shares. The total value of the shares was fixed at Rs.48 lacs. The balance of Rs.16 lacs has not yet been paid to them. The Mill-Wallas had received Rs.48 lacs from the Bank without my consent. The Bank officials have been obtaining my signatures on blank papers and preparing documents by themselves, the contents of which were never read over to me. Had I been allowed to run the factory and not arrested in this case I would have paid up the loan which I received."
The appellant did not step into the witness-box in disproof of the charge. He also led no defence.
5. On the assessm ent of evidence available on record, both oral as well as documentary, the learned Presiding Officer found the appellant guilty and convicted him in terms stated hereinabove. This judgment, dated 27th February, 1991 is the subject-matter of the present appeal.
6. There is overwhelming documentary evidence on record to prove that the appellant had taken the loan of Rs.71 lass from the Main Branch of National Bank of Pakistan. Besides other documents which are available on record the attention of the appellant was drawn to the following documents executed by him in favour of the Bank for the purpose of availing of the loan:--
(i) Promissory Note, dated 10-7-1985 for an amount of Rs.65,63,734 (Exh.2/M-1).
(ii) Resolution of the Board of Directors of Mizan Steel Ltd., signed by the appellant as Chairman/Director of the Mills, dated 10-7-1985 (Exh.2/M).
(iii) Mortgage Deed dated 20th June, 1985, bearing the signatures of the appellant and those of other three Directors (Exh.2/M-3).
(iv) Guarantee for repayment of loan of Rs.56 lacs signed by the appellant and the other three Directors (Exh.2/M-4).
(v) Agreement for financing, dated 26-7-1985 (Exh.2/M-2) signed by the appellant and the other three Directors of Mizan Steel Ltd. and he was asked whether he executed the above documents and put his signatures thereon, to which he replied as follows:-- "I admit my signatures on all these documents. The promissory note (Exh.2/M-1) was executed by me, but on other documents my signatures were obtained on blank papers and I was assured by the Bank officials that they will do the needful. I had appeared before the Registrar and admitted the mortgage deed (Exh.2/M-3)."
7. The solemnity of a document ranks higher and forms superior type of evidence than any other form of evidence. Where documentary evidence is available, it will generally play a decisive part in the decision of the point to which it relates. It is beyond imagination that the appellant who is an educated person would put his signatures on blank papers. The appellant has admitted his signatures on almost all the material documents available on record and it does not lie in his mouth to say today that he had simply put his signatures on the documents so produced. We are, therefore, in entire agreement with the assessment of evidence made by learned Presiding Officer on this limited point.
8. Admittedly the appellant was charged for the offence under section 403/406/420/109, P.P.C. The charge under section 403/406/109, P.P.C. Was, however, dropped and the appellant was found guilty for the offence under section 420, P.P.C. Alone for the reasons which find place in paragraph 44 of the impugned judgment in the following words:-- "It has next been urged that the charge so far as it relates to breach of trust is not made out against the accused. The property i.e. Mizan Steel Ltd. Alongwith plot, structure, the machinery etc., which was mortgaged with the Bank to secure the disputed loan, remained the property of the accused in spite of the mortgage and as such he cannot be deemed to commit breach of trust in respect of his own property. He has referred to section 403, P.P.C. According to which the property alleged to have been misappropriated must be owned by the complainant. In the present case, according to the learned counsel, the mortgaged property did not become the property of the Bank. The ownership vested in the accused in spite of the mortgage hence the accused cannot be deemed to have been entrusted with any property by the Bank. Consequently, the offence under section 403/406, P.P.C. Cannot be deemed to have been committed. Even if this plea is accepted, the accused could not be absolved of the liability so far as the offence of cheating under section 420 is concerned as shall be evident from what follows."
9. The question for consideration, therefore, is whether on the evidence available on record the offence of cheating is made out. Since the decision of this case hinges on the interpretation of section 415, P.P.C., which defines the offence of cheating it would be convenient to reproduce it, which is as follows:-- "415. Cheating. Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person (or any other person) in body, mind, reputation or property, is said to ---cheat---."
10. To constitute cheating under this section there must be:--
(1) deception of any person and thereby,
(2) (a) fraudulently or dishonestly inducing that person-- (i)to deliver any property to any person, or
(ii) to consent that any person shall retain any property, or
(b) intentionally inducing that person to do or omit to do anything which he would not do or omit if he were not so deceived and which act or omission causes or is likely to cause harm to that person in body, mind, reputation or property.
(See Penal Law of India by Dr. Gour, 10th Edition)
11. The dividing line between a case of breach of contract and a case of cheating is often very difficult to draw and the prudent course is, as pointed out by Muhammad Ali Sayeed, J., in the case of Jamot Ghulam Muhammad and 3 others v. The State and another reported in 1972 P Cr. L J 1130:- - "While meeting this approach I cannot but observe that ingredients of offences under sections 420, 403 and 406 are to a substantial extent available in most cases of breach of contract. Similarly a default by a borrower in repayment of a debt without admission of liability may also frequently partake of the character of an offence under section 406, P.P.C. There are numerous other instances of defaults in transactions purely civil in nature but which often appear to answer fully the ingredients of a criminal offence; and with a little clever glossing over every such case could be converted into an earnest prosecution. It is here that a Court is called upon to act with circumspection and to exercise the utmost care and caution before it is persuaded to employ its process for compelling attendance. This duty is heavier in private complaints which relate to transactions apparently civil in nature. The tendency to view a criminal action as a handy means to constrain a person's conduct cannot be underscored. We are still left with people in this country who are prepared to pay a price for their fair name and the spectre of a criminal prosecution can often compel them easily to relent on a stand which is otherwise well--founded in law and in equity. It is this growing abuse of the process of a Criminal Court that has to be guarded against.
The difficulty for the Court itself often arises on account of the overlapping nature of a civil and criminal cause. But yet with a prudent application of mind it should be possible to draw a distinction between the two. It is perhaps well to remember that the word `crime' suggests that not only should a man have brought about the forbidden actus but also that the line of conduct which he had voluntarily continued to that conclusion was inspired, or at least accompanied, by mens rea. The accused, in other words, shall have been actuated by a legally reprehensible attitude of mind."
12. The evidence which has come on record is that the appellant wanted to purchase Mizan Steel Ltd. Partly out of the amount of loan so applied. Admittedly the application of loan (Exh.2/B) was processed by the Advance Section of the National Bank of Pakistan and according to the usual practice letters to several banks were sent to get their opinion about the integrity of the appellant.
Two of such letters were replied, one by United Bank Ltd. (Exh.2/C) and the other by Alkam International Ltd. (Exh.2/D). The letter of United Bank Ltd. Is relevant and for the sake of convenience is reproduced in extenso.
"Mian Jamshed Hussain son of Mian Karam Ellahi maintains a personal account with our Shershah Branch (LD-1376) which is quite satisfactory. Engaged as dealers in iron and steel etc. Propose to purchase Mizan Steel Mills Ltd. Shershah S.I.T.E., Karachi for which part payment has been made.
Their over all means are estimated to be very good."
13. The evidence of Akbar Ali Barolia (P.WA) who is the star witness of the prosecution and whose testimony seems to have weighed considerably with the trial Court in tipping the balance against the appellant, has made it clear that the loan was sanctioned after observing all the formalities and the amount was released after being satisfied about the financial position of the appellant. We are also prepared to assume that the witnesses who were regarded as reliable by the learned Presiding Officer were in fact trustworthy, but even then the prosecution was obliged to prove that the appellant had a dishonest intention to defraud the Bank from the very inception, and this in our view is the crux of the whole matter. A case, which is on all fours with the present one, is the case of Reazuddin v. Emperor reported in AIR 1934 Pat. 231, wherein it was held that a finding that the accused was trying to get out of a bad bargain is not a finding that from the beginning the accused had the intention of defrauding the complainant and the accused cannot be convicted of cheating.
14. In the case of Sheosagar Pandey v. Emperor reported in 37 Cr. L J 38, it was again observed:-- "The distinction between a case of mere breach of-contract and one of cheating depends upon the intention of the accused at the time of the alleged inducement which may be judged by his subsequent act but of which the subsequent act is not the sole criterion."
15. The case of Harnam Singh and another v. Emperor reported in 38 Cr. L J 845, is also relevant on the point in issue, wherein it was observed:-- "Apart from these circumstances it is difficult to say that there is anything to establish criminal intent at the time of the alleged bargain. It may have been the case that the two petitioners intended to carry out the bargain at the time and, if that is so, no offence was committed under section 420 Indian Penal Code. It was contended that the fact that the petitioners now deny the transaction altogether and refuse to return the money showed that they had a criminal intent from the beginning. This is not necessarily so and their denial may merely amount to the usual mistaken attempt to protect themselves from the result of this prosecution."
16. By parity of reasoning it must be held that in the present case also the appellant disputed the receipt of loan under a mistaken attempt to protect himself from the result of the criminal prosecution.
17. In the case of Mobarik Ali Ahmad v. The State of Bombay, reported in PLD 1958 SC (Ind.) 115, the test to determine whether evidence discloses a breach of civil liability or criminal offence under section 420, P.P.C. Was laid down and it was held that the question depends upon whether the complainant in parting with his money acted on the representations of accused and in belief of the truth thereof and whether these representations when made were in fact false to the knowledge of the accused and whether he had a dishonest intention from the outset.
18. This question was also considered in the case of Banchamani Saha v. Kshir Babu Sinha reported in AIR 1959 Tripura 38, wherein it was observed:-- "To sustain a conviction under section 420, P.P.C. It must be established beyond reasonable doubt, that the accused practised deception and thereby dishonestly induced the person so deceived to deliver property. Subsequent denial of a transaction or refusal to return the money does not show that there was the necessary criminal intent from the beginning."
19. In the case of Prithiraj Bacha v. The State reported in PLD 1959 Dacca 88, a Division Bench held as follows:-- "From the above it is clear that in a case like this in order to constitute cheating it must be established that some one is made to part with some property on the promise of another to return something in lieu thereof which the latter had no intention to give. The initial intention to deceive, therefore, must be established in order to justify a conviction for cheating."
20. In Abdul Awal Chowdhury v. Muhammad Waliullah reported in PLD 1961 Dacca 53, this question was again considered and it was remarked that for a conviction under section 420, P.P.C., criminal intent at the time of offence must be established, the test in cases of cheating is not what the accused did months afterwards, but what was in his mind at the time when, and under what circumstances, he received the money from the complainant and whether the accused then intended to pay what he promised to pay. It was further observed that the mere fact that the accused denied the transaction at the trial and refused to return the money, does not necessarily show that he had a criminal intent from the beginning and his denial may merely amount to the usual mistaken attempt to protect himself from the result of the prosecution.
21. The case of Hari Prasad Chamaria v. Bishun Kumar Surekha and others reported in AIR 1974 SC 301, is the nearest parallel to the present case, wherein it was held:-- "We have heard Mr. Maheshwari on behalf of the appellant and are of the opinion that no case has been made out against the respondents under section 420, Indian Penal Code. For the purpose of the present appeal, we would assume that the various allegations of fact which have been made in the complaint by the appellant are correct. Even after making that allowance, we find that the complaint does not disclose the commission of any offence on the part of the respondents under section 420, Indian Penal Code. There is nothing in the complaint to show that the respondents had dishonest or fraudulent intention at the time the appellant parted with Rs.35,000. There is also nothing to indicate that the respondents induced the appellant to pay them Rs.35,000 by deceiving him. It is further not the case of the appellant that a representation was made by the respondents to him at or before the time he paid the money to them and that at the time the representation was made, the respondents knew the same to be false. The fact that the respondents subsequently did not abide by their commitment that they would show the appellant to be the proprietor of Drang Transport Corporation and would also render accounts to him in the month of December might create civil liability for them, but this fact would not be sufficient to fasten criminal liability on the respondents for the offence of cheating."
22. To establish the case under section 420, P.P.C. There must have been clear evidence to the effect that the appellant had a guilty mind from the very outset, which evidence as observed earlier, is lacking in this case. In fact a simple case of breach of contract was turned into a criminal case just to put pressure upon the appellant so that he may repay the loan. It may be added that the parties have already resorted to civil litigation. We think that the general proposition of law is well-settled that a broken promise by itself does not bring the case within the mischief of cheating.
In the elegant words of Newsam, J., expressed in M.M.S.T. Chidambaram Chettiar v. Shanmughdm Pillai, reported in AIR 1938 Mad. 129:-- "In the world of business things are often done which are betrayals of confidence and deceptions which arouse moral indignation but are nevertheless civil wrongs which can be righted by Civil Courts and are not crimes which can be punished by a Criminal Court. Not every immoral act is criminal and it is an abuse of the process of a Court to attempt to create new crimes in order to compel men to conform to a high standard of probity in business dealings or to force them to execute their premises."
23. With regard to the shifting of machinery from the precints of the mills, the learned Presiding Officer has placed implicit reliance upon the evidence of Adrian Haider (P.W.12) who had made the survey of the mills and has submitted such report. He has, however, lost sight of the fact that no conviction under section 403, P.P.C. Or 406, P.P.C. Was recorded against the appellant and consequently this piece of evidence will not lead to a conclusion that the appellant had no intention to repay the loan from the very outset.
24. As a result, therefore, of this unsatisfactory state of evidence in this case we find ourselves unable to uphold the conviction of the appellant and giving him the benefit of a reasonable doubt, we set aside his conviction and sentences, and would direct that he may be set at liberty, if not required in any) other case. The fine, if paid, be returned to him.
25. In the result the appeal is accepted. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.