A rich French Baroness comes to India to attend a marriage. Leading jewellers of Delhi, having come to know that she is a keen purchaser of rare diamonds and pearls, visit her in her suite at the five star hotel. Initially she declines to make any purchase. Being pressed, she selects some diamonds worth lakhs of rupees. She has no ready cash. She tells the jewellers that her host is out of country and for payment they may either wait till his return to India or she may issue post-dated cheques. No body suspects the soundness of the baroness, and sellers gladly accept the post-dated cheques. The cheques are later dishonoured. what offence if any is committed ?

In the scenario the conduct of the French Baroness may attract criminal liability under Section 138 and Section 139 of the Negotiable Instruments Act, 1881 and potentially Section 420 of the Indian Penal Code, 1860, depending on the intent and facts proven.

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Legal Analysis:

1. Section 138 – Negotiable Instruments Act, 1881

• Offence: Dishonour of cheque for insufficiency of funds or if it exceeds the arrangement.

• The cheques issued by the Baroness were post-dated and subsequently dishonoured. If proper legal notice was issued by the jewellers and the Baroness failed to pay within 15 days, she is prima facie liable under Section 138.

• Punishment: Up to 2 years imprisonment, or fine up to twice the cheque amount, or both.

2. Section 139 – Presumption in favour of holder

• The law presumes that the cheque was issued for discharge of a legally enforceable debt, unless rebutted by the accused.

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2. Section 420 – Indian Penal Code, 1860

• Offence: Cheating and dishonestly inducing delivery of property.

• For invoking Section 420, mens rea (intent to cheat) at the time of issuance must be proven.

• If it is proved that the Baroness never intended to pay and used the cheques just to obtain the diamonds dishonestly, then Section 420 IPC may apply.

Key Ingredient:

• Dishonest intention at the time of issuing the cheque.

• Inducement leading to the delivery of diamonds.

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Relevant Case Law:

1. Sanjay Mishra v. Ms. Kanishka Kapoor, 2009 (1) DCR 228 (Bom HC)

• It was held that mere dishonour of cheque is not enough; liability must be legally enforceable.

2. K.C. Builders v. Assistant Commissioner of Income Tax, (2004) 2 SCC 731

• Supreme Court held that mere failure to honour cheque or repay debt does not attract criminal liability unless fraudulent intent is proven.

3. Jugesh Sehgal v. Shamsher Singh Gogi, (2009) 14 SCC 683

• For prosecution under Section 420 IPC, the intention to cheat must exist at the inception.

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Conclusion:

• Under Section 138 NI Act: The Baroness is clearly liable, as she issued cheques which were dishonoured.

• Under Section 420 IPC: Only if it can be shown that she never intended to pay, and the cheques were issued fraudulently, can criminal liability for cheating be imposed.

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Advice for the Jewellers:

• Proceed with a criminal complaint under Section 138 of the NI Act before the Magistrate.

• Simultaneously, they may consider filing a civil recovery suit.

• If strong evidence suggests cheating, then file a complaint under Section 420 IPC as well.