Police, courts unaware of distinction between cheating and criminal breach of trust: Supreme Court

The Supreme Court on Friday lamented the fact that even after 162 years of the Indian Penal Code, 1860 (IPC) being in force, the police and the courts have not been able to understand the fine distinction between the offences of criminal breach of trust and cheating [Delhi Race (1940) Limited and Others v. State of Uttar Pradesh and Another]..Highlighting the sad state of affairs where police officers are mechanically registering first information reports (FIRs) for both offences on a mere allegation of dishonesty or fraud, a Bench of Justice JB Pardiwala and Justice Manoj Misra called for training of police officers across the country."...it has become a common practice for the police officers to routinely and mechanically proceed to register an FIR for both the offences i.e. criminal breach of trust and cheating on a mere allegation of some dishonesty or fraud, without any proper application of mind. 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 Court observed..The Court was hearing an appeal by a horse racing company and its Secretary challenging an Allahabad High Court order which had refused to quash a summoning order in a complaint under Sections 406 (criminal breach of trust), 420 (cheating) and 120B (criminal conspiracy) IPC.The private complainant had claimed that the appellant company used to purchase grains and oats meant to be fed to horses. It was alleged that appellant company had failed to pay ₹9,11,434 to the complainant.The Additional Chief Judicial Magistrate conducted an inquiry into the allegations and issued process to the appellant company.While refusing to quash the summoning order, the High Court noted that there was mala fide intention on the part of appellant company in witholding the said amount.Aggrieved, the company approached the apex court..At the outset, the top court noted that under the IPC, there is no provision pertaining to vicarious liability which can add the office bearers of a company as accused so far as the offences of cheating or criminal breach of trust are concerned."Vicarious liability of the office bearers would arise provided any provision exists in that behalf in the statute. Statutes indisputably must contain provision fixing such vicarious liabilities...The office bearers could be arrayed as accused only if direct allegations are levelled against them. In other words, the complainant has to demonstrate that he has been cheated on account of criminal breach of trust or cheating or deception practiced by the office bearers," the Court emphasised.Therefore, the Court was of the view that the magistrate failed to consider the correctness of the complaint in its entirety in this regard..Furthermore, the Court noted that even if the complaint is looked in its entirety, no offence either of cheating or criminal breach of trust is made out. It noted that although these offences involve dishonest intention, they are mutually exclusive.While for cheating, criminal intention is necessary at the time of making a false or misleading representation, for criminal breach of trust, mere proof of entrustment is sufficient, the Court said."...the court of the Additional Chief Judicial Magistrate could have issued process for the offence punishable under Section 420 of the IPC i.e. cheating but in any circumstances no case of criminal breach of trust is made out. 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," the Court clarified.The Court added that the offence of cheating under Section 420 IPC will also not be made out, since the complainant had affirmed that the invoices raised by them were not cleared."If it is the case of the complainant that a particular amount is due and payable to him then he should have filed a civil suit for recovery of the amount against the appellants herein. But he could not have gone to the court of Additional Chief Judicial Magistrate by filing a complaint of cheating and criminal breach of trust," the Court said while setting aside the criminal proceedings against the appellants..Before parting with the case, the Court expressed its dissatisfaction as to how both courts and police officers, despite years of IPC remaining in force and now the new law, are unable to understand the distinction between cheating and criminal breach of trust. .Senior Advocate Suhail Dutt and Advocates Azhar Alam, Sankalp Goswami and B Vijayalakshmi Menon appeared for the company and its office bearers.Advocates Rajat Singh, Neeraj Kumar Sharma and Sarthak Chandra appeared for the complainant..[Read Judgment]