High Time Police Officers Are Given Training On Distinction Between 'Cheating' & 'Criminal Breach Of Trust' : Supreme Court

The Supreme Court on Friday (Aug. 23) suggested that police officers across the country should be imparted proper training in law to understand the fine distinction between the offences of cheating and criminal breach of trust.

“It is high time that the police officers across the country are imparted proper training in law so as to understand the fine distinction between the offence of cheating viz-a-viz criminal breach of trust. Both offences are independent and distinct. The two offences cannot coexist simultaneously in the same set of facts. They are antithetical to each other. The two provisions of the IPC (now BNS, 2023) are not twins that they cannot survive without each other.”, the bench comprising Justices JB Pardiwala and Manoj Misra observed.

"It is indeed very sad to note that even after these many years, the courts have not been able to understand the fine distinction between criminal breach of trust and cheating," the Court added.

The Court directed the Registry to send one copy each of this judgment to the Principal Secretary, Ministry of Law & Justice, Union of India and also to the Principal Secretary, Home Department, Union of India.

The offence of cheating was covered by Section 420 IPC (S.318 BNS) and criminal breach of trust by S.406 IPC (S.316 BNS).

The Court said that as and when the case is registered via FIR than it becomes the responsibility of the Police to thoroughly ascertain whether the allegations leveled by the informant indeed fall under the category of cheating or criminal breach of trust.

Also, it expressed dismay over a common practice adopted by police officers to routinely and mechanically proceed to register an FIR for both offences i.e. criminal breach of trust and cheating on a mere allegation of some dishonesty or fraud, without any proper application of mind.

Whereas, for the magistrates, the Court said that it becomes their responsibility when a case arises from a private complaint to meticulously examine the contents of the complaint so as to determine whether the offence of cheating or criminal breach of trust as the case may be is made out from the averments made in the complaint.

The aforesaid observation of the Apex Court came while deciding an appeal preferred by a company and its officer bearers against the High Court's decision not to quash the process issued under Section 204 Code of Criminal Procedure (“CrPC”) by the magistrate for the offence committed under Section 406, 420 and 120 B of the Indian Penal Code (IPC).

The allegation labeled against the appellants was that they failed to make payment towards the sale of horse grains and oats over a period of time supplied by the complainant.

By holding that both the Magistrate and High Court committed an error in justifying the issuance of process for an offence punishable under Section 406/420 of IPC, the Court said that the evidence led in support of it shows essential ingredients of the offences alleged are absent.

In support, the Court explained the distinction between the criminal breach of trust and cheating, and reasoned why the offence of criminal breach of trust is not made out in the instant case.

"There is a distinction between criminal breach of trust and cheating. For cheating, criminal intention is necessary at the time of making a false or misleading representation i.e., since inception. In criminal breach of trust, mere proof of entrustment is sufficient. Thus, in case of criminal breach of trust, the offender is lawfully entrusted with the property, and he dishonestly misappropriated the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver any property. In such a situation, both the offences cannot co-exist simultaneously."

The court reasoned that since there was no entrustment of property (being a basic requirement for the offence of criminal breach of trust), therefore there cannot be an offence made out under Section 406 IPC.

“The reason being that indisputably there is no entrustment of any property in the case at hand. It is not even the case of the complainant that any property was lawfully entrusted to the appellants and that the same has been dishonestly misappropriated. The case of the complainant is plain and simple. He says that the price of the goods sold by him has not been paid. Once there is a sale, Section 406 of the IPC goes out of picture. According to the complainant, the invoices raised by him were not cleared. No case worth the name of cheating is also made out.”, the Court observed.

“From the aforesaid, there is no manner of any doubt whatsoever that in case of sale of goods, the property passes to the purchaser from the seller when the goods are delivered. Once the property in the goods passes to the purchaser, it cannot be said that the purchaser was entrusted with the property of the seller. Without entrustment of property, there cannot be any criminal breach of trust. Thus, prosecution of cases on charge of criminal breach of trust, for failure to pay the consideration amount in case of sale of goods is flawed to the core. There can be civil remedy for the non-payment of the consideration amount, but no criminal case will be maintainable for it.”, the judgment authored by Justice JB Pardiwala said.

Magistrate Shall Not Issue Process Mechanically

The Court expressed concerns over the casual issuance of summons in the criminal case and observed that the summons in the criminal case cannot be issued as a matter of course.

“This Court has time and again reminded that summoning of an accused in a criminal case is a serious matter. Criminal law cannot be set into motion as a matter of course. It is not that the complainant has to bring only two witnesses to support his allegations in the complaint to have the criminal law set into motion. The order of the Magistrate summoning the accused must reflect that he has applied his mind to the facts of the case and the law applicable thereto. He has to examine the nature of allegations made in the complaint and the evidence both oral and documentary in support thereof. It is not that the Magistrate is a silent spectator at the time of recording of preliminary evidence before summoning of the accused. The Magistrate has to carefully scrutinise the evidence brought on record and may even himself put questions to the complainant and his witnesses to elicit answers to find out the truthfulness of the allegations or otherwise and then examine if any offence is prima facie committed by all or any of the accused.”

In essence, the Court held that “issuance of summons is a serious matter and, therefore, should not be done mechanically and it should be done only upon satisfaction on the ground for proceeding further in the matter against a person concerned based on the materials collected during the inquiry.”

The Court said that the magistrate failed to ask upon a question to himself whether Appellant no.2 and 3, who were the officer bearers would be personally liable for the acts committed by Appellant no.1/Company.

In other words, the failure of the complainant to demonstrate that he has been cheated on account of criminal breach of trust or cheating or deception practiced by the office bearers would not make the officer bearers liable for the offence.

“Where a jurisdiction is exercised on a complaint petition filed in terms of Section 156(3) or Section 200 of the CrPC, the Magistrate is required to apply his mind. The Penal Code does not contain any provision for attaching vicarious liability on the part of the appellant Nos. 2 and 3 respectively herein who are none other than office bearers of the appellant No. 1 Company. When the appellant No. 1 is the Company and it is alleged that the company has committed the offence then there is no question of attributing vicarious liability to the office bearers of the Company so far as the offence of cheating or criminal breach of trust is concerned. The office bearers could be arrayed as accused only if direct allegations are levelled against them.”, the Court observed.

In conclusion, the Court reiterated the settled principle of law that “When dealing with a private complaint, the law enjoins upon the magistrate a duty to meticulously examine the contents of the complaint so as to determine whether the offence of cheating or criminal breach of trust as the case may be is made out from the averments made in the complaint. The magistrate must carefully apply its mind to ascertain whether the allegations, as stated, genuinely constitute these specific offences.”

Since the magistrate failed to apply its mind to ascertain whether the allegations labeled constitute the offence of criminal breach of trust, hence the Court set aside the order passed by the High Court so also the order passed by the Chief Judicial Magistrate took cognizance upon the complaint.

Appearance:

For Petitioner(s) Mr. Suhail Dutt, Sr. Adv. Mr. Sankalp Goswami, Adv. Mr. Azhar Alam, Adv. Ms. B. Vijayalakshmi Menon, AOR

For Respondent(s) Mr. Rajat Singh, AOR Mr. Neeraj Kumar Sharma, Adv. Mr. Sarthak Chandra, Adv. Mr. Raghav Garg, Adv.

Case Title: Delhi Race Club (1940) Ltd. & Ors. Versus State of Uttar Pradesh & Anr., CRIMINAL APPEAL NO. 3114 OF 2024

Citation : 2024 LiveLaw (SC) 603

Click here to read/download the judgment