A Thorough Look Into The Various Facets Of Cheating

Update: 2022-03-11 08:19 GMT

Chapter  17  of the Indian Penal Code (IPC)  titled as  offences against property  ( sections 415 to 420) deals with  provisions relating to cheating. Section 415 of the I.P.C is the  definition of cheating; the general punishment for which is contained in section 417 of the I.P.C. Section 416 of the I.P.C. defines what cheatingIndian Penal...

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Chapter  17  of the Indian Penal Code (IPC)  titled as  offences against property  ( sections 415 to 420) deals with  provisions relating to cheating. Section 415 of the I.P.C is the  definition of cheating; the general punishment for which is contained in section 417 of the I.P.C. Section 416 of the I.P.C. defines what cheatingIndian Penal Code (IPC) by personation is. Aggravated forms of cheating are punishable under sections 418, 419 and 420 of the I.P.C.

Below is an extract of the relevant portion of Part I of the First Schedule to the Code of Criminal Procedure, 1973:

Section

Punishment

Cognizable or non-cognizable

Bailable or non- bailable

By what Court triable

417

Imprisonment for (sic) 1 year, or fine, or both

Non-cognizable

Bailable

Any Magistrate

418

Imprisonment for (sic) 3 years, or fine, or both

Non-cognizable

Bailable

Any Magistrate

419

Imprisonment for (sic) 3 years, or fine, or both

Cognizable

Bailable

Any Magistrate

420

Imprisonment for (sic) 7 years, or fine, or both

Cognizable

Non-bailable

Magistrate of the first class

This article focusses on what cheating is, what are the various ingredients of the offence, how it is punished, cheating in juxtaposition to civil liability on breach of contract, when dishonour of cheque is cheating, what constitutes an attempt to cheat, the required standard of proof in matters of cheating, etc.

Definition Of Cheating Analysed

Section 415 of the I.P.C. reads as under:

"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".

Explanation.—A dishonest concealment of facts is a deception within the meaning of this section."

The above section should be read in two segments: First segment as containing the following essentials:

      a)Deception must be practiced;

      b)There should be inducement;

      c)Inducement should be either fraudulent or dishonest;

       d)There must be delivery or consent for retention of any property — by the person deceived; and

       e)The delivery may be to any person.

Second segment as containing the following essentials:

        a)Deception must be practiced;

        b)There should be inducement;

        c)Inducement should be intentional;

        d)Inducement should be directed towards making the person deceived to do something or omit to do something which he would not do or omit if         he were not so deceived; and

        e)Such act or omission should cause or be likely to cause damage or harm to that person in body, mind, reputation or property.

As seen above, as per section 415 of the I.P.C., cheating can be by deception inducing any person fraudulently or dishonestly to do things mentioned in section 415 of the I.P.C. or by inducing a person intentionally to do or omit to do things mentioned in section 415 of the I.P.C.

What Would Be Deception

Deception has in it the element of misleading, of making a person believe something which is not real. It implies causing of a person to believe as true something that is false. According to the Webster's New International Dictionary the word 'deceive' indicates "inculcating of one so that he takes the false as true, the unreal as existent, the spurious asgenuine."1 It is immaterial whether the deception has the capability of imposing upon ordinary minds. What is required is that it must impose upon the mind of the person deceived.2 Deception may be by words orconduct.3 As to what is sufficient to constitute deception must be decided in each case on its own facts. A person cannot be said to have been deceived if he sees through the deception and if he is in fact not induced by the deception practised by the accused.

The definition of the following terms should be kept in mind before proceeding further:

Section 24 of the I.P.C. defines dishonestly as under:

Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing dishonestly.

Section 23 of the I.P.C. defines wrongful gain, wrongful loss and gaining wrongfully and losing wrongfully as under:

Wrongful gain is gain by unlawful means of property to which the person gaining is not legally entitled.

Wrongful loss is the loss by unlawful means of property to which the person losing it is legally entitled.

A person is said to gain wrongfully when such person retains wrongfully, as well as when such person acquires wrongfully. A person is said to lose wrongfully when such person is wrongfully kept out of any property, as well as when such person is wrongfully deprived of property.

Section 25 of the I.P.C. defines fraudulently as under:

A person is said to do a thing fraudulently if he does that thing with intent to defraud but not otherwise.

Defects In The Drafting Of Section 415 And 420 Of The Indian Penal Code

The definition of cheating as contained in section 415 of the I.P.C. has already been mentioned above. Section 420 reads as under :

Cheating and dishonestly inducing delivery of property.— Whoever cheats and thereby dishonestly induces the person de- ceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished….

Section 417 of the I.P.C. and section 420 of the I.P.C. both prescribe punishment for cheating. Sections 415 and 420 of the I.P.C. are ill- drafted. The defect in the drafting of section 415 I.P.C. is due to the draft of section 420 of the I.P.C. There appear to be two prominent flaws in the drafting of section 420 of the I.P.C.:

The First Defect

It is worth noting that it is not possible to cheat a person through any of the modes mentioned in section 415 of the I.P.C. and thereby dishonestly induce him to deliver some property; if the inducement is dishonest and directed towards delivery of some property, it can only be the one which is prescribed under the first segment of section 415 of the I.P.C.

Nonetheless section 420 of the I.P.C. is worded as: Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person ….(emphasis added). Here the language of the section should have been in the following language: Whoever cheats by dishonestly inducing the person deceived to deliver any property to any person ….

The Second Defect

The next defect in the language of section 420 of the I.P.C. is that it prescribes punishment for a kind of cheating not included in the definition of cheating provided in section 415 of the I.P.C. The part of section 415 of the I.P.C. which deals with dishonest inducement is limited to delivery of property or consenting to retention of property, but section 420 of the

I.P.C. brings in a new kind of cheating by dishonest inducement into picture. It talks about cheating by dishonestly inducing the person de- ceived to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security.

Now, the making, alteration or destruction as envisaged here does not require delivery as envisaged in the first segment of the definition contained in section 415 of the I.P.C.; hence, by no stretch of imagination can such dishonest inducement to make, alter or destroy be covered in the phrase delivery of property. Undoubtedly, the requirement of dishonest inducement to make, alter or destroy cannot be covered by the second segment of section 415 of the I.P.C. as it does not talk of dishonest inducement but of intentional inducement.

Way Out Of The Apparent Flaws

Thus there are two prominent flaws in the provision of section 420 of the I.P.C.: firstly, it talks of cheating and thereby dishonestly inducing…, where it should have read as cheating by dishonestly inducing…; and secondly, it brings a type of cheating into picture which is not envisaged by section 415 of the I.P.C. Be that as it may, according to the rule of harmonious construction, the provisions contained in section 415 and 420 I.P.C. should be so read as to give effect to both without stultifying either.

The Various Aspects Of Cheating And Punishment Therefor

Thus for the first segment, cheating is punishable differently in different situations as under:

Under section 420 of the I.P.C.

If and only if the deception is practised by dishonestly (not fraudulently) inducing the person deceived to deliver any property to any person, the resultant act of cheating would be punishable under section 420 of the I.P.C.

Under section 417 of the I.P.C.

If the deception is practised by dishonestly (not fraudulently) inducing the person deceived to consent that any person shall retain any property, the resultant act of cheating would be punishable under section 417 of the the I.P.C.

If the deception is practised by fraudulently (not dishonestly) inducing the person deceived to deliver any property to any person

or

If the deception is practised by fraudulently (not dishonestly) inducing the person deceived to consent that any person shall retain any property, the resultant act of cheating would be punishable under section 417 of the the I.P.C.

For the second segment, cheating is punishable under section 417 of the the I.P.C.

For the residue as introduced by section 420 of the I.P.C., viz. cheating by dishonestly inducing the person deceived to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, the punishment is provided in section 420 of the I.P.C. itself.

In other words, thus, what is punishable under section 420 of the I.P.C. are only the following two:

   1. Deception practised by dishonestly (not fraudulently) inducing the person deceived to deliver any property to any person — covered by the first        segment of section 415 of the I.P.C.; and

   2. Deception practised by dishonestly (not fraudulently) inducing the person deceived to make, alter or destroy the whole or any part of a valuable      security, or anything which is signed or sealed, and which is capable of being converted into a valuable security — introduced in the provision of          section 420 of the I.P.C.

Thus except the deception practised by dishonestly (not fraudulently) inducing the person deceived to deliver any property to any person — covered by the first segment of section 415 of the I.P.C — every other mode of cheating envisaged under section 415 of the I.P.C. is punishable under section 417 of the I.P.C.

Civil Liability And Criminal Liability In Juxtaposition

It is not the law that a criminal court is precluded from taking cognisance of an offence merely because on the same set of facts the person concerned might also be subjected to civil liability.4

It is only in those cases where the representation on the basis of which the money is obtained by an accused person was correct at the time it was made or was not false to the knowledge of the accused and only subsequently the accused became dishonest or failed to carry out his part of the contract, that the dispute can be said to be of a civil nature.5

Breach Of Contract And Cheating Distinguished

To hold a person guilty of the offence of cheating, it has to be shown that his intention was dishonest at the time of making the promise. Such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfil the promise.6

The distinction between a case of mere breach of contract and one of cheating therefore depends upon the intention of the accused at the time of the alleged inducement.7 Mere breach of a contract cannot give rise to a criminal prosecution. The distinction between a case of mere breach of contract and one of cheating depends upon the intention of the accused at the time of the alleged inducement which may be judged by his subsequent act, but of which the subsequent act is not the sole criterion. Where there is no clear and conclusive evidence of the criminal intention of the accused at the time the offence is said to have been committed, and where the party said to be aggrieved has an alternative remedy in the civil court the matter should not be allowed to be fought in the Criminal Courts.8

Selling Someone Else's Property — Whether Cheating

If someone (say A) sells someone else's property (say C) to a third person (say B) — the owner (C) not being a party to the sale transaction — it cannot be said that by the sale of the property the owner (C) has been cheated, as there if no deception to the owner nor is he induced to deliver any property or to do or omit to do anything.

If both the purchaser and the seller acted in conspiracy, there is no question of one deceiving the other. The offence of cheating is not committed in respect of a third party on whom no deception has been practised and who merely sustains pecuniary loss in consequence of accused's acts.9

Cheque And Cheating

The law is well settled that a single transaction may give rise to a civil as well as a criminal liability; and not just this, a single transaction may give rise to two criminal liabilities i.e., one under section 138 of Negotiable Instruments Act and one under section 420 of the I.P.C.10

Mere dishonouring of the cheque will not bring the matter within the mischief of section 420 of the Indian Penal Code. The element of cheating must be at the initial stage.11 If the element of cheating viz., the fraudulent, dishonest or intentional inducement to deceive is not present at the initial stage, subsequent dishonour of a cheque would attract penalty not under section 420 of the I.P.C. but only under section 138 of the Negotiable Instruments Act.

Post-Dated Cheque And Cheating

The intention of the drawer at the time the cheque is issued is very material in order to determine whether the intention of the accused was to make the payment or otherwise. A distinction will have to be drawn between a case where a post dated cheque is issued in order to discharge an existing liability and a case where it is issued against delivery of goods, property or cash with an assurance that it well be encashed when presented to the bank in due course. In one case it may amount only to a breach of promise if the cheque is not encashed while in the other case it may be prima facie evidence of an intention to cheat.12A post-dated cheque in payment of goods already received is a mere promise to pay on a future date and a broken promise is not a criminal offence.13

A post-dated cheque for payment of goods already delivered is only a promise to pay on a future date. If the promise was broken by the dishonour of the cheque the liability being only civil no criminal offence will be there.14

Issuance of post-dated cheque for past debt or past rent or past liability knowingly that there is no amount in the bank account, is only a breach of promise, and not a criminal liability under section 420 of the Indian Penal Code for which a complaint can be filed.15

If from the very inception of the contract the intention is of dishonesty and deception and in consequence thereof a person is induced to part with any property or to do or omit to do anything that he would not do or omit to do but for that deception, the offence of cheating is prima facie made out; but in case in which as a result of passing of some property or doing of an act or omission to do it, a post-dated cheque is issued with the full knowledge of both the parties that for the present the cheque was not encashable, there is no dishonesty or inducement at the very inception of the contract. And if subsequently for some reason or the other on the due date the cheques are dishonoured, the case may not be covered under Section 420 of the Penal Code, 1860. It will only be a case of civil liability. The reason being that it was not the intention of the person issuing the cheque to make an immediate payment and the post dated cheque was only in the nature of a promise to pay which promise, if it is broken, could give rise only to a civil liability.16

If a person gives a cheque which is dishonoured and from the circumstances it could be presumed that he must have been aware and even intended that the cheque would be and should be dishonoured, he would prima facie be guilty under S. 420. The position would be otherwise if he had no knowledge that he had no sufficient money in the Bank when issuing the cheque. A post-dated cheque is a representation about a future event, the holding out of a hope rather than the representation of a present act and if such a cheque were to be dishonoured, it amounts to a broken promise but not to a criminal offence although it may amount to discreditable conduct in business circles. When the accused gives the post- dated cheque for goods delivered, a fortiori no offence of cheating can be spelt out.17

The drawing up of a cheque does not imply any representation that the drawer has money in the Bank to the amount shown in the cheque, for he may either have authority to overdraw, or have an honest intention of paying-in the necessary money before the cheque can be presented. Giving of a cheque in lieu of money already due, with the knowledge that the drawer has no funds in the Bank does not amount to an offence but is only a civil wrong. But if a person gives a cheque which is dishonoured and from the circumstances it could be presumed that he must have been aware that the cheque would be dishonoured, he would be guilty under S. 420.18

Attempt To Cheat

To make out a completed offence of cheating, the complainant who is the victim of false, fraudulently or intentionally deceptive representation must have committed the act which he is induced by the accused to do (by such inducement). If the act is not done by the complainant as a result of the inducement, the act of cheating would not be completed though in certain circumstances, an offence of attempting to commit cheating might have been committed.19

It is not necessary that the accused should complete every stage in the actual offence except the final stage. 20

Mere preparation is an indifferent act possessing no definite indication of criminality. It is no doubt true that it is not unoften a question of nicety as to where does preparation end and attempt begins. The answer to this question is, an attempt is an act of such a nature that it is in itself evidence of the criminal intent upon its face. The thing speaks for itself.21

A man may attempt to cheat, although the person he attempts to cheat is forewarned, and is therefore not cheated.22

The only reason why the offence stopped short at an attempt and did not proceed to the cheating itself was because the party who was sought to be cheated was cautious and not confiding. An overt act was begun by the accused which would have led to the finished offence but for an interruption arising independently of the will of the accused.23

S. 511 was not meant to cover only the penultimate act towards the completion of an offence and not acts precedent. If those precedent acts are done in the course of the attempt to commit the offence and are done with the intent to commit it and are done towards its commission, the offence of attempt to cheat would be complete. 24

The fact that the complainant was not deceived in fact is immaterial for the offence under S. 420 read with S. 511 of the I.P.C.25

Standard Of Proof

To hold a person guilty of the offence of cheating, it has to be shown that his intention was dishonest at the time of making the promise. Such a dishonest intention cannot be inferred from the mere fact that he could not subsequently fulfil the promise.26 It is not necessary that there should be some positive evidence about the dishonest intention. Such intention can be inferred by the surrounding circumstances and subsequent  conduct.27 If the law is not interpreted in this manner, dishonest persons would schemingly skip the law and defeat the justice.28

Thus, it is seen that the definition of the offence of cheating as contained in the I.P.C. is ill-drafted. What is contained in section 415 I.P.C. is not just what cheating is all about. Some of its facets are included in the punishing section i.e., section 420 I.P.C. How the various facets are distinct and how they are to be punished must be taken note of. The fact that a transaction gives rise to a civil liability ipso facto cannot lead to the conclusion that in such cases no criminal liability can be affixed onto the accused. The intent at the beginning of the questioned transaction is what is material, and subsequent conduct of the accused may not always be the decisive factor although it may be relevant for inferring the initial intent. When it comes to post-dated cheques, it should be borne in mind whether the cheque has been issued for fulfilling some past liability or whether it has been issued in a transaction wherein the victim has due to the issuance of the post-dated cheque parted with property. In the former, no offence of cheating may be made out; whereas in the latter, the offence of cheating is prima facie made out. Distinction amongst the concepts of preparation to cheat, an attempt to cheat and cheating itself must be clearly borne in mind. To prove cheating, it is the surrounding circumstances and conduct which often serve as the guide to determine whether an offence of cheating has been committed or not.

The soul of the provision should not be lost sight of otherwise it may become difficult to clearly say whether a particular act would fall within the four walls of cheating, and if it would fall then under which provision would it be punishable: loosing such sight may result in injustice.

The author is a Civil Judge Senior Division, Tarana, Ujjain, M.P.Views are personal

1 P.M. Natarajan vs Krishna Chandra Gupta 1975 CriLJ 899

2 R vs. William Woolley 169 E.R. 372 (Crown Court decision)

3 Khoda Bakhsh vs. Bakeya Mundari (1905) 2 Cri LJ 76424 In the matter of R. MacCrea, 1893 AWN 71

4 Chintaman vs. Dyaneshwar, 1974 Cr.L.J 542

5 A.C. Budwar vs. State 1956 SCC OnLine All 304

6 State of Kerala v. A. Pareed Pillai, (1972) 3 SCC 661

7 Azad All Tahsildar v. Amswar Ali AIR 1959 Tripura 40

8 Bageshwar Misser v. Mt. Khandari Kuer, AIR 1970 Pat 20 and Banchamani Saha vs Kshir Babu Sinha 1959 CriLJ 1027

9 Reference may be made for similar view on Sheonarayan Jaiswal v. State of Bihar, AIR 1953 Pat 225 and Vijay Narayandas Rizwani v. Dilip,(1996) 1 Bom CR 322

10 For similar view see Sosamma v. Rajendran, 1993 SCC OnLine Ker 61

11 Kanwar Girendra Singh v. Supreme Tractors, 1979 SCC OnLine P&H 190

12 see Jawahar Lal Bansal v. Mohinder Singh, 1979 SCC OnLine P&H 211 and Murari Lal v. Shiv Parkash and other 1971 Cur. L.J. 96.

13 M.M.S.T. Chidambaran Chettiar v. Shanmugham Pillai AIR 1930, Page 129

14 Chary v. Martin, 1982 SCC OnLine Ker 83

15 Susemma Bijoy vs. Mohinder Kumar Guleria, 1994 (3) Crimes 164 (H.P.)

16 Shyam Sundar v. Lala Bhawan Kishore, 1988 SCC OnLine All 888 1989 Cri LJ 559

17 Sreethara Kamath v. Jawala Prasad Gupta 1970 KLT 45

18 Cheriyan v. Kuruvilla 1968 KLT 279

19 V.R. Venugopal vs Miss T. Pankajam AIR 1961 AP 266

20 Emperor v. Raghunath AIR 1941 Oudh 3

21 Ganapathiudayar v. T. A. Chinnayya Mudaliar AIR 1953 Mad 609

22 Govt. of Bengal v. Umesh Chunder Mitter, (1889) ILR 16 Cal 310. Also see Emperor v. Raghunath, 1940 SCC OnLine Oudh CC 154, Shamji v. Emperor, AIR 1922 Nag 40

23 Emperor v. Mansing 15 Bom LR 568

25 State of Maharashtra v. Abid Husen Sahib Husen, 1978 Cri LJ 429

26 State Of Kerala vs A. Pareed Pillai And Anr. AIR 1973 SC 326

27 S.R. Narsimlu vs Unknown 1973 CriLJ 1481 and Nadir Ali Barqa Zaidi And Ors. vs The State Of U.P. AIR 1960 All 103

28 Arvindbhai Ravjibhai Patel vs State Of Gujarat And Ors. 1998 CriLJ 463

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