Some thoughts on the distinction between a mere breach of contract and offence of cheating.

The clear distinction between these two concepts is often ignored. Often deliberately – with a view to turn a patently civil dispute into a criminal case (to exert pressure, ease recovery, etc.).

This is – no doubt – a very unfortunate tendency. (Over 70% of all cases pending at the trial court level are criminal cases. Well, more on this some time later!).

Be that as it may, Courts often sift-out purely civil cases from genuine cases of cheating and quash the former and continue the latter.

The test to discern this is as follows:

  1. See what precisely is being characterised as ‘cheating’.
  2. Is it a false representation that the Accused made? What precisely was said by the accused which wasn’t true. (For instance, “I can predict the future accurately but I’ll tell you only if you do this or pay me X”, or “This pill that I’ve invented cures COVID” or “I can execute this contract and maintain this nuclear reactor for you! I have that competency!”, or “Supply me the goods, I’m giving you a post dated cheque of 10 Crores as security. You will definitely be paid, don’t worry!”) (Appreciate the distinction in the nature of these claims)
  3. Examine if the Accused knew or had a reason to believe that this claim/representation/promise may not be true or not capable of performance. (The weirder the claim, the greater the evidence needed to prove its correctness, remember!)
  4. Knowing the falsity, or – at any rate – not believing in its truth, he made this representation.
  5. This representation was made with a clear intent to get the Complainant to do or not to do something, or deliver property, etc.
  6. In other words, representation was made with the intent of gaining something wrongfully. (See the definition of Dishonest Intent).
  7. And the Accused acted with a fraudulent intent. (Again, a defined term in IPC. Check that!).
  8. In other words, the Accused knew this representation to be false and wanted to deceive the Complainant . And this intent to deceive was present at the very inception. That is, from the very point when this utterance/representation was made for the first time. (This is very important!).
  9. In other words, the Accused should have knowingly deceived the Complainant. And this act or intent of Deception should be present at the very inception. That is, the Accused should have known his representation to be false from the very outset and the representation should have been made with an intent to deceive and induce, and not with a genuine intent to perform one’s promise.
  10. For instance, appreciate the difference here. A small shopkeeper giving a cheque of 5 Lacs has committed the offence of dishonour of cheque and breach of contract if the cheque gets dishonoured, and not cheating. Having said that, if the small shopkeeper, knowing perfectly his finances (with an annual turn over of – say – 10 Lacs only) issues a cheque of 100 Crores, he should be attributed with the intent to deceive. This intent is clear as there’s no way in hell that this cheque is going to clear, and knowing this perfectly well, the accused issued the cheque.
  11. The above test basically sifts cases of breach of contract from cases of cheating.
  12. Stated differently, if the Accused promises to do something which the Accused does not do later or could not do later, and reneges on his promise, for whatever reason, that is NOT cheating but only a mere breach of contract.
  13. However, if the Accused NEVER INTENDED TO DO WHAT WAS PROMISED IN THE FIRST PLACE, but said it or made that promise -only with view to deceive the Complainant and to induce the Complainant into paying up monies, etc. THAT IS CHEATING.

Sources:

  1. Section 415-420 IPC.
  2. Satishchandra Ratanlal Shah v. State of Gujarat, (2019) 9 SCC 148
  3. Inder Mohan Goswami V. State Of Uttaranchal (2007) 12 SCC 1
  4. Hridaya Ranjan Prasad Verma V. State of Bihar & Anr. (2000) 4 SCC 168

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