IPC Analysis of "Criminal Breach of Trust & Cheating"-A Harmonious & Contrasting Legal Perspective?

By Samrat Bandopadhyay*[1]

Abstract

When drawing the distinction between ‘Cheating’ and ‘Breach of Trust’ it becomes important and imminent to understand that where and when the element of ‘dishonest intention’ came in the first instance. The instant paper is an attempt to look at Criminal Breach of Trust and Cheating from varied perspectives and dimensions and to critically analysis from harmonious and contrasting legal perspective. It is pertinent to note that in ‘Cheating’ the dishonest intention begins and starts at the inception of any transaction, while in case of ‘Breach of Trust’ the person is first entrusted to get the property legally and whereby, subsequently after being entrusted the property, the person unlawfully retains or convert it for his or her own usage. It is inherent in the analysis of the ‘Breach of Trust’ that such a entrustment is based on some confidence which is provided ‘voluntarily’ and without any coercion and is rather based on ‘free consent’. If such a confidence is being placed with trickery or deception, then such a confidence is deemed to be ‘no trust entrustment’ and is not based on any consent, therefore such a case tantamount to ‘Cheating’. Another vital difference which emerges between ‘Cheating and Criminal Breach of Trust’ is about the apriori relationship which was established while going ahead with such transaction and is based on ‘fiduciary relationship’ which is an integral component in cases involving ‘Breach of Trust’, as such a fiduciary relationship leads to ‘entrustment of property’ in the first instance between the owner of the property and the offender in the first place.

Keywords:

Cheating; Criminal Breach of Trust; Deception; Dishonest Intention; Entrustment; Embezzlement; Fiduciary Relationship; Fraudulent Activities; Puffing of Goods; Impersonation; Inducing Delivery of Property; Misleading; Misrepresentation of facts.

Introduction

Judicial system is constantly evolving in its journey of delivering quality, efficient and effective delivery of justice. With the passage of time, In India, the ‘codified’ Indian Penal Code, 1980 have incorporated many provisions with amendments with its evolution diverse aspects with judicial precedents which have made the justice delivery in the realm of ‘Criminal Law’ more robust, nimble and supple. In catena of cases, it is well established time to time that cases of ‘Criminal Law’ which is based on ‘guilt by the accused has to be proved beyond reasonable doubt’ – the barometer and the yardstick is ‘high’ on the part of the prosecution in Criminal cases. However, with the advent of technology and progress in digital and electronic arena, the changing landscape of ‘Criminal Law’ is dynamically progressing, where the offences in criminal law domain are swiftly changing and taking new contours. Nonetheless, the underlying concepts of a substantial law such as the ‘Indian Penal Code’ have stood the test of time since 1860 when it was drafted in the chairmanship of Thomas Babington Macaulay.

Review of Literature and Judicial Precedents

Reliance has been placed on varied judicial precedents in judicial system of India and to English Laws in UK. Along with Comparative Analysis of law, the instant paper critically analyses the provisions in the Indian Penal Code 1860 in light of the statutes implementation in India and Statutory provisions in form of enactment have been relied upon for analysis of the offence of ‘Cheating’ and ‘Criminal Breach of Trust’. Proper citation and relevance of a case with the topic in question has been referred for explicating the averments and supplicating the arguments and comments posited to exemplify the topic of the paper. The ratio decidendi of judicial rulings and the reliance is being placed in the instant article on judicial precedents. Reliance has been placed on procedural norms and rules as enunciated in Code of Criminal Procedure, 1973[2]. The Common Law countries and their pronouncement in the catena of judgments surfacing before the Hon’ble Courts of Law has been the guiding light which has been the sources when analysing the varied facets of law in the subject matter which has been delved upon in this article. The doctrines and principles seminal on the justice delivery based on the grounds of ‘Beyond reasonable doubt’[3] has been the bedrock on which the yardstick of legal judgment and pronouncements in criminal cases has been relied upon in varied cases. The judicial precedents have provided the ‘procedural direction’ and the guidance for the subordinate courts by ‘Doctrine of Stare decisis’[4] on same facts and issues in the cases. Pertinently, ‘Doctrine of Double Jeopardy’[5] has been the relying factor to prevent the state to institute suit for prosecution on the same facts and issues, so that a person is not tried for same offence twice.

Problem Statement

The instant research paper is trying to vividly and comprehensively address the pertinent questions and problems in the domain of ‘Cheating’ and ‘Criminal Breach of Trust’ and to posit a question on the topic. The problem is more specific to realm of ‘Criminal Law’ with the seminal purpose to explicate and to delve into the building correlation between the parameters which are the pivotal grounds for building a case and to draw inferences with the definitive and substantive aspects along with the penal provisions in the statute and relating the same with judicial precedents on the topic. The primary aim to frame the problem in this instant analysis as: “Is Criminal Breach of Trust and Cheating - A harmonious and contrasting legal perspective?”

Objective and Research Question

The objective of the analysis is to explicate and to delve into the related questions which emanates from the ambit of ‘Cheating’ and ‘Criminal Breach of Trust’ and to interpret and expound on continuum of factors which has a bearing on the interpretation, ingredients of the criminal offence in question, result of inferences and analysis of the topic. This is also to examine the context, with sectoral/industry perspective, in which the penal provisions related to substantive aspects of ‘Cheating’ and ‘Criminal Breach of Trust’ can be applied for meeting the ends of justice.

Discussion

The harmonious and contrasting analysis of the concept of ‘Cheating and Breach of Trust’ is multifaceted and requires an analysis of the component of ‘dishonest intention’, however in Cheating that ‘dishonest intention’ is there right from the beginning, whereas in case of ‘Breach of Trust’ such dishonest intention comes later after the ‘fiduciary relation’ based on confidence, has been broken by the dishonest intent that creeps in later when the offender converts the use of the property dishonestly on the basis of inducement with dishonest intention.

The case in point is Vadivel v Packialakshmi[6], where the accused took the possession of some jewellery from another in the pretext of returning it back after a marriage ceremony. In the instance case, the alleged offender not only did he failed to return the jewellery but also pledged the jewellery in the bank as if it belonged to him. When the matter came up before the Session Judge, the accused was found guilty of Section 420. The Hon’ble Judge held that the case deemed fit to apply Section 420 of Indian Penal Code 1860, rather than Section 406. The matter when brought before the Hon’ble Madras High Court, though it was contended that in the instant case, the provisions and was erroneously applied, the Hon’ble Madras High Court held that the case squarely fell in the four walls and limbs of Section 415, as the inducement with fraudulent and dishonest intention was evident from the beginning as the pretext of marriage and subsequently, the person was induced to part with her jewellery, even though there may have been ‘entrustment’ of the jewellery by the person to the offender on genuine belief, still then the offender had a dishonest intention when it comes to question of ‘Cheating’.

An interesting case which emerged way back in 1904 was that of Emperor v Raza Hussain[7], where an illiterate woman was standing in the queue of railway ticket and another person was present in the railway station. It so happened that the woman with all due cognizance handed over her ticket to this stranger to her. The offender who was held liable of criminal misappropriation and not for cheating, replaced the woman’s ticket with his.

In Shankarlal Vishwakarma v State[8], the accused had made false bills related to salaries of teachers and was holding a vital post of Assistant District Inspector of Schools and misused the responsibility bestowed on him with encashment from the treasury and did not disburse the money to pay any bills. In the instant case, the Court while drawing the distinction between ‘Cheating and Criminal Breach of Trust’ held that in the instant case, there was no ‘Breach of Trust’ as the Assistant District Inspector of Schools was not ‘entrusted’ that money to pay bills but rather, he tricked the authorities to deliver the money to him in the pretext of paying bills for the salaries of the teacher, hence the Court held that it fell in the bracket of offence of ‘Cheating’.

The instant paper has been an attempt to look at the broader canvass of issues pertaining to ‘Cheating and Criminal Breach of Trust’ from Comparative Law perspective as well as from sectoral perspective with basis of analysis on catena of judgment which are not only having the value of being judicial precedent but also a guiding light in reliance of the cases involving the issues which are intricate to the sectoral and domain specific nature of industry. The issues pertaining to ‘banking sector’, Cooperative, Partnership firms, deviance from the personal law and its overlap with ‘Criminal Law’ has been the subject matter of deliberation in the instant article.

The Section 415 of the Indian Penal Code 1860, embodies the definitive section for the offence of ‘Cheating’ whereby the penal provision is explicated in Section 417, that is punishment for cheating.

‘Cheating’ - Basic Ingredients

The Basic Ingredients of Cheating is divided into two distinct clauses:

1. The first clause includes the offence when the person is deceived fraudulently or dishonestly induced to deliver property

2. The second clause mentions that it does not require that the inducement to be fraudulent or dishonest. Nonetheless, it is required that by reason of intentional inducement, damage or harm as to body and mind and affecting the reputation or property of the person was caused has to be made out

In the aforesaid condition, ‘Cheating’ is deemed to have been done to the person. It is vital to understand that ‘dishonest concealment of facts is a deception’.

It is vital to draw a Comparative Law analysis at this juncture and to understand the contrast with Indian Laws. As per English laws, there is a statutory act ‘Theft Act, 1968’, which specifies that obtaining of another’s property dishonestly with deception and with the intent of permanently depriving that person of his property is an offence. However, in Indian Laws, the intent to deprive permanently is not an ingredient to be made a case out of ‘Cheating’.

So, critically analysing the Indian Penal Code provision on ‘Cheating’ avers one to the argument, that ‘Deception’ is the essence of the offence of ‘Cheating’. The word ‘deceiving’ is causing someone to believe what is false or misleading as to a matter of fact. Such sham or trickery is being done by words or conducts and wilful misrepresentation to mislead and whereby, fraud is being played upon.

Reliance is placed on the case, Shyam Sunder v Lala Bhawan Kishore[9], it was held that in cases of ‘Cheating’, a fraudulent representation may be made directly or indirectly via. any agent but the gist of the offence is ‘deceit’ practiced before the delivery of property forms the basis of ‘dishonest intention’.

As seen in the case Ayodhya Prasad v Emperor[10], it was held that mere deceit is not sufficient and there has to be inducement on the person deceived to deliver some property or harm should be caused as to body, mind, reputation or property.

In the dimension of analysis related to ‘Puffing of goods’, it is vital to see that ‘mere puffing of goods by vendor’ is not a offence per se. As held by Hon’ble High Court of Calcutta in the case, A.K Khosla v T.S Venkatesan[11]an exaggeration or deception in the ordinary course of dealing in a bargaining process is not a subject matter of Criminal prosecution save and except if the goods sold is entirely of different description and a statement of mere praise or opinion are in complete deviance from the specific facts which are unknown to the knowledge of the parties, the offender can be squarely brought in the ambit of ‘Cheating’, for example, if a gold chain is represented as 15-carat but was actually of 5-carats only while selling the item to the customer.

‘Criminal Breach of Trust’- Basic Ingredients

The basic ingredients when it comes to applicability of ‘Criminal Breach of Trust’ involves:

1. Entrustment of property, which may be movable or immovable property or which has the basis characteristic of categorizing it as ‘dominion over the property’

2. ‘Trust’ is the basis vital element while such entrustment is being done

3. There has to be ‘misappropriation’ or ‘conversion’ of the property for one’s own usage by the person who was ‘entrusted with the property’

4. Such conversion or retention must be in contravention or in violation of any prescribed defined law as to how such trust has to be discharged or of any contract made touching the discharge of such trust.

The vital aspect of ‘Dishonest Intention’ is the essence of ‘Criminal Breach of Trust’. The case of Kedarnath v. State[12], was seminal considering that such an act of ‘Criminal Breach of Trust’ has to done with dishonestly deliberately or intentionally and should not be accidental or inadvertently. In Rajib Lochan Behari v State of Orissa[13], it was held that mental act of fraudulent misappropriation which was an essential component of ‘Criminal Breach of Trust’.

The expression of ‘Entrustment’ implies that the person who is handling over the property does so voluntarily and continues to be its owner. In C.M Narayan v. State of Travancore-Cochin[14], it was held that the beneficiary of the ‘entrusted interest’ must hold the property on account of some person or in some way for his or her own benefit, to be made a case of ‘Criminal Breach of Trust’. In Lake v Simmons[15], it was held that ‘entrustment’ implies the custody or management of the property for some specific and defined purpose but does not necessarily imply conferring of any proprietary rights. In V.R Dalal v Yougendra Naranji Thakkar[16], it was held that if the ‘entrustment’ is not there or missing then the case of ‘Criminal Breach of Trust’ cannot be made out as it was held to be first ingredient which is tested in such cases involving the matter of ‘Criminal Breach of Trust’.

In the perspective of “Misappropriation or conversion to one’s own use”, it is vital to critically analyse the temporary diversion of money could fit in the concept of ‘misappropriation’ as seen in the case Shabbir Ahmed Sherkhan v State of Maharashtra[17], where a police official after availing travelling and daily allowance (TA/DA) from the government department, went to his home town on unauthorised absence, though after coming back from the leave, he returned the money. But, it was held that such an act did constitute ‘Breach of Trust’ as to be brought in the ambit of Section 409 that is ‘Criminal Breach of Trust’ with respect to public servant or banker or merchant or agent.

Another dimension which emerged with the judgment of Hon’ble Apex Court with the case of State of Himachal Pradesh v Karavir[18], it is vital for the prosecution to prove ‘entrustment’, as such the ‘Burden of proof’ with regard to ‘misappropriation’ need not be proved by prosecution and the accused then subsequently, have to prove that there has not been any ‘misappropriation’ and the money was utilised or applied to the purpose for which it was entrusted in the first instance.

From the perspective of ‘Violation of legal contract’, it comes seminal to understand and analyse that the establishment of the issue pertinent to dishonest use or disposal of property in violation of law, is the vital point when it come to interpretation of the expression ‘direction of law’. In Sudhir Shantilal Mehta v CBI[19], it was held that failure on the part of State Bank of India (SBI) officials to follow the explicit guidelines and instruction of Reserve Bank of India (RBI) or even the provisions of departmental manual was deemed to be ‘violation of direction of law’, which resulted in application of ‘Criminal Breach of Trust’.

Areas or domain where it is not construed as ‘Entrustment’

The cases which does not come in the ambit of ‘Entrustment’ has been subject matter of debate, In C.L. Sagar v Mayawati[20], the issue was regarding conferring of ‘political ticket’ where the complainant alleged that he had entrusted fifty thousand to the Vice-President of a political party for getting the ticket for election. In the instant case, Hon’ble Court held that the complainant was not able to prove specifically whether there was ‘breach of trust’ considering that entrustment was not substantiated with adequate reasons as to the purpose of money being deposited in bank and no offence was made out.

Another area where the Courts have been reluctant to consider ‘Breach of trust’ has been pertaining to ‘transaction of sale’ and it cannot be construed to be ‘entrustment’ as seen in the case, State of Gujarat v Jaswantlal[21], where the Hon’ble Supreme Court of India held that after delivery of cement of 100 kg to one of accused, Government had neither the right nor any dominion over the transaction where the accused sent 60 kg to the work site and the remaining and the remaining was delivered to another person.

In RP Sablok v Kaushalya Devi[22], the Hon’ble Court held that money deposited in bank cannot come in the scope of ‘Entrustment’ as the money paid to the bank based on the stipulation of interest rated as agreed by the party while opening bank account and the money deposited ceases to be money of the depositor with the condition that when the deposited wants to get back the money on withdrawal would get the deposited sum back with interest and hence, the case of violation of ‘breach of trust’ by misappropriation cannot be made out in such instances.

Comparative Analysis on ‘Stridhana’ Property and Marriage Aspects

In India, dishonest misappropriated of ‘Stridhana’ property could amount to criminal breach of trust. Doing a comparative study with other common law countries, in English Laws, a woman has joint possessory rights with her husband along with ‘Matrimonial property’ with defined share of allocation as to how it would be disposed in emergent conditions. However, in India as seen in Rashmi Kumar v Mahesh Kumar Bhada[23], it was seen that, when wife had entrusted her husband with the ‘Stridhana’ and later the usband misappropriated it dishonestly, or converted it for his own usage the property ‘entrusted’ to him. The Hon’ble Court held that any special agreement to establish that the property provided to husband was not issue in question but rather ‘Criminal breach of trust’ is evident considering that in another case Balram Singh v Sukhwant Kaur[24], the Court held that ‘Criminal Breach of trust’ is to be construed as a continuing offence and whereby, fresh cause of action accrues to the wife till the return of property.

Another case, Bhasker Lal Sharma v Monica[25], Hon’ble Supreme Court observed that the allegation of misappropriation of ‘Stridhan’ was maintainable as allegation by wife of taking away of gifts and cash offerings, which was entrusted to mother-in-law was held to be ‘criminal breach of trust’ when it was misappropriated attracting the penal section 406 of IPC, that is punishment for criminal breach of trust.

On the case of ‘Cheating’ which was held in the case Hari Majhi v State[26], that if a full grown girl consensually goes for the act of sexual intercourse and does such act until she became pregnant, it is an act of promiscuity and unless it can be established before the Hon’ble Court that the accused never intended to marry her from the very inception.

In Bipul Mehdi v State of Assam[27], it was held by the Hon’ble Court that if it can be established that the man dishonestly induced the woman for sexual intercourse on the false promise of marriage, it was squarely fitting and deemed to be a case of ‘Cheating’.

Cases of Embezzlement

In Vishwa Nath v State of Jammu and Kashmir[28], where a case of embezzlement was made out against the accused, the Hon’ble Court held that the even if the accused refunded the money entrusted to him when the dishonest act was found out, it does not absolve the person from ‘Criminal breach of trust’.

Scenario with Partnership firms on ‘Entrustment of dominion over Property’

For executive responsibilities in companies, the scenario has been quite dynamic and the Courts of the law of the land have opined that merely proving ‘dominion over the property’ or ‘entrustment of dominion’ is not sufficient, what is required is to proved as to whether the dominion over the property was the direct correlative causa causan result of the ‘entrustment’ in such cases. The case in point is R.K Dalmia v Delhi Administration[29], it was held by the Hon’ble Apex Constitutional Court, the Supreme Court of India that one partner given exclusive authority by other partners to collect money and to deposit the same in the common stock of the company tantamount to ‘entrustment’ with ‘dominion over the property’ and hence, the offence squarely comes under the ambit of Section 405 of IPC 1860. In V Rahavji v State of Maharashtra[30], it was held by Hon’ble Supreme Court of India that all the partners in a partnership firm had ‘equal rights’ as to ‘dominion over the property of the firm’, in such cases, the intricacies are further accentuated by the fact that the Court has to look at the relationship of that ‘entrustment’ and whether any misappropriation of the ‘entrusted property’ for one’s own use was made out or not. Having special arrangement in the form of agreement could be of substantial importance in such cases to establish the ‘entrustment over that dominion property’. In Anil Saran v State of Bihar[31], it held that in absence of any agreement in partnership firm by the partners would not qualify a fit case for invoking Section 405 of ‘Criminal breach of Trust’.

Scenario with Banking companies ‘Internal Operation Management’ and ‘Entrustment’

In the domain of Cooperative Society and misuse of the banking norms by the department officials became of the subject matter for adjudication in the cases, Mir Nagvi Askari v CBI[32]and R. Venkatkrishnan v CBI[33], where the bank official misused the ‘entrusted’ responsibility with regards to the advance credit on banker’s cheque to customer and dishonestly used that money whereby conferring benefits to the customer was held to be guilty of offence as per ‘Criminal Breach of Trust’.

Conclusion

To conclude, it is vital to note that Criminal Breach of Trust and Cheating, though ‘A harmonious and contrasting legal perspective’, could be two distinct offences and as such generally involving the element of ‘Mens Rea’ that is ‘dishonest intention’ is a sine qua none, but at the same time these are ‘mutually exclusive’ and different in this basis essence and objective. The objective of ‘Criminal Breach of Trust’ is breaching of that ‘entrustment’ in a voluntary manner while in the case of ‘Cheating’ there is inherent purpose and objective to inducement and to deceive with dishonest intent. With the passage of time, the legal system is evolving dynamically to address the emergent issues in the domain of Criminal Law system so that the law is all-inclusive and holistic in its very foundational means and methods to provide justice for a progressive outlook for the betterment of humanity in the justice delivery system. The dynamic changes have warranted to look at Criminal Law from the perspective of technology and clamour to meet the ends of justice with a robust and supple comprehensive and legal system where the substantive law such as Indian Penal Code 1860 and the procedural law such as Code of Criminal Procedure, 1973 has to be proactive in tandem to address the challenges posed which are complex and yet vital at the same time. The essence of any law which has survived about 150 years in apt testimonial of the fact that answers have to pass the touchstone of provisions mentioned in Indian Penal Code 1860 and in the act whereby the expertise and the proficiency is in finding solutions which is the bedrock of talent of any criminal lawyer and a quintessential challenge for the legal fraternity as a whole.

***

[1] * Director, Central Government Civil Services Officer, Group A, Government of India, MBA (IIT Kharagpur), BE (Information Science and Engineering) and presently pursuing Law in final year of 3 year LL.B. course at RGSOIPL, IIT Kharagpur. Author could be reached at email: hi.samrat.2015@gmail.com. [2] Code of Criminal Procedure, 1973 commenced from 1st April, 1974 [3]Doctrines and principles of ‘Beyond reasonable doubt’ is the guiding light in justice mechanism of Criminal Law and which have been the touchstone of judicial rulings in Common Law countries [4]‘Doctrine of Stare decisis’ enunciates the rules and principles established by superior courts have a binding effect on the inferior courts. [5]‘Doctrine of Double Jeopardy’ has been seminal to prevent vexing a person twice for same facts and issues of an offence [6] Vadivel v Packialakshmi, 1996 CrLJ 300 (Mad) [7] Emperor v Raza Hussain (1904) 25 AWN 9 [8] Shankarlal Vishwakarma v State 1991 CrLJ 2808 (M.P) [9] Shyam Sunder v Lala Bhawan Kishore 1989 CrLJ 559 [10] Ayodhya Prasad v Emperor AIR 1938 Sind 193 [11] A.K Khosla v T.S Venkatesan, 1992 CrLJ 1448 (Cal) [12] Kedarnath v. State AIR 1965 All 233 [13] Rajib Lochan Behari v State of Orissa AIR 1981 SC 1646 [14] C.M Narayan v. State of Travancore-Cochin AIR 1953 SC 478 [15] Lake v Simmons (1927) AC 487 [16] V.R Dalal v Yougendra Naranji Thakkar (2008) 15 SCC 625 [17] Shabbir Ahmed Sherkhan v State of Maharashtra (2009) 5 SCC 22 [18] State of Himachal Pradesh v Karavir AIR 2006 SC 2211 [19] Sudhir Shantilal Mehta v CBI (2009) 8 SCC 1 [20] C.L. Sagar v Mayawati, 2003 CrLJ 690 (All) [21] State of Gujarat v Jaswantlal AIR 1968 SC 700 [22] RP Sablok v Kaushalya Devi 1982 CrLJ 1342 (Del) [23] Rashmi Kumar v Mahesh Kumar Bhada (1997) 2 SCC 397 [24] Balram Singh v Sukhwant Kaur, 1992 CrLJ 792 (P&H) [25] RP Sablok v Kaushalya Devi 1982 CrLJ 1342 (Del) [26] Hari Majhi v State 1990 CrLJ 650 [27] Bipul Mehdi v State of Assam, 2008 Cr.L.J. 1099 (Gau.)(D.B.) [28] Vishwa Nath v State of Jammu and Kashmir AIR 1983 SC 174 [29] R.K Dalmia v Delhi Administration AIR 1962 SC 1821 [30] V Rahavji v State of Maharashtra AIR 1965 SC 1443 [31] Anil Saran v State of Bihar AIR 1996 SC 204 [32] Mir Nagvi Askari v CBI (2009) 15 SCC 643 [33] R. Venkatkrishnan v CBI (2009) 11 SCC 737