Legal Provisions Regarding “Cheating” – Section 415 of IPC

Section 417 explains the punishment for cheating. Section 418 explains cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect. Section 419 explains the punishment for cheating by personation. Section 420 explains cheating and dishonestly inducing delivery of property.

Definition:

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Section 415 defines “Cheating”. It has given 9 illustrations giving the clear picture.

Sec. 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:

(a) 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.

(b) 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.

(c) 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.

(d) 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.

(e) A, by pledging as diamonds articles which he knows are not diamonds, intentionally deceives Z, and thereby dishonestly induces Z to lend money. A cheats.

(f) A intentionally deceives Z into a belief that A means to repay any money that Z may lend him and thereby dishonestly induces Z to lend him money, A not intending to repay it. A cheats.

(g) 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.

(h) 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.

(i) 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 sales and conveyance to B, and receives the purchase or mortgage money from Z. A cheats.

Important Points:

A. Ingredients of Cheating:

The ingredients of Section 415 are as follows:

a. The accused must have induced fraudulently or dishonestly a person.

b. The deceived should be induced to deliver any property to any person or to consent that any person shall retain any property.

c. If the person deceived, must be intentionally induced by the wrong-doer to do or omit to do anything which he would not do or omit if such deceived person was not so deceived.

d. The deceived should suffer any damage or harm in body, mind, reputation or property by the deceitful act of the wrong doer.

e. A dishonest concealment of facts is also treated as a cheating.

B. Fraudulently or Dishonestly:

These words in the Section are most important. These words denote the elements of deception and dishonest intention. A willful misrepresentation of a fact with intention to defraud another person is cheating.

C. When a person cheats another, the deceived person must have suffered or injured in body, mind, reputation or property. Where no loss or damage was caused to the person deceived, the accused cannot be punished for the offence of cheating.

D. Property:

Property may be of any kind movable or immovable. The property need not necessarily belong to the person deceived. A passport, an admission card to an examination, title deeds, salary of a person, health certificate, etc., are deemed as property for the purpose of this Section and Section 420.

E. Mens Rea:

Mens Rea (guilty intention) is an essential element of the offence of cheating. The very purpose and aim of the accused are to procure the property by means of deceiving the victim/ complainant. The accused induces the deceived with fraudulent and dishonest intention.

In Chinthamani vs. Dyaneshwar (1974 CrLJ 542 Bombay) case, the accused sold the property to the complainant. In fact, they said property was already mortgaged to some other person. The accused concealed the mortgage and registered it in favour of the complainant and received full consideration. The High Court held that it was a clear cheating offence.

F. Cheating by Personation:

Section 416 lays down that 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 another, or representing that he or any other person is a person other than he or such other person really is. The offence is committed whether the individual personated is a real or imaginary person.

Illustrations:

(a) A cheats by pretending to be a certain rich banker of the same name. A cheats by personation.

(b) A cheats by pretending to be B, a person who is deceased. A cheats by personation.

G. M.N.A. Aachar vs. Dr. D.L. Raja Gopal (1977 CrLJ 228 Karnataka):

In this case, the accused was already married. He represented himself to be a bachelor and married with the complainant’s daughter. The accused was held guilty of offence of cheating by personation and also under Section 494 (Bigamy.)

H. Punishment for Cheating:

Section 417 imposes the punishment for cheating with imprisonment of either description for a term which may extend to one year, or with fine, or with both. Nature of offence: The offence under this Section is non-cognizable, bailable, compoundable with permission of the Court before which any prosecution of such offence is pending, and triable by any Magistrate.

I. Cheating with knowledge that wrongful loss may ensue to person whose interest offender is bound to protect:

Section 418 provides that 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. Nature of offence: The offence under this Section is non-cognizable, bailable, compoundable with permission of the Court before which any prosecution of such offence is pending, and triable by any Magistrate.

J. Punishment for cheating by personation:

Section 419 imposes punishment for the offence of cheating by personation with imprisonment of either description for a term which may extend to three years, or with fine, or with both. Nature of offence: The offence under this Section is cognizable, bailable, compoundable with permission of the Court before which any prosecution of such offence is pending, and triable by any Magistrate.

K. Cheating and dishonestly inducing delivery of property:

Section 420 provides that 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 filed, 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. Nature of offence: The offence under this Section is cognizable, bailable, compoundable with permission of the Court before which any prosecution of such offence is pending, and triable by any Magistrate.

L. Section 420 is an aggravated form of cheating:

In Section 417 a general provision is made defining the cheating. For the cases in which property is transferred, the specific provision is made in Section 420. However the offence of cheating of any person by delivery of property is punishable under either of the two Sections. But where the case appears to be of a serious nature, then the prosecution may be conducted under Section 420.

M. Mobarik Ali Ahmed vs. the State of Bombay (Air 1957 SC 857)

Brief Facts:

The appellant/Mobarik Ali Ahmed was doing business in the name of “Atlas Industrial and Trading Corporation” and “Ifthiar Ahmed & Co.” in Karachi. The complainant/Luis Antonio Correa was a businessman, doing business in Goa. In the year 1951, there was scarcity of rice in Goa.

The complainant contacted the accused/appellant for the supply of 2,000 tons of rice, which was agreed by the accused subject to the condition that 50% of the value payable in advance, before the shipping and remaining after the documents of shipping received.

Accordingly the complainant paid Rs. 81,000/ – (on 23-7-1951) Rs. 2,30,000/- (on 28-8-1951) and Rs. 2,36,900/- (on 29-8-1951) to the appellant/ accused through his agent. The appellant received the above mentioned cash but did not supply the rice.

The complainant waited for one year and then initiated criminal proceedings against the four directors of the appellant company, i.e., MobarikAli, Santran, A.A. Rowji and S.A. Rowji.

The last three accused absconded. The appellant fled to England. The Indian Authorities made an application to the Metropolitan Magistrate, Bow Street, London, who ordered the arrest of the appellant. He was brought to Bombay and then was tried.

The trial Court proceeded against the appellant and found him guilty under Section 420, and imposed penalty and imprisonment for three years and ten months. On appeal Bombay High Court confirmed the conviction. The appellant appealed to the Supreme Court.

Judgment:

The Supreme Court held: “The appellant ceased to be an Indian citizen and was a Pakistani national at the time of the commission of the offence, he must be held guilty and punished under IPC notwithstanding he is not being corporeally present in India at that time.”

Principles:

1. A conviction of an accused person under Sec. 420 would be valid though the charges under Sec. 420 read with Sec. 34 unless prejudice is shown to have occurred.

2. That all the ingredients necessary for finding the offences of cheating under Sec. 420 read with Sec. 415 occurred at Bombay. In that sense the entire offence was committed at Bombay and not merely the consequence, viz., delivery of money which was one of the ingredients of the offence.

3. Though the appellant was a Pakistani national at the time of the commission of the offence, he must be held guilty and punished under the Penal Code notwithstanding his not being corporeally present in India at the time because on a plain reading of Section. Section 2 of the Penal Code applied to him.

4. That the fastening of criminal liability on the appellant, who was a foreigner, was not to give any extra-territorial operation to the law, in as much as the exercise of criminal jurisdiction in the case. Where all the ingredients of the offence occurred within the municipal territory was exercise of municipal jurisdiction.

N. John McIver vs. Emperor (AIR 1936 FB Mad. 353)

Brief Facts:

J. McIver (A-1) was a Stock Broker under the name “Huson Tud & Co.” in Madras. K.S. Narasimha Chari (A-2) was an employee of accused-1. A-1 met one Rao Bahadur Boora Lakshmaiah Chetty on 14-3-1935 representing that their company had entered into a contract with the Imperial Bank of India under which they were under an obligation to sell and to deliver them 6 1/2% interests. 1935 Bombay Development Loan Bonds of the face value of Rs. 3,50,000/- and that the last date was 27-3-1935. Believing the words of A-1, the complainant/Rao Bahadur handed over the cash.

Accused-1 did not hand over the Bonds and postponed under one pretext or the other. The complainant filed a complaint in the Court of the Presidency, Egnore against the accused-1 & 2, under Sec. 403 & 420 of the I.P.C. (Cheating and Criminal Breach of Trust)

The accused compromised with the complainant and as a result he was acquitted from the charges. At this junction the State interfered and appealed to the Madras High Court contending that the Magistrate had no powers to compound the case, when once he issued summons. The accused pleaded “autrefois acquit”, (the accused once acquitted cannot be punished or tried on the same charge). The question of law arose.

Judgment:

The Madras High Court Full Bench gave the judgment in favour of the accused.

Principles:

1. There can be no consent by a person who is cheated and of there is deceit which prevented any true consent arising there could be no entrusting; the terms are mutually exclusive.

2. The word “entrusted” should be construed as it access in the Section headed “criminal breach of trust”. The notion of a trust in the ordinary sense of that word is that there is a person the transferee or the entrusted, in which confidence is reported by another who commits property to him; and this again supposes that the confidence is freely given.

A person who tricks another into delivering property to him bears no resemblance to a trustee in the ordinary acceptation of that term and Sec. 405 given no sanction to regarding him as a trustee. The essence of the criminal breach of trust is the dishonest conversion of property entrusted, but the act of cheating itself involves a conversion.

Conversion signifies the depriving of the owner of the use and possession of his property. When the cheat afterward sells or consumes or otherwise uses the fruit of his cheating he is not committing an act of conversion for the conversion is already done, but he is furnishing evidence of the fraud he practised to get hold of the property. Therefore, cheating is a complete offence by itself.

O. Abhayanand Mishra vs. State of Bihar (AIR 1961 SC 1698)

Brief Facts: The appellant sought the permission of Patna University for appearing M.A. examinations (English) in 1954. He enclosed the attested copies of B.A. Degree and permission letter from the Head Master of the school in which he was working.

Permission was granted by the University. Before commencing the examinations, the University authorities received the information that the appellant did not pass B.A., and was not working as a teacher, and that he was debarred from the University.

They reported the matter to the police, who investigated and filed the charge, sheet against the appellant under Section 420, and 511. The trial Court convicted him.

On appeal the High Court upheld the conviction. He appealed to the Supreme Court contending that an admission card to sit for M.A. examination had no pecuniary value and therefore the provision of Sec. 420 would not be attracted.

Further he contended that he applied to the University for the permission, and it was a mere preparation and it could not be treated as an attempt under Sec. 511.

Judgment:

The Supreme Court dismissed the appeal. It upheld the judgments of the Lower Court and the High Court.

Principles:

1. An admission card to sit for an examination of a University is property within the meaning of Sec. 420. Though the admission card as such has no pecuniary value it has immense value to the candidate for the examination.

2. There is a thin line between the preparation for and an attempt to commit an offence. Undoubtedly a culprit first intends to commit the offence, then makes preparation for committing it and therefore, attempts to commit the offence.

If the attempt succeeds, he has committed the offence; if it fails due to reasons beyond his control, he is said to have attempted to commit the offence.

Therefore, attempted to commit the offence can be said to begin when the preparations are complete and the culprit commences to do something with the intention of committing the offence and which is a step towards the commission of the offence. The moment he commences to do an act with the necessary intention, he commences his attempt to commit the offence.

P. Dr.Vimala vs Delhi Administration (AIR1963 SC 1572)

Q. Breach of contract:

There is a clear distinction between mere breach of contract and the offence of cheating. It depends upon the intention of the wrong-doer at the time of the inducement and his subsequent conduct. Mere breach of contract cannot give rise a criminal prosecution.

R. Nageshwar Prasad Singh vs. Narayan Singh and others (1998 (5) SCC 694)

Brief Facts:

Nageshwar Prasad Singh the appellant herein has certain property in Patna. Narayan Singh and others, the respondents herein, contracted Nageshwar Prasad Singh to purchase a plot for certain consideration. Sale deed was concluded. Narayan Singh paid earnest money to the appellant and agreed to pay the balance at a future date. Nageshwar Prasad handed over the site to Narayan Singh.

Narayan Singh started construction. Narayan Singh filed a civil case for specific performance of the contract in a civil Court against Nageshwar Prasad. Besides it, Narayan Singh being an advocate also filed a cheating case against Nageshwar Prasad alleging that Nageshwar did not fulfil the contract.

Nageshwar Prasad contended that being it was a breach of contract from the respondent Narayan Singh the provisions of Section 420 would not attract in this case. The High Court dismissed his appeal.

On appeal, the Supreme Court held that it was purely a breach of contract and the tricks played by Narayan Singh to delay the payment and harass the land owner. It quashed the trial Court’s judgment under Section 420, and also the decision of the High Court’s decision, and ordered Narayan Singh to pay Rs. 10,000/- to the appellant/Nageshwar Prasad for the vexatious proceedings.

S. Ram Prakash Singh vs. State of Bihar (1998 (1) SCC 173)

Brief Facts:

The accused/appellant was a development officer in LIC. He introduced some false and fake insurance proposals to LIC with a view to earn promotion on the basis of inflated business. Contents of proposals were in the handwriting of accused.

The trial Court punished the accused under Sections 420. He appealed to the High Court. The High Court upheld the conviction. He appealed to the Supreme Court contending that on the basis of the proposals the policies were not issued and no loss occurred to LIC, and his acts should be treated as preparation. The Supreme Court held that the accused was rightly convicted by the Courts below.