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What is the offence of cheating and punishment for it?

Section 420 of the Indian Penal Code refers to the offence in which an individual deceives and/or cheats on another person and induces the latter (the deceived) to deliver any property to the deceiver.

According to the penal code, any person who dishonestly induces a person to deliver any property to a 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 with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.

Elements of Section 420:

1. Cheating

Cheating is defined under Section 415 of the Penal code. According to it, if a person intentionally and dishonestly induces another person to do or omit to do any action that the deceived would not have done if the person was not deceived, and which act/omission causes of is certainly likely to cause damage or other harm to the deceived in body, mind, reputation or property, is said to ‘cheat’.

2. Dishonest Inducement

i. When the act or omission of the particular act results in the wrongful gain of property to the deceiver and the wrongful loss of property to the deceived, then the former is said to have dishonestly induced the latter.

ii. In the case of K.J. Hubert v. Sub Inspector of Police, it was decided that the mere act of introducing a person to a bank to enable such person to open an account in the bank, without anything more, does not attract the offence of cheating punishable under Section 420 IPC against the person who makes the introduction, even when the person introduced by him subsequently commits an act of cheating against the bank.

3. Presence of Mens Rea

i. It refers to the mental state of a person while committing the crime. If the person had intent to do it, then there is a prevalence of mens rea. Therefore, it must be proved beyond doubt that the accused actively and knowingly contributed and had a part in the crime.

ii. This is an essential concept to prove in most criminal cases.

Therefore, for cheating, one has to prove that there was an intent to cheat. It must be shown that there is a failure of the promise which was made. It must be shown that there was no effort on the part of accused to perform his promise.

4. Prudence of a Man

A prudent man need not be a genius though he is a wise man. He does not get influenced by his emotions and can understand the consequences of his act. He acts by weighing the circumstances by understanding others point of view and willing to learn. The said definition of prudent man calls upon the judge to become realistic and practical.

5. Cognizance under Section 420

The offence of cheating is cognizable and a non-bailable offence. It is triable by Magistrate of the First Class and therefore FIR under Section 156(3) or Private Complaint under Section 200 may be preferred.

Care should also be given to see that no unnecessary complaints are filed under this section, especially against public officials doing acts in their official capacity. In the case of Rajkumar Mishra v. Gurjeet Kaur Bajwa, it was held that the accused was merely functioning in his official duty as a notary worker, and therefore, earlier decisions convicting the worker under s.420 was set aside.

Therefore, the petitioner, while filing under S.420 of IPC needs to be careful to see whether it comes under the purview of the criminal provision. As stated in the case of Abdul Hakkem v. State of Kerala, an initially criminal complaint under Section 420, which was later realized to actually be civil in nature led to the quashing of the complaint. The court held that "Mere breach of trust or agreement will not by itself amount to a criminal offence under Section 420 IPC."

It was held in the case of Ratanlal Shah v. State of Gujarat that mere inability of the appellant to return the loan amount cannot give rise to a criminal prosecution for cheating unless fraudulent or dishonest intention is shown right at the beginning of the transaction as it is this mens rea which is the crux of the offence.

What is the difference between 'breaching a contract' and the 'offence of cheating'

i. The main difference is the intention of the accused at the time of committing the act, combined with his subsequent act. However, subsequent act will not be the sole standard to judge his intention.

ii. Mere breach of contract does not create criminal liability for cheating, unless it is proved that he had fraudulent intention during the happening of the transaction Therefore, it is the intention which is the essential to the offence.

iii. If it is proved that the defaulter had dishonest intention at the time of entering into the contract or making a promise, he will be held guilty for the offence of cheating.

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