The
Supreme Court on Friday expressed disappointment that even after 162 years of
the Indian Penal Code, 1860 (IPC) being in effect, police and courts still
struggle to differentiate between the offenses of criminal breach of trust and
cheating. In the case of Delhi Race (1940) Limited and Others v. State of
Uttar Pradesh and Another, a Bench of Justice JB Pardiwala and Justice
Manoj Misra emphasized the need for nationwide training of police officers,
pointing out that they often mechanically register first information reports
(FIRs) for both offenses based on mere allegations of dishonesty or fraud.
The
Court remarked, "It has become a common practice for police officers to
routinely and mechanically register an FIR for both criminal breach of trust
and cheating on a mere allegation of dishonesty or fraud, without proper
application of mind. It is high time that police officers across the country
are provided with adequate legal training to understand the distinction between
the offense of cheating and criminal breach of trust. Both offenses are
distinct and cannot coexist in the same set of facts, as they are antithetical
to each other."
The
Court was hearing an appeal from a horse racing company and its Secretary, who
challenged an Allahabad High Court order refusing to quash a summoning order in
a complaint filed under Sections 406 (criminal breach of trust), 420
(cheating), and 120B (criminal conspiracy) of the IPC. The private complainant
alleged that the company had failed to pay ₹9,11,434 for grains and oats meant
for horses.
The
Additional Chief Judicial Magistrate conducted an inquiry and issued a process
against the company. However, the High Court, in refusing to quash the
summoning order, noted that the company had a mala fide intention in
withholding the payment.
Dissatisfied
with the High Court's decision, the company approached the Supreme Court. The
apex court pointed out that the IPC contains no provision for vicarious
liability that would automatically implicate the office bearers of a company in
cases of cheating or criminal breach of trust. The Court stressed that
vicarious liability would only arise if explicitly provided for in the statute,
and office bearers could only be charged if direct allegations were made
against them.
The
Court further observed that the magistrate failed to fully consider the
correctness of the complaint. Upon examining the complaint, the Court found
that no offense of either cheating or criminal breach of trust was made out, as
these offenses, though involving dishonest intention, are mutually exclusive.
While criminal intention is necessary for cheating, mere proof of entrustment
suffices for criminal breach of trust.
The
Court clarified, "The Additional Chief Judicial Magistrate could have
issued a process for the offense punishable under Section 420 of the IPC, i.e.,
cheating, but no case of criminal breach of trust is made out. There is no
entrustment of any property in this case. The complainant's case is
straightforward: the price of the goods sold was not paid. Once there is a
sale, Section 406 of the IPC does not apply."
The
Court also noted that the offense of cheating under Section 420 IPC was not
made out, as the complainant admitted that the invoices raised were not
cleared. The appropriate course of action for the complainant would have been
to file a civil suit for the recovery of the amount, rather than criminal
proceedings.
The
Supreme Court set aside the criminal proceedings against the appellants and
expressed concern that despite the long history of the IPC, and now the new
law, courts and police officers still struggle to understand the distinction
between cheating and criminal breach of trust.
