A growing trend is observed by the judiciary in the usage of criminal
prosecution as a tool of harassment or for seeking private vendetta or with an
ulterior motive to pressurized the accused. This strategy is frequently used to
paint matters which are predominantly of civil nature with the colour of
This strategy is based on the premise that to get desired results
from civil litigation is a time-consuming process and therefore if a person is
somehow trapped in a criminal prosecution, the probability of imminent
settlement increases. In course of the ensuing discussion, an attempt is made to analyse
the elements of Cheating
under Indian Penal Code in light of judicial
pronouncements encircling the above issue.
Provisions pertaining to the offence of cheating are contained in sections 415
to section 420 of the Indian Penal code (IPC). The offence of cheating is
established only when all the following elements are to be proved, namely:
- that the representation made by the accused was false,
- that the accused knew that the representation was false at the very time
he made it,
- that he made that false representation with the dishonest intention of
deceiving the person to whom it is made, and
- that he thereby induced that person to deliver the property or to do or
to omit to do something which he would have otherwise not done or omitted.
Thus, for a person to be convicted for the offence of cheating under section 420
of IPC, it has to be established that not only the accused has cheated someone,
but also that by cheating he has dishonestly induced the person cheated, to
deliver any property. The element of mens-rea is a predominant factor while
determining the offence of cheating but in reality, it has to be coupled with
actual damage to the person who is claiming to be cheated.
A person can be said to have done dishonestly, if he does that thing with the
intention of causing wrongful gain to one person, or wrongful loss to another
person. On a charge of cheating, the element of mens-rea has to be evaluated at
the very time when such false representation is made. In cases pertaining to
cheating, the burden lies on the prosecution to prove affirmatively both
elements i.e. false representation has been made and the presence of dishonest
intention when it was being made.
It has been further recognized that if the accused gives any explanation of his
conduct which is reasonable, it must be taken into consideration, and if there
is a possibility that the explanation might be true, it must be accepted, even
though the court may not be absolutely convinced of its truth, and even though
the accused may not have been able to prove his defence quite conclusively.
If the charge is that the accused has committed a breach of a false promise to
do something at future date, as a result of which the complainant had been
induced to part with his money or property, the question whether the accused is
guilty of a criminal offence of cheating or is liable in a Civil court for
damages for breach of contract depends upon the state of mind of the accused at
the time when the promise was made.
If the prosecution fails to prove the presence of ulterior intentions at the
time of making such promise in affirmation, then criminal liability cannot be
foisted at a later stage, arising due to non-fulfilment of promise. The only
remedy available is to obtain a decree for damages for breach of contract in a
The premise being attached to this reasoning is that there is a possibility that
the accused may have intended, at the time when he made the promise, to carry it
out, and his subsequent failure to do so may be the result of circumstances
about which he had no knowledge at the time when he made the promise and not
because of any dishonest intention at the very onset.
Suppose accused induced the complainant to enter into a contract to part with
his goods on a promise, that he would make payment against delivery, and when
the complainant delivered the goods, the accused did not make the cash payment
against the delivery as promised. It was proved that at the time he made the
promise ha had no cash available with him and has no prospect of being able to
make cash payment against the delivery.
On these facts, the charge of cheating was established because the circumstances
of the case placed it beyond any doubt that at the time when the transaction was
entered into, the accused has entertained a dishonest intention to cause
wrongful loss to the complainant on the pretext of a false promise. On the
contrary, if the accused was able to satisfy the court that he was financially
viable at the time of making such promise, the matter would have been restricted
to only a breach of contract rather than a criminal prosecution.
In the case of State of Kerala v. A. Pareed Pillai and another
two-Judge Bench ruled that 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 and such a dishonest intention cannot be inferred from a mere fact that
he could not subsequently fulfil the promise.
Similar view has been taken in the case of S.W. Palanitkar and others v.
State of Bihar & anothe
r [(2002) 1 SCC 241] and also in the case of State
of Kerala vs. A. Pareed Pillai and Anr.
[(1972) 3 SCC 661].
In the case of Hiralal Harilal Bhagwati vs CBI
, it has been held that:
It is settled law, by a catena of decisions, that for establishing the offence
of cheating, the complainant is required to show that the accused had the
fraudulent or dishonest intention at the time of making promise or
representation. From his making failure to keep promise subsequently, such a
culpable intention right at the beginning that is at the time when the promise
was made cannot be presumed.
It is seen from the records that the exemption certificate contained necessary
conditions which were required to be complied with after importation of the
machine. Since the GCS could not comply with it, therefore, it rightly paid the
necessary duties without taking advantage of the exemption certificate.
The conduct of the GCS clearly indicates that there was no fraudulent or
dishonest intention of either the GCS or the appellants in their capacities as
office-bearers right at the time of making an application for exemption.
Also in the case of Vir Prakash Sharma v. Anil Kumar Agarwal
SCC 373], it has been held that:
Non-payment or underpayment of the price of the goods by itself does not amount
to commission of an offence of cheating or criminal breach of trust.
In the case of All Cargo Movers (I) Pvt. Ltd. v. Dhanesh Badarmal Jain and
[2007 (12) SCALE 391], stating:
"For the said purpose, allegations in the complaint petition must disclose the
necessary ingredients therefore. Where a civil suit is pending and the complaint
petition has been filed one year after filing of the civil suit, we may for the
purpose of finding out as to whether the said allegations are prima facie cannot
notice the correspondences exchanged by the parties and other admitted
documents. It is one thing to say that the Court at this juncture would not
consider the defence of the accused but it is another thing to say that for
exercising the inherent jurisdiction of this Court, it is impermissible also to
look to the admitted documents. Criminal proceedings should not be encouraged,
when it is found to be mala fide or otherwise an abuse of the process of the
Court. Superior Courts while exercising this power should also strive to serve
the ends of justice."
Similar observation has been raised in the case of Sharon Michael and ors.
vs. State of Tamil Nadu and Anr
. [2009 (1) SCALE 627]".
In the case of Laxmi Narayan Kalra v. the State of Bihar
, AIR 1956 SC
544: 1956 CrLJ 948, the cheque was issued by way of security but was not
supported by credit in the bank. The court opined that:
under the circumstances, though the action of the accused was highly
reprehensible, in absence of any dishonest intention, the charge under section
420 failed, and conviction has to be set aside.
Recently in the case of Satishchandra Ratanlal Shah v. the State of Gujarat
it was held that:
the mere inability of the appellant to return the loan amount cannot give rise
to criminal prosecution for cheating unless the fraudulent or dishonest
intention is shown right at the beginning of the transaction, as it is this
men's rea which is the crux of the offence.
It has been held that giving of a cheque in lieu of money due with the knowledge
that the drawer had no funds with the bank, does not amount to an offence of
cheating in the absence of any evidence to show that the person to whom the
cheque was issued parted with any property, or that he did anything which he
would not have done, had he knew that the cheque would be dishonoured. A
reference may be made to Nagarajan v. Jinnah Saheb
In this case, it has been held that where 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 the necessary money before the cheque can be presented.
Mere fact that the cheque is dishonoured may not by itself give rise to a
criminal offence [Bholanath v. State
, 1982 CrLJ 1482]. Mere dishonour of
cheque given by the accused for payment of the price of goods supplied is no
offence unless the giving of the cheque is connected with the purchase and
supply of the goods [Prestolite of India v. Munsif Magistrate Hawali
1978 CrLJ 58 (All)].
However it has been held in the case of Sazid Khan v. State of Haryana, 2018 SCC
OnLine P&H 1733, Section 138 of NI Act and Section 420 IPC not exclusive to
each other, a person can be charged with both offences simultaneously
In the case of Dalip Kaur & Ors. Vs. Jagnar Singh & Anr,
It was held that
if the dispute between the parties was essentially a civil dispute resulting
from a breach of contract on the part of the appellants for non- refunding the
amount of advance, the same would not constitute an offence of "cheating
or criminal breach of trust
Thus from the above discussion, it is clear that ulterior intention is the
premise for cheating. However, the courts have on multiple occasion has opined
that there exists no permanent yardstick to determine the underlying nature of
an event to be classified as a matter of purely civil in nature or whether it
has the essence of cheating. It has to be determined on the fact of each case.
It has gone to envisage that the injury alleged may form the basis of civil
claim and may also constitute the ingredients of some crime punishable under
When there is a dispute between the parties arising out of a transaction
involving the passing of valuable properties between them, the aggrieved person
may have right to sue for damages or compensation and at the same time, the law
permits the victim to proceed against the wrongdoer for having committed an
offence of criminal breach of trust or cheating
Therefore, it is essential that the averments raised in the complaint as well as
in the petition do clearly bring out all the facts in a coherent manner, so as
to enable the adjudicating authority to differentiate between civil and criminal
aspects of the case.