Institute of Legal and Management Studies

The Supreme Court observed that the offence of criminal breach of trust and cheating cannot co-exist on the basis of same allegations. The Court said that the offence of cheating (S.420 IPC/S.318 BNS) involves criminal intention from inception; however, for criminal breach of trust (S.406 IPC/S.316 BNS), there is lawful entrustment at the beginning, which is later misappropriated.

So, both these offences cannot exist simultaneously on same facts, as they are "antithetical" to each other.

“For cheating, criminal intention is necessary at the time of making 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 misappropriates the same. Whereas, in case of cheating, the offender fraudulently or dishonestly induces a person by deceiving him to deliver a property. In such a situation, both offences cannot co-exist simultaneously. Consequently, the complaint cannot contain both the offences that are independent and distinct. The said offences cannot co-exist simultaneously in the same set of facts as they are antithetical to each other.”, the Court observed.

A bench of Justice BV Nagarathna and Justice R Mahadevan heard the case which involved a simple transaction i.e., an Agreement for Sale of property where the appellant-accused received an advance payment but did not execute the sale or return the money for eight years. The complainant filed a case alleging both cheating and criminal breach of trust, however, the High Court refused to quash the criminal cases leading to the present appeal before the Supreme Court.

Setting aside the impugned decision, the judgment authored by Justice Nagarathna, relying on the case of Delhi Race Club (1940) Limited vs. State of Uttar Pradesh, (2024) 10 SCC 690 observed:

“it is pertinent to mention that if it is the case of the complainant/respondent No.2 that the offence of criminal breach of trust as defined under Section 405 IPC, punishable under Section 406 IPC, is committed by the accused, then in the same breath it cannot be said that the accused has also committed the offence of cheating as defined in Section 415, punishable under Section 420 IPC.”

Further, on the aspect of criminal breach of trust, the Court said that “every act of breach of trust may not result in a penal offence unless there is evidence of a manipulating act of fraudulent misappropriation of property entrusted to him.”

“In the present case, the complainant/respondent No.2 has failed to establish the ingredients essential to constitute an offence under Section 406 IPC. The complainant/respondent No.2 has failed to place any material on record to show us as to how he had entrusted property to the appellant. Furthermore, the complaint also omits to aver as to how the property, so entrusted to the appellant, was dishonestly misappropriated or converted for his own use, thereby committing a breach of trust.”, the court added.

On the aspect of cheating, the Court said that if the complaint admitted that the property was entrusted to the appellant, then no case of cheating would arise as the necessary ingredients of cheating i.e., inducement to deliver property was absent.

“On a bare perusal of the FIR as well as the complaint, we do not find that the offence of cheating as defined under Section 420 IPC is made out and we do not find that there is any cheating and dishonest inducement to deliver any property or a valuable security involved in the instant case.”, the court said.

Accordingly, the appeal was allowed.

Cause Title: ARSHAD NEYAZ KHAN VERSUS STATE OF JHARKHAND & ANOTHER

Citation : 2025 LiveLaw (SC) 950

Click here to read/download the judgment

Appearance:

For Petitioner(s) :Ms. Srija Choudhury, AOR

For Respondent(s) :Mr. Rajiv Shankar Dvivedi, Adv. Ms. Madhusmita Bora, AOR Mr. Pawan Kishore Singh, Adv.