John Beaumont, Kt., C.J.
1. This is an appeal from a conviction by the Presidency Magistrate, Third Court, who convicted the accused of cheating and sentenced him under Section 420 of the Indian Penal Code. The learned Magistrate gave a long and exhaustive judgment, but I think some of the facts with which he deals are not relevant. The relevant facts are very few.
2. The accused is a retail trader, and the complainant is a wholesale dealer, and on September 16, the accused, through his servant, ordered certain rolls of lead sheets which are referred to in the charge. The price to be paid was Rs. 561, and as the goods were not at the moment in Bombay but were on board a ship in the docks, they were to be delivered as soon as they were unloaded. They were in fact delivered on September 24, It is disputed in the evidence as to what the exact terms of payment were. According to the complainant's case the accused promised expressly to pay on October 1, According to the accused's case there was no express agreement for payment, and payment was to be on the date usual according to the custom of the market, which on the evidence I think was on the expiration of one month. But for the purposes of the charge I think it makes no difference whether there was an express promise to pay on October 1, or an implied promise to pay at the expiration of a month, Before the goods were paid for, viz., on October 1, a mortgagee of the accused's stock took possession of the accused's place of business with all the stock therein, including the goods purchased from the complainant. On October 13, the accused filed his petition in insolvency. The accused is now charged with cheating by dishonestly inducing the complainant to deliver the rolls of lead sheets.
3. A certain amount of evidence was given on behalf of the accused to suggest that he had an inquiry for these goods from the Government of India and that he intended to sell them very quickly. That evidence is, I think, not of much importance. There was also some question as to whether when the goods were delivered from the docks the accused told the complainant's brother that they were wanted for sale up-country and the brother suggests that the goods would not have been delivered but for that representation. That, I think, is irrelevant, because the contract for delivery of the goods had been made on September 16, and the complainant could not impose a now condition on the 24th.
4. The case, therefore, comes to this. The accused as a merchant ordered certain goods on September 16 and promised expressly or impliedly to pay for them on a fixed date. In point of fact he did not pay for them. From the fact that all his stock was mortgaged, and that on October 13, he filed his petition in insolvency, it appears that on September 16, he must have been in embarrassed circumstances. Moreover the prosecution called six witnesses who stated that about the time when this particular contract was made the accused also ordered goods from them and he had not paid for them. That evidence would clearlybe relevant on the question whether the accused was in embarrasasd circumstances at the date when he entered into this contract;. The learned Magistrate has relied on the evidence as being relevant under Sections 14 and 15 of the Indian Evidence Act upon the question whether, when the accused entered into a contract with the complainant, he had the fraudulent intention of not paying for the goods, I doubt whether the evidence was relevant under those sections, but even if it was, its evidentiary value is very small The circumstances in which the different orders were given would not presumably be the same, and before we could infer that there was a fraudulent intention governing all the orders, we should have to know the exact circumstances in which the different orders ware given. However, there is no question that at the date when the contract was made the accused was in embarrassed circumstances.
5. The ease is one, I think, of considerable importance to merchants, because if a man carrying on a retail trade orders goods from his wholesaler and then becomes insolvent before he is able to pay for them, it is a very serious matter if from that circumstance alone, viz., that he could not and did not pay for the goods, the Court is to infer that he had a dishonest intention when he ordered the goods so that he is liable to be prosecuted for cheating. In almost every case in which a trader becomes insolvent, he has made a struggle against that fate, A man who is in embarrassed circumstances is not bound to disclose all his circumstances to people with whom he deals on credit. If he were, he could never get any credit. He is not entitled of course to make any untrue statement. If any question is put to him, he must answer truthfully ; if he does not, there is a clear case of cheating. But in this Case it is not suggested that he was asked any question or made to the complainant any false representation.
6. Now under Section 415, which defines cheating, there must be deceit of the person cheated whereby he was fraudulently or dishonestly induced to deliver property. That is the only material part of the section for the purposes of this case. Mr. O'Gorman for the accused says that you must have some definite representation of fact on which to base your cheating. I am not prepared to go as far as that. I think that if a person orders goods on credit, and promises expressly orimpliedly to pay for them on a particular date, then if the prosecution proves that at the date of the contract the circumstances of the accused were such that he must have known that it was practically impossible that he would be able to pay for the goods, there would be a case of cheating. But, in my opinion, the prosecution have not established that case here, The mere fact that the accused was inembarassed circumstances is not enough. Anyretailer must know that if he is to avoid insolvency he will have to pay his wholesale traders, and I am not satisfied that the accused did not intend to pay. He might have succeeded in selling the goods at a profit, in which case he might have paid the complainant, or he might have brought off a successful stroke of business which would have put him in funds. The question whether there was intention to deceive must be answered as at the date when the contract was made, and if the prosecutionis right, then there was an offence of cheating here, and that offence would not have been affected by the fact that the accused did in fact pay the complainant on the specified date.
7. It is difficult here to see what motive the accused could have for deliberately ordering goods with the intention of not paying for them. It was suggested before the learned Magistrate, and in this Court, that the mortgage of the accused's stock was not a genuine mortgage, and that there was some collusion between the accused and the mortgagee. But no such case is established on the evidence. The only evidence is that the mortgagee appears to be a man of small means from which it is suggested that he could not have advanced the sum of Rs. 20,000 alleged to be due on the mortgage. But we cannot from that circumstance infer that the mortgage was not a genuine transaction. The mortgagee may have been a nominee of a wealthy person. If the evidence established a case of collusion between the accused and the mortgagee, if the scheme was that the accused should order goods on credit with the intention that before he paid for them the mortgagee, who was really a nominee of his own, should step in and seize the goods, there would be a plain case of cheating. But no such case is established on the evidence. We have really got nothing except the fact that at the time when these goods were ordered the accused was in embarrassed circumstances, and, in my opinion, we are not justified from that fact in inferring that the accused did not intend to pay for these goods, and that the statement that he would pay for them on a particular day was a deception.
8. I think, therefore, that the appeal must be allowed. The fine will be refunded and the bail bonds cancelled,
9. The material facts in this case are as follows, The appellant by his manager ordered certain goods from the complainant on September 16. The goods were delivered on September 24, At the time of the order the appellant was in embarrassed circumstances. He had mortgaged all his stock -in-trade on June 9, and on October 1 the mortgagee took possession, On October 13, he made an application to be declared insolvent, The charge against him is under Section 420 of the Indian Penal Code that he committed cheating by dishonestly inducing the complainant to deliver the goods in question, viz., three rolls of lead sheets valued at Rs. 561,
10. Now the complainant alleged that at the time these goods were ordered there was a promise to pay for them on October 1. There is no corroboration of his statement on this point which can be said to have any value, and the learned Magistrate has not found as a fact that there was any such promise. There was further a suggestion that false representations were made as to the destination of the goods with the idea of leading the complainant to suppose that the accused had already got a customer for them. From certain remarks in the judgment of the learned Magistrate it would appear that ha considered that there was some truth in the evidence on this point, but, as the learned Chief Justice has pointed out, thatevidence is not relevant for the purposes of the present charge, because it has no reference to the material date, September 16. There m no evidence and no suggestion even that on September 16 any representation as to the destination of the goods was made, and what the prosecution has to show is that on September 16, not on the 24th, the accused cheated the complainant.
11. The learned Magistrate has stated his view of the law in these terms:
The only question to be determined is whether at the time of making the contract the intention was to pay on the due date.
A merchant whose stock-in-trade is mortgaged is not debarred from obtaining goods on credit, and his conduct) cannot be characterised as dishonest provided on the due date or within a reasonable time thereafter he expected to be in possession of sufficient money, or receive assistance' from some other person as a surety to satisfy the vendor.
13. And again:
It is perfectly clear from illustrations (f) and (g) to Section 415 of the Indian Penal Code that a promise as to future conduct not intended to be kept would amount to cheating.
14. The effect of what the learned Magistrate has found on the facts is given on the concluding page of his judgment:
The accused's conduct since June 9 shows that he had no intention to pay for the goods that he stored from time totime... I am satisfied beyond reasonable doubt that on September 16 when the contract was concluded accused No. 2 (that is, the appellant) had no intention to pay for the rolls purchased from the complainant.
15. Of the two illustrations to Section 415 to which the Magistrate refers illustration (f) is clearly the one most in point. It is this :-
A intentionally deceives Z into a belief that A means to repay any money that Z may lend to him, and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats.
Now in connection with this illustration the first point to be considered is what is meant by deceiving. It is plain that deceiving in this section does not necessarily require that there should be any representation in words. In fact the explanation to the section says that ' a dishonest concealment of facts is a deception within the meaning of this section,' although, as pointed out in Mayne's Criminal Law of India, p. 698, the concealment must be of something which there is a duty to disclose, and in the present case it could not be seriously argued that it was the duty of the accused to disclose to the complainant the details of his financial position. But the deceit referred to in the section and the illustration may clearly be by conduct. The nature of the transaction itself may imply an assertion, and in all essential points I think it may besaid that the present case is similar to the case of Reg. v. Jones (1898) 1 Q.B. 119 The facts there were that a person went into a restaurant and ordered a meal knowing that he had no money. It was held that he was not guilty of false pretences under the English Larceny Act but was guilty under the provisions of a special statute penalising the obtaining credit by fraud. In my opinion there can be no doubt that in India he could have been convicted under the provisions of Section 420 on the ground that his conduct necessarily implied a promise to pay which deceived the other party.
16. The other question which arises in connection with this illustration to Section 415 is what is meant by the words 'not intending to pay.' It might perhaps be suggested that every merchant who orders goods in the course of his business must in a sense intend to pay because otherwise his business could not be carried on. At the same time he may know that except for a miracle he will not be able to pay, and, in my opinion, in such a case it can reasonably besaid that he has no intention of paying, since he cannot be said to intend to do what he has no expectation of being able to do. Speaking for myself I do not consider that it would be necessary to prove absolute impossibility of payment.
17. Dealing with the present case then, my understanding of the law is that it would amount to an offence of cheating under Section 415 if one had firstly an implied promise to pay, as we have here, and secondly proof that the accused had no reasonable expectation of being able to pay within a reasonable time. But I agree with the learned Chief Justice that the appellant is entitled to an acquittal because on the evidence which has been produced the prosecution cannot be said to have proved that he had no reasonable expectation of being able to payfor the goods. The evidence as to the accused's financial position would not justify us in going to the length of holding that on September 16 he had no expectation of being able to pay for these three rolls of lead sheets. The Evidence as to similar but unconnected transactions which has been admitted under Sections 14 and 15 of the Indian Evidence Act is no doubt admissible for the purpose of showing that the accused was in an embarrassed financial position, That fact, however, is admitted. I do not consider that the evidence has much value for the purpose of showing what the accused's intention was either in respect of those other transactions or the present one. It has been suggested by the prosecution that the mortgage effected by the accused was a fraudulent transaction and there was collusion between him and the mortgagee. If there had been any satisfactory proof of that no doubt the position would have been very different; it might then have been possible to hold that the accused had a dishonest intention at the time he gave this order on September 16. But the only evidence adduced on that point is the evidence of one witness who deposes that the mortgagee was not a person of substance, which by itself is quite insufficient to support an allegation of fraud and collusion. The learned Magistrate has also commented upon title accused's failure to produce evidence as to his financial stability. But, in my opinion, it was for the prosecution to prove affirmatively that he had no reasonable expectation of paying for these goods and until that was done there was no burden upon the accused to produce evidence at all.
18. I agree, therefore, that this appeal should be allowed and the conviction set aside.