Cheating: Concept, Essentials and Case Laws

Cheating: Concept, Essentials and Case Laws | Overview

• Introduction
• Essentials
• Deception: What and when is it cheating?
• Dishonest concealment of facts: Explanation of section 415
• Misrepresentation in cheating
• Cheating different from other offences
• Cheating related to false promise to marry
• Inducement
• Dishonest intention: Mental element required
• Complaint of cheating: Is it necessary to mention dishonesty?
• Damage or harm: Caused or likely to cause?
• Civil liability v. Criminal liability: Cheating or breaching?
• Punishment for cheating
• Cheating by personation and its punishment:
• Cheating in fiduciary relationship:

This article talks about the different forms of cheating including Civil and Criminal cases of induced deception. It explains why cheating is different from other offences like criminal misappropriation and breach of trust. When it comes to liability, the offence cheating is of criminal liability and the variation with a civil suit is briefly discussed. Further, other sections in the category of the offence of cheating are explained in brief.

Introduction

Hawkins defines cheating as deceitful practices in defrauding or endeavouring to defraud another of his own right by means of some artful device contrary to the plain rule of common honesty. [Smith and Hogan, criminal law 10th edition]. Cheating at common law was a misdemeanour and punishable by imprisonment and fine.

The offence of cheating, its forms and its punishment are dealt in the category “Of Cheating”^[1]under the chapter titled “Of Offences Against Property”^[2]

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

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

Illustrations

1. A, by falsely pretending to be in the Civil Service, intentionally deceives Z, and thus dishonestly induces Z to let him have on credit goods for which he does not mean to pay; A cheats
2. A, by putting a counterfeit mark on an article, intentionally deceives Z into a belief that this article was made by a certain celebrated manufacturer, and thus dishonestly induces Z to buy and pay for the article; A cheats
3. A, by exhibiting to Z a false sample of an article intentionally deceives Z into believing that the article corresponds with the sample, and thereby dishonestly induces Z to buy and pay for the article; A cheats
4. A, by tendering in payment for an article a bill on a house with which A keeps no money, and by which A expects that the bill will be dishonoured, intentionally deceives Z, and thereby dishonestly induces Z to deliver the article, intending not to pay for it; A cheats
5. A, by pledging as diamond articles which he knows are not diamonds, intentionally deceives Z, and thereby dishonestly induces Z to lend money; A cheats
6. A Intentionally deceives Z into a belief that A means to repay any money that Z may lend to him and thereby dishonestly induces Z to lend him money, A not intending to repay it; A cheats
7. A intentionally deceives Z into a belief that A means to deliver to Z a certain quantity of indigo plant which he does not intend to deliver, and thereby dishonestly induces Z to advance money upon the faith of such delivery; A cheats; but if A, at the time of obtaining the money, intends to deliver the indigo plant, and afterwards breaks his contract and does not deliver it, he does not cheat, but is liable only to a civil action for breach of contract
8. A intentionally deceives Z into a belief that A has performed A’s part of a contract made with Z, which he has not performed, and thereby dishonestly induces Z to pay money; A cheats
9. A sells and conveys an estate to B; A, knowing that in consequence of such sale he has no right to the property, sells or mortgages the same to Z, without disclosing the fact of the previous sale and conveyance to B, and receives the purchase or mortgage money from Z; A cheats

Essentials

The following are the essentials for the offence of cheating:

1. The accused must ‘deceive any person’
2. After deceiving he must- (a). ‘Fraudulently or dishonestly induce the person to deliver any property to any person or; to consent that any person shall retain any property’ (b). ‘Intentionally induce the person, to do or omit to do anything which he would not do or omit if he were not so deceived’
3. Such ‘act or omission’, to that person in ‘body, mind, reputation or property’-(a).Causes damage or;(b).Is likely to cause damage or;(c).Causes harm or;(d).Is likely to cause harm

The deception in this section can be done in two ways firstly, by fraudulently or dishonestly inducing the person and secondly, by intentionally inducing that person so deceived. It is not enough if the person deceived is only induced but also should be fulfilling the other essentials laid down in the section for the conviction of the accused.^[3]The inducement may be of any of the two kinds and the deception is common in both the parts.

Deception: What and when is it cheating?

The first and foremost important essential for proving cheating, in any case, is deception.^[4]The deception may be expressed by words or implications or by conduct.^[5]The manner of deception always depends upon the facts and circumstances of each case.^[6]

In the case of Swami Dhirendra Brahmachari v. Shailendar Bhushan (1995) Cr LJ 1810 (Del), although this was a case dealing with a petition to quash the FIR filed by the complainants against the petitioners for cheating, the court observed the actions of the petitioners to claim that the training programme offered by them to be a government initiative and act of charging the caution amount of Rs. 1000 for each member, were fulfilling the ingredients of section 415 which was charged by the police officials. Hence the court held that deception is an act of making any person believe something which is not true or making one not to believe something which is true. Thus, dismissed the petition.

Deception is essential for the charge of cheating, therefore in the absence of the same or on the occasion of lack of evidence, cheating cannot be established. Further, the deception must be practised prior to the delivery of property.^[7]

Dishonest concealment of facts: Explanation of section 415

As it is mentioned in the explanation of section 415, that even dishonest concealment of facts will amount to deception. Although not all concealments are of material facts, if it is done with dishonest intention then it is deception. Such concealment may not be illegal but must be dishonest.^[8]It is dishonest concealment even if the accused had no legal obligation to speak but remains silent.^[9]

Misrepresentation in cheating

The act of deception is always coupled with fraudulent or dishonest intention when the accused is making a promise or representation. If the accused is deceiving by misrepresentation then it must be present from the very beginning of the commission of cheating or attempt to commit cheating, as it is sine qua non for this offence.^[10]

Is it enough if the misrepresentation is wilful or does it require some other element too? It is definitely not enough to constitute the act of being accused of cheating if the misrepresentation is not coupled with a dishonest intent or an intention to defraud. Hence, it is of utmost importance to establish the fact that whether the accused had full knowledge of his representation to be false or is it not known to him to be false, at the time when such misrepresentation is made.^[11]

Cheating different from other offences

The difference between cheating and criminal breach of trust was expounded in the case of Shankarlal Vishwakarma v State of Madhya Pradesh (1991) Cr LJ 2808 (MP) (DB). In the offence of criminal breach of trust, although the accused misappropriated the property, one receives by entrustment of the victim.

In cheating, there is no such entrustment nor there is any duty to remain trustworthy. There is deception committed by the accused upon the victim to induce the delivery of any property, which was misappropriated by the accused.^[12]

Further, the difference between the offence of criminal misappropriation and cheating lies in the fact that the accused from the beginning with the dishonest intention induces the victim to take the possession of any property. But in the criminal misappropriation after possession of the property, there is dishonest intention to misappropriate it.^[13]

Cheating related to false promise to marry

The question arises as to whether a false promise to marry made by the accused to deceive the woman for having sexual intercourse amounts to cheating or not? The court of law in the judgment of Ravichandran v. Mariyammal (1992) Cr LJ 1675 (Mad), held that making false representation and deceiving any woman and having mutual intercourse is an act amounting to the offence of cheating and punishable under section 417 of the IPC.^[14]

This case was taken as a precedent in the case of Mailsami v. State of Tamil Nadu(1994) Cr LJ 2238 (Mad), in which the accused made promises to marry, had sexual intercourse and made her pregnant. When the woman was six months pregnant, the accused made a condition to marry, which was to abort the pregnancy. The victim refused to do so. The court decided that the deception of the accused had induced the victim to do something which would not have been done if not deceived and induced so. Thus, the act of accused amounts to cheating and was made punishable under section 417.^[15]

But in order to convict the accused, it is necessary to prove that the promises made by the accused for inducing the victim to have sexual intercourse, was false.^[16]It is also necessary to prove that those promises were made with fraudulent intent, with no intention of honouring it and must be motivated with a desire to have sexual intimacy.^[17]

Inducement

After deception as the first step is successfully proved, the inducement either fraudulently or dishonestly to deliver or retain property; or intended to commit act or omission is the second part of the offence of cheating.^[18]After the accused deceives the victim, there must be an inducement to either deliver any property or believe it to be retained or; to do something or omit to do something. Without such inducement, mere deception would not amount to the offence of cheating.

In the case of Shri Bhagwan Samardha Sreepadha Vallabha Venkata Vishwanandha Maharaj v. State of Andhra PradeshAIR 1999 SC 2332, the accused claimed to possess divine powers. He induced the perpetrator that he can treat the dumbness of his girl child and looted money.

The court held that the accused represented that he possessed divine powers which deceived the victim and by promising to treat the dumbness of a girl with divine powers was induced to receive money from the victim who responded to such inducement is an act amounting to the offence of cheating.^[19]

Dishonest intention: Mental element required

It is required for the inducement to be either dishonest or fraudulent, or intentional. Hence, if the mental element is absent while inducing the victim then it does not amount to cheating. Further, there must be dishonest intention present while making promises which were made with no intention to honour it.^[20]

In the case of Dr Sharma’s Nursing Home v. Delhi Administration (1998) 8 SCC 745, the accused assured the prosecutors to have an air-conditioned room. Rather, the prosecutors were not provided with the air-conditioned room but were charged for the same. The trial court held it to be a case of cheating and convicted the accused. The supreme court on an appeal held that there was no evidence to prove that there was dishonest intention of the accused to induce the prosecutors.^[21]

It is necessary to prove that dishonest intention was present from the very beginning.^[22]If there is mere non-fulfilment of promises it does not amount to cheating.^[23]The court held in the case of Hari Prasad Chamaria v.Bhisun Kumar Surekha AIR 1974 SC 301, if there are facts proving that the accused was unable to fulfil the promises, then subsequently it leads to civil liability but not a criminal offence of cheating.^[24]

Doing anything which was intended to cause wrongful gain to the accused and wrongful loss to the victim is known to be dishonesty.^[25]Further wrongful gain is when someone receives something which he is not legally entitled and wrongful loss is the loss incurred by someone through unlawful means.^[26]

So, in order to prove that there is dishonesty one must prove either wrongful gain by the accused or wrongful loss incurred by the victim. It is not mandatory to prove both.^[27]If a person does not perform his or her duty and breaks the rules of the procedure then it is not a dishonest intention but mere breach of performance of duty. The dishonesty must be able to create criminal liability and not mere civil liability.^[28]

Deceptive inducement or false pretence may be expressed or implied and the evidence may have relied upon the circumstances of the case and the conduct of the accused.^[29]Mens rea is the most essential element in the offence of cheating.^[30]

Complaint of cheating: Is it necessary to mention dishonesty?

There was a question whether the complaint made by the victim claiming the accused to have committed cheating, should have all the ingredients mentioned? Is it necessary for the victim to mention in the complaint that there was deception and dishonest or fraudulent inducement made out by the accused for possession of the property of the victim?

This was discussed in the case of Rajesh Bajaj v. State NCT of Delhi AIR 1999 SC 1216, the victim was a garment manufacturer who made a complaint upon the accused who was a managing director of a German company. The accused wanted to import garments and made a deal with the victim. The victim said that he was induced to sell the garments to the accused upon the promise that he would receive the amount within 15 days of the receipt of the invoice. But the accused failed to do so even after sending a victim’s representative to visit the german company.

The Delhi High Court quashed the complaint due to three reasons firstly, there was no evidence that the accused had a dishonest intention at the time of exporting goods from the victim. Secondly, there was no proof that the victim was induced with dishonesty to sell goods to the accused and defraud and thirdly, the court observed the case at hand to be a civil dispute due to the nature of the transaction that took place between the two parties.

The Supreme Court held otherwise, it stated that there is no mandate to include all the ingredients of the offence of cheating in the complaint. It is not necessary to mention the intention of the accused to be dishonest or fraudulent verbatim in the complaint.

It also laid down that when all the facts are mentioned in the complaint, the court should not quash the complaint when it is in the investigation stage itself. And with regard to the fact of inducement, the apex court made it clear that the intention of the accused must be looked into rather than the nature of the transaction to decide the offence of cheating.

When the complaint was made out clear that the accused induced the victim to believe that the payment would be made on a later date, the victim realised dishonesty only when the payment was not made as promised. Thus, the court did not find any fault for quashing the complaint and thought it to be fit for a prima facie case of cheating to be investigated by the authorities.^[31]

Damage or harm: Caused or likely to cause?

The section requires that there must be cause or likely to cause damage or harm to the victim’s body, mind, reputation or property. The terms prove that the section refers to causation of something due to an act or omission committed.^[32]Hence, the causation of damage or harm must not be a consequence of any other or unconnected act or omission.^[33]

Further, the section is so wide enough to include all damages or harm caused or likely to be caused as a direct consequence of the induced act.^[34]The relation between the damage or harm and the act of cheating must be proximate and not remote or vague.^[35]

When no damage is caused there is no offence of cheating. In the case of Ramkrishna Babura Maske v. Kisan Shivraj Shelke (1975) Cr LJ 173 (Bom), where the complainant stated that the accused induced him to marry by concealing the fact that she was pregnant with someone else.

The court held that there is no wrongful gain or wrongful loss incurred by the complainant due to the concealment of the above facts by the accused woman. Although the revealing of pregnancy with someone else can be a ground for divorce but cannot be held to be an offence of cheating.^[36]

In another case of Ram Prakash Singh v. State of Bihar AIR 1998 SC 296, an appeal was made by the accused who was convicted for cheating. It was pleaded by the appellant that the act of creating false and fake insurance proposals for the purpose of gaining promotion. As it was claimed that there was neither wrongful gain to the accused nor wrongful loss to the company but for a negligible amount, the Supreme Court held against it. The court decided that the act of the accused for creating fake and false insurance proposals were capable of damaging the reputation of the company and upheld the conviction.^[37]

Civil liability v. Criminal liability: Cheating or breaching?

While dealing with the offence of cheating there is a confusion whether the case is of civil nature or criminal nature. The difference lies in the deception, inducement, dishonest or fraudulent intention etc. But in a civil dispute, the accused merely fails to perform his part of the contract or fails to fulfil the promises made by him. The dishonest intention is absent in the case of a civil dispute.

There are cases which might be of civil nature but the prosecutors file for criminal liability too. In such a case of Nageshwar Prasad Singh v. Narayan Singh AIR 1999 SC 1480, the accused and the complainant entered into a contract. A part of the consideration was paid by the accused and the rest of the consideration was not paid as agreed.

The complainant filed a civil suit for specific performance of the contract, also filed a case of an offence of cheating against the accused. The apex court held that when the case was clear that there lies no dishonest intention to not fulfil the promise made due to the fact that a part of the consideration was already paid. This shows that this is a case of mere breach of contract but not cheating. Further, the court imposed costs upon the complainant-respondents for vexatious proceedings.^[38]

Punishment for cheating

The punishment for cheating is provided in section 417.^[39] section 420 deals with punishment for cheating and dishonestly inducing delivery of property.^[40]

417 Punishment for cheating. Whoever cheats shall be punished with imprisonment of either description for a term which may extend to one year, or with fine, or with both

420 Cheating and dishonestly inducing delivery of property. Whoever cheats and thereby dishonestly induces the person deceived 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 with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine

Cheating by personation and its punishment:

The offence of cheating by personation is provided in section 416^[41]and its punishment is provided in section 419 of the penal code.^[42]

416 Cheating by personation. A person is said to “cheat by personation” if he cheats by pretending to be some other person, or by knowingly substituting one person for or another, or representing that he or any other person is a person other than he or such other person really is

Explanation—The offence is committed whether the individual personated is a real or imaginary person

Illustrations

1. A cheats by pretending to be a certain rich banker of the same name; A cheats by personation
2. A cheats by pretending to be B, a person who is deceased; A cheats by personation”

419 Punishment for cheating by personation. Whoever cheats by personation shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both

In order to prove this offence one must prove all the essentials of cheating along with the fact that the accused impersonated and cheated.^[43]Further there is no requirement of proving who the accused was impersonating as the character being personated may be an imaginary or nonexistent or unknown.^[44]

Cheating in fiduciary relationship:

The offence of cheating when there is a fiduciary duty to protect the property as provided in section 418 of the penal code.^[45]

418 Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect. Whoever cheats with the knowledge that he is likely thereby to cause wrongful loss to a person whose interest in the transaction to which the cheating relates, he was bound, either by law, or by a legal contract, to protect, shall be punished with imprisonment of either description for a term which may extend to three years, or with fine, or with both

The section covers the offence of cheating by one who is in a fiduciary relationship with the perpetrator. For example, principal and agent, director of a company, bank and customer etc. have a fiduciary relationship and duty to protect. There can be no conviction under this section if such a relationship is not established.^[46]

Further, the intention is also required to be proved for conviction under this section. It was held in the case of S Shankarmani & Ors v. Nibar Ranjan Parida (1991) Cr LJ 65 (Ori), although there is a fiduciary relationship, if the dishonest intention of the accused to cheat is not established or absent then there is no offence under this section.^[47]

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^[1] Indian Penal Code 1860, ss 415-420

^[2] Indian Penal Code 1860, ch XVII

^[3] Divender Kumar Singla v. Baldev Krishna Singla, AIR 2004 SC 3084

^[4] Ramantar v. Hari Ram, (1982) Cr LJ 2266(Gau)

^[5] Ramnarayan Popoli v. CBI, (2003) 3 SCC 641

^[6] Hira Lal Hari Lal Bhagwati v. CBI, (2003) SCC 1121

^[7] Narayan Das v. State of Orissa, AIR 1952 Ori 149

^[8] Surendra Meneklal v. Bai Narmada, AIR 1963 Guj 239

^[9] Banwarilal v. State of Uttar Pradesh, AIR 1956 All 341

^{[10 ]}V Y Jose v. State of Gujarat, (2009) 3 SCC 78

^[11] State of Manipur v. LB Singh, AIR 1954 Mani 13

^[12] Shankarlal Vishwakarma v. State of Madhya Pradesh, (1991) Cr LJ 2808 (MP) (DB)

^[13] KC Thomas v. A Varghse, (1974) Cr LJ 207(Ker)

^[14] Ravichandran v. Mariyammal, (1992) Cr LJ 1675 (Mad)

^[15] Mailsami v. State of Tamil Nadu, (1994) Cr LJ 2238 (Mad)

^[16] Dibesh Sarkar v. State of West Bengal, (1989) Cr LJ 30(Cal)

^[17] Hari Majhi v. State of West Bengal, (1990) Cr LJ 650(Cal)

^[18] Hatiram Nayak v. Surendra Kumar Mallik, (1986) Cr LJ 1271(Ori)

^[19] Shri Bhagwan Samardha Sreepadha Vallabha Venkata Vishwanandha Maharaj v. State of Andhra Pradesh, AIR 999 SC 2332^[20]Mahadeo Prasad v. State of West Bengal, AIR 1954 SC 724

^[21] Dr Sharma’s Nursing Home v. Delhi Administration, (1998) 8 SCC 745

^[22] SW Palnitkar v. State of Bihar, (2002) 1 SCC 241

^[23] Ajay Mitra v. State of Madhya Pradesh, AIR 2003 SC 1069

^[24] Hari Prasad Chamaria v. Bhisun Kumar Surekha, AIR 1974 SC 301

^[25] Indian Penal Code 1860, s 24

^[26] Indian Penal Code 1860, s 23

^[27] Tulsi Ram v. State of Uttar Pradesh, AIR 1963 SC 666

^[28] Anil Kumar Bose v. State of Bihar, AIR 1974 SC 1560

^[29] Shivanarayan Kabra v. State of Madras, AIR 1967 SC 986

^[30] Med Chi Chemicals & Pharma Ltd v. Biological E Ltd, (2000) 3 SCC 269

^[31] Rajesh Bajaj v. State NCT of Delhi, AIR 1999 SC 1216

^[32] Ramji Lakhamsi v. Harshadrai, AIR 1960 Bom 268

^[33] Ratan Singh v. Emperor, AIR 1934 Lah 833

^[34] Legal Remembrancer v. Manmatha Bhusan Chatterjee, AIR 1924 Cal 495

^[35] Prem Chand v. State of Uttar Pradesh, AIR 1953 All 381

^[36] Ramkrishna Babura Maske v. Kisan Shivraj Shelke, (1975) Cr LJ 173 (BOM)

^[37] Ram Prakash Singh v. State of Bihar, AIR 1998 SC 296

^[38] Nageshwar Prasad Singh v. Narayan Singh, AIR 1999 SC 1480

^[39] Indian Penal Code 1860, s 417

^[40] Indian Penal Code 1860, s 420

^[41] Indian Penal Code 1860, s 416

^[42] Indian Penal Code 1860, s 419

^[43] Thakur Mandal v. Emperor, AIR 1942 Pat 43

^[44] Re K Rama Rao, AIR 1960 AP 441

^[45] Indian Penal Code 1860, s 418

^[46] Mobarik Ali Ahmed v. State of Bombay, AIR 1957 SC 857

^[47] S Shankarmani & Ors v. Nibar Ranjan Parida, (1991) Cr LJ 65 (Ori)

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