Saturday, 22 August 2015

Basic concept of negligence of professionals in discharge of their duty

In Galoo Limited’s case – 1995 (1) All ER 15, plaintiff
had purchased substantial shares from second plaintiff i.e.
Limited Company. Second plaintiff owned all the shares of 3rd
plaintiff. As it turned out that second and third plaintiffs were
insolvent, plaintiff initiated action in tort against the auditor
alleging that there was substantial inaccuracy in auditing the
account and auditors were failed to discover and report the
inaccuracy. Claim was substantially dismissed. It was held
that occurrence of loss to the plaintiff is not possible to corelate
with the transaction in question, hence, no cause of
action against the auditor. It also held that the fact that the
potential bidder or lender might rely on the audited account
of the company that by itself is not sufficient to impose duty of

care owed by the auditor towards bidder or lender. Recently,
in Mehjoo’s case – 2014 (4) All ER 806, claimant was holding
Iranian domicile. He studied at U.K. and was staying in U.K.
Dispute arose as running business in which the claimant had
substantial share, was sold. Main grievance of claimant was,
Chartered Accountant failed to give advise to the claimant to
avail a scheme, namely, Bearer warrant scheme, by which the
claimant could have avoided capital gain tax. One of the
Judges in separate and concurrent order relying on 1978 (3)
All ER 571 (583) has held, thus;
“There is no such thing as a general retainer in that
sense. The expression “my solicitor” is as meaningless
as the expression “my tailor” or “my bookmaker” in
establishing any general duty apart from that arising out
of a particular matter in which his services are retained.
The extent of his duties depends on the terms and limits
of that retainer and any duty of care to be implied must
be related to what he is instructed to do.
Now no doubt the duties owed by a solicitor to this
client are high, in the sense that he holds himself out as
practicing a highly skilled and exacting profession, but I
think that the court must beware of imposing on
solicitors, or on professional men in other spheres,
duties which go beyond the scope of what they are
requested and undertake to do. It may be that a
particularly meticulous and conscientious practitioner
would, in his client’s general interests, take it on himself
to pursue a line of enquiry beyond the strict limits
comprehended by his instructions. But that is not the

rest. The test is what the reasonably competent
practitioner would do having regard to the standards
normally adopted in his profession, and cases such as
Duchess of Argyll v. Beuselinck [(1972) 2 Lloyd’s Rep
172], Griffiths v. Evans [(1953) 2 All ER 1364, [1953 1
WLR 1424] and Hall v. Meyrick [[1957] 2 All ER 722,
[1957] 2 QB 455 demonstrate that the duty is directly
related to the confines of the retainer.”
6.2 It is interesting to make quick reference to early cases
on the point. In Re Kingston Cotton Mill Co.’s case – (1896) 2
Ch 279, it was held that auditor has to work as watchdog and
not as a “bloodhound”. In later case i.e. Re City Equitable Fire
Insurance Co. Ltd.’s case – (1925) 1 Ch 407, ‘watchdog’
principle was reiterated, however, in that case it was found
that auditor was not negligent in discharge of his duty. Then,
in Formento (Sterling Area) Limited’ case 1958 (1) All ER at
Page-23, test of ‘inquiring mind’ in examining the conduct of
auditor was introduced. This test of ‘inquiring mind’ was
reiterated in Re Thomas Gerrard & Son Ltd.’s case – 1967 (2)
All ER 525.
R/CR.MA/6116/2010 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
CRIMINAL MISC.APPLICATION (FOR QUASHING & SET ASIDE
FIR/ORDER) NO. 6116 of 2010

HONOURABLE MR.JUSTICE R.D.KOTHARI

HARESH A PATEL....Applicant(s)
Versus
STATE OF GUJARAT & 1....Respondent(s)

Date : 08/05/2015



1. The question, namely, what is cheating and breach of
trust that is raised most often in the Courts, is once again
raised in the present case. In a sense, context in the present
case is somewhat novel as the question herein raised by the

petitioner who at the relevant time was an auditor and was
asked to carry out audit of the account of respondent No.2 –
co-operative society. The petitioner is one of the accused in
criminal complaint lodged before Kevadiya Colony Police
Station. Liability of auditor in the facts of the case, is in issue.
2. The relevant facts may be referred to ;
2.1 The complainant is, “Senapati” in respondent No.2 –
society. It is registered co-operative society. It is alleged that
duty of ’Senapati’ is akin to a welfare officer. The said cooperative
society is known as “The Police Karmachari
Employees’ Credit Society – SRP Group14, Kevadiya Colony.”
There are five different co-operative societies of this SRP
Group. They are known as; A, B, C, D and Head Quarters
Company Society. The period in question herein is 1.4.2008 to
31.3.2009. The petitioner was appointed as an auditor by the
Registrar. The petitioner has carried out the audit for the year
in question also. The audit report for the said period is at
Annexure-D. The complaint is filed against three. Principal
accused in the opinion of complainant is one Bhavarsinh. He
was cashier at the relevant time. The other accused is one
Guravnan, who was honourary Secretary at the relevant time
and was also holding charge of additional Senapati for some
time. The third accused is the present petitioner. The
grievance of the complainant is, one Bhavarsinh, who, at the
relevant time, was cashier in the cooperative society, has
siphoned off Rs.6,34,238/- from the account of respondent
No.2 – cooperative society and said Bhavarsinh has pocketed
the said amount. That accused Guravnan has aided and
abetted some of the deeds of Bhavarsinh. It is the say of the

complainant that petitioner has failed to report in his audit
report about malpractice committed by the cashier
Bhavarsinh and thereby, he too has committed the offence of
cheating and breach of trust. The complaint is fairly
exhaustive. In order to appreciate properly the case of the
parties, specific instances given by the complainant qua
misappropriation may be mentioned. One of the modes
alleged to have resorted is, via different entries, the amount of
the society was transferred to the provision store. Said
transfer is on the ground that provision store is in need of the
amount. Instances of irregularity via this mode are as under :
Sr.
No
.
Mode Entry
No.
Amount Nature of irregularity
1 Transferri
ng the
amount to
the
provision
store
267 1,00,000
/-
Though this amount is
credited in day book of
Provision Store,
however, this amount
is not mentioned in the
opening stock of
relevant date i.e.
12.1.2009.
2 “ 268 “ By not crediting the
said amount in day
book of the provision
store.
3 “ 274 “ “
4 “ 288 “ “
5 “ 289 “ ”
6 “ 298 90,000/- “
2.2 The main grievance of complainant is, making of
irregular entries in the above-referred manner or, rather
failure to make entires as stated in above table. The other

grievance is, in the day book of cooperative society, entry of
Rs.22,737/- is made to the effect that said amount is deposited
in bank account of the society. While, in fact, said amount is
not deposited in the bank and only paper entry is made. It is
alleged that cashier has committed misappropriation by that
mode. Similarly, on verifying the day book of the society on
8.4.2009, it would appear that the voucher is of Rs.2,20,000/-,
while entry in the bank’s pass-book shows that Rs.2,00,000/-
only deposited in the bank. Thus, by making false entry and
making interpolation in the day book of the society,
Rs.20,000/- was misappropriated. The last instance of
misappropriation is, thus;
In one of the societies, one Bharwad had an account,
viz., Account No.29. He had taken loan twice. First is on
11.4.2008 of Rs.5000/- and second loan was on 25.10.2008 of
Rs.10,000/-. From the second loan taken by him, he had
cleared and had paid up the first loan and what had remained
thereafter with Mr.Bharwad is – claims complainant –
Rs.1500/-. Presumably, first loan of Rs.5000/- was paid with
interest on it. It is the say of Mr.Bharwad – says complainant
– that he had handed over the cash of Rs.1500/- to the cashier
Mr.Bhavarsinh, however, said cashier had not given any
receipt for the same and that is how, cashier had
misappropriated Rs.15,00/-. The complainant also alleges that
concerned P.I. had also examined the day book of the society
from 13.3.2009 to 23.3.2009 and had found that incorrect
entry of Rs.90,000/- had been made in the day book of the
society and thereby, Bhavarsinh had made misappropriation.
2.3 Accused – Bhavarsinh, in an inquiry carried out by

society prior to lodging of the complaint, while admitting the
guilt, had said that by mistake, entry was not made or it is
made incorrectly. It is also the say of the complainant that
pursuant to the admission of guilt by him, he has deposited
Rs.1 lac in the society on 7.1.2009. The complainant claims
that Rs.5,01,500/- was misappropriated by cashier Bhavarsinh
and that Guravnan has aided and abetted cashier Bhavarsinh.
In other words, it is alleged that they have acted in collusion
and had committed misappropriation. Secondly, during the
period from 23.3.2009 to 22.5.2009, by making false entries in
the day book of the society and in other day books of the
society, Bhavarsinh has misappropriated Rs.32,738/-. Thus,
claim of complainant is Bhavarsinh and Guravnan have
misappropriated Rs.6,34,238/-.
3. Heard learned advocates appearing on behalf of the
respective parties. Learned advocate Mr.Dhval D.Vyas for the
petitioner, after briefly referring the facts of the case, has
drawn attention to relevant material on record. Learned
advocate has submitted that there is not even prima facie case
so far as present petitioner is concerned. Mr.Vyas has drawn
attention to audit report submitted by petitioner and
correspondence exchanged between the complainant and the
present petitioner (Annexure-F) prior to lodging of the
complaint. Relying on the said correspondence, it was
submitted that continuation of criminal proceedings against
the present petitioner is abuse of process of law. Learned
advocate has also drawn attention to relevant case laws on
the point.
4. Complainant, though served, has remained absent.

5. Learned APP at the time of hearing has mainly placed
reliance on the contents of the detailed complaint and has
pointed out that allegations are made by setting out the
grievance in detail and such factual assertion, in the
circumstances of the case, should be left to the trial court for
adjudication.
6. In essence and substance, the say of the complainant is,
petitioner has shown negligence in discharge of his duties.
The sole petitioner before this Court at the relevant time was
working as an Auditor. The question of deviation from duty by
the petitioner may be considered by applying the test of
‘reasonable man’ and secondly, by asking the question,
namely, what in general is expected from the auditor. Taking
second aspect first, brief reference may be made to the recent
English case law on the point.
6.1 In Galoo Limited’s case – 1995 (1) All ER 15, plaintiff
had purchased substantial shares from second plaintiff i.e.
Limited Company. Second plaintiff owned all the shares of 3rd
plaintiff. As it turned out that second and third plaintiffs were
insolvent, plaintiff initiated action in tort against the auditor
alleging that there was substantial inaccuracy in auditing the
account and auditors were failed to discover and report the
inaccuracy. Claim was substantially dismissed. It was held
that occurrence of loss to the plaintiff is not possible to corelate
with the transaction in question, hence, no cause of
action against the auditor. It also held that the fact that the
potential bidder or lender might rely on the audited account
of the company that by itself is not sufficient to impose duty of

care owed by the auditor towards bidder or lender. Recently,
in Mehjoo’s case – 2014 (4) All ER 806, claimant was holding
Iranian domicile. He studied at U.K. and was staying in U.K.
Dispute arose as running business in which the claimant had
substantial share, was sold. Main grievance of claimant was,
Chartered Accountant failed to give advise to the claimant to
avail a scheme, namely, Bearer warrant scheme, by which the
claimant could have avoided capital gain tax. One of the
Judges in separate and concurrent order relying on 1978 (3)
All ER 571 (583) has held, thus;
“There is no such thing as a general retainer in that
sense. The expression “my solicitor” is as meaningless
as the expression “my tailor” or “my bookmaker” in
establishing any general duty apart from that arising out
of a particular matter in which his services are retained.
The extent of his duties depends on the terms and limits
of that retainer and any duty of care to be implied must
be related to what he is instructed to do.
Now no doubt the duties owed by a solicitor to this
client are high, in the sense that he holds himself out as
practicing a highly skilled and exacting profession, but I
think that the court must beware of imposing on
solicitors, or on professional men in other spheres,
duties which go beyond the scope of what they are
requested and undertake to do. It may be that a
particularly meticulous and conscientious practitioner
would, in his client’s general interests, take it on himself
to pursue a line of enquiry beyond the strict limits
comprehended by his instructions. But that is not the

rest. The test is what the reasonably competent
practitioner would do having regard to the standards
normally adopted in his profession, and cases such as
Duchess of Argyll v. Beuselinck [(1972) 2 Lloyd’s Rep
172], Griffiths v. Evans [(1953) 2 All ER 1364, [1953 1
WLR 1424] and Hall v. Meyrick [[1957] 2 All ER 722,
[1957] 2 QB 455 demonstrate that the duty is directly
related to the confines of the retainer.”
6.2 It is interesting to make quick reference to early cases
on the point. In Re Kingston Cotton Mill Co.’s case – (1896) 2
Ch 279, it was held that auditor has to work as watchdog and
not as a “bloodhound”. In later case i.e. Re City Equitable Fire
Insurance Co. Ltd.’s case – (1925) 1 Ch 407, ‘watchdog’
principle was reiterated, however, in that case it was found
that auditor was not negligent in discharge of his duty. Then,
in Formento (Sterling Area) Limited’ case 1958 (1) All ER at
Page-23, test of ‘inquiring mind’ in examining the conduct of
auditor was introduced. This test of ‘inquiring mind’ was
reiterated in Re Thomas Gerrard & Son Ltd.’s case – 1967 (2)
All ER 525.
7. Having taken note of English Law on professional
negligence, now reference may be made to test of ‘reasonable
man’.
7.1 In Mahadev Prasad Kaushik’s case – (2008) 14 SCC 479,
it was held in Para.26 as under :
“26. Though the term 'negligence' has not been
defined in the Code, it may be stated that negligence
is the omission to do something which a reasonable
man, guided upon those considerations which

ordinarily regulate the conduct of human affairs would
do, or doing something which a reasonable and
prudent man would not do.”
7.2 Similarly, M.S.Grewal’s case – (2001) 8 SCC 151 is
relevant and important. It was the case under Fatal Accident
Act. The school management had organized a picnic at the
river bank. On account of rash and negligent act of the
teachers, 14 students were drowned in the river as students
were allowed to play in the danger zone of the water. It was
found that caution and warning was not given. It was held in
Para.14 as under :
“14. Negligence in common parlance mean and
imply 'failure to exercise due care, expected of a
reasonable prudent person'. It is a breach of duty and
negligence in law ranging from inadvertence to
shameful disregard of safety of others. In most
instances, it is caused by heedlessness or
inadvertence, by with the negligent party is unaware
of the results which may follow from his act.
negligence is thus a breach of duty or lack of proper
care in doing something, in short, it is want of
attention and doing of something which a prudent and
a reasonable man would not do (vide Black's Law
Dictionary).Though sometimes, the word
'inadvertence' stands and used as a synonym to
negligence, but in effect negligence represents a state
of the mind which however is much serious in nature
than mere inadvertence.There is thus existing a
differentiation between the two expressions - whereas
inadvertence is a milder form of negligence,
'negligence' by itself mean and imply a state of mind
where there is no regard for duty or the supposed care
and attention which one ought to bestow. Clerk and
Lindsell on Torts (18th Ed.) sets out four several
requirements of the tort of negligence and the same
read as below :
"(1) the existence in law of a duty of care situation, i.e.
one in which the law attaches liability to carelessness.

There has to be recognition by law that the careless
infliction of the kind of damage in suit on the class of
person to which the claimant belongs by the class of
person to which the defendant belongs is actionable;
(2) breach of the duty of care by the defendant, i.e.
that it failed to measure up to the standard set by law;
(3) a casual connection between the defendant's
careless conduct and the damage;
(4) that the particular kind of damage to the particular
claimant is not so unforeseeable as to be too remote."
8. Now, case of petitioner may be considered applying the
above principle. Before that, two aspects may be borne in
mind; one, there is no specific statutory provision in the Act
laying down the ‘duties of the auditor’ and secondly,
proceedings are at nascent stage and I have no benefit of
evidence on record, therefore, embarking on detailed
discussion on duties of auditor etc., would not be fair and
proper.
9. In the present case, audit report is at Annexure-D. The
report is in detail. It is in printed form wherein against each of
the printed column in the form, there is a brief hand written
comment offered by the auditor / petitioner. Beside that, at
the end of the report, auditor has also offered comment under
the heading of ‘suggestions and deficiencies’. If we peruse the
audit report, prima facie it does not appear that comment
offered by the auditor is only formal in nature or that they are
evasive. Further, learned advocate Shri Vyas, upon
instructions from his client, submits that this printed form is
supplied by office of Registrar itself. Reference may be made
to the query made by the Court. The Court had made query

about compliance to Section 84(2) – and precisely how
verification of the cash and securities may be gathered from
the report, in response to that, the learned advocate draws
attention to Column Nos.11 and 12 in the printed form, and
had submitted that comments offered therein by the petitioner
may be read along with the suggestion and deficiency offered
by the auditor at the end of the report. In this regard,
attention was drawn to Item Nos.10 and 11. Reference to the
report and to the comment are relevant. Under heading of
suggestion and deficiency, the petitioner has identified 17
deficiencies and suggestions. Strong reliance was placed on
Item No. 15, which reads as under :-
cc s!5f 5|MlJhG :8MZ BFT[ ~FP 54))4!&_qv
pWFZ AFSL K[ H[GL lJUT DF\UTF T[ TFP#!
v_#v_)GM A\W DF,:8MS CMJFG]\ H6FI[, K[P
T[ A\W DF,:8MSGL IFNL 56 VMl08 VY[" ZH]
SZ[, GYLPcc
9.1. At the time of hearing, it was also pointed out that prior
to lodging of the complaint, complainant had addressed a
letter on 19.1.2010 on behalf of the society. It was addressed
to the petitioner. Opinion of the petitioner was sought on the
deficiencies that were noticed and referred to in that letter, -
the petitioner had replied the same on 15.2.2010. It is at
Annexure-F. petitioner’s reply is fairly exhaustive and specific.
Therein, against most of the deficiencies identified and
referred to in the letter, - this letter and reply are prior to
lodging of the complaint - petitioner has recommended
initiation of criminal proceedings against the Bhawarlal.

Prima facie, the handwritten comment offered by the
auditor does not appear to suffer from non-application of
mind.
10. Weighing the material on record with the above-referred
test laid down, can it be said that petitioner has shown no
regard for his duty or can it be said that care and attention
that petitioner expected to show, was not shown by him or can
it be said that the petitioner has omitted to do something
which reasonable man would not omit to do or the petitioner
has done something that any reasonable or prudent man
would not do.
11. The Court, in the present case, is called upon to consider
initiation of criminal proceeding against petitioner. Grievance
of complainant, in a sense, is “negligence” shown by the
applicant, as referred above. I have also made a reference
that allegation of negligence may be appreciated by applying
the test of the reasonable man and by resorting to the other
test, as stated above. It may be borne in mind that aggrieved
party has option either to take civil action or to file criminal
complaint. It is obvious that considerations for the Court in
examining the case under civil and criminal jurisdiction would
be different. In Kedarnath’s case – AIR 1965 Allahabad 233,
meaning of ‘negligence’ in tort action and in criminal action is
considered. It is held as under:
“ ‘Negligence’ is a term of art but has distinct meanings
in different jurisdictions. In torts, damage is an essential
ingredient, but that element is not necessary in the law
of master and servant. In the law of crimes, there is a
series of offence, based on negligence, in which loss or

injury is not material. It is enough, if the act is likely to
cause injury or endanger life. Sections 279, 285, 287
and 290 of the Indian Penal Code 1860 are illustrative
examples. For criminal breach of trust under Section
405 Indian Penal Code 1860 dishonesty, that is,
wrongful loss or gain, has to be established.”
12. In oft-quoted Jacob Mathew’s case – (2005) 6 SCC 1, the
Court had occasion to consider the issue of negligence. In that
case, the Court was concerned with medical negligence. The
Court, quashing the criminal complaint against the doctor,
has pointed out how the concept of negligence defers in civil
and criminal law. It was held (p.736);
“1. xxx xxx xxx
 2. xxx xxx xxx
 3. xxx xxx xxx
 4. xxx xxx xxx
5. The jurisprudential concept of negligence differs in
civil and criminal law. What may be negligence in civil
law may not necessarily be negligence in criminal law.
For negligence to amount to an offence, the element of
means rea must be shown to exist. For an act of amount
to criminal negligence, the degree of negligence should
be much higher i.e. gross or of a very high degree.
Negligence which is neither gross nor of a higher degree
may provide a ground for action in civil law but cannot
form the basis for prosecution....”
6. xxx xxx xxx
7. To prosecute a medical professional for negligence
under criminal law it must be shown that the accused
did something or failed to do something which in the
given facts and circumstances no medical professional in
his ordinary senses and prudence would have done or
failed to do. The hazard taken by the accused doctor
should be of such a nature that the injury which resulted
was most likely imminent.
8. 
[In this regard, See : Post Graduate Institute of Medical
Education’s case – (2009) 7 SCC 330, Para.16] also.
13. The complainant complains about commission of breach
of trust (Sections 405 and 409) and commission of cheating
(Section 420). It may be noted that offences and penalties
under the Co-operative Societies Act (Chapter-XII) are not in
issue. The complaint is not about offence under the Societies
Act. The complaint is under the IPC. Factual assertions made
by the complainant are referred herein-above. First, case of
breach of trust may be considered.
14. It takes place by any one of these four acts by the
accused – they are - either misappropriation or conversion or
user or disposal of property. In Sardar Singh’s case – AIR
1977 SC 1766, appellant at the relevant time was Patwari. He
was suspended. He was directed to hand over the charge to
the authority, however, he did not hand over the charge and
consequently, charge was forcibly taken from him by breaking
open the lock. Thereafter, a criminal case was filed against
the appellant. One of the charge was, Patwari had received
Rs.26.50 ps. for issuance of certified copy. However, he had
failed to give satisfactory account for that. The other charge
was failure to return the receipt book. The Magistrate found
that former charge is not proved. But the appellant came to be
convicted for later charge as it was established that receipt
book was entrusted to the appellant and when charge was
forcibly taken from the appellant, receipt book was not found.
Hence, the Magistrate was pleased to convict the appellant
for offence of breach of trust. The Sessions Court dismissed

the appeal and Revision came to be dismissed by the High
Court. The Supreme Court allowing the appeal had held that;
“2. ... But from this it does not necessarily follow that
the appellant committed criminal breach of trust in
respect of the receipt-book. Section 409 can be invoked
only if it can be shown that the accused being in any
manner entrusted with property or with dominion over
property in his capacity as public servant committed
criminal breach of trust in respect of that property. The
offence of criminal breach is defined in Section 405 and
an essential ingredient of this offence is that the
accused being in any manner entrusted with property
or with dominion over property, dishonestly
misappropriates or converts to his own use that
property or dishonestly uses or disposes of that
property in violation of any direction of law prescribing
the mode in which such trust is to be discharged or of
any legal contract, express or implied, which he has
made touching the discharge of such trust. ... ...”
14.1 It concluded, thus;
“..What the section requires is something much more
than mere failure or omission to return the receiptbook.
The prosecution has to go further and show that
the appellant dishonestly misappropriated or converted
the receipt book to his own use or dishonestly used or
disposed of it. That, we are afraid, the prosecution has
not been able to do in the present case. We are,
therefore, of the view that the appellant was wrongly
convicted under S. 409”
15. Thus, one of the facets of criminal breach of trust is
entrustment of property or, that person should have domain
over it. The other facet is, failure to give account of the
property so entrusted or giving of an explanation that is
untrue. It is not possible to relate act of petitioner with
requirement of former facet. As to later facet, in this regard,
reference may be made to Jaikrishnadas Manohardas Desai’s

case – AIR 1960 SC 889. Head Note-A reads, thus;
“(A) Penal Code (45 of 1860) , S.409 - BREACH OF
TRUST - Proof - Failure to account for property
entrusted - Dishonest misappropriation or conversion
when may be inferred. To establish a charge of criminal
breach of trust, the prosecution is not obliged to prove
the precise mode of conversion, misappropriation or
misapplication by the accused of the property entrusted
to him or over which he has dominion. The principal
ingredient of the offence being dishonest
misappropriation or conversion which may not
ordinarily be a matter of direct proof, entrustment of
property and failure, in breach of an obligation, to
account for the property entrusted, if proved, may in the
light of other circumstances, justifiably lead to an
inference of dishonest misappropriation or conversion.
Conviction of a person for the offence of criminal breach
of trust may not, in all cases, be founded merely on his
failure to account for the property entrusted to him, or
over which he has dominion, even when a duty to
account is imposed upon him, but where he is unable to
account or renders an explanation for his failure to
account which is untrue, an inference of
misappropriation with dishonest intent may readily he
made.”
(See also :Krishna Kumar’s case – AIR 1959 SC 1390).
That act is not intentional but, it was on account of
accidental loss is for accused to bring on record.
15.1 Essentials, therefore, that attracts offence of breach of
trust, are not possible to infer so far as case of applicant is
concerned.
16. Now, about cheating. In this regard, reference may be
made to a decision of the Supreme Court in case of . G.V. Rao
v. L.H.V. Prasad and others, AIR 2000 SC 2474. In Para.7, it is
held;

“As mentioned above, Section 415 has two parts. While
in the first part, the person must "dishonestly" or
"fraudulently" induce the complaint to deliver any
property; in the second part, the person should
intentionally induce the complainant to do or omit to do
a thing. That is to say, in the first part, inducement
must be dishonest or fraudulent. In the second part, the
inducement should be intentional. As observed by this
Court in Jaswantrai Manilal Akhaney v. State of
Bombay, AIR 1956 SC 575 : 1956 Cri LJ 1116 : 1956
SCR 483 a guilty intention is an essential ingredient of
the offence of cheating. In order, therefore, to secure
conviction of a person for the offence of cheating, "mens
rea." on the part of that person, must be established. It
was also observed in Mahadeo Prasad v. State of West
Bengal, AIR 1954 SC 724 : 1954 Cri LJ 1806 that in
order to constitute the offence of cheating, the intention
to deceive should be in existence at the time when the
inducement was offered.
16.1 In short, definition of ‘cheating’ is in two parts. Both the
parts speak of inducement. In former part, inducement should
be ‘dishonest’ and ‘fraudulent’ and in the later part, it should
be ‘intentional’. As to the inducement in the preceding
paragraph in the said judgment i.e. in Para.6, it is said,
‘...Such inducement should have led the person deceived or
induced to do or omitted to do anything which he would not
have done or omitted to do, if he were was not deceived.’

16.2 No case of cheating by the applicant in the facts of the
case.
17. Lastly, taking the say of the complainant as it is and if
one considers irregularity in respect of Day Book, it hardly
takes the case of complainant any further. The say of the
complainant is that the petitioner in Audit Report has not
referred or has not drawn attention of the Society that there is
no corresponding entry of withdrawal of amount in the Day
Book of the provision store. What is Day Book ? It is defined
as a tradesmen/ merchants account book. In Black’s Law
Dictionary it is explained as “..... Book in which all the
occurrence of the day are set down. It is usually a book of
original entries ...”.
It would appear from this that entry in Day Book is for
limited and for transitory period. At the end of day – so as to
say – entries from the Day Book is to be carried into ledger or
other such permanent register. There is nothing on record
and not even the allegations in the complaint that the failure
to make the entry in the Day Book as alleged corresponds
with or it has culminated into none making of entry in the
main ledger or such other accounting book. Further, the
grievance of the complainant about the ‘Day Book’ is to be
appreciated in the background of the fact that for the audit
work, the Form of the Audit Report – Printed Form is
supplied by the office of the Registrar itself and in the present
case, besides filling this printed form, the applicant has also
appended numerous suggestions and deficiencies at the end
of the printed form. It may be stated that proceed to consider
such technical and formal accounting discrepancy, in the

circumstances of the case, in exercise of criminal jurisdiction
may raise a question of legality and propriety. The grievance
of the complainant about the Day Book is a mere technical,
formal and academic. The claim that the applicant has
committed breach of trust and/or cheating, as he had failed to
draw attention to the above referred accounting irregularity is
reduced to academic or technical grievance also because the
main accused as per the say of the complainant himself in the
complaint has admitted the guilt. Had it been the case that
Bhanvarlal - the main accused had disown the allegations and
on the other hand the Audit Report on record is such that the
Auditor had routinely and mechanically – without offering the
comments – had certified the account as ‘O.K.,’ and further
still, the main accused had taken shelter to that Audit Report
– then the matter would have been different – no such case
herein.
17.1. At the time of hearing, the learned advocate for the
applicant upon instructions has also submitted that the
Registrar has not initiated any action etc., pursuant to the
present complaint filed against the applicant. On the contrary,
it was submitted that the present applicant was continued as
Auditor for subsequent period also.
18. In view of above discussion, submission of Mr. Dhaval
Vyas, learned advocate for the applicant is accepted. There is
no case on record so far as present applicant is concerned.
19. Accordingly, application is allowed. The complaint
registered as C.R.No. I-9 of 2010 at Kevadia Police Station,
District Narmada is hereby quashed and set aside so far as

present applicant is concerned. It is hereby clarified that
criminal case against the other accused may be proceeded in
accordance with law. Rule is made absolute.
(R.D.KOTHARI, J.)

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