New Delhi, Observing that movie making is a high risk business, the Supreme Court on Thursday quashed criminal proceedings for cheating against a producer after he failed to return money to a financer.
A bench of justices PS Narasimha and Manoj Misra said in order to constitute an offence of cheating, the intention to deceive should be in existence.
Setting aside an order of the Madras High court, the top court said it is necessary to show that a person had fraudulent or dishonest intention at the time of making the promise.
Mere failure to keep the promise subsequently cannot be the sole basis to presume that dishonest intention existed from the very beginning, it said.
In our view, the high court overlooked that movie making is a high risk business. No one can be sure whether a movie would earn profits or would be a flop. If one agrees to share profits in lieu of his investment in a movie, he takes the risk of a possible zero return.
“Thus, the nature of transaction between the parties was a crucial factor in determining whether the investor party should be allowed to bring in a criminal action or pursue civil remedies. Unfortunately, the high court overlooked this vital aspect,” the bench said.
The apex court said there is nothing to indicate that the appellant had a dishonest intention from the very beginning.
“Had it been a case where the appellant had not made the movie despite borrowing funds to make one, an inference about existence of a dishonest intention was permissible. However, here there is no allegation that movie was not made. Rather, it was made and released,” the bench said.
The top court said in absence of allegations that movie made profits, the complaint and the supporting materials failed to indicate that the appellant harboured a dishonest intention from inception.
“In conclusion, the allegations only disclosed a civil cause of action and the High Court fell in error in not quashing the criminal proceedings,” it said.
In this case, V Ganesan was producing a movie and ran short of funds. He, therefore, requested the complainant to lend him money on assurance that it would be returned by a share in profits to the extent of 30 per cent.
Later, more money was lent on promise of an additional 17 per cent share in profits.
Ultimately, two postdated cheques of ₹24 lakh each were issued by Ganesan to the complainant towards return of the principal amount which returned unpaid for
insufficient funds in the account.
Based on this, it was alleged that the accused had cheated the complainant.
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