Cheating is commonly referred to as a case of 420 in layman’s terms. Cheating, like other criminal offences such as breach of trust and misappropriation, results in wrongful gain or loss. However, in cheating, the dishonest intention is present from the very beginning of the transaction, and in breach of trust, the person receives property legally but retains or converts it in an illegal manner, resulting in a loss of trust.

Section 415 of the Indian Penal Code describes cheating as follows: — 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”. However, despite the fact that the fifth law commission recommended the addition of two new sections 420 A and 420 B to deal with the problem of dishonest contractors defrauding the government on a massive scale while supplying goods or performing work, which was also sanctioned by the fourteenth law commission into reforms, no action has been taken by the legislature on this issue to date.

The two elements that are essential to comprise the offences of cheating are deception and inducement. Deception is the act of leading someone into error by convincing them to believe something that is false or to disbelieve something that is true, and such deception may be accomplished through words or conduct.  In Swami Dhirendra Brahmachari v. Shaikndra Bushan, (1995) Cr LJ, the court held that when the accused made false statements about his ashram being recognized by the Government of India, thereby inducing students to apply for admission, the court found him guilty of cheating. When focusing on the effect of the fraudulent or dishonest act, it is necessary to consider whether the person deceived is compelled to deliver or do something, whether in the form of an act or an omission. Swami BS SVYV Maharaj v. State of Andhra Pradesh AIR 1999 SC 2332 held that when the appellant – accused made a representation that he had divine powers through his touches, thereby leading the complainant to believe that he could cure congenital dumbness of a little girl through these powers, inducing the complainant to shell out money to accused is fraudulent and amounted to inducement.

In Ram Jas v. State of Uttar Pradesh AIR 1970 SC 1811 , the Supreme Court recognized the crucial ingredient of the offences of cheating – 

  1. There must be a fraudulent or dishonest inducement on the part of the person deceiving him; and
  2. A ) the person who has been deceived should be induced to deliver any property to any person or to consent to the retention of any property; or 

B) The person who has been deceived should be intentionally induced to do or omit to do anything that he would not do or omit if he had not been deceived, and the person who has been deceived should be punished accordingly.

3. In cases covered by (2) (B), the act or omission must be one that causes or is likely to cause damage or harm to the person’s physical, mental, or reputational well-being as well as physical or financial property.

Offence of cheating is cognizable and nonbailable. The trial is presided over by a magistrate of first class. FIR or Application can be filed under section 156 (3) CrPC and in case of a private complaint under Section 200 CrPC. When the offence of cheating is not severe or when it is a simple case of cheating, the offender is sentenced to one – year imprisonment, a fine, or a combination of two punishment options. The punishment for cheating by personation under Section 416 is imprisonment for three years or a fine or both in the case of cheating by a guardian, trustee, solicitor, agent, or manager of the Hindu Family. Section 416 also covers cheating by deception.

The promise should be made with the intent to deceive present at the time of the promise. Hon’ble Supreme Court in the matter of S.W Palanitkar v. State of Bihar, (2001) 10 TMI1150 observed that in order to convict an individual for the offences of cheating there should be the pre- existing dishonest or fraudulent intention of the individual from the commencement, while in the case of breach of Contract there is no pre-existing dishonest or fraudulent intention on the part of the person from the beginning of the agreement.

The Delhi High Court in the matter of Wolfgang Reim & Ors v. State & Anr, emphatically apprehended that an individual must not be charged with the offences of cheating and criminal breach of trust concurrently for the same transaction since According to law, there must be a connection between the parties in order for one party to entrust another with property. As a result, in order to commit criminal breach of trust, the dishonest intention of the accused must be present after the accused has obtained control over the property, whereas in order to commit cheating, deceitful intent on the part of the accused must be present at the time of the transaction’s inception. The Gauhati High Court and the Punjab and Haryana High Court, in the cases of Mahindra and Mahindra Financial Services Ltd. and Ors v. Delta Classic Pvt. Ltd. and JalpaParahad Aggarwal vs. State of Haryana and Ors. respectively, have taken analogous approaches. Nonetheless, the Supreme Court is yet to pass a commentary on the same.

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