Difference between Cheating and Criminal Breach of Trust
INTRODUCTION
The Indian Penal Code (IPC)1860 (hereinafter referred as the code),which has been repealed by Bharatiya Nyaya Sanhita (BNS) in December 2023 and came into effect on 1st July 2024, provided for criminal breach of trust and cheating under following sections namely Section 405 and section 420 respectively.
The Supreme Court in its recent judgement in Delhi Race Club (1940) Ltd &Ors v. State of Uttar Pradesh & Anr ,2024 has went on to explain the distinction between the offence of cheating vis-a-vis criminal breach of trust. It stated that with a view to clear a serious misconception of law in the mind of the police as well as the courts below, that if it is a case of the complainant that offence of criminal breach of trust as defined under Section 405 of IPC, punishable under Section 406 of IPC, is committed by the accused, then in the same breath it cannot be said that the accused has also committed the offence of cheating as defined and explained in Section 415 of the IPC, punishable under Section 420 of the IPC.
The court has highlighted that both offences are independent and distinct. The two offences cannot coexist simultaneously in the same set of facts. They are antithetical to each other. The two provisions of the IPC (now BNS, 2023) are not twins that they cannot survive without each other.
ANALYSIS
Section 405 of IPC defines Criminal Breach of Trust which reads as under: –
“405. Criminal breach of trust.—Whoever, being in any manner entrusted with property, or with any 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, or wilfully suffers any other person so to do, commits “criminal breach of trust”
Section 415 of IPC define cheating which reads as under: –
“415. Cheating. —Whoever, by deceiving any person, fraudulently or dishonestly induces the person so deceived to deliver any property to any person, or to consent that any person shall retain any property, or intentionally induces the person so deceived to do or omit to do anything which he would not do or omit if he were not so deceived, and which act or omission causes or is likely to cause damage or harm to that person in body, mind, reputation or property, is said to “cheat”.”
The Supreme Court in Delhi Race Club (1940) Ltd &Ors v. State of Uttar Pradesh & Anr referred to its decision in S.W. Palanitkar & Ors. v. State of Bihar & Anr.reported in (2002) 1 SCC 241 in which the court expounded the difference in the ingredients required for constituting an of offence of criminal breach of trust (Section 406 IPC) viz-a-viz the offence of cheating (Section 420). The relevant observations read as under: –
“9. The ingredients in order to constitute a criminal breach of trust are: (i) entrusting a person with property or with any dominion over property, (ii) that person entrusted (a) dishonestly misappropriating or converting that property to his own use; or (b) dishonestly using or disposing of that property or wilfully suffering any other person so to do in violation (i) of any direction of law prescribing the mode in which such trust is to be discharged, (ii) of any legal contract made, touching the discharge of such trust.
10. The ingredients of an offence of cheating are: (i) there should be fraudulent or dishonest inducement of a person by deceiving him, (ii)(a) the person so deceived should be induced to deliver any property to any person, or to consent that any person shall retain any property; or (b) the person so deceived should be intentionally induced to do or omit to do anything which he would not do or omit if he were not so deceived; and (iii) in cases covered by (ii)(b), the act ofomission should be one which causes or is likely to cause damage or harm to the person induced in body, mind, reputation or property.”
From the above it observed that the offences under Criminal Breach of Trust and Cheating have specific ingredients.
Essential Ingredients under Criminal Breach of Trust (Section 406 of IPC,1860)
In Sadhupati Nageshwara Rao V state of Andra Pradesh AIR 2012 SC 3242 it was held that basic requirement to bring home the accusation under Section 405 of the code are the requirements to prove conjointly (i) entrustment and (ii)whether the accused was actuated by dishonest intention or not, misappropriated it or converted it to his own use to the detriment of the person who entrusted it.
Hence from the above case laws it follows the essential ingredients are:-
1 The entrustment of property with a person or dominion over property
2.The person entrusted with–
a) dishonestly disappropriates or Converts it for his own use
b)dishonestly used or disposed of the property or willfully suffers any other person so to do in violation of:
i. any direction of law prescribing the method in which the trust is discharged; or
ii. legal contract touching the discharge of trust (see: S.W.P. Palanitkar (supra).
The word entrusted has not been defined under the code. In Jaswantrai Manilal Akhaney v. State of Bombay[1956 SCR 483]. The expression “entrustment” carries with it the implication that the person handing over any property or on whose behalf that property is handed over to another, continues to be its owner. Further the person handing over the property must have confidence in the person taking the property so as to create a fiduciary relationship between them. A mere transaction of sale cannot amount to an “entrustment”
Simarly, in Central Bureau of Investigation, SPE, SIU(X), New Delhi v. Duncans Agro Industries Ltd., Calcutta reported in (1996) 5 SCC 591 this Court held that the expression “entrusted with property” used in Section 405 of the IPC connotes that the property in respect of which criminal breach of trust can be committed must necessarily be the property of some person other than the accused or that the beneficial interest in or ownership thereof must be in the other person and the offender must hold such property in trust for such other person or for his benefit.
Essential Ingredients under Cheating
Similarly In respect of an offence under Section 420 IPC, the essential ingredients are: –
1) deception of any person, either by making a false or misleading representation or by other action or by omission;
2) fraudulently or dishonestly inducing any person to deliver any property, or
3) the consent that any persons shall retain any property and finally intentionally inducing that person to do or omit to do anything which he would not do or omit (see: Harmanpreet Singh Ahluwalia v. State of Punjab, (2009) 7 SCC 712 : (2009) Cr.L.J. 3462 (SC)).
The court went on to explain that
” 28. Every act of breach of trust may not result in a penal offence of criminal breach of trust unless there is evidence of manipulating act of fraudulent misappropriation. An act of breach of trust involves a civil wrong in respect of which the person may seek his remedy for damages in civil courts but, any breach of trust with a mens rea, gives rise to a criminal prosecution as well.”
“29.the case of cheating and dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, a person who comes into possession of the movable property and receives it legally, but illegally retains it or converts it to his own use against the terms of the contract, then the question is, in a case like this, whether the retention is with dishonest intention or not, whether the retention involves criminal breach of trust or only a civil liability would depend upon the facts of each case.”
The court highlighted that the distinction between mere breach of contract and and the offence of criminal breach of trust and cheating is a fine one. In mere breach of contract cannot give rise rise to a criminal prosecution unless fraudulent or dishonest intention is shown right from the beginning of the transaction ie the time when the offence is said to have been committed. Whereas in criminal breach of trust, the property must be entrusted to accused or he must be in dominion over it . The property in respect of which the offence is committed must be either the property of some person other than accused or beneficial interest in or ownership of it must be of some other person.Although the offence, i.e. the offence of breach of trust and cheating involve dishonest intention, yet they are mutually exclusive and different in basic concept. There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously accused must hold the property in trust.In case of cheating, the intention of the accused at the time of inducement should be looked into which may be judged by a subsequent conduct.The definition in the section does not restrict the property to movables or immoveable alone. This Court in R K Dalmia vs Delhi Administration, (1963) 1 SCR 253 held that the word ‘property’ is used in the Code in a much wider sense than the expression ‘moveable property’. There is no good reason to restrict the meaning of the word ‘property’ to moveable property only when it is used without any qualification in Section 405.
Opinion of Author
It cannot be contented that both are mutually exclusive but the offences can co-exist simultaneously which can be contented. The view of SC that these two sections are antithetical cannot be subscribed , take for illustration let’s say A entrusts the property to B who dishonestly or falsely represented himself to be a property manager and thereby fraudulently inducing A to deliver the same and then misuses the property or Converts the property for his own use . This illustration above is satisfying the ingredients of the both the Sections 406 and 420 of IPC,1860. In VIJAY KUMAR GHAI & ORS. VERSUS THE STATE OF WEST BENGAL & ORS 2022 SC 305the court observed that at the same time, in order to attract the ingredients of Section of 406 and 420 IPC it is imperative on the part of the complainant to prima facie establish that there was an intention on part of the petitioner and/or others to cheat and/or to defraud the complainant right from the inception. Furthermore it has to be prima facie established that due to such alleged act of cheating the complainant had suffered a wrongful loss and the same had resulted in wrongful gain for the accused. In absence of these elements, no proceeding is permissible in the eyes of law with regard to the commission of the offence punishable u/s 420 IPC. The court in the above case observed that:
31. To establish the offence of Cheating in inducing the delivery of property, the following ingredients need to be proved:-
1. The representation made by the person was false
2. The accused had prior knowledge that the representation he made was false.
3. The accused made false representation with dishonest intention in order to deceive the person to whom it was made.
4. The act where the accused induced the person to deliver the property or to perform or to abstain from any act which the person would have not done or had otherwise committed.
Conclusion
Reference
Refer Judgement here: https://api.sci.gov.in/supremecourt/2024/17272/17272_2024_10_1502_54999_Judgement_23-Aug-2024.pd