Dharmadhikari, J.
1. Complainant Chintaman Gajanan Deo filed a complaint against the accused-respondent No, 1 for prosecuting the accused for an offence under Section 420 of the Indian Penal Code.
The complainant who is an employee as a teacher under the Zila Parishad, Yeotmal, was posted to village Arjuna. He used to come from Yeotmal every day to the place of his duty, and therefore, he decided to purchase a house from the accused. So a talk in that respect took place between him and the accused. One Madse Guruii (P. W. 2), who was also a teacher, was present during the course of these negotiations. The accused agreed to sell his house for Rupees l,500/-. The complainant had made a specific enquiry from the accused as to Whether the said house was either mortgaged or had anv other encumbrances. The accused made a clear statement to the complainant that the house was free from all encumbrances and that he could purchase it safely. Relying on this representation of the accused, the complainant agreed to purchase the said house and ultimately purchased the same by sale-deed executed on 7-6-1968. The complainant paid to the accused an amount of Rs. 1,500/- and the sale-deed was duly executed and registered. The accused also delivered possession of the said house to the complainant.
2. In the month of October 1968 the complainant came to know that a proclamation of sale was affixed to the property proclaiming that it would be sold for recovery of the dues of Co-operative Thrift Society, Yeotmal. It transpired that the said house property was mortgaged with the Yeotmal Co-operativeThrift Society vide mortgage-deed dated 10-3-1952. The complainant had ultimately to pay the amount. Prior to the payment of the amount, the complainant approached the accused and enquired about the previous dealings and also informed him that the house was going to be auctioned. The accused, however, remained indifferent and stated that the complainant being a purchaser of the property is responsible for the payment of the mortgage dues to the Society. He refused to talk to the complainant and asked the complainant to leave his house. Because the complainant had already purchased the house he thought it expedient to protect his interest, and therefore, ultimately paid the loan of Rs. 275/- on 5-2-1969 and got the property released. In this view of the matter, as the complainant was cheated by the accused the present complaint was filed against the accused person.
3. The accused admitted that he had agreed to sell his house to the complainant. He further admits the execution of the sale-deed. He further admits that in the year 1962 he had obtained a loan from the Co-operative Thrift Society. Yeotmal and that he had mortgaged this house with the said Society. It is also admitted by him that on the day the house was sold by him to the complainant the loan was not repaid and the mortgage was in existence. However, it is stated by him that he had communicated this fact to the complainant orally and that knowing full well about the said mortagage the complainant agreed to purchase the house. According to the accused, the said house was in fact sold for Rs. 1,732/-, but the complainant paid him an amount of Rs. 1,500/- only after deducting an amount of Rs. 232/- on account of this loan. The accused denied that he has ever suppressed or concealed the fact that the house property was already mortagaged. He also examined one Ganesh Baliram in his defence.
4. After appreciating the evidence on record the Judicial Magistrate. First Class, Yeotmal came to the conclusion that the accused has made a positive statement that the house was free from encumbrances and acting on this representation the complainant purchased this house. Therefore, it is clearly established that the accused had cheated the complainant within the meaning of Section 415 of the Indian Penal Code. In this view of the matter the Judicial Magistrate. First Class, convicted the accused for an offence punishable under Section 420 of the Indian Penal Code, and sentenced him to suffer rigorous imprisonment for a period of one month and to pay a fine of Rs. 500/-, or in default of payment, of fine to suffer further rigorous imprisonment for a period of one month. It was further directed that if the fine amount is realised, an amount of Rs. 200/- shall be paid to the complainant by way of compensation,
5. Against this order of conviction and sentence an appeal was filed by the accused and the Sessions Judge, Yeotmal vide his order dated 6-7-1970 allowed the appeal set aside the conviction and the sentence imposed by the Judicial Magistrate, First Class. The learned Sessions Judge held that the liability arising out of the present transaction was clearly of a civil nature, and therefore, it cannot be said that the accused has committed any offence punishable under Section 420 of the Indian Penal Code, After relying upon the provisions of the Transfer of Property Act and particularly Section 55(1)(a) and Section 3 of the Transfer of Property Act the learned Sessions Judge came to the conclusion that the omission on the part of the appellant to disclose the fact of encumbrance cannot be said to be fraudulent. However, the learned Sessions Judge agreed with the findings of fact recorded by the learned Judicial Magistrate so far as the appreciation of evidence was concerned. It was found as a fact both by the Judicial Magistrate as well as the learned Sessions Judge that at the time of negotiations for the purchase of the property, the accused told the complainant that the property was free from all encumbrances. The Judicial Magistrate, First Class, as well as the Sessions Judge disbelieved the evidence adduced on behalf of the accused namely the evidence of D. W. 1 Ganesh. It was observed by the Courts below that no suggestions were made to the witnesses examined on behalf of the complainant about the fact that D. W. 1 Ganesh was present at the time of the negotiations. Therefore, ultimately it was held by the the Sessions Judge that the Judicial Magistrate, First Class, was justified in disbelieving the evidence of Ganesh that he was present at the time of the negotiations and at that time the accused had clearly told the complainant about the encumbrance. It was further held that D. W. 1 Ganesh was not present at the time when the talk took place. The learned Sessions Judge further held that the story put up by the accused and D. W. Ganesh that the house in fact was sold for Rs. 1,750/- out of which an amount of Rs. 250/- was retained by the complainant to discharge the loan of the Society cannot be accepted. Therefore ultimately a finding was recorded that the accused had not disclosed to the complainant the fact of encumbrance of the Society. However, in view of the provisions of Sections 3 and 55 of the Transfer of Property Act the learned Judge took the view that the controversy involved in these proceedings was of a civil nature. In this view of the matter the appeal filed by the accused was allowed. Against this order of acquittal passed by the Sessions Judge, Yeotmal, the present appeal has been filed by the complainant.
6. Shri Modak. who appears for the complainant-appellant before me, contended that the whole approach of the learned Sessions Judge to the question involved in these proceedings is illegal. The learned Sessions Judge has not noticed the provisions of Section 415 of the Indian Penal Code and particularly illustration (i). According to Shri Modak, the provisions of the Transfer of Property Act are irrelevant for deciding the controversy involved in these proceedings, Once it is found that when the property was sold the accused had made a representation that, there was no encumbrance on the property or the property was free from all incumbrances and believing this representation the complainant purchased the property and parted with the money, then it should have been held by the Court below that not only the representation of fact made by the accused was false to his own knowledge, but it was made with dishonest intention to cheat the complainant.
7. On the other hand, it is contended by Shri V. M. Golwalkar, who appears for the respondent No. 1-accused before me. that the dispute involved in the appeal is purely of a civil nature, apart from the fact that the accused had in terms told the complainant about the mortgage of the Society, and therefore, the complainant has retained an amount of Rs. 250/-. In any case it will be a case of a breach of contract which can give rise to a civil liability. He further contended before me that in fact the complainant had filed a civil suit for recovery of this amount against the accused and has secured a decree. He further contended that after passing of the decree the accused filed an application under the provisions of the Provincial Insolvency Act and has also shown the complainant as one of his creditors. All these facts clearly show that there was no dishonest intention on the part of the accused when he sold the property. On the contrary he has disclosed all the material facts and in spite of the knowledge of the mortgage of the Society, the complainant had purchased the property. Apart from this he further contended that in any case this is not a fit case where this Court should set aside the order of acquittal passed by the learned Sessions Judge as the case does not involve any question of public importance and the complainant had alternate remedy of approaching the Civil Court and in fact he has approached the Civil Court and has secured a decree in his favour.
8. So far as the finding of fact recorded by the Courts below are concerned, in my opinion, both the Courts below were right in coming to the conclusion that the complainant had made a specific enquiry from the accused about the encumbrance on the property and in terms the accused has stated that the said house is free from all encumbrances though he had a knowledge of a prior mortgage of the Society. Complainant Chintaman (P. W. 1) has specifically stated in his evidence that the talk took place between him and the accused. At that time the complainant, Madse Guruii and accused were present there. The agreement was settled at Rs. 1,500/-. He then enquired from the accused if there were encumbrances over the house, or whether it was mortgaged or sold to anyone and the accused told him that the house was free from all encumbrances and that it was neither sold nor mortgaged to anyone. He further stated that believing on this representation of the accused he did not make any further enquiries in this behalf and paid the amount. Subsequently when a proclamation was issued by the society for attaching the property and selling it in auction, he for the first time came to know about this mortgage. At that time also he approached the accused but the accused flatly denied his responsibility and on the contrary refused to talk to him. Ultimately for the protection of his property he had to pay the amount of Rupees 275/- to the Society. This version of the complainant is duly corroborated by Vishwanath (C. W. 2), who is also a teacher. This witness has specifically stated that in the month of June 1968 on 2nd or 3rd a talk took place at his residence, about the purchase of this house between the complainant and the accused. The complainant specifically enquired from the accused if there were' any encumbrances and the accused told him that the property was free from all encumbrances. No doubt the suggestions were made to these witnesses that actually the property was to be sold for Rupees 1,750/- but Rs. 250/- were retained by the complainant in view of the previous mortgage about which an information was given by the accused to the complainant during the course of negotiations. The suggestions in this behalf were specifically denied by both the witnesses. For establishing his own case the accused examined D. W. 1 Ganesh Baliram, who had also purchased a plot along with the built house from the accused. He tried to support the version of the accused by stating that the agreement took place in the house of the accused and at that time he was present and the sale price was fixed at Rs. 1,750/- and the accused had told the complainant that he had borrowed some amount from the Society on a mortgage. However, the evidence of this witness was rightly disbelieved by both the Courts below for the reason that at no time it was stated by the accused that this witness was present during the course of negotiations. However, it is interesting to note that when this witness also purchased the property from the accused he was also not informed that the house which was purchased by this witness had any encumbrances. At that time also he had asked the accused about the encumbrances of the house purchased by him and the Accused had told him that the house was free from all encumbrances. After one year of the purchase of the house by him he came to know that the house was not free from all encumbrances and it was also mortgaged to the Society. In view of this evidence on record, in my opinion, it is quite clear that during the course of negotiations about the purchase of the house by the complainant in spite of the specific enquiries the accused had not told the complainant that the said house was already encumbered for a loan taken from the Society and in view of this loan it was mortgaged in favour of the Society. There was an active representation by the accused of the fact that the house was not encumbrance at all and as a result of this dishonest inducement the property was purchased by by the complainant and he has parted with the money. Though the complainant as a purchaser had made a specific enquiry about the encumbrance he was told by the accused vendor that there was none, It is further clear from the record that the complainant had acted upon this representation rather because of this representation alone he has purchased the suit property.
9. Then the only question which remains to be considered is whether this false representation on the part of the accused could be said to amount to cheating as contemplated by Section 415 of the Indian Penal Code, or it will only amount to non-disclosure of a fact regarding which it was obligatory on the part of the purchaser to make reasonable enquiries as contemplated by the provisions of the Transfer of Property Act. It will have to be further seen ,as to whether the mortgage in favour of the Society being a registered document it constituted a sufficient notice to the purchaser and nothing further was required to be done by the accused as the vendor of the property.
10. The learned Sessions Judge has taken the view that in view of the explanation to Section 3 of the Transfer of Property Act the complainant shall be deemed to have a notice of this mortgage, The learned Sessions Judge has further observed that under Section 55 (i)(a) of the Transfer of Property Act read with the proviso at the end of said section there was no duty cast on the accused-vendor to tell the complainant about the said mortgage, and therefore, an omission on his part to disclose this cannot be said to be fraudulent. In any case the encumbrance was such that the complainant could have learnt about It had he looked for it as any prudent person placed in his position was expected to have done. Ultimately it was observed by the learned Sessions Judge that the liability of the accused was merely of a civil nature. In my opinion this approach of the learned Sessions Judge was not well founded having regard to the facts and circumstances of the present case.
11. This cannot be termed to be a case of mere omission to disclose a material fact. On the contrary the complainant has made a specific enquiry in this behalf and in spite of such an enquiry a false representation has been made by the accused. In my opinion, making of an enquiry by the complainant with the accused in this behalf and his knowingly making a false statement will make a world of difference. In this context the provisions of Section 41'5 of the Indian Penal Code are relevant, and particularly illustration (i) which reads as under.
(i) A sells and conveys an estate to B, A. knowing that in consequence of such sale he has no right to the property, sells or mortgages the same to Z, without disclosing the fact of the previous sale and conveyance to B. and receives the purchase or mortgage money from Z. A cheats.
Shri Modak has relied upon this illustration to Section 415 and according to him, the present case squarely falls within the said illustration. Whether the material on record discloses only a breach of civil liability or criminal offence under Section 420 of the Indian Penal Code will depend upon whether the complainant in parting with his money acted on the representation of the accused and believed the truth thereof and whether this representation when made was in fact false to the knowledge of the accused and he had a dishonest intention from the outset.
12. It is observed, by the Supreme Court while dealing with this aspect of the matter in Mobarik Ali Ahmed v. State of Bombay : 1957CriLJ1346 as under:
In a case of this kind a question may well arise at the outset whether the evidence discloses only a breach of civil liability or a criminal offence. That of course would depend upon whether the complainant in parting with his money to the tune of about Rs, 5 1/2 lakhs acted on the representations of the appellant and in belief of the truth thereof and whether, those representations when made were in fact false to the knowledge of the appellant and whether the appellant had a dishonest intention from the outset.
13. However, it is contended by Shri Golwalkar that mere non-disclosure of any material fact relating to the property will not amount to concealment of a fact with dishonest intention. We are not concerned in this case with a case of mere non-disclosure. Here in this case the complainant before purchasing the house had definitely enquired about the encumbrances from the accused and he was told by the accused vendor that there were none. It is apparent from the evidence of the complainant that he had acted on these representations and had purchased the house and paid the money. The intention of the accused will have to be gathered from the surrounding circumstances, including his subsequent conduct which will throw light as to what was his intention at the relevant time. It is pertinent to note in this case that when subsequently the complainant came to know about the mortgage of the Society after the proclamation was affixed to the property, he contacted the accused and at that stage also the accused said that he had now sold the house and he was not responsible for it, He went to the extent of asking the complainant to go out of the house. The accused went to the extent of refusing to return back the copy of the mortgage-deed obtained by the complainant. This is not the only incident where the accused had acted in this way. D. W. 1 Ganesh had also state in his cross-examination that he also came to know subsequently that the property purchased by him was also mortgaged to the Society, He came to know about this encumbrance after about one year. When he had questioned the accused initially at the time of purchase of the house as to whether there are any encumbrances on the property he was also told that the house is free from all encumbrances. The conduct of the accused and the representations made by him will have to be read in this context.
14. This aspect of the matter has been considered by the Punjab High Court in Kuldip Singh v. State . After making a reference to the provisions of the Transfer of Property Act it is observed by the Punjab High Court in para. 4 of the judgment as under:
The Transfer of Property Act deals with the rights of individuals in the property which is the subject-matter of any transaction. It is not concerned with whether a person has been cheated or not. The object of the explanation to Section 3 is to safeguard the interests of a third party who has acquired a good title under a previous registered instrument but it does not in any way alter or modify the criminal liability of a person who deliberately suppresses certain facts or mis-states certain facts. If 'A' has sold some property to 'B' by a registered deed and he then sells it again to 'C', 'C' cannot acquire a good title in the property because he must be deemed to have had notice of the previous registered sale deed in favour of 'B' but never the less he was made to part with money on a misrepresentation made by 'A' and therefore 'A' is guilty of the offence of cheating. This is a case which is mentioned in list. (i) to Section 415, Penal Code. The doctrine of constructive notice cannot be imported into criminal law for the purpose of determining whether a person is guilty of the offence of cheating or not ....
It is the intention which is important and not whether a man is under a legal duty to disclose or suppress facts within his knowledge. Therefore, where a person with the intention of causing wrongful loss to another makes a false representation to him or suppresses certain facts, he will he said to have acted dishonestly even if the law does not require him to state the truth. Therefore, the non-disclosure of the previous encumbrances will not affect the rights of the previous mortgagees and will not pass a complete title to the purchaser, the purchaser may nevertheless have been cheated.
Similar view seems to have been taken by Sindh High Court in Shivnath Sahibram v. Jathanand AIR 1937 Sind 56 : 38 Cri LJ 510. to which a reference has been made by the Punjab High Court in the aforesaid decision. Allahabad High Court in Dori Lal v. Emperor AIR 1919 All 217 : 20 Cri LJ 331 has also taken the same view. In the said case it is observed by the Allahabad High Court that even a dishonest concealment of the fact will amount to an offence as contemplated by the Explanation to Section 415 of the Indian Penal Code. In Banwarilal v. The State : AIR1956All341 the Allahabad High Court while dealing with this matter has observed as under:
The requirement of the offence of cheating under Section 415 is that the accused must deceive a person and fraudulently or dishonestly induce him to do some act which he would not have done otherwise. If a person is deceived and fraudulently or dishonestly induced to do act. the accused is guilty of cheating and it is immaterial how he has deceived and induced him.
The explanation to Section 415 makes it clear that dishonest concealment of fact is a deception within the meaning of the section. It is to be noted that the concealment of fact that is said to be a deception is dishonest concealment and not illegal and deliberate concealment. If a statute requires a person to mention a fact and he conceals it, it is illegal, and not necessarily dishonest concealment of the fact.
This concealment may be deliberate or conscious or may be accidental or bona fide arising out of ignorance of law. Accidental or bona fide concealment even though it is illegal, may not be said to be deception, but according to the authorities mentioned above dishonest concealment is not deception unless it is illegal and deliberate. The language of the explanation is however, different. It does not make deliberate and illegal concealment deception : instead it makes dishonest concealment deception.
It may be conceded that concealment of a fact is not quite the same thing as mere refraining from stating it and that something more than mere refraining from stating a fact is required to constitute concealment. But that something need not be a statutory provision compelling exposure of the fact; any other duty, such as arising out of the circumstances in which the parties are placed and the nature of the negotiations between them, is enough. Also any act, done, or precaution taken, to prevent the fact from being brought to the notice of the other party, is concealment even in the absence of a duty to state it.
If a person keeps an ornament in a box in his house, it may not amount to concealing, it; but if he buries it underground, he conceals it even though he is not required by anv duty to expose its presence to the world. In our opinion the authorities go too far in laying down that the duty to state a fact must be a statutory duty; concealment can arise even in the absence of a statutory duty.
Every concealment does not, however, amount to deception; only dishonest concealment amounts to deception according to the explanation. And just as there can be concealment without there being a duty to speak (as for instance when a person does some act or takes some precaution to hide the fact). So also concealment can be dishonest even in the absence of a legal obligation to speak. Dishonesty has nothing to do with infringement of the law : it, depends upon the state of mind at the time of the concealment or the intention behind it. If the intention is dishonest, the concealment is dishonest even in the absence of a duty to speak.
15. Gujarat High Court in Surendra Maneklal v. Bai Narmada : AIR1963Guj239 has also taken the similar view. In that case the accused did not mention to the complainant the fact that an injunction order was issued by the Civil Court restraining them from selling the property at the time when they entered into an agreement to sell the property and this was held to be a dishonest concealment of fact.
16. It is no doubt true that the intention of the accused is to be gathered with reference to the time, he made the representation. In the present case though the complainant made ,a specific enquiry from the accused as to whether there was any encumbrance on the property he made a statement which was false to his own knowledge, that the property was free from all encumbrances. Because of this false representation the, complainant purchased the said house and paid the consideration to the accused. In my opinion this is a case where because of this misrepresentation or a false representation the complainant was made to part with the money, because, it is clear from the record that, if he had known about the fact of the previous mortgage he would not have purchased the house, or in any case he would not have parted with the whole money.
17. In this view of the matter, in my opinion, the learned Judicial Magistrate was right in holding the accused guilty of an offence under Section 415, and therefore, convicting him under Section 420 of the Indian Penal Code. In the view which I have taken, therefore, it is obvious that the contrary view taken by the Sessions Judge in this behalf is not correct. Whether a particular transaction also gives rise to a civil liability or not is not relevant for deciding the act as to whether the accused is guilty of an offence of cheating under Section 415 read with Section 420 of the Indian Penal Code. A person cannot be allowed to take advantage of his own wrong and then ask the other party to seek his remedy in the Civil Court. A person cannot be left to the vagaries of a seller of the property who deliberately makes a false representation relating to the title of his property and induces the other side acting on this representation to part with the money. No doubt, that this may also give rise to civil liability, but that does not and cannot mean that such a person is immune from criminal charge even if the complainant succeeds in proving that the accused Intended to dishonestly obtain money by misrepresentation. In a given case same set of facts can give rise both to a civil liability as well as criminal prosecutions, but there is nothing in law to prevent the Criminal Courts from taking cognizance of an offence merely because on same facts, the person concerned might be also subjected to civil liability. As, observed by this Court in Mosinbhai v. Emperor AIR 1932 Bom 273 : 33 Cri LJ 401 a person is not entitled to make anv untrue statement. If any question is put to him, he must answer truthfully, if he does not, there is a clear case of cheating. In this case the accused dishonestly induced the complainant to believe that the property was free from all encumbrances, when in fact to his own knowledge it was not. Therefore, this act of the accused definitely amounted to cheating as defined in Section 415 of the Indian Penal Code. It is no doubt true that on the basis of an indemnity clause in the sale-deed, complainant could also file a civil suit, but this will not preclude him from launching a criminal case for cheating.
18. In the result, therefore, the appeal is allowed. The order of acquittal passed by the Sessions Judge, Yeotmal is set aside and the accused is convicted of the offence under Section 420 of the Indian Penal Code and sentenced to suffer rigorous imprisonment for a period of one month and to pay a fine of Rs. 500/-, or in default of payment of fine to further suffer rigorous imprisonment for a period of one month. If the amount of fine is realised, an amount of Rs. 200/-(Rs. Two hundred) shall be paid to the complainant by way of compensation.