What are the ingredients of Cheating?

Case-Laws on Cheating under section 415 and 420 of Indian Penal Code, 1860

Topic #007

What is Cheating?

In R.K. Vijayasarathy v. Sudha Seetharam¹, the Hon’ble Supreme Court has stated that an act to be constituted as an offence of Cheating under Section 415 of IPC, the following ingredients have to be satisfied

1. There should be fraudulent or dishonest inducement of a person by deceiving him:

   1. The person so induced should be intentionally induced to deliver any property to any person or to consent that any person shall retain any property, or

   2. The person so induced should be intentionally induced to do or to omit to do anything which he would not do or omit if he were not so deceived; and

2. In cases covered by 1. 2 above, the act or omission should be one which caused or is likely to cause damage or harm to the person induced in body, mind, reputation or property.

A fraudulent or dishonest inducement is an essential ingredient for an act to constitute an offence under Section 415.

In G. V Rao v. L.H.V Prasad & Ors², the Hon'ble Supreme Court held that section 415 has two-part.

1. While in the first part the person must dishonestly or fraudulently induce the complainant 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.

2. In the second part, the inducement should be intentional.

   The Hon'ble Supreme Court has also held that the mens-rea on the part of the persons, must also be established.

In R.K. Vijayasarathy (Supra), the Hon’ble Supreme Court has stated that an offence to be constituted as cheating and dishonestly inducing delivery of property under Section 420 of IPC, the following ingredients have to be satisfied

1. A person must commit the offence of cheating under Section 415; and

2. The person cheated must be dishonestly induced to

   1. deliver property to any person; or

   2. make, alter or destroy valuable security or anything signed or sealed and capable of being converted into valuable security.

Cheating is an essential ingredient for an act to be constituted as an offence under Section 420.

Cheating and Criminal Breach of Trust

In R.K. Vijayasarathy (Supra), the Hon’ble Supreme Court has stated that an offence to be constituted as Criminal Breach of Trust under Section 405 of IPC, the following ingredients have to be satisfied:

1. A person should have been entrusted with property, or entrusted with dominion over property;

2. That person should dishonestly misappropriate or convert to their own use that property, or dishonestly use or dispose of that property or wilfully suffer any other person to do so; and

3. That such misappropriation, conversion, use or disposal should be in violation of any direction of law prescribing the mode in which such trust is to be discharged, or of any legal contract which the person has made, touching the discharge of such trust.

Entrustment is an essential ingredient for an act to be constituted as an offence under Section 405, whereas in Cheating, fraudulent or dishonest inducement is an essential ingredient.

Failure to keep up the promise

In Hridaya Ranjan Prasad Verma v. State of Bihar³, the Hon'ble Supreme Court held that a mere failure to keep up promise subsequently cannot be presumed as an act leading to cheating.

Breach of Contract

In Dalip Kaur & Ors. Vs. Jagnar Singh & Anr⁴, the question for determination before the Hon’ble Supreme Court was whether breach of contract of an agreement for sale would constitute an offence under Section 406 or Section 420 of the IPC. After examining the fact of the case and relevant Sections of the IPC, the Supreme Court held that an offence of “cheating” would be constituted when the accused has fraudulent or dishonest intention at the time of the making of promise or representation. A pure and simple breach of contract does not constitute the offence of “cheating”.

In Vesa Holdings Private Limited v. State of Kerala and others⁵, it is observed and held by the Hon’ble Supreme Court that every breach of contract would not give rise to an offence of cheating and only in those cases, breach of contract would amount to cheating where there was any deception played at the very inception. It is further observed and held that for the purpose of constituting an offence of cheating, the complainant is required to show that the accused had the fraudulent or dishonest intention at the time of making a promise or representation. It is further observed and held that even in a case where allegations are made in regard to failure on the part of the accused to keep his promise, in the absence of a culpable intention at the time of making initial promise being absent, no offence under Section 420 IPC can be said to have been made out. It is further observed and held that the real test is whether the allegations in the complaint disclose the criminal offence of cheating or not.

Non-Payment

In Vir Prakash Sharma v. Anil Kumar Agarwal⁶, it has been held that non-payment or underpayment of the price of the goods by itself does not amount to the commission of an offence of cheating or criminal breach of trust.

Onus on the Complainant

In Hari Prasad Chamaria v. Bishun Kumar Surekha⁷, the Hon’ble Supreme Court held that unless the complaint showed that the accused had the dishonest or fraudulent intention at the time the complainant parted with the money it would not amount to an offence under Section 420, IPC and it may only amount to a breach of contract.

In Hira Lal Hari Lal Bhagwati v. CBI, New Delhi⁸, the Hon’ble Supreme Court has observed that for establishing the offence of cheating, the complainant is required to show that the accused had fraudulent or dishonest intention at the time of making promise or representation. From his failure to keep promise subsequently, such a culpable intention right at the beginning cannot be presumed.

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Also, Refer

1. S.W.Palanitkar vs. State of Bihar (2002) 1 SCC 241

2. Harmanpreet Singh Ahluwalia vs. State of Punjab (2009) 7 SCC 712

3. S.V.L. Murthy etc. v. State represented by CBI, Hyderabad (2009) 6 SCC 77

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1. (2019) 16 SCC 739

2. (2000) 3 SCC 693

3. (2000) 4 SCC 168

4. (2009) 14 SCC 696

5. (2015) 8 SCC 293

6. (2007) 7 SCC 373

7. (1973) 2 SCC 823

8. (2003) 5 SCC 257