Cheating: Civil Liability Versus Criminal Liability

The crucial aspect to be noted in the law relating to cheating is the intention of the person accused of cheating. Most often, especially in-issues relating to commercial transactions, the disputes are difficult to separate in terms of their civil and criminal liabilities. As stated earlier, -the crucial difference between a criminal cause of action as against a purely civil transaction is the intention of the-person at the time when the cause of action arose or the alleged offence commenced. The important aspect is to examine whether at that stage, the accused deliberately or intentionally induced the other person to part with property or to do an act or desist from doing an act, or whether it was only subsequently that the dispute arose.


Nageshwar Prasad Sinha Vs. Narayan Singh AIR 1999 SC 1480 the respondent- complainant, Narayan Singh, an advocate, had entered into an agreement of sale of certain properties with the accused in Patna city. Part of the consideration had been paid as earnest money. Possession had also been delivered to the complainant as per the sale deed. However, the complainant had not made the full payment as agreed upon, resulting in delay in completing the legal formalities of the sale. The complainant had also filed a civil suit for specific performance against the accused. Thereafter, the complainant filed a criminal complaint alleging committing of offence under section 420 IPC.


The Supreme Court considered ill(g) to section 415. IPC and stated that the latter part of the illustration showed that:

At the time when the agreement for sale was executed, it could have in no event been termed dishonest so as to hold that the complainant was cheated of the earnest money, which they passed to the appellants as part consideration, when possession of the total land involved in the bargain was passed over to the complainant-respondent, and which remains in their possession. Now, it is left to imagine who would be interested in delaying the matter and completing the bargain when admittedly the complainant have not performed their part in making full payment.


Thus, the court held that the liability, if any, was only civil in nature and not criminal.


Breach of contract and cheating: The distinction between mere breach of contract and the offence of cheating is a fine one. It depends upon the intention of the accused at the time of inducement which may be judged by his subsequent conduct, but for which the subsequent conduct is not the sole test. Mere breach of contract cannot give rise to criminal prosecution under Sec. 420, I.P.C., unless fraudulent or dishonest intention is shown right at the beginning of the transaction, that is the time when the offence is said to have been committed.


Cheating and extortion :The offence of cheating must, like that of extortion be committed by the wrongful obtaining of a consent. The difference is that the extortioner obtains the consent by intimidation and the cheat by deception.

Cheating, criminal breach of trust, and criminal misappropriation: Cheating differs from the last two offences in the fact that the cheat takes possession of property by deception. There is wrongful gain or loss in both cases and in both cases there is inducement to deliver property. In the case of cheating the dishonest intention starts with the very inception of the transaction. But in the case of criminal breach of trust, the person who comes into possession of movable property receives it legally but retains it. or converts it to his own use against the terms of the contract.



Dishonestly obtaining another’s property by deception with the intention of permanently depriving that person of his property is an offence under Sec. 15(1) of the Theft Act, 1968. This intent to deprive permanently is not an ingredient of the Indian Law. There is no deception unless a person is induced to believe as true what in fact is false. (An operative cause of obtaining the property). In this case certain person came to an elderly widow representing that they were tree surgeons and that they could provide her the “service for a certain money of felling her three deceased trees. She went to withdraw the money and also informed the police. They were arrested and held guilty of attempted deception.) Director of Public. Prosecution Vs. Ray, (1973) 3 AH ER. 131. Deception can also be in an implied form. The-most common example of which is a bouncing cheque. English Courts have held that when a man issues a cheque in favour of another he impliedly represents that he has an account at the bank, that the cheque would be honoured as he has requisite amount in the bank to his credit or he has an overdraft facility' or will immediately arrange it, so that the cheque does not bounce. If things turn out to be otherwise, the accused will have-cheated the other party by impliedly inducing him to accept a valueless cheque which he would not have accepted if he had been aware of the true state of facts is not free from difficulty on this score as decisions are conflicting and in some cases it has been held that if no express representation is made that he has the requisite amount in the bank or if no allegations are made in the complaint that bouncing of the cheque resulted in harm to the complainant in his body mind, reputation or property, the mere fact that the cheque was dishonoured would not make the accused liable for cheating. A contrary view appears to have been taken in Bholanath Arora case 1982 Cr LJ 1482 (Delhi) which is more in accordance with the views taken in the English decision than with the Indian cases cited above. It is felt that the view taken by the English courts on this point are more reasonable for even a fool would not accept a valueless cheque but for the implied representation that the cheque would be honored. It is hoped that law on this point would be brought a par with that of England if necessarily, by suitable legislation. (Necessary legislation was passed in 1988 by amending the Negotiable Instrument Act by providing that a dishonored cheque is a punishable crime.)